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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ________)*
CyberMedia, Inc.
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(Name of Issuer)
Common Stock, $0.01 par value
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(Title of Class of Securities)
23249P107
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(CUSIP Number)
Prabhat K. Goyal
Chief Financial Officer
Network Associates, Inc.
3965 Freedom Circle
Santa Clara, CA 95054
(408) 988-3832
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
Copies to:
Dennis C. Sullivan
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301-3699
(650) 328-6561
July 28, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedules, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 23249P107 SCHEDULE 13D
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1 NAME OF REPORTING PERSONS
S. S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Networks Associates, Inc. I.R.S. Employer Identification Number:
77-0316593
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC; OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY
OWNED BY 2,659,145*
BY EACH ----------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
BY EACH
REPORTING 2,787,116*
PERSON ----------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
2,659,145*
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10 SHARED DISPOSITIVE POWER
2,787,116*
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* On July 28, 1998, Networks Associates, Inc. ("Network Associates") entered
into support agreements (the "Support Agreements") with Kanwal Rekhi, James
R. Tolonen, Suhas Patil, Ronald S. Posner, Robert Davis and Kenneth Kucera
(the "Stockholders"), each an affiliate of CyberMedia, Inc. (the "Issuer").
Pursuant to the Support Agreements, upon the terms set forth therein, the
Stockholders generally have agreed to tender, in accordance with the terms of
the tender offer described in this Schedule 13D (the "Offer"), an aggregate
of approximately 2,787,116 shares of Common Stock, par value $0.01 per share,
of the Issuer (the "Shares"). In addition, the Stockholders have granted an
irrevocable proxy with respect to such Shares to Network Associates, which
Shares are reflected in Rows (8) and (10).
Also on July 28, 1998, Network Associates and the Issuer entered into a Note
Purchase and Security Agreement pursuant to which Network Associates agreed
to loan the Issuer $10,000,000 in principal amount (the outstanding principal
balance and any accrued but unpaid interest constituting the "Loan Amount").
The Loan Amount is evidenced by a Secured Subordinated Convertible Promissory
Note dated July 28, 1998 (the "Convertible Note"). The Convertible Note is
convertible into 1,501,501 Shares, which Shares are reflected in Rows (7) and
(9).
In addition, in connection with the Offer, Network Associates and the Issuer
entered into the Issuer Option Agreement, pursuant to which the Issuer
granted Network Associates the Option (the "Issuer Option") to acquire, under
certain circumstances, a number of Shares equal to 19.9% of the total number
of Shares issued and outstanding as of July 27, 1998 less the number of
Shares issuable upon full conversion of the Convertible Note. Assuming full
conversion of the Convertible Note, the number of Shares subject to the
Issuer Option would be 1,157,644.
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CUSIP NO. 23249P107 SCHEDULE 13D
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,446,261
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
34.0%+
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14 TYPE OF REPORTING PERSON*
CO
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+ Assumes full conversion of the Convertible Note and the exercise in full
of the Issuer Option.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP NO. 23249P107 SCHEDULE 13D
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Item 1. Security and Issuer.
This Schedule 13D relates to the common stock, $0.01 par value ("Common
Stock"), of CyberMedia, Inc., a Delaware corporation (the "Issuer"). The
principal executive offices of the Issuer are located at 2850 Ocean Park Blvd.,
Suite 100, Santa Monica, CA 90405.
Item 2. Identity and Background.
This Statement is being filed on behalf of Networks Associates, Inc., a
Delaware corporation ("Network Associates"), having its principal office located
at 3965 Freedom Circle, Santa Clara, California 95054.
Network Associates is a leading developer and provider of network
security and management software products.
During the last five years, Network Associates has not been (a)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
The table set forth in Exhibit 1 is incorporated herein by reference and
lists the name, principal occupation or employment, the name, principal business
and address of any corporation or other organization in which such employment is
conducted and citizenship for the directors and executive officers of Network
Associates. The business address for the directors and executive officers of
Network Associates is c/o Network Associates, Inc., 3965 Freedom Circle, Santa
Clara, California 95054. To the knowledge of Network Associates, none of such
directors or executive officers has, during the last five years, been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
or been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such civil proceeding was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violations with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
On July 28, 1998, Network Associates entered into an Agreement and Plan
of Merger (the "Merger Agreement") by and among Network Associates, Cyclone
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Network Associates ("Purchaser"), and the Issuer. The Merger Agreement provides,
among other things, for the commencement of a tender offer pursuant to which
Purchaser offers to purchase all outstanding shares of Common Stock of the
Issuer (the "Shares") at a purchase price of $9.50 per Share (such amount, or
any greater amount per share paid pursuant to the Offer, being hereinafter
referred to as the "Offer Price") (the "Offer"). Pursuant to the Merger
Agreement, Network Associates commenced the Offer on August 3, 1998. The Offer
is conditioned upon, among other things (1) there being validly tendered and not
withdrawn prior to the Expiration Date (as hereinafter defined) or there being
held by Network Associates, Purchaser or any affiliate thereof or issuable upon
the exercise or conversion of any equity or debt security held by Network
Associates, Purchaser or any affiliate thereof which is then exercisable or
convertible, Shares that would constitute at least a majority of the Shares then
outstanding, on a fully diluted basis on the date of purchase (including, for
purposes of such calculation, all Shares issuable upon exercise of outstanding
stock options and warrants which are
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CUSIP NO. 23249P107 SCHEDULE 13D
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vested or scheduled to vest prior to October 31, 1998 with an exercise price
less than the Offer Price, and conversion of all convertible securities or other
rights to purchase or acquire Shares with a conversion price less than the Offer
Price) (the "Minimum Condition") and (2) the expiration or termination of any
applicable waiting periods imposed by the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended (the "Hart-Scott-Rodino Act"). The Merger
Agreement also provides that after the purchase of the Shares pursuant to the
Offer and subject to the satisfaction or waiver of certain conditions set forth
therein, Purchaser will be merged with and into the Issuer (the "Merger").
Concurrently with the execution of the Merger Agreement, Network
Associates entered into support agreements (the "Support Agreements") with
Kanwal Rekhi, James R. Tolonen, Suhas Patil, Ronald S. Posner, Robert Davis and
Kenneth Kucera (the "Stockholders"), each an affiliate of the Issuer. Pursuant
to the Support Agreements, upon the terms set forth therein, the Stockholders
generally have agreed to tender, in accordance with the terms of the Offer,
approximately 2,787,116 Shares. In addition, the Stockholders have granted an
irrevocable proxy with respect to such Shares to Network Associates.
Also on July 28, 1998, immediately prior to the execution of the Merger
Agreement, Network Associates and the Issuer entered into a Note Purchase and
Security Agreement (the "Loan Agreement") pursuant to which Network Associates
agreed to loan the Issuer $10,000,000 in principal amount (the outstanding
principal balance and any accrued but unpaid interest constituting the "Loan
Amount"). The Loan Amount is evidenced by a Secured Subordinated Convertible
Promissory Note (the "Convertible Note"). The Convertible Note is convertible
into 1,501,501 Shares.
Also concurrently with the execution of the Merger Agreement, Network
Associates and the Issuer entered into a stock option agreement (the "Issuer
Option Agreement"), pursuant to which the Issuer granted Network Associates the
option (the "Issuer Option") to acquire, under certain circumstances, a number
of Shares equal to 19.9% of the total number of Shares outstanding as of July
27, 1998 less any Shares issuable upon full conversion of the Convertible Note.
Assuming full conversion of the Convertible Note, such number of Shares issuable
upon exercise of the Issuer Option would be 1,157,644.
No monetary consideration has been tendered to date for the Shares
underlying the Issuer Option, and no monetary consideration has been or will be
paid in connection with the Support Agreements or the conversion of the
Convertible Note. In the event that the Issuer Option becomes exercisable and
the Issuer elects to exercise the Issuer Option, the Issuer intends to obtain
the necessary funds from its available working capital.
Item 4. Purpose of Transaction.
Each of the Support Agreements, the Convertible Note and the Issuer
Option was entered into in connection with the Merger Agreement and the Offer.
The purpose of the Offer and the Merger is for Network Associates to
acquire control of, and the entire equity interest in, the Issuer. The purpose
of the Merger is for Network Associates to acquire all Shares not purchased
pursuant to the Offer. Upon consummation of the Merger, the Issuer will become a
wholly-owned subsidiary of Network Associates. The Offer is being made pursuant
to the Merger Agreement.
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CUSIP NO. 23249P107 SCHEDULE 13D
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It is expected that, initially following the Merger, the products of the
Issuer will become part of Network Associates' McAfee Software Division, a new
business unit dedicated to expanding Network Associates' desktop product line,
and the business and operations of the Issuer will be integrated gradually into
Network Associates' operations. Network Associates will continue to evaluate the
business and operations of the Issuer during the pendency of the Offer and after
the consummation of the Offer and the Merger, and will take such actions as it
deems appropriate under the circumstances then existing. Network Associates
intends to seek additional information about the Issuer during this period.
Thereafter, Network Associates intends to review such information as part of a
comprehensive review of the Issuer's business, operations, capitalization and
management with a view to optimizing exploitation of the Issuer's potential in
conjunction with Network Associates' business.
Under the Delaware General Corporation Law (the "DGCL"), the approval of
the Issuer's Board of Directors and the affirmative vote of the holders of a
majority of the outstanding Shares are required to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the Merger. The
Issuer's Board of Directors has unanimously approved and adopted the Merger
Agreement and the transactions contemplated thereby, and, unless the Merger is
consummated pursuant to the short-form merger provisions under the DGCL
described below, the only remaining required corporate action of the Issuer is
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby by the affirmative vote of the holders of a majority of the
Shares outstanding on the record date set for the stockholder meeting at which
the Merger Agreement is presented for adoption and approval. Accordingly, if the
Minimum Condition is satisfied, Purchaser will have sufficient voting power to
cause the approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the affirmative vote of any other stockholders.
In the Merger Agreement, the Issuer has agreed to take all action
necessary to convene a special meeting of its stockholders as soon as
practicable after the consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement and the transactions contemplated
thereby, if such action is required by the DGCL. Network Associates has agreed
that all Shares owned by it or any of its subsidiaries (including Purchaser)
will be voted in favor of the Merger Agreement and the transactions contemplated
thereby.
If Purchaser purchases Shares pursuant to the Offer, the Merger
Agreement provides that Network Associates will be entitled to designate such
number of directors, rounded up to the next whole number, on the Issuer's Board
of Directors as is equal to the product of the total number of directors
(determined after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Network Associates or its affiliates bears to the total
number of Shares then outstanding. The Issuer has further agreed, upon request
of Network Associates, to promptly take all actions necessary to cause Network
Associates' designees to be so elected, including, if necessary, increasing the
size of the Issuer's Board of Directors (to the extent permitted by the Issuer's
Certificate of Incorporation and By-laws and/or seeking the resignations of one
or more existing directors, provided, however, that prior to the Effective Time
(as defined in the Merger Agreement) the Issuer's Board of Directors shall at
all times have at least two members who are members of the Issuer's Board of
Directors on the date of the Merger Agreement and are neither officers of the
Issuer or any of its subsidiaries, nor officers or directors of Purchaser or any
of its affiliates, or other independent directors appointed to replace such
persons. Network Associates currently intends to designate a majority of the
directors of the Issuer following consummation of the Offer. It is currently
anticipated that Network Associates will designate William L. Larson, Prabhat K.
Goyal, Zachary A. Nelson, Richard A. Hornstein and Gregory P.G. Wharton or such
other persons as
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CUSIP NO. 23249P107 SCHEDULE 13D
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Network Associates shall determine, to serve as directors of the Issuer
following consummation of the Offer. Purchaser expects that such representation
would permit Purchaser to exert substantial influence over the Issuer's conduct
of its business and operations.
Under the DGCL, if Purchaser acquires, pursuant to the Offer, at least
90% of the outstanding Shares, Purchaser will be able to approve the Merger
without a vote of the Company's stockholders. In such event, Network Associates
and Purchaser anticipate that they will take all necessary and appropriate
action to cause the Merger to become effective as soon as reasonably practicable
after such acquisition, without a meeting of the Issuer's stockholders. If,
however, Purchaser does not acquire at least 90% of the outstanding Shares
pursuant to the Offer or otherwise and a vote of the Company's stockholders is
required under the DGCL, a significantly longer period of time would be required
to effect the Merger. Pursuant to the Merger Agreement, the Issuer has agreed to
take all action necessary under the DGCL and its Certificate of Incorporation
and By-laws to convene a meeting of its stockholders promptly following
consummation of the Offer to consider and vote on the Merger Agreement, if a
stockholders' vote is required.
Except as indicated the Offer to Purchase, neither Network Associates
nor Purchaser has any present plans or proposals that relate to or would result
in an extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Issuer or any subsidiary, a sale or transfer of a
material amount of assets of the Issuer or any subsidiary or any material change
in the Issuer's capitalization or dividend policy or any other material changes
in the Issuer's corporate structure or business, or the composition of the
Issuer's Board of Directors or management.
The purchase of the Shares by Purchaser pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and may reduce
the number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than Purchaser.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion on the Nasdaq
National Market. If trading volume were to be lower than such standards,
quotations might continue to be published in the "additional list" or in one of
the "local lists," or such quotations might not be published at all. If the
number of holders of Shares (based on round lots ) fell below 400, the Nasdaq
National Market might cease to provide quotations but quotations might still be
available from other sources. Purchaser cannot predict whether Nasdaq National
Market trading volume standards for publication will be met after the Offer.
The Shares are currently registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Such registration may be terminated upon
application by the Issuer to the Commission if there are fewer than 300 record
holders of Shares. It is the intention of Purchaser to seek to cause an
application for such termination to be made as soon after consummation of the
Offer as the requirements for termination of registration of the Shares are met.
If such registration were to be terminated, the Issuer would no longer legally
be required to disclose publicly in proxy materials distributed to stockholders
the information that it now must provide under the Exchange Act or to make
public disclosure of financial and other information in annual, quarterly and
other reports required to be filed with the Commission under the Exchange Act;
the officers, directors and 10% stockholder of the Issuer would no longer be
subject to the "short-swing" insider trading reporting and profit recovery
provisions of the Exchange Act or the proxy statement requirements of the
Exchange Act in connection with stockholders' meetings; and the Shares would no
longer be eligible for Nasdaq National Market
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CUSIP NO. 23249P107 SCHEDULE 13D
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reporting. Furthermore, if such registration were to be terminated, persons
holding "restricted securities" of the Issuer may be deprived of their ability
to dispose of such securities under Rule 144 promulgated under the Securities
Act of 1933, as amended ("the Securities Act").
Item 5. Interest in Securities of the Issuer.
Network Associates is deemed to have beneficial ownership, as defined in
Rule 13d-3(a), of an aggregate of 5,446,261 Shares, which would represent
approximately 34.0% of the Shares that would be outstanding in the event of the
full conversion of the Convertible Note and the exercise in full of the Issuer
Option. Network Associates would have sole voting and dispositive power over (i)
any Shares acquired pursuant to the mandatory tender provisions of the Support
Agreement, (ii) any Shares issued upon the conversion of the Convertible Note
and (iii) any Shares issued upon exercise of the Issuer Option. Currently,
Network Associates has shared voting power over the 2,787,116 Shares subject to
the provisions of the Support Agreements.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
The Support Agreements
Concurrently with the execution of the Merger Agreement, Network
Associates entered into the Support Agreements with the Stockholders, each of
whom is an affiliate of the Issuer. In the aggregate, such Stockholders owned
approximately 2,787,116 Shares representing approximately 20.9% of the currently
outstanding Shares as of July 27, 1998. The following is a summary of the
material terms of the Support Agreements. This summary is not a complete
description of the terms and conditions of the Support Agreements and is
qualified in its entirety by reference to the full text of the Support
Agreements which is incorporated herein by reference and a copy of which has
been filed with the Securities and Exchange Commission (the "Commission") as an
exhibit to this Schedule 13D.
Pursuant to the Support Agreements, each of the Stockholders agreed to
tender and not withdraw his Shares pursuant to the Offer. Each of the
Stockholders has also agreed, for so long as his Support Agreement is in effect,
at any meeting of the stockholders of the Issuer, however called, to vote his
Shares in favor of the Merger, against any action or agreement that would result
in a breach of any covenant, representation or warranty or any other obligation
or agreement of the Issuer under the Merger Agreement, and against any action or
agreement that would impede, interfere with, delay, postpone or attempt to
discourage the Merger or the Offer. Each of the Stockholders also granted
representatives of Network Associates an irrevocable proxy to vote his Shares in
favor of the Merger and other transactions contemplated by the Merger Agreement
and against any other acquisition proposal.
In addition, each of the Stockholders agreed not to (i) transfer any or
all of his Shares, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of his Shares, (iii)
grant any proxy, power-of-attorney or other authorization in or with respect to
his Shares, (iv) deposit his Shares into a voting trust or enter into a voting
agreement or arrangement with respect to his Shares or (v) take any other action
that would in any way restrict, limit or interfere with the performance of his
obligations under the Support Agreements or the Merger Agreement or which would
make any representation or warranty of such stockholder under the Support
Agreements untrue or incorrect.
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CUSIP NO. 23249P107 SCHEDULE 13D
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The agreements and proxy contained in each Support Agreement will
terminate on the earlier of payment for the Shares pursuant to the Offer and the
termination of the Merger Agreement in accordance with its terms.
The Issuer Option Agreement
Concurrently with the execution of the Merger Agreement, the Issuer and
Network Associates entered into the Issuer Option Agreement. The following is a
summary of the material terms of the Issuer Option Agreement. This summary is
not a complete description of the terms and conditions of the Issuer Option
Agreement and is qualified in its entirety by reference to the full text of the
Issuer Option Agreement, which is incorporated herein by reference, and a copy
of which has been filed with the Commission as an exhibit to this Schedule 13D.
Pursuant to the Issuer Option Agreement, the Issuer granted Network
Associates the option to acquire, under certain circumstances, a number of
Shares equal to 19.9% of the total number of Shares issued and outstanding as of
July 27, 1998 less the number of Shares issuable upon full conversion of the
Convertible Note, and adjusted thereafter to reflect changes in the Issuer's
capitalization occurring after the date of the Merger Agreement (provided that
the number of Shares issuable upon exercise of the Issuer Option shall be
reduced to the extent necessary so that the aggregate number of Shares issuable
under the Issuer Option and upon conversion of the Convertible Note shall not,
upon such issuance, constitute more than 19.9% of the total number of Shares
issued and outstanding). The per share purchase price of Shares purchased
pursuant to exercise of the Issuer Option is the Offer Price, payable in cash.
The Issuer Option is exercisable, in whole or in part, at any time or
from time to time after the occurrence of an event (a "Trigger Event") that
causes a termination fee of $4,000,000 (the "Termination Fee") to become payable
to Network Associates by the Issuer under the Merger Agreement. The Issuer
Option terminates upon the earlier of the following: (i) the Effective Time (as
defined in the Merger Agreement) of the Merger, (ii) the termination of the
Merger Agreement under circumstances that do not constitute a Trigger Event and
following which a Trigger Event cannot occur, (iii) six months after Network
Associates receives written notice from the Issuer of the occurrence of a
Trigger Event, (iv) 12 months following the termination of the Merger Agreement
if during such 12-month period no Trigger Event has occurred, and no
transaction, the consummation of which would give rise to a Trigger Event, is
pending, and (v) the date following 12 months after the termination of the
Merger Agreement when no transaction entered into or commenced prior to that
date that, if consummated, would have given rise to a Trigger Event, remains
pending. The exercise period is automatically extended if exercise of the Issuer
Option is prohibited or restrained for certain legal reasons. In addition, the
Issuer Option cannot be exercised by Network Associates if Network Associates is
in material breach of its material representations, warranties, covenants or
agreements in the Issuer Option Agreement or the Merger Agreement.
The Issuer's obligation to issue Shares under the Issuer Option is
subject to a number of conditions, including expiration of all applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended, the absence of any injunction or order, receipt of any required
governmental consents, approvals, orders, authorizations and permits.
At any time when the Issuer Option is exercisable, Network Associates
has the right (the "Put Option") to require the Issuer to repurchase the Issuer
Option, either in whole or in part, at a price equal
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CUSIP NO. 23249P107 SCHEDULE 13D
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to (i) the difference between the Market Price (as defined below) and the
exercise price, multiplied by (ii) the number of Shares subject to purchase
under the Issuer Option or the portion thereof specified in the repurchase
notice. "Market Price" is defined as the average per share closing sale price of
the Shares on the Nasdaq National Market for the 10 trading days immediately
preceding the date of the repurchase notice.
In the event that Network Associates (and/or any of its affiliates)
receives Net Proceeds (as defined below) which, combined with any Termination
Fee paid to Network Associates pursuant to the Merger Agreement and any payment
made to Network Associates (and/or any of its affiliates) pursuant to Network
Associates' exercise of the Put Option (or upon any other sale of the Issuer
Option) exceed $5,500,000, Network Associates is required to promptly remit to
the Issuer an amount equal to all Net Proceeds in excess of such amount. "Net
Proceeds" is defined as the aggregate proceeds from the sale or other
disposition of Shares acquired by Network Associates (and/or any of its
affiliates) upon exercise of the Issuer Option (plus any securities or other
assets issued to Network Associates (and/or any of its affiliates) in exchange
for or as dividends upon such Shares and any cash dividends received by Network
Associates (and/or any of its affiliates) with respect to such Shares) less the
exercise price multiplied by the number of Shares included in such disposition.
Prior to July 28, 2003, the Issuer Option Agreement requires Network
Associates to vote all Shares acquired upon exercise of the Issuer Option in the
same manner and in the same proportion as all other Shares are voted on each
matter submitted to a stockholder vote. In addition, the Issuer Option Agreement
requires Network Associates to execute written consents with respect to such
Shares in the same proportion as written consents are executed by other holders
of Shares.
Under the Issuer Option Agreement, Network Associates' right to sell,
assign, pledge or otherwise dispose of or transfer Shares acquired upon exercise
of the Issuer Option is subject to certain restrictions and first-refusal rights
in favor of the Issuer.
In addition, the Issuer Option Agreement gives Network Associates
certain rights to have the Shares acquired upon exercise of the Issuer Option
registered under the Securities Act for sale in a public offering. The
registration rights take effect after the termination of the Merger Agreement
and are subject to certain conditions and limitations. In lieu of registration,
the Issuer Option Agreement gives the Issuer the option to agree to purchase,
for cash, all or part of the Shares covered by the registration request, at a
price equal to at least 80% of the average per share closing sale price of the
Shares on the Nasdaq National Market for the 20 trading days immediately
preceding the date Network Associates gives notice. The Issuer Option Agreement
allows Network Associates to demand a total of two registrations, and allows the
Issuer to defer the requested registrations for prescribed periods of time under
certain circumstances.
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CUSIP NO. 23249P107 SCHEDULE 13D
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The Loan Agreement
On July 28, 1998, immediately prior to the execution of the Merger
Agreement, the Issuer and Network Associates entered into the Loan Agreement
pursuant to which Issuer agreed to loan the Issuer the Loan Amount. The Loan
Amount is evidenced by the Convertible Note issued concurrently with the
execution of the Loan Agreement. The following is a summary of the material
terms of the Loan Agreement and the Convertible Note. This summary is not a
complete description of the terms and conditions of the Loan Agreement or
Convertible Note, and is qualified in its entirety by reference to the full text
of such agreements, which are incorporated herein by reference and copies of
which have been filed with the Commission as an exhibit to this Schedule 13D.
Conversion Right. Network Associates has the right, in its sole
discretion, at any time and from time to time to elect to convert all or any
part of the Loan Amount into the number of Shares (the "Conversion Shares")
determined by dividing the total Loan Amount being converted by the Conversion
Price. The Conversion Price means $6.66 per Share, subject to adjustment for
stock splits, subdivisions and reverse stock splits.
Interest. The Convertible Note bears interest at an annual rate equal to
LIBOR (3-month) in effect on the first day of each calendar quarter, plus two
percent. Upon an "Event of Default" (as defined in the Convertible Note and
described below), interest will accrue at an annual rate equal to two percent
plus the rate otherwise in effect. Interest payments are due on the first day of
each calendar quarter, beginning on October 1, 1998, and upon maturity or any
prepayment of the outstanding principal amount.
Repayment; Acquisition. The Loan Amount is payable in full on July 28,
2000. Unless and until the Merger Agreement shall have been terminated in
accordance with its terms, the Issuer may not prepay any principal or interest
under the Convertible Note without the prior written consent of Network
Associates. Thereafter, the Issuer shall have the right at any time and from
time to time, upon 10 business days' prior written notice to Network Associates
(during which notice period Network Associates will remain entitled to elect to
convert all or part of the Loan Amount), to prepay the Loan Amount, in whole or
in part, without payment of any premium or penalty. The Loan Amount is due and
payable (without any prepayment penalty), upon either (i) the closing of the
sale or transfer of all or substantially all of the Issuer's assets; or (ii) the
closing of a merger or consolidation of the Issuer or other transaction or
series of related transactions in which the stockholders immediately prior to
such transaction or transactions do not own a majority of the voting securities
of the Issuer or the surviving corporation as applicable.
Subordination. The Convertible Note is subordinated, as to both security
interest and right of payment, to up to $6 million of senior debt which the
Issuer may obtain from banks, insurance companies, lease financing institutions
or other institutional lenders (the "Senior Debt").
Security Interests. As collateral security for the prompt and complete
payment and performance of the Issuer's obligations under the Convertible Note,
the Issuer granted Network Associates a continuing security interest in all of
the presently existing and hereafter acquired or arising assets of the Issuer,
including the Issuer's intangible property and intellectual property rights (the
"Collateral").
-8-
<PAGE> 12
- ---------------------------------
CUSIP NO. 23249P107 SCHEDULE 13D
- ---------------------------------
Covenants. In connection with the Loan Agreement, the Issuer covenanted
that it:
(a) will not transfer or otherwise encumber any interest in the
Collateral, except for certain permitted liens that may be granted in favor of
the holders of Senior Debt and except for non-exclusive licenses under its
patents, copyrights and other intellectual property rights granted by the Issuer
in the ordinary course of business;
(b) will deliver to Network Associates a quarterly report
listing any applications or registrations that it has made, filed or acquired in
respect of any patents, copyrights or trademarks and the status of any
outstanding applications or registrations;
(c) will protect, defend and maintain the validity and
enforceability of its material patents and copyrights, use its best efforts to
detect infringements of its patents and copyrights and promptly advise Network
Associates of infringements detected, and not allow any material patents or
copyrights to be abandoned, forfeited or dedicated to the public without the
written consent of Network Associates, which shall not be unreasonably withheld;
(d) will within 30 days of the date of the Loan Agreement
register or cause to be registered (to the extent not already registered) with
the United States Copyright Office, the copyrights associated with the currently
shipping versions of its "First Aid" software products, and register with the
United States Copyright Office once each calendar quarter those additional
copyrights developed, authored or acquired by the Issuer from time to time for
new releases and of each then shipping version of its First Aid and Uninstaller
software; and
(e) will not create, incur, assume or suffer to exist any lien
with respect to any of its property or assign or otherwise convey any right to
receive income therefrom, or enter into any agreement that would impair or
conflict with its obligations under the Loan Agreement and Convertible Note
without Network Associates' prior written consent, which consent shall not be
unreasonably withheld, and will not permit the inclusion in any contract to
which it becomes a party of any provisions that could or might in any way
prevent the creation of a security interest in the Issuer's rights and interests
in any property included within the definition of the Collateral acquired under
such contracts, except for permitted liens and the granting of liens in favor of
the holders of Senior Debt, and except that certain contracts may contain
anti-assignment provisions that could in effect prohibit the creation of a
security interest in such contracts if the Issuer is required, in its
commercially reasonable judgment, to accept such provisions.
Events of Default. The occurrence of any of the following would
constitute an Event of Default under the Loan Agreement and Convertible Note:
(a) The Issuer's breach of the obligation to pay any amount due
within 10 days of the date of written notice from Purchaser to the Issuer of
such breach;
(b) The Issuer's failure to perform, keep or observe any of its
covenants, conditions, promises, agreements or obligations under any agreement
with any third person or entity, after the expiration of any applicable grace
period under such agreement, or after any period of forbearance acknowledged in
writing by the other party to such agreement, if such failure has a material
adverse effect on the Issuer's assets, operations or financial condition;
-9-
<PAGE> 13
- ---------------------------------
CUSIP NO. 23249P107 SCHEDULE 13D
- ---------------------------------
(c) The Issuer's institution of proceedings against itself, or
the Issuer's filing of a petition or answer or consent seeking reorganization or
release, under the federal Bankruptcy Code, or any other applicable federal or
state law relating to creditors' rights and remedies, or the Issuer's consent to
the filing of any such petition or the appointment of a receiver, liquidation,
assignee, trustee or other similar official of the Issuer or of any substantial
part of its property, or the Issuer's making of an assignment for the benefit of
creditors, or the taking of corporate action in furtherance of such action;
(d) the creation (whether voluntary or involuntary) of, or any
attempt to create, any lien or encumbrance upon any of the Collateral, other
than permitted liens and liens in favor of the holders of Senior Debt, or the
making or any attempt to make any levy, seizure or attachment thereof and such
lien, encumbrance, levy, seizure or attachment has not been removed, discharged
or rescinded within 10 days after the Issuer is notified of or learns of such
lien, encumbrance, levy, seizure or attachment;
(e) the occurrence and continuance of any default under any
lease or agreement for borrowed money that gives the lessor or the creditor of
such indebtedness, as applicable, the right to accelerate the lease payments or
the indebtedness, as applicable, in an amount in excess of $1,000,000 or the
right to exercise any rights or remedies with respect to any of the Collateral;
(f) the entry of any judgment or order against the Issuer in an
amount in excess of $1,000,000 which remains unsatisfied or undischarged and in
effect for 30 days without a stay of enforcement or execution; or
(g) the Issuer's breach of any warranty or agreement made by the
Issuer in the Loan Agreement and, as to any breach that is capable of cure, the
Issuer fails to cure such breach within 20 days of notice from Network
Associates of the occurrence of such breach.
Remedies upon Event of Default. Upon an Event of Default, Network
Associates will have all the rights and remedies of a secured creditor under
California law, including the right to foreclose on the Collateral, to require
the Issuer to assemble the Collateral and any tangible property in which Network
Associates has a security interest and to make it available to Network
Associates at a place designated by Network Associates. Network Associates will
have a nonexclusive, royalty-free license to use the copyrights, patents and
trademarks of the Issuer to the extent reasonably necessary to permit Network
Associates to exercise its rights and remedies upon the occurrence of an Event
of Default. The Issuer will pay any expenses (including reasonable attorneys'
fees) incurred by Network Associates in connection with the exercise of any of
Network Associates' rights upon default, including without limitation, any
expense incurred in disposing of the Collateral.
Registration Rights. Network Associates has the right to demand that the
Issuer register Conversion Shares under the Securities Act. Network Associates
may demand up to four registrations, at the Issuer's expense, for resale in a
public offering if the Issuer is eligible to register shares on Form S-3 (or two
registrations if it is not so eligible). The right to demand registration is
subject to various conditions and limitations, including the right of the Issuer
to defer such registration for prescribed periods of time under certain
circumstances.
-10-
<PAGE> 14
- ---------------------------------
CUSIP NO. 23249P107 SCHEDULE 13D
- ---------------------------------
Item 7. Material to be filed as Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1. Directors and Executive Officers of Networks Associates, Inc.
2. Offer to Purchase, dated August 3, 1998.
3. Agreement and Plan of Merger, dated as of July 28, 1998, by and
among Network Associates, Purchaser and the Issuer.
4. Stock Option Agreement, dated as of July 28, 1998, by and
between Network Associates and the Issuer.
5. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and Kanwal Rekhi.
6. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and James R. Tolonen.
7. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and Suhas Patil.
8. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and Ronald S. Posner.
9. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and Robert Davis.
10. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and Kenneth Kucera.
11. Note Purchase and Security Agreement, dated as of July 28, 1998,
by and among the Issuer and Network Associates.
12. Secured Subordinated Convertible Promissory Note, dated July 28,
1998, made by the Issuer in favor of Network Associates.
</TABLE>
-11-
<PAGE> 15
- ---------------------------------
CUSIP NO. 23249P107 SCHEDULE 13D
- ---------------------------------
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 7, 1998
NETWORKS ASSOCIATES, INC.
/s/ William L. Larson
----------------------------------------
By: William L. Larson
Its: Chief Executive Officer and
Chairman of the Board
-12-
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1. Directors and Executive Officers of Networks Associates, Inc.
2. Offer to Purchase, dated August 3, 1998.
3. Agreement and Plan of Merger, dated as of July 28, 1998, by and
among Network Associates, Purchaser and the Issuer.
4. Stock Option Agreement, dated as of July 28, 1998, by and
between Network Associates and the Issuer.
5. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and Kanwal Rekhi.
6. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and James R. Tolonen.
7. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and Suhas Patil.
8. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and Ronald S. Posner.
9. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and Robert Davis.
10. Support Agreement, dated as of July 28, 1998, by and between
Network Associates and Kenneth Kucera.
11. Note Purchase and Security Agreement, dated as of July 28, 1998,
by and among the Issuer and Network Associates.
12. Secured Subordinated Convertible Promissory Note, dated July 28,
1998, made by the Issuer in favor of Network Associates.
</TABLE>
<PAGE> 1
EXHIBIT 1
DIRECTORS AND EXECUTIVE OFFICERS
OF
NETWORKS ASSOCIATES, INC.
<TABLE>
<CAPTION>
(A) (C) (F)
PRINCIPAL OCCUPATION OR
DIRECTORS EMPLOYMENT AND ADDRESS CITIZENSHIP
- -------------------------------- ------------------------------------- --------------
<S> <C> <C>
William L. Larson Chief Executive Officer and United States
Chairman of the Board, Networks
Associates, Inc.
Leslie G. Denend President and Director, Networks United States
Associates, Inc.
Virginia Gemmell Director, Networks Associates, United States
Inc., President, GlidePath, Inc., a
consulting firm.
Edwin L. Harper Director, Networks Associates, United States
Inc., President and Chief Executive
Officer of SyQuest Technology,
Inc., a manufacturer of computer
peripherals.
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
(A) (C) (F)
PRINCIPAL OCCUPATION OR
EXECUTIVE OFFICERS EMPLOYMENT AND ADDRESS CITIZENSHIP
- -------------------------------- ----------------------------------- -------------
<S> <C> <C>
William L. Larson Chief Executive Officer and United States
Chairman of the Board
Leslie G. Denend President United States
Dennis L. Cline Executive Vice President of United States
Worldwide Sales
Prabhat K. Goyal Chief Financial Officer, Vice United States
President of Finance and
Administration, Treasurer and
Secretary
Zachary A. Nelson Executive Vice President of Total United States
Service Desk Division
Peter R. Watkins Executive Vice President of Total United States
Virus and Defense Division
</TABLE>
<PAGE> 1
EXHIBIT 2
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CYBERMEDIA, INC.
AT
$9.50 NET PER SHARE
BY
CYCLONE ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
NETWORK ASSOCIATES, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, AUGUST 28, 1998, UNLESS EXTENDED.
THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS, (I) SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE (THE "SHARES"), OF CYBERMEDIA, INC. (THE "COMPANY")
THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF THE SHARES THEN OUTSTANDING ON A
FULLY DILUTED BASIS ON THE DATE OF PURCHASE (INCLUDING, FOR PURPOSES OF SUCH
CALCULATION, ALL SHARES ISSUABLE UPON EXERCISE OF OUTSTANDING STOCK OPTIONS AND
WARRANTS THAT ARE VESTED OR SCHEDULED TO VEST PRIOR TO OCTOBER 31, 1998 WITH AN
EXERCISE PRICE LESS THAN THE OFFER PRICE (AS DEFINED BELOW), AND CONVERSION OF
ALL CONVERTIBLE SECURITIES OR OTHER RIGHTS TO PURCHASE OR ACQUIRE SHARES WITH A
CONVERSION PRICE LESS THAN THE OFFER PRICE) BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) OR HELD BY NETWORKS
ASSOCIATES, INC. ("PARENT"), CYCLONE ACQUISITION CORP., A WHOLLY-OWNED
SUBSIDIARY OF PARENT ("PURCHASER"), OR ANY AFFILIATE THEREOF OR ISSUABLE UPON
THE EXERCISE OR CONVERSION OF ANY EQUITY OR DEBT SECURITY HELD BY PARENT,
PURCHASER OR ANY AFFILIATE THEREOF WHICH IS THEN EXERCISABLE OR CONVERTIBLE, AND
(II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIODS IMPOSED BY
THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENT ACT OF 1976, AS AMENDED. THE OFFER
IS ALSO SUBJECT TO THE OTHER TERMS AND CONDITIONS SET FORTH IN SECTIONS 1 AND 15
OF THIS OFFER TO PURCHASE.
THIS OFFER (THE "OFFER") IS BEING MADE PURSUANT TO THE AGREEMENT AND PLAN OF
MERGER, DATED AS OF JULY 28, 1998 (THE "MERGER AGREEMENT"), BY AND AMONG PARENT,
PURCHASER AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY
(A) DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING EACH OF THE OFFER AND THE MERGER OF PURCHASER WITH AND INTO
THE COMPANY, ARE FAIR TO AND IN THE BEST INTERESTS OF THE HOLDERS OF THE SHARES,
(B) APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY AND (C) RESOLVED TO RECOMMEND THAT THE STOCKHOLDERS OF THE COMPANY
ACCEPT THE OFFER AND APPROVE AND ADOPT THE MERGER AGREEMENT AND APPROVE THE
TRANSACTIONS CONTEMPLATED THEREBY.
------------------------
IMPORTANT
Any stockholder of the Company desiring to tender Shares should either (i)
complete and sign the Letter of Transmittal or a facsimile thereof in accordance
with the instructions in the Letter of Transmittal and deliver the Letter of
Transmittal with the Shares and all other required documents to the Depositary
(as defined herein) or follow the procedures for book-entry transfer set forth
in Section 3 or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for the stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if they
desire to tender their Shares.
Any stockholder of the Company who desires to tender Shares and whose
certificates representing such Shares are not immediately available or who
cannot comply with the procedures for book-entry transfer on a timely basis or
who cannot deliver all required documents to the Depositary, in each case prior
to the expiration of the Offer, must tender such Shares pursuant to the
guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance may be directed to MacKenzie Partners,
Inc., the Information Agent, at the address and telephone number set forth on
the back cover of this Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal and other related materials may be obtained
from the Information Agent or from brokers, dealers, commercial banks and trust
companies.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS, INC.
THE DATE OF THIS OFFER TO PURCHASE IS AUGUST 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
Introduction......................................................... 1
1. Terms of the Offer.......................................... 3
2. Acceptance for Payment and Payment for Shares............... 4
3. Procedure for Tendering Shares.............................. 5
4. Withdrawal Rights........................................... 7
5. Certain Federal Income Tax Consequences..................... 7
6. Price Range of Shares; Dividends on the Shares.............. 8
7. Effect of the Offer on Nasdaq National Market Listing,
Market for Shares and SEC Registration...................... 8
8. Certain Information Concerning the Company.................. 9
9. Certain Information Concerning Purchaser and Parent......... 11
10. Source and Amount of Funds.................................. 12
11. Background of the Offer..................................... 12
12. Purpose of the Offer; The Merger; Plans for the Company..... 14
13. The Transaction Documents................................... 16
14. Dividends and Distributions................................. 28
15. Certain Conditions to Purchaser's Obligations............... 29
16. Certain Regulatory and Legal Matters........................ 30
17. Fees and Expenses........................................... 31
18. Miscellaneous............................................... 31
Annex I. Certain Information Concerning the Directors and Executive
Officers of Parent and Purchaser................................... I-1
</TABLE>
i
<PAGE> 3
TO THE HOLDERS OF COMMON STOCK OF CYBERMEDIA, INC.:
INTRODUCTION
Cyclone Acquisition Corp., a Delaware corporation ("Purchaser") and a
wholly-owned subsidiary of Networks Associates, Inc., a Delaware corporation
("Parent"), hereby offers to purchase all of the outstanding shares of Common
Stock, par value $0.01 per share (collectively, the "Shares"), of CyberMedia,
Inc., a Delaware corporation (the "Company"), at a purchase price of $9.50 per
Share (such amount, or any greater amount per Share paid pursuant to the Offer,
being hereinafter referred to as the "Offer Price"), net to the seller in cash,
without interest thereon, less any required withholding taxes, upon the terms
and subject to the conditions set forth in this Offer to Purchase and the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). Tendering
stockholders will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by Purchaser pursuant to the Offer. However, any
tendering stockholder or other payee who fails to complete and sign the
Substitute Form W-9 that is included in the Letter of Transmittal may be subject
to a required backup federal income tax withholding of 31% of the gross proceeds
payable to such stockholder or other payee pursuant to the Offer. See Section 3.
Purchaser will pay all charges and expenses of BankBoston, N.A. (the
"Depositary"), and MacKenzie Partners, Inc. (the "Information Agent") for their
respective services in connection with the Offer and the Merger (as hereinafter
defined). See Section 17.
Purchaser is a corporation newly formed by Parent in connection with the
Offer and the transactions contemplated by the Merger Agreement (as hereinafter
defined).
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY (A) DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING EACH OF
THE OFFER AND THE MERGER OF PURCHASER WITH AND INTO THE COMPANY, ARE FAIR TO AND
IN THE BEST INTERESTS OF THE HOLDERS OF THE SHARES (B) APPROVED AND ADOPTED THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND (C) RESOLVED TO
RECOMMEND THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND APPROVE AND
ADOPT THE MERGER AGREEMENT AND APPROVE THE TRANSACTIONS CONTEMPLATED THEREBY.
THE COMPANY'S BOARD OF DIRECTORS HAS RECEIVED THE OPINION OF HAMBRECHT &
QUIST LLC, THE COMPANY'S FINANCIAL ADVISOR ("H&Q"), DATED JULY 28, 1998, TO THE
EFFECT THAT, AS OF SUCH DATE AND SUBJECT TO THE VARIOUS ASSUMPTIONS AND
LIMITATIONS SET FORTH THEREIN, THE CASH CONSIDERATION TO BE RECEIVED BY THE
STOCKHOLDERS OF THE COMPANY PURSUANT TO THE OFFER AND THE MERGER IS FAIR, FROM A
FINANCIAL POINT OF VIEW, TO SUCH HOLDERS. A COPY OF THAT OPINION IS SET FORTH IN
FULL AS AN EXHIBIT TO THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON
SCHEDULE 14D-9 WHICH IS BEING MAILED TO THE COMPANY'S STOCKHOLDERS, AND
STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS HEREINAFTER DEFINED)
OR THERE BEING HELD BY PARENT, PURCHASER OR ANY AFFILIATE THEREOF OR ISSUABLE
UPON THE EXERCISE OR CONVERSION OF ANY EQUITY OR DEBT SECURITY HELD BY PARENT,
PURCHASER OR ANY AFFILIATE THEREOF WHICH IS THEN EXERCISABLE OR CONVERTIBLE,
SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF THE SHARES THEN OUTSTANDING,
ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (INCLUDING, FOR PURPOSES OF
SUCH CALCULATION, ALL SHARES ISSUABLE UPON EXERCISE OF OUTSTANDING STOCK OPTIONS
AND WARRANTS WHICH ARE VESTED OR SCHEDULED TO VEST PRIOR TO OCTOBER 31, 1998
WITH AN EXERCISE PRICE LESS THAN THE OFFER PRICE, AND CONVERSION OF ALL
CONVERTIBLE SECURITIES OR OTHER RIGHTS TO PURCHASE OR ACQUIRE SHARES WITH A
CONVERSION PRICE LESS THAN THE OFFER PRICE) (THE "MINIMUM CONDITION") AND (2)
THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIODS IMPOSED BY THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENT ACT OF 1976, AS AMENDED. SEE SECTIONS 1
AND 15.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE COMPANY'S STOCKHOLDERS. ANY SUCH SOLICITATION WOULD BE MADE ONLY PURSUANT TO
SEPARATE PROXY MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").
The Company has represented to Parent and Purchaser that, as of July 27,
1998, there were 13,362,540 Shares issued and outstanding, and has provided
information to Parent as to the number of outstanding stock options (the
"Options") and warrants (the "Warrants") to purchase Shares which are vested or
scheduled to vest (without taking into account any potential acceleration of
vesting) prior to October 31, 1998 and which have exercise prices below $9.50
per Share. In addition, Parent holds a Secured Subordinated Convertible
Promissory Note of the Company in the principal amount of $10,000,000 (the
"Convertible Note") which is convertible at a conversion price of $6.66 per
Share. The Convertible Note was issued by the Company pursuant to a Note
Purchase and Security Agreement (the "Loan Agreement") entered
<PAGE> 4
into on July 28, 1998. See Section 13. Upon conversion in full, the Convertible
Note allows Parent to acquire approximately 1,500,000 Shares. Based on the
foregoing, and assuming that 1,500,000 Shares are issued to Parent upon
conversion of the Convertible Note, Purchaser believes that approximately
6,250,000 Shares must be validly tendered and not withdrawn prior to the
expiration of the Offer in order for the Minimum Condition to be satisfied. See
Section 1.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 28, 1998 (the "Merger Agreement"), by and among Parent, Purchaser and
the Company. The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser and further provides that, after the
purchase of Shares pursuant to the Offer and subject to the satisfaction or
waiver of certain conditions set forth therein, Purchaser will be merged with
and into the Company (the "Merger"), with the Company surviving the Merger as a
wholly-owned subsidiary of Parent. The Merger Agreement is more fully described
in Section 13. The Merger is subject to a number of conditions, including the
approval and adoption of the Merger Agreement by stockholders of the Company if
such approval is required by applicable law. See Section 12. If Purchaser
acquires a majority of the outstanding Shares, it will have sufficient voting
power to approve and adopt the Merger Agreement and the Merger without the vote
of any other stockholder of the Company. If Purchaser acquires at least 90% of
the outstanding Shares, Parent intends to approve and consummate the Merger
without any action by, or any further prior notice to, the other stockholders of
the Company pursuant to the short-form merger provisions of the Delaware General
Corporation Law (the "DGCL"). In the Merger, each outstanding Share other than
(i) Shares held directly or indirectly by Parent, Purchaser, the Company or any
of their wholly-owned subsidiaries, and (ii) Shares held by stockholders who
have properly exercised their appraisal rights under the DGCL) immediately prior
to the Effective Time (as defined below) will be canceled and extinguished and
converted into the right to receive the Offer Price, without interest thereon.
See Section 13.
Concurrently with the execution of the Merger Agreement, Parent entered
into support agreements (the "Support Agreements") with each member of the
Company's Board of Directors and two of its executive officers who are not
directors. See Section 13. Pursuant to the Support Agreements, such directors
and officers have agreed, among other things, to tender, in accordance with the
terms of the Offer, all of the Shares beneficially owned by them. In the
aggregate, approximately 2,787,116 Shares are subject to the Support Agreements,
representing approximately 18.0% of the outstanding Shares on a fully diluted
basis (approximately 20.9% of the currently outstanding Shares). In addition,
Parent has the right to obtain approximately 1,500,000 Shares upon conversion in
full of the Convertible Note. The Shares subject to the Support Agreements
together with the Shares subject to the Convertible Note represent approximately
27.7% of the outstanding Shares on a fully diluted basis (approximately 28.9% of
the currently outstanding Shares plus the Shares issuable upon conversion of the
Convertible Note).
Also concurrently with the execution of the Merger Agreement, Parent and
the Company entered into a stock option agreement (the "Company Option
Agreement") pursuant to which Parent acquired the option to purchase under
certain circumstances Shares equal to 19.9% of the total number of Shares
outstanding as of the date of the Merger Agreement less any Shares issuable upon
full conversion of the Convertible Note.
The information contained in this Offer to Purchase concerning the Company
was supplied by the Company. Purchaser and Parent take no responsibility for the
completeness or accuracy of such information. The information contained in this
Offer to Purchase concerning the Offer, the Merger, Parent and Purchaser was
supplied by Purchaser. The Company takes no responsibility for the completeness
or accuracy of such information.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
References herein to Parent shall, unless the context indicates otherwise,
include Parent and all of its subsidiaries including Purchaser.
THIS OFFER TO PURCHASE CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES, INCLUDING THE RISKS ASSOCIATED WITH SATISFYING THE
VARIOUS CONDITIONS TO THE OFFER. CERTAIN OF THESE FACTORS AS WELL AS ADDITIONAL
RISKS AND UNCERTAINTIES, ARE DETAILED IN THE COMPANY'S PERIODIC FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION").
2
<PAGE> 5
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of any
extension or amendment), Purchaser will accept for payment and pay for all
Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn in accordance with Section 4. The term "Expiration Date" means
Midnight, New York City time, on Friday, August 28, 1998, unless and until
Purchaser, in accordance with the terms of the Offer and the Merger Agreement,
extends the period of time during which the Offer is open, in which event the
term "Expiration Date" means the latest time and date at which the Offer, as so
extended, expires.
