<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
4FRONT TECHNOLOGIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
Common Stock, par value $.001 per share (the "Common
Stock"), and options to acquire Common Stock of 4Front
Technologies, Inc.
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
14,553,355 (including 1,449,899 options and 267,833
warrants to purchase common stock
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
$18.50 per share in cash-out merger plus the difference
between $18.50 per share and the exercise price of each
share underlying an option or warrant to purchase shares
of Common Stock.
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$269,237,068
----------------------------------------------------------
(5) Total fee paid:
$53,847.42
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
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4FRONT TECHNOLOGIES, INC.
6300 SOUTH SYRACUSE WAY, SUITE 293
ENGLEWOOD, COLORADO 80111
303-721-7341
September 25, 2000
Dear Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held at 11:00 A.M. on , , 2000, at
the offices of Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York
10103.
At the meeting you will be asked to (1) vote whether to approve a proposed
merger combining 4Front and NCR Corporation, (2) elect six directors of the
Company and (3) approve an amendment to the 4Front Technologies, Inc. 1996
Equity Incentive Plan which would increase the number of options available for
grant thereunder to 2,000,000. The Board asks you to vote in favor of the
merger, in favor of the director nominees proposed by the Board and in favor of
the amendment to the 4Front Technologies, Inc. 1996 Equity Incentive Plan.
The Board of Directors has unanimously approved the merger, but the approval
of our stockholders is required in order to proceed with the completion of the
merger. The merger agreement provides that 4Front will become a wholly-owned
subsidiary of NCR, and you and each other stockholder of 4Front will receive
$18.50 for each share of 4Front Common Stock owned by you, and each option
holder or warrant holder will receive the difference between $18.50 per share
and the exercise price per share set forth in the relevant option agreement or
warrant multiplied by the number of shares for which such option or warrant is
exercisable. 4Front stockholders holding at least a majority of the outstanding
shares of 4Front Common Stock are required to vote to approve and adopt the
merger agreement. The merger cannot be completed unless the 4Front stockholders
approve it.
The Board of Directors has determined that the merger is fair to you and is
in your best interests. The Board of Directors therefore unanimously recommends
that you vote to approve and adopt the merger agreement. A vote of the NCR
stockholders is not required to approve and adopt the merger agreement.
Attached to this letter you will find a formal Notice of Annual Meeting and
a related proxy statement. The proxy statement provides detailed information
about the Annual Meeting and the matters to be considered at the Annual Meeting,
and especially about the proposed merger, so please read the entire proxy
statement carefully.
The attached notice and proxy statement are dated September 25, 2000, and
were first mailed to stockholders on or about September 25, 2000. Those of you
who were holders of record of 4Front Common Stock at the close of business on
September 22, 2000 are entitled to receive notice of and to vote at the
stockholders' meeting. On that day, shares of 4Front Common Stock
were outstanding. Each share entitles the holder to one vote.
As explained in the attached proxy statement, you may withdraw your proxy at
any time before it is actually voted at the meeting. If you plan to attend the
meeting in person, please remember to bring a form of personal identification
with you and, if you are acting as a proxy for another stockholder, please bring
written confirmation from the record owner that you are acting as a proxy.
Beneficial owners of stock held by banks, brokers or investment plans (I.E.,
held in "street name") will need proof
<PAGE>
of ownership to be admitted to the meeting and will need written authorization
from the record owner in order to vote at the meeting. A recent brokerage
statement or letter from your broker or bank are examples of proof of ownership
sufficient for admittance to the meeting, but a proxy from your broker or bank
or similar document will be required in order for you to vote shares held in
street name at the meeting.
We look forward to greeting personally those stockholders who are able to be
present at the meeting; however, whether or not you plan to be with us at the
meeting, it is important that your shares be represented. Accordingly, you are
requested to sign and date the enclosed proxy and mail it in the envelope
provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
Anil Doshi
Chairman of the Board
of Directors
Mark Ellis
President
<PAGE>
4FRONT TECHNOLOGIES, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
Englewood, Colorado
September 25, 2000
Notice is hereby given that the annual meeting of stockholders of 4Front
Technologies, Inc. will be held on , , 2000 at
11:00 A.M. at the offices of Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New
York, New York 10103 for the following purposes:
(1) To consider and vote on the merger agreement among NCR Corporation,
a wholly-owned subsidiary of NCR ("Sub") and 4Front pursuant to which a
subsidiary of NCR will merge into 4Front and 4Front will become a
wholly-owned subsidiary of NCR, and you and each other stockholder of 4Front
will receive $18.50 for each share of 4Front common stock owned, and each
option holder or warrant holder will receive the difference between $18.50
per share and the exercise price per share set forth in the relevant option
agreement or warrant, multiplied by the number of shares of common stock for
which such option or warrant is exercisable;
(2) To elect six directors to serve for the ensuing year;
(3) To approve an amendment to the 4Front Technologies, Inc. 1996 Equity
Incentive Plan which would increase the number of options available for
grant thereunder to 2,000,000; and
(4) To transact such other business as may properly come before the
annual meeting or any adjournment thereof.
The items of business to be considered at the annual meeting are more fully
described in the attached proxy statement.
This notice and the accompanying proxy statement are dated September 25,
2000, and will be first mailed to stockholders on or about September 25, 2000.
We have attached a copy of the Merger Agreement as Annex A to the proxy
statement which accompanies this notice of meeting.
Stockholders of record at the close of business on September 22, 2000 will
be entitled to notice of and to vote at the annual meeting or any adjournment
thereof. All stockholders are cordially invited to attend the annual meeting in
person. Stockholders who are unable to attend the annual meeting in person are
requested to complete and date the enclosed form of proxy and return it promptly
in the envelope provided. No postage is required if mailed in the United States.
Stockholders who attend the annual meeting may revoke their proxy and vote their
shares in person.
Stockholders who do not vote in favor of the Merger Agreement and who
otherwise comply with the procedures described in Section 262 of the Delaware
General Corporation Law will be entitled to dissenters' rights. We have
summarized for you the provisions of Section 262 of the Delaware General
Corporation Law in the section of the accompanying Proxy Statement called
"Dissenters' Appraisal Rights." That summary includes a description of the
procedure that dissenting stockholders must follow to assert dissenters' rights.
The entire text of Section 262 of the Delaware General Corporation Law is
attached as Annex B to the accompanying Proxy Statement.
CRAIG KLEINMAN
SECRETARY
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROPOSALS TO BE VOTED UPON AT THE ANNUAL MEETING............ 1
SUMMARY TERM SHEET.......................................... 2
WHO CAN HELP ANSWER YOUR QUESTIONS.......................... 5
THE ANNUAL STOCKHOLDERS MEETING............................. 6
General................................................... 6
Matters to be Considered at the 4Front Annual
Stockholders' Meeting................................... 6
Recommendations of the 4Front Board....................... 6
Stockholders Entitled to Vote and Vote Required........... 6
Voting Procedures......................................... 7
Solicitation of Proxies................................... 8
Quorum.................................................... 8
PROPOSAL 1--APPROVAL OF THE MERGER AGREEMENT................ 9
THE MERGER................................................ 9
Brief Description of NCR................................ 9
Background of the Merger................................ 10
Reasons for the Merger.................................. 13
Opinion of Financial Advisor to 4Front.................. 14
Interests of Certain Persons in the Merger.............. 18
Federal Income Tax Consequences to U.S. Stockholders.... 19
Regulatory Matters...................................... 20
Effect on Employee Equity Plans......................... 21
Dissenters' Appraisal Rights............................ 21
Merger Expenses and Fees and Other Costs................ 22
THE MERGER AGREEMENT...................................... 23
The Merger.............................................. 23
Effective Time of the Merger............................ 23
Merger Consideration.................................... 23
Payment for Shares...................................... 24
Representations and Warranties.......................... 25
Certain Covenants....................................... 26
Other Agreements........................................ 27
Conditions to the Merger................................ 27
Amendments and Waivers.................................. 28
No Solicitation; Alternative Acquisition Proposals...... 28
Termination of the Merger Agreement..................... 29
Termination Fees and Expenses........................... 30
Voting Agreements....................................... 31
PROPOSAL 2--ELECTION OF DIRECTORS........................... 32
EXECUTIVE COMPENSATION...................................... 35
PROPOSAL 3--AMENDMENTS TO THE 4FRONT TECHNOLOGIES, INC. 1996
EQUITY INCENTIVE PLAN..................................... 42
BENEFICIAL OWNERSHIP OF COMMON STOCK........................ 43
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
FORWARD-LOOKING STATEMENTS.................................. 44
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 44
STOCKHOLDER PROPOSALS....................................... 44
OTHER BUSINESS.............................................. 44
ANNEXES
ANNEX A Agreement and Plan of Merger among NCR
Corporation, NCR Merger Sub, Inc. and 4Front
Technologies
ANNEX B Dissenters' Rights
ANNEX C Fairness Opinion of 4Front's Financial Advisor
ANNEX D 4Front 1996 Equity Incentive Plan, as proposed to
be amended
</TABLE>
ii
<PAGE>
PROPOSALS TO BE VOTED UPON AT THE ANNUAL MEETING
PROPOSAL 1--APPROVAL OF THE MERGER AGREEMENT
SUMMARY OF PROPOSAL
We propose that 4Front merge with NCR. The merger requires the approval of
the holders of a majority of 4Front's outstanding common stock.
BACKGROUND
4Front has entered into the Merger Agreement with NCR. As a result of the
merger, 4Front will become a wholly-owned subsidiary of NCR and each share of
4Front common stock issued and outstanding at the effective time of the merger
(other than shares held by 4Front and stockholders, if any, who properly
exercise their dissenters' rights under Delaware law) will be converted into the
right to receive $18.50 in cash, without interest, and 4Front will cease to be a
publicly-traded company.
BOARD RECOMMENDATION
4Front's board of directors believes that the merger is in the best
interests of the 4Front stockholders and unanimously recommends that you vote
"FOR" approval of the merger and the adoption of the Merger Agreement. The
affirmative vote of a majority of all shares of 4Front Common Stock outstanding
is required in order to approve the Merger Agreement and the merger.
PROPOSAL 2--ELECTION OF DIRECTORS
BACKGROUND
Six directors (constituting the entire Board) are to be elected at the
Annual Meeting. For these director seats, the 4Front board has nominated Anil
Doshi, Mark Ellis, Terence Burt, Craig Kleinman, Brian V. Murray and Arthur
Keith Ross, each of whom now serve as directors of 4Front.
For information regarding Messrs. Doshi, Ellis, Burt, Kleinman, Murray and
Ross, see "Election of Directors."
All of the nominees for director have indicated their willingness to be
elected as directors. If, as a result of circumstances not now known or
foreseen, any of them shall become unavailable or unwilling to serve as a
director, proxies may be voted for the election of such other person or persons
as the 4Front board of directors may select. The board has no reason to believe
that any of the nominees will be unable or unwilling to serve.
BOARD RECOMMENDATION
4Front's board of directors recommends that stockholders vote "FOR" the
election as directors of Messrs. Doshi, Ellis, Burt, Kleinman, Murray and Ross.
The nominees receiving a plurality of the votes properly cast at the
stockholders' meeting shall be elected to the board. "No" votes, votes against
any nominee and withholding authority to vote for one or more nominees will
result in that nominee receiving fewer votes. Unless otherwise directed, the
persons named on the enclosed proxy card will vote all shares for which they are
appointed as proxies "FOR" the election of the board's nominees. See "Voting
Procedures."
1
<PAGE>
PROPOSAL 3-- AMENDMENT TO THE 4FRONT TECHNOLOGIES, INC. 1996 EQUITY INCENTIVE
PLAN
BACKGROUND
4Front's Board of Directors has unanimously approved an amendment to the
4Front Technologies Inc. 1996 Equity Incentive Plan (the "Plan"), which would
increase the number of options available for grant thereunder to 2,000,000. The
primary features of the Plan, and the salient federal income tax consequences
associated with options granted under the Plan, are summarized above under the
heading "Stock Options and Benefit Plans."
BOARD RECOMMENDATION
4Front's board of directors recommends that the 4Front stockholder vote
"FOR" the approval of the amendments to the Plan. The affirmative vote of a
majority of the shares of 4Front Common Stock present or represented at the
meeting is required to approve this proposal.
SUMMARY TERM SHEET
THIS SECTION SUMMARIZES SELECTED INFORMATION ABOUT THE PROPOSED MERGER AND
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND
THE MERGER AND FOR A MORE COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS OF
THE MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE PROXY STATEMENT, ITS ANNEXES
AND THE OTHER DOCUMENTS TO WHICH WE REFER. WE HAVE INCLUDED A COPY OF THE MERGER
AGREEMENT IN THIS PROXY STATEMENT AS ANNEX A.
Q: WHAT WILL HAPPEN IN THE MERGER?
A: Upon completion of the merger, a subsidiary of NCR will be merged with and
into 4Front and the holders of 4Front common stock, other than those
stockholders who exercise and perfect their dissenters' appraisal rights,
will receive a cash payment of $18.50 for each of their outstanding shares
of 4Front common stock.
Q: WHO WILL OWN 4FRONT AFTER THE MERGER?
A: After the merger, 4Front will be a privately held company wholly owned by
NCR.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A. If the merger is completed, you will receive $18.50 in cash, without
interest, for each share of 4Front common stock that you own. This is the
"Per Share Amount." For example, if you own 100 shares of 4Front common
stock, upon completion of the merger you will receive $1,850 in cash prior
to any tax that may be due. In addition, each option holder or warrant
holder of 4Front will receive the difference between $18.50 per share and
the exercise price per share set forth in the relevant option agreement or
warrant, multiplied by the number of shares of common stock for which option
or warrant is exercisable at the time of the merger.
Q: WHY IS 4FRONT PROPOSING THE MERGER?
A: 4Front is proposing the merger because the 4Front board believes that the
merger is a more desirable alternative than continuing to operate 4Front as
a public company. In particular, the 4Front board considered the risks of
continuing to operate 4Front as a public company and the opportunity for
4Front's stockholders to achieve liquidity with respect to their investment
in 4Front at a price that the 4Front board believes is fair. To review the
background and reasons for the merger in greater detail, see pages 13
through 14.
2
<PAGE>
Q: WHY IS THE 4FRONT BOARD RECOMMENDING THAT I VOTE FOR THE MERGER AGREEMENT?
A: In the opinion of the 4Front board, the terms and provisions of the Merger
Agreement and the merger are fair to and in the best interests of 4Front and
its stockholders. To review the background and reasons for the Merger in
greater detail, see pages 10 to 14.
Q: DID THE 4FRONT BOARD RETAIN FINANCIAL ADVISORS?
A. To assist it in making its recommendation regarding the merger, the 4Front
board retained Chase H&Q as its financial advisor in connection with its
evaluation of the merger. Chase H&Q delivered to the 4Front board an opinion
to the effect that, as of the date of that opinion, the Per Share Amount to
be received by the holders of 4Front stock was fair, from a financial point
of view, to the holders of 4Front stock. We have attached as Annex C to this
proxy statement the full text of the opinion of Chase H&Q. This opinion sets
forth the assumptions made, matters considered and limitations on the review
taken in connection with the opinion. To review a more detailed description
of the Chase H&Q opinion, see pages 14 to 18.
Q: IF THE MERGER IS COMPLETED, WHEN CAN I EXPECT TO RECEIVE THE CASH MERGER
CONSIDERATION FOR MY SHARES?
A: Promptly after the merger is completed, 4Front will send you detailed
instructions regarding the surrender of your 4Front common stock
certificates. You should not send your 4Front common stock certificates to
4Front or anyone else until you receive these instructions. NCR will send
payment of the cash merger consideration to you as promptly as practicable
following its receipt of your stock certificates and other required
documents.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We expect the merger to be completed in the fourth quarter of 2000.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: The receipt of the cash merger consideration by you will be a taxable
transaction for U.S. federal income tax purposes. You will recognize a gain
or loss in an amount equal to the difference between the adjusted tax basis
of your 4Front common stock and the amount of cash you receive in the
merger. If your 4Front common stock is a capital asset, your gain or loss
will generally be long-term gain or loss if your deemed holding period for
your 4Front common stock is more than one year at the effective time of the
merger. To review the U.S. tax consequences to you in greater detail, see
pages 19 through 20. As with any transaction of this type, your tax
consequences will depend on your personal situation. You should consult your
tax advisors for a full understanding of the tax consequences of the merger
to you.
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: You are being asked to approve the Merger Agreement, which provides for the
acquisition of 4Front by NCR. After the merger, 4Front will be a privately
held company and you will no longer own an equity interest in 4Front. The
4Front board has approved the Merger Agreement and the transactions
contemplated thereby and recommends that you vote "FOR" the approval of the
Merger Agreement. We do not expect to ask you to vote on any other matters
at the annual meeting other than the election of six directors of 4Front and
the approval of the amendment to 4Front's Equity Incentive Plan to increase
the number of options to be granted to 2,000,000. However, if a motion is
made to adjourn the annual meeting, you may also be asked to vote on
adjournment of the annual meeting.
3
<PAGE>
Q: WHAT RIGHTS DO I HAVE IF I OPPOSE THE MERGER?
A: Under Delaware law, you are entitled to dissenters' rights. If you do not
vote in favor of the merger and you properly elect to exercise your
dissenters' rights as described under "The Merger-Dissenters' Appraisal
Rights" and in Annex B, you may receive in the merger the "fair value" of
your 4Front common stock as determined by a court. The fair value could be
equal to, less than or more than $18.50 per share.
Q: WHAT DO I NEED TO DO NOW?
A: This proxy statement contains important information regarding the merger as
well as information about 4Front. It also contains important information
about what the 4Front board considered in evaluating the merger. We urge you
to read this proxy statement carefully, including each Annex.
Q: HOW DO I VOTE?
A: Just indicate on your proxy card how you want to vote, and sign and mail it
in the enclosed envelope as soon as possible, so that your shares will be
represented at the annual meeting. The annual meeting will take place on
, , 2000 at 11:00 a.m., local time, at the offices
of Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York 10103.
You may attend the annual meeting and vote your shares in person, rather
than voting by proxy.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: Send in a later-dated, signed proxy card to 4Front's corporate secretary so
it is received before the annual meeting or attend the annual meeting in
person and vote.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares of 4Front common stock only if you provide
instructions on how to vote. You should instruct your broker how to vote
your shares, following the directions your broker provides. If you do not
provide instructions to your broker, your shares will NOT be voted and they
will have the same effect as a vote "AGAINST" the proposal to approve the
Merger Agreement.
Q: WHAT IS THE EFFECT IF I DO NOT VOTE?
A: If you do not submit a proxy card or vote in person at the annual meeting or
if you abstain from voting, it will have the same effect as a vote "AGAINST"
the merger. Your proxy, when properly executed, will be voted in the manner
directed by you.
Q: WHO CAN VOTE AT THE ANNUAL MEETING?
A: Holders of 4Front common stock at the close of business on September 22, 2000
may vote at the annual meeting.
Q: WHAT VOTE IS REQUIRED?
A: The merger must be approved by holders of at least shares of
4Front common stock, representing a majority of the 4Front common stock
outstanding on September 22, 2000, the record date for the annual meeting.
Certain of 4Front's directors and officers, who own 1,608,728 shares of
outstanding 4Front common stock, representing approximately 12.5% of the
outstanding shares, have agreed to vote their 4Front common stock in favor
of the merger.
