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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 30, 1996
McAFEE ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 0-20558 77-0316593
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2710 Walsh Avenue, Santa Clara, California 95051
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (408) 988-3832
Same
(Former name or former address, if changed since last report.)
Exhibit Index on Page Five
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ITEM 5. OTHER EVENTS
FSA Combination Corp. ("Sub"), a Delaware corporation and an
indirect subsidiary of McAfee Associates, Inc. ("McAfee" or the "Company"), a
Delaware corporation, acquired a controlling interest in FSA Corporation
("FSA"), an Alberta, Canada corporation, pursuant to a reorganization of capital
and other transactions (the "Combination"). The Combination was accomplished
pursuant to the terms of a Combination Agreement (attached as Exhibit 2.1
hereto), dated August 16, 1996, by and among the Company, Sub, FSA and Daniel
Freedman ("Freedman"), the sole shareholder of FSA (the "Combination Agreement")
and was consummated on August 30, 1996. The Combination will be recorded as a
pooling of interests for accounting purposes. The terms of the Combination
Agreement reflected the arm's-length negotiations among the parties.
Pursuant to the terms of the Combination Agreement, the
Company is obligated to issue to Freedman an aggregate of 250,042 shares of
McAfee common stock in exchange for Class F Exchangeable Non-Voting Shares of
FSA held by Freedman (the "Exchangeable Shares") under certain terms and
conditions. Under the terms of the Combination Agreement, ten percent (10%) of
the Exchangeable Shares were placed in an escrow account with Cupertino National
Bank & Trust as security for the agreement of FSA and Freedman to indemnify
McAfee for certain contingencies.
Under the terms of the Combination Agreement, Freedman was
granted certain registration rights in connection with the common stock of the
Company issuable to Freedman upon exchange of the Exchangeable Shares in
accordance with certain terms and conditions. In addition, effective upon the
consummation of the Combination, Freedman was appointed as Vice President of
Security Products of McAfee.
The Company has registered on Form S-8 approximately 106,000
additional shares of the Company's common stock for issuance upon the exercise
of stock options formerly exercisable for shares of FSA common stock, which
options were exchanged for options to purchase shares of McAfee common stock in
connection with the Combination.
A copy of the press release announcing the effectiveness of
the Combination is attached as Exhibit 99.1 and is incorporated herein by
reference.
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Exhibit
Number Description
2.1 Combination Agreement, dated August 16, 1996, by
and among McAfee, Sub, FSA and Freedman.
4.1 Voting and Exchange Trust Agreement, dated August
30, 1996, by and among McAfee, Sub, FSA and John
T. Ramsay.
4.2 Registration Rights Agreement, dated August 30,
1996, by and between McAfee and Freedman.
99.1 Press Release, dated September 3, 1996,
announcing the effectiveness of the Combination.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
MCAFEE ASSOCIATES, INC.
Dated: September 23, 1996 By: /s/ R. Terry Duryea
-------------------------------------
R. Terry Duryea
Vice President of Professional
Services and Corporate Development
and Secretary
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EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
2.1 Combination Agreement, dated August 16, 1996, by and
among the McAfee, Sub, FSA and Freedman.
4.1 Voting and Exchange Trust Agreement, dated August 30,
1996, by and among McAfee, Sub, FSA and John T. Ramsay.
4.2 Registration Rights Agreement, dated August 30, 1996, by
and between McAfee and Freedman.
99.1 Press Release, dated September 3, 1996, announcing the
effectiveness of the Combination.
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EXHIBIT 2.1
COMBINATION AGREEMENT
Pursuant to Item 601(b)(2) of Regulation S-K,
certain exhibits to this Combination Agreement
have been omitted. Such exhibits and schedules will be submitted
to the Securities and Exchange Commission upon request.
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COMBINATION AGREEMENT
AMONG
McAFEE ASSOCIATES, INC.,
FSA COMBINATION CORP.,
FSA CORPORATION,
AND
DANIEL FREEDMAN, THE SOLE SHAREHOLDER OF FSA CORPORATION
AUGUST 16, 1996
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TABLE OF CONTENTS
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1. THE COMBINATION.............................................................................................. 1
1.1 REQUISITE TRANSACTIONS............................................................................. 1
1.2 ADJUSTMENTS FOR CAPITAL CHANGES.................................................................... 2
1.3 FSA OPTIONS........................................................................................ 3
1.4 OTHER EFFECTS OF THE COMBINATION................................................................... 3
1.5 REGISTRATION RIGHTS................................................................................ 3
1.6 REORGANIZATION..................................................................................... 4
1.7 POOLING OF INTERESTS............................................................................... 4
1.8 MATERIAL ADVERSE EFFECT............................................................................ 4
1.9 CURRENCY........................................................................................... 4
2. REPRESENTATIONS AND WARRANTIES OF FSA AND SHAREHOLDER........................................................ 4
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.............................................. 4
2.2 CAPITAL STRUCTURE AND VOTING RIGHTS............................................................... 5
2.3 AUTHORITY......................................................................................... 5
2.4 FINANCIAL STATEMENTS.............................................................................. 6
2.5 ACCOUNT RECEIVABLES............................................................................... 7
2.6 COMPLIANCE WITH APPLICABLE LAWS................................................................... 7
2.7 LITIGATION........................................................................................ 7
2.8 EMPLOYEE BENEFIT PLANS............................................................................ 7
2.9 NO UNDISCLOSED LIABILITIES........................................................................ 8
2.10 ABSENCE OF CERTAIN CHANGES OR EVENTS.............................................................. 8
2.11 AGREEMENTS........................................................................................ 10
2.12 NO DEFAULTS....................................................................................... 11
2.13 CERTAIN AGREEMENTS................................................................................ 11
2.14 TAXES............................................................................................. 12
2.15 INTELLECTUAL PROPERTY............................................................................. 12
2.16 PRODUCTS AND DISTRIBUTION......................................................................... 15
2.17 FEES AND EXPENSES................................................................................. 15
2.18 INSURANCE......................................................................................... 15
2.19 OWNERSHIP OF PROPERTY............................................................................. 15
2.20 ENVIRONMENTAL MATTERS............................................................................. 15
2.21 INTERESTED PARTY TRANSACTIONS..................................................................... 16
2.22 BOARD AND SHAREHOLDER APPROVAL.................................................................... 16
2.23 DISCLOSURE........................................................................................ 16
2.24 RESTRICTIONS ON BUSINESS ACTIVITIES............................................................... 16
2.25 POOLING MATTERS................................................................................... 17
2.26 BOOKS AND RECORDS................................................................................. 17
2.27 GOVERNMENT CONTRACTS.............................................................................. 17
2.28 LABOR MATTERS..................................................................................... 17
2.29 SEVERANCE ARRANGEMENTS............................................................................ 18
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2.30 BANKING RELATIONSHIPS............................................................................. 18
2.31 TRADE REGULATION.................................................................................. 18
2.32 WARRANTY.......................................................................................... 18
3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER................................................................ 18
3.1 PURCHASE FROM OWN ACCOUNT.......................................................................... 19
3.2 RESTRICTED SECURITIES.............................................................................. 19
3.3 FURTHER LIMITATIONS ON DISPOSITION................................................................. 19
3.4 LEGENDS............................................................................................ 19
4. REPRESENTATIONS AND WARRANTIES OF MCAFEE..................................................................... 20
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER............................................... 20
4.2 AUTHORITY.......................................................................................... 20
4.3 LITIGATION......................................................................................... 21
4.4 SEC FILINGS........................................................................................ 21
4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS............................................................... 22
4.6 RESERVE FOR ISSUANCE............................................................................... 22
5. FSA COVENANTS................................................................................................ 22
5.1 ADVICE OF CHANGES.................................................................................. 22
5.2 MAINTENANCE OF BUSINESS............................................................................ 22
5.3 CONDUCT OF BUSINESS................................................................................ 23
5.4 FSA AFFILIATE AGREEMENT............................................................................ 24
5.5 REGULATORY APPROVALS............................................................................... 25
5.6 ACCESS TO INFORMATION.............................................................................. 25
5.7 SATISFACTION OF CONDITIONS PRECEDENT............................................................... 25
5.8 NO OTHER NEGOTIATIONS.............................................................................. 25
5.10 PUBLIC DISCLOSURE................................................................................. 25
6. McAFEE COVENANTS............................................................................................. 26
6.1 ADVICE OF CHANGES.................................................................................. 26
6.2 REGULATORY APPROVALS............................................................................... 26
6.3 NECESSARY CONSENTS................................................................................. 26
6.4 SATISFACTION OF CONDITIONS PRECEDENT............................................................... 26
6.5 EMPLOYMENT AND EMPLOYEE BENEFITS................................................................... 26
6.6 McAFEE AFFILIATE AGREEMENTS........................................................................ 26
7. CLOSING MATTERS.............................................................................................. 27
7.1 THE CLOSING........................................................................................ 27
7.2 ANCILLARY DOCUMENTS/RESERVATION OF SHARES.......................................................... 27
7.3 SUBSTITUTION OF FSA OPTIONS........................................................................ 27
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF FSA AND SHAREHOLDER................................................... 28
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES......................................................... 28
8.2 COVENANTS.......................................................................................... 28
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8.3 DELIVERY OF RELATED DOCUMENTS...................................................................... 28
8.4 POOLING OPINION.................................................................................... 28
8.5 REGISTRATION RIGHTS AGREEMENT...................................................................... 28
8.6 COMPLIANCE WITH FLAW............................................................................... 28
8.7 GOVERNMENT CONSENTS................................................................................ 28
8.8 NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY........................................................... 28
8.9 OPINIONS OF McAFEE'S COUNSEL....................................................................... 29
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF MCAFEE................................................................ 29
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES......................................................... 29
9.2 COVENANTS.......................................................................................... 29
9.3 COMPLIANCE WITH LAW................................................................................ 29
9.4 GOVERNMENT CONSENTS................................................................................ 29
9.5 OPINION OF FSA'S COUNSELS.......................................................................... 29
9.6 DOCUMENTS.......................................................................................... 29
9.7 NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY........................................................... 30
9.8 TENDER OF FSA OPTIONS.............................................................................. 30
9.9 POOLING OPINION.................................................................................... 30
9.10 AFFILIATE AGREEMENT............................................................................... 30
9.11 ESCROW AGREEMENT.................................................................................. 30
9.12 REGULATORY COMPLIANCE AND APPROVAL................................................................ 30
9.13 NO ISSUANCE OF FSA STOCK.......................................................................... 30
9.14 DELIVERY OF AUDITED FINANCIAL STATEMENTS.......................................................... 30
9.15 NECESSARY CONSENTS................................................................................ 30
9.16 NON-COMPETITION AGREEMENT......................................................................... 31
9.17 EMPLOYMENT AGREEMENT.............................................................................. 31
10. TERMINATION OF AGREEMENT.................................................................................... 31
10.1 TERMINATION....................................................................................... 31
10.2 NOTICE OF TERMINATION............................................................................. 32
10.3 EFFECT OF TERMINATION............................................................................. 32
11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS....................................................... 32
12. INDEMNIFICATION AND ESCROW.................................................................................. 32
12.1 INDEMNITY......................................................................................... 32
12.2 ESCROW FUND....................................................................................... 33
12.3 ESCROW PERIOD..................................................................................... 33
12.4 PROTECTION OF ESCROW FUND......................................................................... 33
12.5 CLAIMS UPON ESCROW FUND........................................................................... 33
12.6 OBJECTION TO CLAIMS............................................................................... 34
12.7 RESOLUTION OF CONFLICTS........................................................................... 34
12.8 THIRD PARTY CLAIMS................................................................................ 35
12.9 LIMITS............................................................................................ 35
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13. MISCELLANEOUS............................................................................................... 36
13.1 GOVERNING LAW..................................................................................... 36
13.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS................................................... 36
13.3 SEVERABILITY...................................................................................... 36
13.4 COUNTERPARTS...................................................................................... 36
13.5 OTHER REMEDIES.................................................................................... 36
13.6 AMENDMENT AND WAIVERS............................................................................. 37
13.7 EXPENSES.......................................................................................... 37
13.8 ATTORNEYS' FEES................................................................................... 37
13.9 NOTICES........................................................................................... 37
13.10 CONSTRUCTION OF AGREEMENT........................................................................ 38
13.11 JOINT VENTURE.................................................................................... 38
13.12 FURTHER ASSURANCES............................................................................... 38
13.13 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS........................................................ 39
13.14 ENTIRE AGREEMENT................................................................................. 39
13.15 ATTACHMENTS AND SCHEDULES........................................................................ 39
EXHIBITS
1.1(i) Certificate of Designation
1.5 Registration Rights Agreement
5.4 FSA Affiliate Agreement
6.6 McAfee Affiliate Agreement
7.2(a) Exchangeable Share Provisions
7.2(b)(i) Support Agreement
7.2(b)(ii) Voting and Exchange Trust Agreement
7.3 Option Exchange Agreement
9.11 Escrow Agreement
9.16 Non-Competition Agreement
9.17 Employment Agreement
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COMBINATION AGREEMENT
THIS COMBINATION AGREEMENT (this "AGREEMENT") is entered into
as of August 16, 1996, by and among McAfee Associates, Inc., a Delaware
corporation ("McAFEE"), FSA Combination Corp., a Delaware corporation and an
indirect subsidiary of McAfee ("SUB"), FSA Corporation, an Alberta corporation
("FSA"), and Daniel Freedman, the sole shareholder of FSA ("SHAREHOLDER").
RECITALS
A. The parties hereto intend that, subject to the terms and
conditions hereinafter set forth, Sub will acquire a controlling interest in FSA
pursuant to a reorganization of capital and other transactions (the
"Combination") to be completed in accordance with this Agreement.
B. The Board of Directors and Shareholder of FSA and the
Board of Directors of McAfee and Sub have approved the Combination and the
transactions contemplated by this Agreement.
C. The Combination is intended to be treated as (i) a "pooling
of interests" under United States generally accepted accounting principles ("US
GAAP"), and (ii) a reorganization of capital for purposes of Section 86 of the
Income Tax Act (Canada) (the "ITA").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. THE COMBINATION.
1.1 REQUISITE TRANSACTIONS. At 3:00 p.m. Pacific Daylight Time
(the "EFFECTIVE TIME") on August 30, 1996 (the "EFFECTIVE DATE"), the parties
hereto shall cause the following reorganization of capital to occur and such
reorganization of capital shall be deemed to occur in the following order
without any further act or formality:
(a) The articles of incorporation of FSA shall be amended
to authorize a class of Class F Exchangeable Non-Voting Shares (the
"EXCHANGEABLE SHARES") and one Class E Non-Voting Preferred Share of FSA (the
"CLASS E PREFERRED SHARE").
(b) FSA shall issue to Sub one Class E Preferred Share in
consideration of the transfer to FSA by Sub of one share of the common stock,
$.01 par value, of McAfee (the "McAFEE COMMON STOCK"). The stated capital of the
Class E Preferred Share shall be equal to the fair market value, as determined
by the Board of Directors of FSA, of one share of McAfee Common Stock. A
certificate for such Class E Preferred Share shall be delivered by FSA to Sub.
(c) Each of the Class A Shares of FSA (the "FSA COMMON
SHARES") will be exchanged for .355932 of an Exchangeable Share, subject to
adjustment as
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provided herein, and subject to the provisions of the Escrow Agreement pursuant
to Section 9.11 hereof (the "COMMON EXCHANGE RATIO"). Each of the Class C
Preferred Shares or FSA (the "FSA PREFERRED SHARES") will be exchanged for
11.073 Exchangeable Shares, subject to adjustment as provided herein, and
subject to the provisions of the Escrow Agreement (the "PREFERRED EXCHANGE
RATIO"). The total number of Exchangeable shares to be issued, including shares
to be placed in escrow shall be 250,042.
(d) No fraction of an Exchangeable Share shall be issued.
In the event that the Exchange Ratio would result in the Shareholder being
entitled to a fraction of an Exchangeable Share, the number of Exchangeable
Shares shall be adjusted as follows: (i) if the fraction of the Exchangeable
Share is equal to or greater than 0.5, Shareholder shall receive the next higher
number of Exchangeable Shares and (ii) if the fraction of the Exchangeable Share
is less than 0.5, Shareholder shall receive the next lower number of
Exchangeable Shares.
(e) Upon the exchange referred to in paragraph (c) above,
Shareholder shall cease to be a holder of FSA Common Shares and FSA Preferred
Shares, shall have his name removed from the register of holders of such shares
and shall become a holder of the number of fully paid Exchangeable Shares to
which he is entitled as a result of the exchange referred to in paragraph (c)
and such holder's name shall be added to the register of holders of Exchangeable
Shares accordingly.
(f) The stated capital of the Exchangeable Shares shall
be equal to the aggregate stated capital of the FSA Common Shares and FSA
Preferred Shares immediately prior to the Combination.
(g) The one outstanding Class E Preferred Share will be
exchanged for one FSA Common Share and Sub shall cease to be a holder of the
Class E Preferred Share, shall have its name removed from the register of
holders of Class E Preferred Shares and shall become a holder of the one fully
paid and non-assessable FSA Common Share to which it is entitled as a result of
the exchange referred to in this subsection (g) and such holder's name shall be
added to the register of holders of FSA Common Shares accordingly.
(h) The stated capital of the one FSA Common Share shall
be equal to the stated capital of the one Class E Preferred Share prior to the
Combination.
(i) McAfee shall issue to Sub, which then shall transfer
to the trustee ("TRUSTEE") named in the Voting and Exchange Trust Agreement (as
defined herein) one share of Series A Preferred Stock of McAfee, which Series A
Preferred Stock shall have the rights provided in the Certificate of Designation
attached hereto as Exhibit 1.1(i).
1.2 ADJUSTMENTS FOR CAPITAL CHANGES. If, prior to the
Effective Time, McAfee or FSA recapitalizes through a subdivision of its
outstanding shares into a greater number of shares, or a combination of its
outstanding shares into a lesser number of shares, or reorganizes, reclassifies
or otherwise changes its outstanding shares into the same or a different number
of shares of other classes, or declares a dividend on its outstanding shares
payable in
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shares of its capital stock or securities convertible into shares of its capital
stock, then the exchange ratios shall be adjusted appropriately so as to
maintain the relative proportionate interests of the Shareholder and the holders
of the shares of McAfee Common Stock.
1.3 FSA OPTIONS.
(a) EXCHANGE. At the Effective Time, after the actions
described in Subsections 1.1(a) through (i), each of the then outstanding
options to purchase FSA Common Shares (collectively, the "FSA OPTIONS") shall,
at the Effective Time, and without any further action on the part of any holder
thereof, be exchanged for an option the ("New Option") to purchase that number
of shares of McAfee Common Stock determined by multiplying the number of FSA
Common Shares subject to such FSA Option at the Effective Time by the Common
Exchange Ratio. The New Option shall have an exercise price per share of McAfee
Common Stock equal to the exercise price per share of such FSA Option
immediately prior to the Effective Time divided by the Common Exchange Ratio. If
the foregoing calculation results in an exchanged FSA Option being exercisable
for a fraction of a share of McAfee Common Stock, then the number of shares of
McAfee Common Stock subject to the New Option shall be rounded down to the
nearest whole number of shares and the exercise price per share for the New
Option shall be rounded up to the nearest whole cent. The term, exercisability,
vesting schedule, and all other terms and conditions of the FSA Options will
otherwise be unchanged with respect to the New Option. Continuous employment
with FSA shall be credited to an optionee of FSA for purposes of determining the
number of shares of McAfee Common Stock subject to exercise under a New Option
after the Effective Time.
(b) FORM S-8 REGISTRATION. McAfee will cause the McAfee
Common Stock issuable upon exercise of the New Options to be registered on Form
S-8 promulgated by the Securities and Exchange Commission (the "SEC") as soon as
reasonably practicable after the Effective Date and in no event later than 15
days thereafter, and will maintain the effectiveness of such registration
statement or registration statements for so long as such New Options shall
remain outstanding. McAfee will reserve a sufficient number of shares of McAfee
Common Stock for issuance upon exercise of the New Options.
1.4 OTHER EFFECTS OF THE COMBINATION. At the Effective Time:
(a) the bylaws of FSA immediately prior to the Effective Time will continue as
the bylaws of FSA, subject to later amendment; (b) the directors of FSA will be
William L. Larson and Mungo Hardwicke-Brown; (c) the officers of FSA will be
William L. Larson, President and Chief Executive Officer, Prabhat Goyal, Chief
Financial Officer, and R. Terry Duryea, Secretary; (d) each FSA Common Share,
each FSA Preferred Share and each FSA Option outstanding immediately prior to
the Effective Time will be exchanged as provided in Sections 1.1 and 1.3 hereof;
and (e) the Combination will, from and after the Effective Time, have all of the
effects provided by applicable law.
1.5 REGISTRATION RIGHTS. McAfee and Shareholder shall enter
into a Registration Rights Agreement, in the form attached hereto as Exhibit
1.5.
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1.6 REORGANIZATION. The parties intend to adopt this Agreement
and the Combination as a reorganization of capital of FSA under Section 86 of
the ITA.
1.7 POOLING OF INTERESTS. The parties intend that the
Combination be treated as a "pooling of interests" under US GAAP. Promptly
following the execution of this Agreement, McAfee and FSA shall use their
respective best efforts to obtain and deliver Affiliates Agreements from their
respective affiliates, as contemplated by Sections 5.4 and 6.6 hereof.
1.8 MATERIAL ADVERSE EFFECT. In this Agreement, any reference
to any event, change or effect being "MATERIAL" with respect to any entity or
group of entities means any material event, change or effect related to the
condition (financial or otherwise), properties, assets, liabilities, businesses,
operations, results of operations or prospects of such entity or group of
entities. In this Agreement, the term "MATERIAL ADVERSE EFFECT" used with
respect to a party means any event, change or effect that is materially adverse
to the condition (financial or otherwise), properties, assets, liabilities,
businesses, operations, results of operations or prospects of such party and its
subsidiaries, if any, taken as a whole; provided that a Material Adverse Effect
shall not include any adverse effect resulting from changes in general economic
conditions or conditions generally affecting the internet security software
industry.
1.9 CURRENCY. Unless otherwise specified, all references in
this Agreement to "cash," "cent," "dollars," or "$" shall mean United States
dollars.