Purchaser expressly reserves the right to waive any conditions to the Offer
set forth in Section 15 (the "Tender Offer Conditions") (other than the
conditions set forth in clauses (i) or (iii)(d) of Section 15), to increase the
Offer Price, to extend the duration of the Offer, or to make any other changes
in the terms and conditions of the Offer; provided, however, that, without the
Company's prior written consent, no such change may be made which decreases the
price per Share payable in the Offer, changes the form of consideration to be
paid in the Offer, reduces the maximum number of Shares to be purchased in the
Offer, imposes conditions to the Offer in addition to the Tender Offer
Conditions or amends any other material terms of the Offer in a manner adverse
to the Company's stockholders; and provided further that the Offer may not,
without the Company's prior written consent, be extended beyond September 30,
1998, except that Purchaser may extend the Offer for up to 10 business days if,
as of such date, there shall not have been tendered at least 90% of the
outstanding Shares. In addition, if at any scheduled Expiration Date any of the
conditions to the Offer have not been satisfied or waived by Parent, but are
capable of being satisfied, Parent shall from time to time extend the Offer
until such conditions are satisfied or waived, provided that Parent shall not be
required to extend the Offer beyond September 15, 1998. Subject to the foregoing
restrictions, Purchaser reserves the right (but will not be obligated), in its
sole discretion, to extend the period during which the Offer is open by giving
oral or written notice of such extension to the Depositary and by making a
public announcement of such extension. There can be no assurance that Purchaser
will exercise its right to extend the Offer.
If Purchaser shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and, if at the time that
notice of such increase is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice is first so published, sent or given,
then the Offer will be extended until the expiration of such period of ten
business days. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or a federal holiday, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION. THE
OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE SECTION 15. As
described in the Introduction to this Offer to Purchase, Purchaser believes that
in order to satisfy the Minimum Condition, approximately 6,250,000 Shares must
be validly tendered and not withdrawn prior to the Expiration Date.
Subject to the applicable rules and regulations of the Commission,
Purchaser expressly reserves the right, in its sole discretion, to delay payment
for the Shares regardless of whether such Shares were accepted by it for
payment, in order to comply with applicable law or, subject to the limitations
set forth in the Merger Agreement, to terminate the Offer and not accept for
payment any Shares not previously accepted by it for payment or paid for, if at
the Expiration Date, any of the conditions set forth in Section 15 are not
satisfied, by giving to the Depositary oral or written notice of such delay or
termination. Any extension of the period during which the Offer is open, or
delay in acceptance for payment or payment, or termination or amendment of the
Offer, will be followed, as promptly as practicable, by public announcement
thereof, such announcement in the case of an extension to be issued not later
than 9:00 a.m. New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. The reservation by
Purchaser of the right to delay acceptance for payment of, or payment for,
Shares is subject to the provisions of Rule 14e-1(c) under the Exchange Act,
which requires that Purchaser pay consideration offered or return the Shares
deposited by or on behalf of Stockholders promptly after the termination or
withdrawal of the Offer. Purchaser shall not have any obligation to pay interest
on the purchase price for tendered Shares whether or not Purchaser exercises its
right to extend the Offer.
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<PAGE> 6
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or if it waives a material condition of the
Offer, Purchaser will disseminate additional tender offer materials and extend
the Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act or otherwise. The minimum period during which an offer
must remain open following a material change in the terms of the offer or
information concerning the offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the terms or information changes. With
respect to a change in price or a change in percentage of securities sought, a
minimum 10 business day period is generally required to allow for adequate
dissemination to stockholders and investor response.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the Letter of Transmittal will be mailed
to record holders of the Shares and will be furnished to brokers, dealers,
commercial banks and similar persons whose names, or the names of whose
nominees, appear on the list of stockholders or, if applicable, who are listed
as participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will purchase, by accepting for payment, and will pay
for, all Shares validly tendered prior to the Expiration Date (and not properly
withdrawn in accordance with Section 4) promptly after the Expiration Date.
Subject to compliance with Rule 14e-1(c) under the Exchange Act, Purchaser
expressly reserves the right in its sole discretion, to delay payment for the
Shares regardless of whether such Shares were accepted by it for payment, in
order to comply with applicable law. See Sections 1 and 15. In all cases,
payment for Shares accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates for such Shares or
timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company (the
"DTC"), pursuant to the procedures set forth in Section 3, (ii) a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with all required signature guarantees or, in the case of a book-entry
transfer, an Agent's Message (as defined below) and (iii) any other documents
required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by the DTC to, and
received by, the Depositary and forming a part of a Book-Entry Confirmation,
which states that the DTC has received an express acknowledgment from the
participant in the DTC tendering the Shares that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that
Purchaser may enforce such agreement against the participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when Purchaser gives oral or written notice to the Depositary of Purchaser's
acceptance of such Shares for payment. In all cases, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payment from Purchaser and transmitting such payment to
tendering stockholders. If, for any reason whatsoever, acceptance for payment of
any Shares tendered pursuant to the Offer is delayed, or Purchaser is unable to
accept for payment Shares tendered pursuant to the Offer, then, without
prejudice to Purchaser's rights under Section 15, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn, except to the extent that the tendering stockholders are
entitled to withdrawal rights as described in Section 4 below and as otherwise
required by Rule 14e-1(c) under the Exchange Act. Under no circumstances will
interest be paid on the purchase price for Shares by Purchaser by reason of any
delay in making such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased or untendered
Shares will be returned, without expenses to the tendering stockholder (or, in
the case of Shares delivered by book-entry transfer to the DTC, such Shares will
be credited to an account maintained within the DTC), as promptly as practicable
after the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration
offered to stockholders pursuant to the Offer, such increased consideration will
be paid to all stockholders whose Shares are purchased pursuant to the Offer.
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<PAGE> 7
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to Parent or to one or more direct or indirect subsidiaries of
Parent, the right to purchase Shares tendered pursuant to the Offer, but any
such transfer or assignment will not relieve Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date. In
addition, either (i) certificates representing such Shares must be received by
the Depositary or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below, and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date, or (ii)
there must be compliance with the guaranteed delivery procedure set forth below.
No alternative, conditional or contingent tenders will be accepted. DELIVERY OF
DOCUMENTS TO THE DTC DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at the DTC for purposes of the Offer within
two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the DTC's system may make book-entry
delivery of Shares by causing the DTC to transfer such Shares into the
Depositary's account at the DTC in accordance with the DTC's procedures for
transfer. Although delivery of Shares may be effected through book-entry at the
DTC, the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date or the guaranteed delivery
procedures described below must be complied with.
Signature Guarantees. Signatures on the Letter of Transmittal need not be
guaranteed by a member firm of a registered national securities exchange
(registered under Section 6 of the Exchange Act), by a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States or by any other "Eligible
Guarantor Institution," as defined in Rule 17Ad-15 under the Exchange Act (an
"Eligible Institution"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Letter of Transmittal or (ii) as noted in the following sentence. If the
certificates evidencing Shares are registered in the name of a person or persons
other than the signer of the Letter of Transmittal, or if payment is to be made
or certificates for unpurchased Shares are to be issued to a person other than
the registered owner or owners, then the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates, with
the signatures on the certificates or stock powers guaranteed as provided in the
Letter of Transmittal. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if such
tender complies with all of the following guaranteed delivery procedures:
(a) the tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(c) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), and any
required signature guarantees and any other documents required by the
Letter of Transmittal are received by the Depositary within three Nasdaq
National Market trading days after the date of such Notice of Guaranteed
Delivery.
5
<PAGE> 8
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE DTC, IS AT THE OPTION AND
RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of certificates for the Shares (or a Book-Entry
Confirmation), a properly completed and duly executed Letter of Transmittal (or
a manually signed facsimile thereof) and any other documents required by the
Letter of Transmittal.
Backup Federal Income Tax Withholding. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF SHARES PURCHASED
PURSUANT TO THE OFFER, A TENDERING STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH
SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE
INSTRUCTION 10 TO THE LETTER OF TRANSMITTAL.
Determinations of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Purchaser, in its sole discretion,
and its determination will be final and binding on all parties. Purchaser
reserves the absolute right to reject any or all tenders of any Shares that are
determined by it not to be in proper form or the acceptance of or payment for
which may, in the opinion of Purchaser, be unlawful. Purchaser also reserves the
absolute right to waive any defect or irregularity in the tender of any Shares.
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the Instructions to the Letter of Transmittal)
will be final and binding on all parties. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived. None of Purchaser, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by Purchaser (and any and all other Shares or other securities or rights
issued or issuable in respect of such Shares on or after July 28, 1998). All
such proxies shall be considered coupled with an interest in the tendered
Shares. This appointment is effective when, and only to the extent that,
Purchaser deposits the payment for such Shares. Upon acceptance for payment, all
prior proxies given by the stockholder with respect to such Shares or other
securities or rights will, without further action, be revoked and no subsequent
proxies may be given (and, if given, will not be deemed effective). The
designees of Purchaser will, with respect to the Shares and other securities or
rights, be empowered to exercise all voting and other rights of such stockholder
as they in their sole judgment deem proper in respect of any annual or special
meeting of the Company's stockholders, or any adjournment or postponement
thereof, or in connection with any action by written consent in lieu of any such
meeting or otherwise. Purchaser reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon Purchaser's payment for
such Shares, Purchaser must be able to exercise full voting and other rights
with respect to such Shares and the other securities or rights, including voting
at any meeting of stockholders then scheduled.
The tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer as well as the tendering stockholder's representation
and warranty that (a) such stockholder has a net long position in the Shares
being tendered within the meaning of Rule 14e-4 under the Exchange Act and (b)
the tender of such Shares complies with Rule 14e-4. It is a violation of Rule
14e-4 for a person, directly or indirectly, to tender Shares for such person's
own account unless, at the time of tender, if the person so tendering (i) has a
net long position equal to or greater than the amount of (x) Shares tendered or
(y) other securities immediately convertible into or exchangeable or exercisable
for the Shares tendered and such person will acquire such Shares for tender by
conversion, exchange or exercise and (ii) will cause such Shares to be delivered
in accordance with the terms of the Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf
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<PAGE> 9
of another person. Purchaser's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
stockholder and Purchaser upon the terms and subject to the conditions of the
Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after October 2, 1998. If acceptance for payment or payment for Shares is
delayed for any reason or if Purchaser is unable to purchase or pay for Shares
for any reason, then, without prejudice to Purchaser's rights under the Offer,
tendered Shares may be retained by the Depositary on behalf of Purchaser and may
not be withdrawn except to the extent that tendering stockholders are entitled
to withdrawal rights as set forth in this Section 4, subject to Rule 14e-1(c)
under the Exchange Act which provides that no person who makes a tender offer
shall fail to pay the consideration offered or return the securities deposited
by or on behalf of security holders promptly after the termination or withdrawal
of the Offer.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name in which the certificates representing such Shares are registered, if
different from that of the person who tendered the Shares. If certificates for
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer set
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the DTC to be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
and its determination will be final and binding on all parties. None of
Purchaser, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be returned at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted into the right to receive cash in the
Merger (including pursuant to the exercise of appraisal rights). The discussion
applies only to holders of Shares in whose hands Shares are capital assets, and
may not apply to Shares received pursuant to the exercise of employee stock
options or otherwise as compensation, or to holders of Shares who are in special
tax situations (such as insurance companies, tax-exempt organizations or
non-U.S. persons), or to persons holding Shares as part of a "straddle,"
"hedge," or "conversion transaction." This discussion does not address any
aspect of state, local or foreign taxation.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED
BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local and other income tax laws). In
general, for federal income tax purposes, a holder of Shares will recognize gain
or loss equal to the difference between the holder's adjusted tax basis in the
Shares sold pursuant to the Offer or converted to cash in the Merger and the
amount of cash received therefor. Gain or loss must be determined separately for
each block of Shares (i.e., Shares acquired at the same cost in a single
transaction) sold pursuant to the Offer or converted to cash in the Merger. Such
gain or loss will be capital gain or loss (other than, with respect to the
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<PAGE> 10
exercise of appraisal rights, amounts, if any, which are or are deemed to be
interest for federal income tax purposes, which amounts will be taxed as
ordinary income) and will be long-term gain or loss if, on the date of sale (or,
if applicable, the date of the Merger), the Shares were held for more than 18
months.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a 31% rate. Backup withholding generally applies if the
stockholder (a) fails to furnish his social security number or other taxpayer
identification number ("TIN"), (b) furnishes an incorrect TIN, (c) fails
properly to report interest or dividends or (d) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN provided is his correct number and that he is not subject to backup
withholding. Backup withholding is not an additional tax but merely an advance
payment, which may be refunded to the extent it results in an overpayment of
tax. Certain persons generally are entitled to exemption from backup
withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Each stockholder should consult with
his own tax advisor as to his qualification for exemption from withholding and
the procedure for obtaining such exemption.
6. PRICE RANGE OF SHARES; DIVIDENDS ON THE SHARES.
According to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "Company 10-K"), the Shares are listed and traded on the
Nasdaq National Market under the symbol "CYBR" and the Company has not paid any
cash dividends on the Shares. Pursuant to the Merger Agreement, the Company has
agreed not to declare, set aside or pay any dividends on or make any other
distributions in respect of the Shares until the earlier of the termination of
the Merger Agreement pursuant to its terms, consummation of the Merger, or such
time as Parent's designees shall constitute a majority of the Company's Board of
Directors. The following table sets forth the high and low closing sale prices
per Share on the Nasdaq National Market for the periods indicated, as reported
in published financial sources.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Year Ended December 31, 1996:
Fourth Quarter (from October 23, 1996).................... $25.500 $14.250
Year Ended December 31, 1997:
First Quarter............................................. 22.000 7.875
Second Quarter............................................ 20.500 8.500
Third Quarter............................................. 28.250 12.500
Fourth Quarter............................................ 30.875 13.625
Year Ending December 31, 1998:
First Quarter............................................. 16.750 6.750
Second Quarter............................................ 8.750 4.313
Third Quarter (through July 31, 1998)..................... 9.219 3.875
</TABLE>
The closing sale price per Share on the Nasdaq National Market on July 27,
1998, the last full day of trading prior to the public announcement of
Purchaser's intention to make the Offer, was $7.5625. The closing sale price per
Share on the Nasdaq National Market on July 31, 1998, the last full day of
trading prior to the commencement of the Offer, was $9.1875. Stockholders are
urged to obtain current market quotations for the Shares and to review all
information received by them from the Company, including the proxy materials and
annual and quarterly reports referred to in Section 8.
7. EFFECT OF THE OFFER ON NASDAQ NATIONAL MARKET LISTING, MARKET FOR SHARES AND
SEC REGISTRATION.
The purchase of the Shares by Purchaser pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and may reduce the
number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than Purchaser.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion on the Nasdaq
National Market. If trading volume were to be lower than such standards,
quotations might continue to be published in the "additional list" or in one of
the "local lists," or such quotations might not be published at all. If the
number of holders of Shares (based on round lots) fell below 400, Nasdaq
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<PAGE> 11
might cease to provide quotations but quotations might still be available from
other sources. Purchaser cannot predict whether Nasdaq trading volume standards
for publication will be met after the Offer.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if there are fewer than 300 record holders of Shares. It is the intention of
Purchaser to seek to cause an application for such termination to be made as
soon after consummation of the Offer as the requirements for termination of
registration of the Shares are met. If such registration were to be terminated,
the Company would no longer legally be required to disclose publicly in proxy
materials distributed to stockholders the information which it now must provide
under the Exchange Act or to make public disclosure of financial and other
information in annual, quarterly and other reports required to be filed with the
Commission under the Exchange Act; the officers, directors and 10% stockholders
of the Company would no longer be subject to the "short-swing" insider trading
reporting and profit recovery provisions of the Exchange Act or the proxy
statement requirements of the Exchange Act in connection with stockholders'
meetings; and the Shares would no longer be eligible for Nasdaq National Market
reporting. Furthermore, if such registration were to be terminated, persons
holding "restricted securities" of the Company may be deprived of their ability
to dispose of such securities under Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Securities Act").
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as specifically set forth herein, the information concerning the
Company contained in this Offer to Purchase has been taken from or is based upon
publicly available documents and records on file with the Commission and other
public sources. Neither Parent nor Purchaser has any knowledge that would
indicate that any statements contained herein based on such documents and
records are untrue. However, neither Parent nor Purchaser assumes any
responsibility for the accuracy or completeness of the information concerning
the Company furnished by the Company or contained in such documents and records
or for any failure by the Company to disclose events which may have occurred or
which may affect the significance or accuracy of any such information but which
are unknown to Parent and Purchaser.
The Company is a Delaware corporation with its principal executive offices
located at 2850 Ocean Park Blvd., Suite 100, Santa Monica, CA 90405. According
to the Company 10-K, the Company is a provider of automatic service and support
software products for Windows-based PC users.
Set forth below is certain summary consolidated financial information with
respect to the Company and its subsidiaries excerpted or derived from the
consolidated financial statements presented in the Company 10-K and the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
More comprehensive financial information is included in such reports and in
other documents filed by the Company with the Commission (which may be inspected
or obtained in the manner set forth below), and the following summary is
qualified in its entirety by reference to such reports and other documents and
all of the financial information and notes contained therein or incorporated
therein by reference.
CYBERMEDIA AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------ ------------------
1997 1996 1998 1997
------- ------- ------- -------
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $71,227 $38,524 $4,697 $16,533
Income (loss) from operations...................... (10,328) (3,833) (16,321) 1,650
Net income (loss).................................. (11,740) (3,483) (16,049) 1,332
Net income (loss) per common share................. (0.97) (0.88) (1.27) 0.11
BALANCE SHEET DATA (END OF PERIOD):
Total assets....................................... $60,103 $56,450 $41,248 $57,373
Long-term debt..................................... -- -- -- --
Stockholders' equity............................... 36,644 43,668 21,889 44,762
</TABLE>
9
<PAGE> 12
Certain Recent Developments. On July 28, 1998, the Company announced its
consolidated financial results for the second quarter ended June 30, 1998. Total
revenues for the three months ended June 30, 1998 were $5.9 million, compared to
$20.4 million for the three months ended June 30, 1997. Net loss was $11.9
million, or $0.91 per basic and diluted common share, for the three months ended
June 30, 1998, compared to a net loss of $6.7 million, or $0.55 per basic and
diluted common share, for the comparable prior year period.
Total revenues for the six months ended June 30, 1998 were $10.6 million,
compared to $37.0 million for the six months ended June 30, 1997. Net loss was
$27.9 million, or $2.18 per basic and diluted common share, for the six months
ended June 30, 1998, compared to a net loss of $5.4 million, or $0.45 per basic
and diluted common share, for the comparable prior year period.
Certain Company Estimates. During the course of discussions between Parent
and the Company that led to the execution of the Merger Agreement (see Section
11), the Company provided Parent with certain information relating to the
Company which Purchaser believes is not publicly available. This information
included a preliminary estimated pro forma consolidated statement of operations
for the Company for fiscal years 1998 and 1999 developed by the Company's senior
management following the Company's second quarter ended June 30, 1998 and
predicated on various assumptions made at that time with respect to economic
conditions, sales, gross profits, operating expenses and outstanding borrowings.
These financial projections also assumed, among other things, that the Company
would obtain $10 million in working capital from an equity financing during the
third quarter of 1998. Based on the foregoing, the Company's fiscal 1998
estimate included net sales of $41.2 million, operating losses of $33.1 million
and net losses of $32.4 million. The Company's fiscal 1999 estimate (prepared on
the basis of the same assumptions) included net sales of $80.5 million,
operating income of $4.9 million and net income of $4.9 million. The foregoing
information has been excerpted from the materials presented to Parent by the
Company and does not reflect consummation of the Offer or the Merger. Parent did
not give significant weight to this information in assessing the value of the
Shares or evaluating the business or prospects of the Company.
The foregoing estimates constitute forward-looking statements that involve
risks and uncertainties that could cause actual results to vary materially from
those estimated, including, but not limited to, risks associated with
fluctuations in operating results, business conditions in the computer software
industry, product introductions, patterns of customer and distributor purchases,
competition, rapid technological change and other factors. These risks and
uncertainties are discussed in greater detail in the Company's periodic filings
with the Commission.
THE COMPANY DOES NOT AS A MATTER OF COURSE MAKE PUBLIC ANY ESTIMATES AS TO
FUTURE PERFORMANCE OR EARNINGS, AND THE ESTIMATES SET FORTH ABOVE ARE INCLUDED
IN THIS OFFER TO PURCHASE ONLY BECAUSE THE INFORMATION WAS MADE AVAILABLE TO
PARENT BY THE COMPANY. THE COMPANY HAS INFORMED PARENT THAT THE ESTIMATES WERE
NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED
GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING ESTIMATES OR FORECASTS. THE
COMPANY HAS ALSO INFORMED PARENT THAT ITS INTERNAL FINANCIAL FORECASTS (UPON
WHICH THE ESTIMATES PROVIDED TO PARENT WERE BASED IN PART) ARE, IN GENERAL,
PREPARED SOLELY FOR INTERNAL USE AND CAPITAL BUDGETING AND OTHER MANAGEMENT
DECISION-MAKING PURPOSES AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS
SUSCEPTIBLE TO VARIOUS INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL
EXPERIENCE AND BUSINESS DEVELOPMENTS. PROJECTED INFORMATION OF THIS TYPE IS
BASED ON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE
DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY,
PURCHASER OR PARENT. MANY OF THE ASSUMPTIONS UPON WHICH THE ESTIMATES WERE
BASED, NONE OF WHICH WAS APPROVED BY PARENT OR PURCHASER, ARE DEPENDENT UPON
ECONOMIC FORECASTING (BOTH GENERAL AND SPECIFIC TO THE COMPANY'S BUSINESSES),
WHICH IS INHERENTLY UNCERTAIN AND SUBJECTIVE. THE INCLUSION OF THE FOREGOING
ESTIMATES SHOULD NOT BE REGARDED AS AN INDICATION THAT THE COMPANY, PURCHASER,
PARENT OR ANY OTHER PERSON WHO RECEIVED SUCH INFORMATION CONSIDERS IT AN
ACCURATE PREDICTION OF FUTURE EVENTS, AND NEITHER PURCHASER NOR PARENT HAS
RELIED ON THEM AS SUCH. NONE OF THE COMPANY, PURCHASER OR PARENT ASSUMES ANY
RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF ANY OF THE ESTIMATES OR ANY
OBLIGATION TO UPDATE ANY SUCH ESTIMATES.
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act and, in accordance therewith, is
obligated to file reports and other information with the Commission relating to
its business, financial condition, and other matters. Information as of
particular dates concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities, any material interests of such persons in transactions
with the Company, and other matters is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements, and
10
<PAGE> 13
other information should be available for inspection at the Commission's Public
Reference Room, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies should be obtainable upon payment of the Commission's customary charges
by writing to the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material should also be available for inspection
and copying at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York, 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission also
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy statements and other information regarding companies
that file electronically with the Commission.
9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT.
Purchaser, a Delaware corporation, was recently incorporated for the
purposes of making the Offer and effecting the Merger. All of the outstanding
capital stock of Purchaser is owned by Parent. The principal executive offices
of Purchaser are located at 3965 Freedom Circle, Santa Clara, CA 95054.
Until immediately prior to the time Purchaser purchases Shares and
immediately prior to the Merger, it is not anticipated that Purchaser will have
any significant assets or liabilities or engage in activities other than those
incidental to its formation and capitalization and the transactions contemplated
by the Offer, the Merger Agreement and the Merger. Since Purchaser is newly
formed and has minimal assets and capitalization, no meaningful financial
information is available with respect to it.
Parent is a Delaware corporation with its principal executive offices
located at 3965 Freedom Circle, Santa Clara, CA 95054. Parent is a leading
developer and supplier of enterprise network security and management solutions.
The name, business address, past and present principal occupations and
citizenship of each of the directors and executive officers of Purchaser and
Parent are set forth in Annex I to this Offer to Purchase. Except for the
Convertible Note and the Company Option Agreement which are held by Parent and
were acquired by Parent on July 28, 1998, none of Parent, Purchaser or, to the
best knowledge of Parent and Purchaser, any of the persons listed in Annex I of
this Offer to Purchase or any associate or majority-owned subsidiary of such
person or entity, beneficially owns or has any right to acquire, directly or
indirectly, any Shares, and, to the best knowledge of Parent and Purchaser, no
such person or entity has effected any transaction in the Shares during the past
60 days.
Set forth below is certain summary condensed consolidated financial
information with respect to Parent and its subsidiaries excerpted or derived
from the condensed consolidated financial statements presented in Parent's
Annual Report on Form 10-K for the year ended December 31, 1997 and Parent's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, after giving
effect to restatement for the effects of Parent's merger with Trusted
Information Systems, Inc. during the second quarter of 1998. More comprehensive
financial information is included in such reports and in other documents filed
by Parent with the Commission (which may be inspected or obtained in the manner
set forth below), and the following summary is qualified in its entirety by
reference to such reports or other documents and all of the financial
information and notes contained therein or incorporated therein by reference.
NETWORK ASSOCIATES, INC. AND SUBSIDIARIES
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1996 1995 1998 1997
-------- -------- -------- -------- --------
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenue............................... $647,859 $421,794 $278,910 $196,332 $148,480
Income from operations.................... 6,700 105,846 59,696 54,218 44,135
Net income (loss)......................... (36,919) 64,110 42,341 35,860 30,503
Net income (loss) per share:
Basic.................................. (0.34) 0.65 0.45 0.31 0.28
Diluted................................ (0.34) 0.59 0.41 0.29 0.26
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- ---------------------
1997 1996 1998 1997
-------- -------- ---------- --------
IN THOUSANDS
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets...................................... $655,699 $457,756 $1,112,434 $658,862
Total current liabilities......................... 239,668 121,310 240,579 237,878
Total liabilities................................. 255,207 128,833 612,063 253,492
Total equity...................................... 400,492 328,923 500,371 405,371
</TABLE>
Available Information. Parent is subject to the information and reporting
requirements of the Exchange Act and, in accordance therewith is obligated to
file reports and other information with the Commission relating to its business,
financial condition, and other matters. Information as of particular dates
concerning Parent's directors and officers, their remuneration, stock options
granted to them, the principal holders of Parent's securities, any material
interest of such persons in transactions with Parent, and other matters is
required to be disclosed in proxy statements distributed to Parent's
stockholders and filed with the Commission. Such reports, proxy statements, and
other information should be available for inspection at the Commission's Public
Reference Room, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies should be obtainable upon payment of the Commission's customary charges
by writing to the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material should also be available for inspection
and copying at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York, 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission also
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy statements and other information regarding registrants
that file electronically with the Commission.
Purchaser is not subject to the informational filing requirements of the
Exchange Act. Purchaser does not file reports or other information with the
Commission relating to its business, financial condition or other matters.
10. SOURCE AND AMOUNT OF FUNDS.
If all Shares (including Shares issuable upon exercise or conversion of all
stock options, vested or scheduled to vest prior to August 28, 1998, and
convertible securities or other rights to purchase or acquire Shares), are
tendered to and purchased by Purchaser, the aggregate purchase price for such
Shares and all estimated commissions, fees and expenses related to the Offer
will be approximately $131.5 million. Purchaser intends to obtain the funds
necessary to make such payments through a capital contribution from Parent which
will be made at the time the Shares tendered pursuant to the Offer are accepted
for payment. Parent intends to obtain such funds from Parent's available working
capital. Neither the Offer nor the Merger is conditioned on obtaining financing.
11. BACKGROUND OF THE OFFER.
Business combinations have been a significant part of Parent's business
strategy. Parent has an active corporate development program to review and
evaluate potential corporate acquisition opportunities and other strategic
transactions with the aim of obtaining and developing access to technologies,
products and distribution channels that are complementary to its focus on
enterprise network security and management solutions and related desktop
computer software products. Over the past few years, Parent has completed
numerous acquisitions of public and private companies.
On February 20, 1998, William L. Larson, the Chief Executive Officer and
Chairman of the Board of Parent, contacted Kanwal Rekhi, currently the Chief
Executive Officer and Chairman of the Board of the Company, to learn about the
Company generally. During the course of the discussion, Mr. Larson expressed
interest in exploring a possible relationship between Parent and the Company.
Mr. Rekhi indicated to Mr. Larson that although the Company was focused on
executing on its business plan, Mr. Rekhi would discuss the matter with the
Company's Board of Directors.
On March 5, 1998, Mr. Larson met with Mr. Rekhi again to further discuss a
possible relationship between Parent and the Company.
12
<PAGE> 15
On June 9, 1998, Mr. Larson and Mr. Rehki again discussed the possibility
of a relationship between Parent and the Company. Parent and the Company entered
into a confidentiality agreement under which the Company began to furnish to
Parent certain financial and business information concerning the Company.
During the period from June 9 to June 21, 1998, representatives of Parent
and the Company and H&Q, the Company's financial advisor, exchanged information
and held various discussions and meetings concerning their respective businesses
and the potential framework of an acquisition of the Company by Parent.
In the morning of July 10, 1998, representatives of Parent, the Company and
H&Q held a meeting to discuss a timeframe for a potential acquisition of the
Company by Parent, the need for completing an acquisition quickly, the Company's
capital needs, the status of litigation involving the Company, possible
valuations of the Company, and the extent of the legal, financial and technical
review of the Company that would be required by Parent. Mr. Rekhi indicated to
Mr. Larson that the Company was then currently pursuing a potential private
placement financing of the Company and that, because the Company would be
required to suspend its financing activities if an acquisition proposal from
Parent were to be approved by the Company's Board of Directors, the Company
would require a financing arrangement with Parent pending completion of an
acquisition by Parent.
On July 13, 1998, Parent's legal counsel delivered to the Company's legal
counsel an outline of a potential transaction proposing (a) an all cash tender
offer by a subsidiary of Parent for all of the outstanding shares of the Company
with a subsequent cash-out merger, and (b) a convertible debt financing pursuant
to which Parent would loan $10 million to the Company pursuant to a convertible
promissory note. Representatives of Parent and the Company, together with their
respective legal counsel and H&Q, held telephonic meetings on July 13, 1998 and
July 15, 1998 to discuss the proposal.
On July 16, 1998, Parent's legal counsel delivered a revised proposal
reflecting certain changes discussed during the July 13 meeting.
On July 16, 1998, at a regularly scheduled meeting of Parent's Board of
Directors, Mr. Larson and other members of Parent's management briefed the Board
of Directors on the status of discussions with the Company and presented the
strategic reasons for a possible acquisition of the Company. At that meeting,
Parent's Board of Directors authorized Parent's management to proceed with
discussions concerning the possible acquisition.
From July 15, 1998 to July 27, 1998, representatives of Parent and Parent's
legal counsel held daily discussions with representatives of the Company, H&Q
and the Company's legal counsel to negotiate various aspects of the acquisition
and financing proposals. In addition, between July 18, 1998 and July 23, 1998,
Parent's legal counsel, accountants and representatives of Parent conducted more
intensive legal, financial and technical reviews of the Company.
On July 17, 1998 a draft of the Merger Agreement was provided by Parent's
legal counsel to the Company's legal counsel. From July 21, 1998 through July
27, 1998, legal counsel, H&Q and representatives of Parent and the Company had
numerous discussions concerning various provisions of the draft Merger
Agreement, terms of the financing commitment required by the Company, and drafts
of various related agreements and ancillary documents.
On July 27, 1998, Parent's Board of Directors held a special telephonic
meeting to discuss the proposed acquisition of the Company. At the meeting, Mr.
Larson and other members of Parent's management described the status of the
negotiations and the terms of the proposed definitive Merger Agreement. Legal
counsel to Parent and members of Parent's management summarized the due
diligence review that had been conducted. Following the discussion, Parent's
Board of Directors approved and adopted the Merger Agreement, the Loan Agreement
and the transactions contemplated thereby.
During the evening of July 27, 1998 and the morning of July 28, 1998,
representatives of Parent and the Company, and their respective legal counsel
negotiated and made final revisions to the Merger Agreement, the Loan Agreement,
the Convertible Note and the various related agreements and ancillary documents.
On the morning of July 28, 1998, Parent and Company executed the Loan
Agreement and the Company executed the Convertible Note. Subsequently, Parent
and the Company executed the Merger Agreement and the Stock Option Agreement
and, simultaneously, Parent and certain stockholders of the Company executed the
Support Agreements.
13
<PAGE> 16
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY.
Purpose. The purpose of the Offer and the Merger is for Parent to acquire
control of, and the entire equity interest in, the Company. The purpose of the
Merger is for Parent to acquire all Shares not purchased pursuant to the Offer.
Upon consummation of the Merger, the Company will become a wholly-owned
subsidiary of Parent. The Offer is being made pursuant to the Merger Agreement.
Approval. Under the DGCL, the approval of the Company's Board of Directors
and the affirmative vote of the holders of a majority of the outstanding Shares
are required to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger. The Company's Board of Directors has
unanimously approved and adopted the Merger Agreement and the transactions
contemplated thereby, and, unless the Merger is consummated pursuant to the
short-form merger provisions under the DGCL described below, the only remaining
required corporate action of the Company is the approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the affirmative
vote of the holders of a majority of the Shares outstanding on the record date
set for the stockholder meeting at which the Merger Agreement is presented for
adoption and approval. Accordingly, if the Minimum Condition is satisfied,
Purchaser will have sufficient voting power to cause the approval and adoption
of the Merger Agreement and the transactions contemplated thereby without the
affirmative vote of any other stockholders.
Stockholder Meetings. In the Merger Agreement, the Company has agreed to
take all action necessary to convene a special meeting of its stockholders as
soon as practicable after the consummation of the Offer for the purpose of
considering and taking action on the Merger Agreement and the transactions
contemplated thereby, if such action is required by the DGCL. Parent has agreed
that all Shares owned by it or any of its subsidiaries (including Purchaser)
will be voted in favor of the Merger Agreement and the transactions contemplated
thereby.
Board Representation. If Purchaser purchases Shares pursuant to the Offer,
the Merger Agreement provides that Parent will be entitled to designate such
number of directors, rounded up to the next whole number, on the Company's Board
of Directors as is equal to the product of the total number of directors
(determined after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Parent or its affiliates bears to the total number of
Shares then outstanding. The Company has further agreed, upon request of Parent,
to promptly take all actions necessary to cause Parent's designees to be so
elected, including, if necessary, increasing the size of the Company's Board of
Directors (to the extent permitted by the Company's Certificate of Incorporation
and By-Laws) and/or seeking the resignations of one or more existing directors,
provided, however, that prior to the Effective Time, the Company's Board of
Directors shall at all times have at least two members who are members of the
Company's Board of Directors on the date of the Merger Agreement and are neither
officers of the Company or any of its subsidiaries, nor officers or directors of
Purchaser or any of its affiliates, or other independent directors appointed to
replace such persons. Parent currently intends to designate a majority of the
directors of the Company following consummation of the Offer. It is currently
anticipated that Parent will designate William L. Larson, Prabhat K. Goyal,
Zachary A. Nelson, Richard A. Hornstein and Gregory P.G. Wharton or such other
persons listed on Annex I as Parent shall determine, to serve as directors of
the Company following consummation of the Offer. See Annex I. Purchaser expects
that such representation would permit Purchaser to exert substantial influence
over the Company's conduct of its business and operations.
Short Form Merger. Under the DGCL, if Purchaser acquires, pursuant to the
Offer, at least 90% of the outstanding Shares, Purchaser will be able to approve
the Merger without a vote of the Company's stockholders. In such event, Parent
and Purchaser anticipate that they will take all necessary and appropriate
action to cause the Merger to become effective as soon as reasonably practicable
after such acquisition, without a meeting of the Company's stockholders. If,
however, Purchaser does not acquire at least 90% of the outstanding Shares
pursuant to the Offer or otherwise and a vote of the Company's stockholders is
required under the DGCL, a significantly longer period of time would be required
to effect the Merger. Pursuant to the Merger Agreement, the Company has agreed
to take all action necessary under the DGCL and its Certificate of Incorporation
and By-laws to convene a meeting of its stockholders promptly following
consummation of the Offer to consider and vote on the Merger Agreement, if a
stockholders' vote is required.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders will have certain
rights under the DGCL to dissent and demand appraisal of, and to receive payment
in cash of the fair value of, their Shares. Such rights to dissent, if
applicable statutory procedures are complied with, could lead to a judicial
determination of the fair value of the Shares, as of the day prior to the date
on which the
14
<PAGE> 17
stockholders' vote was taken approving the Merger or similar business
combination (excluding any element of value arising from the accomplishment or
expectation of the Merger), required to be paid in cash to such dissenting
holders for their Shares. In addition, such dissenting stockholders would be
entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is required
to take into account all relevant factors. Accordingly, such determination could
be based upon considerations other than, or in addition to, the market value of
the Shares, including, among other things, asset values and earning capacity. In
Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among other things,
that "proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in an appraisal proceeding. Therefore, the value so determined in
any appraisal proceeding could be the same as, or more or less than, the Offer
Price.
In addition, several decisions by Delaware courts have held that, in
certain circumstances, a controlling stockholder of a company involved in a
merger has a fiduciary duty to other stockholders which requires that the merger
be fair to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and whether
there was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief may
be available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer or otherwise
in which Purchaser seeks to acquire the remaining Shares not held by it.
Purchaser believes, however, that Rule 13e-3 will not be applicable to the
Merger if the Merger is consummated within one year after the Expiration Date at
the same per Share price as paid in the Offer. If applicable, Rule 13e-3
requires, among other things, that certain financial information concerning the
Company and certain information relating to the fairness of the proposed
transaction and the consideration offered to minority stockholders in such
transaction be filed with the Commission and disclosed to stockholders prior to
consummation of the transaction.
Plans for the Company. It is expected that, initially following the Merger,
the products of the Company will become part of Parent's McAfee Software
Division, a new business unit dedicated to expanding Parent's desktop product
line, and the business and operations of the Company will be integrated
gradually into Parent's operations. Parent will continue to evaluate the
business and operations of the Company during the pendency of the Offer and
after the consummation of the Offer and the Merger, and will take such actions
as it deems appropriate under the circumstances then existing. Parent intends to
seek additional information about the Company during this period. Thereafter,
Parent intends to review such information as part of a comprehensive review of
the Company's business, operations, capitalization and management with a view to
optimizing exploitation of the Company's potential in conjunction with Parent's
business.
Confidentiality. In connection with the Company granting Parent and its
representatives access to certain confidential information for purposes of
evaluating the contemplated transaction, Parent and the Company executed a
Confidentiality Agreement, dated as of June 9, 1998 (the "Confidentiality
Agreement"). Among other things, Parent has agreed to keep confidential all
confidential proprietary information furnished to it by the Company relating to
the Company (the "Confidential Information"), subject to certain exceptions and
to use the Confidential Information solely in evaluating possible participation
in certain transactions relating to the Company. Additionally, Parent has agreed
not to solicit or offer employment to any employees of the Company for a period
of 18 months from the date of the Confidentiality Agreement. In the event that
the contemplated transaction is not consummated, Parent must destroy or return
all Confidential Information of the Company upon the Company's request.
Extraordinary Corporate Transactions. Except as indicated in this Offer to
Purchase, neither Parent nor Purchaser have any present plans or proposals which
relate to or would result in an extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the Company or any subsidiary,
a sale or transfer of a material amount of assets of the Company or any
subsidiary or any material change in the Company's capitalization or dividend
policy or any other material changes in the Company's corporate structure or
business, or the composition of the Company's Board of Directors or management.
15
<PAGE> 18
13. THE TRANSACTION DOCUMENTS.
The Merger Agreement
Commencement of the Offer. The Merger Agreement provides that as promptly
as practicable but in no event later than five business days after the date of
the Merger Agreement, Purchaser shall, and Parent shall cause Purchaser to,
commence the Offer at the Offer Price.
Merger. The Merger Agreement provides that, as soon as practicable after
expiration of the Offer and the receipt of any required approvals and adoption
of the Merger Agreement by the Stockholders of the Company, to the extent
required by the DGCL, and the satisfaction or waiver, if possible, of certain
other conditions contained in the Merger Agreement, Purchaser will be merged
with and into the Company, with the Company continuing as the surviving
corporation (the "Surviving Corporation") (the "Effective Time").
Vote Required to Approve Merger. In the Merger Agreement, the Company has
agreed, if required by the DGCL in order to consummate the Merger, to take all
action necessary in accordance with the DGCL to convene and hold a special
meeting of its stockholders (the "Special Meeting") for the purpose of
considering and taking action on the Merger Agreement as soon as practicable
following the acceptance for payment of and payment for Shares by Purchaser
pursuant to the Offer. The Company has further agreed that if a Special Meeting
is convened, the Company shall prepare and file with the Commission a
preliminary proxy statement relating to the Merger and the Merger Agreement, and
use its best efforts (i) to obtain and furnish the information required to be
included by the Commission in the Proxy Statement (as hereinafter defined) and,
after consultation with Parent, to respond as soon as practicable to any
comments made by the Commission with respect to the preliminary proxy statement
and cause a definitive proxy statement (the "Proxy Statement") to be mailed to
its stockholders and (ii) to obtain the necessary approvals of the Merger and
adoption of the Merger Agreement by its stockholders. Subject to compliance with
applicable fiduciary duties, the Company, acting through its Board of Directors,
shall include in the Proxy Statement the recommendation of its Board of
Directors that stockholders of the Company vote in favor of approval and
adoption of the Merger and the Merger Agreement. In the event that proxies are
to be solicited from the Company's stockholders, the Company shall use its best
efforts to obtain the necessary approvals of the Merger and adoption of the
Merger Agreement by stockholders. At any such Special Meeting, all of the Shares
then owned by Parent, Purchaser or any other subsidiaries of Parent will be
voted in favor of the Merger.
Conversion of Securities. At the Effective Time, by virtue of the Merger
and without any action on the part of Parent, Purchaser, or the Company or the
stockholders, each Share issued and outstanding immediately prior thereto (other
than Shares held by Parent, Purchaser, the Company or any of their wholly-owned
subsidiaries and Shares with respect to which appraisal rights are properly
exercised ("Dissenting Shares")) shall be canceled and extinguished and shall be
converted into the right to receive the Offer Price. Each share of common stock
of Purchaser issued and outstanding immediately prior to the Effective Time
shall, at the Effective Time, by virtue of the Merger and without any action on
the part of Purchaser, the Company or the holders of Shares, be converted into
and shall thereafter evidence one validly issued and outstanding share of common
stock of the Surviving Corporation.
Assumption of Stock Option Plans. The Merger Agreement provides that at the
Effective Time each Option outstanding under any of the Company's Amended 1993
Stock Plan or 1996 Directors Option Plan, as amended (collectively, the "Company
Stock Plans") shall be assumed by Parent and shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Option (including, without limitation, any repurchase rights or vesting
provisions) shares of Common Stock, $0.01 par value, of Parent ("Parent Common
Stock"), except that (i) such Option shall be exercisable for that number of
shares of Parent Common Stock equal to the product of the number of Shares that
were issuable upon exercise of such Option immediately prior to the Effective
Time multiplied by a fraction, the numerator of which is the Offer Price and the
denominator of which is the average of the last reported sale prices of Parent
Common Stock on the five trading days immediately preceding the date of the
Effective Time, rounded down to the nearest whole number of shares of Parent
Common Stock and (ii) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such assumed Option will be equal to the
aggregate exercise price for the Shares purchasable pursuant to such Option
immediately prior to the Effective Time divided by the number of full shares of
Parent Common Stock purchasable thereafter in accordance with the foregoing,
rounded down to the nearest whole cent.
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Cancellation of Warrants. The Merger Agreement provides that Parent shall
not assume or continue any outstanding Warrants. The Company, Parent and
Purchaser have agreed that all appropriate action will be taken to provide that,
at or following the Effective Time, each holder of an outstanding Warrant shall
be entitled to receive an amount in cash equal to the product of (i) the excess,
if any, of the Offer Price over the per share exercise price of such Warrant and
(ii) the number of Shares subject to such Warrant which are exercisable
immediately prior to the Effective Time.
Employee Benefit Arrangements. The Merger Agreement provides that the
Company shall, and Parent shall cause the Company to, honor and, from and after
the Effective Time, the Surviving Corporation to honor, all obligations under
the employment and severance agreements to which the Company or any of its
subsidiaries is presently a party. Notwithstanding the foregoing, from and after
the Effective Time, the Surviving Corporation shall have the right to amend,
modify, alter or terminate any Company Employee Plan (as defined below),
provided that any such action shall not affect any rights for which the
agreement or consent of the other party or a beneficiary is required; provided
that, except as prohibited by the Company's 401(k) plan or applicable law, the
Company will promptly take any and all actions necessary and appropriate to
terminate the Company's 401(k) plan, including without limitation (i) adoption
of resolutions by the Company's Board of Directors terminating the 401(k) plan
immediately prior to consummation of the Offer and (ii) timely delivery of any
notices required under the terms of the 401(k) plan. "Company Employee Plan" is
defined as any plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
affiliate of the Company for the benefit of any employee of the Company.
In addition, employees of the Surviving Corporation immediately following
the Effective Time who immediately prior to the Effective Time were employees of
the Company or any Company subsidiary shall be given credit for purposes of
eligibility and vesting under each employee benefit plan, program, policy or
arrangement of Parent or the Surviving Corporation in which such employees
participate subsequent to the Effective Time for all service with the Company
and any Company subsidiary prior to the Effective Time (to the extent such
credit was given by the Company or any Company subsidiary) for purposes of
eligibility and vesting.
Conditions to Obligations of All Parties to the Merger. The respective
obligations of Parent, Purchaser and the Company to consummate the Merger are
subject to the following conditions: (i) the stockholders of the Company shall
have duly approved and adopted the Merger Agreement if required by the DGCL;
(ii) Purchaser shall have accepted for payment and paid for Shares pursuant to
the Offer in accordance with the terms of the Merger Agreement; and (iii) the
consummation of the Merger shall not be restrained, enjoined or prohibited by
any order, judgment, decree, injunction or ruling and there shall not have been
any statute, rule or regulation enacted, promulgated or issued which prevents
the consummation of the Merger or has the effect of making the purchase of the
Shares illegal.
Schedule 14D-9. In the Merger Agreement, the Company has agreed that
concurrently with the filing by Parent and Purchaser of the Schedule 14D-1, or
promptly thereafter on the same day, it will file with the Commission a
Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
containing the recommendation of the Company's Board of Directors that the
Company's stockholders accept the Offer, and approve and adopt the Merger
Agreement and approve the transactions contemplated thereby and shall
disseminate the Schedule 14D-9 as required by Rule 14d-9 under the Exchange Act,
provided, that such recommendation may be withdrawn, modified or amended in
connection with a Superior Proposal (as defined below).
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser,
including, but not limited to, representations and warranties relating to the
Company's organization and qualification, capitalization, obligations with
respect to capital stock, authority to enter into the Merger Agreement and carry
out the transactions contemplated thereby, Commission filings (including
financial statements), absence of certain changes or events, taxes, title to
properties, absence of liens and encumbrances, intellectual property,
compliance, permits and restrictions, litigation, broker's and finder's fees,
employee benefit plans and employee matters, environmental matters, agreements,
contracts and commitments, change of control payments, customs and information
supplied by the Company. The Company has also represented that the Company's
Board of Directors has
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taken or will take all action so that the restrictions contained in Section 203
of the DGCL applicable to a "business combination" (as defined in such Section
203) will not apply to the execution, delivery or performance of the Merger
Agreement or the Company Option Agreement or to the consummation of the Offer or
the Merger or any of the other transactions contemplated by the Merger
Agreement.
Parent and Purchaser have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties relating to Parent's and Purchaser's organization and qualification,
their authority to enter into the Merger Agreement and consummate the Offer and
the Merger, required consents and approvals, documents related to the Offer, the
availability of sufficient funds necessary to satisfy all of Parent's and
Purchaser's obligations to purchase all outstanding Shares pursuant to the Offer
and the Merger and to pay all related fees and expenses, and the absence of
certain litigation.
Conduct of Company's Business Pending Merger. Except as contemplated by the
Merger Agreement, during the period from the date of the Merger Agreement and
continuing until the earlier of the termination of the Merger Agreement pursuant
to its terms, the Effective Time, or such time as Parent's designees shall
constitute a majority of the Company's Board of Directors, the Company has
agreed that the Company and each of its subsidiaries shall, except to the extent
that Parent shall otherwise consent in writing, carry on its business, in all
material respects, in the usual, regular and ordinary course, in substantially
the same manner as heretofore conducted and in compliance in all material
respects with all applicable laws and regulations, pay its debts and taxes when
due, subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, subject to good faith disputes over such
obligations, and use its commercially reasonable efforts consistent with past
practices and policies to (i) preserve intact its present business organization,
(ii) keep available the services of its present officers and employees, and
(iii) preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others with which it has business dealings. In
addition, except as permitted by the terms of the Merger Agreement, without the
prior written consent of Parent, during such period, the Company has agreed not
to do any of the following and not to permit its subsidiaries to do any of the
following:
(a) Waive any stock repurchase rights, or accelerate, amend or change
the period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant, director or other stock
plans or authorize cash payments in exchange for any options granted under
any of such plans except pursuant to written agreements outstanding, or
policies existing, on the date of the Merger Agreement;
(b) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or policies existing, on
the date of the Merger Agreement, or adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company's
intellectual property, or enter into grants to future patent, copyright or
other intellectual property rights, other than non-exclusive licenses
granted in the ordinary course of business and consistent with past
practice (it being agreed that Parent shall not unreasonably withhold
consent to any non-exclusive license agreement related to the Company's
enterprise business and that Parent's failure to reasonably object to any
such agreement within five business days of any request for consent shall
constitute such consent);
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock; provided that any
of the Company's wholly-owned subsidiaries may declare, set aside or pay
dividends or make other distributions with respect to their capital stock
in the ordinary course of business and consistent with past practices.