4
<PAGE>
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. Soon after the merger is completed, we will mail you written instructions
explaining how to obtain the cash merger consideration.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you would like additional copies of this document, or if you would like
to ask any additional questions about the Merger, you should contact:
Craig Kleinman, Secretary
6300 South Syracuse Way, Suite 293
Englewood, Colorado 80111
Telephone: 303-721-7300
5
<PAGE>
THE ANNUAL STOCKHOLDERS MEETING
GENERAL
This proxy statement is being furnished to holders of 4Front common stock in
connection with the solicitation of proxies by and on behalf of the 4Front board
for use at the annual meeting of stockholders to be held at 11:00 a.m. local
time, on , , 2000, at the offices of Fulbright &
Jaworski L.L.P., 666 Fifth Avenue, New York, New York 10103, and at any
adjournment or postponement thereof. We are first mailing this proxy statement,
the accompanying notice, proxy card and letter on or about September 25, 2000 to
all holders of 4Front common stock entitled to notice of, and to vote at, the
annual meeting.
MATTERS TO BE CONSIDERED AT THE 4FRONT ANNUAL STOCKHOLDERS' MEETING
At the annual stockholders' meeting, 4Front stockholders will consider and
vote on:
- approval and adoption of the Merger Agreement;
- the election six directors to serve for the ensuing year;
- the approval of an amendment to the 4Front Technologies, Inc. Equity
Incentive Plan which would increase the number of options available for
grant thereunder to 2,000,000; and
- any other matters that may properly be brought before the 4Front
stockholders' meeting or at any adjournment or postponement of the
stockholders' meeting.
RECOMMENDATIONS OF THE 4FRONT BOARD
4Front's board of directors has unanimously approved the Merger Agreement
and recommends a vote "FOR" approval and adoption of the Merger Agreement and
the merger. See "The Merger--Reasons for the Merger."
4Front's board of directors also recommends that 4Front stockholders vote
"FOR" the election of the six nominees for director and "FOR" the approval of
the amendment to the Plan.
STOCKHOLDERS ENTITLED TO VOTE AND VOTE REQUIRED
The 4Front board has set September 22, 2000 as the record date to determine
which 4Front stockholders will be entitled to vote at the stockholders' meeting.
Only 4Front stockholders of record on the record date will be entitled to
receive notice of and to vote at the stockholders' meeting. On the record date,
there were shares of 4Front common stock outstanding and entitled to vote
at the stockholders' meeting. These shares were held by approximately
stockholders.
Each share of 4Front common stock will have one vote for each matter
properly submitted at the stockholders' meeting. The affirmative vote, either in
person or by proxy, of a majority of the shares of 4Front common stock
outstanding is required in order to approve the Merger Agreement and the
amendment to the Plan. These shares may be represented either in person or by
proxy. If you abstain from voting or if you do not submit a proxy card and do
not vote in person at the stockholders' meeting, your non-action will have the
effect of a vote against the merger and a vote against the amendment of the
Plan. Also, any broker non-vote will have the effect of a vote against the
merger and a vote against the amendment of the Plan. A plurality of votes is
required for the election of directors. Abstentions and broker non-votes will
result in the applicable nominee receiving fewer votes.
As of the close of business on the record date, the directors and executive
officers of 4Front as a group beneficially owned shares of 4Front
common stock, or approximately % of the issued and outstanding shares of
4Front common stock. These figures are calculated without counting shares which
could be acquired be exercising stock options because the shares underlying
6
<PAGE>
those options cannot be voted at the stockholders' meeting. Certain directors
and executive officers of 4Front, representing a total of 12.5% of the
outstanding shares of 4Front common stock presently intend to vote all the
shares they beneficially own "FOR" the approval and adoption of the Merger
Agreement and "FOR" each of the other proposals.
VOTING PROCEDURES
GENERAL
Your vote is important. Because many stockholders cannot personally attend
the stockholders' meeting, it is necessary that a large number be represented by
proxy. If a stockholder of record does not submit a proxy or vote in person at
the stockholders' meeting, his or her shares will not be voted and the
stockholder will not be counted as present for determining the existence of a
quorum. Abstentions and broker non-votes will be included in determining the
number of shares present at the stockholders' meeting, but will not be counted
in the tabulation of votes on any matter.
We encourage you to vote and to vote promptly. Voting promptly may save
4Front the expense of a second mailing.
STOCKHOLDERS OF RECORD
If you are a stockholder of record, meaning that your shares and your stock
certificate(s) are registered in your name with 4Front and its transfer agent,
you may vote (1) by attending the stockholders' meeting or (2) by marking,
signing, dating and mailing the enclosed proxy card in the postage-paid envelope
provided. You may change or revoke your proxy at any time before it is actually
voted at the stockholders' meeting by (1) delivering a written notice of
revocation to the secretary of 4Front, (2) submitting a later-dated proxy or
(3) attending the stockholders' meeting and withdrawing the proxy. You may also
be represented by another person present at the meeting by executing a proxy
designating such person to act on your behalf. If you sign, date and mail your
proxy card without indicating how you want to vote, your vote will be counted as
a vote in favor of the 4Front's board's nominees and in favor of the proposals
to be presented at the stockholders' meeting.
STOCKHOLDERS IN STREET NAME
Different procedures may apply to shares held in the name of a broker or
other intermediary, also referred to as being held in "street name," rather than
in the stockholder's own name. A stockholder whose shares are held in street
name through an intermediary is referred to as the "beneficial owner" of the
shares, while the intermediary or stockholder of record is referred to as the
"record owner" of the shares. Shares held in street name are voted by the record
owner rather than the beneficial owner. However, the record owner usually is
required to provide a means for the beneficial owner to direct how the record
owner is to vote the shares. This may include providing a proxy card or
instructions that may differ from the materials provided by 4Front to its
stockholders of record.
If your shares are held in street name, you should follow whatever
instructions are provided by the record owner of your shares. The broker or
other intermediary serving as record owner of your shares, in its discretion,
may choose to provide a means for you to direct the voting of your shares by
telephone or over the Internet. If so, appropriate instructions may be set forth
on the enclosed proxy card, or the broker or other intermediary may choose to
provide separate instructions.
If your shares are held in street name, your broker or other intermediary
may be permitted to vote your shares in its discretion, particularly if you do
not vote or give specific voting instructions prior to the stockholders'
meeting. If you wish to vote such shares by attending the stockholders' meeting
in person, you will need to obtain a proxy from the broker or other intermediary
who is the stockholder of record having the legal authority to vote your shares.
Please note that, once a beneficial or street
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name owner has submitted voting instructions, such instructions may be changed
or revoked only in accordance with the procedures of the broker or other record
owner of such shares, and then only in accordance with the procedures applicable
to stockholders of record as described above. If your shares are held in street
name, then to change or revoke your voting instructions you must contact the
broker or other intermediary who is the stockholder of record having the legal
authority to vote your shares.
4Front's board of directors is not aware of any matters that will come
before the stockholders' meeting other than the vote on the Merger Agreement,
the election of six directors and the approval of the amendment to the Plan. If
any other matters come before the stockholders' meeting, the persons named on
the enclosed proxy card will have the discretion to vote on those matters using
their best judgment, unless you specifically withhold that authorization when
you complete your proxy card.
Votes cast by proxy or in person at the stockholders' meeting will be
counted by the election inspector appointed for the stockholders' meeting. The
election inspector will determine if a quorum is present. Where proxies are
marked as abstentions, where stockholders appear in person but abstain from
voting or where a broker indicates on a proxy that it does not have
discretionary authority regarding certain shares, those abstentions and "broker
non-votes" will be treated as shares that are present and entitled to vote for
purposes of determining if a quorum is present at the stockholders' meeting.
4FRONT STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
SOLICITATION OF PROXIES
In addition to using the mails, the directors, officers and employees of
4Front may solicit proxies for the stockholders' meeting from stockholders in
person or by telephone. These directors, officers and employees will not be
specifically compensated for their services. We will also make arrangements with
brokerage firms and other custodians, nominees and fiduciaries to send proxy
materials to their principals and will reimburse these parties for their
expenses in doing so. We will pay all costs of soliciting proxies for the
stockholders' meeting. In addition, we have retained Georgeson Shareholder
Communications Inc. for assistance with the solicitation of proxies. For its
services, Georgeson will receive a fee estimated at $15,000 plus reimbursement
for reasonable and customary out-of-pocket expenses.
STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
IN THE ENVELOPE PROVIDED. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE ASK YOUR
COOPERATION IN MAILING YOUR PROXY PROMPTLY, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
QUORUM
The presence, in person or by proxy, of a majority of the issued and
outstanding 4Front common stock entitled to vote at the stockholders' meeting is
necessary to constitute a quorum.
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PROPOSAL 1: APPROVAL OF THE MERGER AGREEMENT
THE MERGER
THE DESCRIPTION IN THIS PROXY STATEMENT OF THE MERGER AND THE PRINCIPAL
TERMS OF THE MERGER AGREEMENT IS SUBJECT TO, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO, THE MERGER AGREEMENT, THE LEGAL DOCUMENT GOVERNING THE MERGER. WE
HAVE ATTACHED A COPY OF THE MERGER AGREEMENT TO THIS PROXY STATEMENT AS ANNEX A
AND RECOMMEND THAT YOU READ IT CAREFULLY.
BRIEF DESCRIPTION OF BUSINESS OF 4FRONT
4Front is a leading provider and integrator of information technology
("IT"), services and solutions to primarily European customers. Our services and
solutions include corporate help-desks, training, system design and support and
a full range of IT consulting services. Our customers are generally blue-chip
corporations and government authorities and include General Electric, British
Telecom, Telecom Italia, Lucent, Computer Sciences Corporation, IBM, Phillips,
Nokia, Ericsson, Siemens, Sony, Cegedim, Renault, Pfizer, PaineWebber, Societe
Generale and the UK Ministry of Defence.
Since 1996, by leveraging our position in the marketplace, we have
progressed from being principally a small provider of support services and
specialized products in the UK to being a provider of a broad range of IT
services and solutions on a European basis and we are now one of the leading
independent providers of IT services in Europe. To further accelerate our move
to providing higher margin IT services, and in light of the rapid development of
e-commerce in the European marketplace, we have recently commenced an initiative
to establish ourselves as a leading provider of e-business solutions and
services and of other higher-value services in Europe. Our revenues have grown
from approximately $84.1 million in fiscal 1998 to over $252.9 million in fiscal
2000.
We are incorporated in the state of Delaware. Our stock trades on NASDAQ
under the symbol "FFTI." On September 21, 2000, the last reported sales price of
our common stock, as reported by NASDAQ, was $ .
Our principal corporate offices are located at 6300 South Syracuse Way,
Suite 293, Englewood, Colorado 80111, telephone (303) 721-7341. Our principal
operational offices are located at 57A Hatton Garden, London, EC1N 8JG, United
Kingdom, telephone 011-44-20-7269-5800.
BRIEF DESCRIPTION OF BUSINESS OF NCR
NCR and its subsidiaries provide solutions designed specifically to enable
businesses to build, expand and enhance their relationships with their customers
by facilitating transactions and transforming data from transactions into useful
business information. Through its presence at customer interaction points, such
as automated teller machines or point-of-sale workstations, NCR's solutions are
designed to help businesses process consumer transactions. They also offer
businesses the opportunity to centralize detailed information in a data
warehouse, analyze the complex relationships among all of the different data
elements and respond with programs designed to improve consumer acquisition,
retention and profitability. NCR offers specific solutions for the retail and
financial industries and also provides solutions for industries including
telecommunications, transportation, insurance, utilities and electronic
commerce, as well as consumer goods manufacturers and government entities. These
solutions are built on NCR's foundation of long-established industry knowledge
and consulting expertise, value-adding software, global customer support
services, a complete line of consumable and media products and a range of
hardware technology.
NCR was originally incorporated in 1884 and was a publicly traded company on
the New York Stock Exchange prior to its merger with a wholly-owned subsidiary
of AT&T Corp. ("AT&T") on September 19, 1991. Effective December 31, 1996, AT&T
distributed to its stockholders all of its
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interest in NCR (the "Distribution") on the basis of one share of NCR common
stock for each 16 shares of AT&T common stock. NCR common stock is listed on the
New York Stock Exchange and trades under the symbol "NCR."
BACKGROUND OF THE MERGER
In early March 2000, Thomas J. Flynn of NCR contacted Anil Doshi, our
Chairman, and indicated that he wanted to discuss something of mutual interest.
Mr. Doshi referred the matter to Terry Burt, our COO, who met with NCR
representatives in late March. During the meeting, NCR indicated an interest in
the potential purchase of our hardware maintenance business.
In April 2000, Messrs. Doshi and Burt and Mark Ellis, our President, met
with representatives of a private internet incubator ("Strategic Buyer 1") who
had contacted Mr. Ellis to propose a meeting which might be of mutual interest.
During the meeting, Strategic Buyer 1 discussed 4Front and their potential
acquisition of or merger with 4Front. Strategic Buyer 1 never made a formal
proposal for any transaction with 4Front.
In early May 2000, representatives of NCR had further discussions with
4Front concerning the sale of our hardware maintenance business, and we signed a
confidentiality agreement with NCR.
On May 9, 2000 and on an unsolicited basis, representatives of NCR called
David Gunby, the manager of 4Front's hardware maintenance business, and informed
him that NCR might prefer to buy all of 4Front but did not make a proposal. The
next day, Mr. Gunby informed Mr. Burt of the call, and Mr. Burt, in turn,
conveyed this to Messrs. Doshi and Ellis. Messrs. Doshi and Ellis constitute the
Executive Committee of 4Front's Board and are authorized to explore strategic
opportunities.
On May 19, 2000, 4Front's Board met in a regularly scheduled session and was
updated on the status of contacts made by Strategic Buyer 1 and NCR.
Between approximately the middle and end of May, 2000, Messrs. Burt and
Gunby, responded to various queries from NCR concerning information which 4Front
had previously publicly disclosed under the non-disclosure agreement. Based on
some of these contacts, Messrs. Burt and Gunby agreed to prepare a presentation
on 4Front's business to be given to the representatives NCR at a meeting in
early June.
In late May 2000, Messrs. Doshi, Ellis and Burt met with representatives of
a UK public company ("Strategic Buyer 2"), during which Strategic Buyer 2
indicated that they saw synergies with 4Front and would like to explore a
possible transaction. Strategic Buyer 2 proposed to return to 4Front with
further details.
On June 1, 2000, Messrs. Ellis and Burt gave NCR representatives the formal
presentation about 4Front's business prepared by Messrs. Ellis, Burt, Gunby and
another employee of 4Front. On June 2, 2000, Messrs. Doshi, Ellis and Burt met
again with NCR. During the meeting, NCR representatives offered to purchase all
of the outstanding stock of 4Front for between $17.00 and $17.25 per common
share of 4Front. After careful consideration and deliberation, Messrs. Doshi and
Ellis rejected the offer and indicated that 4Front was not for sale but that
4Front would consider higher offers. Immediately thereafter, Messrs. Doshi and
Ellis discussed NCR's proposal with 4Front's directors, and the directors
ratified the rejection of NCR's initial offer but also authorized Messrs. Doshi
and Ellis, as the Executive Committee of the Board, to entertain other
unsolicited offers.
In early June, 2000, Strategic Buyer 2 announced disappointing financial
results and its shares declined by approximately 30%, and that it could not
proceed with any transaction with 4Front at that time.
On June 8, 2000, 4Front announced results for the first quarter. 4Front's
stock price fell approximately 30% to $10.63, and 4Front's most widely followed
analyst downgraded the stock and
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issued a 12-month earnings target of $20.00. 4Front believed that the stock
price drop was due, in part, to uncertainty concerning 4Front's "e-business"
initiatives and a restructuring charge resulting from consolidating certain
acquisitions.
In mid-June, 2000, Messrs. Doshi, Ellis and Burt discussed that given the
current market environment and 4Front's stock price currently and the prospects
of increasing 4Front's stock price, NCR's offer appeared more attractive. The
Executive Committee of the Board, however, discussed that while 4Front was not
for sale, it would consider unsolicited offers.
On June 15, 2000, NCR indicated to Mr. Gunby that it would contact 4Front
during the week of June 19, 2000. On June 19, 2000, William J. Eisenman, of NCR,
informed Mr. Doshi that representatives of NCR would contact 4Front on June 21,
2000. On June 21, 2000, Mr. Eisenman of NCR contacted Mr. Doshi to express NCR's
continuing interest in 4Front and to inquire whether NCR could send a team to
London the following week to meet with 4Front's management. As a follow up to
the June 21 call, Mr. Flynn, of NCR, called Mr. Burt to set up another meeting
on June 27, 2000.
On June 27, 2000, representatives of NCR had further discussions with
Mr. Burt and other 4Front personnel concerning 4Front's business. On the same
day, Messrs. Doshi and Ellis met with Strategic Buyer 2, which now indicated
that it again might be interested in 4Front. However, Strategic Buyer 2 did not
make a formal proposal. During that day, Mr. Burt met with NCR representatives
who indicated that they saw no grounds to increase NCR's original offer given
that with 4Front's stock price at approximately $11.00, the offer represented
more than a 50% premium. When 4Front did not react enthusiastically, the parties
agreed to meet for dinner that night. At dinner, the representatives of NCR
explained to Messrs. Doshi, Ellis and Burt that it might be willing to pay
$18.00 per share and if 4Front could dispose of its Services Industries Limited
subsidiary ("SIL"), that 4Front stockholders could, in addition to $18.00 per
share, receive a portion of the sale proceeds.
On June 28, 2000, Messrs. Doshi, Ellis and Burt discussed the expressions of
interest 4Front had received from NCR, Strategic Buyer 1 and Strategic Buyer 2
as well as an overture earlier in the year from a French company ("Strategic
Buyer 3") concerning the acquisition of SIL. They discussed the possible benefit
4Front's stockholders could receive, in addition to NCR's $18.00 per share
offer, resulting from the disposition of SIL. It was agreed that before further
action was taken, 4Front should ascertain if Strategic Buyer 3 were still
interested in acquiring SIL. Accordingly, Mr. Burt called a financial
representative of Strategic Buyer 3, on June 28 to discuss whether it was still
interested in SIL. When he responded affirmatively, the parties agreed to meet
to discuss the matter.
On June 29, 2000, Messrs. Doshi, Ellis and Burt traveled to Paris to meet
with Strategic Buyer 3 to discuss a purchase of SIL. Strategic Buyer 3, however,
indicated a desire to acquire all of 4Front and indicated a possible price of
more than $20.00 but that a significant portion of the consideration would be
Strategic Buyer 3's stock.
Between June 30, 2000 and July 2, 2000, Messrs. Doshi and Ellis reviewed the
status of all negotiations with the members of the Board, including Strategic
Buyer 3's proposal. It was the Board's view that due to market conditions and
the uncertainty of the future value of any potential acquirors' stock, an all
cash deal would be preferable if 4Front were to enter into any transaction.
On July 5, 2000, Mr. Burt flew to New York and briefed 4Front's counsel,
Fulbright & Jaworski L.L.P. ("F&J") on the status of negotiations.
On July 6, 2000, Mr. Ellis joined Mr. Burt with representatives of F&J. F&J
briefed Messrs. Ellis and Burt on the Board's fiduciary obligations.
Subsequently, 4Front retained Chase H&Q ("Chase H&Q") to analyze NCR's offer. At
a meeting with NCR's representatives on that date, Mr. Ellis also proposed to
NCR that it consider a $19.00 per share offer that would not be contingent on
any asset disposition. NCR agreed to consider this proposal.
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Between July 6 and July 12, 2000, Messrs. Doshi and Ellis informed the
entire Board of the status of negotiations with NCR.
On July 14, 2000, the Board held a meeting. Messrs. Doshi, Ellis and Burt
discussed whether to explore the possibility of selling 4Front, which included a
general discussion of the advantages and disadvantages of selling 4Front. The
advantages included maximizing value for 4Front's stockholders, particularly
creating a higher stock price for 4Front in light of the Board's opinion that
the company was undervalued. Mr. Ellis also explained Chase H&Q's initial views
on the acquisition process to the Board.