2. REPRESENTATIONS AND WARRANTIES OF FSA AND SHAREHOLDER
Except as set forth in a letter dated the date of this
Agreement and delivered by FSA to McAfee and Sub concurrently herewith (the "FSA
DISCLOSURE LETTER"), FSA and Shareholder hereby represent and warrant to McAfee
and Sub that:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. FSA
has been duly incorporated and is validly subsisting as a corporation under the
Business Corporations Act (Alberta) (the "ABCA"), is duly organized under such
statute and is up-to-date with respect to the filing of annual returns under
such statute, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted, and
is duly qualified and in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify would not have a Material Adverse Effect on FSA. FSA maintains no
corporate registrations in jurisdictions other than in Alberta. FSA has
delivered to McAfee's counsel complete and correct copies of the articles of
incorporation and bylaws of FSA, in each case as amended to the date of this
Agreement. In addition, prior to the Closing (as defined herein) FSA shall
deliver to McAfee's counsel the minutes for all meetings of, and each resolution
in writing executed by FSA's shareholders and Board of Directors. Such minutes
and resolutions in writing shall be complete in all respects and disclose all
corporate actions taken by the shareholders and Board of Directors since FSA's
date of organization through the Closing Date (as defined herein). FSA does not
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have any subsidiaries or any equity interest, direct or indirect, in any
corporation, partnership, joint venture or other business entity.
2.2 CAPITAL STRUCTURE AND VOTING RIGHTS
(a) STOCK AND OPTIONS. The authorized capital stock of FSA
consists of an unlimited number of Class A (common voting) shares, Class B
(common non-voting) shares, Class C Preferred shares and Class D Preferred
Shares. As of the date of this Agreement, 671,389 FSA Common Shares and 1,000
FSA Preferred Shares are issued and outstanding, all of which are held by
Shareholder. As of the date of this Agreement, there are outstanding FSA Options
to purchase an aggregate of 297,500 FSA Common Shares. No issued FSA Common
Shares are held by FSA in its treasury. All outstanding FSA Shares have been
duly authorized, validly issued, are fully paid and nonassessable and not
subject to preemptive rights. FSA has provided to McAfee's counsel a correct and
complete list of each FSA Option outstanding as of the date hereof, including
the name of the holder of such FSA Option, the grant date of each FSA Option,
the number of shares covered by such FSA Option, the per share exercise price of
such FSA Option, and the vesting schedule applicable to each such FSA Option.
(b) NO OTHER COMMITMENTS. Except as contemplated herein
and for the FSA Options disclosed in Section 2.2(a) above and listed in the FSA
Disclosure Letter, there are no options, subscriptions, warrants, calls, rights,
commitments, plans, conversion or exchange rights or agreements of any character
to which FSA or Shareholder is a party or by which FSA or Shareholder is bound
obligating FSA or Shareholder to assign, issue, deliver, transfer, redeem or
sell, or cause to be assigned, issued, delivered, transferred, redeemed or sold,
any shares of capital stock of FSA or Shareholder, or securities convertible
into or exchangeable for shares of capital stock of FSA or Shareholder, or
obligating FSA or Shareholder to grant, extend or enter into any such option,
subscription, warrant, call, right, commitment, plan, conversion right or
agreement. There are no voting trusts or other agreements or understandings to
which FSA or Shareholder is a party with respect to the voting of the capital
stock of FSA.
(c) REGISTRATION RIGHTS. FSA is not under any obligation
to register under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
or any other securities law, any of its presently outstanding securities or any
securities that may be subsequently issued.
2.3 AUTHORITY
(a) CORPORATE ACTION. FSA and Shareholder have, as
applicable, all requisite legal capacity, power and authority to enter into this
Agreement and, as hereinafter defined, the Escrow Agreement, the Registration
Rights Agreement, the Employment Agreement, the Non-Competition Agreement, the
Support Agreement, and the Voting and Exchange Trust Agreement, and the
Affiliate Agreement (collectively, the "Transaction Documents"), including, if
applicable, corporate and shareholder power and authority, to perform its
obligations hereunder and thereunder and to consummate the Combination and the
other transactions contemplated by this Agreement and the Transaction Documents.
The execution and delivery of this Agreement and the Transaction Documents by
FSA, the consummation by FSA of the Combination and the other
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transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of FSA. This Agreement and the Transaction
Documents have been duly executed and delivered by FSA and Shareholder and this
Agreement and the Transaction Documents are legal, valid and binding obligations
of FSA and Shareholder, enforceable in accordance with their respective terms,
except that such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles.
(b) NO CONFLICT. Neither the execution, delivery and
performance of this Agreement or the Transaction Documents by FSA and
Shareholder, nor the consummation of the transactions contemplated hereby or
thereby by FSA and Shareholder nor compliance with the provisions hereof or
thereof by FSA and Shareholder will: (i) conflict with, or result in any
violations of, the articles of incorporation or bylaws of FSA, or (ii) result in
any breach of or cause a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in, or the loss of any benefit under,
or result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of FSA, or require any consent, waiver,
approval, or license (other than any consent, waiver, approval, or license which
will be obtained prior to the Effective Time) under, any term, condition or
provision of any loan or credit agreement, note, bond, mortgage, indenture,
lease, license, distribution, supply, marketing, or other agreement or
instrument, or judgment, order, decree, statute, law, ordinance, rule, permit,
concession, franchise, or regulation applicable to FSA or its business,
properties or assets, other than any such breaches, defaults, losses, liens,
security interests, charges or encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect on FSA.
(c) GOVERNMENTAL CONSENTS. 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, domestic or foreign (each a "GOVERNMENTAL ENTITY"), is required
to be obtained by FSA or Shareholder in connection with the execution and
delivery of this Agreement or the Transaction Documents or the consummation of
the transactions contemplated hereby or thereby; except for consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on FSA.
2.4 FINANCIAL STATEMENTS. FSA has furnished McAfee with (i)
its unaudited financial statements (balance sheet, statement of operations,
statement of shareholders' equity and statement of cash flows), including notes
thereto, at April 30, 1996, and for the fiscal year then ended (the "ANNUAL
FINANCIAL STATEMENTS"), and its unaudited financial statements (balance sheet,
statement of operations and shareholders' equity) for the two-month period ended
June 30, 1996 (the "FSA FINANCIAL STATEMENTS"). The FSA Financial Statements
have been prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP") consistently applied throughout the periods
indicated and with
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each other, subject to normal recurring year-end adjustments and except that the
unaudited statements may not contain the notes required by Canadian GAAP, and
fairly present the financial position of FSA as of the dates thereof and the
results of FSA's operations and cash flows for the periods then ended. Except as
stated in the FSA Financial Statements, FSA is not a guarantor or indemnitor of
any indebtedness of any person, firm or corporation. The Audited Financial
Statements (as such term is defined in Section 9.14) shall not reflect any
material difference (other than as disclosed in the FSA Disclosure Letter) in
the financial position of FSA from the financial position of FSA reflected in
the Annual Financial Statements and shall not reflect any material liabilities,
contingent or otherwise, not reflected in the Annual Financial Statements.
2.5 ACCOUNT RECEIVABLES. The accounts receivable shown on the
latest interim balance sheet contained in the FSA Financial Statements arose in
the ordinary course of business and have been collected or are collectible in
the book amounts thereof, less an amount not in excess of the allowance for
doubtful accounts and returns provided for in such balance sheet. Allowances for
doubtful accounts and returns are adequate and have been prepared in accordance
with the past practices of FSA. The accounts receivable of FSA arising after the
date of the FSA Financial Statements and prior to the Effective Time arose in
the ordinary course of business and have been collected or are collectible in
the book amounts thereof, less allowances for doubtful accounts and warranty
returns determined in accordance with the past practices of FSA. None of the
accounts receivable are subject to any material asserted claim of offset or
recoupment, or counterclaim and FSA has no knowledge of any specific facts that
would be reasonably likely to give rise to any such claim. No material amount of
receivables are contingent upon the performance by FSA of any obligation and no
agreement for deduction or discount has been made with respect to any material
amount of accounts receivable.
2.6 COMPLIANCE WITH APPLICABLE LAWS. The business of FSA is
not being conducted in violation of any law, ordinance, regulation, rule,
permit, license, or order of any Governmental Entity where such violation would
have a Material Adverse Effect on FSA. To FSA's and Shareholder's knowledge, no
investigation or review by any Governmental Entity with respect to FSA is
pending or threatened. FSA has all permits, licenses, approvals, and franchises
from Governmental Entities required to conduct its business as now being
conducted, and is in compliance with all such permits, licenses, approvals, and
franchises, except for those where such absence would not have a Material
Adverse Effect on FSA.
2.7 LITIGATION. There is no suit, action, arbitration, demand,
claim or proceeding pending or, to the knowledge of FSA and Shareholder,
threatened against FSA; nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against FSA.
2.8 EMPLOYEE BENEFIT PLANS. FSA is not a party to any oral or
written: (i) union or collective bargaining agreement; (ii) agreement with any
officer or other key employee of FSA, the benefits of which are contingent, or
the terms of which are altered, upon the occurrence of a transaction involving
FSA of the nature contemplated by this
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Agreement and the Transaction Documents; (iii) agreement with any employee of
FSA providing any term of employment or compensation guarantee, for severance
pay, or for the payment of compensation in excess of $50,000 per annum; or (iv)
agreement or plan, including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan, any of the benefits of which
shall be increased, or the vesting of the benefits of which shall be
accelerated, by the occurrence of the Combination or any of the transactions
contemplated by this Agreement or the Transaction Documents 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 or the Transaction Documents. There
is no unfunded prior service cost with respect to any bonus, deferred
compensation, pension, profit-sharing, retirement, stock purchase, stock option,
or other employee benefit or fringe benefit plans, whether formal or informal,
maintained by FSA. FSA has no bonus, deferred compensation, severance, pension,
profit-sharing, retirement, stock purchase, stock option, group insurance,
health plan, or other employee benefit or fringe benefit plans ("FSA Plans"),
whether formal or informal, covering its employees, officers, directors or
consultants.
2.9 NO UNDISCLOSED LIABILITIES. FSA does not have any line of
credit, standby financing, or any other financing arrangement or any
liabilities, either accrued or contingent, and whether due or to become due, and
which are material to FSA, whether individually or in the aggregate, other than
(i) liabilities reflected in the FSA Financial Statements, (ii) liabilities
specifically described in this Agreement or the FSA Disclosure Schedule, and
(iii) normal or recurring liabilities incurred since April 30, 1996 in the
ordinary course of business consistent with past practices which are not
material.
2.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 30,
1996, except as contemplated in this Agreement there has not occurred, directly
or indirectly, contingent or otherwise:
(a) any change in the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations or results of operations
of FSA, that could reasonably be expected to have a Material Adverse Effect on
FSA;
(b) any amendments or changes in the articles of
incorporation or bylaws of FSA;
(c) any damage, destruction or loss, whether covered by
insurance or not, that could have a Material Adverse Effect on FSA;
(d) any redemption, repurchase or other acquisition of the
securities of FSA, or any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to the
securities of FSA;
(e) any increase in or modification of the compensation or
benefits payable or to become payable by FSA to any of its directors, employees,
or consultants;
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(f) any increase in or modification of any FSA Plan
(including, but not limited to, the granting of stock options, restricted stock
awards or stock appreciation rights);
(g) any acquisition, sale, license, or transfer of
property or assets of FSA, other than in the ordinary course of business
consistent with past practice;
(h) any alteration in any term of any outstanding security
of FSA;
(i) (A) any incurrence, assumption or guarantee by FSA of
any debt for borrowed money; (B) any issuance or sale of any securities
convertible into or exchangeable for debt securities of FSA; or (C) any issuance
or sale of options or other rights to acquire from FSA, directly or indirectly,
debt securities of FSA or any securities convertible into or exchangeable for
any such debt securities;
(j) any creation or assumption by FSA of any mortgage,
pledge, security interest or lien or other encumbrance on any asset;
(k) any making of any loan, advance or capital
contribution to or investment in any person other than travel loans or advances
made in the ordinary course of business of FSA which are not material;
(l) any entering into, amendment of, relinquishment,
termination or non-renewal by FSA of any contract, license, lease transaction,
commitment or other right or obligation other than in the ordinary course of
business;
(m) any termination, modification, transfer or grant of a
right under the FSA IP Rights (as defined in Section 2.15 below), other than
those terminated, modified, transferred or granted in the ordinary course of
business;
(n) any labor dispute or charge of unfair labor practice,
any activity or proceeding by a labor union or representative thereof to
organize any employees of FSA or any campaign being conducted to solicit
authorization from employees to be represented by such labor union;
(o) any declaration, set aside or payment of any dividend
or other distribution on or in respect of the shares of capital stock of FSA or
declaration of any direct or indirect redemption, retirement, purchase or other
acquisition by FSA of such shares;
(p) any issuance of any shares of capital stock of FSA, or
any warrants, rights, subscriptions, options or entering into any such
commitment relating to any securities of FSA;
(q) any change in the accounting methods or practices FSA
follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates adopted therein;
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(r) any entering into any material commitment or
transaction, or amendment or termination of any material agreement; or
(s) any agreement or arrangement made by FSA to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Agreement untrue or incorrect as of
the date when made.
2.11 AGREEMENTS. Section 2.11 of the FSA Disclosure Letter
sets forth a list of any of the following written or oral contracts,
understandings, agreements, proposed transactions, and other instruments
(collectively, "MAJOR CONTRACTS"), copies of each of which written contracts,
agreements or instruments have been delivered to McAfee's counsel:
(a) licenses of any patent, copyright, trade secret or
other proprietary right by FSA;
(b) continuing contract for the future purchase, sale or
manufacture of products, material, supplies, equipment or services requiring
payment to or from FSA in an amount in excess of $25,000 per annum;
(c) contracts providing for the development of software
for, or license of software to, FSA, or other Intellectual Property Rights used
or incorporated in one or more of the products referred to under Section 2.16 in
the FSA Disclosure Letter;
(d) joint venture contract or other agreement which has
involved or is reasonably expected to involve a sharing of profits or losses in
excess of $25,000 per annum with any other party;
(e) indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money, for a
line of credit or for a leasing transaction of a type required to be
capitalized;
(f) lease or other agreement under which FSA is lessee of
or holds or operates any items of tangible personal property or real property
owned by any third party and under which payments to such third party exceed
$25,000 per annum;
(g) agreement or arrangement for the sale, distribution,
or transfer of any assets, properties or rights having an aggregate value in
excess of $25,000;
(h) agreement which restricts FSA from engaging in any
aspect of its business or competing in any line of business in any geographic
area or in any functional area or that requires FSA to distribute or use
exclusively a third party technology or product;
(i) sales contract, commitment or proposal (including,
without limitation, porting and development projects) of FSA;
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(j) written dealer, distributor, sales representative,
original equipment manufacturer, value added remarketer or other agreement for
the ongoing distribution of the FSA Products (as defined in Section 2.15 below);
(k) to the extent not identified under Section 2.8 in the
FSA Disclosure Letter, contract or commitment for the employment of any officer,
employee or consultant or any other type of contract or understanding with any
officer, employee or consultant which is not immediately terminable without cost
or other liability (except for limitations on such termination rights as exist
under applicable laws);
(l) any other loan or credit agreement, note, bond,
mortgage, indenture, lease or other material agreement which is not otherwise
disclosed elsewhere in the FSA Disclosure Letter, the breach or termination of
which would have a Material Adverse Effect on FSA;
(m) any agreement relating to FSA IP Rights or other
material agreements relating to FSA Products; and
(n) obligations or understandings which are material to
the financial position of FSA with respect to the return to FSA inventory or
merchandise in the possession of wholesalers, distributors, retailers, or other
customers.
All contracts, agreements and instruments listed or described pursuant
to this Section 2.11 are valid, binding, in full force and effect, and
enforceable by FSA in accordance with their respective terms except that such
enforceability may be subject to (i) bankruptcy, insolvency, reorganization or
other similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles. To FSA's and Shareholder's
knowledge, no party to any Major Contract intends to cancel, modify or amend
such contract, agreement or arrangement.
2.12 NO DEFAULTS. FSA is not in default under, and, to FSA's
and Shareholder's knowledge, there exists no event, condition or occurrence
which, after notice or lapse of time, or both, would constitute such a default
by FSA under any contract or agreement to which FSA is a party or to which it or
any of its properties or assets are bound, where such defaults, breaches, or
violations would, in the aggregate, have a Material Adverse Effect on FSA. To
FSA's knowledge, no other party is in default under or in breach or violation
of, nor is there any valid basis for any claim of default by any other party
under or any breach or violation by any other party of, any contract,
commitment, or restriction to which FSA is bound or by which any of its
properties or assets are bound.
2.13 CERTAIN AGREEMENTS. Neither the execution and delivery of
this Agreement and the Transaction Documents, nor the consummation of the
transactions contemplated hereby and thereby will (i) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director, employee or
consultant of FSA from FSA, under any FSA Plan or otherwise,
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(ii) materially increase any benefits otherwise payable under any FSA Plan, or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits, including but not limited to the time of exercise of stock options.
2.14 TAXES. FSA has timely filed, or caused to be filed, all
Tax Returns (as defined below) required to be filed by it, (all of which returns
were correct and complete in all material respects) and has paid or withheld, or
caused to be paid or withheld, all Taxes (as defined below) that are due and
payable, and FSA has provided adequate accruals in accordance with Canadian GAAP
in the FSA Financial Statements for any Taxes that have not been paid, whether
or not shown as being due on any returns. Since January 1, 1993, no material Tax
liability has been assessed, proposed to be assessed, incurred or accrued other
than in the ordinary course of business. FSA has not received any written
notification that any issues have been raised (and are currently pending) by
Revenue Canada, the Internal Revenue Service or any other taxing authority,
including, without limitation, any sales tax authority, in connection with any
of the Tax Returns referred to above, and no waivers of statutes of limitations
have been given or requested with respect to FSA, in each case except for any
such written notices or waivers which have not had and shall not have a Material
Adverse Effect. There are no proposed (but unassessed) additional Taxes, none
have been asserted by Canadian tax authorities and no Tax liens have been filed
other than for Taxes not yet due and payable. FSA has not made an election to be
treated as a "consenting corporation" under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "CODE").
As used in this Agreement, "TAX" and "TAXES" means, with
respect to any entity, (A) all income taxes (including any tax on or based upon
net income, gross income, income as specially defined, earnings, profits or
selected items of income, earnings or profits) and all capital, gross receipts,
sales, goods and services, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, utility, compensation,
social security, workers' compensation, unemployment insurance or compensation,
stamp, occupation, premium, property or windfall profits taxes, alternative or
add-on minimum taxes, customs duties or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties or
additional amounts imposed by any taxing authority (domestic or foreign) on such
entity, and any interest, penalties, additional taxes and additions to tax
imposed with respect to the foregoing, and (B) any liability for the payment of
any amount of the type described in the immediately preceding clause (A) as a
result of being a "transferee" (within the meaning of Section 6901 of the Code,
Section 160 of the ITA, or any other applicable law) of another entity or a
member of an affiliated or combined group. As used in this Agreement, "TAX
RETURNS" means all returns relating to Taxes.
2.15 INTELLECTUAL PROPERTY.
(a) FSA owns, or has the right to use, sell or license
all Intellectual Property Rights (as defined below) necessary or required for
the conduct of its business as presently conducted, and to distribute all FSA
Products (as defined below), free and clear of all liens, claims or
encumbrances, other than statutory liens for amounts not yet due and payable
(such Intellectual Property Rights being hereinafter collectively referred to as
the "FSA IP
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RIGHTS"), and such rights to use, sell or license are sufficient to
conduct the business of FSA currently conducted and as proposed to be conducted
by FSA. The FSA Disclosure Schedule contains an accurate and complete list of
(i) all patents and patent applications and all registered trademarks,
copyrights, and trade names of FSA, (ii) all licenses, sublicenses and other
Intellectual Property Right agreements (other than end-user licenses) as to
which FSA is a party, and (iii) all licenses, sublicenses and other agreements
as to which FSA is a party and pursuant to which FSA is authorized to use any
material third-party technology, trade secret, know-how, process, patents,
trademarks or copyrights, including software ("LICENSED INTELLECTUAL PROPERTY"),
which are incorporated in, are, or form a part of any product of FSA currently
distributed (a "CURRENT FSA PRODUCT") or any FSA Product Under Development (the
"CURRENT FSA PRODUCTS" and "FSA PRODUCTS UNDER DEVELOPMENT" collectively being
referred to herein as the "FSA PRODUCTS").
(b) FSA is not, nor will it be as a result of the
execution and delivery of this Agreement, the Transaction Documents, or the
performance of its obligations hereby and thereby, be in breach of any license,
sublicense or other agreement relating to the FSA IP Rights or Licensed
Intellectual Property.
(c) All patents and registered trademarks claimed by or
issued to FSA are valid and subsisting. All trademarks claimed by or issued to
FSA are enforceable against third parties. FSA is the sole and exclusive owner
of all copyrights in the FSA Products. FSA and Shareholder (i) have not been
sued in any suit, action or proceeding which involves a claim of infringement of
any third party rights, (ii) have no knowledge that the manufacturing,
marketing, licensing or sale of FSA Products infringes any Intellectual Property
Rights of any third party, and (iii) have no knowledge of any claim challenging
or questioning the validity or effectiveness of any of its licenses or
agreements relating thereto. To FSA's and Shareholder's knowledge, there is no
valid basis for any claim of the type specified in the immediately preceding
sentence which would in any material way relate to or interfere with the
continued enhancement and exploitation by FSA of any of the FSA Products. None
of the FSA Products nor the use or exploitation of any FSA IP Rights by FSA in
its current business infringes on the rights of, or constitutes misappropriation
of, any Intellectual Property Rights of any third person or entity.
(d) FSA has not granted any third party any right to
manufacture or reproduce any of the FSA Products or any adaptations,
translations, or derivative works based on the FSA Products or any portion
thereof. Except with respect to the rights of third parties to the Licensed
Intellectual Property described in the FSA Disclosure Letter, no third party has
any right to manufacture, reproduce, distribute, market or exploit any works or
materials of which any of the FSA Products are a "derivative work" as that term
is defined in the United States Copyright Act, Title 17, U.S.C. Section 101. FSA
has not granted any third party any right to use or distribute the source code
version of any FSA Product.