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of the Company or its subsidiaries, except
repurchases of unvested shares at cost in connection with the termination
of the service relationship with any employee, director or consultant
pursuant to stock option or purchase agreements in effect on the date of
the Merger Agreement (which repurchases the Company shall be obligated to
effectuate if the repurchase price is less than the Offer Price);
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of the capital stock of the Company or any of its subsidiaries, or
any securities convertible into shares of such capital stock, or
subscriptions, rights, warrants or options to acquire any shares of such
capital stock or any securities convertible into shares of capital stock,
or enter into other agreements or commitments of any character obligating
it to issue any such shares or
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convertible securities, other than (i) the issuance, delivery and/or sale
of Shares pursuant to the exercise of Options therefor outstanding as of
the date of the Merger Agreement, and (ii) the grant of employee stock
options, consistent with the Company's established past practice for
similarly situated employees, to non-officer employees who are hired in
accordance with the Merger Agreement;
(g) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a material portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or, except
as permitted by the Merger Agreement, otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
business of the Company or enter into any joint venture, strategic
partnership or alliance;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets that are material, individually or in the aggregate,
to the business of the Company, except sales of inventory and used
equipment, or the license of the Company's products in the ordinary course
of business consistent with past practice (it being agreed that Parent
shall not unreasonably withhold consent to any non-exclusive license
agreement related to the Company's enterprise business and that Parent's
failure to reasonably object to any such agreement within five business
days of any request for consent shall constitute such consent);
(j) Incur, assume or pre-pay any indebtedness for borrowed money,
guarantee any indebtedness or obligation of another person, issue or sell
any debt securities or options, warrants, calls or other rights to acquire
any debt securities, enter into any "keep well" or other agreement to
maintain any financial statement condition or enter into any arrangement
having the economic effect of any of the foregoing other than (i) in
connection with the financing of ordinary course trade payables consistent
with past practice, (ii) pursuant to existing credit facilities in the
ordinary course of business, or (iii) as contemplated by the Merger
Agreement;
(k) Hire any employee, except replacements for former non-officer
employees, hired in the ordinary course of business consistent with past
practice;
(l) Adopt or amend any employee stock purchase or employee stock
option plan, or adopt or amend any material employee benefit plan, or enter
into any employment contract or collective bargaining agreement (other than
offer letters and letter agreements entered into in the ordinary course of
business consistent with past practice with employees who are terminable
"at will"), pay any special bonus or special remuneration to any director,
employee or consultant except pursuant to written agreements outstanding on
the date of the Merger Agreement and previously disclosed in writing to
Parent, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of any of its directors,
officers, employees or consultants other than normal periodic salary
increases for non-officer employees made in the ordinary course of
business, consistent with past practice, or change in any material respect
any management policies or procedures;
(m) Make any payments outside of the ordinary course of business in an
aggregate amount in excess of $250,000;
(n) Except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which the Company or any
subsidiary thereof is a party or waive, release or assign any material
rights or claims thereunder;
(o) Enter into, amend or extend any contracts, agreements, or
obligations relating to the distribution, sale, license or marketing by
third parties of the Company's products or products licensed by the
Company, other than agreements, extensions or amendments that grant
non-exclusive rights to such third parties and provide for termination by
the Company for convenience on not more than 60 days' notice;
(p) Materially revalue any of its assets (other than the booking of
reserves in the ordinary course of business and consistent with past
practices) or, except as required by a change in law or in GAAP or the
rules of the Commission, make any change in accounting methods, principles
or practices, including inventory accounting practices;
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(q) Make any loans, advances or capital contributions to, or
investments in, any other person or entity, except for loans, advances,
capital contributions or investments between any wholly-owned subsidiary of
the Company and the Company or another wholly-owned subsidiary of the
Company and advances of business related expenses (including expenses
related to business travel) to employees in the ordinary course and
consistent with past practice;
(r) Authorize or make capital expenditures beyond those provided in
the Company's existing capital expenditure budget, or that are individually
in excess of $100,000 or in the aggregate in excess of $500,000 in any
calendar quarter;
(s) Materially accelerate or delay collection of any notes or accounts
receivable in advance of or beyond their regular due dates or the dates
when the same would have been collected in the ordinary course of business;
(t) Materially delay or accelerate payment of any account payable
beyond or in advance of its due date or the date such liability would have
been paid in the ordinary course of business;
(u) Settle or compromise any suits or claims or threatened suits or
claims for payments in an aggregate amount in excess of $500,000;
(v) Make any tax election not required by law or settle or compromise
any material tax liability;
(w) Cancel or terminate any material insurance policy naming it as a
beneficiary or a loss payable payee or permit any such policy to lapse (it
being understood that the Company may renew any insurance policy in effect
as of the date of the Merger Agreement);
(x) Increase the aggregate dollar value of inventory owned by
distributors in the first and second tiers of its distribution channel
(which has not been "sold through" to end-user customers and which such
distributors have the right to return) above the aggregate value of such
inventory at June 30, 1998;
(y) Begin shipment of any new products to customers, except for alpha
versions and not more than 50 beta versions of any product delivered to
customers solely for evaluation purposes; or
(z) Agree in writing or otherwise to take any of the actions described
in (a) through (y) above.
Source Code Escrow. Under the terms of the Merger Agreement, the Company
agreed to deposit into escrow (the "Source Code Escrow") with Brambles NSD,
Inc., or such other entity as is reasonably satisfactory to Parent and the
Company (the "Escrow Agent"), CDROMs containing true, correct and complete
copies of the source code, together with all relevant documentation, build
instructions, and any tools or libraries used in the build process that are not
commercially available in off-the-shelf or shrink wrap form, for each of its
currently shipping versions of products (including but not limited to versions
of products in the following product families: First Aid, UnInstaller, Oil
Change, Guard Dog and CSS Repair Engine for Workgroups) and versions of all
products currently under development (collectively, the "CyberMedia Source
Code"). The Company will pay all fees and expenses of the Escrow Agent. Prior to
the Expiration Date, the Source Code Escrow will be periodically updated to
include a complete and updated copy of all CyberMedia Source Code. The
CyberMedia Source Code shall be held in the Source Code Escrow at the offices of
the Escrow Agent until the date on which Purchaser has accepted for payment and
paid for Shares pursuant to the Offer (the "Release Date"), at which time it
shall be released to Parent or its representative promptly upon request. In the
event that, prior to the Release Date, the Merger Agreement shall be terminated
pursuant to its terms, the Source Code Escrow shall terminate and the CyberMedia
Source Code shall be returned to the Company.
Non-Solicitation. The Company has agreed in the Merger Agreement that from
and after the date of the Merger Agreement until the earlier of the Effective
Time or termination of the Merger Agreement pursuant its terms, the Company and
its subsidiaries will not, and they will direct their respective Representatives
(as defined below) not to, directly or indirectly, (A) solicit, initiate or
encourage the submission of any Alternative Proposal (as defined below) or (B)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action to
facilitate the making of any proposal that constitutes or may reasonably be
expected to lead to, an Alternative Proposal. The Company has agreed that it and
its subsidiaries will immediately cease, and instruct their respective
Representatives to immediately cease, any and all activities, discussions or
negotiations with any parties conducted previously with respect to any
Alternative Proposal. The Company also has agreed as promptly as practicable,
and in any event within 24 hours, to advise Parent orally and in writing of (i)
any Alternative Proposal or any
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request for non-public information which the Company reasonably believes may
lead to an Alternative Proposal, (ii) the material terms and conditions of such
information, request or Alternative Proposal, and (iii) the identity of the
person making any such information, request or Alternative Proposal. The Company
will keep Parent informed in all material respects of the status and details
(including material amendments) of any such request or Alternative Proposal. For
the purposes of the Merger Agreement, an "Alternative Proposal" is defined as
any inquiry, proposal or offer from any person or Group (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
relating to any direct or indirect acquisition or purchase of any product line
or other material portion of the assets of the Company and its subsidiaries
taken as a whole (but excluding the purchase from the Company of its products or
used equipment in the ordinary course of business), or more than a 20% interest
in the total outstanding voting securities of the Company or any of its
subsidiaries, or any tender offer or exchange offer that if consummated would
result in any person or Group beneficially owning 10% or more of the total
outstanding voting securities of the Company or any of its subsidiaries, or any
merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement. For the purposes of the Merger Agreement,
"Representative" is defined as the officers, directors or employees or any
investment banker, attorney, accountant or other advisor or representative
retained by the Company or its subsidiaries.
Subject to the other provisions of the Merger Agreement, from and after the
date of the Merger Agreement until the earlier of the Effective Time and
termination of the Merger Agreement pursuant to its terms, the Company has
agreed that neither the Company's Board of Directors nor any committee thereof
will (i) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Parent or Purchaser, their approval or recommendation to the
Company's stockholders of the Offer, the Merger Agreement or the Merger or (ii)
cause the Company to enter into any letter of intent, agreement in principal,
acquisition agreement or other similar agreement (an "Acquisition Agreement")
with respect to any Alternative Proposal. In addition, subject to the other
provisions of the Merger Agreement, from and after the date of the Merger
Agreement until the earlier of the Effective Time and termination of the Merger
Agreement pursuant to its terms, the Company has agreed that the Company and its
subsidiaries will not, and they will direct their Representatives not to,
directly or indirectly, make or authorize any public statement, recommendation
or solicitation in support of any Alternative Proposal; provided, however, that
nothing in the Merger Agreement shall prohibit the Company's Board of Directors
from taking and disclosing to the Company's stockholders a position with respect
to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under the
Exchange Act.
Notwithstanding the foregoing, if at any time prior to consummation of the
Offer, the Company's Board of Directors reasonably determines in good faith,
after consultation with outside legal counsel, that it is necessary to do so in
order to comply with its fiduciary duties to the Company's stockholders under
applicable law, the Company's Board of Directors may withdraw or modify its
approval or recommendation of the Offer, the Merger Agreement or the Merger,
approve or recommend a Superior Proposal (as defined below), or enter into an
Acquisition Agreement with respect to a Superior Proposal, provided that the
Company shall have given Parent written notice (a "Notice of Superior Proposal")
at least two business days prior to entering into any such Acquisition Agreement
and at least two business days prior to public disclosure by the Company's Board
of Directors of such withdrawal, modification, approval or recommendation,
advising Parent that the Company's Board of Directors has received a Superior
Proposal, specifying the material terms and conditions of the Superior Proposal
and identifying the person making such Superior Proposal. Any amendment to the
price or material terms of a Superior Proposal shall require an additional
Notice of Superior Proposal and an additional two business day period
thereafter, to the extent permitted under applicable law, prior to public
disclosure by the Company's Board of Directors of its recommendation with
respect thereto. For the purposes of the Merger Agreement, "Superior Proposal"
is defined as a bona fide offer made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction, for consideration consisting of cash and/or securities,
more than 50% of the total outstanding voting securities of the Company or all
or substantially all the assets of the Company, which offer is otherwise on
terms which the Company's Board of Directors determines in its good faith
judgment (after consultation with a financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders from a financial
point of view than the Offer and the Merger, and for which financing, to the
extent required, is then committed or which, in the good faith judgment of the
Company's Board of Directors is capable of being obtained by such third party.
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The Company also has agreed not to provide any non-public information to a
third party unless: (i) the Company provides such non-public information
pursuant to a nondisclosure agreement with terms regarding the protection of
confidential information at least as restrictive as such terms in the
Confidentiality Agreement; and (ii) such non-public information has been
previously or is contemporaneously delivered to Parent.
Public Announcements. Pursuant to the Merger Agreement, the Company, on the
one hand, and Parent and Purchaser, on the other hand, have agreed to attempt in
good faith to consult with each other prior to issuing any press release or
otherwise making any public statement with respect to the Merger Agreement, the
Offer, the Merger or the other transactions contemplated hereby, to provide to
the other party for review a copy of any such press release or statement, and
not to issue any such press release or make any such public statement prior to
attempting in good faith such consultation and review, unless required by
applicable law or any listing agreement with a securities exchange.
Indemnification. Pursuant to the terms of the Merger Agreement, all rights
to indemnification now existing in favor of any of the current or former
directors and officers of the Company (the "Indemnified Parties") as provided in
its Certificate of Incorporation or By-Laws, in each case as of the date of the
Merger Agreement, and in indemnification agreements between the Company and the
Indemnified Parties shall survive the Merger and shall continue in full force
and effect from and after consummation of the Offer in accordance with their
terms, as such terms exist on the date hereof. After the Effective Time, Parent
will cause the Surviving Corporation to honor all rights to indemnification
referred to in the preceding sentence.
Pursuant to the Merger Agreement, Parent has agreed to cause the Company,
and from and after the Effective Time, the Surviving Corporation to maintain in
effect for not less than six years from the Effective Time the current policies
of directors' and officers' liability insurance maintained by the Company;
provided that the Surviving Corporation may substitute therefor other policies
not less advantageous (other than to a de minimus extent) to the beneficiaries
of the current policies, provided that such substitution shall not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time; and provided, further, that the Surviving Corporation shall not
be required to pay an annual premium in excess of 150% of the last annual
premium paid by the Company prior to the date hereof ($210,000 for the 12-month
period ending October 22, 1998). If the Surviving Corporation is unable to
obtain the insurance required by the Merger Agreement for such maximum amount it
is required to obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount.
Termination of Merger Agreement. The Merger Agreement provides grounds for
which it may be terminated, and the Merger abandoned, at any time prior to the
Effective Time, whether before or after approval by the stockholders of the
Company (with any termination by Parent also being an effective termination by
Purchaser). The Merger Agreement may be so terminated:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company, subject, following the consummation of
the Offer, to the concurrence of certain members of the Company's Board of
Directors who are independent of Parent;
(b) by either Parent or the Company if:
(i) the Offer is terminated, withdrawn or expires pursuant to its
terms without any Shares having been purchased thereunder; provided,
however, that neither Parent nor the Company may terminate the Merger
Agreement if such party is in material breach of the Merger Agreement,
including, in the case of Parent, if Parent or Purchaser is in material
violation of the terms of the Offer;
(ii) any court, administrative agency, commission, or other
governmental authority or instrumentality ("Governmental Entity") shall
have issued an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Offer or the Merger, which order, decree,
ruling or other action is final and nonappealable; or
(iii) prior to the purchase of Shares pursuant to the Offer, the
Company's Board of Directors has recommended, or the Company has entered
into an Acquisition Agreement with respect to, a Superior Proposal;
provided, however, that termination by the Company pursuant to this
provision of the Merger Agreement is conditioned upon concurrent payment
by the Company of the Termination Fee (as defined below) in accordance
with the terms of the Merger Agreement.
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(c) by Parent prior to the purchase of Shares pursuant to the Offer
if:
(i) the Company shall have failed to include in the Schedule 14D-9
the recommendation of the Company's Board of Directors that the
stockholders of the Company accept the Offer;
(ii) the Company's Board of Directors or any committee thereof
shall have (A) withdrawn or modified (including but not limited to by
amendment of the Schedule 14D-9) in a manner adverse to Parent or
Purchaser its approval or recommendation of the Offer, the Merger
Agreement or the Merger, (B) approved or recommended, taken no position
with respect to, or failed to recommend against any Alternative
Proposal, or (C) resolved to do any of the foregoing;
(iii) the Company or any of its subsidiaries or any of their
respective Representatives participate in any discussions or
negotiations with or provide any non-public information to any third
party in breach of the non-solicitation provisions of the Merger
Agreement; or
(iv) the Company is in material breach of any of its covenants or
obligations under the Merger Agreement; provided that if such breach is
curable through the exercise of the Company's commercially reasonable
efforts, Parent may not terminate the Merger Agreement under this
provision of the Merger Agreement unless such breach is not cured prior
to September 30, 1998.
(d) by the Company prior to the purchase of Shares pursuant to the
Offer if:
(i) the Offer shall not have been commenced in accordance with its
terms or Parent or Purchaser shall have failed to purchase validly
tendered Shares in violation of the terms of the Offer within 10
business days after the expiration of the Offer; provided, however, that
the Company shall not be entitled to terminate the Merger Agreement
pursuant to this provision of the Merger Agreement if it is in material
breach of the Merger Agreement; or
(ii) Parent or Purchaser is in material breach of any of its
covenants or obligations under the Merger Agreement; provided that if
such breach is curable through exercise of Parent's or Purchaser's
commercially reasonable efforts, the Company may not terminate the
Merger Agreement under this provision of the Merger Agreement unless
such breach is not cured within 20 days after giving notice to Parent.
Fees and Expenses. The Merger Agreement provides that, except as described
below, whether or not the transactions contemplated by the Offer and the Merger
Agreement are consummated, all costs and expenses incurred in connection with
the transactions contemplated by the Offer and the Merger Agreement shall be
paid by the party incurring such expenses.
The Merger Agreement also provides that the Company shall pay Parent a
termination fee of $4,000,000 (the "Termination Fee") under various
circumstances as follows.
The Company is required to pay Parent the Termination Fee concurrently with
termination of the Merger Agreement if the Company exercises its right to
terminate the Merger Agreement because the Company's Board of Directors is
recommending, or the Company is entering into an Acquisition Agreement with
respect to, a Superior Proposal.
The Company is required to pay Parent the Termination Fee within one
business day following termination of the Merger Agreement, if Parent exercises
its right to terminate the Merger Agreement as a result of any of the following:
(i) the Company's Board of Directors has recommended, or the Company
has entered into an Acquisition Agreement with respect to, a Superior
Proposal;
(ii) the Company fails to include in the Schedule 14D-9 the
recommendation of the Company's Board of Directors that the stockholders of
the Company accept the Offer;
(iii) the Company's Board of Directors or any committee thereof (A)
withdraws or modifies (including but not limited to by amendment of the
Schedule 14D-9) in a manner adverse to Parent or Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger, (B)
approves or recommends, takes no position with respect to, or fails to
recommend against any Alternative Proposal, or (C) resolves to do any of
the foregoing; or
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(iv) the Company or any of its subsidiaries or any of their respective
Representatives participate in any discussions or negotiations with or
provide any non-public information to any third party in breach of the non-
solicitation provisions of the Merger Agreement.
The Company is required to pay Parent the Termination Fee if the Merger
Agreement is terminated as a result of the mutual consent of the Company and
Parent, or if the Offer is terminated, withdrawn or expires pursuant to its
terms without any Shares having been purchased thereunder, or is terminated by
Parent due to material breach by the Company of any of its covenants or
obligations under the Merger Agreement which, if curable through the exercise of
the Company's commercially reasonable efforts, has not been cured prior to
September 30, 1998, and if at the time of any such termination there is pending
any offer by any person other than Parent or any affiliate of Parent to effect
an Acquisition (as defined below) and, within 12 months following such
termination, any person other than Parent or any affiliate of Parent effects an
Acquisition, or enters into an Acquisition Agreement with the Company or
commences a tender offer for an Acquisition and the transactions contemplated
thereby are subsequently consummated at any time. In such event, the Termination
Fee must be paid to Parent at or prior to the consummation of such Acquisition.
Finally, if the Merger Agreement is terminated as a result of the mutual
consent of the Company and Parent, or if the Offer is terminated, withdrawn or
expires pursuant to its terms without any Shares having been purchased
thereunder (other than a termination solely as a result of a failure to satisfy
the Minimum Condition, or a failure to satisfy the conditions specified in
Section 15(iii)(a) or (b) below), or is terminated by Parent due to material
breach by the Company of any of its covenants or obligations under the Merger
Agreement which, if curable through the exercise of the Company's commercially
reasonable efforts, has not been cured prior to September 30, 1998, and if at
the time of any such termination no offer by any person other than Parent or any
affiliate of Parent to effect an Acquisition is pending and, within six months
following such termination, any person other than Parent or any affiliate of
Parent effects an Acquisition, or enters into an Acquisition Agreement with the
Company or commences a tender offer for an Acquisition and the transactions
contemplated thereby are subsequently consummated at any time, the Company is
required to pay Parent at or prior to the consummation of such Acquisition an
amount equal to the lesser of (A) the Termination Fee or (B) the amount, if any,
by which the aggregate consideration paid to the Company and/or its stockholders
in such Acquisition exceeds $126,944,000.
For the purposes of the Merger Agreement, an "Acquisition" is defined as
any merger, consolidation or other reorganization, any tender offer or other
transaction or series of related transactions involving the acquisition of
securities of the Company, or any sale or license of all or substantially all
the business or assets of the Company, unless the stockholders of the Company
prior to such transaction or series of related transactions retain following
such transaction or series of related transactions (in respect of their equity
interest in the Company prior thereto) more than 50% of the voting equity
securities of the surviving or successor corporation to the business of the
Company.
If the Company fails promptly to pay the Termination Fee or other amount
due under these provisions, and, in order to obtain such payment, Parent
commences a suit which results in a judgment against the Company for such
amounts, the Company shall pay to Parent its reasonable costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on such amounts at the prime rate of Bank of America, NT&SA, in
effect on the date such payment was required to be made.
The Termination Fee shall not be deemed to be liquidated damages, and the
right to the payment of the Termination Fee shall be in addition to (and not a
maximum payment in respect of) any other damages or remedies at law or in equity
to which Parent or Purchaser may be entitled as a result of the willful
violation or willful breach of any term or provision of the Merger Agreement or
any Support Agreement.
The Support Agreements
Concurrently with the execution of the Merger Agreement, Parent entered
into the Support Agreements with Kanwal Rekhi, James R. Tolonen, Suhas Patil,
Ronald S. Posner, Robert Davis and Kenneth Kucera. In the aggregate, such
stockholders owned approximately 2,787,116 Shares representing approximately
18.0% of the outstanding Shares on a fully diluted basis (approximately 20.9% of
the currently outstanding Shares) as of July 28, 1998. The following is a
summary of the material terms of the Support Agreements. This summary is not a
complete description of the terms and conditions of the Support Agreements and
is qualified in its entirety by reference to the full text of the Support
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Agreements which is incorporated herein by reference and a copy of which has
been filed with the Commission as an exhibit to the Schedule 14D-1.
Pursuant to the Support Agreements, each of these stockholders agreed to
tender and not withdraw his Shares pursuant to the Offer. Each of such
stockholders has also agreed, for so long as the Support Agreement is in effect,
at any meeting of the stockholders of the Company, however called, to vote his
Shares in favor of the Merger, against any action or agreement that would result
in a breach of any covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement, and against any action
or agreement that would impede, interfere with, delay, postpone or attempt to
discourage the Merger or the Offer. Each of such stockholders also granted
representatives of Parent an irrevocable proxy to vote his Shares in favor of
the Merger and other transactions contemplated by the Merger Agreement, against
any Acquisition Proposal.
In addition, each of such stockholders agreed not to (i) transfer any or
all of his Shares, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of his Shares, (iii)
grant any proxy, power-of-attorney or other authorization in or with respect to
his Shares, (iv) deposit his Shares into a voting trust or enter into a voting
agreement or arrangement with respect to his Shares or (v) take any other action
that would in any way restrict, limit or interfere with the performance of his
obligations under the Support Agreements or the Merger Agreement or which would
make any representation or warranty of such stockholder under the Support
Agreement untrue or incorrect.
The agreements and proxy contained in each Support Agreement will terminate
on the earlier of payment for the Shares pursuant to the Offer and the
termination of the Merger Agreement in accordance with its terms.
The Company Option Agreement
Concurrently with the execution of the Merger Agreement, the Company and
Parent entered into the Company Option Agreement. The following is a summary of
the material terms of the Company Option Agreement. This summary is not a
complete description of the terms and conditions of the Company Option Agreement
and is qualified in its entirety by reference to the full text of the Company
Option Agreement, which is incorporated herein by reference, and a copy of which
has been filed with the Commission as an exhibit to the Schedule 14D-1.
Pursuant to the Company Option Agreement, the Company granted Parent the
option (the "Company Option")to acquire, under certain circumstances, a number
of Shares equal to 19.9% of the total number of Shares issued and outstanding as
of July 28, 1998 less the number of Shares issuable upon full conversion of the
Convertible Note, and adjusted thereafter to reflect changes in the Company's
capitalization occurring after the date of the Merger Agreement (provided that
the number of Shares issuable upon exercise of the Company Option shall be
reduced to the extent necessary so that the aggregate number of Shares issuable
under the Company Option and upon conversion of the Convertible Note shall not,
upon such issuance, constitute more than 19.9% of the total number of Shares
issued and outstanding). The per share purchase price of Shares purchased
pursuant to exercise of the Company Option is the Offer Price, payable in cash.
The Company Option is exercisable, in whole or in part, at any time or from
time to time after the occurrence of an event (a "Trigger Event") which causes
the Termination Fee to become payable to Parent by the Company under the Merger
Agreement. The Company Option terminates upon the earlier of the following: (i)
the Effective Time of the Merger, (ii) the termination of the Merger Agreement
under circumstances which do not constitute a Trigger Event and following which
a Trigger Event cannot occur, (iii) six months after Parent receives written
notice from the Company of the occurrence of a Trigger Event, (iv) 12 months
following the termination of the Merger Agreement if during such 12-month period
no Trigger Event has occurred, and no transaction the consummation of which
would give rise to a Trigger Event, is pending, and (v) the date following 12
months after the termination of the Merger Agreement when no transaction entered
into or commenced prior to that date that, if consummated, would have given rise
to a Trigger Event, remains pending. The exercise period is automatically
extended if exercise of the Company Option is prohibited or restrained for
certain legal reasons. In addition, the Company Option cannot be exercised by
Parent if Parent is in material breach of its material representations,
warranties, covenants or agreements in the Company Option Agreement or the
Merger Agreement.
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The Company's obligation to issue Shares under the Company Option is
subject to a number of conditions, including expiration of all applicable
waiting periods under the Hart-Scott-Rodino Act, the absence of any injunction
or order, receipt of any required governmental consents, approvals, orders,
authorizations and permits.
At any time when the Company Option is exercisable, Parent has the right
(the "Put Option") to require the Company to repurchase the Company Option,
either in whole or in part, at a price equal to (i) the difference between the
Market Price (as defined below) and the exercise price, multiplied by (ii) the
number of Shares subject to purchase under the Company Option or the portion
thereof specified in the repurchase notice. "Market Price" is defined as the
average per share closing sale price of the Shares on the Nasdaq National Market
for the 10 trading days immediately preceding the date of the repurchase notice.
In the event that Parent (and/or any of its affiliates) receives Net
Proceeds (as defined below) which, combined with any Termination Fee paid to
Parent pursuant to the Merger Agreement and any payment made to Parent (and/or
any of its affiliates) pursuant to Parent's exercise of the Put Option (or upon
any other sale of the Company Option) exceed $5,500,000, Parent is required to
promptly remit to the Company an amount equal to all Net Proceeds in excess of
such amount. "Net Proceeds" is defined as the aggregate proceeds from the sale
or other disposition of Shares acquired by Parent (and/or any of its affiliates)
upon exercise of the Company Option (plus any securities or other assets issued
to Parent (and/or any of its affiliates) in exchange for or as dividends upon
such Shares and any cash dividends received by Parent (and/or any of its
affiliates) with respect to such Shares) less the exercise price multiplied by
the number of Shares included in such disposition.
Prior to July 28, 2003, the Company Option Agreement requires Parent to
vote all Shares acquired upon exercise of the Company Option in the same manner
and in the same proportion as all other Shares are voted on each matter
submitted to a stockholder vote. In addition, the Company Option Agreement
requires Parent to execute written consents with respect to such Shares in the
same proportion as written consents are executed by other holders of Shares.
Under the Company Option Agreement, Parent's right to sell, assign, pledge
or otherwise dispose of or transfer Shares acquired upon exercise of the Company
Option is subject to certain restrictions and first-refusal rights in favor of
the Company.
In addition, the Company Option Agreement gives Parent certain rights to
have the Shares acquired upon exercise of the Company Option registered under
the Securities Act for sale in a public offering. The registration rights take
effect after the termination of the Merger Agreement and are subject to certain
conditions and limitations. In lieu of registration, the Company Option
Agreement gives the Company the option to agree to purchase, for cash, all or
part of the Shares covered by the registration request, at a price equal to at
least 80% of the average per share closing sale price of the Shares on the
Nasdaq National Market for the 20 trading days immediately preceding the date
Parent gives notice. The Company Option Agreement allows Parent to demand a
total of two registrations, and allows the Company to defer the requested
registrations for prescribed periods of time under certain circumstances.
The Loan Agreement
On July 28, 1998, immediately prior to the execution of the Merger
Agreement, the Company and Parent entered into a Note Purchase and Security
Agreement (the "Loan Agreement") pursuant to which Parent agreed to loan the
Company $10,000,000 in principal amount (the outstanding principal balance and
any accrued but unpaid interest constituting the "Loan Amount"). The Loan Amount
is evidenced by a Secured Subordinated Convertible Promissory Note (the
"Convertible Note") issued concurrently with the execution of the Loan
Agreement. The following is a summary of the material terms of the Loan
Agreement and the Convertible Note. This summary is not a complete description
of the terms and conditions of the Loan Agreement or Convertible Note, and is
qualified in its entirety by reference to the full text of such agreements,
which are incorporated herein by reference and copies of which have been filed
with the Commission as an exhibit to the Schedule 14D-1.
Conversion Right. Parent has the right, in its sole discretion, at any time
and from time to time to elect to convert all or any part of the Loan Amount
into the number of Shares (the "Conversion Shares") determined by dividing the
total Loan Amount being converted by the Conversion Price. The Conversion Price
means $6.66 per Share, subject to adjustment for stock splits, subdivisions and
reverse stock splits.
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Interest. The Convertible Note bears interest at an annual rate equal to
LIBOR (3-month) in effect on the first day of each calendar quarter, plus two
percent. Upon an "Event of Default" (as defined in the Convertible Note and
described below), interest will accrue at an annual rate equal to two percent
plus the rate otherwise in effect. Interest payments are due on the first day of
each calendar quarter, beginning on October 1, 1998, and upon maturity or any
prepayment of the outstanding principal amount.
Repayment; Acquisition. The Loan Amount is payable in full on July 28,
2000. Unless and until the Merger Agreement shall have been terminated in
accordance with its terms, the Company may not prepay any principal or interest
under the Convertible Note without the prior written consent of Parent.
Thereafter, the Company shall have the right at any time and from time to time,
upon 10 business days' prior written notice to Parent (during which notice
period Parent will remain entitled to elect to convert all or part of the Loan
Amount), to prepay the Loan Amount, in whole or in part, without payment of any
premium or penalty. The Loan Amount is due and payable (without any prepayment
penalty), upon either (i) the closing of the sale or transfer of all or
substantially all of the Company's assets; or (ii) the closing of a merger or
consolidation of the Company or other transaction or series of related
transactions in which the stockholders immediately prior to such transaction or
transactions do not own a majority of the voting securities of the Company or
the surviving corporation as applicable.
Subordination. The Convertible Note is subordinated, as to both security
interest and right of payment, to up to $6 million of senior debt which the
Company may obtain from banks, insurance companies, lease financing
institutions, or other institutional lenders (the "Senior Debt").
Security Interests. As collateral security for the prompt and complete
payment and performance of the Company's obligations under the Convertible Note,
the Company granted Parent a continuing security interest in all of presently
existing and hereafter acquired or arising assets of the Company, including the
Company's intangible property and intellectual property rights (the
"Collateral").
Covenants. In connection with the Loan Agreement, the Company covenanted
that it:
(a) will not transfer or otherwise encumber any interest in the
Collateral, except for certain permitted liens and liens that may be
granted in favor of the holders of Senior Debt and except for non-exclusive
licenses under its patents, copyrights and other intellectual property
rights granted by the Company in the ordinary course of business;
(b) will deliver to Parent a quarterly report listing any applications
or registrations that it has made, filed or acquired in respect of any
patents, copyrights or trademarks and the status of any outstanding
applications or registrations;
(c) will protect, defend and maintain the validity and enforceability
of its material patents and copyrights, use its best efforts to detect
infringements of its patents and copyrights and promptly advise Parent of
infringements detected, and not allow any material patents or copyrights to
be abandoned, forfeited or dedicated to the public without the written
consent of Parent, which shall not be unreasonably withheld;
(d) will within 30 days of the date of the Loan Agreement register or
cause to be registered (to the extent not already registered) with the
United States Copyright Office, the copyrights associated with the
currently shipping versions of its "First Aid" software products, and
register with the United States Copyright Office once each calendar quarter
those additional copyrights developed, authored or acquired by the Company
from time to time for new releases and of each then shipping version of its
First Aid and Uninstaller software; and
(e) will not create, incur, assume or suffer to exist any lien with
respect to any of its property or assign or otherwise convey any right to
receive income therefrom, or enter into any agreement that would impair or
conflict with its obligations under the Loan Agreement and Convertible Note
without Parent's prior written consent, which consent shall not be
unreasonably withheld, and will not permit the inclusion in any contract to
which it becomes a party of any provisions that could or might in any way
prevent the creation of a security interest in the Company's rights and
interests in any property included within the definition of the Collateral
acquired under such contracts, except for permitted liens and the granting
of liens in favor of the holders of Senior Debt, and except that certain
contracts may contain anti-assignment provisions that could in effect
prohibit the creation of a security interest in such contracts if the
Company is required, in its commercially reasonable judgment, to accept
such provisions.
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Events of Default. The occurrence of any of the following would constitute
an Event of Default under the Loan Agreement and Convertible Note:
(a) The Company's breach of the obligation to pay any amount due
within 10 days of the date of written notice from Purchaser to the Company
of such breach;
(b) The Company's failure to perform, keep or observe any of its
covenants, conditions, promises, agreements or obligations under any
agreement with any third person or entity, after the expiration of any
applicable grace period under such agreement, or after any period of
forbearance acknowledged in writing by the other party to such agreement,
if such failure has a material adverse effect on the Company's assets,
operations or financial condition;
(c) The Company's institution of proceedings against itself, or the
Company's filing of a petition or answer or consent seeking reorganization
or release, under the federal Bankruptcy Code, or any other applicable
federal or state law relating to creditors' rights and remedies, or the
Company's consent to the filing of any such petition or the appointment of
a receiver, liquidation, assignee, trustee or other similar official of the
Company or of any substantial part of its property, or the Company's making
of an assignment for the benefit of creditors, or the taking of corporate
action in furtherance of such action;
(d) the creation (whether voluntary or involuntary) of, or any attempt
to create, any lien or encumbrance upon any of the Collateral, other than
permitted liens and liens in favor of the holders of Senior Debt, or the
making or any attempt to make any levy, seizure or attachment thereof and
such lien, encumbrance, levy, seizure or attachment has not been removed,
discharged or rescinded within 10 days after the Company is notified of or
learns of such lien, encumbrance, levy, seizure or attachment;
(e) the occurrence and continuance of any default under any lease or
agreement for borrowed money that gives the lessor or the creditor of such
indebtedness, as applicable, the right to accelerate the lease payments or
the indebtedness, as applicable, in an amount in excess of $1,000,000 or
the right to exercise any rights or remedies with respect to any of the
Collateral;
(f) the entry of any judgment or order against the Company in an
amount in excess of $1,000,000 which remains unsatisfied or undischarged
and in effect for 30 days without a stay of enforcement or execution; or
(g) The Company's breach of any warranty or agreement made by the
Company in the Loan Agreement and, as to any breach that is capable of
cure, the Company fails to cure such breach within 20 days of notice from
Purchaser of the occurrence of such breach.
Remedies upon Event of Default. Upon an Event of Default, Parent will have
all the rights and remedies of a secured creditor under California law,
including the right to foreclose on the Collateral, to require the Company to
assemble the Collateral and any tangible property in which Parent has a security
interest and to make it available to Parent at a place designated by Parent.
Parent will have a nonexclusive, royalty-free license to use the copyrights,
patents and trademarks of the Company to the extent reasonably necessary to
permit Parent to exercise its rights and remedies upon the occurrence of an
Event of Default. The Company will pay any expenses (including reasonable
attorneys' fees) incurred by Parent in connection with the exercise of any of
Parent's rights upon default, including without limitation any expense incurred
in disposing of the Collateral.
Registration Rights. Parent has the right to demand that the Company
register Conversion Shares under the Securities Act. Parent may demand up to
four registrations, at the Company's expense, for resale in a public offering if
the Company is eligible to register shares on Form S-3 (or two registrations if
it is not so eligible). The right to demand registration is subject to various
conditions and limitations, including the right of the Company to defer such
registration for prescribed periods of time under certain circumstances.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that the Company will not, and will not
permit any of its subsidiaries to do any of the following without the prior
written consent of Parent: (a) waive any stock repurchase rights, accelerate,
amend or change the period of exercisability of options or restricted stock, or
reprice options granted under any employee, consultant or director stock plans
or authorize cash payments in exchange for any options granted under any of such
plans; (b) grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
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pursuant to written agreement outstanding, or policies existing, on the date of
the Merger Agreement and as previously disclosed in writing to the other, or
adopt any new severance plan, or provide any special bonus or special
remuneration to any director, employee or consultant, or increase the salary or
wage rate or fringe benefits (including rights to severance or indemnification);
(c) declare or pay any dividends on or make any other distributions (whether in
cash, stock or property) in respect of any capital stock or split, combine or
reclassify any capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for any capital stock;
(d) repurchase or otherwise acquire, directly or indirectly, any shares of
capital stock except pursuant to rights of repurchase of any such shares under
any employee, consultant or director stock plan existing on the date of the
Merger Agreement (which repurchase rights the Company shall be obligated to
exercise if the repurchase price is less than the Offer Price); or (e) issue,
deliver, sell or authorize any shares of capital stock or any securities
convertible into shares of capital stock, or subscriptions, rights, warrants or
options to acquire any shares of capital stock or any securities convertible
into shares of capital stock, or enter into other agreements or commitments of
any character obligating it to issue any such shares or convertible securities,
other than the issuance of Shares pursuant to the exercise of stock options
therefor outstanding as of the date of the Merger Agreement. See Section 13
"Conduct of Company's Business Pending Merger."
15. CERTAIN CONDITIONS TO PURCHASER'S OBLIGATIONS.
The Merger Agreement provides that, notwithstanding any other provision of
the Offer, and in addition to (and not in limitation of) Purchaser's rights to
extend and amend the Offer at any time, Purchaser shall not be required to
accept for payment or pay for, or may terminate or amend the Offer and may
postpone the acceptance of, and payment for, subject to Rule 14e-1(c) under the
Exchange Act (whether or not any Shares have theretofore been accepted for
payment or paid for pursuant to the Offer), any Shares tendered pursuant to the
Offer if at the Expiration Date (i) the Minimum Condition is not satisfied, (ii)
any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvement
of 1976 Act, as amended (the "Hart-Scott-Rodino Act"), shall not have expired or
been terminated or (iii) any of the following exist:
(a) any statute, rule, regulation, legislation, ruling, judgment,
order or injunction enacted, enforced, promulgated, amended, issued or
deemed applicable to the Offer or the Merger, by any Governmental Entity of
competent jurisdiction that (1) makes illegal or otherwise prohibits
consummation of the Offer or the Merger, (2) prohibits or materially limits
the ownership or operation by Parent or Purchaser of all or any substantial
portion of the business or assets of the Company (or any of its
subsidiaries that is material to the Company and its subsidiaries, taken as
a whole), or compels Parent or Purchaser to dispose of, divest or hold
separately all or any substantial portion of the business or assets of
Parent, Purchaser or the Company (or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole), or imposes
any material limitation on the ability of Parent or Purchaser to conduct
its business or own such assets, (3) imposes any material limitation on the
ability of Parent or Purchaser effectively to acquire, hold or exercise
full rights of ownership of the Shares, including, without limitation, the
right to vote any Shares acquired or owned by Purchaser or Parent on the
adoption of the Merger Agreement and all other matters properly presented
to the Company's stockholders, (4) requires divestiture by Parent or
Purchaser of any Shares or (5) results in a Material Adverse Effect on the
Company (for the purposes of the Merger Agreement, the term "Material
Adverse Effect" when used in connection with an entity is defined as any
change, event or effect that is materially adverse to the business, assets
(including intangible assets), financial condition or results of operations
of such entity and its subsidiaries, taken as a whole, except for those
changes, events and effects that (i) are directly caused by conditions
affecting the United States economy as a whole or affecting the industry in
which such entity competes as a whole, which conditions do not affect such
entity in a disproportionate manner or (ii) are related to or result from
the announcement or pendency of the Offer and/or the Merger); or
(b) there shall be instituted and pending any action or proceeding by
any Governmental Entity that would reasonably be expected to result in any
of the consequences referred to in clauses (1) through (5) of paragraph (a)
above; or
(c) any change shall have occurred that has had, or reasonably would
be expected to have, a Material Adverse Effect on the Company; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms; or
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement, when read without any exception or qualification
as to materiality or Material Adverse Effect, shall not be true and
correct, as if such representations and warranties were made immediately
prior to the consummation of the Offer (except as to any such
representation or warranty which speaks as of a specific date, which must
be untrue or incorrect as of such
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specific date), except where the failure or failures to be so true and
correct, individually or in the aggregate, do not and would not reasonably
be expected to have a Material Adverse Effect on the Company; or
(f) the Company shall have failed to perform or to comply with any of
its obligations, covenants or agreements under the Merger Agreement in any
material respect.
The foregoing conditions (including those set forth in clauses (i) and (ii)
of the initial paragraph) are for the benefit of Parent and Purchaser and may be
asserted by Parent or Purchaser regardless of the circumstances giving rise to
any such conditions (except for any action or inaction in material breach of the
Merger Agreement by Parent or Purchaser) and, except for the Minimum Condition,
may be waived by Parent or Purchaser, in whole or in part, at any time and from
time to time in their sole discretion, in each case, subject to the terms of the
Merger Agreement. The failure by Parent or Purchaser at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
16. CERTAIN REGULATORY AND LEGAL MATTERS.
Except as set forth in this Section 16, Purchaser is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Shares by Purchaser as
contemplated herein. Should any such approval or other action be required, it
will be sought, but Purchaser has no current intention to delay the purchase of
Shares tendered pursuant to the Offer pending the outcome of any such matter,
subject, however, to Purchaser's right to decline to purchase Shares if any of
the conditions specified in Section 15 shall have occurred. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions, or that adverse
consequences might not result to the Company's business or that certain parts of
the Company's business might not have to be disposed of if any such approvals
were not obtained or other action taken.
Antitrust. The Hart-Scott-Rodino Act provides that the acquisition of
Shares by Purchaser may not be consummated unless certain information has been
furnished to the Division (the "Division") and the Federal Trade Commission (the
"FTC") and certain waiting period requirements have been satisfied. The rules
promulgated by the FTC under the Hart-Scott-Rodino Act require the filing by
each of Parent and the Company of a Notification and Report Form (a "Form") with
the Division and the FTC and that the acquisition of Shares under the Offer may
not be consummated until 15 days after receipt by the Division and the FTC of
the Form filed by Parent. Within such 15-day period, the Division or the FTC may
request additional information or documentary material from Purchaser or the
Company. In the event of such request, the acquisition of Shares under the Offer
may not be consummated until 10 days after receipt of such additional
information or documentary material by the Division or the FTC. Purchaser
expects to file its Form with the Division and the FTC on or about August 4,
1998. The Company has advised Purchaser that the Company also expects to file
its Form with the Division and the FTC on or about August 4, 1998.
State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. On July 27, 1998,
prior to the execution of the Merger Agreement, the Company's Board of
Directors, by unanimous vote of all directors present at a meeting held on such
date, (i) approved and adopted the Merger Agreement and the transactions
contemplated thereby, (ii) determined that the Merger Agreement and the
transactions contemplated thereby, including each of the Offer and the Merger,
are fair to and in the best interests of, the stockholders of the Company and
(iii) recommended that the stockholders of the Company accept the Offer and
approve and adopt the Merger Agreement and the transactions contemplated
thereby. Accordingly, Section 203 is inapplicable to the Offer or the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate
30
<PAGE> 33
governance, constitutionally disqualify a potential acquirer from voting on the
affairs of a target corporation without the prior approval of the remaining
stockholders. The state law before the Supreme Court was by its terms applicable
only to corporations that had a substantial number of stockholders in the state
and were incorporated there.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. Purchaser does not know whether any of these laws will, by their
terms, apply to the Offer or the Merger and has not complied with any such laws.
Should any person seek to apply any state takeover law, Purchaser will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, Purchaser might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Purchaser might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in continuing
or consummating the Offer and the Merger. In such case, Purchaser may not be
obligated to accept for payment any Shares tendered. See Section 15.
Pending Litigation. On or about July 28, 1998, an individual claiming to be
a stockholder of the Company filed a Class Action Complaint in the Court of
Chancery in the State of Delaware (C.A. No. 16565NC) (the "Complaint") alleging,
among other things, that the Company's Board of Directors breached its fiduciary
duties in approving the Merger Agreement and that Parent knowingly aided and
abetted such breach by agreeing to the transaction. The complaint names the
members of the Company's Board of Directors, the Company and Parent as
defendants. The Complaint seeks an injunction restraining the consummation of
the Offer and the Merger, or to rescind them if consummated, and unspecified
compensatory damages. Parent believes the Complaint is without merit and intends
to vigorously defend against it.
17. FEES AND EXPENSES.
Except as set forth below, neither Parent nor Purchaser will pay any fees
or commissions to any broker, dealer or other person for soliciting tenders of
Shares pursuant to the Offer.
Parent and Purchaser have retained MacKenzie Partners, Inc. to act as
Information Agent and BankBoston, N.A. to act as Depositary in connection with
the Offer. Such firms each will receive reasonable and customary compensation
for their services. Purchaser has also agreed to reimburse each such firm for
certain reasonable out-of-pocket expenses and to indemnify each such firm
against certain liabilities in connection with their services, including certain
liabilities under federal securities laws.
Parent and Purchaser will not pay any fees or commissions to any broker or
dealer or other person (other than the Information Agent) for making
solicitations or recommendations in connection with the Offer. Brokers, dealers,
banks and trust companies will be reimbursed by Purchaser for customary mailing
and handling expenses incurred by them in forwarding material to their
customers.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the securities or blue sky
laws of such jurisdiction. In any jurisdiction where the securities or blue sky
laws require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed to be made on behalf of Purchaser by one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Purchaser other than as contained in this Offer to
Purchase or in the Letter of Transmittal, and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by Purchaser.
Purchaser has filed with the Commission a statement on Schedule 14D-1,
pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-1 promulgated
thereunder, furnishing certain information with respect to the Offer. Such
statement and any amendments thereto, including exhibits, may be examined and
copies may be obtained at the same places and in the same manner as set forth in
Section 9 with respect to information of Parent (except that they will not be
available at the regional offices of the Commission).
CYCLONE ACQUISITION CORP.
AUGUST 3, 1998
31
<PAGE> 34
ANNEX I
CERTAIN INFORMATION CONCERNING DIRECTORS AND
EXECUTIVE OFFICERS OF PARENT AND PURCHASER
PARENT
The following table sets forth the name, business or residence address,
principal occupation or employment at the present time and during the last five
years, and the name of any corporation or other organization in which such
employment is conducted or was conducted of each executive officer or director
of Parent. Except as otherwise indicated, all of the persons listed below are
citizens of the United States of America. Each occupation set forth opposite a
person's name, unless otherwise indicated, refers to employment with Parent.
Unless otherwise indicated, the principal business address of each director or
executive officer is Network Associates, Inc., 3965 Freedom Circle, Santa Clara,
CA 95054.
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND
CURRENT BUSINESS ADDRESS POSITION WITH PARENT MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------- ------------------------------- --------------------------------------------------
<S> <C> <C>
William L. Larson Chief Executive Officer and Chief Executive Officer since September 1993.
Chairman of the Board Chairman of the Board of Directors since April
1995. Director since October 1993. President from
October 1993 to December 1997. Vice President of
SunSoft, Inc., a system software subsidiary of Sun
Microsystems, Inc. ("SunSoft"), from August 1988
to September 1993.
Leslie G. Denend President and Director Director since June 1995. Elected President in
December 1997. Chief Executive Officer and
President of Network General Corporation ("Network
General") from June 1993 to December 1997. Senior
Vice President of Network General from February
1993 to June 1993. Currently serves as a director
of Rational Software, Proxim Inc., Informix
Corporation and United Services Automobile
Association.
Virginia Gemmell Director Director since September 1996. Founded GlidePath,
Inc., a consulting firm, and has served as its
President since August 1995. Managing Partner of
Synectics, Inc., a consulting firm, from May 1986
to August 1995.
Edwin L. Harper Director Director since January 1993. President and Chief
Executive Officer of SyQuest Technology, Inc., a
manufacturer of computer peripherals, since June
1996. President and Chief Executive Officer of
ComByte, Inc., a privately-held PC peripherals
company, from June 1993 to June 1996. Currently
serves as a director of SyQuest Technology, Inc.
and Apex PC Solutions, Inc.
</TABLE>
I-1
<PAGE> 35
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND
CURRENT BUSINESS ADDRESS POSITION WITH PARENT MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------- ------------------------------- --------------------------------------------------
<S> <C> <C>
Dennis L. Cline Executive Vice President of Executive Vice President of Worldwide Sales since
Worldwide Sales January 1998. Vice President of North American
Sales from September 1994 to October 1995. Vice
President of North American Channel Sales from
October 1995 to April 1996. Vice President of
Worldwide Channel Sales from April 1996 to October
1996. Vice President of International Sales from
October 1996 to January 1998. From November 1993
to September 1994, Mr. Cline performed sales
consulting services for various companies. Vice
President of Worldwide Sales for Fifth Generation
Systems, a software utilities company, from
January 1993 to November 1993.
Prabhat K. Goyal Chief Financial Officer, Vice Chief Financial Officer, Vice President of Finance
President of Finance and and Administration, Treasurer and Secretary since
Administration, Treasurer and October 1996. Vice President of Finance, Corporate
Secretary Controller and Treasurer from April 1996 to
October 1996. Director, Finance and OEM
Development, Solaris Products Group for SunSoft
from July 1994 to March 1996. Director, Finance
and Sales Operations of SunSoft from November 1991
to June 1994.