On July 24, 2000, F&J and 4Front discussed a draft of the merger agreement
prepared by NCR's counsel. On July 25, 2000, 4Front and NCR and their
representatives met to discuss the draft. On July 25, 2000, NCR proposed an
$18.00 per share price in a transaction, which would not be contingent on any
asset disposition.
On July 25, 2000, the Board held a meeting which was attended by
representatives of F&J and Chase H&Q. Chase H&Q representatives reviewed with
the Board its preliminary analysis of the NCR offer and updated the Board on the
status of Chase H&Q's contacts with other potential acquirors. The
representatives of Chase H&Q noted that, based on their contacts with other
potential acquirors, only Strategic Buyer 2 appeared likely to have any interest
in a transaction with 4Front. The Board then discussed the general parameters of
the NCR offer, including the advantages and disadvantages of a merger compared
to a tender offer and whether NCR's current bid could be improved. Mr. Doshi
noted that NCR was adamant about a merger and that Chase H&Q and Messrs. Doshi
and Ellis would again discuss price with NCR. F&J then reviewed the directors'
fiduciary obligations and noted that while the Board was entertaining
unsolicited bids for the company, the directors were under no obligation to sell
the company.
On July 27, 2000, representatives of Chase H&Q and Messrs. Doshi, Ellis and
Burt met with representatives of NCR to discuss the possibility of NCR
increasing its bid. At the meeting NCR reaffirmed its bid of $18.00 but during
the meeting agreed to increase its bid to $18.05. Later that day, NCR agreed to
increase the price to $18.50 per share if Messrs. Doshi and Ellis would waive a
portion of their severance payments which were specified in their employment
agreements.
On July 30, 2000, the directors of 4Front informally met to discuss the
status of negotiations with NCR. In addition, Messrs. Doshi and Ellis informed
the Board that of the 16 potential purchasers contacted by Chase H&Q, only
Strategic Buyer 2 expressed an interest and signed a confidentiality agreement.
Messrs Doshi and Ellis also noted that Strategic Buyer 3 was not responsive.
Between July 31 and August 2, 2000, 4Front and NCR, and their
representatives, finalized draft documentation which provided for a merger of
4Front with a subsidiary of NCR and the payment to 4Front stockholders of $18.50
per share in cash.
On August 2, 2000, the 4Front Board met with representatives of F&J and
Chase H&Q in attendance. Messrs. Doshi, Ellis and Burt discussed the proposed
NCR transaction with the Board. F&J reviewed the terms of the Merger Agreement
with the Board and discussed with the Board its fiduciary obligations.
Representatives of Chase H&Q then reviewed with the Board its financial analysis
of the transaction and orally delivered its opinion, subsequently confirmed in
writing, that $18.50 per share to be paid by NCR was fair to 4Front's
stockholders from a financial point of view. The representatives of Chase H&Q
also confirmed that as of August 2, 2000, only Strategic Buyer 2 had indicated
any interest in pursuing a transaction with 4Front and that Strategic Buyer 3
remained unresponsive. Following a discussion which included the Board's
determination that any transaction with Strategic Buyer 2 was unlikely due to
its inability to act and the fact that its offer was likely to include, or be
comprised solely of, Strategic Buyer 2's stock, and that Strategic Buyer 3 was
unresponsive, the Board approved the merger and the Merger Agreement. The Merger
Agreement was
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executed after the close of the market on August 2, 2000, and the transaction
was publicly announced prior to the opening of the market on August 3, 2000.
REASONS FOR THE MERGER
In evaluating and determining to approve the merger and the Merger
Agreement, the 4Front board considered a variety of factors, including but not
limited to the following:
(1) 4Front's future prospects and possible alternatives to the proposed
merger, including the prospects for and challenges and risks associated
with, continuing as an independent company. In this regard, the 4Front
board considered the amount and range of acquisition consideration most
likely to be offered by other prospective acquisition partners, the
likelihood of realizing those values, the prospects of receiving a better
financial offer from another potential buyer and the view of 4Front's
management that the merger represented the best strategic alternative
available to 4Front under the circumstances. The 4Front board also
considered the risks of remaining as an independent company, including
4Front's prospects for the success of its "e-business" strategy, the
timing of the merger, and the IT services industry, generally;
(2) The substantial decline of 4Front's stock price in the spring and summer
of 2000 and the view of the 4Front board and management that it could
take a long time for 4Front's stock price to exceed the $18.50 per share
offered by NCR;
(3) The fact that $18.50 per share offered by NCR represented a substantial
premium over the prevailing market prices of 4Front common stock prior to
the time that 4Front was contacted by NCR; and
(4) The opinion of Chase H&Q, 4Front's financial advisor, to the effect
that, as of the date of its opinion and based upon and subject to the
various considerations and limitations set forth in its opinion, the Per
Share Amount was fair, from a financial point of view, to 4Front's
stockholders.
The 4Front board also considered certain countervailing factors in its
deliberations concerning the merger, including:
(1) The potential disruption of 4Front's business that might result from the
announcement of the merger;
(2) The possible difficulties of integrating the management and corporate
cultures of 4Front and NCR;
(3) The uncertainty regarding stockholders, customers and employees'
perceptions of the merger; and
(4) The possibility that the merger might not be completed.
In the view of the 4Front board, however, these considerations were not
sufficient, individually or in the aggregate, to outweigh the advantages of the
merger.
Accordingly, based on all of the foregoing factors, the 4Front board
unanimously approved and adopted the Merger Agreement and the merger. The 4Front
board did not quantify or attempt to assign relative weights to the specific
factors considered in reaching its determination and, further, individual
directors may have given differing weights to differing factors.
THE 4FRONT BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, 4FRONT AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
4FRONT'S STOCKHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
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OPINION OF FINANCIAL ADVISOR TO 4FRONT
4Front engaged Chase H&Q to act as a financial advisor in connection with
the proposed merger. The 4Front board selected Chase H&Q to act as a financial
advisor based on Chase H&Q's qualifications, expertise and reputation, as well
as Chase H&Q's historic investment banking relationship and familiarity with
4Front. Chase H&Q delivered its written opinion on August 2, 2000 to the 4Front
board that, as of such date, based upon and subject to the assumptions made,
matters considered and limits of the review undertaken by Chase H&Q, the $18.50
per share to be received by the holders of 4Front common stock was fair to such
holders from a financial point of view.
THE FULL TEXT OF THE OPINION DELIVERED BY CHASE H&Q TO THE 4FRONT BOARD OF
DIRECTORS, DATED AUGUST 2, 2000, WHICH SETS FORTH THE ASSUMPTIONS MADE, GENERAL
PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF REVIEW
UNDERTAKEN BY CHASE H&Q IN RENDERING ITS OPINION, IS ATTACHED AS ANNEX C TO THIS
PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. THE CHASE H&Q OPINION
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY 4FRONT STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER AGREEMENT. THE SUMMARY OF THE
CHASE H&Q OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF SUCH OPINION ATTACHED HERETO AS ANNEX C. 4FRONT STOCKHOLDERS
ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
In reviewing the proposed transaction, and in arriving at its opinion, Chase
H&Q, among other things:
- reviewed the publicly available consolidated financial statements of
4Front for recent years and interim periods to date and certain other
relevant financial and operating data of 4Front made available to Chase
H&Q from published sources, including Wall Street analysts' research
reports, and from the internal records of 4Front;
- reviewed certain internal financial and operating information relating to
4Front prepared by the senior management of 4Front;
- discussed the business, financial condition and prospects of 4Front with
certain members of 4Front's senior management;
- reviewed the recent reported prices and trading activity for the common
stock of 4Front and compared such information and certain financial
information for 4Front with similar information for certain other
companies engaged in businesses Chase H&Q considered comparable;
- reviewed the financial terms, to the extent publicly available, of certain
comparable merger and acquisition transactions;
- reviewed a draft of the Merger Agreement, dated July 31, 2000; and
- performed such other analyses and examinations and considered such other
information, financial studies, analyses and investigations and financial,
economic and market data as Chase H&Q deemed relevant.
Chase H&Q did not assume responsibility for independent verification of, and
did not independently verify, any of the information concerning 4Front
considered in connection with its review of the proposed transactions, including
without limitation any financial information, forecasts or projections,
considered in connection with the rendering of its opinion. Accordingly, for
purposes of its opinion, Chase H&Q assumed and relied upon the accuracy and
completeness of all such information. In connection with its opinion, Chase H&Q
did not prepare or obtain any independent valuation or appraisal of any of the
assets or liabilities of 4Front, and it did not conduct a physical inspection of
the properties and facilities of 4Front. With respect to the financial forecasts
and projections used in its analysis, Chase H&Q assumed that they reflected the
best currently available estimates and judgments of the expected future
financial performance of 4Front, and Chase H&Q expressed no view as to the
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reasonableness of such forecasts and projections or the assumptions on which
such forecasts or projections were based. For the purposes of its opinion, Chase
H&Q also assumed that neither 4Front nor NCR was a party to any pending
transactions, including without limitation external financings,
recapitalizations or material merger or acquisition discussions, other than the
proposed merger and transactions in the ordinary course of conducting their
respective businesses. 4Front advised Chase H&Q, and for purposes of its opinion
Chase H&Q assumed, that the proposed merger would be treated as a purchase for
financial accounting purposes. Chase H&Q did not give consideration to the tax
effect of the proposed merger on 4Front or the stockholders of 4Front in the
United States or any other jurisdiction.
In performing its analyses, Chase H&Q used published Wall Street estimates
of fiscal year 2001 and 2002 financial performance of 4Front. Because 4Front's
fiscal year ends on January 31, Chase H&Q in its analyses used these estimates
of fiscal year 2001 and 2002 financial performance as estimates of 4Front's
calendar year 2000 and 2001 financial performance, respectively. Chase H&Q also
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control
of 4Front, NCR or Chase H&Q. The analyses performed by Chase H&Q and summarized
below are not necessarily indicative of actual values or actual future results,
which may be significantly more or less favorable than suggested by such
analyses. Because such analyses are inherently subject to uncertainty, being
based upon numerous factors or events beyond the control of 4Front, NCR or their
respective advisors, neither 4Front, Chase H&Q nor any other person assumes
responsibility if future results or actual values are materially different from
the results of analyses based on forecasts or assumptions. Additionally,
analyses relating to the values of businesses do not purport to be appraisals or
to reflect the prices at which businesses or securities actually may be acquired
or bought or sold.
Chase H&Q's opinion is necessarily based upon market, economic, financial
and other conditions as they existed and can be evaluated as of the date of the
opinion and any subsequent change in such conditions would require a
reevaluation of such opinion. Although subsequent developments may affect its
opinion, Chase H&Q has assumed no obligation to update, revise or reaffirm it.
Chase H&Q expressed no opinion as to the price at which 4Front common stock will
trade. In rendering its opinion, Chase H&Q assumed that the executed version of
the Merger Agreement would not differ in any material respect from the drafts
that Chase H&Q reviewed and that the proposed merger would be consummated
substantially on the terms discussed in the Merger Agreement, without any waiver
of any material terms or conditions by any party thereto.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to summary description. The summary of Chase H&Q's
analyses set forth below summarizes the material analyses presented to the
4Front board but is not a complete description of the presentation by Chase H&Q
to the 4Front board or the analysis performed by Chase H&Q in connection with
preparing its opinion. In arriving at its opinion, Chase H&Q did not attribute
any particular weight to any analyses or factors considered by it, but rather
made subjective, qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, Chase H&Q believes that its analyses and
the summary set forth below must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, or of the following
summary, without considering all factors and analyses, could create an
incomplete view of the processes underlying the analyses set forth in the Chase
H&Q presentation to the 4Front board of directors and Chase H&Q's opinion.
The terms of the proposed merger were determined through negotiations
between 4Front and NCR and were approved by the 4Front board. Although Chase H&Q
provided advice to 4Front during the course of these negotiations, the decision
to enter into the Merger Agreement was solely that of the 4Front board. As
described above, the opinion of Chase H&Q and its presentation to the 4Front
board were only one of a number of factors taken into consideration by the
4Front board in making its determination to approve the proposed merger.
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The following is a brief summary of the material financial analyses
performed by Chase H&Q in connection with providing its opinion to the 4Front
board on August 2, 2000.
VALUATION ANALYSIS OF 4FRONT
ANALYSIS OF PUBLICLY TRADED COMPARABLE COMPANIES. This analysis reviews a
business' operating performance and outlook relative to a group of peer
companies to determine an implied value. Using published Wall Street estimates,
Chase H&Q compared, among other things, the equity values and projected revenues
and earnings per share for calendar years 2000 and 2001 for 4Front to
corresponding measures for certain publicly traded information technology
services provider and outsourcing provider companies that Chase H&Q considered
comparable to 4Front. Chase H&Q used multiples of enterprise value to revenues
and per share price to earnings per share when making its comparisons. The
companies that Chase H&Q considered comparable to 4Front were:
- Cambridge Technology Partners
- Complete Business Solutions
- Ciber
- iGate
- Keane
- Perot Systems
- Syntel
- Technology Solutions
- Affiliated Computer Services
- IMR Global
- Modis Professional Services
- RCM Technologies
- Renaissance Worldwide
Chase H&Q determined mean and median enterprise value to revenue and price
to earnings multiples for these companies. Applying such multiples for the
comparable companies to projected calendar year 2000 and 2001 revenues and
earnings per share of 4Front resulted in a range of implied equity value per
share of 4Front of $10.50 to $16.25. Chase H&Q observed that the consideration
of $18.50 per share of 4Front proposed to be paid in the merger exceeded the
implied range.
Chase H&Q also determined the mean control premium paid in certain selected
merger and acquisition transactions involving companies in the information
technology services industry. Applying such premium to the range of implied
equity value per share of 4Front determined above resulted in a range of implied
equity value per share of 4Front of $14.00 to $21.75. Chase H&Q observed that
the consideration of $18.50 per share of 4Front proposed to be paid in the
merger was within the implied range.
ANALYSIS OF SELECTED M&A TRANSACTIONS. This analysis provides a valuation
range based on financial information of selected public companies which have
been recently acquired and are in similar industries as the business being
evaluated. Using published Wall Street estimates, Chase H&Q compared the
proposed merger with nine selected mergers and acquisitions transactions
involving companies in the information technology services industry. The
acquirors and targets in the transactions that Chase H&Q deemed comparable to
the proposed merger were:
- Computer Sciences Corp. / Policy Management Systems
- PSINet / Metamor Worldwide Inc.
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- AT&T Corp. / GRC International Inc.
- Computer Sciences Corp. / Nichols Research Corp.
- Compuware / Data Processing Resources
- Getronics NV / Wang Laboratories Inc.
- Anteon Corp. / Analysis & Technology Inc.
- Computer Associates International / Computer Management Sciences
- Metamor Worldwide Inc. / SPR Inc.
In examining these transactions, Chase H&Q analyzed, among other things, the
multiples of implied enterprise values of the target in the transactions to
(1) revenues of the target for the last four fiscal quarters preceding the
public announcement of the transaction and (2) projected revenues of the target
for the calendar year in which the transaction was publicly announced, if the
transaction had been announced on or prior to September 30, or for the calendar
year following the public announcement of the transaction, if the transaction
had been announced after September 30, and the multiple of the offer price per
share to projected earnings per share for the target for the calendar year in
which the transaction was publicly announced, if the transaction had been
announced on or prior to September 30, or for the calendar year following the
public announcement of the transaction, if the transaction had been announced
after September 30. All multiples for the selected transactions were based on
public information available at the time of public announcement, and Chase H&Q's
analysis did not take into account different market and other conditions during
the two-year period during which the selected transactions occurred. Applying
the means (excluding highest and lowest) and medians of the foregoing sets of
multiples to 4Front's revenues for the last four fiscal quarters, projected
calendar year 2000 revenues and projected calendar year 2000 earnings per share,
based on published Wall Street estimates, resulted in a range of implied equity
value per share of 4Front of $14.50 to $22.50. Chase H&Q observed that the
consideration of $18.50 per share of 4Front proposed to be paid in the merger
was within the implied range.
PREMIUM ANALYSIS. Chase H&Q compared the implied premium as of August 1,
2000 of the consideration to be paid in the proposed merger to the implied
premiums paid in the comparable public company transactions listed above.
Applying the mean (excluding highest and lowest) and median premiums paid to the
price of 4Front common stock on the trading day prior to August 1, 2000 and the
twenty trading days prior to August 1, 2000 resulted in a range of equity values
per share of 4Front of $16.50 to $17.75. Chase H&Q observed that the
consideration of $18.50 per share of 4Front proposed to be paid in the merger
exceeded the implied range.
DISCOUNTED REVENUE ANALYSIS. Chase H&Q performed a discounted revenue
analysis based on published Wall Street estimates of 4Front's revenues for
calendar year 2001. Chase H&Q extrapolated a range of calendar year 2002
revenues assuming a range of revenue growth rates, applied a range of enterprise
value to revenue multiples to such revenues, and then discounted such revenues
based on a range of discount rates. The foregoing analysis resulted in a blended
range of equity value per share of 4Front of $11.00 to $18.00. Chase H&Q
observed that the consideration of $18.50 per share of 4Front proposed to be
paid in the merger exceeded the implied range.
Chase H&Q also observed that no company or transaction used in the above
analyses is identical to 4Front or the proposed merger, and the reasons for and
circumstances surrounding each of the analyzed transactions are inherently
different. Accordingly, an analysis of the results of the foregoing is not
mathematical; rather it involves complex, qualitative considerations and
judgments, reflected in Chase H&Q's opinion, concerning differences in the
financial and operating characteristics of the compared companies, the
characteristics of the selected transactions and other factors that could affect
the public trading values of the comparable companies and 4Front.
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The foregoing description of Chase H&Q's opinion is qualified in its
entirety by reference to the full text of such opinion which is attached as
Annex C to this proxy statement.
Chase H&Q, as part of its investment banking services, is regularly engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, strategic transactions, corporate restructurings, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. Chase H&Q
has previously provided investment banking and other financial advisory services
to 4Front, including as lead manager in 4Front's follow-on offering in
July 1998, and has received fees for rendering these services. In the ordinary
course of business, Chase H&Q acts as a market maker and broker in the publicly
traded securities of 4Front and receives customary compensation in connection
therewith and has provided research coverage of 4Front in the past. In the
ordinary course of business, Chase H&Q may actively trade in the equity and
derivative securities of 4Front and NCRfor its own account and for the accounts
of its customers and, accordingly, may at any time hold a long or short position
in such securities. Chase H&Q may in the future provide investment banking or
other financial advisory services to 4Front or NCR.
Pursuant to an engagement letter with Chase H&Q, we have agreed to pay Chase
H&Q a customary fee in connection with the financial advisory services provided
by Chase H&Q and the delivery of the fairness opinion. We also agreed to
reimburse Chase H&Q for its reasonable out-of-pocket expenses and to indemnify
Chase H&Q against certain liabilities, including liabilities under the federal
securities laws or relating to or arising out of Chase H&Q's engagement as
financial advisor.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the 4Front board for approval of the
merger, 4Front stockholders should be aware that certain members of 4Front's
management and of the 4Front board have interests in the merger that are in
addition to the interests of the 4Front stockholders generally.
EMPLOYMENT AGREEMENTS
Certain of our executive officers and directors have entered into employment
agreements with us which could result in their receiving certain severance
benefits following a change of control if their employment is terminated by us
without good cause or by them. These arrangements are described under "Executive
Compensation--Employment Arrangements." The Merger Agreement requires Anil
Doshi, our chairman and chief executive officer, and Mark Ellis, our vice
chairman and president to resign upon consummation of the merger. In connection
with their resignations, they will receive a lump sum payment of L517,500
($828,000) and L439,125 ($702,600), respectively, and continuation of their
benefits for one year. Terence Burt, our Vice President and Chief Operating
Officer, will enter into a new three-year employment agreement with NCR that
provides for an annual base salary of L154,219 ($246,750) per year with a bonus
of between 40% and 80% of his base salary, depending on his performance under
the agreement.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The Merger Agreement provides that, after the closing of the merger, NCR
will assume all rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the merger in favor of any of our
officers and directors and all of our indemnification agreements or arrangements
in favor of such persons, and that such arrangements shall survive the merger
for a period of six years. In addition, NCR has agreed that for six years after
the closing of the merger, it will maintain in effect our current directors' and
officers' liability insurance coverage on terms and in amounts no less favorable
than prior to the merger.