(e) All designs, drawings, specifications, source code,
object code, documentation, flow charts and diagrams incorporating, embodying or
reflecting any of the FSA Products at any stage of their development (the "FSA
COMPONENTS") were written,
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developed and created solely and exclusively by employees of FSA within the
scope of their employment without the assistance of any third party or entity or
were created by third parties who assigned ownership of their rights to FSA by
means of valid and enforceable consultant confidentiality and invention
assignment agreements, copies of which have been delivered to McAfee. All
employees of FSA (past and present) have assigned or shall assign prior to
Closing ownership of all technology and intellectual property rights to FSA by
executing and delivering a Confidential Information and Assignment of Inventions
Agreement in the form provided to McAfee and its counsel. FSA has at all times
used commercially reasonable efforts to treat the FSA Products, and FSA
Components as containing trade secrets and has not disclosed or otherwise dealt
with such items in such a manner as to cause the loss of such trade secrets by
release into the public domain.
(f) To the knowledge of FSA and Shareholder, no employee
of FSA is in violation of any term of any employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of any
such employee with FSA or, to FSA's knowledge, any other party because of the
nature of the business conducted by FSA (including the development and future
distribution of the FSA Products Under Development).
(g) On or prior to the Closing, each person employed by
FSA (including independent contractors, if any) with access to confidential
information and each former technical employee of FSA who have worked on the FSA
Products will have executed a confidentiality and non-disclosure agreement
pursuant to the form of agreement previously provided to McAfee or its
representatives. Such confidentiality and non-disclosure agreements constitute
valid and binding obligations of FSA and such person, enforceable in accordance
with their respective terms subject to (i) bankruptcy, insolvency,
reorganization or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable remedies. To FSA's and
Shareholder's knowledge, neither the execution or delivery of such agreements,
nor the execution by such persons of their duties as employees of FSA will
conflict with or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument under which any
of such persons are obligated.
(h) No product liability or warranty claims which
individually or in the aggregate could reasonably be expected to exceed $25,000
have been communicated to or threatened against FSA nor, to FSA's and
Shareholder's knowledge, is there any specific situation, set of facts or
occurrence that provides a valid basis for such claim.
FSA will deliver prior to Closing a list of all applications,
registrations, filings and other formal actions made or taken pursuant to United
States, Canadian, provincial, federal, state and foreign laws by FSA to perfect
or protect its interest in FSA IP Rights, including, without limitation, all
patents, patent applications, trademarks, trademark applications, copyrights and
copyright applications and to the knowledge of FSA and Shareholder, there is no
cancellation, termination or expiration of any such registration or patent that
is reasonably foreseeable and is not intended to be renewed or extended by FSA,
except where the failure to renew or extend would not have a Material Adverse
Effect on FSA. To the best of FSA's and
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Shareholder's knowledge, FSA is not using any confidential information or trade
secrets of any former employer of any past or present employees.
As used herein, the term "INTELLECTUAL PROPERTY RIGHTS" shall
mean all worldwide industrial and intellectual property rights, including,
without limitation, patents, patent applications, patent rights, trademarks,
trademark applications, trade names, copyright, copyright applications, mask
works, franchises, licenses, know-how, trade secrets, customer lists,
proprietary processes and formulae, all source and object code, algorithms,
architecture, structure, display screens, layouts, inventions, development tools
and all documentation and media constituting, describing or relating to the
above, including, without limitation, manuals, memoranda and records.
2.16 PRODUCTS AND DISTRIBUTION. The FSA Disclosure Letter
contains a complete list of all Current FSA Products published and/or
distributed by FSA, and all material new products and enhancements to existing
products under development by FSA which are currently expected by FSA to be
released in the next six months (the "FSA PRODUCTS UNDER DEVELOPMENT").
2.17 FEES AND EXPENSES. FSA has not paid or become obligated
to pay any fee or commission to any broker, finder or intermediary in connection
with the transactions contemplated by this Agreement and the Transaction
Documents.
2.18 INSURANCE. FSA maintains and has maintained fire and
casualty, general liability, business interruption, product liability and
sprinkler and water damage insurance in amounts and scope typically maintained
by similarly situated businesses. Section 2.18 of the FSA Disclosure Letter
contains a list of all such insurance policies presently in effect, and correct
and complete copies of all such policies along with a history of claims made
under such policies have been provided to McAfee or McAfee's counsel.
2.19 OWNERSHIP OF PROPERTY. Except for liens for current Taxes
not yet delinquent or for liens imposed by law and incurred in the ordinary
course of business for obligations not yet due to carriers, warehousemen,
laborers, materialmen and the like, FSA owns its real and personal property free
and clear of all security interests, mortgages, liens, charges, claims, options
and encumbrances. All real and tangible personal property of FSA is generally in
good repair and is operational and usable in the operations of FSA, subject to
ordinary wear and tear, and subject to technical obsolescence. FSA is not in
violation of any zoning, building or safety ordinance, regulation or requirement
or other law or regulation applicable to the operation of owned or leased
properties (the violation of which would have a Material Adverse Effect on FSA),
or has received any notice of violation which has not been remedied.
2.20 ENVIRONMENTAL MATTERS.
(a) To FSA's and Shareholder's knowledge, during the
period that FSA has leased or owned its properties or owned or operated any
facilities, there have been no disposals, releases, emissions, spills,
discharges or threatened releases of Hazardous Materials (as
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defined below) on, from or under such properties or facilities. FSA has no
knowledge of any presence, disposals, releases, emissions, spills, discharges or
threatened releases of Hazardous Materials on, from or under any of such
properties or facilities, which may have occurred prior to FSA having taken
possession of any of such properties and facilities. For the purposes of this
Agreement, "HAZARDOUS MATERIALS" shall mean any pollutant, contaminant,
chemical, deleterious substance or industrial, toxic or hazardous waste or
substance.
(b) To FSA's knowledge, none of the properties,
facilities and operations of FSA is in violation of any federal, provincial,
municipal or local laws, statutes, bylaws, ordinances, regulations or orders
("ENVIRONMENTAL LAWS") relating to protection of the environment, occupational
health and safety, industrial hygiene or Hazardous Materials. During the time
that FSA has owned or leased its properties and facilities, neither FSA nor, to
FSA's or Shareholder's knowledge, any third party, used, generated,
manufactured, processed, treated, disposed of, handled or stored on, under or
about such properties or facilities or transported to or from such properties or
facilities any Hazardous Materials.
(c) There has been no litigation brought or threatened
against FSA by, or any settlement reached by FSA with, any party or parties
alleging the presence, disposal, emission, spill, discharge, release or
threatened release of any Hazardous Materials on, from or under any properties
or facilities.
2.21 INTERESTED PARTY TRANSACTIONS. No officer, director,
employee or consultant of FSA nor any member of such person's immediate family
currently has or has had, either directly or indirectly, a material interest in:
(i) any person or entity which purchases from or sells, licenses or furnishes to
FSA any goods, property, technology or intellectual or other property rights or
services; or (ii) any contract or agreement to which FSA is a party or by which
it may be bound or affected.
2.22 BOARD AND SHAREHOLDER APPROVAL. The Board of Directors
and Shareholder of FSA have unanimously approved this Agreement, the Transaction
Documents, and the Combination.
2.23 DISCLOSURE. The representations and warranties made by
FSA and Shareholder in this Agreement, the Transaction Documents, any financial
statement, certificate or exhibit prepared and furnished or to be prepared and
furnished by FSA or its representatives pursuant hereto or in connection with
the transactions contemplated hereby, when taken together, do not contain any
untrue statement of a material fact when made, or omit to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were made or
furnished.
2.24 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material
agreement, judgment, injunction, order or decree binding upon FSA that has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of FSA, any acquisition of property by FSA or
the conduct of business by FSA as currently conducted or as proposed to be
conducted.
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2.25 POOLING MATTERS. Neither FSA nor any of its affiliates
has, to FSA's and Shareholder's knowledge, and based upon consultation with its
independent auditors, taken or agreed to take any action that (without giving
effect to this Agreement, the transactions contemplated hereby or actions
related thereto, or any action taken or agreed to be taken by McAfee or any of
its affiliates) would adversely affect the ability of McAfee to account for the
business combination to be effected by the Combination as a "pooling of
interests" under US GAAP.
2.26 BOOKS AND RECORDS. The books, records and accounts of FSA
(a) have been maintained at FSA's principal place of business in accordance with
good business practices on a basis consistent with prior years, (b) are stated
in reasonable detail and accurately and fairly reflect the transactions and
dispositions of the assets of FSA, and (c) accurately and fairly reflect the
basis for the FSA Financial Statements. FSA has devised and maintains a system
of internal accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management's general or
specific authorization, and (b) transactions are recorded as necessary (i) to
permit preparation of financial statements in conformity with Canadian GAAP, US
GAAP or any other criteria applicable to such statements and (ii) to maintain
accountability for assets.
2.27 GOVERNMENT CONTRACTS. All representations, certifications
and disclosures made by FSA to any Government Contract Party (as defined below)
have been in all material respects current, complete and accurate at the times
they were made. FSA has no knowledge of, and has no reason to know of, any acts,
omissions or noncompliance with regard to any applicable public contracting
statute, regulation or contract requirement (whether express or incorporated by
reference) relating to any of FSA's contracts with any Government Contract Party
(as defined below) in either case that have led to or could lead to, either
before or after the Closing Date, (a) any claim or dispute involving FSA and/or
McAfee as successor in interest to FSA and any Government Contract Party, or (b)
any suspension, debarment or contract termination, or proceeding related
thereto. FSA has no knowledge of, and has no reason to know of, any act or
omission that relates to the marketing, licensing or selling to any Government
Contract Party of any of FSA technical data and computer software and that has
led to or could lead to, either before or after the Closing Date (as defined in
Section 7.1 below), any Material Adverse Effect on any of FSA's rights in and to
its technical data and computer software. Except for (i) Canadian or provincial
government incentives for certain nonmaterial employees, and (ii) research tax
credits, all of FSA's development of technical data and computer software was
developed exclusively at private expense. For purposes of this Agreement, the
term "GOVERNMENT CONTRACT PARTY" means any independent or executive agency,
division, subdivision, audit group or procuring office of Canadian federal or
provincial, or United States federal government, including any prime contractor
of either such federal government and any higher level subcontractor of a prime
contractor of either such federal government, and including any employees or
agents thereof, in each case acting in such capacity.
2.28 LABOR MATTERS. FSA is not a party to any agreement with
respect to its employees with any labor organization, union, group or
association and there are no employee unions (nor any other similar labor or
employee organizations) under local statutes, custom or
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practice. In the past five years, FSA has not experienced any attempt by
organized labor or its representatives to make FSA conform to demands of
organized labor relating to its employees or to enter into a binding agreement
with organized labor that would cover the employees of FSA. There is no labor
strike or labor disturbance pending or, threatened against FSA, nor is any
grievance currently being asserted, and in the past five years FSA has not
experienced a work stoppage or other labor difficulty. FSA is in material
compliance with all applicable laws respecting employment practices, employment
documentation, terms and conditions of employment and wages and hours and is not
and has not engaged in any unfair labor practice. The names, ages, years of
service, title, current annual salary rates or current hourly wages of all
present employees of FSA, and the earnings for each of such employees for the
1995 calendar year have been provided to McAfee and such information is true and
correct. There is no unfair labor practice charge or complaint against FSA
pending. The employment of each employee of FSA is terminable at FSA's will,
with or without cause, subject to such notice requirements or financial payments
in lieu thereof as may be required by law.
2.29 SEVERANCE ARRANGEMENTS. Except as required by applicable
law, FSA has not entered into any severance or similar arrangement in respect of
any employees that provides for any obligation (absolute or contingent) of FSA
or any other person to make any payment to any such employee following
termination of employment.
2.30 BANKING RELATIONSHIPS. The FSA Disclosure Schedule sets
forth a complete and accurate description of all arrangements that FSA has with
any banks, savings and loan associations or other financial institutions
providing for checking accounts, safe deposit boxes, borrowing arrangements, and
certificates of deposit or otherwise, indicating in each case account numbers,
if applicable, and the person or persons authorized to act or sign on behalf of
FSA in respect of any of the foregoing.
2.31 TRADE REGULATION. FSA has not within the past three years
terminated its relationship with or refused to ship FSA Products to any dealer,
distributor, OEM, third party marketing entity or customer which had theretofore
paid or been obligated to pay FSA in excess of Ten Thousand Dollars ($10,000)
over any consecutive twelve (12) month period. All of the prices charged by FSA
in connection with the marketing or sale of any products or services have been
in compliance with all applicable laws and regulations. No claims have been
communicated or, threatened against FSA with respect to wrongful termination of
any dealer, distributor or any other marketing entity, discriminatory pricing,
price fixing, unfair competition, false advertising, or any other material
violation of any laws or regulations relating to anti-competitive practices or
unfair trade practices of any kind, and, to FSA's knowledge, no specific
situation, set of facts, or occurrence provides any valid basis for any such
claim.
2.32 WARRANTY. There are no pending warranty claims against
FSA as to any FSA Products.
3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER.
Shareholder hereby represents and warrants to McAfee and Sub that:
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3.1 PURCHASE FROM OWN ACCOUNT. The Exchangeable Shares will be
acquired for investment for the Shareholder's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that the Shareholder has no present intention of selling, granting any
participation in, or otherwise distributing the Exchangeable Shares (or the
McAfee Common Stock issuable upon exchange of the Exchangeable Shares)
(collectively, the "Securities"). By executing this Agreement, Shareholder
further represents that the Shareholder does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities.
3.2 RESTRICTED SECURITIES. Shareholder understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act,
only in certain limited circumstances. In addition, the Shareholder represents
that it is familiar with Rule 144 promulgated under the Act, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.3 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, the Shareholder further agrees not
to make any disposition of all or any portion of the McAfee Common Stock issued
upon exchange of the Exchangeable Shares unless and until:
(a) There is then in effect a registration statement under
the Securities Act governing such proposed disposition and such disposition is
made in accordance with such registration statement; or
(b) The Shareholder shall have notified McAfee of the
proposed disposition and shall have furnished McAfee with a detailed statement
of the circumstances surrounding the proposed disposition, and if reasonably
requested by McAfee, the Shareholder shall have furnished McAfee with an opinion
of counsel, reasonably satisfactory to McAfee that such disposition will not
require registration of such shares under the Securities Act. It is agreed that
McAfee will not require opinions of counsel for transactions made pursuant to
Rule 144 except in unusual circumstances.
3.4 LEGENDS. It is understood that the certificates evidencing
the Securities may bear the following legend:
"These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold,
offered for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
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4. REPRESENTATIONS AND WARRANTIES OF MCAFEE AND SUB. Except as set
forth in a letter dated the date of this Agreement and delivered by McAfee and
Sub to FSA and Shareholder concurrently herewith (the "McAFEE DISCLOSURE
LETTER"), McAfee and Sub hereby represent and warrant to FSA and Shareholder
that:
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. McAfee and
Sub are corporations duly organized, validly existing and in good standing under
the laws of the jurisdiction of their incorporation, have all requisite
corporate power and authority to own, lease and operate their respective
properties and to carry on their respective business as now being conducted, and
are duly qualified and in good standing to do business in each jurisdiction in
which the nature of their business or the ownership or leasing of their
properties makes such qualification necessary, other than in such jurisdictions
where the failure so to qualify would not have a Material Adverse Effect on
McAfee or Sub.
4.2 AUTHORITY.
(a) CORPORATE ACTION. McAfee and Sub have all requisite
corporate power and authority to enter into this Agreement, the Transaction
Documents, and to perform their respective obligations hereunder and thereunder,
and to consummate the Combination. The execution and delivery of this Agreement
and the Transaction Documents by McAfee and, if applicable, Sub, and the
consummation by McAfee and Sub of the Combination and the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of McAfee and, if applicable, Sub. This Agreement and the
Transaction Documents have been duly executed and delivered by McAfee and, if
applicable, Sub, and this Agreement and the Transaction Documents are the valid
and binding obligations of McAfee and, if applicable, Sub, enforceable in
accordance with their respective terms, except that such enforceability may be
subject to (i) bankruptcy, insolvency, reorganization or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
(b) NO CONFLICT. Neither the execution, delivery and performance
of this Agreement, or the Transaction Documents by McAfee and, if applicable,
Sub, nor the consummation of the transactions contemplated hereby or thereby by
McAfee and Sub nor compliance with the provisions hereof or thereof by McAfee
and Sub will: (i) conflict with, or result in any violations of the certificate
of incorporation or bylaws of McAfee or Sub; or (ii) result in any breach or
cause a default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, amendment, cancellation or acceleration of
any obligation contained in, or the loss of any benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of McAfee or Sub or require any consent, waiver, approval,
or license, under any term, condition or provision of any loan or credit
agreement, note, bond, mortgage, indenture, lease, license, distribution,
supply, marketing, or other agreement or instrument, or judgment, order,
decree, statute, law, ordinance, rule, permit, concession, franchise or
regulation applicable to McAfee or Sub or their respective business, properties
or assets, other than any such breaches, defaults, losses, liens, security
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interests, charges or encumbrances which, individually or in the aggregate,
would not have a Material Adverse Effect on McAfee or Sub.
(c) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained by McAfee or Sub in connection with the
execution and delivery of this Agreement, or the Transaction Documents or the
consummation of the transactions contemplated hereby or thereby, except for
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on McAfee.
4.3 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation against McAfee pending or, to McAfee's knowledge,
threatened, which would be reasonably likely to have a Material Adverse Effect
on McAfee or on the ability of McAfee to consummate the transactions
contemplated by this Agreement and the Transaction Documents; nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against McAfee.
4.4 SEC FILINGS.
(a) McAfee has timely filed all forms, reports and
documents required to be filed by McAfee with the Securities and Exchange
Commission ("SEC") under the Securities and Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), since January 1995 (collectively, the "McAFEE SEC
REPORTS") and has made such McAfee SEC Reports available to FSA. The McAfee SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Exchange Act, 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 in such
McAfee SEC Reports or necessary in order to make the statements in such McAfee
SEC Reports, in the light of the circumstances under which they were made, not
misleading. McAfee's annual report for 1995 on Form 10-K, as filed with the SEC
on April 1, 1996 and all subsequent filings by McAfee with the SEC required
under Section 13 of the Exchange Act, when taken as a whole (collectively, the
"RECENT SEC REPORTS") do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such Recent SEC Reports
or necessary in order to make the statements in such Recent SEC Reports, in
light of the circumstances under which they were made, not misleading.
(b) The financial statements of McAfee included in the
McAfee SEC Reports complied as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with US GAAP applied
on a consistent basis during the periods involved (except as may have been
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q promulgated by the SEC) and fairly present (subject, in
the case of the unaudited statements, to normal, year-end audit adjustments) the
consolidated financial position of McAfee and its consolidated subsidiaries as
at the respective dates thereof
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and the consolidated results of their operations and cash flows for the
respective periods then ended.
4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31,
1996, except as contemplated in this Agreement, there has not occurred, directly
or indirectly, contingent or otherwise:
(a) any change in the condition (financial or otherwise),
properties, assets, liabilities, businesses, operations or results of operations
of McAfee, that could reasonably be expected to have a Material Adverse Effect
on McAfee;
(b) any amendments or changes in the certificate of
incorporation or bylaws of McAfee; or
(c) any agreement or arrangement made by McAfee to take
any action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Agreement untrue or incorrect as of
the date when made.
4.6 RESERVE FOR ISSUANCE. As of the Effective Date, McAfee
shall have reserved for issuance such number of shares of McAfee Common Stock as
shall be necessary to give effect to the exercise of exchangeable share rights
and assumptions of options contemplated hereby and such issuance from time to
time shall have been duly approved by all requisite corporate action by McAfee
in accordance with applicable law and McAfee's certificate of incorporation and
bylaws.
5. FSA COVENANTS.
5.1 ADVICE OF CHANGES. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, FSA will promptly advise McAfee in
writing (a) of any event occurring subsequent to the date of this Agreement that
would render any representation or warranty of FSA contained in this Agreement,
if made on or as of the date of such event or the Closing Date, untrue or
inaccurate in any material respect, (b) of any occurrence having a Material
Adverse Effect on FSA, and (c) of any breach by FSA of any covenant or agreement
contained in this Agreement.
5.2 MAINTENANCE OF BUSINESS. During the period from the date
of this Agreement until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, FSA will use its diligent
commercial efforts to carry on and preserve its business and its relationships
with customers, suppliers, distributors, employees, consultants and others in
substantially the same manner as it has prior to the date hereof. If FSA becomes
aware of any material deterioration in the relationship with any customer,
supplier, distributor, employee or consultant, the termination of which could
have a Material Adverse Effect on FSA, FSA will promptly bring such information
to the attention of McAfee in writing and, if requested by McAfee, FSA will
exert its best efforts to restore the relationship.
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5.3 CONDUCT OF BUSINESS. During the period from the date of
this Agreement until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, FSA will continue to conduct its
business and maintain its business relationships in the ordinary and usual
course and will not (other than as contemplated in Section 1 of this Agreement),
without the prior consent of McAfee:
(a) borrow any money except for amounts that are not in
the aggregate material to the financial condition of FSA;
(b) enter into any material transaction not in the
ordinary course of its business;
(c) encumber or permit to be encumbered any of its assets
except in the ordinary course of its business consistent with past practice;
(d) dispose of any material portion of its assets;
(e) enter into any lease or contract for the purchase or
sale or license of any property, real or personal, except in the ordinary course
of business consistent with past practice;
(f) fail to maintain its equipment and other assets in
good working condition and repair according to the standards it has maintained
to the date of this Agreement, subject only to ordinary wear and tear;
(g) pay any bonus, increased salary or special
remuneration to any officer, director, employee or consultant (except for normal
salary increases consistent with past practices not to exceed 10% per year and
except pursuant to existing arrangements previously disclosed to McAfee), or
enter into or vary the terms of any employment, consulting or severance
agreement with any such person, pay any severance or termination pay, grant any
stock option or issue any restricted stock, adopt any new benefit plan, modify
any FSA Plan, or agree to do any of the foregoing, whether orally or in writing;
(h) change accounting methods;
(i) declare, set aside or pay any cash or stock dividend
or other distribution in respect of capital stock, or redeem or otherwise
acquire any of its capital stock;
(j) amend or terminate any material contract, agreement or
license to which it is a party;
(k) lend any amount to any person or entity, other than
advances for travel and expenses which are incurred in the ordinary course of
business consistent with past practice and documented by receipts for the
claimed amounts;
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(l) guarantee or act as a surety for any obligation except
for obligations in amounts that are not material in the aggregate;
(m) waive or release any right or claim except for the
waiver or release of non-material claims in the ordinary course of business,
consistent with past practice or the waiver or release of rights or claims set
forth in the FSA Disclosure Letter;
(n) issue or sell any shares of its capital stock of any
class (except upon the exercise of a bona fide option or warrant currently
outstanding or permitted to be granted under Section 5.3(g)), or any other of
its securities, or issue or create any warrants, obligations, subscriptions,
options (except as expressly permitted under Section 5.3(g)), convertible
securities or other commitments to issue shares of capital stock, or accelerate
the vesting of any outstanding option or other security;
(o) split or combine the outstanding shares of its capital
stock of any class or enter into any recapitalization or agreement affecting the
number or rights of outstanding shares of its capital stock of any class or
affecting any other of its securities;
(p) merge, consolidate or reorganize with, or acquire any
entity, or enter into any agreement to do any of the foregoing;
(q) amend its articles of incorporation or bylaws except
as contemplated by this Agreement;
(r) license any FSA IP Rights except in the ordinary
course of business consistent with past practice;
(s) agree to any audit assessments by any Tax authority;
(t) change any insurance coverage or issue any
certificates of insurance except in the ordinary course of business consistent
with past practice; or
(u) agree to do or enter into negotiations with respect
to, any of the things described in the preceding clauses in this Section 5.3.