Zachary A. Nelson Executive Vice President of General Manager of Total Service Desk Division
Total Service Desk Division since January 1998. Vice President and General
Manager of Network Management from March 1997 to
January 1998. From February 1993 to March 1997,
Mr. Nelson was employed in various capacities,
most recently as Vice President of Marketing, for
Oracle Corporation.
Peter R. Watkins Executive Vice President of Joined in May 1995 as Vice President,
Total Virus and Defense International Sales. Vice President of
Division International Operations from May 1995 to October
1996. Vice President of Security from October 1996
to January 1997 when he became Vice President and
General Manager of Security. From January 1991 to
April 1995, Mr. Watkins was employed in various
capacities, ultimately serving as Managing
Director of European Operations, at SunSoft.
</TABLE>
I-2
<PAGE> 36
PURCHASER
The following table sets forth the name, business or residence address,
principal occupation or employment at the present time and during the last five
years, and the name of any corporation or other organization in which such
employment is conducted or was conducted of each executive officer or director
of Purchaser. Except as otherwise indicated, all of the persons listed below are
citizens of the United States of America. Each occupation set forth opposite a
person's name, unless otherwise indicated, refers to employment with Parent.
Unless otherwise indicated, the principal business address of each director or
executive officer is Network Associates, Inc., 3965 Freedom Circle, Santa Clara,
CA 95054.
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND
CURRENT BUSINESS ADDRESS POSITION WITH PURCHASER MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------- ------------------------------- --------------------------------------------------
<S> <C> <C>
William L. Larson Director See notation above.
Probhat K. Goyal Director See notation above.
Zachary A. Nelson Director See notation above.
Richard A. Hornstein President and Director Vice President of Legal Affairs and Corporate
Development since January 1998. Director of Legal
Affairs from June 1997 to January 1998. Director
of Tax from April 1997 to June 1997. International
Tax Manager for Coopers & Lybrand from October
1995 to April 1997. Tax manager for KPMG Peat
Marwick from August 1993 to September 1995.
Gregory P.G. Wharton Secretary and Director Manager of Legal Affairs since June 1998.
Associate at Wilson Sonsini Goodrich & Rosati, PC
from May 1997 to May 1998. Associate at Sullivan &
Worcester LLP from May 1995 to April 1997. Law
student at Yale University from August 1993 to May
1995.
</TABLE>
I-3
<PAGE> 37
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each stockholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at one of the addresses set forth below:
The Depositary is:
BANKBOSTON, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand:
c/o Boston Equiserve c/o Boston Equiserve Securities Transfer & Reporting
Corporate Reorganization Corporate Reorganization Services, Inc.
Department Department 55 Broadway -- 3rd Floor
P.O. Box 8029 150 Royall Street New York, NY
Boston, MA 02266-8029 Mail Stop 45-01-40 Attention: Delivery Window
Canton, MA 02021
</TABLE>
<TABLE>
<S> <C>
By Facsimile Transmission: Confirm by Telephone:
(For Eligible Institutions Only) (781) 575-3120
(781) 575-2233
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent as set forth below and will
be furnished promptly at Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC. LOGO
156 5th Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL FREE (800) 322-2885
<PAGE> 1
EXHIBIT 3
AGREEMENT AND PLAN OF MERGER
by and among
NETWORKS ASSOCIATES, INC.,
CYCLONE ACQUISITION CORP.
and
CYBERMEDIA, INC.
dated as of
July 28, 1998
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I THE OFFER.................................................................................2
Section 1.1. The Offer............................................................................2
Section 1.2. Company Action.......................................................................4
Section 1.3. Directors............................................................................5
ARTICLE II THE MERGER................................................................................6
Section 2.1. The Merger...........................................................................6
Section 2.2. Effective Time; Closing..............................................................6
Section 2.3. Effects of the Merger................................................................6
Section 2.4. Certificate of Incorporation and By-Laws of the Surviving Corporation................6
Section 2.5. Directors............................................................................7
Section 2.6. Officers.............................................................................7
Section 2.7. Conversion of Shares.................................................................7
Section 2.8. Options; Company Stock Plans; Warrants...............................................7
Section 2.9. Stockholders' Meeting................................................................8
Section 2.10. Merger Without Meeting of Stockholders...............................................9
Section 2.11. Dissenting Shares....................................................................9
Section 2.12. Payment for Shares...................................................................9
Section 2.13. Supplementary Action................................................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................11
Section 3.1. Organization and Qualification of the Company.......................................11
Section 3.2. Company Capital Structure...........................................................12
Section 3.3. Obligations With Respect to Capital Stock...........................................12
Section 3.4. Authority...........................................................................13
Section 3.5. SEC Filings; the Company Financial Statements.......................................14
Section 3.6. Absence of Certain Changes or Events................................................15
Section 3.7. Taxes...............................................................................16
Section 3.8. Title to Properties; Absence of Liens and Encumbrances..............................17
Section 3.9. Intellectual Property...............................................................18
Section 3.10. Compliance; Permits; Restrictions...................................................22
Section 3.11. Litigation..........................................................................23
Section 3.12. Brokers' and Finders' Fees..........................................................23
Section 3.13. Employee Benefit Plans and Employee Matters.........................................23
Section 3.14. Environmental Matters...............................................................27
Section 3.15. Agreements, Contracts and Commitments...............................................28
Section 3.16. Change of Control Payments..........................................................29
Section 3.17. Customs.............................................................................29
Section 3.18. Information.........................................................................29
Section 3.19. Section 203 of the DGCL Not Applicable..............................................30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER...................................30
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(continued
Page
----
<S> <C>
Section 4.1. Organization and Qualification of Parent and Purchaser..............................30
Section 4.2. Authority...........................................................................30
Section 4.3. Information.........................................................................31
Section 4.4. Available Funds.....................................................................31
Section 4.5. Litigation..........................................................................32
ARTICLE V COVENANTS................................................................................32
Section 5.1. Conduct of Business by the Company..................................................32
Section 5.2. Source Code Escrow..................................................................35
Section 5.3. Access to Information...............................................................36
Section 5.4. Efforts.............................................................................37
Section 5.5. Public Announcements................................................................37
Section 5.6. Employee Benefit Arrangements.......................................................38
Section 5.7. Indemnification.....................................................................38
Section 5.8. Notification of Certain Matters.....................................................39
Section 5.9. State Takeover Laws.................................................................39
Section 5.10. No Solicitation.....................................................................39
Section 5.11. Section 203 of the DGCL.............................................................42
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER.................................................42
Section 6.1. Conditions..........................................................................42
ARTICLE VII TERMINATION; AMENDMENTS; WAIVER..........................................................43
Section 7.1. Termination.........................................................................43
Section 7.2. Notice of Termination; Effect of Termination........................................44
Section 7.3. Fees and Expenses...................................................................44
Section 7.4. Amendment...........................................................................46
Section 7.5. Extension; Waiver...................................................................46
ARTICLE VIII MISCELLANEOUS............................................................................46
Section 8.1. Non-Survival of Representations and Warranties......................................46
Section 8.2. Entire Agreement; Assignment........................................................46
Section 8.3. Validity............................................................................47
Section 8.4. Notices.............................................................................47
Section 8.5. Governing Law.......................................................................48
Section 8.6. Interpretation......................................................................48
Section 8.7. Counterparts........................................................................48
Section 8.8. Severability........................................................................48
Section 8.9. Parties in Interest.................................................................48
Section 8.10. Certain Definitions.................................................................48
Section 8.11. Specific Performance................................................................49
</TABLE>
(ii)
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of July 28, 1998, by and among Networks Associates, Inc., a
Delaware corporation ("Parent"), Cyclone Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Purchaser"), and
CyberMedia, Inc., a Delaware corporation (the "Company").
RECITALS
A. The respective Boards of Directors of Parent, Purchaser and the
Company and the sole stockholder of Purchaser have approved the acquisition of
the Company by the Purchaser on the terms and subject to the conditions set
forth in this Agreement;
B. Pursuant to this Agreement, Purchaser has agreed to commence a
tender offer (the "Offer") to purchase all of the outstanding shares of the
Company's common stock, par value $0.01 per share (the "Shares"), at a price per
Share of $9.50 (the "Offer Price");
C. The Board of Directors of the Company (the "Company Board") has (i)
approved the Offer and (ii) adopted and approved this Agreement and is
recommending that the Company's stockholders accept the Offer, tender their
Shares to Purchaser and approve this Agreement;
D. The Board of Directors of Purchaser and the Company Board have
approved the merger of the Purchaser with and into the Company, as set forth in
this Agreement (the "Merger"), in accordance with the Delaware General
Corporation Law (the "DGCL") and upon the terms and subject to the conditions
set forth in this Agreement, whereby each of the issued and outstanding Shares
not owned directly or indirectly by Parent, Purchaser or the Company will be
converted into the right to receive in cash the Offer Price or such higher price
as is paid pursuant to the Offer;
E. As a condition and inducement to Parent's and Purchaser's
willingness to enter into this Agreement, upon the execution and delivery of
this Agreement, Kanwal Rekhi, James R. Tolonen, Suhas Patil and Ronald S. Posner
(the "Director Stockholders") and Robert Davis and Kenneth Kucera (the
"Management Stockholders") are simultaneously entering into and delivering
support agreements (the "Support Agreements") in the form attached hereto as
Annex II;
F. As a condition and inducement to Parent's and Purchaser's
willingness to enter into this Agreement, Parent and the Company are
simultaneously entering into and delivering a stock option agreement (the
"Company Option Agreement") in the form attached hereto as Annex III; and
G. Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and to
2
<PAGE> 5
prescribe various conditions to the Offer and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
Purchaser and the Company agree as follows:
ARTICLE I
THE OFFER
Section 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VII hereof, as promptly as practicable but in no event
later than the fifth business day following the date of this Agreement,
Purchaser shall, and Parent shall cause Purchaser to, commence (within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) the Offer at the Offer Price.
(b) The obligations of Purchaser to consummate the Offer and to accept
for payment and pay for any of the Shares tendered shall be subject to the
conditions set forth on Annex I hereto (the "Tender Offer Conditions"),
including the condition that a number of Shares equal to a majority of the
Shares outstanding on a fully diluted basis (including for purposes of such
calculation all Shares issuable upon exercise of all stock options and warrants
which are vested or scheduled to vest on or before October 31, 1998 with an
exercise price less than the Offer Price, and conversion of all convertible
securities or other rights to purchase or acquire Shares with a conversion price
less than the Offer Price) shall be validly tendered and not withdrawn prior to
the Expiration Date or shall be held by Parent, Purchaser or any affiliate
thereof or issuable upon the exercise or conversion of any equity or debt
security held by Parent, Purchaser or any affiliate thereof which is then
exercisable or convertible (the "Minimum Condition"). The amount of the Offer
Price shall be net to the seller in cash, upon the terms and subject to the
conditions of the Offer and subject to reduction for any applicable federal
back-up or other applicable withholding or stock transfer taxes. The Offer shall
remain open until 12:00 Midnight, New York City time, on the twentieth business
day following the commencement of the Offer. Parent and Purchaser agree that if
all of the conditions set forth in Annex I hereto are not satisfied by the time
of any scheduled termination of the Offer then, provided that all such
conditions are reasonably capable of being satisfied, Purchaser shall extend the
Offer until such conditions are satisfied or waived; provided that Purchaser
shall not be required to extend the Offer beyond September 15, 1998. As used in
this Agreement, the "Expiration Date" means 12:00 Midnight, New York City time,
on the twentieth business day following the commencement of this Offer, unless
Purchaser extends the Offer as permitted or required by this Agreement, in which
case the "Expiration Date" means the latest time and date to which the Offer is
extended.
(c) Purchaser expressly reserves the right to waive any conditions to
the Offer (other than the
3
<PAGE> 6
conditions set forth in clauses (i) or (iii)(d) of Annex I), to increase the
price per Share payable in the Offer, to extend the duration of the Offer, or to
make any other changes in the terms and conditions of the Offer; provided,
however, that, without the Company's prior written consent, no such change may
be made which decreases the price per Share payable in the Offer, changes the
form of consideration to be paid in the Offer, reduces the maximum number of
Shares to be purchased in the Offer, imposes conditions to the Offer in addition
to the Tender Offer Conditions or amends any other material terms of the Offer
in a manner adverse to the Company's stockholders; and provided further that the
Offer may not, without the Company's prior written consent, be extended, except
as necessary to provide time to satisfy the Tender Offer Conditions, and, in any
event, may not be extended beyond September 30, 1998, except that Purchaser may
extend the Offer for up to 10 business days, if as of such date, there shall not
have been tendered at least 90% of the Shares then outstanding plus any Shares
then held by Parent, Purchaser or any affiliate thereof or issuable upon the
exercise or conversion of any equity or debt security held by Parent, Purchaser
or any affiliate thereof which is then exercisable or convertible, so that the
Merger could be effected without a meeting of the Company's stockholders in
accordance with applicable provisions of the DGCL.
(d) The Offer shall be made by means of an offer to purchase to which
the Company shall not have reasonably objected (the "Offer to Purchase")
containing the terms set forth in this Agreement and the Tender Offer
Conditions. Concurrently with the commencement of the Offer, Parent and
Purchaser shall file with the Securities and Exchange Commission (the "SEC") a
tender offer statement on Schedule 14D-1 under the Exchange Act to which the
Company shall not have reasonably objected reflecting the Offer (together with
all exhibits, amendments and supplements thereto, the "Schedule 14D-1"). The
Schedule 14D-1 will contain or will incorporate by reference the Offer to
Purchase (or portions thereof) and forms of the related letter of transmittal
and summary advertisements (which Schedule 14D-1, Offer to Purchase and other
documents, together with any supplements or amendments thereto, are referred to
herein collectively as the "Offer Documents"). The Company and its counsel shall
be given a reasonable opportunity to review and comment on the Offer Documents
prior to their filing with the SEC or dissemination to the stockholders of the
Company. Parent and Purchaser agree to provide the Company and its counsel with
any comments which Parent, Purchaser or their counsel may receive from the SEC
or the staff of the SEC with respect to such documents promptly after receipt
thereof. Parent and Purchaser represent and warrant that the Offer Documents
will, on the date filed with the SEC and on the date first published, sent or
given to the Company's stockholders, comply in all material respects with all
provisions of applicable federal securities laws and the rules and regulations
promulgated thereunder. Parent, Purchaser and the Company agree promptly to
correct any information provided by any of them for use in the Offer Documents
that shall be or have become false or misleading, and Parent and Purchaser
further agree to take all steps necessary to cause the Schedule 14D-1, as so
corrected, to be filed with the SEC and the other Offer Documents, as so
corrected, to be disseminated to the holders of Shares, in each case as and to
the extent required by applicable federal securities laws.
(e) Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of any
such extension or amendment), Purchaser will purchase by accepting for payment
and will pay for Shares validly tendered and not properly
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withdrawn, as promptly as practicable after the Expiration Date. Parent shall
provide or cause to be provided to Purchaser on a timely basis the funds
necessary to pay for any Shares that Purchaser becomes obligated to accept for
payment, and pay for, pursuant to the Offer.
Section 1.2. Company Action.
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that (i) the Company Board has unanimously (A)
determined that this Agreement and the transactions contemplated hereby,
including each of the Offer and the Merger, are fair to and in the best
interests of the holders of the Shares, (B) approved and adopted this Agreement
and the transactions contemplated hereby and (C) resolved to recommend that the
stockholders of the Company accept the Offer and approve and adopt this
Agreement and approve the transactions contemplated hereby (provided, however,
that subject to the provisions of Section Section 5.10, such recommendation may
be withdrawn, modified or amended in connection with a Superior Proposal (as
defined in Section Section 5.10) and (ii) Hambrecht & Quist ("H&Q"), the
Company's financial advisor, has rendered to the Company Board its opinion to
the effect that the consideration to be received by the holders of Shares
pursuant to each of the Offer and the Merger is fair to the holders of Shares
from a financial point of view. The Company hereby consents to the inclusion in
the Offer Documents of the recommendation of the Company Board described in
clause (i) of the first sentence of this Section Section 1.2(a), and
represents and warrants that it has obtained the consent of H&Q to the inclusion
in the Offer Documents and the Schedule 14D-9 (as defined in Section Section
1.2(b) of a copy of the written opinion referred to in clause (ii) of the
first sentence of this Section Section 1.2(a).
(b) The Company shall file with the SEC, concurrently with the filing by
Parent and Purchaser of the Schedule 14D-1, or promptly thereafter on the same
day, a Solicitation/Recommendation Statement on Schedule 14D-9 under the
Exchange Act, to which Parent shall not have reasonably objected, relating to
the Offer (together with all exhibits, amendments and supplements thereto, the
"Schedule 14D-9"), which shall, subject to Section Section 5.10 hereof, contain
the recommendation of the Company Board described in Section Section 1.2((a))
and the information required pursuant to Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder, and shall disseminate the Schedule 14D-9 as required by
Rule 14D-9 under the Exchange Act. Parent and Purchaser each will supply to the
Company any information with respect to itself and its officers, directors and
affiliates required to be provided in the Schedule 14D-9. Parent and its counsel
shall be given a reasonable opportunity to review and comment on the Schedule
14D-9 prior to its filing with the SEC or dissemination to the stockholders of
the Company. The Company agrees to provide Purchaser and its counsel with any
comments the Company or its counsel may receive from the SEC with respect to the
Schedule 14D-9 promptly after receipt thereof. The Company represents and
warrants that the Schedule 14D-9 will, on the date filed with the SEC and on the
date first published, sent or given to the Company's stockholders, comply in all
material respects with all provisions of applicable federal securities laws and
the rules and regulations promulgated thereunder. The Company, Parent and
Purchaser agree promptly to correct any information provided by any of them for
use in the Schedule 14D-9 that shall be or have become false or misleading, and
the Company further agrees to take all steps necessary to cause the Schedule
14D-9, as so corrected, to be filed with
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the SEC and disseminated to the holders of Shares, in each case as and to the
extent required by applicable federal securities laws.
(c) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and security
position listings of Shares held in stock depositories, each of a recent date,
and shall promptly furnish Purchaser with such additional information, including
updated lists of stockholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request in connection with communicating the Offer and any amendments or
supplements thereto to the Company's stockholders. Subject to the requirements
of applicable laws and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Parent and Purchaser (and their agents) shall hold in confidence the information
contained in any of such labels and lists and, if this Agreement shall be
terminated, will promptly deliver to the Company all copies, extracts, or
summaries of such information then in their possession or control or in the
possession of their agents.
Section 1.3. Directors.
(a) Subject to compliance with applicable law, promptly upon the payment
by Purchaser for the Shares pursuant to the Offer, and from time to time
thereafter, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as is equal to the
product of the total number of directors on the Company Board (determined after
giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares beneficially owned by Parent
or its affiliates bears to the total number of Shares then outstanding. The
Company shall, upon request of Parent, promptly take all actions necessary to
cause Parent's designees to be so elected, including, if necessary, increasing
the size of the Company Board (to the extent permitted by the Company's
Certificate of Incorporation and By-laws) and/or seeking the resignations of one
or more existing directors, provided, however, that prior to the Effective Time
(as defined in Section Section 2.2), the Company Board shall at all times have
at least two members who are members of the Company Board on the date of this
Agreement and are neither officers of the Company or any of its subsidiaries, or
officers or directors of Purchaser or any of its affiliates ("Independent
Directors"). If the number of Independent Directors is reduced below two prior
to the Effective Time, the remaining Independent Director shall be entitled to
designate a person to fill such vacancy who shall not be an officer or affiliate
of the Company or any of its subsidiaries or an officer, director, or affiliate
of Parent or any of its subsidiaries, and such person shall be deemed an
Independent Director for all purposes of this Agreement. If no Independent
Directors then remain, the other directors of the Company on the date hereof
shall designate two persons to fill such vacancies who shall not be officers or
affiliates of the Company or any of its subsidiaries, or officers, directors or
affiliates of Parent or any of its subsidiaries, and such persons shall be
deemed to be Independent Directors for all purposes of this Agreement.
(b) The Company's obligations to appoint Parent's designees to the
Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 thereunder. The Company shall, at its expense, promptly take all actions
required pursuant to such Section and Rule in order to
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fulfill its obligations under this Section Section 1.3 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under such Section and Rule in order to fulfill its
obligations under this Section Section 1.3. Parent will supply any information
with respect to itself, and its officers, directors and affiliates required by
such Section and Rule to the Company.
(c) Following the election or appointment of Parent's designees pursuant
to this Section Section 1.3 and prior to the Effective Time (as defined in
Section Section 2.2), any amendment or termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Parent or Purchaser or any waiver of any of the
Company's rights hereunder, shall require the concurrence of a majority of the
Independent Directors (or in the case where there is only one Independent
Director, the concurrence of such Independent Director).
ARTICLE II
THE MERGER
Section 2.1. The Merger. Upon the terms and subject to the satisfaction
or waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the DGCL, Purchaser shall be merged with and
into the Company. Following the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation").
Section 2.2. Effective Time; Closing. As soon as practicable after the
satisfaction of the conditions set forth in Article VI, the Company shall
execute, in the manner required by the DGCL, and file with the Secretary of
State of the State of Delaware a duly executed and verified certificate of
merger (the "Certificate of Merger"), and the parties shall take such other and
further actions as may be required by law to make the Merger effective.
Contemporaneous with such filing, a closing (the "Closing") will be held at the
offices of Gray Cary Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo Alto,
California, or at such other location as the parties may establish for the
purpose of confirming the foregoing. The time the Merger becomes effective in
accordance with applicable law is referred to herein as the "Effective Time."
Section 2.3. Effects of the Merger. The Merger shall have the effects
set forth in the applicable provision of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of the Company and the
Purchaser shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and the Purchaser shall become the debts, liabilities
and duties of the Surviving Corporation.
Section 2.4. Certificate of Incorporation and By-Laws of the Surviving
Corporation.
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(a) The Certificate of Incorporation of the Company shall be amended to
contain the substantive provisions of the Certificate of Incorporation of
Purchaser, as in effect immediately prior to the Effective Time, and, as so
amended, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter duly amended in accordance with the provisions thereof and
applicable law.
(b) Subject to the provisions of Section Section 5.7 of this Agreement,
the By-Laws of Purchaser, as in effect at the Effective Time, shall be the
By-Laws of the Surviving Corporation until thereafter duly amended in accordance
with the provisions thereof and applicable law.
Section 2.5. Directors. Subject to applicable law, the directors of
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
Section 2.6. Officers. The officers of Purchaser immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
Section 2.7. Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Purchaser, the Company
or the holders of the Shares:
(a) each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held by Parent, Purchaser, the Company or any of their
wholly-owned subsidiaries, and any Dissenting Shares (as defined in Section
Section 2.11)) shall automatically be canceled and extinguished and shall be
converted into the right to receive $9.50, or the greatest amount per Share as
is paid pursuant to the Offer (the "Merger Consideration"), in cash without
interest thereon (in the event of any reclassification, recapitalization, stock
split, stock dividend or similar transaction with respect to the Shares,
appropriate and proportionate adjustments, if any, shall be made to the amount
of the Offer Price and Merger Consideration, and all references to the Offer
Price or the Merger Consideration in this Agreement shall be deemed to be to the
Offer Price or the Merger Consideration as so adjusted);
(b) each Share issued and outstanding immediately prior to the Effective
Time which is owned or held by Parent, Purchaser, the Company or any of their
wholly-owned subsidiaries shall be canceled and extinguished and cease to exist,
without any conversion thereof, and no payment shall be made with respect
thereto;
(c) each holder (other than holders referred to in Section Section
2.7((b))) of a certificate representing any Shares shall after the Effective
Time cease to have any rights with respect to such Shares, except either to
receive the Merger Consideration upon surrender of such certificate, or to
exercise such holder's appraisal rights as provided in Section Section 2.11 and
the DGCL; and
(d) each share of Common Stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into and thereafter
represent one validly issued, fully paid
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and nonassessable share of Common Stock of the Surviving Corporation.
Section 2.8. Options; Company Stock Plans; Warrants.
(a) At the Effective Time, each option to purchase shares of Company
Common Stock (an "Option") outstanding under any of the Company's Amended 1993
Stock Plan, or 1996 Directors Option Plan (collectively the "Company Stock
Plans") shall be assumed by Parent and shall be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under such
Option (including, without limitation, any repurchase rights or vesting
provisions) shares of Common Stock, $.01 par value, of Parent ("Parent Common
Stock"), except that (i) such Option shall be exercisable for that number of
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Option immediately
prior to the Effective Time multiplied by a fraction, the numerator of which is
the Merger Consideration and the denominator of which is the average of the last
reported sale prices of Parent Common Stock on the five (5) trading days
immediately preceding the date of the Effective Time, rounded down to the
nearest whole number of shares of Parent Common Stock and (ii) the per share
exercise price for the shares of Parent Common Stock issuable upon exercise of
such assumed Option will be equal to the aggregate exercise price for the shares
of Company Common Stock purchasable pursuant to such Option immediately prior to
the Effective Time divided by the number of full shares of Parent Common Stock
purchasable thereafter in accordance with the foregoing, rounded down to the
nearest whole cent. As soon as practicable after the Effective Time, Parent
shall deliver to holders of Options appropriate notice setting forth such
holders' rights pursuant hereto.
(b) Parent shall take all corporate action necessary to reserve and make
available for issuance a sufficient number of shares of Parent Common Stock for
delivery under the Options assumed in accordance with this Section Section 2.8
and shall use its best efforts to cause such shares to be approved for quotation
on the Nasdaq National Market. Within five business days following the Effective
Time, Parent shall file a registration statement on Form S-8 (or any successor
or other appropriate form) with respect to the shares of Parent Common Stock
subject to such Options and shall use its best efforts to maintain the
effectiveness of such registration statement for so long as such Options remain
outstanding.
(c) Parent shall not assume or continue any outstanding warrants to
purchase shares of Company Common Stock (the "Warrants"). The parties hereto
shall take all appropriate action to provide that, at or following the Effective
Time each holder of an outstanding Warrant shall be entitled to receive an
amount in cash equal to the product of (i) the excess, if any, of the Merger
Consideration over the per share exercise price of such Warrant and (ii) the
number of Shares subject to such Warrant which are exercisable immediately prior
to the Effective Time.
Section 2.9. Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through the Company Board, shall, in accordance with applicable
law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders
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(the "Special Meeting") as soon as practicable following the acceptance for
payment of and payment for Shares by Purchaser pursuant to the Offer for the
purpose of considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to the Merger and this Agreement, and use its best efforts (A) to
obtain and furnish the information required to be included by the SEC in the
Proxy Statement (as hereinafter defined) and, after consultation with Parent, to
respond as soon as practicable to any comments made by the SEC with respect to
the preliminary proxy statement and cause a definitive proxy statement (the
"Proxy Statement") to be mailed to its stockholders and (B) to obtain the
necessary approvals of the Merger and adoption of this Agreement by its
stockholders; and
(iii) include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the approval and
adoption of the Merger and of this Agreement.
(b) Parent agrees that it will vote, or cause to be voted, all of the
Shares then owned by it, Purchaser or any of its other subsidiaries in favor of
the approval of the Merger and of this Agreement.
Section 2.10. Merger Without Meeting of Stockholders. Notwithstanding
the provisions of Section Section 2.9, in the event that Purchaser shall acquire
at least 90% of the outstanding Shares pursuant to the Offer, the parties hereto
agree to take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the acceptance for payment of and payment
for Shares by Purchaser pursuant to the Offer without a meeting of stockholders
of the Company, in accordance with the provisions of Section 253 of the DGCL.
Section 2.11. Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares which are outstanding immediately prior to the
Effective Time and which are held by a holder who has not voted in favor of the
Merger or consented thereto in writing and who has demanded appraisal for such
Shares in accordance with Section 262 of the DGCL ("Dissenting Shares") shall
not be converted into a right to receive the Merger Consideration pursuant to
Section Section 2.7, but the holders of Dissenting Shares shall instead be
entitled to receive such consideration as shall be determined pursuant to
Section 262 of the DGCL; provided, however, that if any such holder shall have
failed to perfect or shall withdraw or lose such holder's right of appraisal and
payment under the DGCL, such holder's Shares shall be treated as if they had
been converted as of the Effective Time into the right to receive the Merger
Consideration, without interest thereon, as provided in Section Section 2.7 and
such Shares shall no longer be Dissenting Shares. The Company shall give Parent
and Purchaser prompt notice of any demands received by the Company for appraisal
of Shares, and of any withdrawals of demands for appraisal, or of any other
instruments served pursuant to Section 262 of the DGCL and received by the
Company. Prior to the Effective Time, Parent and Purchaser shall have the right
to participate in all negotiations and proceedings with respect to such demands
for appraisal. Prior to the Effective Time, the Company shall not, except with
the prior written consent of Parent and Purchaser, make any payment with respect
to, or settle or offer to settle, any such demands. Each
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holder of Dissenting Shares shall have only such rights and remedies as are
granted to such holder under Section 262 of the DGCL.
Section 2.12. Payment for Shares.
(a) Prior to the Effective Time, Purchaser shall select and appoint a
bank or trust company having net capital of not less than $100,000,000 to act as
paying agent (the "Paying Agent") in effecting the payment of the Merger
Consideration in respect of certificates (the "Certificates") that, prior to the
Effective Time, represented Shares entitled to payment of the Merger
Consideration pursuant to Section Section 2.7. At the Effective Time, Parent or
Purchaser shall deposit, or cause to be deposited, in trust with the Paying
Agent the aggregate Merger Consideration to which holders of Shares shall be
entitled at the Effective Time pursuant to Section Section 2.7.
(b) Promptly after the Effective Time, Purchaser or Parent shall cause
the Paying Agent to mail to each record holder of Certificates a form of letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use of such letter of
transmittal in surrendering the Certificates for payment. Upon the surrender of
each Certificate, together with a completed and duly executed letter of
transmittal and such other documents as may be requested in connection
therewith, the Paying Agent shall pay the holder of such Certificate the Merger
Consideration multiplied by the number of Shares formerly represented by such
Certificate, in consideration therefor, and such Certificate shall forthwith be
canceled. Until so surrendered, each Certificate shall represent solely the
right to receive the aggregate Merger Consideration relating thereto. No
interest or dividends shall be paid or accrued on the Merger Consideration.
(c) If the Merger Consideration (or any portion thereof) is to be paid
and delivered to any person other than the person in whose name the Certificate
surrendered is registered, it shall be a condition to such person's right to
receive such Merger Consideration that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such payment shall pay to the Paying Agent any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Paying Agent that such taxes have been paid or are not
applicable. In the event any Certificate shall have been lost, stolen or
destroyed, the Paying Agent shall be required to pay the full Merger
Consideration in respect of any Shares represented by such Certificate; however,
Parent may require the owner of such lost, stolen or destroyed Certificate to
execute and deliver to the Paying Agent a form of affidavit claiming such
Certificate to be lost, stolen or destroyed in form and substance reasonably
satisfactory to Parent and the posting by such owner of a bond in such amount as
Parent may determine is reasonably necessary as indemnity against any claim that
may be made against Parent or the Paying Agent.
(d) Promptly following the date which is 180 days after the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its
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possession relating to the transactions described in this Agreement, and the
Paying Agent's duties shall terminate. Thereafter, each holder of a Certificate
may surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefor the aggregate Merger Consideration relating thereto, without any
interest thereon. Notwithstanding the foregoing, none of Parent, Purchaser, the
Surviving Corporation or the Paying Agent shall be liable to any person in
respect of any cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered immediately prior to such date on which any payment with
respect thereto would otherwise escheat to or become the property of any court,
administrative agency, commission, or other governmental authority or
instrumentality ("Governmental Entity"), the cash payment in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any person previously entitled thereto.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent,
they shall be surrendered and canceled in return for the payment of the
aggregate Merger Consideration relating thereto, as provided in this Article II.
Section 2.13. Supplementary Action. If at any time after the Effective
Time, any further assignments or assurances in law or any other things are
necessary or desirable to vest or to perfect or confirm of record in the
Surviving Corporation the title to any property or rights of either the Company
or Purchaser, or otherwise to carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are hereby authorized and
empowered, in the name of and on behalf of the Company and Purchaser, to execute
and deliver any and all documents and instruments and to take all other action
necessary or proper to vest or to perfect or confirm title to such property or
rights in the Surviving Corporation, and otherwise to carry out the purposes and
provisions of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser, subject to
the exceptions specifically disclosed in writing in a disclosure schedule
delivered by the Company to Parent on or before the date hereof and certified by
a duly authorized officer of the Company (the "Company Schedule"), as follows:
Section 3.1. Organization and Qualification of the Company.
(a) The Company and each of its subsidiaries (i) is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is
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organized; (ii) has the corporate or other power and authority to own, lease and
operate its assets and property and to carry on its business as now being
conducted; and (iii) is duly qualified or licensed to do business in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary other than in jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not have a Material Adverse
Effect on the Company.
(b) The Company has made available to Parent a true and complete list of
all of the Company's subsidiaries as of the date of this Agreement, indicating
the jurisdiction of organization of each subsidiary and the Company's equity
interest therein.
(c) The Company has delivered or made available to Parent a true and
correct copy of the Certificate of Incorporation and Bylaws of the Company and
similar governing instruments of each of its subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither the Company
nor any of its subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws or equivalent governing instruments.
Section 3.2. Company Capital Structure. The authorized capital stock of
the Company consists of 50,000,000 shares of Common Stock, $0.01 par value per
share (the "Company Common Stock"), of which there were an aggregate of
13,362,540 shares issued and outstanding as of the close of business on July 27,
1998 (with no shares held in treasury) plus shares of Company Common Stock to be
issued due to the exercise of Options since July 14, 1998, and 2,000,000 shares
of Preferred Stock, $0.01 par value per share, of which no shares are issued or
outstanding. All outstanding shares of the Company Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the Certificate of Incorporation or Bylaws
of the Company or any agreement or document to which the Company is a party or
by which it is bound. As of July 27, 1998, the Company has reserved an aggregate
of 4,552,000 shares of the Company Common Stock, net of exercises, for issuance
pursuant to the Company Stock Plans and is obligated to issue 22,511 shares of
Company Common Stock pursuant to the Company's Employee Stock Purchase Plan
during the current purchase period. As of July 27, 1998, there were Options
outstanding to purchase an aggregate of 2,818,386 (minus shares of Company
Common Stock issued upon exercise of Options since July 14, 1998) shares of the
Company Common Stock pursuant to the Company Stock Plans. As of July 27, 1998,
there were Warrants outstanding to purchase an aggregate of 59,668 shares of the
Company Common Stock. All shares of the Company Common Stock subject to issuance
as aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. The Company Schedule lists for
each person who held Options or Warrants as of July 27, 1998, the name of the
holder, the exercise price of such Option or Warrant, the number of shares as to
which such Option or Warrant had vested at such date, the vesting schedule for
such Option or Warrant, whether the exercisability of such Option or Warrant
will be accelerated in any way by the transactions contemplated by this
Agreement, and the extent of any such acceleration; provided that such schedule
does not reflect Option exercises since July 14, 1998.
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Section 3.3. Obligations With Respect to Capital Stock. Except as set
forth in Section Section 3.2, there are no shares of capital stock, partnership
interests or similar ownership interests of any class of the Company's equity
securities, or any securities exchangeable or convertible into or exercisable
for such equity securities, issued, reserved for issuance or outstanding. Except
for securities the Company owns free and clear of all claims and encumbrances,
directly or indirectly through one or more subsidiaries, and except for shares
of capital stock or other similar ownership interests of certain subsidiaries of
the Company that are owned by certain nominee equity holders as required by the
applicable law of the jurisdiction of organization of such subsidiaries, as of
the date of this Agreement, there are no shares of capital stock, partnership
interests or similar ownership interests of any class of equity securities of
any subsidiary of the Company, or any securities exchangeable or convertible
into or exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except as set forth in Section Section 3.2, as of July 27, 1998,
there are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which the Company or any
of its subsidiaries is a party or by which it is bound obligating the Company or
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of the Company or any of
its subsidiaries or obligating the Company or any of its subsidiaries to grant,
extend, accelerate the vesting of or enter into any such subscription, option,
warrant, equity security, call, right, commitment or agreement. As of the date
of this Agreement, except as set forth in the Company Schedule and as
contemplated by this Agreement, the Company Option Agreement and the Support
Agreements, there are no registration rights and, to the knowledge of the
Company, there are no voting trusts, proxies, rights plan, antitakeover plans or
other agreements or understandings to which the Company is a party or by which
it is bound with respect to any equity security of any class of the Company or
with respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries.
Section 3.4. Authority.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and the Company Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Company Option Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby have been
duly and validly authorized and approved by the Company Board and no other
corporate proceedings on the part of the Company are necessary to authorize or
approve this Agreement or the Company Option Agreement or to consummate the
transactions contemplated hereby or thereby (other than, with respect to the
Merger, the approval and adoption of this Agreement by the affirmative vote of
the holders of a majority of the then outstanding Shares entitled to vote
thereon, to the extent required by the applicable law). This Agreement and the
Company Option Agreement have been duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by Parent and
Purchaser, constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except that (i)
such enforcement may be subject to
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bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The execution and delivery of this Agreement and the Company
Option Agreement by the Company do not, and the performance of this Agreement
and the Company Option Agreement by the Company will not, (i) conflict with or
violate the Certificate of Incorporation or Bylaws of the Company or the
equivalent organizational documents of any of its subsidiaries, (ii) subject to
compliance with the requirements set forth in Section Section 3.4((b)) below,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which the Company or
any of its subsidiaries or any of their respective properties is bound or
affected, other than such conflicts or violations which, individually or in the
aggregate, do not and would not reasonably be expected to have a Material
Adverse Effect (as defined in Section Section 8.10((d))) on the Company or a
material adverse effect on the ability of the parties hereto to consummate the
Offer or the Merger, (iii) result in any material breach of or constitute a
material default (or an event that with notice or lapse of time or both would
become a material default) under, or impair the Company's material rights or
alter the material rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a material lien or encumbrance on any of the material
properties or assets of the Company or any of its subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise, concession, or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective assets are bound or affected.
The Company Schedule lists all consents, waivers and approvals under any of the
Company's or any of its subsidiaries' agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby, which, if individually or in the aggregate are not
obtained, would be reasonably expected to have a Material Adverse Effect on the
Company.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained or
made by the Company or any of its subsidiaries in connection with the execution
and delivery of this Agreement or the Company Option Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (ii) the filing of
the Proxy Statement, if applicable, with the SEC in accordance with the Exchange
Act, (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities (or related) laws, the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the securities or antitrust laws of any
foreign country, and (iv) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not be
reasonably expected to have Material Adverse Effect on the Company or a material
adverse effect on the ability of the parties hereto to consummate the Offer or
the Merger.
Section 3.5. SEC Filings; the Company Financial Statements.
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<PAGE> 18
(a) The Company has filed in a timely manner all forms, reports and
documents required to be filed by the Company with the SEC since October 23,
1996 and has made available to Parent such forms, reports and documents in the
form filed with the SEC. All such required forms, reports and documents
(including those that Company may file subsequent to the date hereof) are
referred to herein as the "Company SEC Reports." As of their respective dates,
the Company SEC Reports (i) were prepared, in all material respects, in
accordance with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Reports and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of the Company's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports (the
"Company Financials"), including any Company SEC Reports filed after the date
hereof until the consummation of the Offer, (i) complied, or will comply, as to
form in all material respects with the published rules and regulations of the
SEC with respect thereto, (ii) was, or will be, prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q under the Exchange Act) and (iii)
fairly presented, or will present, the consolidated financial position of the
Company and its subsidiaries as at the respective dates thereof and the
consolidated results of the Company's operations and cash flows for the periods
indicated, except that the unaudited interim financial statements may not
contain footnotes and were or are subject to normal and recurring year-end
adjustments. The consolidated balance sheet of the Company as of June 30, 1998
set forth in Section 3.5 of the Company Schedule is hereinafter referred to as
the "Company Balance Sheet" and shall be deemed to be a part of the Company
Financials. Except as disclosed in the Company Financials, since the date of the
Company Balance Sheet neither the Company nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) required under GAAP to
be set forth on a balance sheet which are, individually or in the aggregate,
material to the business, results of operations or financial condition of the
Company and its subsidiaries taken as a whole, except for liabilities incurred
since the date of the Company Balance Sheet in the ordinary course of business
consistent with past practices.
(c) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be so filed, to agreements, documents or
other instruments which previously have been filed by Company with the SEC
pursuant to the Securities Act or the Exchange Act.
Section 3.6. Absence of Certain Changes or Events. Between the date of
the Company Balance Sheet and the date hereof, there has not been: (i) any event
or occurrence which has had a Material Adverse Effect on the Company, (ii) any
declaration, setting aside or payment of any dividend
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<PAGE> 19
on, or other distribution (whether in cash, stock or property) in respect of,
any of the Company's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by the Company of any of the Company's capital
stock or any other securities of the Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from employees, directors or consultants following the
termination of their services pursuant to the terms of pre-existing stock option
or purchase agreements, (iii) any split, combination or reclassification of any
of the Company's or any of its subsidiaries' capital stock, (iv) any granting by
the Company or any of its subsidiaries of any increase in compensation or fringe
benefits, except for normal increases of cash compensation in the ordinary
course of business consistent with past practice, or any payment by the Company
or any of its subsidiaries of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by the Company
or any of its subsidiaries of any increase in severance or termination pay or
any entry by the Company or any of its subsidiaries into any currently effective
employment, severance, termination or indemnification agreement or any agreement
the benefits of which are contingent or the terms of which are materially
altered upon the occurrence of a transaction involving the Company of the nature
contemplated hereby, (v) entry by the Company or any of its subsidiaries into
any licensing or other agreement with regard to the acquisition or disposition
of any material Intellectual Property (as defined in Section Section 3.9((a)))
other than non-exclusive licenses granted in the ordinary course of business
consistent with past practice, (vi) any material change by the Company in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP or SEC requirements, or (vii) any material revaluation by the
Company of any of its assets, including, without limitation, writing down the
value of capitalized inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice.
Section 3.7. Taxes.
(a) For the purposes of this Agreement, "Tax" or "Taxes" refers to any
and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities relating to taxes,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) The Company and each of its subsidiaries have timely filed (taking
into account applicable extensions) all federal, state, local and foreign
returns, estimates, information statements and reports ("Returns") relating to
Taxes required to be filed by the Company and each of its subsidiaries with any
Tax authority, except such Returns which are not material to the Company, and
have paid all Taxes shown to be due on such Returns.
(c) The Company and each of its subsidiaries as of the Effective Time
will have withheld with respect to its employees all federal and state income
taxes, Taxes pursuant to the Federal Insurance Contribution Act ("FICA"), Taxes
pursuant to the Federal Unemployment Tax Act
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<PAGE> 20
("FUTA") and any other Taxes required to be withheld, in all cases to the extent
such amounts are material individually or in the aggregate.
(d) Neither the Company nor any of its subsidiaries has been delinquent
in the payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against the Company or any of its
subsidiaries, nor has the Company or any of its subsidiaries executed any
unexpired waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(e) To the Company's knowledge, no audit or other examination of any
Return of the Company or any of its subsidiaries by any Tax authority is
presently in progress, nor has the Company or any of its subsidiaries been
notified of any request for such an audit or other examination.
(f) No adjustment relating to any Returns filed by the Company or any of
its subsidiaries has been proposed in writing formally or informally by any Tax
authority to the Company or any of its subsidiaries or any representative
thereof.
(g) Neither the Company nor any of its subsidiaries has any material
liability for unpaid Taxes which has not been accrued for or reserved on the
Company Balance Sheet, whether asserted or unasserted, contingent or otherwise,
which is material to the Company, other than any liability for unpaid Taxes that
may have accrued since the date of the Company Balance Sheet in connection with
the operation of the business of the Company and its subsidiaries in the
ordinary course.
(h) There is no contract, agreement, plan or arrangement to which the
Company is a party of this Agreement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company or any of its subsidiaries that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code").
(i) Neither the Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company.
(j) Neither the Company nor any of its subsidiaries is party to or has
any obligation under any tax-sharing, tax indemnity or tax allocation agreement
or arrangement.
(k) Except as may be required as a result of the Merger, the Company and
its subsidiaries have not been and will not be required to include any material
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
Section 481 or Section 263A of the Code or any comparable provision under state
or foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
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(l) None of the Company's or its subsidiaries' assets are tax exempt use
property within the meaning of Section 168(h) of the Code.
(m) The Company Schedule lists (i) any foreign Tax holidays, (ii) any
intercompany transfer pricing agreements, or other arrangements that have been
established by the Company or any of its subsidiaries with any Tax authority and
(iii) any expatriate programs or policies affecting the Company or any of its
subsidiaries.
Section 3.8. Title to Properties; Absence of Liens and Encumbrances.
(a) The Company Schedule lists all real property interests owned by the
Company or any of its subsidiaries as of the date hereof. The Company Schedule
lists all real property leases to which the Company or any of its subsidiaries
is a party as of the date hereof and each amendment thereto. All such leases are
in full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) that would give rise to a material claim.
(b) The Company and each of its subsidiaries has good and valid title
to, or, in the case of leased properties and assets, valid leasehold interests
in, all of its tangible properties and assets, real, personal and mixed, used or
held for use in its business, free and clear of any liens, pledges, charges,
claims, security interests or other encumbrances of any sort ("Liens"), except
as reflected in the Company Financials and except for liens for taxes not yet
due and payable and such Liens or other imperfections of title and encumbrances,
if any, which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby.
Section 3.9. Intellectual Property.
(a) The Company and each of its subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications for such patents,
trademarks, trade names, service marks and copyrights, and all patent rights,
trade secrets, schematics, technology, know-how, computer software and tangible
or intangible proprietary information or material and other intellectual
property or proprietary rights (collectively, "Intellectual Property") material
to the conduct of its business as currently conducted, including without
limitation all copyrights registered in the name of the Company or any of its
subsidiaries ("Company Intellectual Property"). The Company and each of its
subsidiaries has taken reasonable measures to protect the proprietary nature of
each item of Company Intellectual Property that it considers confidential, and
to maintain in confidence all trade secrets and confidential information that it
presently owns or uses, except where the failure to own, license or possess
legally enforceable rights to use such Company Intellectual Property would not,
individually or in the aggregate, reasonably be expected to result in a material
loss of benefits or a material loss to the Company's business.
(i) Section Section 3.9((a))((i)) of the Company Schedule lists,
as of the date hereof, all patents and patent applications and all trademarks,
registered copyrights, trade names and
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service marks owned by, or licensed exclusively to, the Company or any of its
subsidiaries and which are currently used in connection with the business of the
Company or its subsidiaries, including the jurisdictions in which each item of
such Company Intellectual Property has been issued or registered or in which any
such application for such issuance or registration has been filed.
(ii) Section Section 3.9(a)(ii) of the Company Schedule
lists, as of the date hereof, all written licenses, sublicenses and other
agreements to which Company or any of its subsidiaries is a party and pursuant
to which any person is authorized to use any Company Intellectual Property
rights, excluding (A) source or object code end-user licenses granted to
end-users in the ordinary course of business that permit use of software
products without a right to modify, distribute or sublicense the same ("End-User
Licenses") and (B) licenses, sublicenses or other agreements with resellers,
distributors, original equipment manufacturers and other third party
intermediaries that grant non-exclusive rights to use or modify (for purposes of
establishing program interfaces) and resell or sublicense source or object code
which (I) did not in any individual case represent $100,000 or more of revenues
to the Company in 1997 on a consolidated basis, (II) were in all material
respects in the standard form of agreements provided by the Company to Parent,
and (III) the Company has no reason to believe will be material to the Company's
or any of its subsidiaries' business or would reasonably be expected to result
in a material loss to the Company.
(iii) Section Section 3.9(a)(iii) of the Company Schedule
lists, as of the date hereof, all written licenses, sublicenses and other
agreements to which the Company or any of its subsidiaries is a party and
pursuant to which the Company or any such subsidiary is authorized to use any
third party Intellectual Property, including software ("Third Party Intellectual
Property") which is incorporated in any existing product or service of the
Company or any of its subsidiaries, or any material product or service currently
under development ("Embedded Products").
(iv) Section Section 3.9(a)(iv) of the Company Schedule
lists, as of the date hereof, all written agreements or other arrangements under
which the Company or any of its subsidiaries has provided or agreed to provide
source code of any product of the Company or any of its subsidiaries to any
third party, except for software development kits provided either to agent
integration providers or by End-User Licenses.
The Company has made available to Parent correct and complete
copies of all patents, registrations, applications (owned by the Company or any
of its subsidiaries), and all licenses, sublicenses and agreements referred to
in this Section Section 3.9(a), each as amended to date. Except for retail
purchases of software, neither the Company nor any of its subsidiaries is a
party to any oral license, sublicense or agreement which, if reduced to written
form, would be required to be listed in Section Section 3.9 of the Company
Schedule under the terms of this Section Section 3.9(a).
(b) With respect to each item of Company Intellectual Property that the
Company or any of its subsidiaries owns: (i) other than common law trademarks,
and subject to such rights as have
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been granted by the Company or any of its subsidiaries under non-exclusive
license agreements and joint development agreements entered into by the Company
or any of its subsidiaries (copies of which have previously been made available
or disclosed in writing to Parent), the Company or its subsidiaries possess all
right, title and interest in and to such item; and (ii) such item is not subject
to any outstanding judgment, order, decree, stipulation or injunction that
materially interferes with the conduct of the Company's or any of its
subsidiaries' business as currently conducted.