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STOCK OPTIONS
Each option holder or warrant holder of 4Front will receive the difference
between $18.50 per share and the exercise price per share set forth in its
option agreement or warrant, multiplied by the number of shares of 4Front common
stock for which such option or warrant were exercisable. Accordingly,
substantially all stock options and warrants owned by our directors and
executive officers shall, upon the closing of the merger, become, in effect,
immediately fully vested and option holders and warrant holders will be entitled
to receive cash as if they owned all of the shares of 4Front common stock
underlying the options and warrants immediately prior to the closing.
As a result of the transaction with NCR, our directors and executive
officers, as a group, will receive $5,391,021.83 for their stock options and
warrants. Of this amount, Mr. Ross, a director, will receive $187,220,
Mr. Kleinman, a director, will receive $225,845, Mr. Murray, a director, will
receive $314,720, Mr. McDonnell, our CFO, will receive $387,036.83, Mr. Burt,
our COO, will receive $1,411,000, Mr. Ellis, our President, will receive
$1,342,500 and Mr. Doshi, our Chairman, will receive $1,522,700.
FEDERAL INCOME TAX CONSEQUENCES TO U.S. STOCKHOLDERS
The following discussion describes material United States federal income tax
consequences of the merger to U.S. Stockholders (as defined below). The
discussion is based on the Internal Revenue Code of 1986, as amended, existing
and proposed Treasury regulations, rulings, administrative pronouncements and
judicial decisions, changes to which could materially affect the tax
consequences described herein and could be made on a retroactive basis. As used
herein, the term "U.S. Stockholder" means a beneficial owner of 4Front common
stock that is for United States federal income tax purposes:
- A citizen or individual resident of the United States;
- A corporation created or organized in or under the laws of the United
States or of any political subdivisions thereof;
- An estate the income of which is subject to United States federal income
taxation regardless of its source; or
- A trust, if (a) a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
United States persons have the authority to control all substantial
decisions of the trust or (b) the trust was in existence on August 20,
1996 and has properly elected to continue to be treated as a United States
person.
The receipt of cash in exchange for shares of 4Front common stock pursuant
to the merger will be a taxable transaction for federal income tax purposes and
also may be a taxable transaction under applicable state, local and foreign
income and other tax laws. The tax consequences may vary depending upon, among
other things, your particular circumstances. In general, you will recognize a
gain or a loss for federal income tax purposes equal to the difference between
the adjusted tax basis of your 4Front common stock and the amount of cash
received in exchange for your 4Front common stock in the merger. Such gain or
loss generally will be (a) calculated separately for each block of shares (I.E.,
shares acquired at the same cost in a single transaction) sold pursuant to the
merger, (b) a capital gain or loss if the 4Front common stock is a capital asset
of yours and (c) a long-term gain or loss if the holding period for your 4Front
common stock is more than one year at the effective time of the merger.
Your receipt of cash pursuant to the merger may be subject to backup
withholding at the rate of 31% unless you provide a certified taxpayer
identification number on Form W-9 and you otherwise comply with the backup
withholding rules or demonstrate an exemption from backup withholding.
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Backup withholding is not an additional tax; any amounts withheld may be
credited against your federal income tax liability subject to the withholding.
The foregoing discussion does not address all aspects of federal income
taxation that may be relevant to you and may not apply to you if you
(a) acquired your 4Front common stock pursuant to the exercise of employee stock
options or other compensation arrangements with 4Front, (b) are not a U.S.
Stockholder, (c) exercise your dissenters' rights under Delaware law or (d) are
subject to special tax treatment under the Internal Revenue Code (such as if you
are a dealer in securities, a tax-exempt entity, an insurance company, another
financial institution, or a regulated investment company or you hold your shares
as part of a hedge, straddle, conversion or other special transaction).
This tax discussion is for your general information only. Due to the
individual nature of tax consequences, you are strongly urged to consult with
your tax advisor as to the specific tax consequences of the merger to you,
including the effects of applicable state, local or foreign income or other tax
laws or federal tax laws other than those pertaining to income tax.
REGULATORY MATTERS
We must comply with the Hart-Scott-Rodino Antitrust Improvements Act of 1976
and the rules and regulations thereunder, which provide that certain acquisition
transactions may not be consummated until (1) certain information has been
furnished to the United States Antitrust Division of the Department of Justice
and to the United States Federal Trade Commission and (2) certain waiting
periods have been terminated or have expired. NCR and 4Front filed Notification
and Report Forms with the Antitrust Division and the Federal Trade Commission on
August 30, 2000. The waiting period under the HSR Act was terminated on
, 2000.
Despite the expiration of the Hart-Scott-Rodino waiting period, the
Antitrust Division, the Federal Trade Commission or any state may still
challenge the merger on antitrust grounds. Any time before or after the
effective time of the merger, the Antitrust Division, the FTC or any state could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest. In addition, certain other persons, including private
parties, could take action under the antitrust laws and could seek to enjoin the
consummation of the merger, to rescind the merger or to seek divestiture of
4Front or one or more of its businesses as a result of the merger.
In addition to making filings under the HSR Act, we must comply with the
rules and regulations of the European Community and Japan. We must file
pre-merger notification and report forms required under European Community
Merger Regulation ("EC Merger Regulation"). During a period of approximately
30 days after the filing the European Commission will review our notification
filing and will contact competitors and customers who may file objections to the
merger. If the European Commission finds that the merger does not have an
anti-competitive effect, our filing will be cleared (usually at the end of the
30 day period). It the European Commission has serious competition law concerns
about the merger, it will conduct an in-depth investigation of up to four months
into the effects of the merger on competition in the European Community and the
European Economic area. A hearing will take place if the review proceeds to this
level. We will be required to respond to any requests for additional information
made by any Governmental Entity pursuant to EC Merger Regulation. Filings have
been made under EC Merger Regulation. A filing will be made with Japan after the
transaction closes.
EFFECT ON EMPLOYEE EQUITY PLANS
STOCK OPTION PLANS. Under the terms of the Merger Agreement, each option
holder or warrant holder will receive the difference between $18.50 per share
and the exercise price per share set forth in his or her option agreement or
warrant, multiplied by the number of shares of common stock for which such
option or warrant were exercisable.
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As of July 31, 2000, options to acquire 1,449,899 shares of 4Front common
stock were outstanding under the Plan and warrants to purchase 267,833 shares of
4Front common stock were outstanding.
DISSENTERS' APPRAISAL RIGHTS
You have the right to dissent from the merger and to demand and obtain cash
payment of the appraised value of your shares of 4Front common stock under the
circumstances described below. The appraised value that you obtain for your
shares by dissenting will be determined by a court and may be less than, equal
to or greater than $18.50 per share provided for in the Merger Agreement. If you
fail to comply precisely with the procedural requirements of Section 262 of the
Delaware General Corporation Law, you will lose your right to dissent and seek
payment of the appraised value of your shares.
The following is a summary of Section 262, which specifies the procedures
applicable to dissenting stockholders. This summary is not a complete statement
of the law regarding your right to dissent under Delaware law, and if you are
considering dissenting, we urge you to review the provisions of Section 262
carefully and to consult an attorney. The text of Section 262 is attached to
this proxy statement as Annex B, and we incorporate that text into this proxy
statement by reference. Among other matters, you should be aware of the
following:
- to be entitled to dissent and seek appraisal, you must hold shares of
4Front common stock on the date you make the demand required under
Delaware law, you must continuously hold those shares until the merger has
been completed, you must not vote in favor of the merger and you must
otherwise comply with the requirements of Section 262;
- before the annual meeting, you must deliver a written notice that states
your identity and your intent to demand appraisal to 4Front
Technologies, Inc., 6300 South Syracuse Way, Suite 293, Englewood,
Colorado 80111, Attention: Secretary (you should be aware that simply
voting against the merger or not voting is not a demand for appraisal
rights);
- within ten days after the effective time of the merger, the surviving
corporation will notify all of the dissenting 4Front stockholders who have
complied with Section 262 and who have not voted in favor of the merger;
- within 120 days after the effective time of the merger, the surviving
corporation, you or any other stockholder who has complied with the
requirements of Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the value of the stock of the
dissenting stockholders; if a petition is not filed within this time
period, dissenting stockholders will lose their right to an appraisal and
will be entitled to receive only $18.50 per share;
- the Court of Chancery will determine which dissenting stockholders
complied with the requirements of Section 262 and are entitled to
appraisal rights;
- the Court of Chancery will then appraise the shares, determining their
fair value exclusive of any value arising from the accomplishment or
expectation of the merger, together with a fair rate of interest, if any,
to be paid on the appraised fair value; the Court of Chancery will
consider all relevant factors in determining the fair value and the fair
interest rate (if any);
- the Court of Chancery will then direct the surviving corporation to pay
the fair value of the dissenting shares, together with any interest, to
the stockholders entitled to payment; payment will be made when the
stockholder surrenders the certificates to the surviving corporation;
- the costs of the proceeding for appraising the fair value may be
determined by the court and the court may require the parties to bear the
costs in any manner that the court believes to be equitable;
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- the court may require, upon a dissenting stockholder's request, that all
or a portion of the expenses incurred by that stockholder in connection
with the appraisal, including attorney's and expert's fees, be borne pro
rata by all of the dissenting stockholders;
- if you dissent from the merger, you will not be entitled to vote your
shares of 4Front common stock for any purpose or to receive dividends or
other distributions (other than dividends or other distributions payable
to stockholders of record at a date prior to the effective time of the
merger) after the effective time of the merger; and
- you may withdraw your demand for appraisal and accept $18.50 per share
provided for in the Merger Agreement at any time within 60 days after the
effective date of the merger or after that date with the surviving
corporation's consent.
MERGER EXPENSES AND FEES AND OTHER COSTS
Each of NCR and 4Front will pay its own expenses in connection with the
merger except for certain fees payable if the Merger Agreement is terminated
prior to the closing of the merger. All cost incurred in connection with filings
under the Hart-Scott-Rodino Act, EC Merger Regulation and Japan Merger
Regulation, and all costs of filing, printing and mailing this proxy statement
will be borne equally by us and by NCR.
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THE MERGER AGREEMENT
WE HAVE SUMMARIZED THE MATERIAL PROVISIONS OF THE MERGER AGREEMENT BELOW. A
COPY OF THE MERGER AGREEMENT IS ATTACHED TO THIS PROXY STATEMENT AS ANNEX A. WE
URGE YOU TO READ THE MERGER AGREEMENT CAREFULLY BEFORE DECIDING HOW TO VOTE YOUR
SHARES.
THE MERGER
In the Merger Agreement, we have agreed that, if the Merger Agreement is
approved by the 4Front stockholders and the other conditions to the merger are
satisfied or waived, a subsidiary of NCR will be merged with and into 4Front,
with 4Front surviving the merger as a direct, wholly-owned subsidiary of NCR.
When we refer to the "surviving corporation" in this proxy statement, we mean
4Front as it will exist after the merger. After the merger, all of 4Front's and
the subsidiary's rights, privileges, powers and franchises, and all of their
restrictions, disabilities and duties, will be those of the surviving
corporation. 4Front common stock, all of which will be owned directly or
indirectly by NCR, will be delisted from the Nasdaq National Market and
deregistered under the Securities Exchange Act of 1934 and will no longer be
publicly traded.
EFFECTIVE TIME OF THE MERGER
The merger will occur at the time we file a certificate of merger with the
Secretary of State of the State of Delaware, unless we and NCR agree to specify
in the certificate of merger that the merger will occur at some other time. The
certificate of merger will be filed on the closing date of the merger, which
will occur as promptly as practicable after the Merger Agreement has been
approved by the 4Front stockholders and the other conditions to the merger have
been satisfied or waived, unless we agree with NCR to complete the transaction
on another date. When we refer to the "effective time" of the merger in this
proxy statement, we mean the date and time when the Merger becomes effective, as
described in this paragraph.
MERGER CONSIDERATION
4FRONT COMMON STOCK. At the effective time of the merger, each issued and
outstanding share of 4Front common stock will be converted into the right to
receive $18.50 in cash, without interest.
Some shares of 4Front common stock will not be converted in the merger.
These shares include shares held by 4Front in its treasury, which will be
canceled at the effective time of the merger without any payment. In addition,
shares owned by 4Front stockholders who have demanded appraisal rights in
compliance with Delaware law will not be converted in the merger. See "The
Merger--Dissenters' Appraisal Rights" above.
4FRONT STOCK OPTIONS. At the effective time of the merger, all outstanding
options to purchase shares of 4Front common stock will be canceled. Each holder
of an option, regardless of whether the option is fully vested or exercisable,
will be entitled to receive cash in the amount of (1) $18.50 minus the per share
exercise price of the option multiplied by (2) the number of shares subject to
the option immediately prior to the effective time.
4FRONT WARRANTS. At the effective time of the merger, all outstanding
warrants or similar rights to purchase or acquire shares of 4Front common stock
will be converted into the right to receive cash in the amount of (1) $18.50
minus the per share exercise price of the warrant multiplied by (2) the number
of shares subject to the warrant immediately prior to the effective time.
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4FRONT STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
A TRANSMITTAL FORM.
PAYMENT FOR SHARES
HOW TO RECEIVE PAYMENT. Prior to the effective time of the merger, NCR will
appoint a bank or trust company located in the United States and reasonably
satisfactory to us to be the paying agent. Promptly after the effective time of
the merger, the surviving corporation will mail a letter of transmittal and
other instructional materials to you and the other 4Front stockholders. The
letter of transmittal and other materials will tell you how to surrender your
4Front common stock certificates in exchange for the $18.50 Per Share Amount.
You will not be entitled to receive the cash consideration until you send your
4Front common stock certificates to the paying agent, along with a properly
completed and signed letter of transmittal. NCR has agreed to provide the paying
agent with the cash necessary to pay the Per Share Amount to each holder of
4Front common stock.
YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
YOU SHOULD ALSO NOT SEND YOUR STOCK CERTIFICATES TO US OR TO NCR. PLEASE KEEP
YOUR STOCK CERTIFICATES UNTIL YOU RECEIVE A LETTER OF TRANSMITTAL FROM THE
PAYING AGENT AFTER THE EFFECTIVE TIME OF THE MERGER, AND FOLLOW THE INSTRUCTIONS
CONTAINED IN THE LETTER OF TRANSMITTAL.
TRANSFER OF SHARES. If your shares are held in a name other than the name
registered in our transfer records, you will have to provide the paying agent
with evidence that the shares have been transferred and that any applicable
transfer taxes have been paid.
Our transfer records will close, and we will not register transfers of
shares of 4Front common stock on our books, after the effective time of the
merger. If shares are presented for transfer after that time, they will be
surrendered and canceled, and the Per Share Amount will be paid to the person
who is registered as the holder of the shares on our books.
LOST, STOLEN OR DESTROYED CERTIFICATES. If you have lost a certificate, or
if your certificate has been stolen or destroyed, in order to receive the cash
merger consideration you will have to sign an affidavit stating that your
certificate was lost, stolen or destroyed. In addition, if the surviving
corporation requires, you may have to post a bond indemnifying the surviving
corporation against any claims made against it with respect to the lost, stolen
or destroyed certificate.
TAX WITHHOLDING. The surviving corporation will deduct and withhold from
the cash merger consideration any amounts that it is required to deduct and
withhold under applicable tax law. All amounts so withheld will be treated for
all purposes of the Merger Agreement as having been paid to the applicable
4Front stockholder.
UNCLAIMED CASH MERGER CONSIDERATION. Six months after the closing date of
the merger, the paying agent will deliver to the surviving corporation any
amount of the cash merger consideration that has not been paid to the former
stockholders of 4Front. After that time, the former stockholders of 4Front will
have to surrender their certificates to the surviving corporation to receive the
cash merger consideration. Any such stockholder will be deemed a general
creditor of the surviving corporation for such purpose. Any amount of the cash
merger consideration that has not been claimed by the former stockholders of
4Front two years after the closing date of the merger, or immediately prior to
the time when it would become the property of any governmental entity, shall, to
the extent permitted by applicable law, become the property of the surviving
corporation. Neither NCR, the surviving corporation nor the paying agent will be
liable to any former 4Front stockholder for any amount of the cash merger
consideration properly delivered to a public official under any abandoned
property, escheat or similar law.
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REPRESENTATIONS AND WARRANTIES
We have made customary representations and warranties to NCR in the Merger
Agreement relating to, among other things:
- our organization, the organization of our subsidiaries and similar
corporate matters;
- our capital structure;
- the authorization, execution and delivery and performance of the merger
agreement and the other transaction agreements;
- the absence of conflicts, violations or defaults under our organizational
documents or conflicts with or violations of any laws as a result of
executing the Merger Agreement;
- governmental consents and filings;
- financial statements;
- the absence of conflicts with other documents, agreements and instruments
of which we are a party;
- the absence of material untrue statements or material omissions from our
publicly filed documents and other information supplied to NCR;
- compliance with regulatory requirements and licenses in the conduct of our
business;
- compliance with governmental regulations concerning employee benefit plans
and labor matters;
- our right of to own or license intellectual property rights, such as
copyrights, patents and trademarks used in the conduct of our business;
- the absence of undisclosed liabilities and material adverse events;
- transactions with affiliates;
- the filing of tax returns and the payment of taxes;
- our material agreements and commitments;
- pending and threatened litigation;
- unlawful payments; and
- the steps required to approve the Merger Agreement and the merger.
We have made certain additional representations and warranties regarding our
title to properties, compliance with other laws and regulations. Also, we have
represented and warranted that we have received a fairness opinion of our
financial advisor.
NCR and Merger Sub have made customary representations and warranties to
4Front in the Merger Agreement relating to, among other things:
- their organization, the organization of their subsidiaries and similar
corporate matters;
- their authorization, execution and delivery and performance of the merger
agreement and the other transaction agreements;
- the absence of conflicts, violations or defaults under their respective
organizational documents of conflicts with or violations of any laws as a
result of executing the Merger Agreement;
- the ability of NCR to pay the aggregate consideration for the merger;
- the absence of a broker or finder in connection with the merger;
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- the absence of conflicts with other documents, agreements and instruments
of which either of they are a party;
- pending and threatened litigation relating to the merger; and
- governmental consents and filings.
CERTAIN COVENANTS
INTERIM OPERATIONS OF 4FRONT
From the date of the Merger Agreement until the closing, we and our
subsidiaries have agreed to carry on our businesses in the usual course of their
business and consistent with past practice. We have each also agreed to use all
reasonable efforts consistent with past practices and policies to:
- preserve our present business organizations;
- preserve all of our licenses;
- keep available the services of our present officers and key employees;
- preserve our relationships and goodwill with customers, suppliers and
others having business dealings with us; and
- confer on a regular and frequent basis with NCR and report on our
operational matters and provide NCR with all filings with any entity with
respect to the merger.