5.4 FSA AFFILIATE AGREEMENT. To ensure that the Combination
will be accounted for as a "pooling of interests" and to ensure compliance with
Rule 145 of the rules and regulations promulgated by the SEC under the
Securities Act, Shareholder shall concurrently sign and deliver to McAfee the
FSA Affiliate Agreement in the form of Exhibit 5.4 (the "FSA AFFILIATE
AGREEMENT") agreeing that Shareholder will make no disposition of FSA capital
stock or McAfee Common Stock from the date hereof until McAfee shall have
publicly released its first report of quarterly financial statements that
include the combined financial results of FSA and McAfee for a period of at
least 30 days, and agreeing to certain other restrictions as set forth in such
FSA Affiliate Agreement.
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5.5 REGULATORY APPROVALS. FSA will promptly execute and file,
or join in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or consent of
any Governmental Entity, which may be reasonably required, or which McAfee may
reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement and the Transaction Documents. FSA will promptly
obtain all such authorizations, approvals and consents.
5.6 ACCESS TO INFORMATION. FSA will allow McAfee and its
agents reasonable access to the files, books, records and offices of FSA,
including, without limitation, any and all information relating to FSA's Taxes,
commitments, contracts, leases, licenses and real, personal and intangible
property and financial condition. FSA will cause its accountants to cooperate
with McAfee and its agents in making available to McAfee all financial
information reasonably requested, including, without limitation, the right to
examine all working papers pertaining to all Tax Returns and financial
statements prepared or audited by such accountants.
5.7 SATISFACTION OF CONDITIONS PRECEDENT. During the term of
this Agreement, FSA will use its best efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Section 9, and FSA
will use its best efforts to cause the Combination and the other transactions
contemplated by this Agreement to be consummated.
5.8 NO OTHER NEGOTIATIONS. From and after the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, FSA shall not, and shall not permit its
officers, employees, representatives, agents and affiliates to, directly or
indirectly, (i) solicit, initiate or engage in discussions or negotiations with
any person, encourage submission of any inquiries, proposals or offers by, or
take any other action intended or designed to facilitate the efforts of any
person, other than McAfee, relating to the possible acquisition of FSA (whether
by way of arrangement, amalgamation, purchase or exchange of capital stock,
purchase of assets or otherwise) or any material portion of its capital stock or
assets (with any such efforts by any such person, including a firm proposal to
make such an acquisition, to be referred to as an "ACQUISITION PROPOSAL"), (ii)
provide non-public information with respect to FSA or afford any access to the
properties, books or records of FSA, to any person, other than McAfee, relating
to a possible Acquisition Proposal by any person other than McAfee, (iii) make
or authorize any statement, recommendation or solicitation in support of any
possible Acquisition Proposal by any person, other than by McAfee, or (iv) enter
into an agreement with any person, other than McAfee, providing for a possible
Acquisition Proposal. FSA and its respective directors, officers, employees,
representatives, agents and affiliates, shall immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
5.9 PUBLIC DISCLOSURE. FSA shall not issue any press release
or otherwise making any public statement with respect to the Combination or this
Agreement without the prior written consent of McAfee.
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6. McAFEE COVENANTS.
6.1 ADVICE OF CHANGES. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, McAfee will promptly advise FSA and
Shareholder in writing (a) of any event occurring subsequent to the date of this
Agreement that would render any representation or warranty of McAfee contained
in this Agreement, if made on or as of the date of such event or the Closing
Date, untrue or inaccurate in any material respect, (b) of any occurrence which
would have a Material Adverse Effect on McAfee, and (c) of any breach by McAfee
of any covenant or agreement contained in this Agreement.
6.2 REGULATORY APPROVALS. McAfee will promptly execute and
file, or join in the execution and filing, of any application or other document
that may be necessary in order to obtain the authorization, approval or consent
of any Governmental Entity, which may be reasonably required, or which FSA may
reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement and the Transaction Documents. McAfee will
promptly obtain all such authorizations, approvals and consents.
6.3 NECESSARY CONSENTS. During the term of this Agreement,
McAfee will use its best efforts to obtain such written consents, waivers and
approvals and take such other actions as may be necessary or appropriate to
allow the consummation of the transactions contemplated hereby and to allow FSA
to carry on its business after the Effective Time.
6.4 SATISFACTION OF CONDITIONS PRECEDENT. During the term of
this Agreement, McAfee will use its best efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Section 8, and
McAfee will use its best efforts to cause the Combination and the other
transactions contemplated by this Agreement to be consummated.
6.5 EMPLOYMENT AND EMPLOYEE BENEFITS. McAfee hereby agrees
that from and after the Closing, and for a period of at least 12 months
thereafter, McAfee will, subject to restrictions of applicable law, provide
benefits (other than salary and bonus) to the employees who immediately prior to
the Closing were in the employ of FSA that are in the aggregate substantially
equivalent in value to those benefits that are provided to McAfee employees
under McAfee's employee benefit plans. Nothing in this Section 6.5 shall be
construed to create obligations on the part of McAfee or FSA to provide
continued employment to any employee after the Closing.
6.6 McAFEE AFFILIATE AGREEMENTS. To ensure that the
Combination will be accounted for as a "pooling of interests," McAfee's
affiliates will, prior to Closing, sign and deliver to McAfee the McAfee
Affiliates Agreement in the form of Exhibit 6.6 (the "McAFEE AFFILIATE
AGREEMENTS") agreeing that such persons will make no disposition of McAfee
Common Stock from the date 30 days prior to the Effective Time until McAfee
shall have publicly released its first report of quarterly financial statements
that include the combined financial results of FSA and McAfee for a period of at
least 30 days, and agreeing to certain other restrictions as set forth in such
McAfee Affiliate Agreements.
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7. CLOSING MATTERS.
7.1 THE CLOSING. Subject to the termination of this Agreement
as provided in Section 10 below, the Closing of the transactions contemplated by
this Agreement (the "CLOSING") will take place at the offices of Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP, 600 Hansen Way, Palo Alto,
California 94304 on or before August 30, 1996 (the "CLOSING DATE"), at a time to
be mutually agreed upon by the parties, which date shall be no later than the
third business day after all conditions to Closing set forth herein shall have
been satisfied or waived, unless another place, time and date is mutually
selected by FSA and McAfee.
7.2 ANCILLARY DOCUMENTS/RESERVATION OF SHARES.
(a) Provided all other conditions of this Agreement have
been satisfied or waived, FSA shall, on or before the Closing Date, file
Articles of Amendment pursuant to Section 167(1) of the Business Corporations
Act (Alberta) as part of the Combination, such Articles of Amendment to contain
share conditions for Exchangeable Shares substantially in the form of those
contained in Exhibit 7.2(a) hereto.
(b) On the Effective Date:
(i) McAfee shall execute and deliver a Support
Agreement containing the terms and conditions set forth in Exhibit 7.2(b)(i)
attached hereto (the "SUPPORT AGREEMENT"), together with such other terms and
conditions as may be agreed to by the parties hereto acting reasonably; and
(ii) McAfee and a trustee to be selected by the
Shareholder, which shall be satisfactory to McAfee, acting reasonably, shall
execute and deliver a Voting and Exchange Trust Agreement containing the terms
and conditions set forth in Exhibit 7.2(b)(ii) attached hereto (the "VOTING AND
EXCHANGE TRUST AGREEMENT"), together with such other terms and conditions as may
be agreed to by the parties hereto acting reasonably.
(c) On or before the Effective Date, McAfee will reserve
for issuance such number of shares of McAfee Common Stock as shall be necessary
to give effect to the exchanges and assumptions of options contemplated hereby.
7.3 SUBSTITUTION OF FSA OPTIONS. Prior to the Effective Time,
FSA shall cause an Option Exchange Agreement, in the form attached hereto as
Exhibit 7.3 hereto (the "OPTION EXCHANGE AGREEMENT"), to be executed and
delivered by all holders of FSA Options.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF FSA AND SHAREHOLDER.
The obligations of FSA and Shareholder hereunder are subject
to the fulfillment or satisfaction on or before the Closing, of each of the
following conditions (any one or more of which may be waived by FSA, but only in
a writing signed by FSA):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of McAfee set forth in Section 4 (as qualified by
the McAfee Disclosure Letter) shall be true and accurate in all material
respects on and as of the Closing. FSA shall receive a certificate to such
effect executed by McAfee's Chief Executive Officer and Chief Financial Officer.
8.2 COVENANTS. McAfee shall have performed and complied in all
material respects with all of its covenants required to be performed by it under
this Agreement on or before the Closing, and FSA shall receive a certificate to
such effect signed by McAfee's Chief Executive Officer and Chief Financial
Officer.
8.3 DELIVERY OF RELATED DOCUMENTS. The agreements and actions
contemplated in Section 7.2(b) and (c) shall have been executed and delivered or
completed, as applicable.
8.4 POOLING OPINION. FSA shall have received from Ernst &
Young an opinion, in form and substance satisfactory to FSA and McAfee, that FSA
has not taken any action which would prevent the Combination from being treated
as a "pooling of interests" for accounting purposes.
8.5 REGISTRATION RIGHTS AGREEMENT. McAfee and Shareholder
shall have executed and delivered to each other the Registration Rights
Agreement.
8.6 COMPLIANCE WITH LAW. There shall be no order, decree or
ruling by any governmental agency or threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Combination, which would prohibit or render illegal the transactions
contemplated by this Agreement.
8.7 GOVERNMENT CONSENTS. There shall have been obtained on or
before the Closing such material permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Combination
by any regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken.
8.8 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 Combination or limiting or
restricting McAfee's or FSA's conduct or operation of the business of McAfee or
FSA after the Combination shall have been issued, nor shall any proceeding
brought by a domestic administrative agency or commission or other
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domestic Governmental Entity, seeking any of the foregoing be pending; nor shall
there be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Combination which makes the
consummation of the Combination illegal.
8.9 OPINIONS OF McAFEE'S COUNSEL. FSA and Shareholder shall
have received from Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
and from Blake, Cassels & Graydon, counsel to McAfee, opinions in customary form
in connection with transactions such as the Combination and Shareholder shall
have received from Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
an opinion as to the application of Section 16(b) of the Exchange Act to the
exchange of his Exchangeable Shares and all such opinions shall be reasonably
satisfactory to FSA, Shareholder and their counsel.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF MCAFEE.
The obligations of McAfee hereunder are subject to the
fulfillment or satisfaction on or before the Closing, of each of the following
conditions (any one or more of which may be waived by McAfee, but only in a
writing signed by McAfee):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of FSA and Shareholder set forth in Sections 2
and 3 (as qualified by the FSA Disclosure Letter) shall be true and accurate in
all material respects on and as of the Closing, and McAfee shall receive a
certificate to such effect executed by Shareholder and FSA's Chief Executive
Officer.
9.2 COVENANTS. FSA shall have performed and complied in all
respects with all of its covenants required to be performed by it under this
Agreement on or before the Closing, and McAfee shall receive a certificate to
such effect signed by FSA's Chief Executive Officer and Chief Financial Officer.
9.3 COMPLIANCE WITH LAW. There shall be no order, decree or
ruling by any governmental agency or threat thereof, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Combination, which would prohibit or render illegal the transactions
contemplated by this Agreement.
9.4 GOVERNMENT CONSENTS. There shall have been obtained on or
before the Closing such material permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Combination
by any regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken.
9.5 OPINION OF FSA'S COUNSELS. McAfee shall have received from
Macleod Dixon, counsel to FSA, opinions in customary form in connection with
transactions such as the Combination that are reasonably satisfactory to McAfee
and its counsel.
9.6 DOCUMENTS. McAfee shall have received all written
consents, assignments, waivers, authorizations or other certificates necessary
to provide for the
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continuation in full force and effect of any and all material contracts and
leases of FSA and for FSA to consummate the transactions contemplated hereby.
9.7 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 Combination or limiting or
restricting McAfee's or FSA's conduct or operation of the business of McAfee or
FSA after the Combination shall have been issued, nor shall any proceeding
brought by a domestic administrative agency or commission or other domestic
Governmental Entity, seeking any of the foregoing be pending; nor shall there be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Combination which makes the consummation of
the Combination illegal.
9.8 TENDER OF FSA OPTIONS. Each of the holders of FSA Options
shall have executed and delivered an Option Exchange Agreement to McAfee.
9.9 POOLING OPINION. McAfee shall have received from Coopers &
Lybrand L.L.P. an opinion, in form and substance satisfactory to McAfee, that
the Combination will be treated as a "pooling of interests" for accounting
purposes.
9.10 AFFILIATE AGREEMENT. McAfee shall have received executed
originals of the FSA Affiliate Agreement.
9.11 ESCROW AGREEMENT. The Escrow Agreement, in the form
attached hereto as Exhibit 9.11, shall be executed and delivered by McAfee, the
Escrow Agent and the Shareholder.
9.12 REGULATORY COMPLIANCE AND APPROVAL. All permits,
consents, approvals and waivers from governmental authorities necessary to the
consummation of this Agreement and the transactions contemplated hereby and for
the operation of the business by FSA after the consummation of the Combination
and the ownership of the FSA IP Rights after the consummation of the Combination
shall have been obtained.
9.13 NO ISSUANCE OF FSA STOCK. Shareholder shall be the sole
shareholder of FSA.
9.14 DELIVERY OF AUDITED FINANCIAL STATEMENTS. FSA shall have
furnished McAfee with FSA's audited financial statements (balance sheet,
statement of operations, statement of shareholder's equity and statement of cash
flows), including notes thereto at April 30, 1996, and for the fiscal year then
ended (the "Audited Financial Statements").
9.15 NECESSARY CONSENTS. FSA will have received all written
consents, waivers and approvals and taken such other actions necessary or
appropriate to allow the consummation of the transactions contemplated hereby
and to allow FSA to carry on its business after the Effective Time in the same
manner immediately prior to the Effective Time, including any consents, waivers
and approvals under FSA Material Contracts.
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9.16 NON-COMPETITION AGREEMENT. The Non-Competition Agreement,
in the form attached hereto as Exhibit 9.16, shall be executed and delivered by
Shareholder, FSA and McAfee.
9.17 EMPLOYMENT AGREEMENT. The Employment Agreement, in the
form attached hereto as Exhibit 9.17, shall be executed and delivered by McAfee,
FSA and Shareholder.
10. TERMINATION OF AGREEMENT.
10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written agreement of FSA and McAfee; or
(b) by any of McAfee, Shareholder or FSA, if the
Combination shall not have been consummated by September 30, 1996; or
(c) by any of McAfee, Shareholder or FSA, if a court of
competent jurisdiction or other Governmental Entity shall have issued a
nonappealable final order, decree or ruling or taken any other action, in each
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Combination, except, if the party relying on such order, decree
or ruling or other action has not materially complied with its obligations under
this Agreement; or
(d) by McAfee, if any of the conditions to McAfee's
obligations to effect the Combination which are specified in Section 9 have not
been met or waived by McAfee at such time as such condition is no longer
reasonably capable of satisfaction (provided McAfee is not otherwise in material
breach of its representations, warranties, covenants or agreements under this
Agreement); or
(e) by FSA or Shareholder, if any of the conditions to
FSA's or Shareholder's obligation to effect the Combination which are specified
in Section 8 have not been met or waived by FSA and Shareholder at such time as
such condition is no longer reasonably capable of satisfaction (provided neither
FSA nor Shareholder is otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement); or
(f) by McAfee, Shareholder or FSA, if there has been a
material breach of any representation, warranty, covenant or agreement on the
part of the other party set forth in this Agreement, which breach shall not have
been cured, in the case of a representation or warranty, prior to the Closing
or, in the case of a covenant or agreement, within 10 business days following
receipt by the breaching party of written notice of such breach from the other
party.
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10.2 NOTICE OF TERMINATION. Any termination of this Agreement
under Section 10.1 above will be effective by the delivery of written notice by
the terminating party to the other party hereto.
10.3 EFFECT OF TERMINATION. In the case of any termination of
this Agreement as provided in this Section 10, this Agreement shall be of no
further force and effect (except as provided in Section 12) but nothing herein
shall relieve any party from liability for any breach of this Agreement. No
termination of this Agreement shall affect the obligations contained in the
separate Nondisclosure Agreement between FSA and McAfee, dated August 16, 1996
(the "NONDISCLOSURE AGREEMENT").
11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Notwithstanding any investigation conducted before or after
the Closing Date, and notwithstanding any actual or implied knowledge or notice
of any facts or circumstances which McAfee, Shareholder or FSA may have as a
result of such investigation or otherwise, McAfee, Shareholder and FSA will be
entitled to rely upon the other party's representations, warranties and
covenants set forth in this Agreement. The obligations of McAfee, Sub, FSA and
Shareholder with respect to their respective representations, warranties,
agreements and covenants will survive the Closing and continue in full force and
effect until the date 12 months following the Closing Date (the "REPRESENTATION
TERMINATION DATE"); provided, however, that the representations and warranties
of McAfee, Sub, FSA and Shareholder as to all items expected to be encountered
in the audit process shall terminate when McAfee publishes its audited financial
statements for the fiscal year ending December 31, 1996 (the "FINANCIAL
TERMINATION DATE").
12. INDEMNIFICATION AND ESCROW.
12.1 INDEMNITY. From and after the Effective Time of the
Combination, and subject to the provisions of Section 11, McAfee and Sub shall
be indemnified and held harmless by Shareholder against, and reimbursed for, any
actual liability, damage, loss, obligation, demand, judgment, fine, penalty,
cost or expense (excluding any indirect or consequential damages to McAfee or
Sub (such as lost profits), other than any such damages resulting from
injunctive relief granted as to an intellectual property claim, but including
reasonable attorneys' fees (excluding costs relating to in-house attorneys) and
expenses, and the costs of investigation (excluding in-house costs of
investigation) incurred in defending against or settling such liability, damage,
loss, cost or expense or claim therefor and any amounts paid in settlement
thereof) imposed on or reasonably incurred by McAfee or Sub as a result of any
misrepresentation or breach of any representation, warranty, agreement or
covenant on the part of one or both of FSA and Shareholder under this Agreement
(collectively the "Damages"). Damages in each case shall be net of the amount of
any insurance proceeds, indemnity and contribution actually recovered by McAfee
or Sub. "Damages" as used herein is not limited to matters asserted by third
parties, but includes Damages incurred or sustained by McAfee or Sub in the
absence of claims by a third party. For purposes of this subsection 12.1 and
Section 12.2, the term "McAfee" shall include FSA and the business of FSA after
the Effective Time. Neither
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McAfee nor Sub shall have the right to be indemnified pursuant to this Section
12 unless and until McAfee and Sub shall have incurred since the date of this
Agreement aggregate Damages in the amount of at least $100,000 whereupon McAfee
and Sub shall be entitled to indemnity for all Damages as provided herein.
12.2 ESCROW FUND. As security for the indemnity provided for
in Section 12.1 hereof, 10% of the aggregate Exchangeable Shares to be received
pursuant to Section 1.1(c) hereof (the "Escrow Shares") shall be deposited with
and held in escrow by Cupertino National Bank and Trust (or other institution
selected by McAfee) as escrow agent (the "Escrow Agent"), as of the Closing
Date, such deposit to constitute an escrow fund (the "Escrow Fund") to be
governed by the terms set forth in this Agreement and the provisions of an
Escrow Agreement to be executed and delivered pursuant to Section 9.11. Upon
compliance with the terms hereof and subject to the provisions of this Section
12, McAfee shall be entitled to obtain indemnity from the Escrow Fund for
Damages covered by the indemnity provided for in Section 12.1 of this Agreement.
McAfee shall compensate the Escrow Agent for its services in maintaining the
Escrow Fund. Unless and until the Escrow Shares are delivered to FSA in
accordance with the provisions of this Section 12 and the Escrow Agreement, all
Exchangeable Shares held in the Escrow Fund shall be registered in the name of
the Shareholder. If, prior to the termination of the Escrow Agreement,
Shareholder desires to exchange the Exchangeable Shares deposited in the Escrow
Fund for shares of McAfee Common Stock, such exchange may only occur if all and
not less than all of the Exchangeable Shares deposited in the Escrow Fund are
exchanged for shares of McAfee Common Stock.
12.3 ESCROW PERIOD. The Escrow Fund shall remain in existence
during the period of time (the "Escrow Period") between the Effective Time and
the Representation Termination Date provided that the Escrow Fund shall remain
subject to any indemnity claim for which notice has been duly given prior to the
applicable Termination Date, and until such time as such indemnity claim has
been finally decided, settled or adjudicated.
12.4 PROTECTION OF ESCROW FUND. The Escrow Agent shall hold
and safeguard the Escrow Fund during the Escrow Period, in accordance with the
terms of this Agreement and not as the property of McAfee or FSA, and shall
hold and dispose of the Escrow Fund only in accordance with the terms of the
Escrow Agreement.