(c) Except as set forth in Section 3.9 of the Company Schedule, with
respect to each item of Third Party Intellectual Property listed in Section
3.9(a)(iii): (i) the license, sublicense or other agreement covering such
item is legal, valid, binding, enforceable and in full force and effect with
respect to the Company or such subsidiary, and, to the Company's knowledge, is
legal, valid, binding, enforceable and in full force and effect with respect to
each other party thereto; (ii) neither the Company nor any of its subsidiaries
is in material breach or default thereunder, and, to the Company's knowledge, no
other party to such license, sublicense or other agreement is in material breach
or default thereunder, and, to the Company's knowledge, no event has occurred
which with notice or lapse of time would constitute a material breach or default
by the Company or any of its subsidiaries or permit termination, modification or
acceleration thereunder by the other party thereto; (iii) to the Company's
knowledge, the underlying item of Third Party Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation or injunction to
which the Company or any of is subsidiaries is a party or has been specifically
named that materially interferes with the conduct of the Company's or any of its
subsidiaries' business as currently conducted, nor, to the Company's knowledge,
subject to any other outstanding judgment, order, decree, stipulation, or
injunction that materially interferes with the conduct of the Company's or any
of its subsidiaries' business as currently conducted.
(d) Except as set forth in Section 3.9 of the Company Schedule, as of
the date hereof, neither the Company nor any of its subsidiaries has (i) been
named in any suit, action or proceeding as to which it has been served with
process which involves a claim of infringement or misappropriation of any
Intellectual Property right of any third party or (ii) received any written
notice alleging any such claim of infringement or misappropriation. The Company
has made available to Parent correct and complete copies of all such suits,
actions or proceedings or written notices. To the Company's knowledge, except as
set forth in Section 3.9 of the Company Schedule, the manufacturing, marketing,
licensing or sale of the products or the performance of the services offered by
the Company and its subsidiaries do not currently infringe, and have not
infringed, any Intellectual Property right of any third party (other than patent
rights) or, to the Company's knowledge, any patent rights of third parties; and,
to the knowledge of the Company, none of the Company Intellectual Property
rights are being infringed by activities, products or services of any third
party.
(e) Except as set forth in Section 3.9 of the Company Schedule, the
execution and delivery of this Agreement by the Company, and the consummation of
the transactions contemplated hereby, will neither cause the Company nor any of
its subsidiaries to be in violation or default under any license, sublicense or
other agreement relating to Intellectual
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Property, nor terminate nor modify nor entitle any other party to any such
license, sublicense or agreement to terminate or modify such license, sublicense
or agreement, nor limit in any way the Company's or any of its subsidiaries'
ability to conduct its business or use or provide the use of Company
Intellectual Property or any Intellectual Property rights of others, which
violation, default, termination, modification or limitation would reasonably be
expected, individually or in the aggregate, to result in a material loss of
benefits or material loss to the Company.
(f) Except for Embedded Products for which the Company has valid
non-exclusive licenses which are disclosed in Section 3.9 of the Company
Schedule and which are adequate for each of the Company's and its subsidiaries'
businesses as presently conducted, and except for usual and customary rights
retained by the United States government with respect to Intellectual Property
developed under research contracts with the Federal government (the "Retained
Fed Rights"), the Company is the sole and exclusive owner or the licensee of,
with all right, title and interest in and to all Company Intellectual Property
(free and clear of any liens or encumbrances), and has sole and exclusive rights
(and is not contractually obligated to pay any compensation to any third party
in respect thereof) to the use and distribution thereof or the material covered
thereby in connection with the services or products in respect of which Company
Intellectual Property is being used, except where the failure to have such
rights would not reasonably be expected to result in a material loss of benefits
or loss to the Company. To the Company's knowledge, the United States government
has never exercised, and the Company has no notice that the government intends
to exercise, its rights to use or provide to others the use of the Retained Fed
Rights with respect to any Company Intellectual Property in a manner that would
be material to the Company's non-governmental business. The Retained Fed Rights
do not materially interfere with the conduct of the Company's business.
(g) The Company has made available to Parent copies of the Company's and
each of its subsidiaries' standard forms of End-User Licenses. Except as
disclosed in Section 3.9 of the Company Schedule (which describes the material
variations from the standard form of End-User License), as of the date hereof,
neither the Company nor any of its subsidiaries has entered into any End-User
Licenses which contain terms materially different than as set forth in the
standard forms of such agreements made available to Parent.
(h) The Company and each of its subsidiaries has taken reasonable
security measures to safeguard and maintain the secrecy, confidentiality and
value of, and its property rights in, all Company Intellectual Property. All
officers, employees and consultants of the Company or any of its subsidiaries
who have access to proprietary information or Company Intellectual Property have
executed and delivered to the Company or such subsidiary an agreement regarding
the protection of proprietary information and the assignment to the Company or
any of its subsidiaries of all Intellectual Property arising from the services
performed for the Company or any of its subsidiaries by such persons. To the
Company's knowledge, no current or prior officers, employees or consultants of
the Company or any of its subsidiaries claim any ownership interest in any
material Company Intellectual Property as a result of having been involved in
the development of such property while employed by or consulting to the Company
or any of its subsidiaries, or otherwise. Except as set forth in Section 3.9 of
the Company Schedule and except for the Embedded Products, all Company
Intellectual Property has been developed by
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employees of the Company or its subsidiaries, within the course and scope of
their employment.
(i) The Company and each of its subsidiaries has sufficient right, title
and interest in and to all material software development tools, not entirely
developed internally, currently used by the Company or any of its subsidiaries
in the development of any of the computer software included in the Company
Intellectual Property.
(j) To the Company's knowledge, there are no material defects in the
Company's or any of its subsidiaries' software products, and there are no errors
in any documentation, specifications, manuals, user guides, promotional
material, internal notes and memos, technical documentation, drawings, flow
charts, diagrams, source language statements, demo disks, benchmark test
results, and other written materials related to, associated with or used or
produced in the development of the Company's or any of its subsidiaries'
software products (collectively, the "Design Documentation"), which defects or
errors would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The occurrence in or use by the computer
software products currently sold by the Company or any of its subsidiaries, of
dates on or after January 1, 2000 (the "Millennial Dates") will not adversely
affect the performance of the software with respect to date dependent data,
computations, output or other functions (including without limitation,
calculating, computing and sequencing) and such software will create, sort and
generate output data related to or including Millennial Dates without errors or
omissions.
(k) No government funding or university or college facilities were used
in the development of the Company's or any of its subsidiaries' software
products and such software was not developed pursuant to any contract or other
agreement with any person or entity except pursuant to contracts or agreements
listed in Section 3.9 of the Company Schedule.
(l) Section 3.9 of the Company Schedule lists all material warranty
claims (including any pending claims) related to the Company's or any of its
subsidiaries' products and the nature of such claims, except for customary
product support and maintenance. Except as set forth in Section 3.9 of the
Company Schedule, neither the Company nor any of its subsidiaries has made any
material oral or written representations or warranties with respect to its
products or services.
(m) Except as set forth in Section 3.9 of the Company Schedule, the
Company and its subsidiaries have been and are in compliance with the Export
Administration Act of 1979, as amended, and all regulations promulgated
thereunder.
Section 3.10. Compliance; Permits; Restrictions.
(a) Neither the Company nor any of its subsidiaries is, in any material
respect, in conflict with, or in default or in violation of (i) any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which the Company or any of its subsidiaries or any of their
respective properties is bound or affected, or (ii) any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties is bound or
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<PAGE> 26
affected, except for conflicts, violations and defaults that (individually or in
the aggregate) would not cause the Company to lose any material benefit or incur
any material liability. To the knowledge of the Company, no investigation or
review by any Governmental Entity is pending or has been threatened against the
Company or any of its subsidiaries, nor, to the Company's knowledge, has any
Governmental Entity indicated an intention to conduct an investigation of the
Company or any of its subsidiaries. There is no material agreement, judgment,
injunction, order or decree binding upon the Company or any of its subsidiaries
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its
subsidiaries, any acquisition of material property by the Company or any of its
subsidiaries or the conduct of business by the Company as currently conducted.
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from any Governmental Entities that
are material to and required for the operation of the business of the Company as
currently conducted (collectively, the "Company Permits") except for any such
failure which would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company. The Company and its
subsidiaries are in compliance in all material respects with the terms of the
Company Permits, except where the failure to be in compliance would not
reasonably be expected to have a Material Adverse Effect on the Company.
Section 3.11. Litigation.
(a) There are no claims, suits, actions or proceedings pending or, to
the Company's knowledge, threatened against, relating to or affecting the
Company or any of its subsidiaries, before any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that seeks
to restrain or enjoin the consummation of the transactions contemplated by this
Agreement, or, except as set forth in Section 3.11 of the Company Schedule,
which would reasonably be expected, either singularly or in the aggregate with
all such claims, actions or proceedings, to have a Material Adverse Effect on
the Company. No Governmental Entity has at any time challenged or questioned in
a writing delivered to the Company the legal right of the Company to design,
manufacture, offer or sell any of its products in the present manner or style
thereof.
(b) Neither the Company nor any of its subsidiaries has ever been
notified in writing that it has been subject to an audit, compliance review,
investigation or like contract review by the office of the Inspector General of
the U.S. General Services Administration or any other Governmental Entity or
agent thereof in connection with any government contract (a "Government Audit").
To the Company's knowledge, no Government Audit is threatened, and in the event
of any such Government Audit, to the knowledge of the Company, no basis exists
for a finding of noncompliance with any material provision of any government
contract or for a material refund of any amounts paid or owed to the Company or
any of its subsidiaries by any Governmental Entity pursuant to such government
contract. For each item disclosed in the Company Schedule pursuant to this
Section 3.11 a true and complete copy of all material correspondence and
documentation with respect thereto has been made available to Parent.
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Section 3.12. Brokers' and Finders' Fees. Except for fees payable to H&Q
pursuant to an engagement letter dated March 31, 1998, a copy of which has been
provided to Parent, the Company has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
Section 3.13. Employee Benefit Plans and Employee Matters.
(a) With the exception of the definition of "Affiliate" set forth in
Section 3.13(a)(i) below (which definition shall apply only to this Section
3.13), for purposes of this Agreement, the following terms shall have the
meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "Company Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any Affiliate for the benefit
of any Employee (as defined in Section 3.13(a)(v) below);
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current, former, or retired
employee, officer, or director of the Company or any Affiliate;
(vi) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(ix) "International Employee Plan" shall mean each Company
Employee Plan that has been adopted or maintained by the Company, whether
informally or formally, for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
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(xi) "Multiemployer Plan" shall mean any Pension Plan (as
defined in Section 3.13(a)(xiii) below) which is a "multiemployer plan," as
defined in Section 3(37) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "Pension Plan" shall mean each Company Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) The Company Schedule contains an accurate and complete list of each
Company Employee Plan and each material Employee Agreement as of the date
hereof. The Company does not have any plan or commitment to establish any new
Company Employee Plan, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Company Employee Plan or material Employee
Agreement, nor does it have any intention or commitment to do any of the
foregoing.
(c) The Company has provided to Parent: (i) correct and complete copies
of all documents embodying each Company Employee Plan and each Employee
Agreement, including all amendments thereto and written interpretations thereof;
(ii) the three most recent annual reports (Form Series 5500 and all schedules
and financial statements attached thereto), if any, required under ERISA or the
Code in connection with each Company Employee Plan or related trust; (iii) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (iv) the most recent summary plan
description together with the summary of material modifications thereto, if any,
required under ERISA with respect to each Company Employee Plan; (v) all IRS
determination, opinion, notification and advisory letters, and rulings relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the DOL with respect to any Company Employee Plan; (vi) all
material written agreements and contracts relating to each Company Employee
Plan, including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (vii) all communications
material to any Employee or Employees relating to any Company Employee Plan and
any proposed Company Employee Plan, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability to the Company; (viii) all standard COBRA forms and related
notices; and (ix) all registration statements and prospectuses prepared in
connection with each Company Employee Plan.
(d) (i) The Company has performed in all material respects all
obligations required to be performed by it under, is not in default or violation
in any material respect of, and has no knowledge of any default or violation by
any other party to each Company Employee Plan, and each Company Employee Plan
has been established and maintained in all material respects in accordance with
its terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including but not limited to ERISA and the Code; (ii) each
Company Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under
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Section 501(a) of the Code has either received a favorable determination letter
from the IRS with respect to such plan as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a determination letter and make any amendments necessary to obtain a favorable
determination; (iii) no "prohibited transaction," within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA, has occurred with respect to any Company Employee
Plan; (iv) there are no actions, suits or claims pending, or, to the Company's
knowledge, threatened (other than routine claims for benefits) against any
Company Employee Plan or against the assets of any Company Employee Plan; (v)
each Company Employee Plan can be amended, terminated or otherwise discontinued
after the Effective Time in accordance with its terms, without material
liability to Parent, the Company or any of its Affiliates (other than ordinary
administration expenses typically incurred in a termination event); (vi) there
are no audits, inquiries or proceedings pending or, to the Company's knowledge,
threatened by the IRS or DOL with respect to any Company Employee Plan; and
(vii) neither the Company nor any Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Section 402(i) of ERISA or
Sections 4975 through 4980 of the Code.
(e) The Company does not now, nor has it ever, maintained, established,
sponsored, participated in, or contributed to, any Pension Plan which is subject
to Title IV of ERISA or Section 412 of the Code.
(f) At no time has the Company contributed to or been requested to
contribute to any Multiemployer Plan.
(g) No Company Employee Plan provides, or has any liability to provide,
retiree life insurance, retiree health or other retiree employee welfare
benefits to any person for any reason, except as may be required by COBRA or
other applicable statute, and the Company has never represented, promised or
contracted (whether in oral or written form) to or with any Employee (either
individually or as a group) or any other person that such Employee(s) or other
person would be provided with retiree life insurance, retiree health or other
retiree employee welfare benefit, except to the extent required by statute.
(h) Neither the Company nor any Affiliate has, prior to the Effective
Time, and in any material respect, violated any of the health care continuation
requirements of COBRA, the requirements of FMLA or any similar provisions of
state law applicable to its Employees.
(i) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(j) The Company: (i) is in compliance in all material respects with all
applicable federal,
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state, local and foreign laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours;
(ii) has withheld all amounts required by law or by agreement to be withheld
from the wages, salaries and other payments to Employees, which amounts are
material individually or in the aggregate; (iii) is not liable for any material
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any material payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending or,
to the Company's knowledge, threatened claims or actions against the Company
under any worker's compensation policy or long-term disability policy. To the
Company's knowledge, no employee of the Company has violated any employment
contract, nondisclosure agreement or noncompetition agreement by which such
employee is bound due to such employee being employed by the Company and
disclosing to the Company or using trade secrets or proprietary information of
any other person or entity.
(k) No work stoppage or labor strike against the Company is pending or,
to the knowledge of the Company, threatened. The Company does not know of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
Company's knowledge, threatened relating to any labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
individually or in the aggregate, would be reasonably likely to have a Material
Adverse Effect on the Company. Neither the Company nor any of its subsidiaries
has engaged in any unfair labor practices within the meaning of the National
Labor Relations Act. The Company is not presently, nor has it been in the past,
a party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is currently
being negotiated by the Company.
(l) Each International Employee Plan has been established, maintained
and administered in material compliance with its terms and conditions and with
the requirements prescribed by any and all statutory or regulatory laws that are
applicable to such International Employee Plan. No International Employee Plan
has unfunded liabilities, that as of the Effective Time, will not be offset by
insurance or fully accrued. Except as required by law, no condition exists that
would prevent the Company or Parent from terminating or amending any
International Employee Plan at any time for any reason.
Section 3.14. Environmental Matters.
(a) Except as would not be reasonably likely to result in material
liability to the Company, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of
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1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies
(a "Hazardous Material"), is present, as a result of the actions of the Company
or any of its subsidiaries or any affiliate of the Company or, to the Company's
knowledge, as a result of any actions of any third party or otherwise, in, on or
under any property, including the land and the improvements, ground water and
surface water thereof, that the Company or any of its subsidiaries has at any
time owned, operated, occupied or leased.
(b) Except as would not be reasonably likely to result in a material
liability to the Company (in any individual case or in the aggregate) (i)
neither the Company nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the Effective
Time, and (ii) neither the Company nor any of its subsidiaries has disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) The Company and its subsidiaries currently hold all material
environmental approvals, permits, licenses, clearances and consents (the
"Company Environmental Permits") necessary for the conduct of the Company's and
its subsidiaries' Hazardous Material Activities and other businesses of the
Company and its subsidiaries as such activities and businesses are currently
being conducted.
(d) No action, proceeding, revocation proceeding, amendment procedure,
writ or injunction is pending, and to the Company's knowledge, no action,
proceeding, revocation proceeding, amendment procedure, writ or injunction has
been threatened by any Governmental Entity against the Company or any of its
subsidiaries in a writing delivered to the Company concerning any Company
Environmental Permit, Hazardous Material or Hazardous Materials Activity of the
Company or any of its subsidiaries. The Company is not aware of any fact or
circumstance which could involve the Company or any of its subsidiaries in any
material environmental litigation or impose upon the Company any material
environmental liability.
Section 3.15. Agreements, Contracts and Commitments. Except as set forth
in the Company Schedule as of the date hereof, neither the Company nor any of
its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer or other employee at the director level or higher or any member of
the Company Board, other than those that are terminable by the Company or any of
its subsidiaries on no more than 30 days notice without liability or financial
obligation, except to the extent general principles of wrongful termination law
may limit the Company's or any of its subsidiaries' ability to terminate
employees at will;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock
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appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(c) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or license
of software products in the ordinary course of business;
(d) any agreement, contract or commitment containing any covenant
limiting in any respect the right of the Company or any of its subsidiaries to
engage in any line of business or to compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition by the Company or any of its subsidiaries after
the date of this Agreement of a material amount of assets not in the ordinary
course of business or pursuant to which the Company has any material ownership
interest in any corporation, partnership, joint venture or other business
enterprise other than the Company's subsidiaries;
(f) any joint marketing or development agreement currently in force
under which the Company or any of its subsidiaries have continuing material
obligations to jointly market any product, technology or service and which may
not be canceled without penalty upon notice of 90 days or less, or any material
agreement pursuant to which the Company or any of its subsidiaries have
continuing material obligations to jointly develop any intellectual property
that will not be owned, in whole or in part, by the Company or any of its
subsidiaries and which may not be canceled without penalty upon notice of 90
days or less; or
(g) any agreement, contract or commitment currently in force to license
any third party to manufacture or reproduce any Company product, service or
technology except as a distributor in the normal course of business.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to any of the agreements, contracts or commitments to
which the Company or any of its subsidiaries is a party or by which any of them
are bound that are required to be disclosed in the Company Schedule pursuant to
Section 3.9 or this Section 3.15 ("Company Contracts") is, as of the date
hereof, in breach, violation or default under, and neither the Company nor any
of its subsidiaries has received written notice that it has breached, violated
or defaulted under, any of the material terms or conditions of any Company
Contract in such a manner as would permit any other party to cancel or terminate
such Company Contract, or would permit any other party to seek material damages
or other remedies (for any or all of such breaches, violations or defaults, in
the aggregate).
Section 3.16. Change of Control Payments. The Company Schedule sets
forth, as of the date hereof, each plan or agreement pursuant to which any
amounts may become payable (whether currently or in the future) to current or
former officers or directors of the Company as a result of or in connection with
the Merger.
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Section 3.17. Customs. The Company has acted with reasonable care to
properly value and classify, in accordance with applicable tariff laws, rules
and regulations, all goods that the Company or any of its subsidiaries import
into the United States or into any other country (the "Imported Goods"). To the
Company's knowledge, there are currently no material claims pending against the
Company by the U.S. Customs Service (or any foreign customs authorities)
relating to the valuation, classification or marking of any of the Imported
Goods.
Section 3.18. Information. None of the information supplied by the
Company for inclusion or incorporation by reference in the Offer Documents or
any other document to be filed with the SEC or any other Governmental Entity in
connection with the transactions contemplated by this Agreement (the "Other
Filings") will, at the respective times filed with the SEC or other Governmental
Entity, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 3.19. Section 203 of the DGCL Not Applicable. The Company Board
has taken all necessary action so that the restrictions contained in Section 203
of the DGCL applicable to a "business combination" (as defined in such Section
203) will not apply to the execution, delivery or performance of this Agreement
or the Company Option Agreement or to the consummation of the Offer or the
Merger or any of the other transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to
the Company as follows:
Section 4.1. Organization and Qualification of Parent and Purchaser.
Each of Parent and Purchaser (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized; (ii) has the corporate or other power and authority to own, lease and
operate its assets and property and to carry on its business as now being
conducted; and (iii) is duly qualified or licensed to do business in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary other than in jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not have a Material Adverse
Effect on Parent.
Section 4.2. Authority.
(a) Each of Parent and Purchaser has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by them of the
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transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent and Purchaser, subject only to
the filing of the Certificate of Merger pursuant to Delaware Law. This Agreement
has been duly executed and delivered by each of Parent and Purchaser and,
assuming the due authorization, execution and delivery by the Company,
constitutes the valid and binding obligation of Parent and Purchaser,
enforceable against Parent and Purchaser in accordance with its terms, except
that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
The execution and delivery of this Agreement by each of Parent and Purchaser
does not, and the performance of this Agreement by each of Parent and Purchaser
will not, (i) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Purchaser, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Parent or Purchaser or by
which any of their respective properties is bound or affected, other than such
conflicts or violations which, individually or in the aggregate, do not and
could not reasonably be expected to have a Material Adverse Effect on Parent or
a material adverse effect on the ability of the parties hereto to consummate the
Offer or the Merger, or (iii) result in any material breach of or constitute a
material default (or an event that with notice or lapse of time or both would
become a material default) under, or impair the rights of Parent or Purchaser or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a material lien or encumbrance on any of the material properties
or assets of Parent or Purchaser pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or Purchaser is a party or by which
Parent or Purchaser or any of their respective properties are bound or affected.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained or
made by Parent or Purchaser in connection with the execution and delivery of
this Agreement or the consummation of the Offer or the Merger, except for (i)
the filing of the Schedule 14D-1 with the SEC in accordance with the Exchange
Act, (ii) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware, (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities (or related) laws and the HSR Act and the
securities or antitrust laws of any foreign country, and (iv) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made could not reasonably be expected to have a Material Adverse
Effect on Parent or a material adverse effect on the ability of the parties
hereto to consummate the Merger.
Section 4.3. Information. Neither the Schedule 14D-1 nor the Offer
Documents, nor any of the information supplied by Parent or Purchaser for
inclusion in the Schedule 14D-9, shall at the respective times they are filed
with the SEC or are first published, sent or given to stockholders or upon the
expiration of the Offer, as the case may be, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein in the light of the
circumstances under which they were made not
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misleading (except for information supplied by the Company for inclusion in the
Schedule 14D-1 and the Offer Documents, as to which Parent and Purchaser make no
representation). None of the information supplied by Parent or Purchaser for
inclusion in the Proxy Statement shall, at the date the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to stockholders, at the
time of the Special Meeting or at the Effective Time, contain any untrue
statement of a material fact required to be stated therein or necessary in order
to make the statements made therein in light of the circumstances under which
they were made, not misleading.
Section 4.4. Available Funds. Parent has or has available to it, and
will make available to Purchaser, all funds necessary to satisfy all of Parent's
and Purchaser's obligations under this Agreement and in connection with the
transaction contemplated hereby, including, without limitation, the obligation
to purchase all outstanding Shares pursuant to the Offer and the Merger and to
pay all related fees and expenses in connection with Offer and the Merger.
Section 4.5. Litigation. There is no action or suit pending or, to
Parent's knowledge, threatened or any judgment decree or order applicable to
Parent or Purchaser or any of their directors or officers that would be
reasonably expected to have a material adverse effect on the consummation of the
Offer or the Merger.
ARTICLE V
COVENANTS
Section 5.1. Conduct of Business by the Company. Except as contemplated
by this Agreement or as set forth in Section 5.1 of the Company Schedule, during
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement pursuant to its terms, the Effective Time, or
such time as Parent's designees shall constitute a majority of the Company
Board, the Company and each of its subsidiaries shall, except to the extent that
Parent shall otherwise consent in writing, carry on its business, in all
material respects, in the usual, regular and ordinary course, in substantially
the same manner as heretofore conducted and in compliance in all material
respects with all applicable laws and regulations, pay its debts and taxes when
due, subject to good faith disputes over such debts or taxes, pay or perform
other material obligations when due, subject to good faith disputes over such
obligations, and use its commercially reasonable efforts consistent with past
practices and policies to (i) preserve intact its present business organization,
(ii) keep available the services of its present officers and employees, and
(iii) preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others with which it has business dealings. In
addition, except as permitted by the terms of this Agreement, and except as
provided in the Company Schedule, without the prior written consent of Parent,
during such period, the Company shall not do any of the following and shall not
permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of
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exercisability of options or restricted stock, or reprice options granted under
any employee, consultant, director or other stock plans or authorize cash
payments in exchange for any options granted under any of such plans except
pursuant to written agreements outstanding, or policies existing, on the date
hereof and disclosed in the Company Schedule;
(b) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or policies existing, on the
date hereof and disclosed in the Company Schedule, or adopt any new severance
plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company Intellectual
Property, or enter into grants to future patent, copyright or other intellectual
property rights, other than non-exclusive licenses granted in the ordinary
course of business and consistent with past practice (it being agreed that
Parent shall not unreasonably withhold consent to any non-exclusive license
agreement related to the Company's enterprise business and that Parent's failure
to reasonably object to any such agreement within five business days of any
request for consent shall constitute such consent);
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock; provided that any of the Company's
wholly-owned subsidiaries may declare, set aside or pay dividends or make other
distributions with respect to their capital stock in the ordinary course of
business and consistent with past practices.
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of the Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the service
relationship with any employee, director or consultant pursuant to stock option
or purchase agreements in effect on the date hereof (which repurchases the
Company shall be obligated to effectuate if the repurchase price is less than
the Offer Price);
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of the capital stock of the Company or any of its subsidiaries, or any
securities convertible into shares of such capital stock, or subscriptions,
rights, warrants or options to acquire any shares of such capital stock or any
securities convertible into shares of capital stock, or enter into other
agreements or commitments of any character obligating it to issue any such
shares or convertible securities, other than (i) the issuance, delivery and/or
sale of shares of Company Common Stock pursuant to the exercise of Options
therefor outstanding as of the date of this Agreement, and (ii) the grant of
employee stock options, consistent with the Company's established past practice
for similarly situated employees, to non-officer employees who are hired in
accordance with Section 5.1((k));
(g) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a material portion of the assets of, or by
any other manner, any business or
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any corporation, partnership, association or other business organization or
division thereof or, except as permitted by Section 5.1((m)) or ((r)), otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of the Company or enter into any joint venture,
strategic partnership or alliance;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of the Company, except sales of inventory and used equipment, or
the license of the Company's products in the ordinary course of business
consistent with past practice (it being agreed that Parent shall not
unreasonably withhold consent to any non-exclusive license agreement related to
the Company's enterprise business and that Parent's failure to reasonably object
to any such agreement within five business days of any request for consent shall
constitute such consent);
(j) Incur, assume or pre-pay any indebtedness for borrowed money,
guarantee any indebtedness or obligation of another person, issue or sell any
debt securities or options, warrants, calls or other rights to acquire any debt
securities, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the economic
effect of any of the foregoing other than (i) in connection with the financing
of ordinary course trade payables consistent with past practice, (ii) pursuant
to existing credit facilities in the ordinary course of business, or (iii) as
contemplated by this Agreement;
(k) Hire any employee, except replacements for former non-officer
employees, hired in the ordinary course of business consistent with past
practice;
(l) Adopt or amend any employee stock purchase or employee stock option
plan, or adopt or amend any material employee benefit plan, or enter into any
employment contract or collective bargaining agreement (other than offer letters
and letter agreements entered into in the ordinary course of business consistent
with past practice with employees who are terminable "at will"), pay any special
bonus or special remuneration to any director, employee or consultant except
pursuant to written agreements outstanding on the date hereof and previously
disclosed in writing to Parent, or increase the salaries or wage rates or fringe
benefits (including rights to severance or indemnification) of any of its
directors, officers, employees or consultants other than normal periodic salary
increases for non-officer employees made in the ordinary course of business,
consistent with past practice, or change in any material respect any management
policies or procedures;
(m) Make any payments outside of the ordinary course of business in an
aggregate excess of $250,000;
(n) Except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which the Company or any
subsidiary thereof is a party or waive, release or assign any material rights or
claims thereunder;
(o) Enter into, amend or extend any contracts, agreements, or
obligations relating to the distribution, sale, license or marketing by third
parties of the Company's products or products licensed by the Company, other
than agreements, extensions or amendments that grant non-
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exclusive rights to such third parties and provide for termination by the
Company for convenience on not more than 60 days' notice;
(p) Materially revalue any of its assets (other than the booking of
reserves in the ordinary course of business and consistent with past practices)
or, except as required by a change in law or in GAAP or the rules of the SEC,
make any change in accounting methods, principles or practices, including
inventory accounting practices;
(q) Make any loans, advances or capital contributions to, or investments
in, any other person or entity, except for loans, advances, capital
contributions or investments between any wholly-owned subsidiary of the Company
and the Company or another wholly-owned subsidiary of the Company and advances
of business related expenses (including expenses related to business travel) to
employees in the ordinary course and consistent with past practice;
(r) Authorize or make capital expenditures beyond those provided in the
Company's existing capital expenditure budget, or that are individually in
excess of $100,000 or in the aggregate in excess of $500,000 in any calendar
quarter;
(s) Materially accelerate or delay collection of any notes or accounts
receivable in advance of or beyond their regular due dates or the dates when the
same would have been collected in the ordinary course of business;
(t) Materially delay or accelerate payment of any account payable beyond
or in advance of its due date or the date such liability would have been paid in
the ordinary course of business;
(u) Settle or compromise any suits or claims or threatened suits or
claims for payments in an aggregate amount in excess of $500,000;
(v) Make any tax election not required by law or settle or compromise
any material tax liability;
(w) Cancel or terminate any material insurance policy naming it as a
beneficiary or a loss payable payee or permit any such policy to lapse (it being
understood that the Company may renew any insurance policy in effect as of the
date of this Agreement);
(x) Increase the aggregate dollar value of inventory owned by
distributors in the first and second tiers of its distribution channel (which
has not been "sold through" to end-user customers and which such distributors
have the right to return) above the aggregate value of such inventory at June
30, 1998;
(y) Begin shipment of any new products to customers, except for alpha
versions and not more than 50 beta versions of any product delivered to
customers solely for evaluation purposes; or
(z) Agree in writing or otherwise to take any of the actions described
in Section 5.1(a) through (y) above.
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Section 5.2. Source Code Escrow.
(a) Promptly following the execution of this Agreement, the Company
agrees to deposit into escrow (the "Source Code Escrow") with Brambles NSD,
Inc., or such other entity as is reasonably satisfactory to Parent and the
Company (the "Escrow Agent") CDROMs containing true, correct and complete copies
of the source code, together with all relevant documentation, build
instructions, and any tools or libraries used in the build process that are not
commercially available in off-the-shelf or shrink wrap form, for each of its
currently shipping versions of products (including but not limited to versions
of products in the following product families: First Aid, UnInstaller, Oil
Change, Guard Dog and CSS Repair Engine for Workgroups) and versions of all
products currently under development (collectively, the "Cyclone Source Code").
Such deposit shall consist of a sealed package certified by an authorized
officer of the Company to contain a true, correct and complete copy of each such
item of Cyclone Source Code (in form and content) as required by this Agreement.
The Company and Parent will enter into an escrow agreement with the Escrow Agent
with respect to the Source Code Escrow (the "Escrow Agreement") which will
provide that the Company will pay all fees and expenses of the Escrow Agent and
which will contain terms and conditions consistent with the provisions of this
Section 5.2 and other terms and conditions customary for such agreements.
(b) On the day that is 18 business days following the commencement of
the Offer (and, if the Offer is extended, on the day that is two calendar days
prior to the then current Expiration Date and, if the Offer is extended at any
one time by more than 25 days, every 20 days while the Offer is pending), the
Company agrees to deposit into the Source Code Escrow a complete and updated
copy of all Cyclone Source Code, any of which shall thereafter be deemed to be a
part of the Cyclone Source Code.
(c) The Escrow Agreement will direct the Escrow Agent to provide Parent
reasonable access to the Cyclone Source Code for the limited purpose of ensuring
that the Cyclone Source Code is what it purports to be by running a compile of
the Cyclone Source Code and checking the functionality of the resulting binary
code against the provided documentation. Such access shall, to the extent
reasonably practicable, take place on a one-time basis with respect to each
deposit of Cyclone Source Code into the Source Code Escrow, and shall be
conducted with two business days prior notice to the Company and during normal
business hours by a single Parent representative for whom Parent shall be
responsible. Nothing in this Section 5.2((c)) shall entitle Parent to remove or
make copies of the originals of the Cyclone Source Code or any part thereof. The
Company shall be entitled to have a representative present at any inspection of
the Cyclone Source Code by a Parent representative, provided that the Company's
failure to have a representative present shall not prevent or delay Parent's
right to such inspection.
(d) The Cyclone Source Code shall be held in the Source Code Escrow at
the offices of the Escrow Agent until the date on which Purchaser has accepted
for payment and paid for Shares pursuant to the Offer (the "Release Date"). The
Escrow Agreement shall contain provisions instructing the Escrow Agent to
deliver the Cyclone Source Code to Parent or its designated representative
promptly upon request at any time from and after the Release Date.
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(e) In the event that, prior to the Release Date, this Agreement shall
be terminated pursuant to its terms, the Source Code Escrow shall terminate and
the Cyclone Source Code shall be returned to the Company.
Section 5.3. Access to Information.
(a) From the date of this Agreement until the Effective Time, the
Company will give, and will cause its subsidiaries, and each of their respective
officers, directors, employees, counsel, advisors and representatives
(collectively, the "Company Representatives") to give Parent and Purchaser and
their respective officers, employees, counsel, advisors and representatives
(collectively, the "Parent Representatives") reasonable access, upon reasonable
notice and during normal business hours, to the offices and other facilities and
to the books and records of the Company and its subsidiaries and will cause the
Company Representatives and the Company's subsidiaries to furnish Parent,
Purchaser and Parent Representatives, to the extent available, with such
financial and operating data and such other information with respect to the
business and operations of the Company and its subsidiaries as Parent and
Purchaser may from time to time reasonably request subject, in each case, to the
continuing obligations of the parties under the Confidentiality Agreement
between Parent and the Company dated June 9, 1998 (the "Confidentiality
Agreement"), which agreement shall survive until termination pursuant to the
terms thereof. The Company shall furnish promptly to Parent and Purchaser a copy
of each report, schedule, registration statement and other document filed by it
or its subsidiaries during such period pursuant to the requirements of federal,
state or foreign securities laws.
(b) No investigation made by Parent, Purchaser or any Parent
Representative pursuant to this Section 5.3 shall affect any representations or
warranties of the parties contained in this Agreement or any conditions to their
obligations hereunder.
Section 5.4. Efforts.
(a) Subject to the terms and conditions hereof, each of the Company,
Parent and Purchaser shall, and the Company shall cause each of its subsidiaries
to, cooperate and use their respective reasonable commercial efforts to take, or
cause to be taken, all actions reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as promptly as is practicable,
including but not limited to cooperation in the preparation and filing of the
Offer Documents, the Schedule 14D-9, the Proxy Statement, any required filings
under the HSR Act, or other foreign filings and any amendments to any thereof.
(b) If at any time prior to the Effective Time any event or circumstance
relating to the Company, Parent or Purchaser, or any of their respective
subsidiaries, should be discovered by the Company or Parent, as the case may be,
which is required to be set forth in an amendment to the Offer Documents or the
Schedule 14D-9, the discovering party will promptly inform the other party of
such event or circumstance.
(c) Each of the parties will use its reasonable commercial efforts to
obtain as promptly as practicable all consents of any Governmental Entity or any
other person required in connection
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with, and waivers of any violations that may be caused by, the consummation of
the transactions contemplated by the Offer, the Merger and this Agreement.
Section 5.5. Public Announcements. The Company, on the one hand, and
Parent and the Purchaser, on the other hand, agree to attempt in good faith to
consult with each other prior to issuing any press release or otherwise making
any public statement with respect to this Agreement, the Offer, the Merger or
the other transactions contemplated hereby, agree to provide to the other party
for review a copy of any such press release or statement, and shall not issue
any such press release or make any such public statement prior to attempting in
good faith such consultation and review, unless required by applicable law or
any listing agreement with a securities exchange. This Section 5.5 shall
supersede any conflicting provisions of the Confidentiality Agreement.
Section 5.6. Employee Benefit Arrangements.
(a) The Company shall, and Parent agrees to cause the Company to, honor
and, from and after the Effective Time, the Surviving Corporation to honor, all
obligations under the employment and severance agreements to which the Company
or any of its subsidiaries is presently a party which are listed in the Company
Schedule. Notwithstanding the foregoing, from and after the Effective Time, the
Surviving Corporation shall have the right to amend, modify, alter or terminate
any Company Employee Plan, provided that any such action shall not affect any
rights for which the agreement or consent of the other party or a beneficiary is
required; provided that, except as prohibited by the Company's 401(k) plan or
applicable law, the Company will promptly take any and all actions necessary and
appropriate to terminate the Company's 401(k) plan, including without limitation
(i) adoption of resolutions by the Company Board terminating the 401(k) plan
immediately prior to consummation of the Offer and (ii) timely delivery of any
notices required under the terms of the 401(k) plan.
(b) Employees of the Surviving Corporation immediately following the
Effective Time who immediately prior to the Effective Time were employees of the
Company or any Company subsidiary shall be given credit for purposes of
eligibility and vesting under each employee benefit plan, program, policy or
arrangement of the Parent or the Surviving Corporation in which such employees
participate subsequent to the Effective Time for all service with the Company
and any Company subsidiary prior to the Effective Time (to the extent such
credit was given by the Company or any Company subsidiary) for purposes of
eligibility and vesting.
Section 5.7. Indemnification.
(a) Parent agrees that all rights to indemnification now existing in
favor of any of the current or former directors and officers of the Company (the
"Indemnified Parties") as provided in its Certificate of Incorporation or
By-Laws, in each case as of the date of this Agreement, and in indemnification
agreements between the Company and the Indemnified Parties shall survive the
Merger and shall continue in full force and effect from and after consummation
of the Offer in accordance with their terms, as such terms exist on the date
hereof. After the Effective Time, Parent agrees to cause the Surviving
Corporation to honor all rights to indemnification referred to in the preceding
sentence.
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(b) Parent agrees to cause the Company, and from and after the Effective
Time, the Surviving Corporation to maintain in effect for not less than six
years from the Effective Time the current policies of directors' and officers'
liability insurance maintained by the Company; provided that the Surviving
Corporation may substitute therefor other policies not less advantageous (other
than to a de minimus extent) to the beneficiaries of the current policies,
provided that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
provided, further, that the Surviving Corporation shall not be required to pay
an annual premium in excess of 150% of the last annual premium paid by the
Company prior to the date hereof (which the Company represents to be $210,000
for the 12-month period ending October 22, 1998) and if the Surviving
Corporation is unable to obtain the insurance required by this Section 5.7((b))
for such maximum amount it shall obtain as much comparable insurance as possible
for an annual premium equal to such maximum amount.
Section 5.8. Notification of Certain Matters.
(a) Parent and the Company shall give prompt notice in writing to the
other of the occurrence or non-occurrence of any fact or event which would be
reasonably likely to (i) cause any representation or warranty made by such party
in this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Effective Time or (ii) cause any covenant or
agreement made by such party under this Agreement not to be complied with or
satisfied in any material respect; provided, however, that no such notification
shall affect the representations or warranties of any party or the conditions to
the obligations of any party hereunder.
(b) Each of the Company, Parent and Purchaser shall give prompt notice
in writing to the other parties hereto of any notice or other communication from
any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement.
(c) The Company shall give prompt notice in writing to Parent of any
act, omission to act, event or occurrence which, with the passage of time or
otherwise, would be reasonably expected to have a Material Adverse Effect on the
Company; provided, however, that no such notification shall affect the
representations or warranties of any party or the conditions to the obligations
of any party hereunder.
(d) The failure by the Company to provide timely notice of the
occurrence or non-occurrence of any particular fact, event, act, omission to
act, event, occurrence, liability or communication relating to the possible
untruth or inaccuracy of any representation or warranty of the Company in this
Agreement or the possible non-compliance by the Company with any covenant or
obligation of the Company under this Agreement shall not constitute a failure to
satisfy the condition to the Offer set forth in clause (iii)(f) of Annex I, or a
basis for the Parent to terminate this Agreement pursuant to Section
7.1((c))((iv)) unless the matter or matters as to which notice was not timely
sent would constitute or indicate a failure to satisfy clauses (iii) (c) or (e)
of Annex I, or constitute a material breach by the Company of a covenant or
obligation under this Agreement other than this Section 5.8.
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Section 5.9. State Takeover Laws. The Company shall, upon the request of
the Purchaser, take all reasonable steps to assist in any challenge by the
Purchaser to the validity or applicability to the transactions contemplated by
this Agreement, including the Offer and the Merger, of any state takeover law.
Section 5.10. No Solicitation.
(a) For purposes of this Agreement:
(i) "Alternative Proposal" means any inquiry, proposal or offer
from any person or Group relating to any direct or indirect acquisition or
purchase of any product line or other material portion of the assets of the
Company and its subsidiaries taken as a whole (other than the purchase of the
Company's products or used equipment in the ordinary course of business), or
more than a 20% interest in the total outstanding voting securities of the
Company or any of its subsidiaries, or any tender offer or exchange offer that
if consummated would result in any person or Group beneficially owning 10% or
more of the total outstanding voting securities of the Company or any of its
subsidiaries, or any merger, consolidation, business combination, sale of
substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its subsidiaries, other than
the transactions contemplated by this Agreement.
(ii) "Superior Proposal" means a bona fide offer made by a third
party to acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for consideration consisting of
cash and/or securities, more than 50% of the total outstanding voting securities
of the Company or all or substantially all the assets of the Company, which
offer is otherwise on terms which the Company Board determines in its good faith
judgment (after consultation with a financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders from a financial
point of view than the Offer and the Merger, and for which financing, to the
extent required, is then committed or which, in the good faith judgment of the
Company Board is capable of being obtained by such third party.
(iii) "Representative" means the officers, directors or
employees or any investment banker, attorney, accountant or other advisor or
representative retained by the Company or its subsidiaries.
(iv) "Group" means any group as defined under Section 13(d) of
the Exchange Act and the rules and regulations thereunder.
(b) (i) From and after the date of this Agreement until the earlier
of the Effective Time or termination of this Agreement pursuant to its terms,
the Company and its subsidiaries will not, and they will direct their respective
Representatives not to, directly or indirectly, (A) solicit, initiate or
encourage the submission of any Alternative Proposal or (B) participate in any
discussions or negotiations regarding, or furnish to any person any non-public
information with respect to, or take any other action to facilitate the making
of any proposal that constitutes or may reasonably be expected to lead to, an
Alternative Proposal. The Company and its
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subsidiaries will immediately cease, and will instruct and cause their
respective Representatives to immediately cease, any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Alternative Proposal. Any violation of the restrictions set
forth in this Section 5.10(b)(i) by any Representative of the Company or any
of its subsidiaries will be deemed to be a breach material hereof by the
Company.
(ii) Notwithstanding the provisions of Section 5.10(b)(i), if,
at any time prior to the consummation of the Offer, the Company Board reasonably
determines in good faith, after consultation with outside legal counsel, that it
is necessary to do so in order to comply with its fiduciary duties to the
Company's stockholders under applicable law, the Company and its Representatives
may, in response to a Superior Proposal that was unsolicited or that did not
otherwise result from a breach of this Section 5.10, and subject to compliance
with Section 5.10(d) and Section 5.10(f), furnish non-public information with
respect to the Company and participate in discussions and negotiations regarding
such Superior Proposal.
(c) (i) From and after the date of this Agreement until the
earlier of the Effective Time or termination of this Agreement pursuant to its
terms, neither the Company Board nor any committee thereof shall (A) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to Parent
or Purchaser, their approval or recommendation to the Company's stockholders of
the Offer, this Agreement or the Merger or (B) cause the Company to enter into
any letter of intent, agreement in principle, acquisition agreement or other
similar agreement (an "Acquisition Agreement") with respect to any Alternative
Proposal. In addition, from and after the date of this Agreement until the
earlier of the Effective Time and termination of this Agreement pursuant to its
terms, the Company and its subsidiaries will not, and they will direct their
Representatives not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any Alternative
Proposal.
(ii) Notwithstanding the provisions of Section 5.10(c)(i), if,
at any time prior to the consummation of the Offer, the Company Board reasonably
determines in good faith, after consultation with outside legal counsel, that it
is necessary to do so in order to comply with its fiduciary duties to the
Company's stockholders under applicable law, the Company Board may withdraw or
modify its approval or recommendation of the Offer, this Agreement or the
Merger, approve or recommend a Superior Proposal, or enter into an Acquisition
Agreement with respect to a Superior Proposal, provided that the Company shall
have given Parent written notice (a "Notice of Superior Proposal") at least two
business days prior to entering into any such Acquisition Agreement and at least
two business days prior to public disclosure by the Company Board of such
withdrawal, modification, approval or recommendation, advising Parent that the
Company Board has received a Superior Proposal, specifying the material terms
and conditions of the Superior Proposal and identifying the person making such
Superior Proposal. Any amendment to the price or material terms of a Superior
Proposal shall require an additional Notice of Superior Proposal and an
additional two business day period thereafter, to the extent permitted under
applicable law, prior to public disclosure by the Company Board of its
recommendation with respect thereto.
(d) In addition to the obligations of the Company set forth in Section
5.10(b) and
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Section 5.10(c), the Company as promptly as practicable, and in any event
within 24 hours, shall advise Parent orally and in writing of (i) any request
for non-public information which the Company reasonably believes may lead to an
Alternative Proposal, or of any Alternative Proposal, (ii) the material terms
and conditions of such information request or Alternative Proposal, and (iii)
the identity of the person making any such information request or Alternative
Proposal. The Company will keep Parent informed in all material respects of the
status and details (including material amendments) of any such request or
Alternative Proposal.
(e) Nothing contained in this Section 5.10 or elsewhere in this
Agreement shall prohibit the Company from (i) taking and disclosing to its
stockholders a position contemplated by Rules 14d-9 and 14e-2(a) under the
Exchange Act or (ii) making any disclosure to the Company's stockholders if, in
the good faith judgment of the Company Board, after consultation with outside
legal counsel, failure to so disclose would be inconsistent with applicable
laws; provided that neither the Company nor the Company Board nor any committee
thereof shall, except in accordance with the provisions of Section
5.10(c)(ii), withdraw or modify, or publicly propose to withdraw or modify,
its position with respect to the Offer, this Agreement or the Merger or approve
or recommend, or propose to approve or recommend, an Alternative Proposal.
(f) Notwithstanding anything to the contrary in this Section 5.10, the
Company will not provide any non-public information to a third party unless: (i)
the Company provides such non-public information pursuant to a nondisclosure
agreement with terms regarding the protection of confidential information at
least as restrictive as such terms in the Confidentiality Agreement; and (ii)
such non-public information has been previously or is contemporaneously
delivered to Parent.
Section 5.11. Section 203 of the DGCL. From and after the date of this
Agreement until the earlier of the termination of this Agreement pursuant to its
terms or the Effective Time, the Company will not approve any acquisition of
shares of Company Common Stock by any person (other than Parent, Purchaser or
their respective affiliates) which would result in such person becoming an
"interested stockholder" (as such term is defined in Section 203 of the DGCL) or
otherwise become subject to Section 203 of the DGCL, unless such acquisition is
related to a Superior Proposal and the Company has complied with Section 5.10
and, if applicable, Section 7.3.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1. Conditions. The respective obligations of Parent, the
Purchaser and the Company to consummate the Merger are subject to the
satisfaction, at or before the Effective Time, of each of the following
conditions:
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(a) Stockholder Approval. The stockholders of the Company shall have
duly approved and adopted this Agreement, if required by applicable law.
(b) Purchase of Shares. The Purchaser shall have accepted for payment
and paid for Shares pursuant to the Offer in accordance with the terms hereof.
(c) Injunctions; Illegality. The consummation of the Merger shall not be
restrained, enjoined or prohibited by any order, judgment, decree, injunction or
ruling of a Governmental Entity of competent jurisdiction and there shall not
have been any statute, rule or regulation enacted, promulgated or issued by any
Governmental Entity which prevents the consummation of the Merger or has the
effect of making the purchase of Shares illegal.
ARTICLE VII
TERMINATION; AMENDMENTS; WAIVER
Section 7.1. Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the stockholders of the Company (with
any termination by Parent also being an effective termination by Purchaser):
(a) by mutual written consent duly authorized by the Board of Directors
of Parent and the Company Board, subject to the concurrence of the Independent
Directors to the extent required by Section 1.3(c);
(b) by either Parent or the Company if:
(i) the Offer is terminated, withdrawn or expires pursuant to
its terms without any Shares having been purchased thereunder; provided,
however, that neither Parent nor the Company may terminate this Agreement
pursuant to this Section 7.1(b)(i) if such party is in material breach of
this Agreement (including if Parent or Purchaser is in breach of Section 1.1 of
this Agreement) or, in the case of Parent, if Parent or Purchaser is in material
violation of the terms of the Offer; or
(ii) a Governmental Entity shall have issued an order, decree or
ruling or taken any other action, in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Offer or the Merger, which
order, decree, ruling or other action is final and nonappealable.