During the period before the closing, we also agreed that we will not do or
agree to do any of the following:
- terminate or materially amend any contract or agreement, or otherwise
terminate or modify a business relationship with any of our major
customers;
- make any amendments or changes to our charter or issue, sell or deliver
any of our securities or grant any options or warrants for the purchase of
our capital stock, except for the grant of 20,000 options under our stock
option plan;
- declare or pay any dividends on or make any distributions with respect to
our capital stock or split, combine or reclassify any of our capital
stock;
- incur any new indebtedness in excess of $250,000 (other than under a bank
clearing credit facility with our bank) or secure any unsecured
indebtedness;
- acquire another business;
- sell, lease, license, mortgage or dispose of, or otherwise encumber, any
material assets except in the ordinary course of its business and except
in accordance with a proposed asset sale of one of our subsidiaries to a
third party;
- increase the compensation payable to our officers or employees, grant
additional severance or termination pay, enter into any collective
bargaining agreement, adopt any bonus or benefit plan for the benefit of
its employees except for regular salary increases consistent with past
practice;
- initiate or settle any material litigation or arbitration proceeding;
- enter into any agreement that would, after the closing of the merger,
purport to bind NCR or any of its subsidiaries other than the surviving
corporation; or
- make any cash disbursement exceeding $250,000 except as is consistent with
our current budget.
26
<PAGE>
OTHER AGREEMENTS
We have agreed to cause a meeting of the 4Front stockholders to be held as
promptly as practical after the signing of the Merger Agreement. The 4Front
board has agreed to recommend approval of the Merger Agreement by its
stockholders and to take all reasonable and lawful action to solicit and obtain
such approval.
The Merger Agreement contains mutual covenants of the parties, including
covenants relating to preparation and filing of all required documents with the
proper governmental agencies, maintaining the confidentiality of all information
disclosed to each other in connection with the merger, using all reasonable
efforts to obtain all necessary consents, approvals or waivers, as applicable,
of third parties or governmental agencies to the merger.
CONDITIONS TO THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER
Various conditions must be satisfied before we and NCR complete the merger.
Some of these conditions apply to both us and NCR, which means that, if the
conditions are not met, neither we nor NCR will have an obligation to complete
the merger. Other conditions apply only to NCR, which means that, if the
conditions are not met, we will have an obligation to complete the merger but
NCR will not.
CONDITIONS THAT APPLY TO BOTH US AND NCR. Neither we nor NCR will have an
obligation to complete the merger unless the following conditions are satisfied:
- the Merger Agreement and the merger must be approved by the 4Front
stockholders;
- the expiration of the waiting period under the Hart-Scott-Rodino Act shall
have expired or been terminated and all other necessary governmental
approvals shall have been obtained, including the required approvals of
the European Commission or Government of Japan pursuant to EC Merger
Regulation and Japan Merger Regulation;
- no judgment, injunction, order or decree and no provision of any law or
regulation prohibits the completion of the merger;
- all actions by or filings with any governmental body necessary to permit
completion of the merger have been taken or made; and
- Anil Doshi and Mark Ellis shall have resigned from 4Front.
CONDITIONS THAT APPLY ONLY TO NCR. NCR will not have an obligation to
complete the merger unless the following additional conditions are also
satisfied:
- we have performed in all material respects the obligations required to be
performed before the effective time of the merger and complied in all
material respects with the covenants and agreements contained in the
Merger Agreement;
- no material adverse effect on us shall have occurred;
- our representations and warranties in the Merger Agreement shall be true
and correct in all material respects (in all respects, if the
representation and warranty is qualified by materiality) as of the closing
date of the merger;
- NCR shall have received two letters from KPMG, our independent auditors,
one on the date this proxy statement was first filed with the SEC and the
second on the closing date of the merger, indicating it has reviewed our
interim financial statements and that nothing has come to its attention
that would indicate that the interim financial statements are in
compliance with
27
<PAGE>
GAAP or that our accounting treatment was not appropriate or did not
fairly represent our financial condition Front;
- NCR shall have received a closing opinion from our U.K. legal counsel; and
- the number of shares represented by dissenting stockholders shall not
exceed 5% of our total outstanding shares of common stock.
BECAUSE OF THESE CONDITIONS, EVEN IF THE 4FRONT STOCKHOLDERS APPROVE THE
MERGER, THE MERGER MAY NOT OCCUR.
AMENDMENTS AND WAIVERS
The Merger Agreement may be amended by a written amendment executed by us,
NCR and NCR's wholly-owned subsidiary. After the 4Front stockholders have
approved the merger, no party to the Merger Agreement may amend the Merger
Agreement in a way which would require stockholder approval without getting such
approval.
NO SOLICITATION; ALTERNATIVE ACQUISITION PROPOSALS
In the Merger Agreement we agreed with NCR that we would not, and would not
authorize or permit our officers, directors, agents, representatives, advisors
or subsidiaries to:
- solicit or initiate the submission of proposals or offers relating to any
alternative proposal by a third party for the acquisition of 4Front;
- cooperate with, or furnish or cause to be furnished any non-public
information concerning our business, properties, or assets or those of any
of our subsidiaries in connection with any alternative proposal;
- negotiate with anybody with respect to any alternative proposal;
- approve, recommend or permit 4Front or any of its subsidiaries to enter
into an agreement or understanding with any other party relating to any
alternative proposal; or
- vote for, execute a written consent (or equivalent instrument) in favor
of, or otherwise approve or enter into any agreements or understandings
with respect to any of the above.
However, the Merger Agreement does not prohibit 4Front or the 4Front board,
to the extent the 4Front board determines in its good faith judgment, with
advice of outside counsel, that the failure to take such action with respect to
an alternative proposal that was not solicited by 4Front as described above
would be inconsistent with its fiduciary duties to the 4Front stockholders, from
providing information to, participating in discussions or negotiating with any
third party that delivers an alternative proposal that was not solicited in
violation of the actions set forth above subject to, and provided that, we shall
comply with all of the following:
- In the event that 4Front board decides to entertain an alternative
proposal by taking any of the actions referred to above, we must
immediately orally notify NCR to such effect, and give to NCR written
notice of the alternative proposal; and
- Prior to the expiration of ten business days following delivery of the
notice of the alternative proposal to NCR, we must either (A) cease to
entertain the alternative proposal, discontinuing discussions with respect
thereto, and notify NCR to that effect, or (B) notify NCR that the 4Front
board has determined that the alternative proposal is superior to the
merger terms offered by NCR and deliver to NCR the terms and conditions of
that superior proposal; and
- Within five business days following NCR's receipt of a notice of the
superior proposal, NCR has the right to either (A) propose terms
alternative to the superior proposal, which the 4Front
28
<PAGE>
board shall then consider in accordance with their fiduciary duties, and
advise NCR of 4Front's acceptance or rejection of that proposal within
five business days, (B) terminate the Merger Agreement without any further
obligation to 4Front, or (C) notify 4Front that NCR elects neither
(A) nor (B).
In the case of any alternative proposal, 4Front and NCR agreed to consult in
good faith regarding the merits of any alternative proposal. We also agreed not
to make available any information to any party involving an alternative proposal
that has not previously been made available or is not concurrently made
available to NCR.
We are permitted to terminate the Merger Agreement to enter into a
definitive agreement with respect to a superior proposal as long as we pay NCR a
fee of approximately $6.9 million, plus NCR's expenses up to $1.0 million, as
more fully described below under "Termination of the Merger Agreement." A
superior proposal means a proposal to acquire more than two-thirds of our stock,
or substantially all of our assets, on terms that we determine are more
favorable to our stockholders than the merger and for which financing to the
extent required, is fully committed or available.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the effective
time, whether before or after the approval of the 4Front stockholders, by:
- mutual consent of 4Front and NCR;
- either us or NCR if:
- the merger has not been completed by the earlier of March 31, 2000 or
20 days after all of the conditions to closing have been met, except
that no party may terminate the Merger Agreement if the merger has not
been completed because such party is in breach of the agreement;
- a court or a governmental entity has taken final action to restrain or
prohibit the merger, except that no party may terminate the Merger
Agreement if the merger has not been completed because such party has
not made reasonable efforts to complete the merger; or
- the 4Front stockholders do not approve the Merger Agreement.
- by NCR if:
- the 4Front board withdraws or modifies its recommendation of the Merger
Agreement or the merger;
- we fail for any reason to call and hold the stockholders' meeting
within a reasonable time after the signing of the Merger Agreement;
- after five days following our filing with the SEC of our quarterly
report on Form 10-Q for our second quarter ended July 31, 2000 if our
consolidated sales and revenues for our second quarter do not exceed
the consolidated sales and revenues of the first quarter of this fiscal
year; or
- we have materially breached or failed to perform any of our
representations, warranties, covenants or other agreements contained in
the Merger Agreement.
- by us if:
- the 4Front board of directors withdraws or modifies its recommendation
of the merger because it has accepted a competing transaction that it
determines is superior to NCR's
29
<PAGE>
proposal. In this event, we must pay NCR's expenses relating to the
transaction and the termination fee under the Merger Agreement; or
- NCR or its subsidiary have materially breached or failed to perform any
of our representations, warranties, covenants or other agreements
contained in the Merger Agreement.
If the Merger Agreement is validly terminated, the Merger Agreement becomes
void. The only provisions which survive are those relating to confidentiality
and payment of expenses. Neither we nor NCR shall have any liability to the
other unless NCR or we are in willful breach of the agreement.
TERMINATION FEES AND EXPENSES
PAYMENT OF EXPENSES OF THE MERGER GENERALLY
In general, we and NCR will each pay our own fees and expenses incurred in
connection with the merger. All cost incurred in connection with filings under
the Hart-Scott-Rodino Act, European Community Merger Regulations and Japan
Merger Regulations, and all costs of filing, printing and mailing this proxy
statement will be borne equally by us and by NCR.
WHEN 4FRONT MUST PAY NCR'S EXPENSES AND A TERMINATION FEE
We will pay NCR all of NCR's out-of-pocket fees and expenses actually
incurred or accrued by NCR in connection with the Merger Agreement, up to
$1.0 million, and a termination fee of approximately $6.9 million if:
- we do not recommend the merger to our stockholders, or we withdraw our
recommendation, or we fail for any reason to call and hold the
stockholders' meeting within a reasonable time after the signing of the
Merger Agreement;
- we have willfully breached or failed to perform any of its
representations, warranties, covenants or other agreements contained in
the Merger Agreement; or
- an alternative proposal is made before the Merger Agreement is terminated
and we consummate a transaction constituting such alternative proposal
within 12 months of our termination of the Merger Agreement or we take any
action to facilitate such proposal.
As an additional condition to the Merger Agreement, we have granted NCR an
option to purchase 19.9% of the total outstanding shares of 4Front common stock
as of July 31, 2000, or 2,554,289 shares, subject to adjustment, at a price per
share equal to $18.50. This option does not become exercisable by NCR until it
has an unconditional right to the termination fee described above. The right of
NCR to exercise the option terminates on the earliest of (1) the closing date of
the merger, (2) the date NCR terminates the option agreement, (3) 12 months
after the date NCR first became entitled to the termination fee, as described
above, or (4) in the event NCR is not entitled to receive the termination fee,
the date of termination of the Merger Agreement. Under the terms of the option
agreement, in no event can the sum of the termination fee and any profits of NCR
with respect to this option exceed $6,902,000. Pursuant to the option agreement
we granted registration rights to NCR for the shares of common stock it owns
upon exercise of the option. In addition, if the fair market value of our common
stock exceeds the Per Share amount during the exercise period of the option, we
granted NCR the right to require us to repurchase the option, or any part
thereof, at a purchase price equal to the difference between the fair market
value per share and $18.50. As a result of the grant of the option, it is
unlikely that we would be able to consummate an alternative transaction
structured as a "Pooling of Interests" for accounting purposes.
30
<PAGE>
VOTING AGREEMENTS
Certain of our directors and officers, who together beneficially own
1,608,728 shares of outstanding 4Front common stock, or approximately 12.5% of
the outstanding shares of 4Front common stock on the record date, have entered
into a voting agreement with NCR. Under the voting agreement, the stockholders
agreed to vote all shares of 4Front common stock owned or subsequently acquired
by them in favor of the merger. The stockholders also agreed not to sell,
assign, transfer or encumber the shares of 4Front common stock owned or
subsequently acquired by them, except as permitted by the voting agreement and
the Merger Agreement. The voting agreement will automatically terminate when the
Merger Agreement terminates, including if the Merger Agreement is terminated in
connection with our accepting another acquisition proposal as discussed above
under "The Merger Agreement--Alternative Acquisition Proposals."
THE BOARD OF DIRECTORS DEEMS "PROPOSAL NO. 1--APPROVAL OF THE MERGER
AGREEMENT" TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
31
<PAGE>
PROPOSAL NO. 2--ELECTION OF DIRECTORS
Six directors (constituting the entire Board) are to be elected at the
annual meeting. Unless otherwise specified, the enclosed proxy will be voted in
favor of the persons named below to serve until the next annual meeting of
stockholders and until their successors shall have been duly elected and shall
qualify. In the event any of these nominees shall be unable to serve as a
director, the shares represented by the proxy will be voted for the person, if
any, who is designated by the 4Front board to replace the nominee. All nominees
have consented to be named and have indicated their intent to serve if elected.
The 4Front board has no reason to believe that any of the nominees will be
unable to serve or that any vacancy on the 4Front board will occur.
The nominees, their ages, the year in which each first became a director and
their principal occupations or employment during the past five years are:
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION
NOMINEE AGE BECAME DIRECTOR DURING THE PAST FIVE YEARS
------- -------- --------------- ----------------------------------------------
<S> <C> <C> <C>
Anil Doshi..................... 56 1993 Chairman of the Board of Directors, Chief
Executive Officer and a Director of the
Company since April 1993. Mr. Doshi co-founded
Communic8 Software (the Company's predecessor-
in-interest) in January 1990 and served as its
Chairman from April 1992 to March 1993.
Mr. Doshi is a Fellow of the Institute of
Chartered Accountants in England and Wales,
and he is also an Associate of the Institute
of Taxation. From 1988 until 1990, Mr. Doshi
was a consultant to and then Deputy Chairman
of PPI Enterprises, Inc., a New York based
holding company ("PPI").
Mark Ellis..................... 46 1993 Vice Chairman of the Board of Directors since
April 1998 and President and a Director of the
Company since April 1993. Mr. Ellis co-founded
Communic8 Software and served as a director
from January 1992 until March 1993. From 1988
to January 1991, Mr. Ellis served as the
President of PPI. As President of PPI, he
managed that company's American expansion
program and negotiated a number of
acquisitions in the U.S., including the $875
million acquisition of Del Monte Tropical
Fruit from RJR Nabisco. Mr. Ellis attended St.
John's College at Cambridge University in
England and received a B.A. in Law in 1975, an
L.L.B. in 1976 and an M.A. in Law in 1978.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION
NOMINEE AGE BECAME DIRECTOR DURING THE PAST FIVE YEARS
------- -------- --------------- ----------------------------------------------
<S> <C> <C> <C>
Terence Burt................... 44 1997 Vice President and Chief Operating Officer
since April 1998 and a Director of the Company
since April 1997. He co-founded K2 Group Plc
(now 4Front Group Plc) in 1988, and was
Managing Director of the Company's systems
integration division between 1990 and 1996. He
became Managing Director of the Company's
services division in 1996 and Managing
Director of 4Front Group in 1997. Mr. Burt
graduated from the University of Herfordshire
where he qualified as an Associate of the
Association of Cost and Management
Accountants.
Craig Kleinman................. 44 1993 Secretary and a Director of the Company since
April 1993. Mr. Kleinman had served as Chief
Financial Officer of the Company from April
1993 until April 1996. For more than five
years, Mr. Kleinman has been a stockholder in
the certified public accounting firm Kleinman,
Guerra & Company, P.C. Mr. Kleinman received a
B.S. degree in accounting from the University
of Colorado in 1978 and is a member of the
American Institute of Certified Public
Accountants.
Brian V. Murray................ 52 1996 Director of the Company since April 1996.
Mr. Murray is President and Chief Executive
Officer of B.V. Murray & Co., an investment
banking firm, which he founded in July 1996.
Prior thereto, Mr. Murray held various
positions at Bear, Stearns & Co., Inc. from
1978 until July 1996, most recently as a
Senior Managing Director in the Emerging
Markets Group. Mr. Murray received a BS in
Economics from Villanova University in 1970
and an MBA with Honors from the University of
Chicago in 1975. Mr. Murray is a Chartered
Financial Analyst.
Arthur Keith Ross.............. 48 1996 Director of the Company since February 1996.
Mr. Ross is currently a private investor and a
consultant to the London law firm, Denton Wild
Sapt. From 1986 to 1994, Mr. Ross was a
partner in the London law firm Clifford
Chance, which he joined in 1984. Mr. Ross
headed the Clifford Chance Southeast Asian
office in Singapore from 1988 to 1991.
Mr. Ross attended Christ's College at
Cambridge University in England and received a
BA in Law in 1973 and an MA in Law in 1976.
</TABLE>
All directors hold office until our next annual meeting of the stockholders
and until their successors are elected and qualified.
33
<PAGE>
The 4Front board has an audit committee which is charged with reviewing our
internal accounting procedures and consulting with and reviewing the selection
of the our independent auditors. The audit committee currently consists of
Messrs. Ross, Murray and Kleinman. The audit committee was formed in fiscal 1997
and the audit committee charter was adopted by the 4Front board in June 2000.
During fiscal 2000, the audit committee met once. The board of directors also
has a compensation committee charged with recommending to the board the
compensation for its executives and administering our stock option plans. The
compensation committee is currently composed of Messrs. Doshi, Ellis, Murray,
Ross and Kleinman. The compensation committee was formed in fiscal 1997. During
fiscal 2000, the compensation committee met once. The 4Front board has also
established an executive committee charged with exercising powers of the board
of directors expressly delegated to it. The executive committee is currently
composed of Messrs. Doshi and Ellis. During fiscal 2000, the executive committee
did not meet. Each director attended all of the meetings of all committees of
the board of directors on which he served.
During the fiscal year ended January 31, 2000, the board of directors acted
nine times by unanimous written consent in lieu of a meeting and met twice.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors, and persons who beneficially own more than ten percent
of 4Front's common stock, to file initial reports of ownership and reports of
changes in ownership with the SEC and the National Association of Securities
Dealers, Inc. Executive officers, directors and greater than ten percent
beneficial owners are required by SEC regulations to furnish us with copies of
all Section 16(a) forms they file.
Based upon on a review of the copies of such forms furnished to us and
written representations from the its executive officers and directors, we
believe that during fiscal 2000 all Section 16(a) filing requirements applicable
to its executive officers, directors and greater than ten percent beneficial
owners were complied with, except that Messrs. Burt and Newell each reported a
transaction late on Form 4.
VOTE REQUIRED
The six nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy and entitled to vote for them,
a quorum being present, shall be elected as directors. Only votes cast for a
nominee will be counted, except that the accompanying proxy will be voted for
all nominees in the absence of instruction to the contrary. Abstentions, broker
non-votes and instructions on the accompanying proxy card to withhold authority
to vote for one or more nominees will result in the respective nominees
receiving fewer votes. However, the number of votes otherwise received by the
nominee will not be reduced by such action.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL NO. 2--ELECTION OF DIRECTORS" TO BE
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE
"FOR" APPROVAL THEREOF.
34
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation paid or to be paid by us as well as certain other compensation
awarded, earned by and paid, during the fiscal years indicated, to the chairman
of the board and chief executive officer and each of our four other most highly
compensated executive officers for such period in all capacities in which they
served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION SECURITIES
------------------------------ UNDERLYING ALL
FISCAL STOCK OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS OPTIONS COMPENSATION(2)
--------------------------- -------- -------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Anil Doshi.............................. 2000 $284,766 $194,400 70,000 $70,821
Chairman of the Board 1999 259,375 136,120 100,000 71,406
and Chief Executive Officer(3) 1998 205,375 90,365 -- 65,857
Mark Ellis.............................. 2000 $250,594 $145,800 60,000 $43,471
Vice Chairman of the Board 1999 228,250 104,580 90,000 39,810
and President(3) 1998 180,730 65,720 -- 43,918
Terence Burt............................ 2000 $217,810 $ 97,200 60,000 $31,776
Vice President and 1999 191,816 76,360 80,000 27,836
Chief Operating Officer(3) 1998 149,239 36,968 10,000 25,242
Kenneth Newell.......................... 2000 $219,722 $ 72,900 40,000 $27,787
former Vice President 1999 187,976 68,890 60,000 47,901
for Corporate Affairs 1998 152,663 32,860 -- 37,934
Stephen McDonnell....................... 2000 $ 98,415 $ 72,900 50,000 $17,022
Chief Financial Officer(3) 1999 89,640 49,800 15,000 18,945
1998 71,950 24,645 10,000 10,246
</TABLE>
------------------------
(1) Represents the period beginning February 1 of the prior year and ending
January 31 of the year indicated.