12.5 CLAIMS UPON ESCROW FUND. Upon receipt by the Escrow Agent
on or before the Representation Termination Date of a certificate signed by any
officer of McAfee or Sub (an "Officer's Certificate"):
(a) stating that McAfee has paid or properly accrued or
knows of facts giving rise to a reasonable probability that it shall have to pay
or accrue Damages in an aggregate stated amount with respect to which McAfee or
Sub is entitled to payment from the Escrow Fund pursuant to this Agreement (the
"Reduction Amount");
(b) specifying in reasonable detail the individual items
of Damages included in the amount so stated, the date each such item was paid or
properly accrued, or the
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basis for such anticipated liability and the specific nature of the
misrepresentation or breach to which such item is related; and
(c) specifying the number of Escrow Shares to be
delivered to FSA which in the aggregate shall equal the Reduction Amount (based
upon the value of each Escrow Share as of the Closing Date as determined based
upon the average closing price of the McAfee Common Stock as traded on the
Nasdaq National Market for the 10 consecutive trading days ending one trading
day prior to the Closing Date (the "Average Share Price")); provided, however,
that if the Escrow Fund is comprised of McAfee Common Stock, then the Average
Share Price shall be adjusted for stock dividends, stock splits and combinations
which occur after the Effective Date), the Escrow Agent shall, subject to the
provisions of Section 12.6 of this Agreement, deliver to FSA, at a price of
$0.01 per Exchangeable Share, that number of Escrow Shares specified in the
Officer's Certificate. The number of Escrow Shares delivered to FSA in
accordance with this Section 12 shall be deemed to be a reduction in the number
of the Exchangeable Shares issued to Shareholder in the Combination. In
addition, the amount of Damages claimable by McAfee in the Officer's Certificate
shall be deemed to be reduced by an amount equal to the Reduction Amount.
12.6 OBJECTION TO CLAIMS. At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of the Officer's
Certificate shall be delivered to Shareholder and, for a period of thirty (30)
days after such delivery, the Escrow Agent shall not deliver any Escrow Shares
pursuant to Section 12.5 hereof unless the Escrow Agent shall have received
written authorization from Shareholder to make such delivery. After the
expiration of such thirty (30) day period, the Escrow Agent shall make delivery
of the Escrow Shares in accordance with Section 12.5, provided that no such
delivery may be made if Shareholder shall object in a written statement to the
claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such thirty (30) day
period.
12.7 RESOLUTION OF CONFLICTS.
(a) Memorandum of Agreement. In case Shareholder shall
properly object in writing pursuant to Section 12.6 to the indemnity of McAfee
in respect of any claim or claims made in any Officer's Certificate, Shareholder
and McAfee shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If Shareholder and
McAfee should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Escrow Agent.
The Escrow Agent shall be entitled to rely on any such memorandum and distribute
the Escrow Shares from the Escrow Fund in accordance with the terms thereof.
(b) Arbitration. If no such agreement can be reached
after good faith negotiation within thirty (30) days, either McAfee or
Shareholder may demand arbitration of the matter unless the amount of the damage
or loss at issue is pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
McAfee and Shareholder agree to arbitration, and in such event the matter shall
be settled by arbitration
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conducted by three arbitrators. McAfee and Shareholder shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator.
The decision of the arbitrators so selected as to the validity and amount of any
claim in such Officer's Certificate shall be binding and conclusive upon the
parties to this Agreement, and, notwithstanding anything in Section 12.6, the
Escrow Agent shall be entitled to act in accordance with such decision and make
or withhold payments or distributions out of the Escrow Fund in accordance with
such decision.
(c) Judgment. Any such arbitration shall be held in
Seattle, Washington under the commercial rules then in effect of the American
Arbitration Association ("AAA"). Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. For the purposes of
this Section 12.7(c), in any arbitration hereunder in which any claim or the
amount thereof stated in the Officer's Certificate is at issue, McAfee shall be
deemed to be the non-prevailing party unless the arbitrators award McAfee more
than 50% of the amount in dispute; otherwise, Shareholder shall be deemed to be
the non-prevailing party. The non-prevailing party to an arbitration hereunder
shall pay its own expenses, the fees of each arbitrator, the administrative fee
of AAA, and the expenses (including, without limitation, attorneys' fees and
costs) incurred by the other party to the arbitration.
12.8 THIRD PARTY CLAIMS. In the event McAfee becomes aware of
a third-party claim which McAfee believes may result in a demand against the
Escrow Fund, McAfee shall promptly notify the Shareholder of such claim. McAfee
shall have the right to settle any claim with the written consent of the
Shareholder, which consent shall not be unreasonably withheld. In the event that
the Shareholder has consented to any such settlement, Shareholder shall not have
any power or authority to object to the amount of any claim by McAfee against
the Escrow Fund for indemnity with respect to such settlement. If any proceeding
is commenced, or if any claim, demand or assessment is asserted, in respect of
which a claim for indemnification is or might be made against the Escrow Fund
based on matters other than (i) FSA IP rights or (ii) claims made by customers
of McAfee or FSA, the Shareholder may, at his option, contest or defend any such
action, proceeding, claim, demand or assessment, with counsel selected by the
Shareholder who is reasonably acceptable to McAfee; provided, however, that if
McAfee shall reasonably object to such control, then the Shareholder and McAfee
shall cooperate in the defense of such matter; provided further, that the
Shareholder shall not admit any liability with respect thereto or settle,
compromise, pay or discharge the same without prior written consent of McAfee,
which consent shall not be unreasonably withheld. With respect to any claim for
indemnification based on matters relating to FSA IP Rights or customers of FSA
or McAfee, McAfee shall have the option to defend any such proceedings;
provided, however, that McAfee shall conduct such defense in a commercially
reasonable manner and McAfee shall not admit any liability with respect thereto
or settle, compromise, pay or discharge the same without the prior written
consent of the Shareholder, which consent shall not be unreasonably withheld.
The Shareholder or McAfee, which ever is not controlling the defense of any
matter, shall be entitled, at their expense, to participate in such defense.
12.9 LIMITS. Notwithstanding any other provision in this
Agreement or any rule of law or equity:
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(a) McAfee shall not be entitled to maintain a claim
against Shareholder in respect of any Damages incurred by McAfee as a result of
McAfee's own gross negligence or willful misconduct, or that of its employees,
agents or contractors other than Shareholder, or as a result of any occurrence,
matter or thing the occurrence, existence or non-disclosure of which constitutes
a material breach or failure of any representation, warranty, covenant or other
obligation of McAfee hereunder;
(b) McAfee shall not be entitled to recover any indirect,
consequential or special damages from Shareholder; and
(c) McAfee shall be obligated to use reasonable efforts
to mitigate any Damages sustained by it in connection with any matter for which
Shareholder may have liability to McAfee.
13. MISCELLANEOUS
13.1 GOVERNING LAW. The internal laws of the State of
California (irrespective of its choice of law principles) will govern the
validity of this Agreement, the construction of its terms and the interpretation
and enforcement of the rights and duties of the parties hereto, except to the
extent mandatorily governed by the laws of the Province of Alberta.
13.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. Neither
party hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party hereto. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
13.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and 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 greatest extent possible, the economic,
business and other purposes of the void or unenforceable provision.
13.4 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which will be an original as regards any party
whose signature appears thereon and all of which together will constitute one
and the same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all the parties reflected hereon as signatories.
13.5 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
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
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13.6 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
13.7 EXPENSES. Each party will bear its respective expenses
and legal fees incurred with respect to this Agreement, and the transactions
contemplated hereby. If the Combination is consummated, McAfee will pay the
reasonable accounting (including the cost of FSA's audit for its 1995 fiscal
year) and legal fees and expenses of FSA and Shareholder, in all cases excluding
goods and services but not to exceed $120,000.
13.8 ATTORNEYS' FEES. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including, without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
13.9 NOTICES. All notices and other communications pursuant to
this Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, facsimiled (with confirmed receipt), sent by nationally-recognized
overnight courier or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following address (or at such
other address for a party as shall be specified by like notice):
If to FSA, to:
FSA Corporation
1011 First Street S.W., Suite 508
Calgary, Alberta, CANADA T2R 1J2
Attention: Daniel Freedman
Fax Number: 403-264-0873
With a copy to:
Macleod Dixon
Canterra Tower, 3700
400 Third Avenue, S.W.
Calgary, Alberta, CANADA T2P 4H2
Attention: John T. Ramsay, Esq.
Fax Number: 403-264-5973
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If to McAfee, to:
McAfee Associates, Inc.
2710 Walsh Avenue
Santa Clara, CA 95051-0963
Attention: William L. Larson,
President and Chief Executive Officer
Fax Number: 408-970-9727
With a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
600 Hansen Way, Second Floor
Palo Alto, CA 94304
Attention: Carla S. Newell, Esq.
Fax Number: 415-843-0314
If to Shareholder, to:
Daniel Freedman
1232 17A Street NW
Calgary, Alberta, CANADA T2N 2E7
All such notices and other communications shall be deemed to
have been received (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of a facsimile, upon confirmed receipt of the
communication, (c) in the case of delivery by internationally-recognized
overnight courier, on the business day following dispatch, and (d) in the case
of mailing, on the fifth business day following such mailing.
13.10 CONSTRUCTION OF AGREEMENT. This Agreement has been
negotiated by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against either party. A reference to a
Section or an exhibit will mean a Section in, or exhibit to, this Agreement
unless otherwise explicitly set forth. The titles and headings herein are for
reference purposes only and will not in any manner limit the construction of
this Agreement which will be considered as a whole.
13.11 JOINT VENTURE. Nothing contained in this Agreement will
be deemed or construed as creating a joint venture or partnership between any of
the parties. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party.
13.12 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence
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and reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement.
13.13 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions
of this Agreement are intended, nor will be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in any
client, customer, employee, affiliate, stockholder or partner of any party or
any other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement. Anything contained herein to the contrary
notwithstanding, the holders of FSA Options are intended beneficiaries of
Section 1.3.
13.14 ENTIRE AGREEMENT. This Agreement and the exhibits and
schedules attached hereto or delivered in connection herewith constitute the
entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto other than the Nondisclosure Agreement,
which shall remain in full force and effect. The express terms hereof control
and supersede any course of performance inconsistent with any of the terms
hereof.
13.15 ATTACHMENTS AND SCHEDULES. All attachments and schedules
attached hereto, together with the FSA Disclosure Letter and the McAfee
Disclosure Letter, are incorporated herein by reference.
39
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have executed this
Combination Agreement as of the date first above written.
McAFEE ASSOCIATES, INC.
By:
--------------------------
Its:
--------------------------
FSA COMBINATION CORP.
By:
--------------------------
Its:
--------------------------
FSA CORPORATION
By:
--------------------------
Its:
--------------------------
DANIEL FREEDMAN
-----------------------------
[Signature page to Combination Agreement]
<PAGE> 1
EXHIBIT 4.1
VOTING AND EXCHANGE TRUST AGREEMENT
THIS AGREEMENT made as of the 30th day of August, 1996.
AMONG:
MCAFEE ASSOCIATES, INC.,
a corporation existing under the laws of the State of
Delaware, (hereinafter referred to as the "Parent"),
- and -
FSA COMBINATION CORP.,
a corporation existing under the laws of the State of Delaware
and an indirect subsidiary of the Parent,
(hereinafter referred to as the "Sub"),
- and -
FSA CORPORATION,
a corporation existing under the laws of the Province of
Alberta, (hereinafter referred to as the "Company"),
- and -
JOHN T. RAMSAY
(hereinafter referred to as the "Trustee"),
WHEREAS, pursuant to a combination agreement dated as of
August 16, 1996, by and between the Parent, Sub, an indirect subsidiary of
Parent, the Company and Daniel Freedman (such agreement as it may be amended or
restated is hereinafter referred to as the
<PAGE> 2
-2-
"Combination Agreement"), the parties agreed that on the Effective Date (as
defined in the Combination Agreement), the Parent and the Company would execute
and deliver a Voting and Exchange Trust Agreement containing the terms and
conditions set forth in Exhibit 7.2(b)(ii) to the Combination Agreement together
with such other terms and conditions as may be agreed to by the parties to the
Combination Agreement acting reasonably;
AND WHEREAS, pursuant to articles of amendment (the
"Articles") dated August 26, 1996 filed pursuant to the Business Corporations
Act (Alberta), each issued and outstanding Class A Share of the Company (a
"Company Common Share") was exchanged for 0.355932 issued and outstanding
Exchangeable Non-Voting Shares of the Company (the "Exchangeable Shares"), and
each issued and outstanding Class C Preferred Share of the Company (a "Company
Preferred Share") was exchanged for 11.073 issued and outstanding Exchangeable
Shares, and thereafter, the Company's sole issued and outstanding Class E
Preferred Share was exchanged by the holder thereof for one issued and
outstanding Class A Share;
AND WHEREAS, the above-mentioned Articles set forth the
rights, privileges, restrictions and conditions (collectively the "Exchangeable
Share Provisions") attaching to the Exchangeable Shares;
AND WHEREAS, the Parent is to provide voting rights in the
Parent to each holder (other than the Parent and its subsidiaries) from time to
time of Exchangeable Shares, such voting rights per Exchangeable Share to be
equivalent to the voting rights per share of the Parent common stock (the
"Parent Common Stock");
AND WHEREAS, the Parent is to grant to and in favour of the
holders (other than the Parent and its subsidiaries) from time to time of
Exchangeable Shares the right under the circumstances set forth herein, to
require the Parent to purchase from each such holder all or any part of the
Exchangeable Shares held by the holder;
AND WHEREAS, the parties desire to make appropriate provisions
and to establish a procedure whereby voting rights in the Parent shall be
exercisable by holders (other
<PAGE> 3
-3-
than the Parent and its subsidiaries) from time to time of Exchangeable Shares
by and through the Trustee, which will hold legal title to one share of Series A
Preferred Stock to which voting rights attach for the benefit of such holders
and whereby the rights to require the Parent to purchase Exchangeable Shares
from the holders thereof (other than the Parent and its subsidiaries) shall be
exercisable by such holders from time to time of Exchangeable Shares and through
the Trustee, which will hold legal title to such rights for the benefit of such
holders;
AND WHEREAS, these recitals and any statements of fact in this
trust agreement are made by the Parent, Sub and the Company and not by the
Trustee;
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this trust agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this trust agreement, the following terms shall have the
following meanings:
"AFFILIATE" of any person means any other person directly or
indirectly controlled by, or under common control of, that
person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled
by" and "under common control of") as applied to any person,
means the possession by another person, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of that first mentioned person,
whether through the ownership of voting securities, by
contract or otherwise.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the
obligation of the Parent to effect the automatic exchange of
shares of Parent Common Stock for Exchangeable Shares pursuant
to section 5.11 hereof.
"BOARD OF DIRECTORS" means the Board of Directors of the
Company.
<PAGE> 4
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"BUSINESS DAY" means a day other than a Saturday, Sunday or a
statutory holiday in the City of Calgary, Alberta or the City
of Santa Clara, California.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount
expressed in a foreign currency (the "Foreign Currency
Amount") at any date the product obtained by multiplying (a)
the Foreign Currency amount by (b) the noon spot exchange rate
on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event
such spot exchange rate is not available, such exchange rate
on such date for such foreign currency expressed in Canadian
dollars as may be deemed by the Board of Directors to be
appropriate for such purpose.
"CURRENT MARKET PRICE" means, in respect of a share of Parent
Common Stock on any date, the Canadian Dollar Equivalent of
the average of the closing sale price of shares of Parent
Common Stock during a period of 20 consecutive trading days
ending five trading days before such date on the Nasdaq
National Market, or, if the shares of Parent Common Stock are
not then quoted on the Nasdaq National Market, on such other
stock exchange or automated quotation system on which the
shares of Parent Common Stock are listed or quoted, as the
case may be, as may be selected by the Board of Directors for
such purpose.
"EXCHANGE RATIO" has the meaning ascribed thereto in the
Exchangeable Share Provisions.
"EXCHANGE RIGHT" has the meaning ascribed thereto in Section
5.1 hereof.
"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable
Shares.
"EXCHANGEABLE SHARES" has the meaning ascribed thereto in the
recitals hereto.
"HOLDER VOTES" has the meaning ascribed thereto in Section 4.2
hereof.
<PAGE> 5
-5-
"HOLDERS" means the registered holders from time to time of
Exchangeable Shares, other than the Parent and its
subsidiaries.
"INSOLVENCY EVENT" means the institution by the Company of any
proceeding to be adjudicated a bankrupt or insolvent or to be
dissolved or wound up, or the consent of the Company to the
institution of bankruptcy, insolvency, dissolution or winding
up proceedings against it, or the filing of a petition, answer
or consent seeking dissolution or winding up under any
bankruptcy, insolvency or analogous laws, including without
limitation the Companies Creditors' Arrangement Act (Canada)
and the Bankruptcy and Insolvency Act (Canada), and the
failure by the Company to contest in good faith any such
proceedings commenced in respect of the Company within 15 days
of becoming aware thereof, or the consent by the Company to
the filing of any such petition or to the appointment of a
receiver, or the making by the Company of a general assignment
for the benefit of creditors, or the admission in writing by
the Company of its inability to pay its debts generally as
they become due, or the Company not being permitted, pursuant
to solvency requirements of applicable law, to redeem any
Retracted Shares pursuant to Section 6.6 of the Exchangeable
Share Provisions.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in
section 5.4 of the Exchangeable Share Provisions.
"LIQUIDATION EVENT" has the meaning ascribed thereto in
subsection 5.11(b) hereof.
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed
thereto in subsection 5.11(c) hereof.
"LIST" has the meaning subscribed thereto in section 4.6
hereof.
"OFFICER'S CERTIFICATE" means, with respect to the Parent or
the Company, as the case may be, a certificate signed by any
one of the Chairman of the Board, the Vice-Chairman of the
Board, the President, any Vice-President or any other senior
<PAGE> 6
-6-
officer of the Parent or the Company, as the case may be.
"PARENT COMMON STOCK" has the meaning ascribed thereto in the
recitals hereto.
"PARENT CONSENT" has the meaning ascribed thereto in section
4.2 hereof.
"PARENT MEETING" has the meaning ascribed thereto in section
4.2 hereof.
"PERSON" includes an individual, partnership, corporation,
company, unincorporated syndicate or organization, trust,
trustee, executor, administrator and other legal
representative.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in
Section 7.4 of the Exchangeable Share Provisions.
"RETRACTED SHARES" has the meaning ascribed thereto in section
5.7 hereof.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in
section 6.1 of the Exchangeable Share Provisions.
"SUPPORT AGREEMENT" means that certain support agreement made
as of even date hereof between the Company and the Parent.
"TRUST" means the trust created by this agreement.
"TRUST ESTATE" means the Voting Share, any other securities,
the Exchange Right, the Automatic Exchange Rights and any
money or other property which may be held by the Trustee from
time to time pursuant to this trust agreement.
"TRUSTEE" means John T. Ramsay and, subject to the provisions
of Article 10 hereof, includes any successor trustee or
permitted assigns.
"VOTING RIGHTS" means the voting rights attached to the Voting
Share.
"VOTING SHARE" means the one share of Series A Preferred
Stock, U.S. $0.01 par value, issued by the Parent and
delivered by Sub to and deposited with the
<PAGE> 7
-7-
Trustee, which entitles the holder of record to a number of
votes at meetings of holders of Parent Common Stock equal to
the number of shares of Parent Common Stock issuable upon
exchange of then outstanding Exchangeable Shares other than
Exchangeable Shares held by the Parent and its subsidiaries.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this trust agreement into articles, sections
and paragraphs and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of this trust
agreement.
1.3 NUMBER, GENDER, ETC.
Words importing the singular number only shall include the
plural and vice versa. Words importing the use of any gender shall include all
genders.
1.4 DATE FOR ANY ACTION.
If any date on which any action is required to be taken under
this trust agreement is not a Business Day, such action shall be required to be
taken on the next succeeding Business Day.
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 ESTABLISHMENT OF TRUST.
The purpose of this trust agreement is to create the Trust for
the benefit of the Holders, as herein provided. The Trustee will hold the Voting
Share in order to enable the Trustee to exercise the Voting Rights and will hold
the Exchange Right and the Automatic Exchange Rights in order to enable the
Trustee to exercise such rights, in each case as trustee for and on behalf of
the Holders as provided in this trust agreement.
<PAGE> 8
-8-
ARTICLE 3
VOTING SHARE
3.1 ISSUE AND OWNERSHIP OF THE VOTING SHARE.
Sub hereby issues to and deposits with the Trustee the Voting
Share to be hereafter held of record by the Trustee as trustee for and on behalf
of, and for the use and benefit of, the Holders and in accordance with the
provisions of this trust agreement. Sub hereby acknowledges receipt from the
Trustee as trustee for and on behalf of the Holders of good and valuable
consideration (and the adequacy thereof) for the transfer of the Voting Share by
the Sub to the Trustee. During the term of the Trust and subject to the terms
and conditions of this trust agreement, the Trustee shall possess and be vested
with full legal ownership of the Voting Share and shall be entitled to exercise
all of the rights and powers of an owner with respect to the Voting Share,
provided that the Trustee shall:
(a) hold the Voting Share and the legal title thereto as trustee
solely for the use and benefit of the Holders in accordance
with the provisions of this trust agreement, and
(b) except as specifically authorized by this trust agreement,
have no power or authority to sell, transfer, vote or
otherwise deal in or with the Voting Share and the Voting
Share shall not be used or disposed of by the Trustee for any
purpose other than the purposes for which this Trust is
created pursuant to this trust agreement.
3.2 LEGENDED SHARE CERTIFICATES.
The Company will cause each certificate representing
Exchangeable Shares to bear an appropriate legend notifying the Holders of their
right to instruct the Trustee with respect to the exercise of the Voting Rights
with respect to the Exchangeable Shares held by a Holder.
3.3 SAFE KEEPING OF CERTIFICATE.
The certificate representing the Voting Share shall at all
times be held in safe keeping by the Trustee or its agent.
<PAGE> 9
-9-
ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1 VOTING RIGHTS.