(iii) prior to the purchase of Shares pursuant to the Offer, the
Company Board has recommended, or the Company has entered into an Acquisition
Agreement with respect to, a Superior Proposal; provided, however, that
termination by the Company pursuant to this Section 7.1(b)(iii) shall be
conditioned upon concurrent payment by the Company of
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the Termination Fee pursuant to Section 7.3.
(c) by Parent prior to the purchase of Shares pursuant to the Offer if:
(i) the Company shall have failed to include in the Schedule
14D-9 the recommendation of the Company Board that the stockholders of the
Company accept the Offer;
(ii) the Company Board or any committee thereof shall have (A)
withdrawn or modified (including but not limited to by amendment of the Schedule
14D-9) in a manner adverse to Parent or Purchaser its approval or recommendation
of the Offer, this Agreement or the Merger, (B) approved or recommended, taken
no position with respect to, or failed to recommend against any Alternative
Proposal, or (C) resolved to do any of the foregoing;
(iii) the Company or any of its subsidiaries or any of their
respective Representatives participate in any discussions or negotiations with
or provide any non-public information to any third party in breach of the
provisions of Section 5.10;
(iv) the Company is in material breach of any of its covenants
or obligations under this Agreement; provided that if such breach is curable
through the exercise of the Company's commercially reasonable efforts, Parent
may not terminate this Agreement under this Section 7.1(c)(iv) unless such
breach is not cured on or prior to September 30, 1998;
(d) by the Company prior to the purchase of Shares pursuant to the Offer
if:
(i) the Offer shall not have been commenced in accordance with
Section 1.1, or Parent or Purchaser shall have failed to purchase validly
tendered Shares in violation of the terms of the Offer within 10 business days
after the expiration of the Offer; provided, however, that the Company shall not
be entitled to terminate this Agreement pursuant to this Section 7.1(d)(i)
if it is in material breach of this Agreement; or
(ii) Parent or Purchaser is in material breach of any of its
covenants or obligations under this Agreement; provided that if such breach is
curable through exercise of Parent's or Purchaser's commercially reasonable
efforts, the Company may not terminate this Agreement under this Section
7.1(d)(ii) unless such breach is not cured within 20 days after giving
notice to the Parent.
Section 7.2. Notice of Termination; Effect of Termination.
(a) Any termination of this Agreement under Section 7.1 above will be
effective immediately upon the delivery of written notice by the terminating
party to the other parties hereto.
(b) In the event of the termination of this Agreement as provided in
Section 7.1, this Agreement shall be of no further force or effect, except (i)
as set forth in this Section 7.2, Section 7.3 and Article VIII (miscellaneous),
each of which shall survive the termination of this Agreement, and (ii) nothing
herein shall relieve any party from liability for any willful
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breach of this Agreement.
(c) Except as provided in Section 7.2(d), no termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
(d) In the event this Agreement is terminated pursuant to Section
7.1(b)(iii) or Section 7.1(c)(i), (ii) or (iii), the Company irrevocably waives
any otherwise applicable standstill or other agreement or restrictions in favor
of the Company (contractual or otherwise) on the ability and right of Parent,
Purchaser or any of their affiliates to acquire Shares.
Section 7.3. Fees and Expenses.
(a) Except as set forth in this Section 7.3, all costs and expenses
incurred in connection with this Agreement, the Offer, the Merger and the other
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not such transactions are consummated.
(b) In the event that this Agreement is terminated pursuant to Section
7.1(b)(iii) or Section 7.1(c)(i), (ii) or (iii), the Company shall, concurrently
with such termination in the case of termination by the Company pursuant to
Section 7.1(b)(iii), or within one business day after any other such
termination, pay Parent a termination fee of $4,000,000 (the "Termination Fee")
in immediately available funds by wire transfer to an account designated by
Parent. In the event that this Agreement is terminated pursuant to Section
7.1(a), Section 7.1(b)(i) or Section 7.1(c)(iv), and at the time of such
termination there is pending any offer by any person other than Parent or any
affiliate of Parent to effect an Acquisition (as hereinafter defined) and,
within 12 months following such termination, any person other than Parent or any
affiliate of Parent effects an Acquisition, or enters into an Acquisition
Agreement with the Company or commences a tender offer for an Acquisition and
the transactions contemplated thereby are subsequently consummated at any time,
the Company shall pay Parent the Termination Fee at or prior to the consummation
of such Acquisition in immediately available funds by wire transfer to an
account designated by Parent. In the event that this Agreement is terminated
pursuant to Section 7.1(a), Section 7.1(b)(i) (other than a termination solely
as a result of a failure to satisfy the Minimum Condition, or a failure to
satisfy the conditions specified in clauses (iii)(a) or (iii)(b) of Annex I) or
Section 7.1(c)(iv), and at the time of such termination no offer by any person
other than Parent or any affiliate of Parent to effect an Acquisition is
pending, and, within six months following such termination, any person other
than Parent or any affiliate of Parent effects an Acquisition, or enters into an
Acquisition Agreement with the Company or commences a tender offer for an
Acquisition and the transactions contemplated thereby are subsequently
consummated at any time, the Company shall pay Parent at or prior to the
consummation of such Acquisition in immediately available funds by wire transfer
to an account designated by Parent an amount equal to the lesser of (A) the
Termination Fee or (B) the amount, if any, by which the aggregate consideration
paid to the Company and/or its stockholders in such Acquisition exceeds
$126,944,000. For the purposes hereof, an "Acquisition" shall mean any merger,
consolidation
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<PAGE> 49
or other reorganization, any tender offer or other transaction or series of
related transactions involving the acquisition of securities of the Company, or
any sale or license of all or substantially all the business or assets of the
Company, unless the stockholders of the Company prior to such transaction or
series of related transactions retain following such transaction or series of
related transactions (in respect of their equity interest in the Company prior
thereto) more than 50% of the voting equity securities of the surviving or
successor corporation to the business of the Company. The Company acknowledges
that the agreements contained in this Section 7.3(b) are an integral part of
the transactions contemplated by this Agreement, and that, without these
agreements, Parent would not enter into this Agreement; accordingly, if the
Company fails promptly to pay any amount due pursuant to this Section 7.3(b),
and, in order to obtain such payment, Parent commences a suit which results in a
judgment against the Company for the amounts set forth in this Section 7.3(b),
the Company shall pay to Parent its reasonable costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts set forth in this Section 7.3(b) at the prime rate of
Bank of America, NT&SA, in effect on the date such payment was required to be
made.
(c) The Termination Fee shall not be deemed to be liquidated damages,
and the right to the payment of the Termination Fee shall be in addition to (and
not a maximum payment in respect of) any other damages or remedies at law or in
equity to which Parent or Purchaser may be entitled as a result of the willful
violation or willful breach of any term or provision of this Agreement or any
Support Agreement.
Section 7.4. Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Parent and Company.
Section 7.5. Extension; Waiver. At any time prior to the Effective Time
any party hereto may, to the extent legally allowed and subject to the terms and
conditions of Section 1.3(c) hereof, (i) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Non-Survival of Representations and Warranties. The
representations and warranties by the Company made in Article III shall not
survive beyond the consummation of the Offer, and
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<PAGE> 50
the representations and warranties made by Parent and Purchaser in Article IV
shall not survive beyond the Effective Time.
Section 8.2. Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments referred
to herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of each other
party (except that Parent may assign its rights and Purchaser may assign its
rights, interest and obligations to any wholly-owned subsidiary of Parent
incorporated in the State of Delaware without the consent of the Company
provided that no such assignment shall relieve Parent of any liability for any
breach by such assignee). Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
Section 8.3. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
Section 8.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
If to Parent or the Purchaser:
Networks Associates, Inc.
2805 Bowers Avenue
Santa Clara, California 95051
Attn: Richard Hornstein, Esq.
Fax: (408) 346-3038
with a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, California 94301
Attn: Dennis C. Sullivan, Esq.
Bradley J. Rock, Esq.
Fax: (650) 327-3699
If to the Company:
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CyberMedia, Inc.
2850 Ocean Park Blvd., Suite 100
Santa Monica, California 90405
Attn: Chief Executive Officer
Fax: (310) 581-4751
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Arthur F. Schneiderman, Esq.
Blair W. Stewart, Jr., Esq.
Daniel R. Mitz, Esq.
Fax: (650) 493-6811
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
Section 8.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 8.6. Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made in this Agreement to a
Section or Article, such reference shall be to a Section or Article of this
Agreement, unless otherwise indicated. Whenever the words "include," "includes,"
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation." Whenever "or" is used in this Agreement it
shall be construed in the nonexclusive sense. The words "herein," "hereby,"
"hereof," "hereto," "hereunder" and words of similar import refer to this
Agreement.
Section 8.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 8.8. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby, subject to the terms and conditions hereof,
are fulfilled to the fullest extent possible.
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<PAGE> 52
Section 8.9. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except with respect
to Sections Section 5.6 and Section 5.7 and the obligations of the parties
following consummation of the Offer which are intended for the benefit of the
Company's stockholders, nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 8.10. Certain Definitions. As used in this Agreement:
(a) the term "affiliate", as applied to any Person, shall mean any other
person directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Person" or "person" shall include individuals,
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act);
(c) the term "subsidiary" or "subsidiaries" means, with respect to
Parent, the Company or any other person, any corporation, partnership, joint
venture or other legal entity of which Parent, the Company or such other person,
as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, stock or other equity interests the
holders of which are generally entitled to 50% or more of the vote for the
election of the board of directors or other governing body of such corporation
or other legal entity;
(d) the term "Material Adverse Effect" when used in connection with an
entity means any change, event or effect that is materially adverse to the
business, assets (including intangible assets), financial condition or results
of operations of such entity and its subsidiaries, taken as a whole, except for
those changes, events and effects that (i) are directly caused by conditions
affecting the United States economy as a whole or affecting the industry in
which such entity competes as a whole, which conditions do not affect such
entity in a disproportionate manner, or (ii) are related to or result from the
announcement or pendency of the Offer and/or the Merger; and
(e) the phrase "to the Company's knowledge" refers to the actual
knowledge of any of the following officers and employees of the Company: Kanwal
Rekhi, James R. Tolonen, Alex Klyce, Nancy Tullos and Jane Wike.
Section 8.11. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having
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<PAGE> 53
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity, without posting any bond or proving that damages
would be inadequate.
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<PAGE> 54
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
Networks Associates, Inc.
By: /s/ Richard Hornstein
-----------------------------------------
Name: Richard Hornstein
Title: Vice President, Legal Affairs and Corporate
Development
Cyclone Acquisition Corp.
By: /s/ Richard Hornstein
-----------------------------------------
Name: Richard Hornstein
Title: Vice President, Legal Affairs and
Corporate Development
CyberMedia, Inc.
By: /s/ Kanwal Rekhi
-----------------------------------------
Name: Kanwal Rekhi
Title: Chief Executive Officer and Chairman of the
Board
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<PAGE> 55
Annex I
TENDER OFFER CONDITIONS
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement and Plan of Merger to which this Annex is attached,
except that the term "Merger Agreement" shall be deemed to refer to such
Agreement and Plan of Merger.
Notwithstanding any other provisions of the Offer, Purchaser shall not
be required to accept for payment or pay for any tendered Shares, if at the
Expiration Date (i) the Minimum Condition is not satisfied, (ii) any applicable
waiting period under the HSR Act shall not have expired or been terminated, or
(iii) any of the following exist:
(a) any statute, rule, regulation, legislation, ruling, judgment, order
or injunction enacted, enforced, promulgated, amended, issued or deemed
applicable to the Offer or the Merger, by any Governmental Entity of competent
jurisdiction that (1) makes illegal or otherwise prohibits consummation of the
Offer or the Merger, (2) prohibits or materially limits the ownership or
operation by Parent or Purchaser of all or any substantial portion of the
business or assets of the Company (or any of its subsidiaries that is material
to the Company and its subsidiaries, taken as a whole), or compels Parent or
Purchaser to dispose of, divest or hold separately all or any substantial
portion of the business or assets of Parent, Purchaser or the Company (or any of
its subsidiaries that is material to the Company and its subsidiaries, taken as
a whole), or imposes any material limitation on the ability of Parent or
Purchaser to conduct its business or own such assets, (3) imposes any material
limitation on the ability of Parent or Purchaser effectively to acquire, hold or
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote any Shares acquired or owned by Purchaser or Parent on the
adoption of the Merger Agreement and all other matters properly presented to the
Company's stockholders, (4) requires divestiture by Parent or Purchaser of any
Shares, or (5) results in a Material Adverse Effect on the Company; or
(b) there shall be instituted and pending any action or proceeding by
any Governmental Entity that would reasonably be expected to result in any of
the consequences referred to in clauses (1) through (5) of paragraph (a) above;
or
(c) any change shall have occurred that has had, or reasonably would be
expected to have, a Material Adverse Effect on the Company; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms; or
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement, when read without any exception or qualification as to
materiality or Material Adverse Effect, shall not be true and correct, as if
such representations and warranties were made
<PAGE> 56
immediately prior to the consummation of the Offer (except as to any such
representation or warranty which speaks as of a specific date, which must be
untrue or incorrect as of such specific date), except where the failure or
failures to be so true and correct, individually or in the aggregate, do not and
would not reasonably be expected to have a Material Adverse Effect on the
Company; or
(f) the Company shall have failed to perform or to comply with any of
its obligations, covenants or agreements under the Merger Agreement in any
material respect.
The foregoing conditions (including those set forth in clauses (i) and
(ii) of the initial paragraph) are for the benefit of Parent and Purchaser and
may be asserted by Parent or Purchaser regardless of the circumstances giving
rise to any such conditions (except for any action or inaction in material
breach of the Merger Agreement by Parent or Purchaser) and, except for the
Minimum Condition, may be waived by Parent or Purchaser, in whole or in part, at
any time and from time to time in their sole discretion, in each case, subject
to the terms of the Merger Agreement. The failure by Parent or Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
<PAGE> 1
EXHIBIT 4
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of July 28, 1998, by and between Networks Associates, Inc., a Delaware
corporation ("Parent"), and CyberMedia, Inc., a Delaware corporation (the
"Company").
RECITALS
A. Concurrently with the execution and delivery of this Agreement, the
Company, Parent and Cyclone Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Purchaser"), are entering into an Agreement
and Plan of Merger of even date herewith (the "Merger Agreement"), pursuant to
which Purchaser agrees to make a tender offer (the "Offer") for all outstanding
shares of common stock, par value $.01 per share (the "Shares"), of the Company,
at a price of $9.50 per Share (the "Offer Price") net to the seller in cash, to
be followed by a merger (the "Merger") of Purchaser with and into the Company
(capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement);
B. Concurrently with the execution and delivery of this Agreement, the
Company and Parent are entering into a Note Purchase and Security Agreement of
even date herewith pursuant to which Parent is lending the Company the principal
amount of $10,000,000, evidenced by a Secured Convertible Promissory Note of
even date herewith (the "Convertible Note"); and
C. As a condition and inducement to Parent's willingness to enter into the
Merger Agreement and make the Offer, Parent and Purchaser have required that the
Company agree, and the Company has agreed, to grant to Parent an option to
acquire certain shares of the Company's authorized but unissued common stock,
par value $.01 per share ("Company Common Stock"), on the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, to induce Parent to enter into the Merger Agreement and in
consideration of the representations, warranties, covenants and agreements
contained herein and in the Merger Agreement, the parties hereto hereby agree as
follows:
1. Grant of Option. The Company hereby grants to Parent an irrevocable
option (the "Company Option") to purchase a number of shares of Company Common
Stock equal to the Option Number (as defined in Section 2(d)), on the terms
and subject to the conditions set forth below.
2. Exercise and Termination of the Company Option.
(a) Exercise. The Company Option may be exercised by Parent, in whole
or in part, at any time or from time to time after the occurrence of an event
which causes the Termination Fee (as defined in the Merger Agreement) to become
payable to Parent (a "Trigger Event") and prior to the termination of Parent's
right to exercise the Company Option by the terms of this
<PAGE> 2
Agreement. The Company shall notify Parent promptly in writing of the occurrence
of any Trigger Event; however, such notice shall not be a condition to the right
of Parent to exercise the Company Option. Notwithstanding the foregoing, the
Company Option may not be exercised if Parent is in material breach of any of
its material representations, warranties, covenants or agreements in this
Agreement or the Merger Agreement.
(b) Exercise Procedure. In the event that Parent wishes to exercise the
Company Option, Parent shall deliver to the Company written notice (an "Exercise
Notice") specifying the total number of shares of Company Common Stock that
Parent wishes to purchase. To the extent permitted by law and the Certificate of
Incorporation of the Company (the "Company Charter") and provided that the
conditions set forth in Section 3 to the Company's obligation to issue the
shares of Company Common Stock to Parent hereunder have been satisfied or
waived, Parent shall, upon delivery of the Exercise Notice and tender of the
applicable aggregate Exercise Price (as hereinafter defined), immediately be
deemed to be the holder of record of the shares of Company Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Company
Common Stock shall not theretofore have been delivered to Parent. Each closing
of a purchase of shares of Company Common Stock hereunder (a "Closing") shall
occur at a place, on a date, and at a time reasonably designated by Parent in an
Exercise Notice delivered at least two (2) business days prior to the date of
such Closing.
(c) Termination of the Company Option. Parent's right to exercise the
Company Option shall terminate upon the earliest to occur of: (i) the Effective
Time; (ii) the termination of the Merger Agreement pursuant to, Section
7.1(b)(i) (solely as a result of a failure to satisfy the conditions specified
in clauses (iii)(a) or (iii)(b) of Annex I to the Merger Agreement), Section
7.1(b)(ii) or Section 7.1(d) thereof; (iii) six (6) months following the receipt
by Parent of written notice from the Company of the occurrence of a Trigger
Event; (iv) twelve (12) months following the termination of the Merger Agreement
if during such twelve (12)-month period no Trigger Event has occurred, and no
transaction the consummation of which would give rise to a Trigger Event, is
pending; and (v) the date following twelve (12) months after the termination of
the Merger Agreement when no transaction entered into or commenced prior to that
date that, if consummated, would have given rise to a Trigger Event, remains
pending. Notwithstanding the foregoing, if, after the occurrence of a Trigger
Event and prior to the termination of the Company Option pursuant to the
foregoing, the Company Option cannot be exercised by reason of any applicable
judgment, decree, order, law or regulation, the Company Option shall remain
exercisable and shall not terminate until the earlier of (x) the date on which
such impediment shall become final and not subject to appeal and (y) 5:00 p.m.,
Pacific Standard Time, on the tenth (10th) business day after such impediment
shall have been removed. The rights of Parent set forth in Section 10 shall not
terminate upon termination of Parent's right to exercise the Company Option, but
shall extend to the time provided in such section.
(d) Option Number. The "Option Number" shall initially be the number of
Shares equal to nineteen and nine-tenths percent (19.9%) of the total number of
shares of Company Common Stock issued and outstanding as of the date of this
Agreement less the number of shares issuable upon full conversion of the
Convertible Note, and shall be adjusted hereafter to reflect
2
<PAGE> 3
changes in the Company's capitalization occurring after the date hereof in
accordance with Section 11 (provided that the number of Shares issuable
hereunder shall be reduced to the extent necessary so that the aggregate number
of Shares issuable hereunder and upon conversion of the Convertible Note shall
not, upon such issuance, constitute more than nineteen and nine-tenths percent
(19.9%) of the total number of shares of Company Common Stock issued and
outstanding).
(e) Exercise Price. The purchase price per share of Company Common
Stock purchased pursuant to exercise of the Company Option (the "Exercise
Price") shall be a cash amount per share equal to the Offer Price or such higher
price as is payable pursuant to the Offer.
(f) Certain Limitations. In the event that Parent (and/or any of its
affiliates) receives Net Proceeds (as defined below) which, combined with any
Termination Fee paid to Parent pursuant to Section 7.3 of the Merger Agreement
and any payment made to Parent (and/or any of its affiliates) pursuant to
Section 7 hereof (or upon any other sale of the Company Option), exceed
$5,500,000, an amount equal to all Net Proceeds in excess of such amount shall
be promptly remitted by Parent to the Company. For purposes of this Agreement,
"Net Proceeds" shall mean the aggregate proceeds from the sale or other
disposition of shares of Company Common Stock acquired by Parent (and/or any of
its affiliates) upon exercise of the Company Option (plus any securities or
other assets issued to Parent (and/or any of its affiliates) in exchange for or
as dividends upon such shares and any cash dividends received by Parent (and/or
any of its affiliates) with respect to such shares) less the Exercise Price
multiplied by the number of such shares included in such disposition.
3. Conditions to Closing. The obligation of the Company to issue the
shares of Company Common Stock to Parent hereunder is subject to the conditions
that (a) all waiting periods, if any, under the Hart Scott Rodino Antitrust
Improvements Act of 1975, as amended (the "HSR Act"), applicable to the issuance
of the shares of Company Common Stock by the Company and the acquisition of such
shares by Parent hereunder shall have expired or been terminated; (b) no
preliminary or permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such issuance shall be in
effect; and (c) all consents, approvals, orders, authorizations and permits of
any federal, state, local or foreign governmental authority, if any, required in
connection with the issuance of the shares of Company Common Stock and the
acquisition of such shares by Parent hereunder shall have been obtained. It is
agreed that at any time during which Parent shall be entitled to deliver to the
Company an Exercise Notice, the parties will use their respective best efforts
to satisfy all conditions to any Closing so that such Closing may take place as
promptly as practicable.
4. Closing. At any Closing:
(a) The Company shall deliver to Parent or its designee a single
certificate in definitive form representing the number of shares of Company
Common Stock designated by Parent in its Exercise Notice, such certificate to be
registered in the name of Parent and to bear the legend set forth in Section 12;
(b) Parent shall deliver to the Company the aggregate Exercise Price
for the shares of
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<PAGE> 4
Company Common Stock so designated and being purchased by wire transfer of
immediately available funds to the account or accounts specified in writing by
the Company or by certified or official bank check payable to the order of the
Company;
(c) Each party shall pay all expenses incurred by such party, and
Parent shall pay any and all federal, state and local taxes and other charges
that may be payable in connection with the preparation, issue and delivery by
the Company of stock certificates under this Section 4; and
(d) The Company shall cause the shares being delivered by it pursuant
hereto to be approved for quotation on The Nasdaq National Market and shall pay
all expenses in connection with the application for approval of such quotation.
5. Representations and Warranties of the Company. The Company represents
and warrants to Parent that:
(a) the Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all corporate
power and authority required to enter into this Agreement and to carry out its
obligations hereunder;
(b) the execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company and
no other corporate proceedings on the part of the Company and no action of the
Company's stockholders are necessary to authorize this Agreement or any of the
transactions contemplated hereby; this Agreement has been duly and validly
executed and delivered by the Company, and, assuming the due authorization,
execution and delivery hereof by Parent and the receipt of all required
governmental approvals, constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally, and
except that the availability of equitable remedies, including specific
performance, may be subject to the discretion of any court before which any
proceeding therefor may be brought;
(c) except for any filings required under the HSR Act, the Company has
taken all necessary corporate action to authorize and reserve for issuance and
to permit it to issue, upon exercise of the Company Option, and at all times
from the date hereof through the expiration of the Company Option will have
reserved for issuance, a number of authorized and unissued shares of Company
Common Stock not less than the Option Number, such amount being subject to
adjustment as provided in Section 11, all of which, upon their issuance and
delivery in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable;
(d) the shares of Company Common Stock issued to Parent upon the
exercise of the Company Option will be, upon delivery thereof to Parent, free
and clear of all claims, liens, charges, encumbrances and security interests of
any nature whatsoever, excluding those created or imposed by Parent;
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<PAGE> 5
(e) the execution and delivery of this Agreement by the Company do not,
and the consummation by the Company of the transactions contemplated hereby will
not, violate, conflict with, or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time, or both) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination, cancellation, or acceleration of any
obligation or the loss of a material benefit under, or the creation of a lien,
pledge, security interest or other encumbrance on assets (any such violation,
conflict, breach, default, termination, acceleration, right of termination,
cancellation or acceleration, loss, or creation, a "Violation") by the Company
or any of its subsidiaries, pursuant to (i) any provision of the Company Charter
or the Bylaws of the Company, (ii) any provision of any material loan or
material credit agreement, note, mortgage, indenture, lease, benefit plan or
other material agreement, obligation, instrument, permit, concession, franchise
or license (a "Material Contract") of the Company or any of its subsidiaries or
to which any of them is a party or by which any of them or their properties or
assets are bound, or (iii) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or any of its subsidiaries or any
of their properties or assets;
(f) the execution and delivery of this Agreement by the Company does
not, and (except for the expiration or early termination of the waiting period
under the HSR Act and except as contemplated by Sections 10(e), (f) and
(j)) the performance of this Agreement by the Company and the consummation of
the transactions contemplated hereby will not, require any consent, approval,
order, authorization or permit of, filing with, or notification to any
Governmental Entity; and
(g) assuming the representations and warranties of Parent contained in
Section 6(e) and 6(f) are true and correct, the issuance, sale and delivery
of the shares of Company Common Stock hereunder would be exempt from the
registration and prospectus delivery requirements of the Securities Act, as in
effect on the date hereof, and the Company shall not take any action which would
cause the issuance, sale, and delivery of shares of Company Common Stock
hereunder not to be exempt from such requirements.
6. Representations and Warranties of Parent. Parent represents and
warrants to the Company that:
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all corporate
power and authority required to enter into this Agreement and to carry out its
obligations hereunder;
(b) the execution and delivery of this Agreement by Parent and the
consummation by Parent of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent, and no other
corporate proceedings on the part of Parent and no action of Parent's
stockholders are necessary to authorize this Agreement or any of the
transactions contemplated hereby; this Agreement has been duly and validly
executed and delivered by Parent and, assuming the due authorization, execution
and delivery hereof by the Company and the receipt of all required governmental
approvals, constitutes the valid and binding obligation of Parent, enforceable
against Parent in accordance with its terms, except as
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<PAGE> 6
may be limited by applicable bankruptcy, insolvency, reorganization, or other
similar laws affecting the enforcement of creditors' rights generally, and
except that the availability of equitable remedies, including specific
performance, may be subject to the discretion of any court before which any
proceeding may be brought;
(c) the execution and delivery of this Agreement by Parent do not, and
the consummation by Parent of the transactions contemplated hereby will not,
violate, conflict with, or result in the breach of any provision of, or
constitute a default (with or without notice or a lapse of time, or both) under,
or result in any Violation by Parent or any of its subsidiaries, pursuant to (i)
any provision of the Certificate of Incorporation or Bylaws of Parent, (ii) any
Material Contract of Parent or any of its subsidiaries or to which any of them
is a party or by which any of them or any of their properties or assets are
bound, or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or its properties or assets, which Violation, in
the case of each of clauses (ii) or (iii), would have a Material Adverse Effect
on Parent;
(d) the execution and delivery of this Agreement by Parent does not,
and (except for the expiration or early termination of the waiting period under
the HSR Act and except as contemplated by Sections 10(e), (f) and (j)) the
performance of this Agreement by Parent and the consummation of the transactions
contemplated hereby will not, require any consent, approval, order,
authorization or permit of, filing with, or notification to any Governmental
Entity;
(e) any shares of Company Common Stock acquired by Parent upon exercise
of the Company Option will be acquired for Parent's own account, for investment
purposes only and will not be, and the Company Option is not being, acquired by
Parent with a view to the public distribution thereof, in violation of any
applicable provision of the Securities Act; and
(f) Parent is, and at the time of any exercise of the Company Option
will be, an "accredited investor" as defined in Regulation D promulgated under
the Securities Act.
7. Put Right.
(a) At any time during which the Company Option is exercisable pursuant
to Section 2, Parent may, by delivering written notice to the Company (the
"Repurchase Notice"), require the Company to repurchase from Parent all or any
portion of the Company Option, as specified by Parent, at the Option Repurchase
Price (as defined below).
(b) For purposes of this Agreement, "Option Repurchase Price" shall
mean (i) the difference between the Exercise Price and the Market Price (as
defined below) as of the date of the applicable Repurchase Notice multiplied by
(ii) the number of shares of Company Common Stock purchasable pursuant to the
Company Option and covered by the applicable Repurchase Notice.
(c) For purposes of this Agreement, "Market Price" shall mean, as of
any date, the average per share closing sale price of the Company Common Stock
on the Nasdaq National
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<PAGE> 7
Market for the ten (10) trading days immediately preceding such date.
(d) In the event that Parent exercises its rights under this Section 7,
the Company shall, within ten (10) business days thereafter, pay the Option
Repurchase Price to Parent by wire transfer of immediately available funds to
the account or accounts specified in writing by Parent; provided, however, that
the Company shall not be required pursuant to this Section 7 to pay to Parent an
amount which, when combined with any Termination Fee paid to Parent pursuant to
Section 7.3 of the Merger Agreement and any Net Proceeds received by Parent,
exceeds $5,500,000.
8. Voting of Shares. Following the date hereof and prior to the fifth
anniversary of the date hereof (the "Expiration Date"), (a) Parent shall vote
any shares of Company Common Stock acquired by Parent pursuant to this Agreement
("Restricted Shares"), or otherwise beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) by Parent, on each matter
submitted to a vote of the stockholders of the Company for and against such
matter in the same proportion as all other shares of Company Common Stock are
voted (whether by proxy or otherwise) for and against such matter, and (b)
Parent shall execute written consents with respect to the Restricted Shares in
the same proportion as written consents are executed by other holders of Company
Capital Stock. Before acquiring any Restricted Shares hereunder, Parent shall
execute and deliver a proxy to the Company authorizing the Company to vote and
execute written consents with respect to all Restricted Shares acquired by
Parent hereunder in accordance with the provisions of this Section 8.
9. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expiration Date, Parent
shall not, directly or indirectly, by operation of law or otherwise, sell,
assign, pledge, or otherwise dispose of or transfer any Restricted Shares
beneficially owned by Parent, other than in accordance with Sections 9(b),
9(c) or 10.
(b) Permitted Sales. Following the termination of the Merger Agreement,
Parent shall be permitted to sell any Restricted Shares beneficially owned by it
if such sale is made pursuant to a tender or exchange offer that has been
approved or recommended, or otherwise determined to be fair to and in the best
interests of the holders of Company Common Stock by a majority of the members of
the Board of Directors of the Company.
(c) The Company's Right of First Refusal. At any time after the first
occurrence of a Trigger Event and prior to the expiration of twenty-four (24)
months immediately following the first purchase of shares of Company Common
Stock pursuant to the Company Option, if Parent shall desire to sell, assign,
transfer or otherwise dispose of all or any of the shares of Company Common
Stock or other securities acquired by it pursuant to the Company Option, it
shall give the Company written notice of the proposed transaction (a "Parent
Offer Notice"), identifying the proposed transferee, accompanied by a copy of a
binding offer to purchase such shares or other securities signed by such
transferee and setting forth the terms of the proposed transaction. A Parent
Offer Notice shall be deemed an offer by Parent to Company, which may be
accepted within five (5) business days of the receipt of such Parent Offer
Notice, on the same terms and
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<PAGE> 8
conditions and at the same price at which Parent is proposing to transfer such
shares or other securities to such transferee. The purchase of any such shares
or other securities by the Company shall be settled within five (5) business
days of the date of the acceptance of the offer and the purchase price shall be
paid to Parent in immediately available funds. In the event of the failure or
refusal of the Company to purchase all the shares or other securities covered by
a Parent Offer Notice, Parent may sell all, but not less than all, of such
shares or other securities to the proposed transferee at no less than the price
specified and on terms no more favorable to the transferee than those set forth
in the Parent Offer Notice; provided that the provisions of this sentence shall
not limit the rights Parent may otherwise have in the event the Company has
accepted the offer contained in the Parent Offer Notice and wrongfully refuses
to purchase the shares or other securities subject thereto. The requirements of
this Section 9((c)) shall not apply to (i) any disposition as a result of which
the proposed transferee would own beneficially not more than one percent (1%) of
the outstanding voting power of the Company, (ii) any disposition of Company
Common Stock or other securities by a person to whom Parent has assigned its
rights under the Company Option with the consent of the Company, (iii) any sale
by means of a public offering registered under the Securities Act, or (iv) any
transfer to a wholly-owned subsidiary of Parent which agrees in writing to be
bound by the terms hereof.
10. Registration Rights.
(a) Following any exercise of the Company Option, Parent and/or any
permitted transferee(s) of Restricted Shares under clauses (ii) or (iv) of
Section 9(c) (a "Holder") may by written notice (the "Registration Notice") to
the Company request the Company to register under the Securities Act all or any
part of the Restricted Shares beneficially owned by the Holder(s) (the
"Registrable Securities") pursuant to a bona fide firm commitment underwritten
public offering in which the Holder(s) and the underwriters shall effect as wide
a distribution of such Registrable Securities as is reasonably practicable and
shall use reasonable efforts to prevent any person (including any "group" as
used in Rule 13d-5 under the Exchange Act)) and its affiliates from purchasing
through such offering Restricted Shares representing more than one percent (1%)
of the outstanding shares of Company Common Stock on a fully diluted basis (a
"Permitted Offering"); provided, however, that any such Registration Notice must
relate to a number of shares equal to at least two percent (2%) of the
outstanding shares of Company Common Stock on a fully diluted basis and that any
rights to require registration hereunder shall terminate with respect to any
shares that may be sold pursuant to Rule 144(k) under the Securities Act.
(b) The Registration Notice shall include a certificate executed by the
Holder(s) and its or their proposed managing underwriter, which underwriter
shall be an investment banking firm of nationally recognized standing (the
"Manager"), stating that (i) they have a good faith intention to commence
promptly a Permitted Offering, and (ii) the Manager in good faith believes that,
based on the then-prevailing market conditions, it will be able to sell the
Registrable Securities to the public in a Permitted Offering within one hundred
twenty (120) days at a per share price equal to at least eighty percent (80%) of
the average per share closing sale price of the Company Common Stock on the
Nasdaq National Market for the twenty (20) trading days immediately preceding
the date of the Registration Notice (the "Registration Notice Price").
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<PAGE> 9
(c) The Company (and/or any person designated by the Company) shall
thereupon have the option, exercisable by written notice delivered to the
Holder(s) within five (5) business days after the receipt of the Registration
Notice, irrevocably to agree to purchase all or any part of the Registrable
Securities proposed to be so sold for cash at a price equal to the product of
(i) the number of Registrable Securities to be so purchased by the Company
and/or its designee and (ii) the Registration Notice Price.
(d) Any purchase of Registrable Securities by the Company (or its
designee) under Section 10(c) shall take place at a closing to be held at the
principal executive offices of the Company or at the offices of its counsel at
any reasonable date and time designated by the Company and/or such designee in
such notice within twenty (20) business days after delivery of such notice, and
any payment for the shares to be so purchased shall be made by delivery at the
time of such closing in immediately available funds.
(e) If the Company does not elect to exercise its option pursuant to
Section 10((c)) with respect to all Registrable Securities, it shall use its
best efforts to effect, as promptly as practicable, the registration under the
Securities Act of the unpurchased Registrable Securities proposed to be so sold;
provided, however, that (i) the Holder(s) shall not be entitled to demand more
than an aggregate of two (2) effective registration statements hereunder, and
(ii) the Company will not be required to file any such registration statement
during any period of time (not to exceed forty (40) days after such request in
the case of clause (A) below or ninety (90) days after such request in the case
of clauses (B) and (C) below) when (A) the Company is in possession of material
non-public information which it reasonably believes would be detrimental to be
disclosed at such time and, in the opinion of counsel to the Company, such
information would be required to be disclosed if a registration statement were
filed at that time; (B) the Company is required under the Securities Act to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) the Company determines, in its reasonable
judgment, that such registration would interfere with any financing, acquisition
or other transaction involving the Company or any of its material subsidiaries
and that such transaction is material to the Company and its subsidiaries taken
as a whole. If consummation of the sale of any Registrable Securities pursuant
to a registration hereunder does not occur within one hundred twenty (120) days
after the effectiveness of the initial registration statement, the provisions of
this Section 10 shall again be applicable to any proposed registration.
(f) The Company shall use its reasonable efforts to cause any
Registrable Securities registered pursuant to this Section 10 to be qualified
for sale under the securities or Blue Sky laws of such jurisdictions as the
Holder(s) may reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; provided, however, that the
Company shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
(g) The registration rights set forth in this Section 10 are subject to
the condition that the Holder(s) shall provide the Company with such information
with respect to the Holders' Registrable Securities, the plans for the
distribution thereof, and such other information with
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<PAGE> 10
respect to the Holder(s) as, in the reasonable judgment of counsel for the
Company, is necessary to enable the Company to include in such registration
statement all material facts required to be disclosed with respect to a
registration thereunder.
(h) A registration effected under this Section 10 shall be effected at
the Company's expense, except for underwriting discounts and commissions and the
fees and expenses of counsel to the Holder(s), and the Company shall provide to
the underwriters such documentation (including certificates, opinions of counsel
and "comfort" letters from auditors) as is customary in connection with
underwritten public offerings as such underwriters may reasonably require.
(i) In connection with any registration effected under this Section 10,
the parties agree (i) to indemnify each other and the underwriters in the
customary manner, (ii) to enter into an underwriting agreement in form and
substance customary for transactions of such type with the Manager and the other
underwriters participating in such offering, and (iii) to take all further
actions which shall be reasonably necessary to effect such registration and sale
(including, if the Manager deems it necessary, participating in road-show
presentations).
(j) The Company shall be entitled to include (at its expense)
additional shares of Company Common Stock in a registration effected pursuant to
this Section 10 only if and to the extent the Manager determines that such
inclusion will not adversely affect the prospects for success of such offering.
11. Adjustment Upon Changes in Capitalization.
(a) Without limiting any restriction on the Company contained in this
Agreement or in the Merger Agreement, in the event of any change in the Company
Common Stock by reason of any stock dividend, stock split, merger (other than
the Merger), recapitalization, combination, exchange of shares or any similar
transaction, the type and number of shares or securities subject to the Company
Option, and the Exercise Price per share provided herein, shall be adjusted
appropriately and proper provision shall be made in the agreements governing
such transaction so that Parent shall receive, upon exercise of the Company
Option, the number and class of securities or property that Parent would have
received in respect of the shares of Company Common Stock issuable to Parent if
the Company Option had been exercised immediately prior to such event or the
record date therefor, as applicable.
(b) In the event that the Company shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Parent or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Parent or one of
its subsidiaries, to merge into the Company and the Company shall be the
continuing or surviving corporation, but, in connection with such merger, the
then-outstanding shares of Company Common Stock shall be changed into or
exchanged for stock or other securities of the Company or any other person or
cash or any other property; or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Parent or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that upon the consummation of such
transaction and upon the subsequent exercise of the Company Option, Parent shall
be entitled to receive, for each share of Company
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<PAGE> 11
Common Stock with respect to which the Company Option has not theretofore been
exercised, an amount of consideration in the form of and equal to the per share
amount of consideration that would be received by the holder of one share of
Company Common Stock (and, in the event of an election or similar arrangement
with respect to the type of consideration to be received by the holders of
Company Common Stock, subject to the foregoing, proper provision shall be made
so that the holder of the Company Option would have the same election or similar
rights as would the holder of the number of shares of Company Common Stock for
which the Company Option is then exercisable).
12. Restrictive Legends. Each certificate representing shares of Company
Common Stock issued to Parent hereunder shall include a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE
SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCK OPTION AGREEMENT DATED AS OF
JULY 28, 1998, A COPY OF WHICH MAY BE OBTAINED FROM THE CORPORATION.
It is understood and agreed that (i) the reference to the resale restrictions of
the Securities Act and state securities or Blue Sky laws in the foregoing legend
shall be removed by delivery of substitute certificate(s) without such reference
if Parent shall have delivered to the Company a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such legend is not required for
purposes of the Securities Act or such laws; (ii) the reference to the
provisions of this Agreement in the foregoing legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares have
been sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law. Certificates
representing shares sold in a registered public offering pursuant to Section 10
shall not be required to bear the legend set forth in this Section 12.
13. Binding Effect; No Assignment; No Third-Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as expressly
provided for in this Agreement, neither this Agreement nor the rights or
obligations of either party hereto are assignable, except by operation of law,
or with the written consent of the other party, and any such attempted
assignment in violation of this Agreement shall be void and of no force or
effect. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
permitted assigns any rights or remedies of any nature whatsoever. Any
Restricted Shares sold by a party in compliance with the provisions of Section
10 shall, upon consummation of such sale, be free of the restrictions imposed
with respect to such shares by this Agreement, unless and until such party shall
repurchase or otherwise become the beneficial owner of such
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<PAGE> 12
shares, and any transferee of such shares shall not be entitled to the
registration rights of such party.
14. Specific Performance. The parties hereto recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, whether at law or in equity, the other party shall be entitled to an
injunction to prevent or restrain any violation or threatened violation of the
provisions of this Agreement. In the event that any action should be brought in
equity to enforce the provisions of this Agreement, neither party will allege,
and each party hereby waives the defense, that there is an adequate remedy at
law.
15. Validity.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
(b) In the event that any Governmental Entity holds any provisions of
this Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith the execution and delivery of an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision and the economic effects thereof.
(c) If for any reason any Governmental Entity determines that Parent is
not permitted to acquire the full number of shares of Company Common Stock
provided in this Agreement (as the same may be adjusted pursuant to the
provisions hereof) or that the Company is not permitted to purchase from Parent
pursuant to Section 7 the full portion of the Company Option provided in said
section, it is the express intention of the Company to allow Parent to acquire
or to require the Company to repurchase such lesser number of shares or such
lesser portion of the Company Option as may be permissible without any other
amendment or modification hereof.
16. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if (a) delivered personally, or (b) if sent by
overnight courier service (receipt confirmed in writing), or (c) if delivered by
facsimile transmission (with receipt confirmed), or (d) five (5) days after
being mailed by registered or certified mail (return receipt requested) to the
parties in each case to the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) If to the Company, to:
CyberMedia, Inc.
2580 Ocean Park Boulevard, Suite 100
Santa Monica, CA 90405
Attn: Chief Executive Officer
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Fax: (310) 664-5014
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Arthur F. Schneiderman, Esq.
Blair W. Stewart, Esq.
Daniel R. Mitz, Esq.
Fax: (650) 493-6811
(b) If to Networks Associates, Inc., to:
Networks Associates, Inc.
2865 Bowers Avenue
Santa Clara, CA 95051
Attn: Richard Hornstein, Esq.
Fax: (408) 346-3038
with a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301
Attn: Dennis C. Sullivan, Esq.
Bradley J. Rock, Esq.
Fax: (650) 327-3699
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State and without regard to its choice
of law principles.
18. Interpretation. The headings contained in this Agreement are for
reference purposes and shall not affect in any way the meaning or interpretation
of the Agreement. When reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement, unless otherwise indicated.
Whenever the words "include," "includes," or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever "or" is used in this Agreement it shall be construed in
the nonexclusive sense. The words "herein," "hereby," "hereof," "hereto,"
"hereunder" and words of similar import refer to this Agreement.
19. Counterparts; Effect. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
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20. Expenses. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
21. Amendments; Waiver. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
22. Further Assurance. Each party agrees to execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
NETWORKS ASSOCIATES, INC.
By: /s/ Richard Hornstein
---------------------------------
Name: Richard Hornstein
Title: Vice President, Legal Affairs
and Corporate Development
CYBERMEDIA, INC.
By: /s/ Kanwal Rekhi
---------------------------------
Name: Kanwal Rekhi
Title: Chief Executive Officer and
Chairman of the Board
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EXHIBIT 5
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") is made and entered into as
of July 28, 1998, by and between Networks Associates, Inc., a Delaware
corporation ("Parent"), and Kanwal Rekhi ("Seller").
RECITALS
A. Concurrently with the execution and delivery of this Agreement,
Parent, Cyclone Acquisition Corp. ("Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of Parent, and CyberMedia, Inc., a Delaware corporation
(the "Company"), are entering into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"), pursuant to which Purchaser agrees to make a
tender offer (the "Offer") for all outstanding shares of common stock, par value
$.01 per share (the "Shares"), of the Company, at a price of $9.50 per Share
(the "Offer Price") net to the seller in cash, to be followed by a merger (the
"Merger") of Purchaser with and into the Company (capitalized terms used but not
defined herein shall have the meanings set forth in the Merger Agreement);
B. As of the date hereof, Seller beneficially owns directly 441,375
Shares (the "Owned Shares"); and
C. As a condition to their willingness to enter into the Merger
Agreement and make the Offer, Parent and Purchaser have required that Seller
agree, and, in order to facilitate the Offer and the Merger, Seller is willing
to agree, (i) to tender pursuant to the Offer the Owned Shares, together with
any Shares acquired after the date hereof and prior to the termination of the
Offer, whether upon the exercise of options, conversion of convertible
securities or otherwise (collectively, the "Tender Shares"), on the terms and
subject to the conditions provided for in this Agreement and (ii) to enter into
the other agreements set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and Vote.
1.1 Tender. Seller hereby agrees to validly tender (or cause the
record owner of such shares to validly tender) the Tender Shares pursuant to and
in accordance with the terms of the Offer, as soon as practicable after
commencement of the Offer (but in no event later than five business days after
the filing of the Offer Documents with the SEC, in the case of the Owned Shares,
or the first business day following their acquisition, in the case of any other
Tender Shares), by physical delivery of the certificates therefor and to not
withdraw such Tender Shares, except following termination of this Agreement
pursuant to Section 2 hereof. Seller hereby acknowledges and agrees that
Parent's and Purchaser's obligation to accept for payment and pay for the Tender
Shares is subject to the terms and conditions of the Offer. Seller hereby agrees
to permit Parent and Purchaser to publish and disclose in the Offer Documents
and, if approval of
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the Company's stockholders is required under applicable law, the Proxy Statement
(including all related documents and schedules filed with the SEC) his identity
and ownership of the Tender Shares and the nature of his commitments,
arrangements and understandings under this Agreement.
1.2 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the stockholders of the Company,
however called, Seller shall (a) vote the Tender Shares in favor of the Merger;
(b) vote the Tender Shares against any action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Tender
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer, including, but not
limited to: (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries; (ii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries or a reorganization, recapitalization or
liquidation of the Company and its subsidiaries; (iii) any change in the
management or Board of Directors of the Company, except as otherwise agreed to
in writing by Parent; (iv) any material change in the present capitalization or
dividend policy of the Company; or (v) any other material change in the
Company's corporate structure or business.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Seller hereby irrevocably grants to, and appoints William L.
Larson and Richard Hornstein, or either of them, in their respective capacities
as officers of Parent, and any individual who shall hereafter succeed to any
such office of Parent, and each of them individually, Seller's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of Seller, to vote the Tender Shares in favor of the Merger and
otherwise as contemplated by Section 1.2.
(b) Seller represents that any proxies heretofore given in
respect of the Tender Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) Seller understands and acknowledges that Parent is entering
into the Merger Agreement in reliance, among other things, upon Seller's
execution and delivery of this Agreement. Seller hereby affirms that the
irrevocable proxy set forth in this Section 1.3 is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of Seller under this Agreement. Seller
hereby further affirms that the irrevocable proxy is coupled with an interest
and may under no circumstances be revoked. Seller hereby ratifies and confirms
all that such proxies and attorneys-in-fact may lawfully do or cause to be done
by virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212(e) of the Delaware
General Corporation Law.
1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not:
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(a) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of the Tender Shares or any interest therein; provided, however, that Seller
may transfer (i) the Tender Shares by will or intestacy, and (ii) up to 10% of
the Tender Shares as a bona fide gift or gifts, provided that prior to any such
permitted transfer, each transferee shall agree in writing (in a form
satisfactory to Parent) that such transferee will receive and hold such Tender
Shares subject to the provisions of this Agreement;
(b) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Tender Shares or
any interest therein;
(c) grant any proxy, power-of-attorney or other authorization in
or with respect to any or all of the Tender Shares;
(d) deposit the Tender Shares into a voting trust or enter into
a voting agreement or arrangement with respect to the Tender Shares; or
(e) take any other action that would make any representation or
warranty of Seller hereunder untrue or incorrect.
1.5 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that he may have under applicable
law.
2. Expiration. This Agreement and Seller's obligation to tender
provided herein shall terminate on the earlier of the payment for the Tender
Shares pursuant to the Offer and the termination of the Merger Agreement in
accordance with its terms.
3. Representation and Warranties. Seller hereby represents and warrants
to Parent as follows:
3.1 Title. Seller has good and valid title to the Owned Shares and,
upon the acquisition thereof, will have good and valid title to any other Tender
Shares, in each case, free and clear of any lien, pledge, charge, encumbrance or
claim of whatever nature and, upon the purchase of the Tender Shares by
Purchaser, Seller will deliver good and valid title to the Tender Shares, free
and clear of any lien, charge, encumbrance or claim of whatever nature.
3.2 Ownership of Shares. On the date hereof, the Owned Shares are
owned of record or beneficially by Seller and, on the date hereof, the Owned
Shares constitute all of the Shares owned of record or beneficially by Seller.
Seller has sole voting power and sole power of disposition with respect to all
of the Owned Shares, with no restrictions, subject to applicable federal
securities laws, on Seller's rights of disposition pertaining thereto.
3.3 Power; Binding Agreement. Seller has the legal capacity, power
and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by Seller
will not violate any other agreement to which Seller is a party including,
without limitation, any voting agreement, stockholders agreement or voting
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trust. This Agreement has been duly and validly executed and delivered by Seller
and constitutes a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms.
3.4 No Conflicts. Other than in connection with or in compliance
with the provisions of the Exchange Act and the HSR Act, no authorization,
consent or approval of, or filing with, any court or any public body or
authority is necessary for the consummation by Seller of the transactions
contemplated by this Agreement. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
constitute a material breach, violation or default (or any event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, encumbrance, pledge, charge or claim upon any of the properties or assets
of Seller under, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which Seller is a party or by
which his properties or assets are bound.