(2) Represents contributions made by 4Front to executive pension plans of
$43,521, $21,212, $11,061, $8,424 and $5,030 for the year ended January 31,
2000, for Messrs. Doshi, Ellis, Burt, Newell and McDonnell, respectively,
the remainder being car allowances and insurance benefits.
(3) Messrs. Doshi, Ellis, Burt and McDonnell entered into new employment
agreements with 4Front in June 2000, which provide for annual base salaries
of L198,000 ($316,800), L174,000 ($278,400), L150,219 ($240,350) and L93,150
($149,040), respectively. See "--Employment Arrangements."
35
<PAGE>
STOCK OPTIONS
The following table sets forth certain summary information concerning
individual grants of stock options made during the year ended January 31, 2000
to each of our executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------
% OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED 2000(1) PER SHARE(2) DATE(3) 5%(4) 10%(4)
---- ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Anil J. Doshi.............. 70,000 8.5% $13.35 12/5/09 $1,088,500 $2,288,300
Mark Ellis................. 60,000 7.3% $13.35 12/5/09 933,000 1,961,400
Terence W. Burt............ 10,000 1.2% $ 8.75 5/24/09 201,500 381,500
50,000 6.1% $13.35 12/5/09 777,500 1,634,500
Kenneth J. Newell.......... 40,000 4.9% $13.35 12/5/09 622,000 1,342,000
Stephen McDonnell.......... 10,000 1.2% $ 8.75 5/24/09 201,500 381,500
40,000 4.9% $13.35 12/5/09 622,000 1,342,000
</TABLE>
------------------------
(1) Based on aggregate of 820,360 options which were granted during fiscal 2000.
(2) All options were granted at fair market value on the date of grant.
(3) All options have a fixed term of ten years and vest in full over 30 months
from the date of grant, at a rate of 33 1/3% after six months, a further
33 1/3% after 18 months and the remainder at 30 months. These options will
become fully vested upon completion of the merger.
(4) Potential gains are reported net of the option exercise price, but before
taxes associated with exercise. These amounts represent certain assumed
rates of appreciation only in the price of the 4Front's common stock during
the terms of the options in accordance with rates specified in applicable
federal securities regulations. Actual gains on stock option exercises are
dependent on the future performance of the common stock and overall stock
market conditions. The amounts reflected in this table may not necessarily
be achieved. 4Front's common stock price, as reported by the Nasdaq National
Market on January 31, 2000, was $17.75 per share.
The following table sets forth at January 31, 2000 the number of securities
underlying unexercised options and the value of unexercised options held by each
of the executive officers named in the Summary Compensation Table. During fiscal
year ended January 31, 2000, Messrs. Doshi, Ellis, Burt and Newell exercised and
retained 150,000, 150,000, 43,084 and 60,296, respectively, and Messrs. Burt,
Newell and McDonnell exercised and sold 16,366, 22,904 and 12,500, respectively.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR END OPTIONS AT YEAR END(1)
--------------------------- ----------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C> <C>
Anil Doshi........................................ 166,667 123,333 2,925,500
Mark Ellis........................................ 163,334 106,666 2,760,250
Terence Burt...................................... 148,050 90,000 2,421,338
Kenneth Newell.................................... 132,634 66,666 2,044,575
Stephen McDonnell................................. 30,333 49,167 604,750
</TABLE>
------------------------
(1) Computed based upon the difference between the stock option exercise price
and the closing price of our Common Stock on January 31, 2000 ($17.75).
36
<PAGE>
EMPLOYMENT ARRANGEMENTS
We have entered into employment agreements with Messrs. Doshi and Ellis
effective as of June 22, 2000. These agreements are terminable at any time after
an initial term of three years on one year's notice. Under such agreements,
Messrs. Doshi and Ellis are entitled to base annual salaries of L198,000
($316,800) and L174,000 ($278,400), respectively, plus annual bonuses pursuant
to our bonus and other incentive compensation plans. Prior to the execution of
such employment agreements, Messrs. Doshi and Ellis had received annual salaries
of L179,687 ($296,000) and L158,125 ($260,000), respectively, as compensation
for services performed for us and our affiliates. In addition, the employment
agreements provide for payments to Messrs. Doshi and Ellis in the event of a
change in control. Pursuant to the transaction with NCR, Messrs. Doshi and Ellis
will receive L517,500 ($828,000) and L439,125 ($702,600), respectively.
Messrs. Newell and Burt entered into employment agreements with us at
salaries as of February 1, 1999 of L136,562 ($225,000). Mr. McDonnell entered
into an employment agreement with us on June 22, 2000 at a base salary of
L93,150 ($149,040). Mr. Newell retired from 4Front on May 31, 2000 and
Mr. Burt's base annual salary was increased to L150,219 ($240,350) for the
fiscal year 2001.
No other executive officer is currently party to an employment agreement
with us. As appropriate, other employment contracts may be entered into with
other key executives.
STOCK OPTIONS AND BENEFIT PLANS
We maintain contributory, non-defined pension plans for the benefit of
Messrs. Doshi and Ellis to which it makes contributions of approximately $54,000
(L32,000) per annum. We also maintain contributory, non-defined pension plans
for the benefit of Messrs. Newell and Burt to which we make contributions of
approximately $15,000 (L9,000) per annum.
1996 EQUITY INCENTIVE PLAN
In May 1996, we adopted the Plan, which, as amended, currently provides for
the issuance of incentive stock options ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
non-qualified stock options ("NQSOs") to purchase an aggregate of up to
1,100,000 shares of 4Front common stock. The Plan permits the granting of
options to officers, employees, directors and consultants of 4Front. The Plan
was approved by stockholders on February 5, 1997 and pursuant to the Plan a
total of 247,000 options, exercisable between $3 3/8 and $5 3/4 per share, being
at or above market value at time of grant, were granted to employees and to two
directors. In November 1997, a total of 87,500 options, exercisable at $8.75,
being at or above market value at the time of grant, were granted to employees.
During 1998, the Board granted 40,000 options each to Messrs. Doshi, Ellis,
Newell and Burt and 6,000 options each to Messrs. Kleinman, Ross and Murray,
each at an exercise price of $8.75 per share, equal to the fair market value of
the common stock on the date of grant. In October of 1998, the 4Front board also
granted 60,000 options to Mr. Doshi, 50,000 to Mr. Ellis, 40,000 to Mr. Burt,
20,000 options to Mr. Newell and 6,000 options to each of Messrs. Kleinman, Ross
and Murray, each at an exercise price of $5.625 per share, equal to the fair
market value of the common stock on the date of grant. In October of 1998, the
4Front board also granted 60,000 options to Mr. Doshi, 50,000 to Mr. Ellis,
40,000 to Mr. Burt, 20,000 options to Mr. Newell, 10,000 options to
Mr. McDonnell and 6,000 options to each of Messrs. Kleinman, Ross and Murray,
each at an exercise price of $5.625 per share, equal to the fair market value of
the common stock on the date of grant. During 1999, the 4Front board also
granted 60,000 options to Mr. Doshi, 50,000 options to Mr. Ellis, 40,000 options
to Mr. Burt, 20,000 options to Mr. Newell, 15,000 options to Mr. McDonnell and
6,000 options each to Messrs. Kleinman, Ross and Murray, each at an exercise
price of $5.625 per share, equal to the fair market value of the common stock on
the date of grant. During fiscal 2000, the board granted 10,000 options to each
of Messrs. Burt and
37
<PAGE>
McDonnell at an exercise price of $8.75 per share and, subject to stockholder
approval to amend the Plan, granted a further 70,000 options to Mr. Doshi,
60,000 options to Mr. Ellis, 50,000 options to Mr. Burt, 40,000 options to
Mr. Newell, 40,000 options to Mr. McDonnell, 12,500 options to Mr. Kleinman, and
10,000 options each to Messrs. Ross and Murray, each at an exercise price of
$13.35 per share, all equal to the fair market value of the common stock on the
date of the grant.
The purpose of the Plan is to provide incentives to attract, retain and
motivate eligible persons whose present and potential contributions are
important to our success and the success of our subsidiaries and affiliates, by
offering them an opportunity to participate in our future performance through
awards of stock options. The Plan is administered by the compensation committee.
Under the Plan, stock options may be granted to certain directors, officers,
employees, consultants, independent contractors and advisors of 4Front or its
subsidiaries or affiliates. By encouraging stock ownership, we seek to attract,
retain and motivate such persons and to encourage such employees and persons to
devote their best efforts to our business and financial success. We also believe
that stock incentive programs, such as the Plan, are commonly employed by
companies as an important element of a total compensation program.
Grants under the Plan may consist of ISOs or NQSOs or a combination thereof.
Our employees, officers, consultants, and certain directors and advisors and
those of our subsidiaries and affiliates whom the compensation committee deems
to have contributed significantly to 4Front or who have the potential to
contribute to our future success will be eligible to receive any of the
different types of awards under the Plan. Directors who are not our employees,
consultants and advisors will be entitled to receive only NQSOs under the Plan.
An optionee will not realize taxable income upon the grant of an option. In
general, the holder of an NQSO (within the meaning of Section 422 of the Code)
will realize ordinary income when the option is exercised equal to the excess of
the value of the stock over the exercise price (i.e., the option spread), and
4Front receives a corresponding deduction, subject to the executive compensation
deduction limitations of Section 162(m) of the Code. (If the optionee is subject
to the six-month restrictions on sale of common stock under Section 16(b) of the
Exchange Act, the optionee generally will recognize ordinary income on the date
the restrictions lapse, unless an early income recognition election is made.)
Upon a later sale of the stock, the optionee will realize gain or loss equal to
the difference between the selling price and the value of the stock at the time
the option was exercised.
The holder of an ISO will not realize taxable income upon the exercise of
the option (although the option spread is an item of tax preference income
potentially subject to the alternative minimum tax). If the stock acquired upon
exercise of the ISO is sold or otherwise disposed of within two years from the
option grant date or within one year from the exercise date, then, in general,
gain realized on the sale is treated as ordinary income to the extent of the
option spread at the exercise date, and 4Front receives a corresponding
deduction, subject to the executive compensation deduction limitations of
Section 162(m) of the Code. Any remaining gain is treated as capital gain. If
the stock is held for at least two years from the grant date and one year from
the exercise date, then gain or loss realized upon the sale will be capital gain
or loss and 4Front will not be entitled to a deduction. A special basis
adjustment is applied to reduce the gain for alternative minimum tax purposes.
It is possible that all or a portion of the compensation realized under the
Plan by certain executive officers will not be deductible by us by reason of the
executive compensation deduction limitations of Section 162(m) of the Code.
Accordingly, although we expect that the compensation committee will take into
consideration the non-deductibility of compensation attributable to a particular
award under the Plan, no assurance can be given that all or part of any such
compensation will be deductible by us.
38
<PAGE>
COMPENSATION OF DIRECTORS
Messrs. Murray and Ross each received compensation of $23,000 in the fiscal
year 2000. In February 2000, their compensation was increased to $25,300 per
year. No other director receives any compensation for services as a director.
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS
The report of the compensation committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or under
the Exchange Act, except to the extent that 4Front specifically incorporates
this information by reference, and shall otherwise not be deemed filed under
such acts.
The compensation committee currently consists of Messrs. Doshi, Ellis,
Murray and Ross. The compensation committee administers 4Front's executive
compensation programs, monitors corporate performance and its relationship to
compensation of executive officers, and makes appropriate recommendations
concerning matters of executive compensation.
COMPENSATION PHILOSOPHY
We believe that executive compensation should be closely related to
increased stockholder value. One of our strengths contributing to its successes
is a strong management team. The compensation program is designed to enable us
to attract, retain and reward capable employees who can contribute to our
continued success, principally by linking compensation with the attainment of
key business objectives. Equity participation and a strong alignment to
stockholders' interests are key elements of our compensation philosophy.
Accordingly, our executive compensation program is designed to provide
competitive compensation, support our strategic business goals and reflect our
performance.
The compensation program reflects the following principles:
- Compensation should encourage increased stockholder value.
- Compensation programs should support our short- and long-term strategic
business goals and objectives.
- Compensation programs should reflect and promote our values and reward
individuals for outstanding contributions toward business goals.
- Compensation programs should enable us to attract and retain highly
qualified professionals.
PAY MIX AND MEASUREMENT
Our executive compensation is comprised of two components, base salary and
incentives, each of which is intended to serve the overall compensation
philosophy.
BASE SALARY
Our salary levels are intended to be consistent with competitive pay
practices and level of responsibility, with salary increases reflecting
competitive trends, our overall financial performance and resources, general
economic conditions as well as a number of factors relating to the particular
individual, including the performance of the individual executive, and level of
experience, ability and knowledge of the job.
INCENTIVES
Incentives consist of stock options and, to a lesser extent, cash awards.
The compensation committee strongly believes that the pay program should provide
employees with an opportunity to
39
<PAGE>
increase their ownership and potentially gain financially from stock price
increases. By this approach, the best interests of stockholders, executives and
employees will be closely aligned. Therefore, executives and other employees are
eligible to receive stock options, giving them the right to purchase shares of
4Front common stock at a specified price in the future. The grant of options is
based primarily on a key employee's potential contribution to our growth and
profitability, based on the compensation committee's discretionary evaluation.
Options are granted at the prevailing market value of 4Front common stock and
will only have value if our stock price increases. Generally, grants of options
vest over a period of time and executives must be employed by us for such
options to vest. The granting of cash awards is discretionary and is not
dependent on any one factor.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR THE FISCAL YEAR ENDED JANUARY 31, 2000
For the fiscal year ended January 31, 2000 and prior to the execution of his
new employment agreement, Mr. Doshi had received an annual salary of L179,687
($296,000), as compensation for services he performed for us and our affiliates.
We have entered a new employment agreement with Mr. Doshi, effective as of
June 22, 2000 under which Mr. Doshi's annual base salary was increased to
L198,000 ($316,800).
The employment arrangements with Mr. Doshi are deemed appropriate by the
compensation committee considering the overall performance of 4Front and
Mr. Doshi.
TAX EFFECTS
Changes made in 1993 to the Code impose certain limitations on the
deductibility of executive compensation paid by public companies for taxable
years beginning in or after 1994. In general, under the limitations, the Company
will not be able to deduct annual compensation paid to certain executive
officers in excess of $1,000,000 except to the extent that such compensation
qualifies as "performance-based compensation" (or meets other exceptions not
here relevant). Non-deductibility would result in additional tax cost to us. It
is possible that at least some of the cash and equity-based compensation paid or
payable to our executive officers will not qualify for the "performance-based
compensation" exclusion under the deduction limitation provisions of the Code.
Nevertheless, the compensation committee anticipates that in making compensation
decisions it will give consideration to the net cost to us (including, for this
purpose, the potential limitation on deductibility of executive compensation).
The compensation committee believes that linking executive compensation to
corporate performance results in a better alignment of compensation with
corporate business goals and stockholder value. The committee believes its
compensation practices are directly tied to stockholder returns and linked to
the achievement of our annual and longer-term financial and operational results
on behalf of its stockholders. In view of our performance and achievement of
goals and competitive conditions, the compensation committee believes that
compensation levels during fiscal 2000 adequately reflect our compensation goals
and policies.
COMPENSATION COMMITTEE
Anil Doshi
Mark Ellis
Brian Murray
Arthur Keith Ross
Craig Kleinman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee currently consists of Messrs. Doshi, Ellis,
Murray, Ross and Kleinman. Messrs. Doshi and Ellis abstain from votes on their
compensation.
40
<PAGE>
4FRONT'S PERFORMANCE
The stock price performance graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or under the Exchange Act,
except to the extent we specifically incorporate this information by reference,
and shall not otherwise be deemed filed under these acts.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
3/21/95 1/31/96 1/31/97 1/31/98 1/31/99 1/31/00
<S> <C> <C> <C> <C> <C> <C>
4FRONT TECHNOLOGIES, INC. 100.00 114.67 66.67 128.17 166.67 295.83
7373 SIC CODE INDEX 100.00 146.19 168.65 203.12 501.97 853.75
RUSSELL 2000 INDEX 100.00 122.76 146.03 172.39 172.39 200.19
NASDAQ MARKET INDEX 100.00 119.55 157.33 185.31 289.23 432.65
</TABLE>
The above graph compares the performance of 4Front from March 21, 1995, the
date that our common stock commenced trading publicly, through January 31, 2000,
against the performance of the Nasdaq Market Index, the Russell 2000 Index and
the SIC Code Index, an index comprised of approximately 130 computer companies,
including 4Front.
41
<PAGE>
PROPOSAL NO. 3--AMENDMENTS TO THE
4FRONT TECHNOLOGIES, INC. 1996 EQUITY INCENTIVE PLAN
The 4Front board has unanimously approved an amendment to the 4Front
Technologies Inc. 1996 Equity Incentive Plan (the "Plan"), which would increase
the number of options available for grant thereunder to 2,000,000. The primary
features of the Plan, and the salient federal income tax consequences associated
with options granted under the Plan, are summarized above under the heading
"Executive Compensation--1996 Equity Incentive Plan." The full text of the Plan,
as amended, is set forth in Annex D to this proxy statement and the following is
qualified by reference thereto.
As of July 31, 2000, options to purchase an aggregate of 1,449,899 shares
were outstanding under the Plan (including 681,560 stock options granted in
December 1999 and May 2000). If the Proposal is adopted, the stock options that
would be approved under the Plan to 4Front's chief executive officer and each of
the four other most highly compensated executive officers of 4Front are set
forth below in the following table:
STOCK OPTIONS TO BE GRANTED IF THE
4FRONT TECHNOLOGIES, INC. 1996 EQUITY
INCENTIVE PLAN IS AMENDED
<TABLE>
<CAPTION>
EXERCISE PRICE PER NUMBER
NAME AND POSITION STOCK OPTION OF OPTIONS
----------------- ------------------ ----------
<S> <C> <C>
Anil Doshi
Chairman of the Board and CEO............................. (1) 70,000
Mark Ellis
Vice Chairman of the Board and President.................. (1) 60,000
Kenneth Newell
former Vice President for Corporate Affairs............... (1) 40,000
Terence Burt
Vice President and Chief Operating Officer................ (1) 50,000
Executive Group............................................. (1) 220,000
Non-Executive Director Group................................ (1) 37,500
Non-Executive Officer Employee Group........................ (1) 0
</TABLE>
------------------------
(1) The exercise price per stock option is $13.35, the closing price of 4Front's
common stock on December 6, 1999, the date of grant. The options are
exercisable as follows: one-third exercisable 6 months after the date of
grant, one-third exercisable 18 months after the date of grant and the
balance exercisable 30 months after the date of grant.
The board believes that the Plan has enhanced its ability to attract,
motivate and retain key personnel and thereby serves our best interests, as well
as the best interests of its shareholders.
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares of common stock
issued, outstanding and entitled to vote, present or represented at the meeting,
a quorum being present, is required for the adoption of this proposal. Broker
non-votes with respect to this matter will be treated as neither a vote "for" or
a vote "against" the matter, although they will be counted in determining if a
quorum is present. However, abstentions will be considered in determining the
number of votes required to attain a majority of the shares present or
represented at the meeting and entitled to vote. Accordingly, an abstention from
voting by a stockholder present in person or by proxy at the meeting has the
same legal effect as a vote "against" the matter because it represents a share
present or represented at the meeting and entitled to vote, thereby increasing
the number of affirmative votes required to approve this proposal.