The Trustee, as the holder of record of the Voting Share,
shall be entitled to all of the Voting Rights, including the right to consent to
or to vote in person or by proxy the Voting Share, on any matter, question or
proposition whatsoever that may properly come before the stockholders of the
Parent at a Parent Meeting or in connection with a Parent Consent (in each case,
as hereinafter defined). The Voting Rights shall be and remain vested in and
exercised by the Trustee. Subject to section 7.15 hereof, the Trustee shall
exercise the Voting Rights only on the basis of instructions received pursuant
to this Article 4 from Holders entitled to instruct the Trustee as to the voting
thereof at the time at which the Parent Consent is sought or the Parent Meeting
is held. To the extent that no instructions are received from a Holder with
respect to the Voting Rights to which such Holder is entitled, the Trustee shall
not exercise or permit the exercise of such Holder's Voting Rights.
4.2 NUMBER OF VOTES.
With respect to all meetings of stockholders of the Parent at
which holders of shares of Parent Common Stock are entitled to vote (a "Parent
Meeting") and with respect to all written consents sought by the Parent from its
stockholders including the holders of shares of Parent Common Stock (a "Parent
Consent"), each Holder shall be entitled to instruct the Trustee to cast and
exercise, in the manner instructed, the votes comprised in the Voting Rights for
each Exchangeable Share owned of record by such Holder on the record date
established by the Parent or by applicable law for such Parent Meeting or Parent
Consent, as the case may be (the "Holder Votes"), in respect of each matter,
question or proposition to be voted on at such Parent Meeting or to be consented
to in connection with such Parent Consent.
4.3 MAILINGS TO SHAREHOLDERS.
With respect to each Parent Meeting and Parent Consent, the
Trustee will mail or cause to be mailed (or otherwise communicate in the same
manner as the Parent utilizes in communications to holders of Parent Common
Stock, subject to the Trustee's ability to provide
<PAGE> 10
-10-
this method of communication and upon being advised in writing of such method)
to each of the Holders named in the List on the same day as the initial mailing
or notice (or other communication) with respect thereto is given by the Parent
to its stockholders:
(a) a copy of such notice, together with any proxy or information
statement and related materials to be provided to stockholders
of the Parent;
(b) a statement that such Holder is entitled to instruct the
Trustee as to the exercise of the Holder Votes with respect to
such Parent Meeting or Parent Consent, as the case may be;
(c) a statement as to the manner in which such instructions may be
given to the Trustee, including an express indication that
instructions may be given to the Trustee to give:
(i) a proxy to such Holder or his designee to exercise
personally the Holder Votes; or
(ii) a proxy to a designated agent or other representative
of the management of the Parent to exercise such
Holder Votes;
(d) a statement that if no such instructions are received
from the Holder, the Holder Votes to which such
Holder is entitled will not be exercised;
(e) a form of direction whereby the Holder may so direct and
instruct the Trustee as contemplated herein; and
(f) a statement of (i) the time and date by which such
instructions must be received by the Trustee in order to be
binding upon it, which in the case of a Parent Meeting shall
not be earlier than the close of business on the second
Business Day prior to such meeting, and (ii) the method for
revoking or amending such instructions.
<PAGE> 11
-11-
The materials referred to above are to be provided by the Parent to the Trustee,
but shall be subject to review and comment by the Trustee.
For the purpose of determining Holder Votes to which a Holder
is entitled in respect of any such Parent Meeting or Parent Consent, the number
of Exchangeable Shares owned of record by the Holder shall be determined at the
close of business on the record date established by the Parent or by applicable
law for purposes of determining stockholders entitled to vote at such Parent
Meeting or to give written consent in connection with such Parent Consent. The
Parent will notify the Trustee in writing of any decision of the Board of
Directors of the Parent with respect to the calling of any such Parent Meeting
or the seeking of any such Parent Consent and shall provide all necessary
information and materials to the Trustee in each case promptly and in any event
in sufficient time to enable the Trustee to perform its obligation contemplated
by this section 4.3.
4.4 COPIES OF STOCKHOLDER INFORMATION.
The Parent will deliver to the Trustee at the same time as
such materials are first sent to holders of Parent Common Stock, copies of all
proxy materials, (including notices of Parent Meetings but excluding proxies to
vote shares of Parent Common Stock), information statements, reports (including
without limitation all interim and annual financial statements) and other
written communications that are to be distributed from time to time to holders
of Parent Common Stock in sufficient quantities so as to enable the Trustee to
send those materials to each Holder. The Trustee will promptly mail or otherwise
send to each Holder, at the expense of Parent, copies of all such materials (and
all materials specifically directed to the Holders or to the Trustee for the
benefit of the Holders by the Parent) received by the Trustee from the Parent.
4.5 OTHER MATERIALS.
Promptly after receipt by the Parent or any stockholder of the
Parent of any material sent or given generally to the holders of Parent Common
Stock by or on behalf of a third party, including without limitation dissident
proxy and information circulars (and related information and material) and
tender and exchange offer circulars (and related information and material), the
Parent shall use its best efforts to obtain and deliver to the Trustee copies
thereof in
<PAGE> 12
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sufficient quantities so as to enable the Trustee to forward such material
(unless the same has been provided directly to Holders by such third party) to
each Holder as soon as possible thereafter. As soon as practicable after receipt
thereof, the Trustee will mail or otherwise send to each Holder, at the expense
of the Parent, copies of all such materials received by the Trustee from the
Parent.
4.6 LIST OF PERSONS ENTITLED TO VOTE
The Company shall forthwith upon each request made at any time
by the Trustee in writing, prepare or cause to be prepared a list (a "List") of
the names and addresses of the Holders showing the number of Exchangeable Shares
held of record by each such Holder, in each case at the close of business on the
date specified by the Trustee in such request. Each such List shall be delivered
to the Trustee promptly after receipt by the Company of such request and in any
event within sufficient time as to enable the Trustee to perform its obligations
under this Agreement.
4.7 ENTITLEMENT TO DIRECT VOTES
Any Holder named in a List prepared in connection with any
Parent Meeting or any Parent Consent will be entitled (a) to instruct the
Trustee in the manner described in section 4.3 hereof with respect to the
exercise of the Holder Votes to which such Holder is entitled or (b) to attend
such meeting and personally to exercise thereat (or to exercise with respect to
any written consent), as the proxy of the Trustee, the Holder Votes to which
such Holder is entitled except, in each case, to the extent that such Holder has
transferred the ownership of any Exchangeable Shares in respect of which such
Holder is entitled to Holder Votes after the close of business on the record
date for such meeting or seeking of consent.
4.8 VOTING BY TRUSTEE, AND ATTENDANCE OF TRUSTEE REPRESENTATIVE, AT MEETING
In connection with each Parent Meeting and Parent Consent, the
Trustee shall exercise, either in person or by proxy, in accordance with the
instructions received from a Holder pursuant to section 4.3 hereof, the Holder
Votes as to which such Holder is entitled to direct the vote (or any lesser
number thereof as may be set forth in the instructions); provided, however,
<PAGE> 13
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that such written instructions are received by the Trustee from the Holder prior
to the time and date fixed by it for receipt of such instructions in the notice
given by the Trustee to the Holder pursuant to section 4.3 hereof.
4.9 TERMINATION OF VOTING RIGHTS
All of the rights of a Holder with respect to the Holder Votes
exercisable in respect of the Exchangeable Shares held by such Holder, including
the right to instruct the Trustee as to the voting of or to vote personally such
Holder Votes, shall be deemed to be surrendered by the Holder to the Parent and
such Holder Votes and the Voting Rights represented thereby shall cease
immediately upon the delivery by such holder to the Trustee of the certificates
representing such Exchangeable Shares in connection with the exercise by the
Holder of the Exchange Right or the occurrence of the automatic exchange of
Exchangeable Shares for shares of Parent Common Stock, as specified in Article 5
hereof (unless in either case the Parent shall not have delivered the requisite
shares of the Parent Common Stock issuable in exchange therefor to the Trustee
for delivery to the Holders), or upon the redemption of Exchangeable Shares
pursuant to Article 6 or Article 7 of the Exchangeable Share Provisions, or upon
the effective date of the liquidation, dissolution or winding-up of the Company
pursuant to Article 5 of the Exchangeable Share Provisions, or upon the purchase
of Exchangeable Shares from the holder thereof by the Parent pursuant to the
exercise by the Parent of the Retraction Call Right, the Redemption Call Right
or the Liquidation Call Right.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHT
The Parent hereby grants to the Trustee as trustee for and on
behalf of, and for the use and benefit of, the Holders (a) the right (the
"Exchange Right"), upon the occurrence and during the continuance of an
Insolvency Event, to require the Parent, either directly or indirectly through
one of its subsidiaries, to purchase from each or any Holder all or any part of
the Exchangeable Shares held by the Holder and (b) the Automatic Exchange
Rights, all in accordance with the provisions of this agreement. The Parent
hereby acknowledges receipt from
<PAGE> 14
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the Trustee as trustee for and on behalf of the Holders of good and valuable
consideration (and the adequacy thereof) for the grant of the Exchange Right and
the Automatic Exchange Rights by the Parent to the Trustee. During the term of
the Trust and subject to the terms and conditions of this trust agreement, the
Trustee shall possess and be vested with full legal ownership of the Exchange
Right and the Automatic Exchange Rights and shall be entitled to exercise all of
the rights and powers of an owner with respect to the Exchange Right and the
Automatic Exchange Rights, provided that the Trustee shall:
(a) hold the Exchange Right and the Automatic Exchange Rights and
the legal title thereto as trustee solely for the use and
benefit of the Holders in accordance with the provisions of
this trust agreement; and
(b) except as specifically authorized by this trust agreement,
have no power or authority to exercise or otherwise deal in or
with the Exchange Right or the Automatic Exchange Rights and
the Trustee shall not exercise any such rights for any purpose
other than the purposes for which this Trust is created
pursuant to this trust agreement.
5.2 LEGENDED SHARE CERTIFICATES
The Company will cause each certificate representing
Exchangeable Shares to bear an appropriate legend notifying the Holders of:
(a) their right to instruct the Trustee with respect to the
exercise of the Exchange Right in respect of the Exchangeable
Shares held by a Holder; and
(b) the Automatic Exchange Rights.
5.3 GENERAL EXERCISE OF EXCHANGE RIGHT
The Exchange Right shall be and remain vested in and exercised
by the Trustee. Subject to section 7.15 hereof, the Trustee shall exercise the
Exchange Right only on the basis of instructions received pursuant to this
Article 5 from Holders entitled to instruct the Trustee as to
<PAGE> 15
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the exercise thereof. To the extent that no instructions are received from a
Holder with respect to the Exchange Right, the Trustee shall not exercise or
permit the exercise of the Exchange Right.
5.4 EXCHANGE CONSIDERATION
The exchange consideration (the "Exchange Consideration") to
be delivered by the Parent (either directly or indirectly through one or more of
its subsidiaries) for each Exchangeable Share to be exchanged by the Parent
(either directly or indirectly through one or more of its subsidiaries) under
the Exchange Right shall be an amount per share equal to (a) the Current Market
Price of a share of Parent Common Stock on the last Business Day prior to the
day of transfer of such Exchangeable Shares under the Exchange Right multiplied
by the Exchange Ratio at that time plus (b) an additional amount equivalent to
the full amount of all dividends declared and unpaid on each such Exchangeable
Share (provided that if the record date for any such declared and unpaid
dividends occurs on or after the day of closing of such exchange, the Exchange
Consideration shall not include such additional amount equivalent to the
declared and unpaid dividends). In connection with each exercise of the Exchange
Right, the Parent (either directly or indirectly through one or more of its
subsidiaries) will provide to the Trustee an Officer's Certificate setting forth
the calculation of the Exchange Consideration for each Exchangeable Share. The
Exchange Consideration for each such Exchangeable Share so exchanged may be
satisfied only by the Parent issuing and delivering or causing to be delivered
(either directly or indirectly through one or more of its subsidiaries) to the
Trustee, on behalf of the relevant Holder, the number of shares of Parent Common
Stock equal to the Exchange Ratio at that time and a cheque for the balance, if
any, of the Exchange Consideration without interest thereon.
5.5 EXERCISE INSTRUCTIONS
Subject to the terms and conditions herein set forth, a Holder
shall be entitled, upon the occurrence and during the continuance of an
Insolvency Event, to instruct the Trustee to exercise the Exchange Right with
respect to all or any part of the Exchangeable Shares registered in the name of
such Holder on the books of the Company. To cause the exercise of the Exchange
Right by the Trustee, the Holder shall deliver to the Trustee, in person or by
certified or
<PAGE> 16
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registered mail, at its principal office in Calgary, Alberta or at such other
places in Canada as the Trustee may from time to time designate by written
notice to the Holders, the certificates representing the Exchangeable Shares
which such Holder desires the Parent (either directly or indirectly through one
or more of its subsidiaries) to exchange, duly endorsed in blank, and
accompanied by such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the Business Corporations Act (Alberta)
and the by-laws of the Company and such additional documents and instruments as
the Trustee may reasonably require together with (a) a duly completed form of
notice of exercise of the Exchange Right, contained on the reverse of or
attached to the Exchangeable Share certificates, stating (i) that the Holder
thereby instructs the Trustee to exercise the Exchange Right so as to require
the Parent (either directly or indirectly through one or more of its
subsidiaries) to exchange the number of Exchangeable Shares specified therein,
(ii) that such Holder has good title to and owns all such Exchangeable Shares to
be acquired by the Parent free and clear of all liens, claims and encumbrances,
(iii) the names in which the certificates representing the Parent Common Stock
issuable in connection with the exercise of the Exchange Right are to be issued
and (iv) the names and addresses of the person to whom such new certificates
should be delivered and (b) payment (or evidence satisfactory to the Trustee,
the Company and the Parent of payment) of the taxes (if any) payable as
contemplated by section 5.8 of this trust agreement. If only a part of the
Exchangeable Shares represented by any certificate or certificates delivered to
the Trustee are to be exchanged by the Parent under the Exchange Right, a new
certificate for the balance of such Exchangeable Shares shall be issued to the
holder at the expense of the Company.
5.6 DELIVERY OF PARENT COMMON STOCK; EFFECT OF EXERCISE
Promptly after receipt of the certificate representing the
Exchangeable Shares which the Holder desires the Parent (either directly or
indirectly through one or more of its subsidiaries) to purchase under the
Exchange Right (together with such documents and instruments of transfer and a
duly completed form of notice of exercise of the Exchange Right (and payment of
taxes, if any, or evidence thereof)), duly endorsed for transfer to the Parent
and Sub, the Trustee shall notify the Parent, Sub and the Company of its receipt
of the same, which notice to the Parent, Sub and the Company shall constitute
exercise of the Exchange Right by the
<PAGE> 17
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Trustee on behalf of the holder of such Exchangeable Shares, and the Parent
(either directly or indirectly through one or more of its subsidiaries) shall
immediately thereafter deliver or cause to be delivered to the Trustee, for
delivery to the Holder of such Exchangeable Shares (or to such other persons, if
any, properly designated by the Holder), the certificates for the number of
shares of Parent Common Stock issuable in connection with the exercise of the
Exchange Right, which shares shall be duly issued, fully paid and non-assessable
and shall be free and clear of any lien, claim or encumbrance, and cheques for
the balance, if any, of the total Exchange Consideration therefor without
interest, provided, however, that no such delivery shall be made unless and
until the Holder requesting the same shall have paid (or provided evidence
satisfactory to the Trustee, the Company and the Parent of the payment of) the
taxes (if any) payable as contemplated by section 5.8 of this trust agreement.
Immediately upon the giving of notice by the Trustee to the Parent, Sub and the
Company of the exercise of the Exchange Right, as provided in this section 5.6,
the exchange shall be deemed to have occurred, and the Holder of such
Exchangeable Shares shall be deemed to have transferred to the Parent and Sub
all of its right, title and interest in and to such Exchangeable Shares and in
the related interest in the Trust Estate and shall cease to be a holder of such
Exchangeable Shares and shall not be entitled to exercise any of the rights of a
holder in respect thereof, other than the right to receive his proportionate
part of the total Exchange Consideration therefor, unless the requisite number
of shares of Parent Common Stock (together with a cheque for the balance, if
any, of the total Exchange Consideration therefor without interest) is not
allotted, issued and delivered by the Parent to the Trustee, for delivery to
such Holder (or to such other persons, if any, properly designated by such
Holder), within five Business Days of the date of the giving of such notice by
the Trustee, in which case the rights of the Holder shall remain unaffected
until such shares of the Parent Common Stock are so allotted, issued and
delivered by the Parent (either directly or indirectly through one or more of
its subsidiaries) and any such cheque is so delivered and paid. Concurrently
with such Holder ceasing to be a holder of Exchangeable Shares, the Holder shall
be considered and deemed for all purposes to be the holder of the shares of
Parent Common Stock delivered to it pursuant to the Exchange Right.
<PAGE> 18
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5.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION
In the event that a Holder has exercised its right under
Article 6 of the Exchangeable Share Provisions to require the Company to redeem
any or all of the Exchangeable Shares held by the Holder (the "Retracted
Shares") and is notified by the Company pursuant to Section 6.6 of the
Exchangeable Share Provisions that the Company will not be permitted as a result
of solvency requirements of applicable law to redeem all such Retracted Shares,
subject to receipt by the Trustee of the written notice to that effect from the
Company and provided that the Parent (either directly or indirectly through one
or more of its subsidiaries) shall not have exercised the Retraction Call Right
with respect to the Retracted Shares and that the Holder has not revoked the
retraction request delivered by the Holder to the Company pursuant to Section
6.1 of the Exchangeable Share Provisions, the retraction request will constitute
and will be deemed to constitute notice from the Holder to the Trustee
instructing the Trustee to exercise the Exchange Right with respect to those
Retracted Shares which the Company is unable to redeem. In any such event, the
Company hereby agrees with the Trustee and in favour of the Holder immediately
to notify the Trustee of such prohibition against the Company redeeming all of
the Retracted Shares and immediately to forward or cause to be forwarded to the
Trustee all relevant materials delivered by the Holder to the Company (including
without limitation a copy of the retraction request delivered pursuant to
Section 6.1 of the Exchangeable Share Provisions) in connection with such
proposed redemption of the Retracted Shares and the Trustee will thereupon
exercise the Exchange Right with respect to the Retracted Shares that the
Company is not permitted to redeem and will require the Parent to purchase such
shares in accordance with the provisions of this Article 5.
5.8 STAMP OR OTHER TRANSFER TAXES
Upon any sale of Exchangeable Shares to the Parent (either
directly or indirectly through one or more of its subsidiaries) pursuant to the
Exchange Right or the Automatic Exchange Rights, the share certificate or
certificates representing the Parent Common Stock to be delivered in connection
with the payment of the total purchase price therefor shall be issued in the
name of the Holder of the Exchangeable Shares so sold or in such names as such
Holder may otherwise direct in writing without charge to the holder of the
Exchangeable Shares so sold,
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provided, however, that such Holder (a) shall pay (and neither the Parent, the
Company nor the Trustee shall be required to pay) any documentary, stamp,
transfer or other similar taxes that may be payable in respect of any transfer
involved in the issuance or delivery of such shares to a person other than such
Holder or (b) shall have established to the satisfaction of the Trustee, the
Parent and the Company that such taxes, if any, have been paid.
5.9 NOTICE OF INSOLVENCY EVENT
Immediately upon the occurrence of an Insolvency Event or any
event which with the giving of notice or the passage of time or both would be an
Insolvency Event, the Company and the Parent (either directly or indirectly
through one or more of its subsidiaries) shall give written notice thereof to
the Trustee. As soon as practicable after receiving notice from the Company and
the Parent (either directly or indirectly through one or more of its
subsidiaries) or from any other person of the occurrence of an Insolvency Event,
the Trustee will mail to each Holder, at the expense of the Parent (either
directly or indirectly through one or more of its subsidiaries), a notice of
such Insolvency Event in the form provided by the Parent (either directly or
indirectly through one or more of its subsidiaries), which notice shall contain
a brief statement of the right of the Holders with respect to the Exchange
Right.
5.10 RESERVATION OF SHARES OF PARENT COMMON STOCK
The Parent hereby represents, warrants and covenants that it
has reserved for issuance and will at all times keep available, free from
pre-emptive and other rights, out of its authorized and unissued capital stock
such number of shares of Parent Common Stock (a) as is equal to the sum of the
number of Exchangeable Shares issued and outstanding from time to time,
multiplied by the Exchange Ratio at that time and (b) as are now and may
hereafter be required to enable and permit the Company to meet its obligations
hereunder, under the Support Agreement, under the Exchangeable Share Provisions
and under any other security or commitment pursuant to which the Parent may now
or hereafter be required to issue shares of Parent Common Stock.
<PAGE> 20
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5.11 AUTOMATIC EXCHANGE ON LIQUIDATION OF PARENT
(a) The Parent will give the Trustee written notice of each of the
following events at the time set forth below:
(i) in the event of any determination by the Board of
Directors of the Parent to institute voluntary
liquidation, dissolution or winding-up proceedings
with respect to the Parent or to effect any other
distribution of assets of the Parent among its
stockholders for the purpose of winding up its
affairs, at least 60 days prior to the proposed
effective date of such liquidation, dissolution,
winding-up or other distribution; and
(ii) immediately, upon the earlier of (A) receipt by the
Parent of notice of and (B) the Parent otherwise
becoming aware of any threatened or instituted claim,
suit, petition or other proceedings with respect to
the involuntary liquidation, dissolution or winding
up of the Parent or to effect any other distribution
of assets of the Parent among its stockholders for
the purpose of winding up its affairs.
(b) Immediately following receipt by the Trustee from the Parent
of notice of any event (a "Liquidation Event") contemplated by
section 5.11(a)(i) or 5.11(a)(ii) above, the Trustee will give
notice thereof to the Holders. Such notice will be provided by
the Parent to the Trustee and shall include a brief
description of the automatic exchange of Exchangeable Shares
for shares of Parent Common Stock provided for in section
5.11(c) below.