4. Additional Shares. Seller hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of any Shares acquired by Seller
after the date hereof.
5. Further Assurances. From time to time, at Parent's request and
without further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein
shall terminate upon Seller's sale of the Tender Shares to Purchaser in the
Offer, other than Seller's representation and warranty in Section 3.1, which
shall survive the sale of the Tender Shares and the termination of this
Agreement following such sale.
6.2 Entire Agreement; Assignment. This Agreement (a) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand delivery
or telecopy or by any courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
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<PAGE> 5
If to Seller: Kanwal Rekhi
2850 Ocean Park Boulevard, Suite 100
Santa Monica, CA 90405
copy to: Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Arthur F. Schneiderman, Esq.
Blair W. Stewart, Esq.
Daniel R. Mitz, Esq.
Fax: (650) 493-6811
If to Parent: Networks Associates, Inc.
2865 Bowers Avenue
Santa Clara, CA 95051
Attention: Richard Hornstein, Esq.
Fax: (408) 346-3038
copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301
Attention: Dennis C. Sullivan, Esq.
Bradley J. Rock, Esq.
Fax: (650) 327-3699
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
6.6 Specific Performance. Seller recognizes and acknowledges that a
breach by him of any covenants or agreements contained in this Agreement will
cause Parent to sustain damages for which it would not have an adequate remedy
at law for money damages, and therefore Seller agrees that in the event of any
such breach Parent shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
6.7 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or
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interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to be duly
executed as of the day and year first above written.
PARENT: SELLER:
NETWORKS ASSOCIATES, INC. KANWAL REKHI
By: /s/ Richard Hornstein By: /s/ Kanwal Rekhi
------------------------------ ----------------------------
Name: Richard Hornstein Name: Kanwal Rekhi
Date: July 27, 1998 Date: July 27, 1998
6
<PAGE> 1
EXHIBIT 6
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") is made and entered into as
of July 28, 1998, by and between Networks Associates, Inc., a Delaware
corporation ("Parent"), and James R. Tolonen ("Seller").
RECITALS
A. Concurrently with the execution and delivery of this Agreement,
Parent, Cyclone Acquisition Corp. ("Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of Parent, and CyberMedia, Inc., a Delaware corporation
(the "Company"), are entering into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"), pursuant to which Purchaser agrees to make a
tender offer (the "Offer") for all outstanding shares of common stock, par value
$.01 per share (the "Shares"), of the Company, at a price of $9.50 per Share
(the "Offer Price") net to the seller in cash, to be followed by a merger (the
"Merger") of Purchaser with and into the Company (capitalized terms used but not
defined herein shall have the meanings set forth in the Merger Agreement);
B. As of the date hereof, Seller beneficially owns directly 132,812
Shares (the "Owned Shares"); and
C. As a condition to their willingness to enter into the Merger
Agreement and make the Offer, Parent and Purchaser have required that Seller
agree, and, in order to facilitate the Offer and the Merger, Seller is willing
to agree, (i) to tender pursuant to the Offer the Owned Shares, together with
any Shares acquired after the date hereof and prior to the termination of the
Offer, whether upon the exercise of options, conversion of convertible
securities or otherwise (collectively, the "Tender Shares"), on the terms and
subject to the conditions provided for in this Agreement and (ii) to enter into
the other agreements set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and Vote.
1.1 Tender. Seller hereby agrees to validly tender (or cause the
record owner of such shares to validly tender) the Tender Shares pursuant to and
in accordance with the terms of the Offer, as soon as practicable after
commencement of the Offer (but in no event later than five business days after
the filing of the Offer Documents with the SEC, in the case of the Owned Shares,
or the first business day following their acquisition, in the case of any other
Tender Shares), by physical delivery of the certificates therefor and to not
withdraw such Tender Shares, except following termination of this Agreement
pursuant to Section 2 hereof. Seller hereby acknowledges and agrees that
Parent's and Purchaser's obligation to accept for payment and pay for the Tender
Shares is subject to the terms and conditions of the Offer. Seller hereby agrees
to permit Parent and Purchaser to publish and disclose in the Offer Documents
and, if approval of
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the Company's stockholders is required under applicable law, the Proxy Statement
(including all related documents and schedules filed with the SEC) his identity
and ownership of the Tender Shares and the nature of his commitments,
arrangements and understandings under this Agreement.
1.2 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the stockholders of the Company,
however called, Seller shall (a) vote the Tender Shares in favor of the Merger;
(b) vote the Tender Shares against any action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Tender
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer, including, but not
limited to: (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries; (ii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries or a reorganization, recapitalization or
liquidation of the Company and its subsidiaries; (iii) any change in the
management or Board of Directors of the Company, except as otherwise agreed to
in writing by Parent; (iv) any material change in the present capitalization or
dividend policy of the Company; or (v) any other material change in the
Company's corporate structure or business.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Seller hereby irrevocably grants to, and appoints William L.
Larson and Richard Hornstein, or either of them, in their respective capacities
as officers of Parent, and any individual who shall hereafter succeed to any
such office of Parent, and each of them individually, Seller's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of Seller, to vote the Tender Shares in favor of the Merger and
otherwise as contemplated by Section 1.2.
(b) Seller represents that any proxies heretofore given in
respect of the Tender Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) Seller understands and acknowledges that Parent is entering
into the Merger Agreement in reliance, among other things, upon Seller's
execution and delivery of this Agreement. Seller hereby affirms that the
irrevocable proxy set forth in this Section 1.3 is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of Seller under this Agreement. Seller
hereby further affirms that the irrevocable proxy is coupled with an interest
and may under no circumstances be revoked. Seller hereby ratifies and confirms
all that such proxies and attorneys-in-fact may lawfully do or cause to be done
by virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212(e) of the Delaware
General Corporation Law.
1.4 No Inconsistent Arrangements. Seller hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not:
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(a) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of the Tender Shares or any interest therein; provided, however, that Seller
may transfer (i) the Tender Shares by will or intestacy, and (ii) up to 10% of
the Tender Shares as a bona fide gift or gifts, provided that prior to any such
permitted transfer, each transferee shall agree in writing (in a form
satisfactory to Parent) that such transferee will receive and hold such Tender
Shares subject to the provisions of this Agreement;
(b) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Tender Shares or
any interest therein;
(c) grant any proxy, power-of-attorney or other authorization in
or with respect to any or all of the Tender Shares;
(d) deposit the Tender Shares into a voting trust or enter into
a voting agreement or arrangement with respect to the Tender Shares; or
(e) take any other action that would make any representation or
warranty of Seller hereunder untrue or incorrect.
1.5 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that he may have under applicable
law.
2. Expiration. This Agreement and Seller's obligation to tender
provided herein shall terminate on the earlier of the payment for the Tender
Shares pursuant to the Offer and the termination of the Merger Agreement in
accordance with its terms.
3. Representation and Warranties. Seller hereby represents and warrants
to Parent as follows:
3.1 Title. Seller has good and valid title to the Owned Shares and,
upon the acquisition thereof, will have good and valid title to any other Tender
Shares, in each case, free and clear of any lien, pledge, charge, encumbrance or
claim of whatever nature and, upon the purchase of the Tender Shares by
Purchaser, Seller will deliver good and valid title to the Tender Shares, free
and clear of any lien, charge, encumbrance or claim of whatever nature.
3.2 Ownership of Shares. On the date hereof, the Owned Shares are
owned of record or beneficially by Seller and, on the date hereof, the Owned
Shares constitute all of the Shares owned of record or beneficially by Seller.
Seller has sole voting power and sole power of disposition with respect to all
of the Owned Shares, with no restrictions, subject to applicable federal
securities laws, on Seller's rights of disposition pertaining thereto.
3.3 Power; Binding Agreement. Seller has the legal capacity, power
and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by Seller
will not violate any other agreement to which Seller is a party including,
without limitation, any voting agreement, stockholders agreement or voting
3
<PAGE> 4
trust. This Agreement has been duly and validly executed and delivered by Seller
and constitutes a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms.
3.4 No Conflicts. Other than in connection with or in compliance
with the provisions of the Exchange Act and the HSR Act, no authorization,
consent or approval of, or filing with, any court or any public body or
authority is necessary for the consummation by Seller of the transactions
contemplated by this Agreement. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
constitute a material breach, violation or default (or any event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, encumbrance, pledge, charge or claim upon any of the properties or assets
of Seller under, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which Seller is a party or by
which his properties or assets are bound.
4. Additional Shares. Seller hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of any Shares acquired by Seller
after the date hereof.
5. Further Assurances. From time to time, at Parent's request and
without further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein shall
terminate upon Seller's sale of the Tender Shares to Purchaser in the Offer,
other than Seller's representation and warranty in Section 3.1, which shall
survive the sale of the Tender Shares and the termination of this Agreement
following such sale.
6.2 Entire Agreement; Assignment. This Agreement (a) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand delivery
or telecopy or by any courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
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<PAGE> 5
If to Seller: James R. Tolonen
2850 Ocean Park Boulevard, Suite 100
Santa Monica, CA 90405
copy to: Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Arthur F. Schneiderman, Esq.
Blair W. Stewart, Esq.
Daniel R. Mitz, Esq.
Fax: (650) 493-6811
If to Parent: Networks Associates, Inc.
2865 Bowers Avenue
Santa Clara, CA 95051
Attention: Richard Hornstein, Esq.
Fax: (408) 346-3038
copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301
Attention: Dennis C. Sullivan, Esq.
Bradley J. Rock, Esq.
Fax: (650) 327-3699
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
6.6 Specific Performance. Seller recognizes and acknowledges that a
breach by him of any covenants or agreements contained in this Agreement will
cause Parent to sustain damages for which it would not have an adequate remedy
at law for money damages, and therefore Seller agrees that in the event of any
such breach Parent shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
6.7 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or
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<PAGE> 6
interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to be
duly executed as of the day and year first above written.
PARENT: SELLER:
NETWORKS ASSOCIATES, INC. JAMES R. TOLONEN
By: /s/ Richard Hornstein By: /s/ James R. Tolonen
------------------------------ ---------------------------
Name: Vice President, Legal Affairs and Name: James R. Tolonen
Corporate Development
Date: July 27, 1998 Date: July 27, 1998
6
<PAGE> 1
EXHIBIT 7
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") is made and entered into as of
July 28, 1998, by and between Networks Associates, Inc., a Delaware corporation
("Parent"), and Suhas Patil ("Seller").
RECITALS
A. Concurrently with the execution and delivery of this Agreement, Parent,
Cyclone Acquisition Corp. ("Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of Parent, and CyberMedia, Inc., a Delaware corporation
(the "Company"), are entering into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"), pursuant to which Purchaser agrees to make a
tender offer (the "Offer") for all outstanding shares of common stock, par value
$.01 per share (the "Shares"), of the Company, at a price of $9.50 per Share
(the "Offer Price") net to the seller in cash, to be followed by a merger (the
"Merger") of Purchaser with and into the Company (capitalized terms used but not
defined herein shall have the meanings set forth in the Merger Agreement);
B. As of the date hereof, Seller beneficially owns directly 1,948,729
Shares (the "Owned Shares"); and
C. As a condition to their willingness to enter into the Merger Agreement
and make the Offer, Parent and Purchaser have required that Seller agree, and,
in order to facilitate the Offer and the Merger, Seller is willing to agree, (i)
to tender pursuant to the Offer the Owned Shares, together with any Shares
acquired after the date hereof and prior to the termination of the Offer,
whether upon the exercise of options, conversion of convertible securities or
otherwise (collectively, the "Tender Shares"), on the terms and subject to the
conditions provided for in this Agreement and (ii) to enter into the other
agreements set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and Vote.
1.1 Tender. Seller hereby agrees to validly tender (or cause the record
owner of such shares to validly tender) the Tender Shares pursuant to and in
accordance with the terms of the Offer, as soon as practicable after
commencement of the Offer (but in no event later than five business days after
the filing of the Offer Documents with the SEC, in the case of the Owned Shares,
or the first business day following their acquisition, in the case of any other
Tender Shares), by physical delivery of the certificates therefor and to not
withdraw such Tender Shares, except following termination of this Agreement
pursuant to Section 2 hereof. Seller hereby acknowledges and agrees that
Parent's and Purchaser's obligation to accept for payment and pay for the Tender
Shares is subject to the terms and conditions of the Offer. Seller hereby agrees
to permit Parent and Purchaser to publish and disclose in the Offer Documents
and, if approval of
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the Company's stockholders is required under applicable law, the Proxy Statement
(including all related documents and schedules filed with the SEC) his identity
and ownership of the Tender Shares and the nature of his commitments,
arrangements and understandings under this Agreement.
1.2 Voting. Seller hereby agrees that, during the time this Agreement
is in effect, at any meeting of the stockholders of the Company, however called,
Seller shall (a) vote the Tender Shares in favor of the Merger; (b) vote the
Tender Shares against any action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement; and (c) vote the Tender Shares against
any action or agreement (other than the Merger Agreement or the transactions
contemplated thereby) that would impede, interfere with, delay, postpone or
attempt to discourage the Merger or the Offer, including, but not limited to:
(i) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries or a reorganization, recapitalization or liquidation of the
Company and its subsidiaries; (iii) any change in the management or Board of
Directors of the Company, except as otherwise agreed to in writing by Parent;
(iv) any material change in the present capitalization or dividend policy of the
Company; or (v) any other material change in the Company's corporate structure
or business.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Seller hereby irrevocably grants to, and appoints William L.
Larson and Richard Hornstein, or either of them, in their respective capacities
as officers of Parent, and any individual who shall hereafter succeed to any
such office of Parent, and each of them individually, Seller's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of Seller, to vote the Tender Shares in favor of the Merger and
otherwise as contemplated by Section 1.2.
(b) Seller represents that any proxies heretofore given in respect
of the Tender Shares are not irrevocable, and that any such proxies are hereby
revoked.
(c) Seller understands and acknowledges that Parent is entering into
the Merger Agreement in reliance, among other things, upon Seller's execution
and delivery of this Agreement. Seller hereby affirms that the irrevocable proxy
set forth in this Section 1.3 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of Seller under this Agreement. Seller hereby further
affirms that the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked. Seller hereby ratifies and confirms all that such
proxies and attorneys-in-fact may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law.
1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not:
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(a) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of the Tender Shares or any interest therein; provided, however, that Seller
may transfer (i) the Tender Shares by will or intestacy, and (ii) up to 10% of
the Tender Shares as a bona fide gift or gifts, provided that prior to any such
permitted transfer, each transferee shall agree in writing (in a form
satisfactory to Parent) that such transferee will receive and hold such Tender
Shares subject to the provisions of this Agreement;
(b) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Tender Shares or
any interest therein;
(c) grant any proxy, power-of-attorney or other authorization in or
with respect to any or all of the Tender Shares;
(d) deposit the Tender Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Tender Shares; or
(e) take any other action that would make any representation or
warranty of Seller hereunder untrue or incorrect.
1.5 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that he may have under applicable
law.
2. Expiration. This Agreement and Seller's obligation to tender provided
herein shall terminate on the earlier of the payment for the Tender Shares
pursuant to the Offer and the termination of the Merger Agreement in accordance
with its terms.
3. Representation and Warranties. Seller hereby represents and warrants to
Parent as follows:
3.1 Title. Seller has good and valid title to the Owned Shares and,
upon the acquisition thereof, will have good and valid title to any other Tender
Shares, in each case, free and clear of any lien, pledge, charge, encumbrance or
claim of whatever nature and, upon the purchase of the Tender Shares by
Purchaser, Seller will deliver good and valid title to the Tender Shares, free
and clear of any lien, charge, encumbrance or claim of whatever nature.
3.2 Ownership of Shares. On the date hereof, the Owned Shares are owned
of record or beneficially by Seller and, on the date hereof, the Owned Shares
constitute all of the Shares owned of record or beneficially by Seller. Seller
has sole voting power and sole power of disposition with respect to all of the
Owned Shares, with no restrictions, subject to applicable federal securities
laws, on Seller's rights of disposition pertaining thereto.
3.3 Power; Binding Agreement. Seller has the legal capacity, power and
authority to enter into and perform all of his obligations under this Agreement.
The execution, delivery and performance of this Agreement by Seller will not
violate any other agreement to which Seller is a party including, without
limitation, any voting agreement, stockholders agreement or voting
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<PAGE> 4
trust. This Agreement has been duly and validly executed and delivered by Seller
and constitutes a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms.
3.4 No Conflicts. Other than in connection with or in compliance with
the provisions of the Exchange Act and the HSR Act, no authorization, consent or
approval of, or filing with, any court or any public body or authority is
necessary for the consummation by Seller of the transactions contemplated by
this Agreement. The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
material breach, violation or default (or any event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any lien,
encumbrance, pledge, charge or claim upon any of the properties or assets of
Seller under, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which Seller is a party or by
which his properties or assets are bound.
4. Additional Shares. Seller hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of any Shares acquired by Seller
after the date hereof.
5. Further Assurances. From time to time, at Parent's request and without
further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein shall
terminate upon Seller's sale of the Tender Shares to Purchaser in the Offer,
other than Seller's representation and warranty in Section 3.1, which shall
survive the sale of the Tender Shares and the termination of this Agreement
following such sale.
6.2 Entire Agreement; Assignment. This Agreement (a) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand delivery
or telecopy or by any courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
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<PAGE> 5
If to Seller: Suhas Patil
2850 Ocean Park Boulevard, Suite 100
Santa Monica, CA 90405
copy to: Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention:Arthur F. Schneiderman, Esq.
Blair W. Stewart, Esq.
Daniel R. Mitz, Esq.
Fax: (650) 493-6811
If to Parent: Networks Associates, Inc.
2865 Bowers Avenue
Santa Clara, CA 95051
Attention: Richard Hornstein, Esq.
Fax: (408) 346-3038
copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301
Attention: Dennis C. Sullivan, Esq.
Bradley J. Rock, Esq.
Fax: (650) 327-3699
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
6.6 Specific Performance. Seller recognizes and acknowledges that a
breach by him of any covenants or agreements contained in this Agreement will
cause Parent to sustain damages for which it would not have an adequate remedy
at law for money damages, and therefore Seller agrees that in the event of any
such breach Parent shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
6.7 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original, but both of which shall
constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or
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<PAGE> 6
interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to be
duly executed as of the day and year first above written.
PARENT: SELLER:
NETWORKS ASSOCIATES, INC. SUHAS PATIL
By: /s/ Richard Hornstein By: /s/ Suhas Patil
-------------------------------- --------------------------------
Name: Vice President, Legal Affairs Name: Suhas Patil
and Corporate Development
Date: July 27, 1998 Date: July 27, 1998
6
<PAGE> 1
EXHIBIT 8
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") is made and entered into as of
July 28, 1998, by and between Networks Associates, Inc., a Delaware corporation
("Parent"), and Ronald S. Posner ("Seller").
RECITALS
A. Concurrently with the execution and delivery of this Agreement, Parent,
Cyclone Acquisition Corp. ("Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of Parent, and CyberMedia, Inc., a Delaware corporation
(the "Company"), are entering into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"), pursuant to which Purchaser agrees to make a
tender offer (the "Offer") for all outstanding shares of common stock, par value
$.01 per share (the "Shares"), of the Company, at a price of $9.50 per Share
(the "Offer Price") net to the seller in cash, to be followed by a merger (the
"Merger") of Purchaser with and into the Company (capitalized terms used but not
defined herein shall have the meanings set forth in the Merger Agreement);
B. As of the date hereof, Seller beneficially owns directly 264,200 Shares
(the "Owned Shares"); and
C. As a condition to their willingness to enter into the Merger Agreement
and make the Offer, Parent and Purchaser have required that Seller agree, and,
in order to facilitate the Offer and the Merger, Seller is willing to agree, (i)
to tender pursuant to the Offer the Owned Shares, together with any Shares
acquired after the date hereof and prior to the termination of the Offer,
whether upon the exercise of options, conversion of convertible securities or
otherwise (collectively, the "Tender Shares"), on the terms and subject to the
conditions provided for in this Agreement and (ii) to enter into the other
agreements set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and Vote.
1.1 Tender. Seller hereby agrees to validly tender (or cause the record
owner of such shares to validly tender) the Tender Shares pursuant to and in
accordance with the terms of the Offer, as soon as practicable after
commencement of the Offer (but in no event later than five business days after
the filing of the Offer Documents with the SEC, in the case of the Owned Shares,
or the first business day following their acquisition, in the case of any other
Tender Shares), by physical delivery of the certificates therefor and to not
withdraw such Tender Shares, except following termination of this Agreement
pursuant to Section 2 hereof. Seller hereby acknowledges and agrees that
Parent's and Purchaser's obligation to accept for payment and pay for the Tender
Shares is subject to the terms and conditions of the Offer. Seller hereby agrees
to permit Parent and Purchaser to publish and disclose in the Offer Documents
and, if approval of
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the Company's stockholders is required under applicable law, the Proxy Statement
(including all related documents and schedules filed with the SEC) his identity
and ownership of the Tender Shares and the nature of his commitments,
arrangements and understandings under this Agreement.
1.2 Voting. Seller hereby agrees that, during the time this Agreement
is in effect, at any meeting of the stockholders of the Company, however called,
Seller shall (a) vote the Tender Shares in favor of the Merger; (b) vote the
Tender Shares against any action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement; and (c) vote the Tender Shares against
any action or agreement (other than the Merger Agreement or the transactions
contemplated thereby) that would impede, interfere with, delay, postpone or
attempt to discourage the Merger or the Offer, including, but not limited to:
(i) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries or a reorganization, recapitalization or liquidation of the
Company and its subsidiaries; (iii) any change in the management or Board of
Directors of the Company, except as otherwise agreed to in writing by Parent;
(iv) any material change in the present capitalization or dividend policy of the
Company; or (v) any other material change in the Company's corporate structure
or business.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Seller hereby irrevocably grants to, and appoints William L.
Larson and Richard Hornstein, or either of them, in their respective capacities
as officers of Parent, and any individual who shall hereafter succeed to any
such office of Parent, and each of them individually, Seller's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of Seller, to vote the Tender Shares in favor of the Merger and
otherwise as contemplated by Section 1.2.
(b) Seller represents that any proxies heretofore given in respect
of the Tender Shares are not irrevocable, and that any such proxies are hereby
revoked.
(c) Seller understands and acknowledges that Parent is entering
into the Merger Agreement in reliance, among other things, upon Seller's
execution and delivery of this Agreement. Seller hereby affirms that the
irrevocable proxy set forth in this Section 1.3 is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of Seller under this Agreement. Seller
hereby further affirms that the irrevocable proxy is coupled with an interest
and may under no circumstances be revoked. Seller hereby ratifies and confirms
all that such proxies and attorneys-in-fact may lawfully do or cause to be done
by virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212(e) of the Delaware
General Corporation Law.
1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not:
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(a) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of the Tender Shares or any interest therein; provided, however, that Seller
may transfer (i) the Tender Shares by will or intestacy, and (ii) up to 10% of
the Tender Shares as a bona fide gift or gifts, provided that prior to any such
permitted transfer, each transferee shall agree in writing (in a form
satisfactory to Parent) that such transferee will receive and hold such Tender
Shares subject to the provisions of this Agreement;
(b) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Tender Shares or
any interest therein;
(c) grant any proxy, power-of-attorney or other authorization in
or with respect to any or all of the Tender Shares;
(d) deposit the Tender Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Tender Shares; or
(e) take any other action that would make any representation or
warranty of Seller hereunder untrue or incorrect.
1.5 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that he may have under applicable
law.
2. Expiration. This Agreement and Seller's obligation to tender provided
herein shall terminate on the earlier of the payment for the Tender Shares
pursuant to the Offer and the termination of the Merger Agreement in accordance
with its terms.
3. Representation and Warranties. Seller hereby represents and warrants to
Parent as follows:
3.1 Title. Seller has good and valid title to the Owned Shares and,
upon the acquisition thereof, will have good and valid title to any other Tender
Shares, in each case, free and clear of any lien, pledge, charge, encumbrance or
claim of whatever nature and, upon the purchase of the Tender Shares by
Purchaser, Seller will deliver good and valid title to the Tender Shares, free
and clear of any lien, charge, encumbrance or claim of whatever nature.
3.2 Ownership of Shares. On the date hereof, the Owned Shares are owned
of record or beneficially by Seller and, on the date hereof, the Owned Shares
constitute all of the Shares owned of record or beneficially by Seller. Seller
has sole voting power and sole power of disposition with respect to all of the
Owned Shares, with no restrictions, subject to applicable federal securities
laws, on Seller's rights of disposition pertaining thereto.
3.3 Power; Binding Agreement. Seller has the legal capacity, power and
authority to enter into and perform all of his obligations under this Agreement.
The execution, delivery and performance of this Agreement by Seller will not
violate any other agreement to which Seller is a party including, without
limitation, any voting agreement, stockholders agreement or voting
3
<PAGE> 4
trust. This Agreement has been duly and validly executed and delivered by Seller
and constitutes a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms.
3.4 No Conflicts. Other than in connection with or in compliance with
the provisions of the Exchange Act and the HSR Act, no authorization, consent or
approval of, or filing with, any court or any public body or authority is
necessary for the consummation by Seller of the transactions contemplated by
this Agreement. The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
material breach, violation or default (or any event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any lien,
encumbrance, pledge, charge or claim upon any of the properties or assets of
Seller under, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which Seller is a party or by
which his properties or assets are bound.
4. Additional Shares. Seller hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of any Shares acquired by Seller
after the date hereof.
5. Further Assurances. From time to time, at Parent's request and without
further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein shall
terminate upon Seller's sale of the Tender Shares to Purchaser in the Offer,
other than Seller's representation and warranty in Section 3.1, which shall
survive the sale of the Tender Shares and the termination of this Agreement
following such sale.
6.2 Entire Agreement; Assignment. This Agreement (a) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand delivery
or telecopy or by any courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
4
<PAGE> 5
If to Seller: Ronald S. Posner
2850 Ocean Park Boulevard, Suite 100
Santa Monica, CA 90405
copy to: Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Arthur F. Schneiderman, Esq.
Blair W. Stewart, Esq.
Daniel R. Mitz, Esq.
Fax: (650) 493-6811
If to Parent: Networks Associates, Inc.
2865 Bowers Avenue
Santa Clara, CA 95051
Attention: Richard Hornstein, Esq.
Fax: (408) 346-3038
copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301
Attention: Dennis C. Sullivan, Esq.
Bradley J. Rock, Esq.
Fax: (650) 327-3699
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
6.6 Specific Performance. Seller recognizes and acknowledges that a
breach by him of any covenants or agreements contained in this Agreement will
cause Parent to sustain damages for which it would not have an adequate remedy
at law for money damages, and therefore Seller agrees that in the event of any
such breach Parent shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
6.7 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original, but both of which shall
constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or
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<PAGE> 6
interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to be
duly executed as of the day and year first above written.
PARENT: SELLER:
NETWORKS ASSOCIATES, INC. Ronald S. Posner
By: /s/ Richard Hornstein By: /s/ Ronald S. Posner
------------------------------ ----------------------------------
Name: Vice President, Legal Affairs Name: Ronald S. Posner
and Corporate Development
Date: July 27, 1998 Date: July 27, 1998
6
<PAGE> 1
EXHIBIT 9
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") is made and entered into as of
July 28, 1998, by and between Networks Associates, Inc., a Delaware corporation
("Parent"), and Robert Davis ("Seller").
RECITALS
A. Concurrently with the execution and delivery of this Agreement, Parent,
Cyclone Acquisition Corp. ("Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of Parent, and CyberMedia, Inc., a Delaware corporation
(the "Company"), are entering into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"), pursuant to which Purchaser agrees to make a
tender offer (the "Offer") for all outstanding shares of common stock, par value
$.01 per share (the "Shares"), of the Company, at a price of $9.50 per Share
(the "Offer Price") net to the seller in cash, to be followed by a merger (the
"Merger") of Purchaser with and into the Company (capitalized terms used but not
defined herein shall have the meanings set forth in the Merger Agreement);
B. As of the date hereof, Seller beneficially owns directly 0 Shares (the
"Owned Shares"); and
C. As a condition to their willingness to enter into the Merger Agreement
and make the Offer, Parent and Purchaser have required that Seller agree, and,
in order to facilitate the Offer and the Merger, Seller is willing to agree, (i)
to tender pursuant to the Offer the Owned Shares, together with any Shares
acquired after the date hereof and prior to the termination of the Offer,
whether upon the exercise of options, conversion of convertible securities or
otherwise (collectively, the "Tender Shares"), on the terms and subject to the
conditions provided for in this Agreement and (ii) to enter into the other
agreements set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and Vote.
1.1 Tender. Seller hereby agrees to validly tender (or cause the record
owner of such shares to validly tender) the Tender Shares pursuant to and in
accordance with the terms of the Offer, as soon as practicable after
commencement of the Offer (but in no event later than five business days after
the filing of the Offer Documents with the SEC, in the case of the Owned Shares,
or the first business day following their acquisition, in the case of any other
Tender Shares), by physical delivery of the certificates therefor and to not
withdraw such Tender Shares, except following termination of this Agreement
pursuant to Section 2 hereof. Seller hereby acknowledges and agrees that
Parent's and Purchaser's obligation to accept for payment and pay for the Tender
Shares is subject to the terms and conditions of the Offer. Seller hereby agrees
to permit Parent and Purchaser to publish and disclose in the Offer Documents
and, if approval of
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the Company's stockholders is required under applicable law, the Proxy Statement
(including all related documents and schedules filed with the SEC) his identity
and ownership of the Tender Shares and the nature of his commitments,
arrangements and understandings under this Agreement.
1.2 Voting. Seller hereby agrees that, during the time this Agreement
is in effect, at any meeting of the stockholders of the Company, however called,
Seller shall (a) vote the Tender Shares in favor of the Merger; (b) vote the
Tender Shares against any action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement; and (c) vote the Tender Shares against
any action or agreement (other than the Merger Agreement or the transactions
contemplated thereby) that would impede, interfere with, delay, postpone or
attempt to discourage the Merger or the Offer, including, but not limited to:
(i) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries or a reorganization, recapitalization or liquidation of the
Company and its subsidiaries; (iii) any change in the management or Board of
Directors of the Company, except as otherwise agreed to in writing by Parent;
(iv) any material change in the present capitalization or dividend policy of the
Company; or (v) any other material change in the Company's corporate structure
or business.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Seller hereby irrevocably grants to, and appoints William L.
Larson and Richard Hornstein, or either of them, in their respective capacities
as officers of Parent, and any individual who shall hereafter succeed to any
such office of Parent, and each of them individually, Seller's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of Seller, to vote the Tender Shares in favor of the Merger and
otherwise as contemplated by Section 1.2.
(b) Seller represents that any proxies heretofore given in
respect of the Tender Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) Seller understands and acknowledges that Parent is entering
into the Merger Agreement in reliance, among other things, upon Seller's
execution and delivery of this Agreement. Seller hereby affirms that the
irrevocable proxy set forth in this Section 1.3 is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of Seller under this Agreement. Seller
hereby further affirms that the irrevocable proxy is coupled with an interest
and may under no circumstances be revoked. Seller hereby ratifies and confirms
all that such proxies and attorneys-in-fact may lawfully do or cause to be done
by virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212(e) of the Delaware
General Corporation Law.
1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not:
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(a) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of the Tender Shares or any interest therein; provided, however, that Seller
may transfer (i) the Tender Shares by will or intestacy, and (ii) up to 10% of
the Tender Shares as a bona fide gift or gifts, provided that prior to any such
permitted transfer, each transferee shall agree in writing (in a form
satisfactory to Parent) that such transferee will receive and hold such Tender
Shares subject to the provisions of this Agreement;
(b) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Tender Shares or
any interest therein;
(c) grant any proxy, power-of-attorney or other authorization in
or with respect to any or all of the Tender Shares;
(d) deposit the Tender Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Tender Shares; or
(e) take any other action that would make any representation or
warranty of Seller hereunder untrue or incorrect.
1.5 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that he may have under applicable
law.
2. Expiration. This Agreement and Seller's obligation to tender provided
herein shall terminate on the earlier of the payment for the Tender Shares
pursuant to the Offer and the termination of the Merger Agreement in accordance
with its terms.
3. Representation and Warranties. Seller hereby represents and warrants to
Parent as follows:
3.1 Title. Seller has good and valid title to the Owned Shares and,
upon the acquisition thereof, will have good and valid title to any other Tender
Shares, in each case, free and clear of any lien, pledge, charge, encumbrance or
claim of whatever nature and, upon the purchase of the Tender Shares by
Purchaser, Seller will deliver good and valid title to the Tender Shares, free
and clear of any lien, charge, encumbrance or claim of whatever nature.
3.2 Ownership of Shares. On the date hereof, the Owned Shares are owned
of record or beneficially by Seller and, on the date hereof, the Owned Shares
constitute all of the Shares owned of record or beneficially by Seller. Seller
has sole voting power and sole power of disposition with respect to all of the
Owned Shares, with no restrictions, subject to applicable federal securities
laws, on Seller's rights of disposition pertaining thereto.
3.3 Power; Binding Agreement. Seller has the legal capacity, power and
authority to enter into and perform all of his obligations under this Agreement.
The execution, delivery and performance of this Agreement by Seller will not
violate any other agreement to which Seller is a party including, without
limitation, any voting agreement, stockholders agreement or voting
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trust. This Agreement has been duly and validly executed and delivered by Seller
and constitutes a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms.
3.4 No Conflicts. Other than in connection with or in compliance with
the provisions of the Exchange Act and the HSR Act, no authorization, consent or
approval of, or filing with, any court or any public body or authority is
necessary for the consummation by Seller of the transactions contemplated by
this Agreement. The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
material breach, violation or default (or any event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any lien,
encumbrance, pledge, charge or claim upon any of the properties or assets of
Seller under, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which Seller is a party or by
which his properties or assets are bound.
4. Additional Shares. Seller hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of any Shares acquired by Seller
after the date hereof.
5. Further Assurances. From time to time, at Parent's request and without
further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein shall
terminate upon Seller's sale of the Tender Shares to Purchaser in the Offer,
other than Seller's representation and warranty in Section 3.1, which shall
survive the sale of the Tender Shares and the termination of this Agreement
following such sale.
6.2 Entire Agreement; Assignment. This Agreement (a) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand delivery
or telecopy or by any courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
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If to Seller: Robert Davis
2850 Ocean Park Boulevard, Suite 100
Santa Monica, CA 90405
copy to: Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Arthur F. Schneiderman, Esq.
Blair W. Stewart, Esq.
Daniel R. Mitz, Esq.
Fax: (650) 493-6811
If to Parent: Networks Associates, Inc.
2865 Bowers Avenue
Santa Clara, CA 95051
Attention: Richard Hornstein, Esq.
Fax: (408) 346-3038
copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301
Attention: Dennis C. Sullivan, Esq.
Bradley J. Rock, Esq.
Fax: (650) 327-3699
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
6.6 Specific Performance. Seller recognizes and acknowledges that a
breach by him of any covenants or agreements contained in this Agreement will
cause Parent to sustain damages for which it would not have an adequate remedy
at law for money damages, and therefore Seller agrees that in the event of any
such breach Parent shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
6.7 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original, but both of which shall
constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or
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interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
IN WITNESS WHEREOF, Parent and Seller have caused this Agreement to be
duly executed as of the day and year first above written.
PARENT: SELLER:
NETWORKS ASSOCIATES, INC. ROBERT DAVIS
By: /s/ Richard Hornstein By: /s/ Robert W. Davis
----------------------------- ----------------------------------
Name: Richard Hornstein Name: Robert W. Davis
Date: July 27, 1998 Date: July 27, 1998
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EXHIBIT 10
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") is made and entered into as
of July 28, 1998, by and between Networks Associates, Inc., a Delaware
corporation ("Parent"), and Kenneth Kucera ("Seller").
RECITALS
A. Concurrently with the execution and delivery of this Agreement,
Parent, Cyclone Acquisition Corp. ("Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of Parent, and CyberMedia, Inc., a Delaware corporation
(the "Company"), are entering into an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"), pursuant to which Purchaser agrees to make a
tender offer (the "Offer") for all outstanding shares of common stock, par value
$.01 per share (the "Shares"), of the Company, at a price of $9.50 per Share
(the "Offer Price") net to the seller in cash, to be followed by a merger (the
"Merger") of Purchaser with and into the Company (capitalized terms used but not
defined herein shall have the meanings set forth in the Merger Agreement);
B. As of the date hereof, Seller beneficially owns directly 0 Shares
(the "Owned Shares"); and
C. As a condition to their willingness to enter into the Merger
Agreement and make the Offer, Parent and Purchaser have required that Seller
agree, and, in order to facilitate the Offer and the Merger, Seller is willing
to agree, (i) to tender pursuant to the Offer the Owned Shares, together with
any Shares acquired after the date hereof and prior to the termination of the
Offer, whether upon the exercise of options, conversion of convertible
securities or otherwise (collectively, the "Tender Shares"), on the terms and
subject to the conditions provided for in this Agreement and (ii) to enter into
the other agreements set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration given to each party hereto, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Agreement to Tender and Vote.
1.1 Tender. Seller hereby agrees to validly tender (or cause the
record owner of such shares to validly tender) the Tender Shares pursuant to and
in accordance with the terms of the Offer, as soon as practicable after
commencement of the Offer (but in no event later than five business days after
the filing of the Offer Documents with the SEC, in the case of the Owned Shares,
or the first business day following their acquisition, in the case of any other
Tender Shares), by physical delivery of the certificates therefor and to not
withdraw such Tender Shares, except following termination of this Agreement
pursuant to Section 2 hereof. Seller hereby acknowledges and agrees that
Parent's and Purchaser's obligation to accept for payment and pay for the Tender
Shares is subject to the terms and conditions of the Offer. Seller hereby agrees
to permit Parent and Purchaser to publish and disclose in the Offer Documents
and, if approval of
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the Company's stockholders is required under applicable law, the Proxy Statement
(including all related documents and schedules filed with the SEC) his identity
and ownership of the Tender Shares and the nature of his commitments,
arrangements and understandings under this Agreement.
1.2 Voting. Seller hereby agrees that, during the time this
Agreement is in effect, at any meeting of the stockholders of the Company,
however called, Seller shall (a) vote the Tender Shares in favor of the Merger;
(b) vote the Tender Shares against any action or agreement that would result in
a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement; and (c) vote the Tender
Shares against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer, including, but not
limited to: (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries; (ii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries or a reorganization, recapitalization or
liquidation of the Company and its subsidiaries; (iii) any change in the
management or Board of Directors of the Company, except as otherwise agreed to
in writing by Parent; (iv) any material change in the present capitalization or
dividend policy of the Company; or (v) any other material change in the
Company's corporate structure or business.
1.3 Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Seller hereby irrevocably grants to, and appoints William L.
Larson and Richard Hornstein, or either of them, in their respective capacities
as officers of Parent, and any individual who shall hereafter succeed to any
such office of Parent, and each of them individually, Seller's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of Seller, to vote the Tender Shares in favor of the Merger and
otherwise as contemplated by Section 1.2.
(b) Seller represents that any proxies heretofore given in
respect of the Tender Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) Seller understands and acknowledges that Parent is entering
into the Merger Agreement in reliance, among other things, upon Seller's
execution and delivery of this Agreement. Seller hereby affirms that the
irrevocable proxy set forth in this Section 1.3 is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of Seller under this Agreement. Seller
hereby further affirms that the irrevocable proxy is coupled with an interest
and may under no circumstances be revoked. Seller hereby ratifies and confirms
all that such proxies and attorneys-in-fact may lawfully do or cause to be done
by virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212(e) of the Delaware
General Corporation Law.
1.4 No Inconsistent Arrangements. Seller hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not:
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(a) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of the Tender Shares or any interest therein; provided, however, that Seller
may transfer (i) the Tender Shares by will or intestacy, and (ii) up to 10% of
the Tender Shares as a bona fide gift or gifts, provided that prior to any such
permitted transfer, each transferee shall agree in writing (in a form
satisfactory to Parent) that such transferee will receive and hold such Tender
Shares subject to the provisions of this Agreement;
(b) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Tender Shares or
any interest therein;
(c) grant any proxy, power-of-attorney or other authorization in
or with respect to any or all of the Tender Shares;
(d) deposit the Tender Shares into a voting trust or enter into
a voting agreement or arrangement with respect to the Tender Shares; or
(e) take any other action that would make any representation or
warranty of Seller hereunder untrue or incorrect.
1.5 Waiver of Appraisal Rights. Seller hereby waives any rights of
appraisal or rights to dissent from the Merger that he may have under applicable
law.
2. Expiration. This Agreement and Seller's obligation to tender
provided herein shall terminate on the earlier of the payment for the Tender
Shares pursuant to the Offer and the termination of the Merger Agreement in
accordance with its terms.
3. Representation and Warranties. Seller hereby represents and warrants
to Parent as follows:
3.1 Title. Seller has good and valid title to the Owned Shares and,
upon the acquisition thereof, will have good and valid title to any other Tender
Shares, in each case, free and clear of any lien, pledge, charge, encumbrance or
claim of whatever nature and, upon the purchase of the Tender Shares by
Purchaser, Seller will deliver good and valid title to the Tender Shares, free
and clear of any lien, charge, encumbrance or claim of whatever nature.
3.2 Ownership of Shares. On the date hereof, the Owned Shares are
owned of record or beneficially by Seller and, on the date hereof, the Owned
Shares constitute all of the Shares owned of record or beneficially by Seller.
Seller has sole voting power and sole power of disposition with respect to all
of the Owned Shares, with no restrictions, subject to applicable federal
securities laws, on Seller's rights of disposition pertaining thereto.
3.3 Power; Binding Agreement. Seller has the legal capacity, power
and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by Seller
will not violate any other agreement to which Seller is a party including,
without limitation, any voting agreement, stockholders agreement or voting
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trust. This Agreement has been duly and validly executed and delivered by Seller
and constitutes a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms.
3.4 No Conflicts. Other than in connection with or in compliance
with the provisions of the Exchange Act and the HSR Act, no authorization,
consent or approval of, or filing with, any court or any public body or
authority is necessary for the consummation by Seller of the transactions
contemplated by this Agreement. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
constitute a material breach, violation or default (or any event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, encumbrance, pledge, charge or claim upon any of the properties or assets
of Seller under, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which Seller is a party or by
which his properties or assets are bound.
4. Additional Shares. Seller hereby agrees, while this Agreement is in
effect, to promptly notify Parent of the number of any Shares acquired by Seller
after the date hereof.
5. Further Assurances. From time to time, at Parent's request and
without further consideration, Seller shall execute and deliver such additional
documents and take all such further action as may be reasonably necessary or
desirable to consummate and make effective the transactions contemplated by
Section 1 of this Agreement.
6. Miscellaneous.
6.1 Non-Survival. The representations and warranties made herein
shall terminate upon Seller's sale of the Tender Shares to Purchaser in the
Offer, other than Seller's representation and warranty in Section 3.1, which
shall survive the sale of the Tender Shares and the termination of this
Agreement following such sale.
6.2 Entire Agreement; Assignment. This Agreement (a) constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and (b)
shall not be assigned by operation of law or otherwise, provided that Parent may
assign its rights and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Parent
of its obligations hereunder if such assignee does not perform such obligations.
6.3 Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand delivery
or telecopy or by any courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
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If to Seller: Kenneth Kucera
2850 Ocean Park Boulevard, Suite 100
Santa Monica, CA 90405
copy to: Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Arthur F. Schneiderman, Esq.
Blair W. Stewart, Esq.
Daniel R. Mitz, Esq.
Fax: (650) 493-6811
If to Parent: Networks Associates, Inc.
2865 Bowers Avenue
Santa Clara, CA 95051
Attention: Richard Hornstein, Esq.
Fax: (408) 346-3038
copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301
Attention: Dennis C. Sullivan, Esq.
Bradley J. Rock, Esq.
Fax: (650) 327-3699
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
6.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
6.6 Specific Performance. Seller recognizes and acknowledges that a
breach by him of any covenants or agreements contained in this Agreement will
cause Parent to sustain damages for which it would not have an adequate remedy
at law for money damages, and therefore Seller agrees that in the event of any
such breach Parent shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
6.7 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
6.8 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or
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interpretation of this Agreement.
6.9 Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
IN WITNESS WHEREOF, Parent and Seller have caused this
Agreement to be duly executed as of the day and year first above written.
PARENT: SELLER:
NETWORKS ASSOCIATES, INC. KENNETH KUCERA
By: /s/ RICHARD HORNSTEIN By: /s/ KENNETH C. KUCERA
--------------------------- --------------------------
Name: Richard Hornstein Name: Kenneth C. Kucera
Date: July 27, 1998 Date: July 27, 1998
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EXHIBIT 11
CYBERMEDIA, INC.
NOTE PURCHASE AND SECURITY AGREEMENT
<PAGE> 2
CYBERMEDIA, INC.
NOTE PURCHASE AND SECURITY AGREEMENT
This NOTE PURCHASE AND SECURITY AGREEMENT is made as of the 28th day of
July, 1998 by and among CYBERMEDIA, INC., a Delaware corporation (the
"Company"), and NETWORKS ASSOCIATES, INC., a Delaware corporation (the
"Purchaser").
The parties hereby agree as follows:
SECTION 1. AMOUNT AND TERMS OF THE LOAN
1.1 THE LOAN. Subject to the terms of this Agreement, the Purchaser
agrees to loan to the Company, the principal amount of Ten Million Dollars
($10,000,000) (the "Loan Amount") pursuant to a secured subordinated convertible
promissory note in the form attached hereto as Exhibit A (the "Note").
Capitalized terms in this Agreement not otherwise defined herein are as defined
in the Note.
SECTION 2. THE CLOSING
2.1 CLOSING DATE. The closing of the purchase and sale of the Note (the
"Closing") shall be held at 1:00 a.m. PDT on the date hereof or at such other
time as the Company and the Purchaser shall agree (the "Closing Date").
2.2 DELIVERY. At the Closing (i) the Purchaser will deliver to the
Company a wire transfer of funds in the amount of the Loan Amount; and (ii) the
Company shall deliver to the Purchaser the Note representing the Loan Amount.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
3.1 CORPORATE POWER. The Company will have at the Closing Date all
requisite corporate power to execute and deliver this Agreement and the Note and
to carry out and perform its obligations under the terms of this Agreement.
3.2 AUTHORIZATION. All corporate action on the part of the Company, its
directors and its shareholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company and the performance of
the Company's obligations hereunder, including the issuance and delivery of the
Note, has been taken or will be taken prior to the Closing. The Company agrees
to take all necessary corporate action to reserve or authorize the equity
securities issuable upon conversion of the Note. This Agreement and the Note
constitute valid and binding obligations of the Company enforceable in
accordance with their terms, subject to laws of general application relating to
bankruptcy, insolvency, the relief of debtors and, with respect to rights to
indemnity, subject to federal and state securities laws. The Common Stock or
other equity securities of the Company, when issued upon conversion of the Note
in compliance
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with the provisions of this Agreement or the Note, will be validly issued, fully
paid and nonassessable and free of any liens or encumbrances.
3.3 GOVERNMENTAL CONSENTS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of the Company
in connection with the valid execution and delivery of this Agreement, the
offer, sale or issuance of the Note and the equity securities issuable upon
conversion of the Note or the consummation of any other transaction contemplated
hereby shall have been obtained and will be effective at the Closing except for
notices required or permitted to be filed with certain state and federal
securities commissions, which notices will be filed on a timely basis, and
filings to perfect security interests.
3.4 OFFERING. Assuming the accuracy of the representations and warranties
of the Purchaser contained in Section 4 hereof, the offer, issue, and sale of
the Note are and will be exempt from the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and are
exempt from registration and qualification under the registration, permit, or
qualification requirements of all applicable state securities laws.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 PURCHASE FOR OWN ACCOUNT. The Purchaser represents that it is
acquiring the Note and the equity securities issuable upon conversion of the
Note (collectively, the "Securities") solely for its own account and beneficial
interest for investment and not for sale or with a view to distribution of the
Securities or any part thereof, has no present intention of selling (in
connection with a distribution or otherwise), granting any participation in, or
otherwise distributing the same, and does not presently have reason to
anticipate a change in such intention.
4.2 INFORMATION AND SOPHISTICATION. The Purchaser acknowledges that it
has received all the information it has requested from the Company and considers
necessary or appropriate for deciding whether to acquire the Note. The Purchaser
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the Note
and to obtain any additional information necessary to verify the accuracy of the
information given the Purchaser. The Purchaser further represents that it has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risk of this investment.
4.3 ABILITY TO BEAR ECONOMIC RISK. The Purchaser acknowledges that
investment in the Note involves a high degree of risk, and represents that it is
able, without materially impairing its financial condition, to hold the
Securities for an indefinite period of time and to suffer a complete loss of its
investment.
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4.4 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, the Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a Registration Statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) The Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, the Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration under the 1933 Act.
(c) Notwithstanding the provisions of paragraphs ((a)) and ((b))
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by the Purchaser to one or more direct or indirect affiliates of
Purchaser, if all transferees agree in writing to be subject to the terms hereof
to the same extent as if they were the Purchaser hereunder. 4.5 SUITABILITY. The
Purchaser is an "accredited investor" as such term is defined in Rule 501 under
the Securities Act.
4.5 SUITABILITY. The Purchaser is an "accredited investor" as such term
is defined in Rule 501 under the Securities Act.