42
<PAGE>
THE BOARD OF DIRECTORS DEEMS "PROPOSAL NO. 3--AMENDMENT TO 4FRONT
TECHNOLOGIES, INC. 1996 EQUITY INCENTIVE PLAN" TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of August 1, 2000 (except as
otherwise noted in the footnotes) regarding the beneficial ownership (determined
in accordance with the rules of the Securities and Exchange Commission (the
"SEC"), which generally attribute beneficial ownership of securities to persons
who possess sole or shared voting power and/or investment power with respect to
those securities) of our common stock of: (i) each person known by us to own
beneficially more than five percent of the outstanding common stock; (ii) each
director and nominee for director; (iii) each executive officer named in the
Summary Compensation Table (see "Executive Compensation"); and (iv) all of our
directors and executive officers as a group. Except as otherwise specified, the
named beneficial owner has the sole voting and investment power over the shares
listed.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNERSHIP OF COMMON
NAME OF BENEFICIAL OWNER COMMON STOCK STOCK
------------------------ ----------------------- -------------
<S> <C> <C>
Anil Doshi (1).............................................. 1,050,212 8.42%
Mark Ellis (2).............................................. 605,312 4.86%
Terence Burt (3)............................................ 258,716 2.08%
Stephen McDonnell (4)....................................... 32,133 *
Craig Kleinman (5).......................................... 51,833 *
Brian Murray (6)............................................ 21,833 *
Arthur Keith Ross (7)....................................... 165,183 1.33%
All Directors and Executive Officers as a Group (7 persons)
(8)....................................................... 2,139,710 16.84%
</TABLE>
------------------------
* Less than 1%
(1) Includes 45,512 shares of common stock which are owned by Aliki Financial
Corp., a corporation in which Mr. Doshi has a 65% interest. Also includes
90,000 shares of common stock purchasable pursuant to immediately
exercisable options.
(2) Includes 45,512 shares of common stock which are owned by Aliki Financial
Corp., a corporation in which Mr. Ellis has a 35% interest. Also includes
80,000 shares of common stock purchasable pursuant to immediately
exercisable options.
(3) Includes 27,744 shares of common stock owned by Mr. Burt's wife and 14,395
shares held by Lex Nominees International as nominee for a Jersey resident
settlement established for the benefit of Mr. Burt and his wife and
children. Also includes 90,000 shares of common stock purchasable pursuant
to immediately exercisable options. Mr. Burt disclaims beneficial ownership
of the shares held by his wife.
(4) Includes of 25,833 shares purchasable pursuant to immediately exercisable
options.
(5) Includes 11,833 shares purchasable pursuant to immediately exercisable
options.
(6) Includes 19,333 shares of common stock purchasable pursuant to immediately
exercisable options.
(7) Includes 9,333 shares purchasable pursuant to immediately exercisable
options.
(8) Includes 326,332 shares subject to options which are immediately
exercisable. Does not include 284,669 shares subject to options which are
not exercisable within 60 days of August 1, 2000.
43
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION DIFFERENT FROM THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED
SEPTEMBER 25, 2000. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROXY STATEMENT IS ACCURATE AS OF ANY LATER DATE, AND THE MAILING OF THIS PROXY
STATEMENT TO STOCKHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE CONTRARY.
FORWARD-LOOKING STATEMENTS
This document and the documents that are incorporated by reference include
certain forward-looking statements about 4Front that are subject to risks and
uncertainties. Forward-looking statements include certain information concerning
4Front and the synergistic benefits of the merger set forth under "The
Merger--Reasons for the merger" and "--Opinion of financial advisor to 4Front."
To that extent, 4Front claims the protection of the disclosure liability safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Also, statements including the words "believes,"
"expects," "anticipates," "intends," "estimates," or similar expressions are
forward-looking statements. Many factors, some of which are discussed in this
document and in the documents which 4Front has incorporated by reference, could
affect the future financial results of 4Front and could cause actual results to
differ materially from the results anticipated by these forward-looking
statements. 4Front does not undertake any obligation to publicly update any
forward-looking statements to reflect new information or further events or
occurrences.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP serves as our independent certified public accountant
and served in that role during the fiscal year ended January 31, 2000.
Representatives of KPMG are expected to be present at the annual meeting, where
they will be available to respond to appropriate questions and have the
opportunity to make a statement if they so desire.
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at our 2001
annual meeting of stockholders, if such a meeting is held, must be received by
4Front no later than June 1, 2001 for inclusion in the board of directors' proxy
statement and form of proxy relating to that meeting. In addition, proxies
received in connection with the 2000 annual meeting of stockholders will confer
on 4Front discretionary authority (i) to vote on any stockholder proposal which
is received by 4Front after June 1, 2000 and (ii) to vote on any stockholder
proposal which is received by 4Front on or before June 1, 2000 if the proxy
statement includes advice on the nature of the matter and how 4Front intends to
exercise its discretion to vote on such matter.
OTHER BUSINESS
The board of directors knows of no other business to be acted upon at the
annual meeting. However, if any other business properly comes before the annual
meeting, it is the intention of the persons named in the enclosed proxy to vote
on such matters in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in obtaining
the necessary vote. Therefore, whether or not you expect to attend the annual
meeting, please sign the proxy and return it in the enclosed envelope.
By Order of the Board of Directors
Craig Kleinman
SECRETARY
Dated: September 25, 2000
44
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
NCR CORPORATION,
NCR MERGER SUB INC. AND
4FRONT TECHNOLOGIES, INC.
DATED AS OF AUGUST 2, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I--DEFINITIONS AND CONSTRUCTION............................. 1
1.1 Certain Definitions......................................... 1
1.2 Additional Definitions...................................... 6
1.3 Terms Generally............................................. 7
ARTICLE II--MERGER SUB.............................................. 7
2.1 Organization of Merger Sub.................................. 7
ARTICLE III--THE MERGER AND RELATED MATTERS......................... 8
3.1 The Merger.................................................. 8
3.2 Closing..................................................... 9
3.3 Conversion of Securities.................................... 9
3.4 Company Stock Options; Warrants............................. 9
3.5 Dissenting Shares........................................... 10
3.6 Surrender of Shares; Stock Transfer Books................... 10
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF THE COMPANY........... 11
4.1 Organization and Qualification.............................. 11
4.2 Authorization and Validity of Transaction Agreements........ 12
4.3 Capitalization.............................................. 12
4.4 Reports and Financial Statements............................ 13
4.5 No Approvals or Notices Required; No Conflict with
Instruments................................................. 14
4.6 Absence of Certain Changes or Events........................ 15
4.7 Information Supplied........................................ 16
4.8 Legal Proceedings........................................... 16
4.9 Licenses; Compliance with Regulatory Requirements........... 17
4.10 Brokers or Finders.......................................... 17
4.11 Tax Matters................................................. 18
4.12 Employee Matters............................................ 19
4.13 Fairness Opinion............................................ 20
4.14 Recommendation of the Company Board......................... 20
4.15 Vote Required............................................... 21
4.16 Intangible Property; Copyrights............................. 21
4.17 Year 2000................................................... 21
4.18 Investment Securities....................................... 21
4.19 Transactions with Affiliates and Certain Agreements......... 21
4.20 No Investment Company....................................... 22
4.21 State Takeover Statutes..................................... 22
4.22 Unlawful Payments........................................... 22
ARTICLE V--REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.. 22
5.1 Organization and Qualification.............................. 22
5.2 Authorization and Validity of Transaction Agreements with
respect to Parent........................................... 22
5.3 Authorization and Validity of Agreement with respect to
Merger Sub.................................................. 22
5.4 No Conflict with Instruments................................ 23
5.5 No Prior Activities of Merger Sub........................... 23
5.6 Information Supplied........................................ 23
5.7 Brokers..................................................... 23
5.8 Financing................................................... 23
5.9 Ownership of Company Capital Stock.......................... 23
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
5.10 Legal Proceedings........................................... 23
5.11 Government Consents......................................... 23
ARTICLE VI--COVENANTS AND AGREEMENTS................................ 24
6.1 Stockholder Meeting......................................... 24
6.2 Access to Information Concerning Properties and Records..... 25
6.3 Confidentiality............................................. 25
6.4 Public Announcements........................................ 26
6.5 Conduct of the Company's Business Prior to Effective Time... 26
6.6 No Solicitation............................................. 29
6.7 Reasonable Efforts.......................................... 30
6.8 Certain Litigation.......................................... 31
6.9 Indemnification of Directors and Officers................... 32
6.10 Company Stock Options....................................... 33
6.11 Employee Matters............................................ 34
6.12 Asset Sale.................................................. 34
6.13 Company Key Employees....................................... 35
6.14 Integration Team............................................ 35
6.15 Section 16 Matters.......................................... 35
ARTICLE VII--CONDITIONS TO THE MERGER............................... 35
7.1 Conditions to the Merger.................................... 35
7.2 Conditions to Parent and Merger Sub's Obligations to Effect
the Merger.................................................. 36
7.3 Conditions to Company Obligation to Effect the Merger....... 37
ARTICLE VIII--TERMINATION........................................... 37
8.1 Termination and Abandonment................................. 37
8.2 Termination Fee; Effects of Termination..................... 38
ARTICLE IX--MISCELLANEOUS........................................... 39
9.1 No Waiver or Survival of Representations, Warranties,
Covenants and Agreements.................................... 39
9.2 Notices..................................................... 39
9.3 Entire Agreement............................................ 40
9.4 Assignment; Binding Effect; Benefit......................... 40
9.5 Amendment................................................... 40
9.6 Extension; Waiver........................................... 41
9.7 Headings.................................................... 41
9.8 Counterparts................................................ 41
9.9 Applicable Law.............................................. 41
9.10 No Remedy in Certain Circumstances.......................... 41
9.11 Severability................................................ 41
9.12 Company Disclosure Memorandum............................... 41
9.13 Enforcement................................................. 42
9.14 Submission to Jurisdiction; Waivers......................... 42
9.15 Personal Liability.......................................... 42
</TABLE>
<TABLE>
<S> <C> <C>
EXHIBITS
Exhibit A: Form of Certificate of Merger
Exhibit B: Form of Stock Option Agreement
Exhibit C: Form of Voting Agreement
Exhibit Form of McVeigh Employment Contract
D-1:
Exhibit Form of Burt Employment Contract
D-2:
Exhibit Form of Ellis Resignation Letter
E-1:
Exhibit Form of Doshi Resignation Letter
E-2:
Exhibit F: Form of Non-Competition and Non-Solicitation Agreement
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and effective
as of this 2nd day of August, 2000 by and among NCR CORPORATION, a Maryland
corporation ("PARENT"), NCR MERGER SUB INC., a Delaware corporation ("MERGER
SUB") and a subsidiary of Parent, and 4FRONT TECHNOLOGIES, INC., a Delaware
corporation (the "COMPANY").
RECITALS
WHEREAS, the respective boards of directors of Parent and the Company have
each determined that it is in the best interests of each corporation and its
respective stockholders for Parent, through an Affiliate, to acquire the Company
upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, the respective boards of
directors of each of Parent, Merger Sub and the Company have approved this
Agreement and the merger of Merger Sub with and into the Company (the "MERGER")
in accordance with the General Corporation Law of the State of Delaware ("DGCL")
upon the terms and subject to the conditions set forth herein; and
WHEREAS, pursuant to the Merger, at the Effective Time, all issued and
outstanding shares (the "SHARES") of Company Common Stock (as defined herein)
will be converted into the right to receive the Per Share Amount (as defined
herein) in cash; and
WHEREAS, as a condition and inducement to Parent's willingness to enter into
this Agreement, (i) Parent and the Company are entering into a Stock Option
Agreement, dated as of the date hereof and substantially in the form as that
attached hereto as EXHIBIT B (the "STOCK OPTION AGREEMENT"), pursuant to which
the Company is granting to Parent an option to purchase shares of Company Common
Stock; and (ii) Parent, the Company and certain of the Company's stockholders
(the "VOTING STOCKHOLDERS") are entering into a Voting Agreement, dated as of
the date hereof substantially in the form as that attached hereto as EXHIBIT C
(the "VOTING AGREEMENT"), pursuant to which the Voting Stockholders have agreed,
among other things, to vote the shares of Company Common Stock held by them in
favor of the adoption of this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings unless the context otherwise requires:
An "AFFILIATE" of any Person shall mean any other Person which, directly
or indirectly, controls or is controlled by or is under common control with
such Person. A Person shall be deemed to "control," be "controlled by" or be
"under common control with" any other Person if such other Person possesses,
directly or indirectly, power to direct or cause the direction of the
management or policies of such Person whether through the ownership of
voting securities or partnership interests, by contract or otherwise.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including all
Exhibits hereto.
"ALTERNATIVE PROPOSAL" shall mean any proposal, other than (x) as
contemplated by this Agreement, (y) otherwise proposed by Parent or its
Affiliates, or (z) the Asset Sale as
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contemplated by this Agreement, for: (i) a merger, consolidation, share
exchange, reorganization, other business combination, recapitalization or
similar transaction involving the Company or any of its Subsidiaries;
(ii) the acquisition, directly or indirectly, of an equity interest
representing greater than 15% of the voting securities of the Company or any
of its Subsidiaries; (iii) the acquisition of a substantial portion of any
of the assets of the Company or any of its Subsidiaries; or (iv) any similar
transaction the effect of which would be reasonably likely to prohibit,
restrict or delay the consummation of the Merger or any of the other
transactions contemplated by this Agreement, or which would reasonably be
expected to dilute materially the benefits to Parent of the transactions
contemplated hereby.
"ANNUAL REPORT" shall mean the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 2000, filed with the Commission on
April 28, 2000.
"APPLICABLE LAWS" shall mean, with respect to any Person, any statute,
law, regulation, ordinance, rule, judgment, rule of common law, order,
decree, award, governmental approval, concession, grant, franchise, license,
agreement, directive, guideline, policy, requirement, or other governmental
restriction or any similar form of decision of, or determination by, or any
interpretation or administration of any of the foregoing by, any
governmental authority, whether in effect as of the date hereof or
thereafter, and in each case as amended, applicable to such Person or its
subsidiaries or their respective assets.
"ASSET SALE" shall mean the sale by the Company, in one or more
transactions, of the assets comprising its Services Industries Limited
("SIL") Group business in accordance with SECTION 6.12.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"COMMISSION" shall mean the U.S. Securities and Exchange Commission and
the staff of the Securities and Exchange Commission.
"COMPANY" shall have the meaning specified in the first paragraph
hereof.
"COMPANY BOARD" shall mean the board of directors of the Company.
"COMPANY COMMON STOCK" shall mean shares of the Company's common stock,
par value $0.001 per share.
"COMPANY DISCLOSURE MEMORANDUM" shall mean the disclosure memorandum,
dated as of the date of the Agreement and signed by an authorized officer of
the Company, that has been delivered by the Company to Parent in connection
with this Agreement.
"COMPANY STOCK PLANS" shall mean the 1996 Equity Incentive Plan and the
options, agreements and plans listed in Section 4.3 of the Company
Disclosure Memorandum.
"CONTROL" (including the term "controlling" and phrases "controlled by"
and "under common control with") shall have the meanings given to such term
and phrases in Rule 405 under the Securities Act.
"DGCL" shall have the meaning specified in the Recitals hereto.
"EC MERGER REGULATION" shall mean Regulation 4064/899/ECC concerning the
control of concentrations between undertakings adopted by the Council of
European Communities on December 21, 1989, as amended.
"EFFECTIVE TIME" shall mean the time when the Merger of Merger Sub with
and into the Company becomes effective under Applicable Law as provided in
SECTION 3.1(a).
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"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"FOREIGN OFFICIAL" shall mean any Person deemed to be a "foreign
official" under the Foreign Corrupt Practices Act, as amended, and shall
also include (i) any foreign political party or official thereof, and
(ii) any candidate for foreign political office.
"GAAP" shall mean generally accepted accounting principles as required
by the Commission under its rules and regulations and as accepted by the
accounting profession in the United States as in effect from time to time.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication (whether or not the recourse of the lender is to the whole of
the assets of such Person or only to a portion thereof): (i) every liability
of such Person (excluding intercompany accounts between the Company and any
wholly-owned Subsidiary of the Company or between wholly-owned Subsidiaries
of the Company) which consists of or relates to a liability, including the
following: (A) for borrowed money, (B) evidenced by notes, bonds, debentures
or other similar instruments (whether or not negotiable), (C) for
reimbursement of amounts drawn under letters of credit, bankers' acceptances
or similar facilities issued for the account of such Person, (D) issued or
assumed as the deferred purchase price of property or services (excluding
contingent payment obligations and accounts payable), and (E) relating to a
capitalized lease obligation and all debt attributable to sale/ leaseback
transactions of such Person; and/or (ii) every liability of others of the
kind described in the preceding clause (i) which such Person has guaranteed
or which is otherwise its legal liability, in either case to the extent
required pursuant to GAAP to be set forth as a liability on a balance sheet
of such Person.
"INJUNCTION" shall mean any permanent or preliminary injunction,
restraining order, decree or other similar order or decree issued or entered
by any court or Governmental Entity.
"JAPAN MERGER REGULATION" shall mean the Act No. 54 Concerning
Prohibition of Private Monopolization and Maintenance of Fair Trade of
Japan.
"LIEN" shall mean any security interest, mortgage, pledge,
hypothecation, charge, claim, option, right to acquire, adverse interest,
assignment, deposit arrangement, encumbrance, restriction, lien (statutory
or other), or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing,
and the filing of any financing statement under the Uniform Commercial Code
or comparable law of any jurisdiction).
"MAJOR CUSTOMER" shall mean any customer of the Company that (i) in the
twelve month period preceding July 31, 2000, contributed revenues to the
Company in excess of $500,000; or (ii) on the basis of contractual
obligations in effect as of the date hereof, is scheduled to contribute in
excess of $500,000 to the Company's revenues for the fiscal year ending on
January 31, 2001.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, any
change, effect, event, occurrence or state of facts (or any development that
has had or is reasonably likely to have any change or effect) that is
materially adverse to the business, financial condition, or results of
operations of such Person and its Subsidiaries, taken as a whole, or which
would prevent or materially delay the consummation of the transactions
contemplated hereby, PROVIDED, HOWEVER, none of the following shall be
deemed in themselves (either alone or in combination) to constitute,
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and none of the following shall be taken into account in determining whether
there has been, a Material Adverse Effect: (i) any change in the market
price or trading volume of the capital stock of such Person after the date
hereof; (ii) changes, events or occurrences in the United States securities
markets which are not specific to such Person; (iii) any adverse change,
event, development or effect arising from or relating to general business or
economic conditions which is not specific to such Person and its
Subsidiaries; (iv) any adverse change event, development or effect arising
from or relating to the information technology industry generally which is
not specific to such Person and its Subsidiaries; (v) any failure by such
Person to meet internal forecasts or projections or published revenue or
earnings predictions for any period ending (or for which revenues or
earnings are released) on or after the date of this Agreement; (vi) with
respect to the Company, any adverse change, event, development or effect
(x) attributable to the announcement or pendency of the Merger (including
any cancellations of or delays in customer agreements, any reduction in
sales, any disruption in supplier, distributor, partner or similar
relationships or any loss of employees), or (y) resulting from or relating
to compliance with the terms of, or the taking of any action required by,
this Agreement; and (vii) any adverse change, event, development or effect
arising from or relating to any change in GAAP.
"MERGER" shall have the meaning specified in the Recitals hereto.
"MERGER SUB" shall have the meaning specified in the first paragraph
hereof.
"PARENT" shall have the meaning specified in the first paragraph hereof.
"PARENT BOARD" shall mean the board of directors of Parent.