(c) In order that the Holders will be able to participate on a pro
rata basis with the holders of Parent Common Stock in the
distribution of assets of the Parent in connection with a
Liquidation Event, on the fifth Business Day prior to the
effective date (the "Liquidation Event Effective Date") of a
Liquidation Event all of the then outstanding Exchangeable
Shares shall be automatically exchanged for shares of Parent
Common Stock as provided below. To effect such automatic
<PAGE> 21
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exchange, the Parent (either directly or indirectly through
one or more of its subsidiaries) and the Holder shall exchange
each Exchangeable Share outstanding on the fifth Business Day
prior to the Liquidation Event Effective Date and held by
Holders for an exercise price per share equal to (a) the
Current Market Price of a share of Parent Common Stock on the
fifth Business Day prior to the Liquidation Event Effective
Date multiplied by the Exchange Ratio at that time, which
shall be satisfied by the Parent (either directly or
indirectly through one or more of its subsidiaries) issuing to
the Holder the number of shares of Parent Common Stock equal
to the Exchange Ratio at that time plus (b) an additional
amount equivalent to the full amount of all dividends declared
and unpaid on each such Exchangeable Share and all dividends
declared on the Parent Common Stock that have not been
declared on such Exchangeable Shares in accordance with
Section 3.1 of the Exchangeable Share Provisions (provided
that if the record date for such declared and unpaid dividends
occurs on or after the day of closing of such exchange, the
Exchange Consideration shall not include such additional
amounts equivalent to such declared and unpaid dividends). In
connection with such automatic exchange, the Parent will
provide to the Trustee an Officer's Certificate setting forth
the calculation of the Exchange Consideration for each
Exchangeable Share.
(d) On the fifth Business Day prior to the Liquidation Event
Effective Date, the closing of the automatic exchange of
Exchangeable Shares for Parent Common Stock shall be deemed to
have occurred, and each Holder of Exchangeable Shares shall be
deemed to have transferred to the Parent (either directly or
indirectly through one or more of its subsidiaries) all of the
Holder's right, title and interest in and to such Exchangeable
Shares and the related interest in the Trust Estate and shall
cease to be a holder of such Exchangeable Shares and the
Parent (either directly or indirectly through one or more of
its subsidiaries) shall issue to the Holder the shares of
Parent Common Stock issuable upon the automatic exchange of
Exchangeable Shares for Parent Common Stock and shall deliver
to the Trustee
<PAGE> 22
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for delivery to the Holder a cheque for the balance, if any,
of the total exercise price for such Exchangeable Shares
without interest. Concurrently with such holder ceasing to be
a holder of Exchangeable Shares, the Holder shall be
considered and deemed for all purposes to be the holder of the
shares of Parent Common Stock issued to it pursuant to the
automatic exchange of Exchangeable Shares for Parent Common
Stock and the certificates held by the Holder previously
representing the Exchangeable Shares exchanged by the Holder
with the Parent (either directly or indirectly through one or
more of its subsidiaries) pursuant to such automatic exchange
shall thereafter be deemed to represent the shares of Parent
Common Stock issued to the Holder by the Parent (either
directly or indirectly through one or more of its
subsidiaries) pursuant to such automatic exchange. Upon the
request of a Holder and the surrender by the Holder of
Exchangeable Share certificates deemed to represent shares of
Parent Common Stock, duly endorsed in blank and accompanied by
such instruments of transfer as the Parent (either directly or
indirectly through one or more of its subsidiaries) may
reasonably require, the Parent (either directly or indirectly
through one or more of its subsidiaries) shall deliver or
cause to be delivered to the Holder certificates representing
the shares of Parent Common Stock of which the Holder is the
holder.
ARTICLE 6
RESTRICTIONS ON ISSUE OF SERIES A PREFERRED STOCK
6.1 ISSUE OF ADDITIONAL SHARES
During the term of this trust agreement, the Parent will not
issue any shares of Series A Preferred Stock in addition to the Voting Share.
<PAGE> 23
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ARTICLE 7
CONCERNING THE ISSUE
7.1 POWERS AND DUTIES OF THE TRUSTEE
The rights, powers and authorities of the Trustee under this
trust agreement, in its capacity as trustee of the Trust, shall include:
(a) receipt and deposit of the Voting Share from the Sub as
trustee for and on behalf of the Holders in accordance with
the provisions of this agreement;
(b) granting proxies and distributing materials to Holders as
provided in this trust agreement;
(c) voting the Holder Votes in accordance with the provisions of
this trust agreement;
(d) receiving the grant of the Exchange Right and the Automatic
Exchange Rights from the Parent as trustee for and on behalf
of the Holders in accordance with the provisions of this trust
agreement;
(e) exercising the Exchange Right and enforcing the benefit of the
Automatic Exchange Rights, in each case in accordance with the
provisions of this trust agreement, and in connection
therewith receiving from Holders Exchangeable Shares and other
requisite documents and distributing to such holders the
shares of Parent Common Stock and cheques, if any, to which
such holders are entitled upon the exercise of the Exchange
Right or pursuant to the Automatic Exchange Rights, as the
case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of the
Trust Estate as provided in this trust agreement;
(h) taking action at the direction of a Holder or Holders to
enforce the obligations of the Parent under this trust
agreement;
<PAGE> 24
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(i) taking such other actions and doing such other things as are
specifically provided in this trust agreement.
In the exercise of such rights, powers and authorities the
Trustee shall have (and is granted) such incidental and additional rights,
powers and authority not in conflict with any of the provisions of this trust
agreement as the Trustee, acting in good faith and in the reasonable exercise of
its discretion, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such discretionary rights, powers and
authorities by the Trustee shall be final, conclusive and binding upon all
persons. For greater certainty, the Trustee shall have only those duties as are
set out specifically in this trust agreement.
The Trustee in exercising its rights, powers, duties and
authorities hereunder shall act honestly and in good faith with a view to the
best interests of the Holders and shall exercise the care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances.
The Trustee shall not be bound to give any notice or do or
take any act, action or proceeding by virtue of the powers conferred on it
hereby unless and until it shall be specifically required to do so under the
terms hereof, nor shall the Trustee be required to take any notice of, or to do
or to take any act, action or proceeding as a result of any default or breach of
any provision hereunder, unless and until notified in writing of such default or
breach, which notices shall distinctly specify the default or breach desired to
be brought to the attention of the Trustee and in the absence of such notice the
Trustee may for all purposes of this Agreement conclusively assume that no
default or breach has been made in the observance or performance of any of the
representations, warranties, covenants, agreements or conditions contained
herein.
7.2 NO CONFLICT OF INTEREST
The Trustee represents to the Company, the Sub and the Parent
that at the date of execution and delivery of this trust agreement there exists
no material conflict of interest in the role of the Trustee as a fiduciary
hereunder and the role of the Trustee in any other capacity. The Trustee shall,
within 90 days after it becomes aware that such a material conflict of interest
<PAGE> 25
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exists, either eliminate such material conflict of interest or resign in the
manner and with the effect specified in Article 10 hereof. If, notwithstanding
the foregoing provisions of this section 7.2, the Trustee has such a material
conflict of interest, the validity and enforceability of this trust agreement
shall not be affected in any manner whatsoever by reason only of the existence
of such material conflict of interest. If the Trustee contravenes the foregoing
provisions of this section 7.2, any interested party may apply to the Court of
Queen's Bench of Alberta for an order that the Trustee be replaced as trustee
hereunder.
7.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC.
The Company and the Parent irrevocably authorize the Trustee,
from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Exchangeable Shares and
the Parent Common Stock; and
(b) requisition, from time to time, (i) from any such registrar or
transfer agent any information readily available from the
records maintained by it which the Trustee may reasonably
require for the discharge of its duties and responsibilities
under this trust agreement, and (ii) from the transfer agent
of the Parent Common Stock, and any subsequent transfer agent
of such shares, the share certificates issuable upon the
exercise from time to time of the Exchange Right and pursuant
to the Automatic Exchange Rights in the manner specified in
Article 5 hereof.
The Parent irrevocably authorizes its registrar and transfer
agent to comply with all such requests. The Parent covenants that it will supply
its transfer agent with duly executed share certificates for the purpose of
completing the exercise from time to time of the Exchange Right and the
Automatic Exchange Rights, in each case pursuant to Article 5 hereof.
7.4 BOOKS AND RECORDS
(a) The Trustee shall keep available for inspection by the Parent
and the Company, at the Trustee's principal office in Calgary,
Alberta, correct and complete books and
<PAGE> 26
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records of account relating to the Trustee's actions under
this trust agreement, including without limitation all
information relating to mailings and instructions to and from
the Holders and all transactions pursuant to the Voting
Rights, the Exchange Right and the Automatic Exchange Rights
for the term of this Agreement.
7.5 INCOME TAX RETURNS AND REPORTS
The Trustee shall, to the extent necessary, prepare and file
on behalf of the Trust appropriate United States and Canadian income tax returns
and any other returns or reports as may be acquired by applicable law.
7.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE
The Trustee shall exercise any or all of the rights, duties,
powers or authorities vested in it by this trust agreement at the request, order
or direction of any Holder upon such Holder furnishing to the Trustee reasonable
funding, security and indemnity against the costs, expenses and liabilities
which may be incurred by the Trustee herein or thereby, provided that no Holder
shall be obligated to furnish to the Trustee any such funding, security or
indemnity in connection with the exercise by the Trustee of any of its rights,
duties, powers and authorities with respect to the Voting Share pursuant to
Article 4 hereof, subject to Section 7.15 hereof, and with respect to the
Exchange Right pursuant to Article 5 hereof, subject to section 7.15 hereof, and
with respect to the Automatic Exchange Rights pursuant to Article 5 hereof.
None of the provisions contained in this trust agreement shall
require the Trustee to expend or risk its own funds or otherwise incur financial
liability in the exercise of any of its rights, powers, duties or authorities
unless funded, given funds, security and indemnified as aforesaid.
7.7 ACTIONS BY HOLDERS
No Holder shall have the right to institute any action, suit
or proceeding or to exercise any other remedy authorized by this trust agreement
for the purpose of enforcing any of its rights or for the execution of any trust
or power hereunder unless the Holder has requested the
<PAGE> 27
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Trustee to take or institute such action, suit or proceeding and furnished the
Trustee with the funding, security and indemnity referred to in section 7.6
hereof and the Trustee shall have failed to act within a reasonable time
thereafter. In such case, but not otherwise, the Holder shall be entitled to
take proceedings in any court of competent jurisdiction such as the Trustee
might have taken, it being understood and intended that no one or more Holders
shall have any right in any manner whatsoever to affect, disturb or prejudice
the rights hereby created by any such action, or to enforce any right hereunder
or under the Voting Rights, the Exchange Right or the Automatic Exchange Rights,
except subject to the conditions and in the manner herein provided, and that all
powers and trusts hereunder shall be exercised and all proceedings at law shall
be instituted, had and maintained by the Trustee, except only as herein
provided, and in any event for the equal benefit of all Holders.
7.8 RELIANCE UPON DECLARATIONS
The Trustee shall not be considered to be in contravention of
any of its rights, powers, duties and authorities hereunder if, when required,
it acts and relies in good faith upon lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
furnished pursuant to the provisions hereof or required by the Trustee to be
furnished to it in the exercise of its rights, powers, duties and authorities
hereunder and such lists, mailing labels, notices, statutory declarations,
certificates, opinions, reports or other papers or documents comply with the
provisions of section 7.9 hereof, if applicable, and with any other applicable
provisions of this trust agreement.
7.9 EVIDENCE AND AUTHORITY TO TRUSTEE.
The Company or the Parent or both shall furnish to the Trustee
evidence of compliance with the conditions provided for in this trust agreement
relating to any action or step required or permitted to be taken by the Company
or the Parent (or both) or the Trustee under this trust agreement or as a result
of any obligation imposed under this trust agreement, including, without
limitation, in respect of the Voting Rights or the Exchange Right or the
Automatic Exchange Rights and the taking of any other action to be taken by the
Trustee at the request of or on the application of the Company or the Parent (or
both) forthwith if and when:
<PAGE> 28
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(a) such evidence is required by any other section of this trust
agreement to be furnished to the Trustee in accordance with
the terms of this section 7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this trust agreement, gives the Company or
the Parent or both written notice requiring it to furnish such
evidence in relation to any particular action or obligation
specified in such notice.
Such evidence shall consist of an Officer's Certificate of the
Company or the Parent or both, or a statutory declaration or a certificate made
by persons entitled to sign an Officer's Certificate stating that any such
condition has been complied with in accordance with the terms of this trust
agreement.
Whenever such evidence relates to a matter other than the
Voting Rights or the Exchange Right or the Automatic Exchange Rights, and except
as otherwise specifically provided herein, such evidence may consist of a report
or opinion of any solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert or any other person whose qualifications give authority to a
statement made by him, provided that if such report or opinion is furnished by a
director, officer or employee of the Company or the Parent it shall be in the
form of an Officer's Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report
furnished to the Trustee as evidence of compliance with a condition provided for
in this trust agreement shall include a statement by the person giving the
evidence:
(a) declaring that he has read and understands the provisions of
this trust agreement relating to the condition in question;
(b) describing the nature and scope of the examination or
investigation upon which he based the statutory declaration,
certificate, statement or opinion; and
(c) declaring that he has made such examination or investigation
as he believes is necessary to enable him to make the
statements or give the opinions contained or expressed
therein.
<PAGE> 29
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7.10 EXPERTS, ADVISERS AND AGENTS
The Trustee may:
(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from or prepared by any
solicitor, auditor, accountant, appraiser, valuer, engineer or
other expert, whether retained by the Trustee or by the
Company or by the Parent or otherwise, and may employ such
assistants as may be necessary to the proper determination and
discharge of its powers and duties and determination of its
rights hereunder and may pay proper and reasonable
compensation for all such legal and other advice or assistance
as aforesaid; and
(b) employ such agents and other assistants as it may reasonably
require for the proper determination and discharge of its
powers and duties hereunder, and may pay reasonable
remuneration for all services performed for it (and shall be
entitled to receive reasonable remuneration for all services
performed by it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and expenses made or
incurred by it in the determination and discharge of its
duties hereunder and in the management of the Trust.
7.11 INVESTMENT OF MONEYS HELD BY TRUSTEE
Unless otherwise provided in this trust agreement, any moneys
held by or on behalf of the Trustee which under the terms of this trust
agreement may or ought to be invested or which may be on deposit with the
Trustee or which may be in the hands of the Trustee may be invested and
reinvested in the name or under the control of the Trustee in securities in
which, under the laws of the Province of Alberta, trustees are authorized to
invest trust moneys, provided that such securities are stated to mature within
two years after their purchase by the Trustee, and the Trustee shall so invest
such moneys on the written direction of the Company. Pending the investment of
all moneys as hereinbefore provided, such moneys may be deposited in the name of
the Trustee in any chartered bank in Canada or, with the consent of the Company,
in the deposit department of the Trustee or any other loan or trust company
authorized to accept
<PAGE> 30
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deposits under the laws of Canada or any province thereof at the rate of
interest then current on similar deposits.
7.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY
The Trustee shall not be required to give any bond or security
in respect of the execution of the trusts, rights, duties, powers and
authorities of this trust agreement or otherwise in respect of the premises.
7.13 TRUSTEE NOT BOUND TO ACT ON COMPANY'S REQUEST
Except as in this trust agreement otherwise specifically
provided, the Trustee shall not be bound to act in accordance with any direction
or request of the Company or the Parent or of the directors thereof until a duly
authenticated copy of the instrument or resolution containing such direction or
request shall have been delivered to the Trustee, and the Trustee shall be
empowered to act and rely upon any such copy purporting to be authenticated and
believed by the Trustee to be genuine.
7.14 AUTHORITY TO CARRY ON BUSINESS
The Trustee represents to the Company and the Parent that at
the date of execution and delivery by it of this trust agreement it is
authorized to carry on the business of a trust company in the Province of
Alberta but if, notwithstanding the provisions of this section 7.14, it ceases
to be so authorized to carry on business, the validity and enforceability of
this trust agreement and the Voting Rights, the Exchange Right and the Automatic
Exchange Rights shall not be affected in any manner whatsoever by reason only of
such event but the Trustee shall, within 90 days after ceasing to be authorized
to carry on the business of a trust company in the Province of Alberta, either
become so authorized or resign in the manner and with the effect specified in
Article 10 hereof.
7.15 CONFLICTING CLAIMS
If conflicting claims or demands are made or asserted with
respect to any interest of any Holder in any Exchangeable Shares, including any
disagreement between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Holder in
<PAGE> 31
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any Exchangeable Shares resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee shall be entitled, at its sole
discretion, to refuse to recognize or to comply with any such claim or demand.
In so refusing, the Trustee may elect not to exercise any Voting Rights,
Exchange Right or Automatic Exchange Rights subject to such conflicting claims
or demands and, in so doing, the Trustee shall not be or become liable to any
person on account of such election or its failure or refusal to comply with any
such conflicting claims or demands. The Trustee shall be entitled to continue to
refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting
Rights, Exchange Right or Automatic Exchange Rights subject to
such conflicting claims or demands have been adjudicated by a
final judgement of a court of competent jurisdiction; or
(b) all differences with respect to the Voting Rights, Exchange
Right or Automatic Exchange Rights subject to such conflicting
claims or demands have been conclusively settled by a valid
written agreement binding on all such adverse claimants, and
the Trustee shall have been furnished with an executed copy of
such agreement.
If the Trustee elects to recognize any claim or comply with
any demand made by any such adverse claimant, it may in its discretion require
such claimant to furnish such surety bond or other security satisfactory to the
Trustee as it shall deem appropriate fully to indemnify it as between all
conflicting claims or demands.
7.16 ACCEPTANCE OF TRUST
The Trustee hereby accepts the Trust created and provided for
by and in this trust agreement and agrees to perform the same upon the terms and
conditions herein set froth and to hold all rights, privileges and benefits
conferred hereby and by law in trust for the various persons who shall from time
to time be Holders, subject to all the terms and conditions herein set forth.
<PAGE> 32
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ARTICLE 8
COMPENSATION
8.1 FEES AND EXPENSES OF THE TRUSTEE
The Trustee shall be entitled to reasonable compensation from
the Holders for all of the services rendered by it under this trust agreement
and will reimburse the Trustee for all reasonable expenses (including but not
limited to taxes, compensation paid to experts, agents and advisors and travel
expenses) and disbursements, including the cost and expense of any suit or
litigation of any character and any proceedings before any governmental agency
reasonable incurred by the Trustee in connection with its rights and duties
under this trust agreement, provided that the Parent and the Company shall have
no obligation to reimburse the Trustee for any expenses or disbursements paid,
incurred or suffered by the Trustee in any suit or litigation in which the
Trustee is determined to have acted in bad faith or with negligence or willful
misconduct.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 INDEMNIFICATION OF THE TRUSTEE
The Parent and the Company jointly and severally agree to
indemnify and hold harmless the Trustee and each of its directors, officers,
employees and agents appointed and acting in accordance with this trust
agreement (collectively, the "Indemnified Parties") against all claims, losses,
damages, costs, penalties, fines and reasonable expenses (including reasonable
expenses of the Trustee's legal counsel) which, without fraud, negligence,
wilful misconduct or bad faith on the part of such Indemnified Party, may be
paid, incurred or suffered by the Indemnified Party by reason of or as a result
of the Trustee's acceptance or administration of the written instructions
delivered to the Trustee by the Parent or the Company pursuant hereto. In no
case shall the Parent or the Company be liable under this indemnity for any
claim against any of the Indemnified Parties unless the Parent and the Company
shall be notified by the Trustee of the written assertion of a claim or of any
action commenced against the Indemnified Parties, promptly after any of the
Indemnified Parties shall have received any such written assertion of a claim or
shall have been served with a summons or other first legal process giving
information as
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to the nature and basis of the claim. Subject to (ii), below, the Parent and the
Company shall be entitled to participate at their own expense in the defense
and, if the Parent or the Company so elect at any time after receipt of such
notice, either of them may assume the defense of any suit brought to enforce any
such claim. The Trustee shall have the right to employ separate counsel in any
such suit and participate in the defense thereof but the fees and expenses of
such counsel shall be at the expense of the Trustee unless: (i) the employment
of such counsel has been authorized by the Parent or the Company, such
authorization not to be unreasonably withheld, or (ii) the named parties to any
such suit include both the Trustee and the Parent or the Company and the Trustee
shall have been advised by counsel acceptable to the Parent or the Company that
there may be one or more legal defenses available to the Trustee that are
different from or in addition to those available to the Parent or the Company
and that an actual or potential conflict of interest exists (in which case the
Parent and the Company shall not have the right to assume the defense of such
suit on behalf of the Trustee but shall be liable to pay the reasonable fees and
expenses of counsel for the Trustee).
9.2 LIMITATION OF LIABILITY
The Trustee shall not be held liable for any loss which may
occur by reason of depreciation of the value of any part of the Trust Estate or
any loss incurred on any investment of funds pursuant to this trust agreement,
except to the extent that such loss is attributable to the fraud, negligence,
wilful misconduct or bad faith on the part of the Trustee.
ARTICLE 10
CHANGE OF TRUSTEE
10.1 RESIGNATION
The Trustee, or any trustee hereafter appointed, may at any
time resign by giving written notice of such resignation to the Parent and the
Company specifying the date on which it desires to resign, provided that such
notice shall never be given less than 60 days before such desired resignation
date unless the Parent and the Company otherwise agree and provided further that
such resignation shall not take effect until the date of the appointment of a
successor trustee and the acceptance of such appointment by the successor
trustee. Upon receiving such notice of
<PAGE> 34
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resignation, the Parent and the Company shall promptly appoint a successor
trustee by written instrument in duplicate, one copy of which shall be delivered
to the resigning trustee and one copy to the successor trustee. Failing
acceptance by a successor trustee, a successor trustee may be appointed by an
order of the Court of Queen's Bench of Alberta upon application of one or more
of the parties hereto.
10.2 REMOVAL
The Trustee, or any trustee hereafter appointed, may be
removed with or without cause, at any time on 60 days' prior notice by written
instrument executed by the Holders of the majority of the Exchangeable Shares,
in duplicate, one copy of which shall be delivered to the Trustee so removed and
one copy to the successor trustee.
10.3 SUCCESSOR TRUSTEE
Any successor trustee appointed as provided under this trust
agreement shall execute, acknowledge and deliver to the Parent and the Company
and to its predecessor trustee an instrument accepting such appointment.
Thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this trust agreement, with like effect as
if originally named as trustee in this trust agreement. However, on the written
request of the Parent and the Company or of the successor trustee, the trustee
ceasing to act shall, upon payment of any amounts then due it pursuant to the
provisions of this trust agreement, execute and deliver an instrument
transferring to such successor trustee all the rights and powers of the trustee
so ceasing to act. Upon the request of any such successor trustee, the Parent,
the Company and such predecessor trustee shall execute any and all instruments
in writing for more fully and certainly vesting in and confirming to such
successor trustee all such rights and powers.