SECTION 5. COVENANTS
5.1 GRANT OF SECURITY INTEREST. (a) As collateral security for the prompt
and complete payment of the Note and the Company's present or future
indebtedness, obligations and liabilities to Purchaser under the Note and this
Agreement, the Company hereby grants and pledges to Purchaser a continuing
security interest in all presently existing and hereafter acquired or arising
collateral (the "Collateral") as follows. The "Collateral" shall consist of all
right, title and interest of the Company in and to the following:
(i) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
(ii) All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Company's custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Company's books relating to any of the foregoing;
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<PAGE> 5
(iii) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, trademarks,
servicemarks, trade styles, trade names, leases, license agreements, franchise
agreements, blueprints, drawings, purchase orders, customer lists, route lists,
infringements, claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, design rights, income tax refunds, payments of
insurance and rights to payment of any kind, all patents, patent applications
and like protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations in part of the
same, including without limitation the patents and patent applications set forth
on Exhibit B attached hereto (collectively, the "Patents");
(iv) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations owing to
Company arising out of the sale or lease of goods, the licensing of technology
or the rendering of services by Company, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Company and Company's books
relating to any of the foregoing;
(v) All documents, cash, deposit accounts, securities,
securities accounts, investment property, letters of credit, certificates of
deposit, instruments and chattel paper now owned or hereafter acquired and
Company's books relating to the foregoing;
(vi) All trade secret rights, including all rights to unpatented
inventions, know how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired;
(vii) Any and all copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held, including without limitation those set forth on Exhibit C
attached hereto (collectively, the "Copyrights");
(viii) Any and all claims for damages by way of past, present
and future infringement of any of the rights included above, with the right, but
not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(ix) All licenses or other rights to use any of the trademarks,
Copyrights or Patents, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(x) All amendments, renewals and extensions of any of the
Copyrights or Patents;
(xi) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing; and
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<PAGE> 6
(xii) Any and all claims, rights and interests in any of the
above and all substitutions for, additions and accessions to and proceeds
thereof.
Notwithstanding the foregoing, (i) the security interest granted herein
shall be effective upon the earlier to occur of (A) the fifth business day after
the date of this Agreement, and (B) the consent of Imperial Bank to the security
interest granted herein and agreement to the subordination provisions of the
Note; and (ii) the security interest granted herein shall not extend to and the
term "Collateral" shall not include any property, rights or licenses to the
extent the granting of a security interest therein (1) would be contrary to
applicable law or (2) is prohibited by or would constitute a default under any
agreement or license under which such property, rights or licenses arise (but
only to the extent such prohibition is enforceable under applicable law).
(b) AUTHORIZATION AND REQUEST. The Company authorizes and requests
that the Register of Copyrights and the Commissioner of Patents and Trademarks
record this security agreement.
(c) COVENANTS AND WARRANTIES. The Company represents, warrants,
covenants and agrees as follows:
(i) Except as disclosed in the Agreement and Plan of Merger
between Company and Purchaser of even date herewith (the "Merger Agreement"),
Company has good and indefeasible title to the Collateral, free and clear of
Liens, except for Permitted Liens. The Company is now the sole owner of the
Patents and Copyrights, except for non-exclusive licenses granted by the Company
to its customers in the ordinary course of business;
(ii) Performance of this Agreement does not conflict with or
result in a breach of any agreement to which the Company is party or by which
the Company is bound, except to the extent that certain intellectual property
agreements prohibit the assignment of the rights thereunder to a third party
without the licensor's or other party's consent and this Agreement constitutes
an assignment;
(iii) During the term of this Agreement, the Company will not
transfer or otherwise encumber any interest in the Collateral, except for
Permitted Liens and Liens that may be granted in favor of Senior Debt and except
for non-exclusive licenses under Patents, Copyrights and other intellectual
property rights of the Company granted by the Company in the ordinary course of
business or as set forth in this Agreement;
(iv) To its knowledge, and except as disclosed in the Merger
Agreement, each of the Patents is valid and enforceable, and no part of the
Patents or Copyrights has been judged invalid or unenforceable, in whole or in
part, and no claim has been made that any part of the Collateral violates the
rights of any third party;
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<PAGE> 7
(v) The Company shall deliver to Purchaser within (30) days of
the last day of each calendar quarter, a report signed by the Company, in form
reasonably acceptable to Purchaser, listing any applications or registrations
that the Company has made, filed or acquired in respect of any patents,
copyrights or trademarks and the status of any outstanding applications or
registrations;
(vi) The Company shall (A) protect, defend and maintain the
validity and enforceability of the material Patents and Copyrights (B) use its
best efforts to detect infringements of the Patents and Copyrights and promptly
advise Purchaser in writing of material infringements detected and (C) not allow
any material Patents or Copyrights to be abandoned, forfeited or dedicated to
the public without the written consent of Purchaser, which shall not be
unreasonably withheld;
(vii) The Company shall register or cause to be registered (to
the extent not already registered) with the United States Copyright Office, the
copyrights associated with the currently shipping versions of each of its
software products whose names include the words "First Aid" within thirty (30)
days of the date of this Agreement. Once each calendar quarter the Company shall
register or cause to be registered with the United States Copyright Office those
additional copyrights developed, authored or acquired by the Company from time
to time for new releases (that is, versions of such software which offer
meaningful additional features beyond mere corrections) of each then shipping
version of First Aid and Uninstaller software (or successor software products);
(viii) Subject to any filings that may be required to perfect
the security interests granted herein, and to Permitted Liens and Liens in favor
of Senior Debt, this Agreement creates, and in the case of after acquired
Collateral, this Agreement will create at the time the Company first has rights
in such after acquired Collateral, in favor of Purchaser a valid and perfected
security interest in the Collateral in the United States junior in priority only
to Permitted Liens and Liens in favor of the Senior Debt, securing the payment
and performance of the obligations evidenced by the Note;
(ix) All information heretofore, herein or hereafter supplied to
Purchaser by or on behalf of the Company with respect to the Collateral is
accurate and complete in all material respects; and
(x) Except for Permitted Liens and the granting of Liens in
favor of Senior Debt, the Company shall not create, incur, assume or suffer to
exist any Lien with respect to any of its property or assign or otherwise convey
any right to receive income therefrom, or enter into any agreement that would
impair or conflict with the Company's obligations hereunder without Purchaser's
prior written consent, which consent shall not be unreasonably withheld. The
Company shall not permit the inclusion in any contract to which it becomes a
party of any provisions that could or might in any way prevent the creation of a
security interest in the Company's rights and interests in any property included
within the definition of the Collateral acquired under such contracts, except
that certain contracts may contain anti-assignment
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<PAGE> 8
provisions that could in effect prohibit the creation of a security interest in
such contracts if the Company is required, in its commercially reasonable
judgment, to accept such provisions.
(d) PURCHASER'S RIGHTS. Purchaser shall have the right, but not the
obligation, to take, at the Company's sole expense, any actions that the Company
is required under this Agreement to take but which the Company fails to take,
after fifteen (15) days' notice to the Company. The Company shall reimburse and
indemnify Purchaser for all reasonable costs and reasonable expenses incurred in
the reasonable exercise of its rights under this Section 5.1((d)).
(e) FURTHER ASSURANCES; ATTORNEY IN FACT
(i) On a continuing basis, the Company will make, execute,
acknowledge and deliver, and file and record in the filing and recording places
in the United States, all such instruments, including appropriate financing and
continuation statements and collateral agreements and filings with the United
States Patent and Trademark Office and the Register of Copyrights, and take all
such action as may reasonably be deemed necessary or advisable, or as requested
by Purchaser, to perfect Purchaser's security interest in all its registered
Copyrights and Patents and otherwise to carry out the intent and purposes of
this Agreement, or for assuring and confirming to Purchaser the grant or
perfection of a security interest in all Collateral.
(ii) The Company hereby irrevocably appoints Purchaser as the
Company's attorney-in-fact, with full authority in the place and stead of the
Company and in the name of the Company, from time to time in Purchaser's
discretion, to take any action and to execute any instrument which Purchaser may
deem necessary or advisable to accomplish the purposes of this Agreement,
including (i) to modify, in its sole discretion, this Agreement without first
obtaining the Company's approval of or signature to such modification by
amending Exhibit B and Exhibit C, thereof, as appropriate, to include reference
to any right, title or interest in any Copyrights or Patents acquired by the
Company after the execution hereof or to delete any reference to any right,
title or interest in any Copyrights or Patents in which the Company no longer
has or claims any right, title or interest, (ii) to file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of the Company
where permitted by law, and (iii) after the occurrence of an Event of Default,
to transfer the Collateral into the name of Purchaser or a third party to the
extent permitted under the California Uniform Commercial Code.
(f) EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default under the Agreement:
(i) An Event of Default occurs under the Note; or
(ii) The Company breaches any warranty or agreement made by the
Company in this Agreement and, as to any breach that is capable of cure, the
Company fails to cure such breach within twenty (20) days of notice from
Purchaser of the occurrence of such breach.
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<PAGE> 9
(g) REMEDIES. Upon the occurrence and continuance of an Event of
Default, Purchaser shall have the right to exercise all the remedies of a
secured party under the California Uniform Commercial Code, including without
limitation the right to require the Company to assemble the Collateral and any
tangible property in which Purchaser has a security interest and to make it
available to Purchaser at a place designated by Purchaser. Purchaser shall have
a nonexclusive, royalty free license to use the Copyrights, Patents and
trademarks to the extent reasonably necessary to permit Purchaser to exercise
its rights and remedies upon the occurrence of an Event of Default. The Company
will pay any expenses (including reasonable attorneys' fees) incurred by
Purchaser in connection with the exercise of any of Purchaser's rights
hereunder, including without limitation any expense incurred in disposing of the
Collateral. All of Purchaser's rights and remedies with respect to the
Collateral shall be cumulative.
(h) INDEMNITY. The Company agrees to defend, indemnify and hold
harmless Purchaser and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the loan transaction contemplated by this Agreement,
and (b) all losses or expenses in any way suffered, incurred, or paid by
Purchaser as a result of or in any way arising out of, following or
consequential to the loan transaction between Purchaser and the Company under
this Agreement (including without limitation reasonable attorneys' fees and
reasonable expenses), except for losses arising from or out of Purchaser's gross
negligence or willful misconduct.
5.2 NOTICE OF DEFAULTS. The Company agrees and covenants to promptly
notify Purchaser upon the occurrence of any Event of Default as defined in the
Note.
5.3 REGISTRATION RIGHTS.
(a) Following the conversion of some or all of the Loan Amount into
Conversion Shares (each as defined in the Note) in accordance with the Note,
Purchaser may by written notice (the "Registration Notice") to the Company
request the Company to register under the Securities Act all or any part of the
Conversion Shares beneficially owned by Purchaser (the "Registrable Securities")
pursuant to a bona fide firm commitment underwritten public offering in which
Purchaser and the underwriters shall endeavor to effect a reasonably wide
distribution of such Registrable Securities and shall use their reasonable
efforts to prevent any person (including any "group" as used in Rule 13d-5 under
the Exchange Act) and its affiliates from purchasing through such offering
Conversion Shares representing more than one percent (1%) of the outstanding
shares of common stock of the Company on a fully diluted basis, provided that
firm commitment underwriting shall not be required if the number of Conversion
Shares proposed to be registered at any one time represents less than three
percent (3%) of the outstanding shares of common stock of the Company on a fully
diluted basis (in either case, a "Permitted Offering").
(b) The Registration Notice shall include a certificate executed by
Purchaser and, if applicable, its proposed managing underwriter, which
underwriter shall be an investment banking firm of nationally recognized
standing (the "Manager"), stating that (i) they have a good faith intention to
commence promptly a Permitted Offering, and (ii) the Manager in good faith
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<PAGE> 10
believes that, based on the then-prevailing market conditions, it will be able
to sell the Registrable Securities to the public in a Permitted Offering within
one hundred twenty (120) days at a per share price equal to at least eighty
percent (80%) of the then Fair Market Value of such shares, as defined below.
"Fair Market Value" means the average of the daily closing prices for the ten
(10) trading days before the date of the Registration Notice (the "Registration
Notice Price"). The closing price for each day shall be the last sale price on
such date or, if no such sale takes place on such date, the average of the
closing bid and asked prices on such date, in each case as officially reported
on the principal national securities exchange or national market system on which
such shares are then listed, admitted to trading or traded.
(c) The Company (and/or any person designated by the Company) shall
thereupon have the option exercisable by written notice delivered to Purchaser
within five (5) business days after the receipt of the Registration Notice,
irrevocably to agree to purchase all or any part of the Registrable Securities
proposed to be so sold for cash at a price equal to the product of (i) the
number of Registrable Securities to be so purchased by the Company and (ii) the
Registration Notice Price.
(d) Any purchase of Registrable Securities by the Company (or its
designee) under Section 5.3((c)) shall take place at a closing to be held at the
principal executive offices of the Company or at the offices of its counsel at
any reasonable date and time designated by the Company and/or such designee in
such notice within twenty (20) business days after delivery of such notice, and
any payment for the shares to be so purchased shall be made by delivery at the
time of such closing in immediately available funds.
(e) If the Company does not elect to exercise its option pursuant to
Section 5.3((c)) with respect to all Registrable Securities, it shall use all
commercially reasonable efforts to effect, as promptly as practicable, the
registration under the Securities Act of the unpurchased Registrable Securities
proposed to be so sold and to cause such registration to be declared effective
and such effectiveness maintained until the distribution of the Registrable
Securities thereunder is completed or for a period of 120 days, whichever is
shorter; provided, however, that (i) Purchaser shall not be entitled to demand
more than an aggregate of four (4) effective registration statements hereunder
if the Company is eligible to register the Registrable Securities on Form S-3
(or an equivalent or successor form), or two (2) effective registration
statements hereunder if the Company is not so eligible, and (ii) the Company
will not be required to file any such registration statement during any period
of time (not to exceed forty (40) days after such request in the case of clause
(A) below or ninety (90) days after such request in the case of clauses (B) and
(C) below) when (A) the Company is in possession of material non-public
information which it reasonably believes would be detrimental to be disclosed at
such time and, in the judgment of counsel to the Company, such information would
be required to be disclosed if a registration statement were filed at that time;
(B) the Company is required under the Securities Act to include audited
financial statements for any period in such registration statement and such
financial statements are not yet available for inclusion in such registration
statement; or (C) the Company determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other
transaction involving the Company or
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<PAGE> 11
any of its material subsidiaries and that such transaction is material to the
Company and its subsidiaries taken as a whole.
(f) The Company shall use all commercially reasonable efforts to
cause any Registrable Securities registered pursuant to this Section 5.3 to be
qualified for sale under the securities or Blue Sky laws of such jurisdictions
as Purchaser may reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; provided, however, that the
Company shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
(g) The registration rights set forth in this Section 5.3 are subject
to the condition that Purchaser shall provide the Company with such information
with respect to its Registrable Securities, the plans for the distribution
thereof, and such other information with respect to Purchaser as, in the
reasonable judgment of counsel for the Company, is necessary to enable the
Company to include in such registration statement all material facts required to
be disclosed with respect to a registration thereunder.
(h) A registration effected under this Section 5.3 shall be effected
at the Company's expense, except for underwriting discounts and commissions and
the fees and the expenses of counsel to Purchaser, and the Company shall provide
to the underwriters such documentation (including certificates, opinions of
counsel and "comfort" letters from auditors) as is customary in connection with
underwritten public offerings as such underwriters may reasonably require.
(i) In connection with any registration effected under this Section
5.3, the parties agree (A) to indemnify each other and the underwriters, if any,
in the customary manner, (B) if applicable, to enter into an underwriting
agreement in form and substance customary for transactions of such type with the
Manager and the other underwriters participating in such offering, and (C) to
take all further actions which shall be reasonably necessary to effect such
registration and sale (including if the Manager deems it necessary,
participating in road-show presentations).
(j) The Company shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected pursuant to
this Section 5.3 only if and to the extent the offering is firmly underwritten
and the Manager determines that such inclusion will not adversely affect the
prospects for success of such offering.
SECTION 6. MISCELLANEOUS
6.1 ENFORCEMENT COSTS. Company shall pay all costs and expenses,
including, without limitation, reasonable attorneys' fees and expenses Purchaser
expends or incurs in connection with the enforcement of this Agreement, the
collection of any sums due under the Note, any actions for declaratory relief in
any way related to this Agreement, or the protection or preservation of any
rights of the holder hereunder.
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6.2 BINDING AGREEMENT. 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 third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3 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, made and to be performed entirely within the State of
California.
6.4 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.
6.5 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.
6.6 NOTICES. Any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
or upon deposit with the United States Post Office, postage prepaid, addressed
to the Company at 2850 Ocean Park Boulevard, Suite 100, Santa Monica, California
90405, or to a Purchaser at its address shown on the signature page below, or at
such other address as such party may designate by ten (10) days advance WRITTEN
NOTICE TO THE OTHER PARTY.
6.7 COURSE OF DEALING. No course of dealing, nor any failure to exercise,
nor any delay in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
6.8 ATTORNEYS' FEES. If any action relating to this Agreement is brought
by either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements.
6.9 AMENDMENTS. Except as otherwise expressly permitted herein, this
Agreement may be amended only by a written instrument signed by both parties
hereto.
6.10 CALIFORNIA LAW AND JURISDICTION; JURY WAIVER. This Agreement shall be
governed by the laws of the State of California, without regard for choice of
law provisions. The Company and Purchaser consent to the exclusive jurisdiction
of any state or federal court located in Santa Clara County, California. THE
COMPANY AND PURCHASER EACH WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE NOTE, THIS AGREEMENT,
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this NOTE PURCHASE AND
SECURITY AGREEMENT as of the date first written above.
COMPANY:
CYBERMEDIA, INC.
By: /s/ Kanwal Rekhi
-------------------------------------
Title: Chief Executive Officer and
Chairman of the Board
PURCHASER:
NETWORKS ASSOCIATES, INC.
By: /s/ Richard Hornstein
-------------------------------------
Title: Vice President, Legal Affairs and
Corporate Development
Networks Associates, Inc.
3965 Freedom Circle
Santa Clara, CA 95054
Attention: Chief Financial Officer
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<PAGE> 14
EXHIBIT A
Secured Subordinated Convertible Promissory Note
1
<PAGE> 15
EXHIBIT B
Patents
<TABLE>
<CAPTION>
Registration/ Registration/
Application Application
Description Number Date
- ----------- ------------- -------------
<S> <C> <C> <C>
1. Automatic Updating of Diverse Software Products 08/660,488 June 7, 1996
on Multiple Client Computer Systems
2. Method and Software Products for Continued 06/686,250 July 24, 1996
Application Execution after Generation of Fatal
Exceptions
</TABLE>
2
<PAGE> 16
EXHIBIT C
Copyrights
<TABLE>
<CAPTION>
Registration/ Registration/
Application Application
Description Number Date
- ----------- ------------- -------------
<S> <C> <C> <C>
1. CyberMedia UnInstaller Version 3.5
2. CyberMedia UnInstaller Version 4.0
3. CyberMedia UnInstaller Version 4.5
</TABLE>
3
<PAGE> 1
EXHIBIT 12
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH
RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION.
SECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE
$10,000,000 1:00 a.m. PDT, July 28, 1998
Santa Monica, California
For value received CYBERMEDIA, INC., a Delaware corporation
("Borrower"), promises to pay to NETWORKS ASSOCIATES, INC., a Delaware
corporation ("Holder"), or order, the principal sum of Ten Million Dollars
($10,000,000) together with accrued interest on the outstanding principal amount
at the applicable rate as follows. The balance of the unpaid principal and all
accrued interest thereon from time to time is the "Loan Amount."
1. SECURED NOTE. The repayment of this note (the "Note") is evidenced
and secured by that certain Note Purchase and Security Agreement of even date
herewith, executed by Borrower in favor of Holder (as the same may from time to
time be amended, modified or supplemented or restated, the "Security
Agreement"). Additional rights and remedies of Holder are set forth in the
Security Agreement. All capitalized terms used herein and not otherwise defined
herein shall have the meanings given to them in the Security Agreement.
2. PAYMENT. All payments shall be applied first to accrued interest,
and thereafter to principal.
(i) SCHEDULED PAYMENT. The principal indebtedness shall be payable
in full on the second anniversary of the date hereof. Interest shall be due and
payable in arrears on the first day of each calendar quarter and upon maturity
or prepayment of any principal amount, commencing on October 1, 1998.
(ii) ACQUISITION. The principal outstanding hereunder and the
interest accrued and unpaid shall be due and payable, without payment of any
premium or penalty, upon (i) the closing of the sale or transfer of all or
substantially all of Borrower's assets; or (ii) the closing of a merger or
consolidation of Borrower or other transaction or series of related transactions
in which Borrower's shareholders immediately prior to such transaction or
transactions do not own a majority of the voting securities of Borrower or the
surviving corporation, as applicable.
(iii) PREPAYMENT. Borrower may not prepay any part of the Loan
Amount without the prior written consent of Holder, unless and until that
certain Agreement and Plan of Merger by and among Holder and Borrower of even
date herewith (the "Merger Agreement") shall have been terminated in accordance
with its terms: Thereafter, Borrower shall have the right at any
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<PAGE> 2
time and from time to time, upon ten (10) business days' prior written notice to
Holder (during which notice period Holder will remain entitled to elect to
convert all or part of the Loan Amount in accordance with Section 4), to prepay,
in whole or in part, the principal of this Note, without payment of any premium
or penalty. Any principal prepayment shall be accompanied by a payment of all
interest accrued on the amount prepaid through the date of such prepayment.
(iv) FORM OF PAYMENT. Principal and interest and all other amounts
due hereunder are to be paid in lawful money of the United States of America in
federal or other immediately available funds.
3. INTEREST. Interest shall accrue with respect to the principal sum
hereunder at the per annum rate equal to LIBOR (3-month) as in effect on the
first day of each calendar quarter, plus two percent (2%). However, if an Event
of Default, as defined herein, occurs, then interest shall accrue at the rate
per annum equal to two percent (2%) plus the rate that would otherwise be in
effect (the "Default Rate"). Interest payable hereunder shall be calculated on
the basis of a three hundred sixty (360) day year for actual days elapsed.
4. CONVERSION RIGHT.
(i) CONVERSION RIGHT. Holder shall have the right (the "Conversion
Right"), in its sole discretion, at any time and from time to time to elect to
convert all or any part of the Loan Amount into such number of fully paid and
nonassessable shares of Common Stock as determined by dividing the total amount
of the Loan Amount being converted by the Conversion Price. The Conversion Price
is Six Dollars and Sixty-Six Cents ($6.66) per share, subject to adjustment as
provided in below.
(ii) EXERCISE OF CONVERSION RIGHT. To convert any of the Loan Amount
into shares of Common Stock, Holder shall deliver to Borrower a written notice
of election to exercise the Conversion Right (the "Conversion Notice"). Borrower
shall, as soon as practicable thereafter, issue and deliver to Holder a
certificate or certificates, registered in Holder's name, for the number of
shares of Common Stock to which Holder shall be entitled by virtue of such
exercise (such shares the "Conversion Shares"). The conversion of the Loan
Amount shall be deemed to have been made on the date that Borrower receives the
Conversion Notice (the "Conversion Date") and Holder shall be treated for all
purposes as the record holder of the Conversion Shares as of such date.
(iii) FRACTIONAL SHARES. Borrower shall not issue fractional shares
of Common Stock or scrip representing fractional shares of Common Stock upon
exercise of the Conversion Right. As to any fractional share of Common Stock
which Holder would otherwise be entitled to purchase from Borrower upon such
exercise, Borrower shall purchase from Holder such fractional share at a price
equal to an amount calculated by multiplying such fractional share (calculated
to the nearest 1/100th of a share) by the fair market value of a share of Common
Stock on the Conversion Date. Payment of such amount shall be made in cash or by
check payable to the order of Holder at the time of delivery of any certificate
or certificates arising upon such exercise.
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<PAGE> 3
(iv) CONVERSION PRICE ADJUSTMENTS
(a) Adjustments for Stock Splits and Subdivisions. If Borrower
at any time or from time to time after the date hereof fixes a record date for
the effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable upon conversion of this Note shall be increased
in proportion to such increase of outstanding shares.
(b) ADJUSTMENTS FOR REVERSE STOCK SPLITS. If the number of
shares of Common Stock outstanding at any time after the date hereof is
decreased by a combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion hereof shall be decreased in proportion to such decrease in
outstanding shares.
5. INSPECTION RIGHTS; CONFIDENTIALITY.
(i) INSPECTION RIGHTS. Until the Loan Amount is repaid in full, in
cash, or the Conversion Right is fully exercised, Holder shall be entitled to
visit and inspect Borrower's properties, to examine its books of account and
financial records and to discuss Borrower's financial affairs, finances and
accounts with its officers, all at such reasonable times as may be requested by
Holder; provided, however, that, unless an Event of Default has occurred and is
continuing, such visitation and inspection shall be limited to once per fiscal
quarter within two weeks of the Borrower's public announcement of its earnings
for such quarter.
(ii) CONFIDENTIALITY. Holder shall not disclose to any third party
any Confidential Information disclosed to Holder pursuant to this Section 5, or
use such Confidential Information other than for purposes of this Agreement,
except that (i) Holder may disclose Confidential Information to a third party to
the extent compelled by law, subpoena, civil investigative demand,
interrogatories or similar legal process, (ii) Holder may disclose Confidential
Information if such disclosure is required by Holder's reporting obligations
under federal securities laws, rules and regulations, and (iii) Holder may
disclose Confidential Information to a potential transferee of this Note,
provided that the potential transferee is not a competitor of Borrower and that
the potential transferee agrees to be bound by the same confidentiality
obligations as Holder under this Section 5. For purposes of this Note,
"Confidential Information" is information disclosed by Borrower to Holder
pursuant hereto that is not information which (i) becomes generally available to
the public, other than as a result of
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disclosure by Holder, (ii) was available on a non-confidential basis prior to
its disclosure to Holder by Borrower, or (iii) becomes available to Holder on a
non-confidential basis from a source other than Borrower.
6. REGISTRATION RIGHTS. The Conversion Shares shall be subject to the
Registration Rights provided in the Security Agreement.
7. COLLATERAL. The full amount of this Note is secured by the
Collateral identified and described as security therefor in the Security
Agreement. Borrower shall not, directly or indirectly, create, permit or suffer
to exist, and shall defend the Collateral against and take such other action as
is necessary to remove, any lien or encumbrance on or in the Collateral, or in
any portion thereof, except as permitted pursuant to the Security Agreement.
8. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(i) Borrower's breach of the obligation to pay any amount payable
hereunder within ten (10) days of the date of written notice from Holder to
Borrower of such breach;
(ii) Borrower's failure to perform, keep or observe any of its
covenants, conditions, promises, agreements or obligations under any agreement
with any third person or entity, after the expiration of any applicable grace
period under such agreement, or after any period of forbearance acknowledged in
writing by the other party to such agreement, if such failure has a material
adverse effect on Borrower's assets, operations or financial condition;
(iii) Borrower's institution of proceedings against itself, or
Borrower's filing of a petition or answer or consent seeking reorganization or
release, under the federal Bankruptcy Code, or any other applicable federal or
state law relating to creditor rights and remedies, or Borrower's consent to the
filing of any such petition or the appointment of a receiver, liquidation,
assignee, trustee or other similar official of Borrower or of any substantial
part of its property, or Borrower's making of an assignment for the benefit of
creditors, or the taking of corporate action in furtherance of such action;
(iv) the creation (whether voluntary or involuntary) of, or any
attempt to create, any lien or encumbrance upon any of the Collateral, other
than Permitted Liens and Liens in favor of Senior Debt, or the making or any
attempt to make any levy, seizure or attachment thereof and such lien,
encumbrance, levy, seizure or attachment has not been removed, discharged or
rescinded within ten (10) days after Borrower is notified of or learns of such
lien, encumbrance, levy, seizure or attachment;
(v) the occurrence and continuance of any default under any lease or
agreement for borrowed money that gives the lessor or the creditor of such
indebtedness, as applicable, the right to accelerate the lease payments or the
indebtedness, as applicable, in an amount in excess of $1,000,000 or the right
to exercise any rights or remedies with respect to any of the Collateral;
(vi) the entry of any judgment or order against Borrower in an
amount in excess of
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$1,000,000 which remains unsatisfied or undischarged and in effect for thirty
(30) days without a stay of enforcement or execution; or
(vii) the Borrower breaches any warranty or agreement made by the
Borrower in the Security Agreement and, as to any breach that is capable of
cure, the Borrower fails to cure such breach within twenty (20) days of notice
from Holder of the occurrence of such breach.
9. RIGHTS AND REMEDIES ON EVENT OF DEFAULT.
(i) During the continuance of an Event of Default, Holder shall have
the right, itself or through any of its agents, with or without notice to
Borrower (as provided below), as to any or all of the Collateral, by any
available judicial procedure, or without judicial process (provided, however,
that it is in compliance with the California Uniform Commercial Code), to
exercise any and all rights afforded to a secured party under the California
Uniform Commercial Code or other applicable law. Without limiting the generality
of the foregoing, Holder shall have the right to sell or otherwise dispose of
all or any part of the Collateral, either at public or private sale, in lots or
in bulk, for cash or for credit, with or without warranties or representations,
and upon such terms and conditions, all as Holder, in its sole discretion, may
deem advisable, and it shall have the right to purchase at any such sale.
Borrower agrees that a notice sent at least fifteen (15) days before the time of
any intended public sale or of the time after which any private sale or other
disposition of the Collateral is to be made shall be reasonable notice of such
sale or other disposition. The proceeds of any such sale, or other Collateral
disposition shall be applied, first to the reasonable expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like, and
to Holder's reasonable attorneys' fees and legal expenses, and then to the
repayment hereof and to the payment of any other amounts required by applicable
law, after which Holder shall account to Borrower for any surplus proceeds. If,
upon the sale or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which Holder is legally entitled, Borrower
shall be liable for the deficiency, together with interest thereon at the
Default Rate, and the reasonable fees of any attorneys Holder's employs to
collect such deficiency; provided, however, that the foregoing shall not be
deemed to require Holder to resort to or initiate proceedings against the
Collateral prior to the collection of any such deficiency from Borrower. To the
extent permitted by applicable law, Borrower waives all claims, damages and
demands against Holder arising out of the retention or sale or lease of the
Collateral or other exercise of Holder's rights and remedies with respect
thereto.
(ii) To the extent permitted by law, Borrower covenants that it will
not at any time insist upon or plead, or in any manner whatever claim or take
any benefit or advantage of, any stay or extension law now or at any time
hereafter in force, nor claim, take or insist upon any benefit or advantage of
or from any law now or hereafter in force providing for the valuation or
appraisal of the Collateral or any part thereof, prior to any sale or sales
thereof to be made pursuant to any provision herein contained, or the decree,
judgment or order of any court of competent jurisdiction; or, after such sale or
sales, claim or exercise any right under any statute now or hereafter made or
enacted by any state or otherwise to redeem the property so sold or any part
thereof, and, to the full extent legally permitted, hereby expressly waives all
benefit and advantage of any such law or laws, and covenants that it will not
invoke or utilize any such law
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or laws or otherwise hinder, delay or impede the execution of any power herein
granted and delegated to Holder, but will suffer and permit the execution of
every such power as though no such power, law or laws had been made or enacted.
(iii) Any sale, whether under any power of sale hereby given or by
virtue of judicial proceedings, shall operate to divest all Borrower's right,
title, interest, claim and demand whatsoever, either at law or in equity, in and
to the Collateral sold, and shall be a perpetual bar, both at law and in equity,
against Borrower, its successors and assigns, and against all persons and
entities claiming the Collateral sold or any part thereof under, by or through
Borrower, its successors or assigns.
(iv) Borrower appoints Holder, and any officer, employee or agent of
Holder, with full power of substitution, as Borrower's true and lawful
attorney-in-fact, effective as of the date hereof, with power, in its own name
or in the name of Borrower, during the continuance of an Event of Default, to
endorse any notes, checks, drafts, money orders, or other instruments of payment
in respect of the Collateral that may come into Holder's possession, to sign and
endorse any drafts against debtors, assignments, verifications and notices in
connection with accounts, and other documents relating to Collateral; to pay or
discharge taxes or Liens at any time levied or placed on or threatened against
the Collateral; to demand, collect, issue receipt for, compromise, settle and
sue for monies due in respect of the Collateral; to notify persons and entities
obligated with respect to the Collateral to make payments directly to Holder;
and, generally, to do, at Holder's option and at Borrower's expense, at any
time, or from time to time, all acts and things which Holder deems necessary to
protect, preserve and realize upon the Collateral and Holder's security interest
therein to effect the intent of this Note, all as fully and effectually as
Borrower might or could do; and Borrower hereby ratifies all that said attorney
shall lawfully do or cause to be done by virtue hereof. This power of attorney
shall be irrevocable as long as any of the Loan Amount is outstanding.
(v) All of Holder's rights and remedies with respect to the
Collateral, whether established hereby or by any other agreements, instruments
or documents or by law shall be cumulative and may be exercised singly or
concurrently.
10. SUBORDINATION.
(i) SUBORDINATION TO SENIOR DEBT.
(a) PAYMENT LIMITATIONS. Holder, by accepting this Note, agrees
for itself and its successors and assigns that payment of principal, interest
and other amounts due to Holder under this Note is subordinated in right of
payment to the prior payment in full in cash (or cash equivalents) of the Senior
Debt on the terms set forth herein.
(b) LIEN SUBORDINATION. Any Lien of Holder on any assets or
property of Borrower or any proceeds or revenues therefrom which Holder may have
at any time as security for any amounts due and obligations under this Note
shall be subordinate to all Liens now or hereafter granted to a holder of Senior
Debt by Borrower or by law, notwithstanding the date or order of attachment or
perfection of any such Lien or the provisions of any applicable law. Until
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payment in full in cash of all of Senior Debt, Holder agrees that a holder of
Senior Debt may dispose of any or all of the collateral for the Senior Debt held
by such holder free and clear of any and all Liens in favor of Holder in
accordance with applicable law including taking title to such collateral after
notice to Holder. Holder agrees that any such sale or other disposition by a
holder of Senior Debt as is necessary to satisfy in full, all of the principal
of, interest on and reasonable costs of collection of the Senior Debt shall be
made free and clear of any Lien granted to Holder, provided that the entire
proceeds (after deducting reasonable expenses of sale) are applied to reduce the
Senior Debt. Upon the request of a holder of Senior Debt, Holder shall execute
and deliver or cause to be executed and delivered any releases or other
documents and agreements that a holder of Senior Debt may reasonably request to
dispose of the collateral for the Senior Debt free of any Lien of Holder in such
collateral.
(ii) PERMITTED PAYMENTS. Notwithstanding the subordination of the
Note to the Senior Debt hereunder, (i) principal of the Note may be paid to
Holder as it becomes due and payable, without acceleration, in accordance with
the terms hereof, as amended from time to time in accordance with the terms
hereof, (ii) accrued interest with respect to the Note may be paid to Holder as
such interest becomes due and payable in accordance with the terms hereof, as
amended from time to time in accordance with the terms hereof, and (iii) other
fees, expenses or other amounts payable under or with respect to the Note may be
paid to Holder as such fees, expenses and amounts become due and payable,
without acceleration, in accordance with the terms hereof, as amended from time
to time in accordance with the terms hereof, provided that, in the case of each
such Note payment, on the date of payment such payments are not prohibited
pursuant to Section 10(iii), Section 10(iv), Section 10(v), or Section 10(vii).
(iii) SUBORDINATION ON DISSOLUTION, LIQUIDATION OR REORGANIZATION
OF BORROWER.
(a) PRIORITY OF PAYMENT UPON DISTRIBUTION OF ASSETS. Upon any
Distribution of Assets in the event of any dissolution or winding up or total or
partial liquidation or reorganization, whether voluntary or involuntary, or
adjustment or protection or relief or composition of Borrower or Borrower's
debts, or in any bankruptcy, insolvency, receivership, arrangement,
reorganization, relief or other proceeding of Borrower or upon an arrangement
for the benefit of creditors of Borrower or any other marshaling of the assets
and liabilities of Borrower:
A. all amounts payable under or on account of the Senior
Debt shall first be paid in full, in cash or cash equivalents, before Holder
shall be entitled to receive any Distribution of Assets with respect to the
Note; and
B. before any payment may be made on account of the
Note, any such Distribution of Assets to which Holder would be entitled, except
for the provisions of this Section 10(iii)(a), shall be made directly to
Senior Debtholders to the extent necessary to pay all Senior Debt in full, in
cash or cash equivalents, after giving effect to any concurrent payment or
distribution to Senior Debtholders.
(b) NOTICE OF DISTRIBUTION OF ASSETS. Borrower shall give
prompt written notice to Senior Debtholders and Holder of any Distribution of
Assets of the nature described in
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this Section 10(iii).
(d) HOLDER RELIANCE. Upon any Distribution of Assets, Holder
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such dissolution, winding-up, liquidation,
bankruptcy or reorganization proceeding is pending, or a certificate of the
liquidating trustee or the Senior Debtholders or other Person making such
distribution to Holder, for the purpose of ascertaining the Persons entitled to
participate in such Distribution of Assets, the Senior Debtholders, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto and this Section 10(iii).
(iv) SUBORDINATION ON SENIOR PAYMENT DEFAULT. If there has occurred
and is continuing a Senior Payment Default, the obligation of Borrower to make
payment under or on account of the Note, directly or indirectly, in cash or
other property or by set-off or in any other manner, shall be suspended for the
period commencing upon the date Senior Debtholder notifies Holder of the
commencement of such period, which notice shall either be: (1) in writing,
including telex, telegram, telecopy or other form of electronic transmission; or
(2) telephonic, in which case a written confirmation thereof complying with
clause (1) above must be delivered to Holder on or prior to the date upon which
the payment would otherwise be due and payable in order for such telephonic
notice to be sufficient and within five (5) Business Days after such telephonic
notice is given. Such payment suspension period shall continue until (1) the
Senior Payment Default is cured or waived by Senior Debtholder or (2) Senior
Debtholder waives the benefit of this subsection (ii), unless Senior Debtholder
accelerates payment of the Senior Debt, in which case the obligation of Borrower
to make payment under or on account of the Note shall continue to be suspended
under this Section 10(iv) until such acceleration is rescinded by Senior
Debtholder.
(v) SUBORDINATION ON NONPAYMENT DEFAULT. If there has occurred and
is continuing a Senior Default which is not a Senior Payment Default, the
obligation of Borrower to make payment under or on account of the Note, directly
or indirectly, in cash or other property or by set-off or in any other manner,
may be suspended by Senior Debtholder for the period and in the manner specified
below (the "Standstill Period"). The Standstill Period shall commence upon the
date Senior Debtholder notifies Holder of the commencement of such period (a
"Standstill Notice"), which notice shall either be: (1) in writing, including
telex, telegram, telecopy or other form of electronic transmission; or (2)
telephonic, in which case a written confirmation thereof complying with clause
(1) above must be delivered to Holder on or prior to the date upon which the
payment would otherwise be due and payable in order for such telephonic notice
to be sufficient and within five (5) Business Days after such telephonic notice
is given. So long as the Senior Debt is not totally accelerated by Senior
Debtholder, the Standstill Period shall end on the earlier of (1) the waiver of
the Senior Default by Senior Debtholder, (2) the cure of the Senior Default, or
(3) the one hundred-eightieth (180th) calendar day after the commencement of the
Standstill Period; if the Senior Debt is totally accelerated, the Standstill
Period shall end on the earlier of (1) recission of the acceleration, or (2)
payment in full of the Senior Debt. No more than one (1) Standstill Period can
be declared in any 360-day period.
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(vi) DISCONTINUANCE OF PAYMENT BLOCK. Immediately following the
expiration of any payment suspension period under Section 10(iv) or any
Standstill Period under Section 10(v), all installments of Note which, but for
such suspension, would have become due and payable, shall become immediately due
and payable. Notwithstanding anything to the contrary contained herein, Borrower
may pay and Holder may demand, sue for, or take and retain any payment on the
Note before notice of a payment suspension is given to Holder in accordance with
Section 10(iv) and before a Standstill Notice is given to Holder in accordance
with Section 10(v).
(vii) FORBEARANCE BY HOLDER. Until the Senior Debt is paid in full,
in cash or cash equivalents, or unless requested by Senior Debtholder, Holder
shall not without Senior Debtholder's prior written consent, given in its sole
and absolute discretion: (i) assert, collect or enforce the Note or any of the
amounts due thereunder, exercise any right of set-off; (ii) exercise its right
of possession of any Collateral securing the Note or attach, seize, or realize
upon any Collateral securing the Note or enforce any lien against the
Collateral; (iii) exercise any right under the California Uniform Commercial
Code, including, but not limited to, the right of strict foreclosure, but
excluding the right of redemption; or (iv) commence, or cause to commence,
prosecute or participate in (other than participate in an action, once
commenced, to protect and pursue its rights and remedies as, for example,
exercising its rights in a bankruptcy proceeding) any administrative, legal or
equitable action against Borrower or any administrative, legal or equitable
action that might adversely affect Borrower or its interest, including, but not
limited to, the entry of a decree or order for relief in respect of Borrower
under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect or the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
Borrower or for any substantial part of the Assets; provided, however, that
Holder may undertake any of the above actions following the passage of one
hundred eighty (180) days after Holder or its agents have given written notice
to Senior Debtholder of the intent to take such action.
(viii) DISPOSITION OF COLLATERAL. Upon any foreclosure upon, or
realization or collection in respect of any Collateral whether such action is
taken by or on behalf of Senior Debtholder or Holder or otherwise, all Senior
Debt shall first by satisfied in full in cash or cash equivalents before Holder
shall be entitled to receive or retain any proceeds or assets from such
foreclosure, realization or collection.
(ix) SUBROGATION. Subject to the payment in full of all Senior Debt
in cash or cash equivalents, Holder shall be subrogated to the Senior
Debtholders' rights (to the extent of the payments or distributions made to the
Senior Debtholders pursuant to the provisions of this Section 10 to receive
payments and Distributions of Assets applicable to the Senior Debt. No such
payments or Distributions of Assets applicable to the Senior Debt shall, as
between Borrower and its creditors, other than the Senior Debtholders and
Holder, be deemed to be a payment by Borrower to or on account of this Note; and
for purposes of such subrogation, no payments or Distributions of Assets to the
Senior Debtholders to which Holder would be entitled except for the provisions
of this Section 10 shall, as between Borrower and its creditors, other than the
Senior Debtholders and Holder, be deemed to be a payment by Borrower to or on
account of the Senior Debt.
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(x) NO IMPAIRMENT. Nothing contained in this Section 10 shall
impair, as between Borrower and Holder, the obligation of Borrower, subject to
the terms and conditions of this Section 10, to pay to Holder the principal
hereof and interest hereon as and when the same become due and payable, or shall
prevent Holder, upon an Event of Default, from exercising all rights, powers and
remedies otherwise provided herein or by applicable law, subject to the Senior
Debtholders' rights under this Section 10.
(xi) RELIANCE OF SENIOR DEBTHOLDERS. Holder, by its acceptance
hereof, shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of each Senior Debtholder, whether such Senior Debtholder's Senior
Debt was created or acquired before or after the creation of the indebtedness
evidenced by this Note, and each such Senior Debtholder shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
holding, or in continuing to hold, such Senior Debt.
(xii) NO IMPAIRMENT OF SUBORDINATION. No right of any present or
future Senior Debtholder to enforce the subordination provisions of this Section
10 shall at any time in any way be prejudiced or impaired by any act or failure
to act on Borrower's part or by any act or failure to act, in good faith, by
such Senior Debtholder, or by any noncompliance by Borrower with the terms,
provisions and covenants of this Note or the Purchase Agreement, regardless of
any knowledge thereof which such Senior Debtholder may have or otherwise be
charged with.
(xiii) AMENDMENT RESTRICTIONS. No amendment of this Note shall
directly or indirectly modify the provisions of this Section 10 in any manner
which might terminate or impair the subordination of the Note to the Senior
Debt; provided, however, that such amendments may be effected with the written
consent of the Senior Debtholders.
(xiv) DISGORGEMENT. If, at any time after payment in full of the
Senior Debt any payments of the Senior Debt must be disgorged by a Senior
Debtholder for any reason (including, without limitation, Borrower's
bankruptcy), this Note and the relative rights and priorities set forth herein
shall be reinstated as to all such disgorged payments as though such payments
had not been made and Holder shall immediately pay over to Senior Debtholder all
payments received with respect to the Note to the extent that such payments
would have been prohibited hereunder.
(xv) SENIOR DEBTHOLDER ACTIONS. At any time and from time to time,
without notice to Holder, Senior Debtholders may take such actions with respect
to the Senior Debt as Senior Debtholders, in their sole discretion, may deem
appropriate, including, without limitation, terminating advances to Borrower,
increasing the principal amount, extending the time of payment, increasing
applicable interest rates, renewing, compromising or otherwise amending the
terms of any documents affecting the Senior Debt and any collateral securing the
Senior Debt, and enforcing or failing to enforce any rights against Borrower or
any other party. No such action or inaction shall impair or otherwise affect
Senior Debtholders' rights under the subordination provisions of this Note.
Holder waives the benefits, if any, of California Civil Code Sections 2809,
2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433.
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(xvi) DEFINITIONS. For purposes of this Section 10, the following
terms shall have the following meanings:
"Distribution of Assets": any distribution of Borrower's
assets of any kind or character, whether in cash, property, or securities, and
whether in respect of repayment of indebtedness or otherwise, including, but not
limited to, adequate protection payments under the Bankruptcy Code.
"Lien": any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, security interest, charge or
other encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any agreement to give or refrain from giving a lien,
mortgage, pledge, hypothecation, assignment, deposit arrangement, security
interest, charge or other encumbrance of any kind.
"Permitted Liens": means the following:
(a) Any Liens existing on the Closing Date disclosed in the
Merger Agreement or arising under this Agreement;
(b) Leases or subleases and licenses and sublicenses granted
to others in the ordinary course of Borrower's business not interfering in any
material respect with the business of Borrower, and any interest or title of a
lessor or licensor under any such lease or license;
(c) Liens on assets (including the proceeds thereof and
accessions thereto) that existed at the time such assets were or are acquired by
Borrower (including Liens on assets of any corporation that existed at the time
it became or becomes a Subsidiary); provided such Liens are not granted in
contemplation of or in connection with the acquisition of such asset by
Borrower;
(d) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8(vi);
(e) Easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property not materially interfering with the
business of Borrower;
(f) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payments of customs duties in connection with the
importation of goods;
(g) Liens which constitute rights of set-off of a customary
nature or banker's Liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with arrangements entered into
with banks in the ordinary course of business;
(h) Liens on insurance proceeds in favor of insurance
companies granted solely as security for financed premiums;
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(i) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings; and
(j) Liens (i) upon or in any equipment acquired or held by
Borrower to secure the purchase price of such equipment or indebtedness incurred
solely for the purpose of financing the acquisition of such equipment, or (ii)
existing on such equipment at the time of its acquisition, provided that the
Lien is confined solely to the property so acquired and improvements thereon,
and the proceeds of such equipment.
"Person": any natural person, sole proprietorship, general
partnership, limited partnership, joint venture, trust, unincorporated
organization, association, corporation, governmental or public authority, or any
other organization, irrespective of whether it is a legal entity.
"Senior Debt": the principal of (and premium, if any) and
unpaid interest on and other indebtedness under (i) indebtedness of Borrower,
whether outstanding on the date hereof or hereafter created, to banks, insurance
companies, lease financing institutions, savings and loan associations, credit
unions, or holding companies or subsidiaries thereof, which is for money
borrowed (or purchase or lease of equipment in the case of lease financing) by
Borrower, including any indebtedness incurred after the filing of a petition
with respect to Borrower under the Bankruptcy Code (including any interest
accruing with respect to any such indebtedness after the filing of any such
petition whether or not allowed or allowable as a claim in the bankruptcy
proceeding), and (ii) obligations of Borrower as lessee under leases required to
be capitalized on the balance sheet of the lessee under GAAP and leases of
property or assets made as part of any sale and lease-back transaction to which
Borrower is a party, and (iii) any deferrals, renewals or extensions of any such
indebtedness or any debentures, notes or other evidence of indebtedness issued
in exchange for such Senior Debt; provided, however, that the aggregate
principal amount of the Senior Debt outstanding shall not exceed Six Million
Dollars ($6,000,000).
"Senior Debtholder": any holder of the Senior Debt.
"Senior Default": any event of default or default with
respect to any of the Senior Debt.
"Senior Payment Default": a default in payment of principal,
interest or premium which constitutes a Senior Default.
11. COSTS OF COLLECTION. In the event of any default hereunder,
Borrower shall pay all reasonable attorneys' fees and court costs incurred by
Holder in enforcing and collecting this Note.
12. HOLDER'S RIGHTS; BORROWER WAIVERS. Holder's acceptance of partial
or delinquent payment from Borrower hereunder, or Holder's failure to exercise
any right hereunder, shall not constitute a waiver of any obligation of Borrower
hereunder, or any right of Holder hereunder, and shall not affect in any way the
right to require full performance at any time thereafter. Except as otherwise
specifically provided herein, Borrower waives presentment, diligence,
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demand of payment, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note.
13. GOVERNING LAW. The terms of this Note shall be construed in
accordance with the laws of the State of California, as applied to contracts
entered into by California residents within the State of California, which
contracts are to be performed entirely within the State of California.
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14. AMENDMENT. Any term of this Note may be amended or waived with the
written consent of Borrower and Holder.
BORROWER:
CYBERMEDIA, INC.
a Delaware Corporation
By: /s/ Kanwal Rekhi
-----------------------------
Name: Kanwal Rekhi
Title: Chief Executive Officer and
Chairman of the Board
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