10.4 NOTICE OF SUCCESSOR TRUSTEE
Upon acceptance of appointment by a successor trustee as
provided herein, the Parent and the Company shall cause to be mailed notice of
the succession of such trustee hereunder to each Holder specified in a List. If
the Parent or the Company shall fail to cause
<PAGE> 35
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such notice to be mailed within 10 days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of the Parent and the Company.
ARTICLE 11
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
11.1 AMENDMENTS, MODIFICATIONS, ETC.
This trust agreement may not be amended or modified except by
an agreement in writing executed by the Company, the Parent and the Trustee and
approved by the Holders in accordance with Section 10.2 of the Exchangeable
Share Provisions.
11.2 MINISTERIAL AMENDMENTS
Notwithstanding the provisions of section 12.1 hereof, the
parties to this trust agreement may in writing, at any time and from time to
time, without the approval of the Holders, amend or modify this trust agreement
for the purposes of:
(a) adding to the covenants of any or all of the parties hereto
for the protection of the Holders hereunder;
(b) making such amendments or modifications not inconsistent with
this trust agreement as may be necessary or desirable with
respect to matters or questions which, in the opinion of the
Board of Directors of each of the Parent and Company and in
the opinion of the Trustee and its counsel, having in mind the
best interests of the Holders as a whole, it may be expedient
to make, provided that such boards of directors and the
Trustee and its counsel shall be of the opinion that such
amendments and modifications will not be prejudicial to the
interests of the Holders as a whole; or
(c) making such changes or corrections which, in the advice of
counsel to the Company, the Parent and the Trustee, are
required for the purpose of curing or correcting any ambiguity
or defect or inconsistent provision or clerical omission
<PAGE> 36
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or mistake or manifest error, provided that the Trustee and
its counsel and the Board of Directors of each of the Company
and the Parent shall be of the opinion that such changes or
corrections will not be prejudicial to the interests of the
Holders as a whole.
11.3 MEETING TO CONSIDER AMENDMENTS
The Company, at the request of the Parent, shall call a
meeting or meetings of the Holders for the purpose of considering any proposed
amendment or modification requiring approval pursuant hereto. Any such meeting
or meetings shall be called and held in accordance with the by-laws of the
Company, the Exchangeable Share Provisions and all applicable laws.
11.4 CHANGES IN CAPITAL OF PARENT AND THE COMPANY
(a) At all times after the occurrence of any event effected
pursuant to section 2.7 or section 2.8 of the Support
Agreement, as a result of which either the Parent Common Stock
or the Exchangeable Shares or both are in any way changed,
this trust agreement shall forthwith be amended and modified
as necessary in order that it shall apply with full force and
effect, to all new securities into which the Parent Common
Stock or the Exchangeable Shares or both are to changed and
the parties hereto shall execute and deliver a supplemental
trust agreement giving effect to and evidencing such necessary
amendments and modifications.
ARTICLE 12
TERMINATION
12.1 TERM
The Trust created by this trust agreement shall continue until
the earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by any Holder;
<PAGE> 37
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(b) each of the Company and the Parent elects in writing to
terminate the Trust and such termination is approved by the
Holders of the Exchangeable Shares in accordance with Section
10.2 of the Exchangeable Share Provisions, and
(c) 21 years after the death of the last survivor of the
descendants of Her Majesty Queen Elizabeth II of the United
Kingdom of Great Britain and Northern Ireland living on the
date of the creation of the Trust.
12.2 SURVIVAL OF AGREEMENT
This trust agreement shall survive any termination of the
Trust and shall continue until there are no Exchangeable Shares outstanding held
by a Holder; provided, however, that the provisions of Articles 8 and 9 hereof
shall survive any such termination of this trust agreement.
ARTICLE 13
GENERAL
13.1 SEVERABILITY
If any provision of this trust agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this trust agreement shall not in any way be affected or
impaired thereby and the agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
13.2 INUREMENT
This trust agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns and to the benefit of the Holders.
13.3 NOTICES TO PARTIES
All notices and other communications between the parties
hereunder shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be specified in like
notice):
<PAGE> 38
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(a) if to the Parent at: McAfee Associates, Inc.
2710 Walsh Avenue
Santa Clara, CA 95051-0963
Attention: William L. Larson
President and Chief Executive Officer
Fax Number:(408) 970-9727
with a copy to: Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
600 Hansen Way, Second Floor
Palo Alto, CA 94304
Attention: Carla S. Newell, Esq.
Fax Number: (415) 843-0314
(b) if to the Company at:FSA Corporation
1011 First Street S.W., Suite 508
Calgary, Alberta, CANADA
T2R 1J2
Attention: Daniel Freedman
Fax Number:(403) 264-0873
with a copy to:Macleod Dixon
3700, 400 Third Avenue S.W.
Calgary, Alberta, CANADA
T2P 4H2
Attention: John T. Ramsay, Esq
Fax Number: (403) 264-5973
if to the Trustee at:Macleod Dixon
3700, 400 Third Avenue S.W.
Calgary, Alberta, CANADA
T2P 4H2
Attention: John T. Ramsay, Esq
Fax Number: (403) 264-5973
Any notice or other communication given personally shall be
deemed to have been given and received upon delivery thereof and if given by
telecopy shall be deemed to have been given and received on the date of receipt
thereof unless such day is not a Business Day in which case it shall be deemed
to have been given and received upon the immediately following Business Day.
<PAGE> 39
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13.4 NOTICE OF HOLDERS
Any and all notices to be given and any documents to be sent
to any Holders may be given or sent to the address of such holder shown on the
register of holders of Exchangeable Shares in any manner permitted by the
by-laws of the Company from time to time in force and respect of notices to
shareholders and shall be deemed to be received (if given or sent in such
manner) at the time specified in such by-laws, the provisions of which by-laws
shall apply, with such changes as the context may require, to notices or
documents as aforesaid sent to such holders.
13.5 RISK OF PAYMENTS BY POST
Whenever payments are to be made or documents are to be sent
to any Holder by the Trustee or by the Company, or by such Holder to the Trustee
or to the Parent or the Company, the making of such payment or sending of such
document sent through the post shall be at the risk of the Company, in the case
of payments made or documents sent by the Trustee or the Company, and the
Holder, in the case of payments made or documents sent by the Holder.
13.6 COUNTERPARTS
This trust agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
13.7 JURISDICTION
This trust agreement shall be construed and enforced in
accordance with the laws of the Province of Alberta and the laws of Canada
applicable therein.
13.8 ATTORNMENT
The Parent agrees that any action or proceeding arising out of
or relating to this trust agreement may be instituted in the courts of Alberta,
waives any objection which it may have now or hereafter to the venue of any such
action or proceeding, irrevocably submits to the jurisdiction of the said courts
in any such action or proceeding, agrees to be bound by any judgement of the
said courts and agrees not to seek, and hereby waives, any review of the merits
<PAGE> 40
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of any such judgement by the courts of any other jurisdiction and hereby
appoints the Company at its registered office in the Province of Alberta as the
Parent's attorney for service of processes.
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this trust
agreement to be duly executed as of the date first above written.
MCAFEE ASSOCIATES, INC.
By:____________________________
Its:___________________________
FSA COMBINATION CORP.
By:____________________________
Its:___________________________
FSA CORPORATION
By:____________________________
Its:___________________________
JOHN T. RAMSAY
_______________________________
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 30th day
of August, 1996, by and between McAfee Associates, Inc., a Delaware corporation
(the "Company"), and Daniel Freedman, the sole shareholder of FSA Corporation
(the "Shareholder").
RECITALS
WHEREAS, the Company, FSA Combination Corp., FSA Corporation
("FSA"), and the Shareholder are parties to the Combination Agreement, dated
August 16, 1996 (together with all exhibits, schedules, supplements and any
amendments thereto, the "Combination Agreement") pursuant to which the Company
will acquire an acquisition interest in FSA;
WHEREAS, the execution and delivery of this Agreement is a
condition to the closing of the Combination Agreement;
WHEREAS, the Combination Agreement provides that, as of the
Effective Date, each of the shares of FSA held by the Shareholder will be
exchanged for exchangeable shares of FSA (the "Exchangeable Shares"), and that
the shares of Common Stock of the Company that are issued to the Shareholder in
exchange for such Exchangeable Shares be granted registration rights as set
forth herein; and
WHEREAS, all terms not otherwise defined herein shall have the
same meanings ascribed to them in the Combination Agreement;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and
agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.
(c) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(d) The term "Registrable Securities" means the Common Stock
of the Company ("Common Stock") issued or issuable to the Shareholder upon
exchange of the Exchangeable Shares in accordance with the terms and conditions
of the Articles of
<PAGE> 3
Incorporation of FSA or the Voting and Exchange Trust Agreement, and any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to such Common Stock.
(e) The term "Rule 144" shall mean Rule 144 promulgated under
the Act, as amended from time to time, or any similar successor rule thereto
that may be promulgated by the SEC.
(f) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 Request for Registration.
(a) Subject to the limitations of subsection 1.2(d) hereof, if
the Company shall receive at any time after 120 days following the Closing Date
of the Combination, a written request from Shareholder that the Company file a
registration statement under the Act, the Company will effect, as soon as
practicable after the receipt of such request, the registration under the Act of
all Registrable Securities which the Shareholder requests to be registered;
provided, however, that the Company shall only be required to register up to 50%
of the Registrable Securities pursuant to such request. Notwithstanding the
foregoing, the Company shall not be required to cause any such registration
statement to be declared effective prior to 180 days following the Closing Date
of the Combination. The Company shall not be required to register Registrable
Securities pursuant to this subsection 1.2(a) on more than one occasion.
(b) Subject to the limitations of subsection 1.2(d) hereof, if
the Company shall receive at any time after 300 days following the Closing Date,
a written request from Shareholder that the Company file a registration
statement under the Act covering the registration of any or all of the
Registrable Securities not registered under subsection 1.2(a) above, the Company
will effect, as soon as practicable after the receipt of such request, the
registration under the Act of all such Registrable Securities; provided,
however, that the Company shall not be required to cause any such registration
statement to be declared effective prior to 365 days following the Closing Date
of the Combination. The Company shall not be required to register Registrable
Securities pursuant to this subsection 1.2(b) on more than one occasion.
(c) In the event that at any time after one year from the
Closing Date the Company takes the position that the holding period of the
Exchangeable Shares may not be identified with the holding period of Registrable
Securities under Rule 144(d), the Shareholder shall be entitled to request at
any time after the completion of the registrations requested under subsections
(a) and (b) above, and the Company shall be obligated to effect as soon as
practicable after such request, two additional registrations pursuant to the
terms hereof.
(d) Notwithstanding the foregoing, if the Company shall
furnish to Shareholder a certificate signed by the Chief Executive Officer of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be detrimental to the Company and its stockholders for
such registration statement to be filed, and it is therefore essential to defer
the filing of such registration statement, the Company shall have the right to
2
<PAGE> 4
defer taking action with respect to such filing for a period of not more than
120 days after receipt of the request of the Shareholder; provided, however,
that the Company may not utilize this right more than once for each registration
requested under subsections 1.2(a) and 1.2(b) above, and provided further that
any such deferral shall terminate at such time as officers of the Company may
buy or sell shares of Common Stock in accordance with the Company's insider
trading policy.
(e) Notwithstanding the foregoing, the Company shall not be
required to register any Registrable Securities that are, at the effective date
of the registration statement, held in escrow, or issuable on exchange of
Exchangeable Shares held in escrow, pursuant to the terms of the Combination
Agreement.
1.3 Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Shareholder) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which is not available for the resale of the Registrable Securities,
a registration statement on Form S-4 or any successor form, or a registration in
which the only Common Stock being registered is Common Stock issuable upon
conversion of debt securities which are also being registered), the Company
shall, at such time, promptly give the Shareholder written notice of such
registration. Upon the written request of the Shareholder given within twenty
(20) days after mailing of such notice by the Company in accordance with Section
2.5, the Company shall cause to be registered under the Act all of the
Registrable Securities that the Shareholder has requested to be registered;
provided, however, that the Company shall not be obligated pursuant to this
Section 1.3 to (i) include any of the Registrable Securities in any such
registration which will be declared effective prior to 180 days after the
Closing Date of the Combination or (ii) register more than 50% of the
Registrable Securities in any such registration which will be declared effective
prior to 365 days after the Closing Date of the Combination. In connection with
any registration pursuant to this Section 1.3 which involves the underwritten
offering of the Company's securities, the Company shall not be required to
include any of the Shareholder's securities under such registration statement
unless he agrees to enter into an underwriting agreement in the form agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. Shareholder acknowledges and agrees that at the
underwriters' sole discretion the Registrable Securities may be excluded
entirely from such offering. In addition, if a registration is to be effected
pursuant to a request by another holder of Common Stock of the Company, the
Shareholder's right to participate in any such registration shall be subject to
the prior consent of such holder which consent may be withheld in the holder's
sole discretion.
1.4 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
3
<PAGE> 5
(a) Prepare and file with the SEC as soon as practicable, but
in no event later than 30 days after a request for registration has been made
under Section 1.2, a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective, and, subject to the provisions below, use its best efforts to,
keep such registration statement effective for a period of thirty (30) days or,
if earlier, until the distribution contemplated in the registration statement
has been completed. If at any time after a registration statement becomes
effective, the Company advises Shareholder in writing that due to the existence
of material information that has not been disclosed to the public and included
in the registration statement it is necessary to amend the registration
statement, Shareholder shall suspend any further sale of Registrable Securities
pursuant to the Registration Statement until the Company advises Shareholder
that the registration statement has been amended. In such event, the Company
shall cause the registration statement to be amended as soon as reasonably
practicable, provided that the Company shall not be required to amend the
registration statement during any time when the Company's officers and directors
are prohibited from buying or selling the Company's Common Stock pursuant to the
Company's insider trading policy. Notwithstanding the foregoing sentence, the
Company shall file any amendment necessary for the Shareholder to recommence his
sales under the registration statement concurrently with the commencement of any
period in which directors and officers of the Company are allowed to buy or sell
Common Stock pursuant to the Company's insider trading policy. In the event the
sales of Registrable Securities of the Shareholder are suspended as provided
above, the 30-day period during which a registration statement must be kept
effective shall be extended for the period during which sales are suspended plus
an additional number of trading days equal to the positive number obtained by
subtracting (i) the number of days that the registration statement remained
effective prior to such suspension from (ii) 30.
(b) Subject to subsection 1.4(a), prepare and file with the
SEC such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Shareholder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as he may reasonably request
in order to facilitate the disposition of Registrable Securities owned by him.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Shareholder; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the Act.
(e) The Company will not include any securities in a
registration pursuant to this Agreement other than the Registrable Securities.
4
<PAGE> 6
(f) The Company shall notify the Shareholder if the SEC
advises the Company that the exchange of the Exchangeable Shares for Registrable
Securities is required as a condition to the filing of any registration
statement under Section 1.2. If such exchange is required, the Company's
obligation to register the Registrable Securities under Section 1.2 shall be
conditioned upon the exchange occurring prior to the filing of the Registration
Statement. If a registration statement must be withdrawn because the SEC takes
the position that the exchange must be made before filing, the expenses of such
prior filing shall be borne by the Company pursuant to Section 1.6 and such
prior filing shall not be deemed to satisfy the Company's obligation to effect a
registration under Section 1.2.
(g) The Company shall keep the Shareholder advised of the
status of any registration statement filed under Section 1.2 and coordinate the
effective date of such registration statement with the Shareholder.
1.5 Information from Shareholder. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of Shareholder that
Shareholder shall furnish to the Company such information regarding himself, the
Registrable Securities held by him, and the intended method of disposition of
such securities as shall be required to effect the registration of the
Registrable Securities.
1.6 Expenses of Registration. All expenses of Shareholder,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the Company
shall be borne by the Company; provided, however, that the Company shall not be
required to pay any professional fees of Shareholder other than the fees of one
counsel to the Shareholder (not to exceed $10,000) and provided, further, that
the Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Shareholder (in which case
Shareholder shall bear such expenses unless Shareholder agrees that the
registration shall be deemed to satisfy the Company's obligations to complete
one registration pursuant to Section 1.2 hereof).
1.7 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) The Company will indemnify and hold harmless against any
losses, claims, damages, or liabilities (joint or several) to which he may
become subject under the Act, or the 1934 Act, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, or any rule or regulation
promulgated under the Act, or the
5
<PAGE> 7
1934 Act; and the Company will pay to Shareholder any legal or other expenses
reasonably incurred by him in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.7 (a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company, which consent
shall not be unreasonably withheld, nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with information furnished expressly for use in connection with
such registration by Shareholder. In addition, the Company shall not be liable
for any untrue statement or omission in any prospectus if a supplement or
amendment thereto correcting such untrue statement or omission was delivered to
Shareholder prior to the pertinent sale or sales by Shareholder.
(b) Shareholder will indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Act, any other Shareholder selling securities in such registration statement
and any controlling person of any such Shareholder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by Shareholder expressly
for use in connection with such registration; and Shareholder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.7(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.7(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of Shareholder, which consent shall not be unreasonably withheld; provided,
that, in no event shall any indemnity under this subsection 1.7(b) exceed the
gross proceeds from the offering received by Shareholder.
(c) Promptly after receipt by an indemnified party under this
Section 1.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party
6
<PAGE> 8
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 1.7, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 1.7.
(d) If the indemnification provided for in this Section 1.7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) The obligations of the Company and Shareholder under this
Section 1.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.8 No Assignment of Registration Rights; Inclusion of
Transferee Shares. The registration rights provided hereunder are not
assignable, except to a transferee upon the death of Shareholder, a personal
legal representative in the event of incapacity of the Shareholder or otherwise
by operation of law. Notwithstanding the foregoing, Shareholder may, at his
option, elect to include in any registration requested under Section 1.2 any
Common Stock issued or issuable upon the exchange of Exchangeable Shares held by
a transferee of his Exchangeable Shares or Common Stock (a "Transferee"),
provided that he gives notice to the Company of his election to include the
shares at the time of his request under Section 1.2 and, provided further, that
the Transferee agrees in writing to be bound by the obligations hereunder to the
extent of such Transferee's participation in a registration hereunder. If
Registrable Securities are registered for a Transferee, all references to
Shareholder in this Agreement shall be deemed to refer to the Transferee to the
extent of the Transferee's participation in the registration.
1.9 Suspension of Registration Rights. The registration rights
provided in this Section 1 shall be suspended if all shares of Registrable
Securities held by the Shareholder may be sold pursuant to Rule 144 in any three
(3) month period, and Shareholder shall have received an opinion of the
Company's legal counsel, subject only to customary qualifications, to such
effect.
1.10 Reports Under the Securities Exchange Act.
7
<PAGE> 9
With a view to making available registration on SEC Form S-3
and the benefits of Rule 144, the Company agrees to:
(a) Make and keep current public information available with
the meaning of Rule 144(c).
(b) File with the SEC in a timely manner all reports and other
documents and information required of the Company under the 1934 Act, and take
such other actions as may be necessary to assure the availability of Form S-3
for use in connection with the registration rights provided in this Agreement.
So long as Shareholder owns Registrable Securities, to furnish to Shareholder
forthwith upon request a written statement as to the Company's compliance with
the reporting requirements of Rule 144 and the Securities Exchange Act of 1934,
a copy of the Company's most recent annual and quarterly reports, and such other
reports, documents and other information in the possession of or reasonably
obtainable by the Company as the Shareholder may reasonably request in availing
himself of Rule 144.
(c) So long as Shareholder owns Registrable Securities, to
furnish to Shareholder forthwith upon request a written statement as to the
Company's compliance with the reporting requirements of Rule 144 and the
Securities Exchange Act of 1934, a copy of the Company's most recent annual and
quarterly reports, and such other reports, documents and other information in
the possession of or reasonably obtainable by the Company as the Shareholder may
reasonably request in availing himself of Rule 144.
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
2.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon facsimile (with confirmed receipt), or personal delivery
to the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties.
8
<PAGE> 10
2.6 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
Shareholder.
2.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
2.9 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof.
9
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first above written.
McAFEE ASSOCIATES, INC.
By:.......................................
R. Terry Duryea, Vice President
Professional Services and Corporate
Development
Address:
2710 Walsh Avenue
Santa Clara, California 95051-0963
DANIEL FREEDMAN
..........................................
Address:
1232 17A Street NW
Calgary, Alberta
Canada T2N 2E7
[Signature page to Registration Rights Agreement]
<PAGE> 1
EXHIBIT 99.1
PRESS RELEASE
<PAGE> 2
[MCAFEE LETTERHEAD]
Media Contacts:
Mark Coker
Dovetail Public Relations
(408) 395-3600
Terry Duryea
McAfee
(408) 988-3832
Benjamin Freedman
FOR IMMEDIATE RELEASE FSA Corporation
(408) 264-4822
MCAFEE COMPLETES ACQUISITION OF FSA CORPORATION
SANTA CLARA, CALIF. (September 3, 1996) - McAfee (Nasdaq: MCAF) today announced
it has completed the acquisition of network security software developer, FSA
Corporation, based in Calgary, Alberta, Canada. Under the terms of the
agreement, first announced August 19, 1996, McAfee has acquired privately held
FSA for 356,000 shares of McAfee common stock. The acquisition is accounted for
as a pooling of interests.
FSA's employees, including Dan Freedman, founder and president of FSA, are
continuing with McAfee. Dan Freedman has now become a member of McAfee's
executive staff as vice president of security products, where he manages
McAfee's growing family of network security products. McAfee is maintaining
FSA's offices in Calgary.
Founded in 1989, Calgary-based FSA Corporation was a leading supplier of
corporate security control and audit tools. The company's products have won
industry recognition for their advanced technology, including a nomination for
Best of Show at the April, 1996 Networld+Interop, and a 1996 Reader's Choice
nomination from ENT magazine. FSA can be reached by phone at (403) 264-4822.
FSA's Web address is http://www.fsa.ca.
-MORE-
<PAGE> 3
MCAFEE COMPLETES ACQUISITION OF FSA CORPORATION, PAGE 2 OF 2
Founded in 1989, McAfee is a leading worldwide vendor of Network Security
and Management products for enterprise networks. The Company is also a leader
in Internet and Web-based electronic software distribution. McAfee is
headquartered in Santa Clara, California and can be reached by phone at (408)
988-3832 or by fax at (408) 970-9727. McAfee's Web address is
http://www.mcafee.com.
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