"PARTIES" shall mean Parent, Merger Sub and the Company.
"PER SHARE AMOUNT" shall mean Eighteen and 50/100 Dollars (U.S.)
(US$18.50) per Share.
"PERMITTED ENCUMBRANCES" shall mean the following Liens with respect to
the properties and assets of the Company: (i) Liens for Taxes (as
hereinafter defined), assessments or other governmental charges or levies
not at the time delinquent or thereafter payable without penalty or being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on the Company's
books; (ii) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue
or being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on the
Company's books; (iii) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, leases and contracts (other than for
borrowed money) entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds; (iv) purchase money security
interests or Liens on property acquired or held by the Company in the
ordinary course of business to secure the purchase price of such property or
to secure Indebtedness incurred solely for the purpose of financing the
acquisition of such property; and (v) easements, restrictions and other
defects of title which are not, in the aggregate, material and which do not,
either individually or in the aggregate, materially and adversely affect the
Company's use or occupancy of the property affected thereby.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, unincorporated organization, association, or joint
venture or a government, agency, political subdivision, or instrumentality
thereof.
"REG." shall mean a regulation promulgated by the U.S. Department of
Treasury pursuant to the Code.
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"RESTRICTION", with respect to any capital stock or other security,
shall mean any voting or other trust or agreement, option, warrant, escrow
arrangement, proxy, buy-sell agreement, power of attorney or other Contract,
or any law, rule, regulation, order, judgment or decree which, conditionally
or unconditionally: (i) grants to any Person the right to purchase or
otherwise acquire, or obligates any Person to purchase or sell or otherwise
acquire, dispose of or issue, or otherwise results in or, whether upon the
occurrence of any event or with notice or lapse of time or both or
otherwise, may result in, any Person acquiring (A) any of such capital stock
or other security, (B) any of the proceeds of, or any distributions paid or
which are or may become payable with respect to, any of such capital stock
or other security, or (C) any interest in such capital stock or other
security or any such proceeds or distributions; (ii) restricts or, whether
upon the occurrence of any event or with notice or lapse of time or both or
otherwise, may restrict the transfer or voting of, or the exercise of any
rights or the enjoyment of any benefits arising by reason of ownership of,
any such capital stock or other security or any such proceeds or
distributions; or (iii) creates or, whether upon the occurrence of any event
or with notice or lapse of time or both or otherwise, may create a Lien or
purported Lien affecting such capital stock or other security, proceeds or
distributions.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"SHARES" shall have the meaning specified in the Recitals hereto.
"STOCK OPTION AGREEMENT" shall have the meaning specified in the
Recitals hereto.
"SUBSIDIARY", when used with respect to any Person, shall mean any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such Person or any other Subsidiary of such Person is a general
partner or holds at least 50% of the securities or other interests having by
their terms ordinary voting power to vote in the election of the board of
directors or others performing similar functions with respect to such
corporation or other organization, or (ii) which is directly or indirectly
owned or controlled by such Person, by any one or more of its Subsidiaries,
or by such Person and one or more of its Subsidiaries.
"SUPERIOR PROPOSAL" shall mean any bona fide written Alternative
Proposal to acquire, directly or indirectly, more than 66.66% of the shares
of Company's Common Stock then outstanding or all or substantially all the
assets of the Company and that the Company Board determines in good faith,
after taking into account the advice of a financial advisor of nationally
recognized reputation and legal and regulatory aspects of such Alternative
Proposal, and taking into account all the terms and conditions of the
Alternative Proposal, is more favorable to the Company's stockholders than
the Merger and for which financing, to the extent required, is then fully
committed or reasonably determined to be available by the Company Board, and
is reasonably capable of being completed.
"SURVIVING ENTITY" shall mean the Company as the surviving entity in the
Merger as provided in SECTION 3.1(a).
"TRANSACTION AGREEMENTS" shall mean this Agreement, the Voting Agreement
and the Stock Option Agreement, collectively.
"VOTING AGREEMENT" shall have the meaning specified in the Recitals
hereto.
"VOTING STOCKHOLDERS" shall have the meaning specified in the Recitals
hereto.
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1.2 ADDITIONAL DEFINITIONS. The following additional terms have the
meaning ascribed thereto in the Section indicated below next to such term:
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ --------
<S> <C>
2000 Budget 6.5(e)
Assumed Company Benefit Plans............................... 6.11(a)
Alternative Proposal Notice................................. 6.6(d)
Certificate of Merger....................................... 3.1(a)
Certificates................................................ 3.6(b)
Change in Company Recommendation............................ 6.1(a)
Claim....................................................... 6.9(a)
Closing..................................................... 3.2
Closing Date................................................ 3.2
Company Bylaws.............................................. 3.1(c)
Company Charter............................................. 3.1(c)
Company Consolidated Returns................................ 4.11(a)
Company Plans............................................... 4.12(a)
Company Preferred Stock..................................... 4.3
Company Recommendation...................................... 6.1(a)
Company SEC Reports......................................... 4.4(a)
Company Stockholder Approval................................ 6.1(a)
Company Stockholder Meeting................................. 6.1(a)
Company Systems............................................. 4.17
Confidential Information.................................... 6.3
Contract.................................................... 4.5(d)
Contract Consent............................................ 4.5(c)
Contract Notice............................................. 4.5(c)
Convertible Securities...................................... 4.3
Disclosing Party............................................ 6.3
Dissenting Shares........................................... 3.5(a)
Employee Indemnified Liabilities............................ 6.9(a)
Employees................................................... 6.11(a)
Employment Contracts........................................ 6.13
Environmental and Health Laws............................... 4.9
ERISA....................................................... 4.12(a)
ERISA Affiliate............................................. 4.12(a)
Expenses.................................................... 8.2(b)
Fairness Opinion............................................ 4.13
Governmental Consent........................................ 4.5(b)
Governmental Entity......................................... 4.5(e)
Governmental Filing......................................... 4.5(b)
Indemnified Employee........................................ 6.9(a)
Investment Security......................................... 4.18
IRS......................................................... 4.11(a)
Licenses.................................................... 4.9
Local Approvals............................................. 4.5(b)
Merger Consideration........................................ 3.3(a)
Option...................................................... 3.4(a)
Parachute Gross-Up Payment.................................. 4.12(k)
Paying Agent................................................ 3.6(a)
PBGC........................................................ 4.12(d)
</TABLE>
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<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ --------
<S> <C>
Permits..................................................... 4.9
Proxy Statement............................................. 4.5(b)
Receiving Party............................................. 6.3
Representatives............................................. 6.3
Retention Contracts......................................... 6.13
Superior Proposal Notice.................................... 6.6(a)
Tax......................................................... 4.11(a)
Tax Return.................................................. 4.11(a)
Termination Date............................................ 8.1(b)
Termination Fee............................................. 8.2(a)
Violation................................................... 4.5(d)
Voting Debt................................................. 4.3
Warrant..................................................... 3.4(b)
</TABLE>
1.3 TERMS GENERALLY. The definitions set forth or referenced in SECTIONS
1.1 AND 1.2 shall apply equally to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The words "herein", "hereof" and "hereunder" and words of similar
import refer to this Agreement (including the Exhibits) in its entirety and not
to any part hereof unless the context shall otherwise require. As used herein,
the term "to the Company's knowledge" or any similar term relating to the
knowledge of the Company means the actual knowledge of any of the officers
(determined in accordance with Rule 16a-1(f) under the Exchange Act as in effect
on the date hereof) or directors of the Company. All references herein to
Articles, Sections, Recitals and Exhibits shall be deemed references to
Articles, Sections and Recitals of, and Exhibits to, this Agreement unless the
context shall otherwise require. Unless the context shall otherwise require, any
references to any agreement or other instrument or statute or regulation are to
it as amended and supplemented from time to time (and, in the case of a statute
or regulation, to any successor provisions). Any reference in this Agreement to
a "day" or number of "days" (without the explicit qualification of "business")
shall be interpreted as a reference to a calendar day or number of calendar
days. If any action or notice is to be taken or given on or by a particular
calendar day, and such calendar day is not a business day, then such action or
notice shall be deferred until, or may be taken or given on, the next business
day. References to the term "business day" shall mean any day which is not a
Saturday, Sunday or day on which banks in New York, New York are authorized or
required by law to close. As applied to Parent and the Company, the phrases "as
soon as reasonably practicable," "as promptly as practicable" and similar
phrases shall mean "reasonably promptly under the circumstances, in light of the
other burdens on the time and attention of the directors, officers, employees
and agents of Parent or the Company, as the case may be, and the relative
benefits to Parent or the Company, as the case may be, of this Agreement and
such other burdens."
ARTICLE II
MERGER SUB
2.1 ORGANIZATION OF MERGER SUB. Parent has organized Merger Sub for the
sole purpose of effectuating the Merger contemplated herein. The authorized
capital stock of Merger Sub consists of 1,000 shares of common stock, par value
$0.01 per share, all of which shares have been issued to Parent at a price of
$1.00 per share.
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ARTICLE III
THE MERGER AND RELATED MATTERS
3.1 THE MERGER.
(a) MERGER; EFFECTIVE TIME. At the Effective Time and subject to and
upon the terms and conditions of this Agreement, Merger Sub shall, and
Parent shall cause Merger Sub to, merge with and into the Company in
accordance with the provisions of the DGCL; the separate corporate existence
of Merger Sub shall cease; and the Company shall continue as the Surviving
Entity. The Effective Time shall occur upon the filing with the Secretary of
State of the State of Delaware a Certificate of Merger (the "CERTIFICATE OF
MERGER") substantially in the form as that attached hereto as Exhibit A and
executed in accordance with the applicable provisions of the DGCL, or at
such later time as may be agreed to by Parent and the Company and specified
in the Certificate of Merger. Provided that this Agreement has not been
terminated pursuant to Article VIII, the Parties will cause the Certificate
of Merger to be filed as soon as practicable after the Closing. At the
election of Parent, any direct or indirect, wholly-owned subsidiary of
Parent may be substituted for Merger Sub as a constituent corporation in the
Merger. In such event, the Parties agree to execute an appropriate amendment
to this Agreement in order to reflect the foregoing. Without limiting the
foregoing, Parent may elect (A) to substitute for Merger Sub, a Delaware
limited liability company which is the wholly-owned subsidiary of a
wholly-owned U.K. subsidiary of Parent; or (B) any other alternative
structure to that set forth herein which in its reasonable judgment will
result in more favorable tax consequences for Parent and the Surviving
Entity following the Merger; PROVIDED that no such election shall, in the
case of (A), (i) reduce the Per Share Amount; or (ii) cause any material
delay in the consummation of the Merger; or in the case of (B), in addition
to (i) and (ii), (iii) subject the Company's stockholders, generally, or any
class of such stockholders, generally, to additional tax liabilities that
are primarily attributable to the Merger and such election by the Company.
Subject to the foregoing proviso, the Company shall, and shall cause its
Affiliates to, cooperate with Parent in achieving such structure and shall
execute an appropriate amendment to this Agreement in order to reflect the
foregoing.
(b) EFFECTS OF THE MERGER. The Merger shall have the effect set forth
in 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 Merger Sub shall vest in the
Surviving Entity, and all debts, liabilities and duties of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Entity. If, at any time after the Effective Time, the Surviving Entity
considers or is advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to
vest, perfect or confirm of record or otherwise in the Surviving Entity its
right, title or interest in, to or under any of the rights, properties, or
assets of either the Company or Merger Sub, or otherwise to carry out the
intent and purposes of this Agreement, the officers and directors of the
Surviving Entity will be authorized to execute and deliver, in the name and
on behalf of each of the Company and Merger Sub, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on
behalf of each of the Company and Merger Sub, all such other actions and
things as the board of directors of the Surviving Entity may determine to be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the
Surviving Entity or otherwise to carry out the intent and purposes of this
Agreement.
(c) CERTIFICATE OF INCORPORATION AND BYLAWS OF SURVIVING ENTITY. At
the Effective Time, the Company's Certificate of Incorporation, as amended
("COMPANY CHARTER") shall be amended pursuant to the Certificate of Merger
to be identical to the Certificate of Incorporation of Merger Sub in effect
immediately prior to the Effective Time, except that Article FIRST thereof
shall read as follows: "The name of the Corporation (which is hereinafter
called the "Corporation") is 4Front Technologies, Inc." Such Company Charter
as so amended shall be the Certificate of Incorporation
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of the Surviving Entity until thereafter duly amended in accordance with the
terms thereof and the DGCL. At the Effective Time, the Company's Bylaws
("COMPANY BYLAWS") shall be amended to be identical to the bylaws of Merger
Sub in effect immediately prior to the Effective Time and, in such amended
form, shall be the bylaws of the Surviving Entity until thereafter duly
amended in accordance with the terms thereof, the terms of the Certificate
of Incorporation of the Surviving Entity and the DGCL.
(d) DIRECTORS AND OFFICERS OF SURVIVING ENTITY. At the Effective Time,
the directors of Merger Sub immediately prior to the Effective Time shall be
the directors of the Surviving Entity, and all such directors will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate
of Incorporation and Bylaws of the Surviving Entity, or as otherwise
provided by Applicable Laws. At the Effective Time, the officers of Merger
Sub immediately prior to the Effective Time shall be the officers of the
Surviving Entity, and all such officers will hold office until their
respective successors are duly appointed and qualify in the manner provided
in the Bylaws of the Surviving Entity, or as otherwise provided by
Applicable Laws.
3.2 CLOSING. Upon the terms and subject to the conditions set forth in
ARTICLE VII and the termination rights set forth in ARTICLE VIII, the closing of
the Merger (the "CLOSING") will take place on the first business day after the
satisfaction or waiver (subject to Applicable Laws) of the conditions (excluding
conditions that, by their nature, cannot be satisfied until the Closing Date, as
defined below) set forth in ARTICLE VII, unless this Agreement has been
theretofore terminated pursuant to its terms or unless another time or date is
agreed to in writing by the Parties (the actual time and date of the Closing
being referred to herein as the "CLOSING DATE"). The Closing shall be held at
the offices of Baker Botts L.L.P., 599 Lexington Avenue, 29th Floor, New York,
New York, 10022-6030, unless another place is agreed to in writing by the
Parties.
3.3 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company, or the
holders of any of the Shares:
(a) CONVERSION OF COMPANY SHARES. Each Share issued and outstanding
immediately prior to the Effective Time (other than any Shares to be
cancelled pursuant to SECTION 3.3(b) and any Dissenting Shares (as
hereinafter defined)) shall be cancelled and shall be converted
automatically into the right to receive the Per Share Amount (the "MERGER
CONSIDERATION") payable, without interest, to the holder of such Share, upon
surrender, in the manner provided in SECTION 3.6, of the certificate that
formerly evidenced such Share;
(b) CANCELLATION OF COMPANY TREASURY STOCK. Each Share held in the
treasury of the Company and at the Effective Time shall, by virtue of the
Merger, be cancelled without any conversion thereof and no payment or
distribution shall be made with respect thereto; and
(c) CONVERSION OF MERGER SUB CAPITAL STOCK. Each share of common
stock, par value $0.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of
common stock, par value $0.01 per share, of the Surviving Entity.
3.4 COMPANY STOCK OPTIONS; WARRANTS.
(a) OPTIONS. At the Effective Time, each outstanding option, whether
or not then vested or exercisable in accordance with its terms, to purchase
shares of the Company's capital stock (an "OPTION"), including those
pursuant to any Company Stock Plan, shall be cancelled and be deemed
terminated, and each holder of a cancelled Option shall be entitled to
receive from the Company, in consideration for the cancellation of such
Option, an amount in cash equal to the product of (i) the number of shares
of Company capital stock previously subject to such Option and (ii) the
excess, if any, of the Per Share Amount over the exercise price per share
previously subject to such Option, upon surrender, in the manner provided in
SECTION 3.6, of the agreement, certificate, or other document that formerly
evidenced such Option.
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(b) WARRANTS. At the Effective Time, each outstanding warrant, whether
or not then vested or exercisable in accordance with its terms, to purchase
shares of the Company's capital stock (a "WARRANT"), shall be cancelled and
be deemed terminated, and each holder of a cancelled Warrant shall be
entitled to receive, in consideration for the cancellation of such Warrant,
an amount in cash equal to the product of (i) the number of shares of
Company capital stock previously subject to such Warrant and (ii) the
excess, if any, of the Per Share Amount over the exercise price per share
previously subject to such Warrant, upon surrender, in the manner provided
in SECTION 3.6, of the certificate that formerly evidenced such Warrant
3.5 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
Shares that are outstanding immediately prior to the Effective Time and
which are held by stockholders who shall have not voted in favor of the
Merger or consented thereto in writing and who shall have demanded properly
in writing appraisal for such Shares in accordance with the DGCL
(collectively, the "DISSENTING SHARES") shall not be converted into or
represent the right to receive the Per Share Amount. Such stockholders shall
be entitled to receive payment of the appraised value of such Shares held by
them in accordance with the provisions of the DGCL, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or
who effectively shall have withdrawn or lost their rights to appraisal of
such Shares under the DGCL shall thereupon be deemed to have been converted
into and to have become exchangeable for, as of the Effective Time, the
right to receive the Per Share Amount, without any interest thereon, upon
surrender, in the manner provided in SECTION 3.6, of the certificate or
certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any
other instruments served pursuant to the DGCL in respect of Dissenting
Shares and received by the Company; and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any demands for appraisal or offer
to settle or settle any such demands.
(c) The right of any stockholder to receive the Per Share Amount shall
be subject to and reduced by the amount of any required Tax withholding
obligation.
3.6 SURRENDER OF SHARES; STOCK TRANSFER BOOKS.
(a) Prior to the Effective Time, Merger Sub shall designate a bank or
trust company located in the United States and reasonably satisfactory to
the Company to act as agent (the "PAYING AGENT") for the holders of Shares
in connection with the Merger to receive the funds to which holders of
Shares shall become entitled pursuant to SECTION 3.3(a). Immediately prior
to the Effective Time, Parent shall cause Surviving Entity to have
sufficient funds to deposit, and shall cause Surviving Entity to deposit in
trust with the Paying Agent, cash in the aggregate amount equal to the
product of (i) the number of Shares outstanding immediately prior to the
Effective Time (other than Shares as to which dissenters' rights have been
exercised as of the Effective Time) and (ii) the Per Share Amount.
(b) Promptly after the Effective Time, Parent shall cause the Surviving
Entity to mail to each Person who was, at the Effective Time, a holder of
record of Shares entitled to receive the Merger Consideration pursuant to
SECTION 3.3(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "CERTIFICATES") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use
in effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together
with such letter of
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transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may reasonably be required
pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration for each
Share formerly evidenced by such Certificate, and such Certificate shall
then be cancelled. No interest shall accrue or be paid on the Merger
Consideration payable upon the surrender of any Certificate for the benefit
of the holder of such Certificate. If payment of the Merger Consideration is
to be made to a Person other than the Person in whose name the surrendered
Certificate is registered on the stock transfer books of the Company, it
shall be a condition of payment that the Certificate so surrendered shall be
endorsed properly or otherwise be in proper form for transfer and that the
Person requesting such payment shall have paid all transfer and other Taxes
required by reason of the payment of the Merger Consideration to a Person
other than the registered holder of the Certificate surrendered or shall
have established to the satisfaction of the Surviving Entity that such Taxes
either have been paid or are not applicable. The Surviving Entity shall pay
all charges and expenses, including those of the Paying Agent, in connection
with the distribution of the Merger Consideration. Until surrendered as
contemplated by this SECTION 3.6, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon
such surrender the amount of cash, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted
pursuant to SECTION 3.3.
(c) At any time following the sixth month after the Effective Time, the
Surviving Entity shall be entitled to require the Paying Agent to deliver to
it any funds which had been made available to the Paying Agent and not
disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it) and, thereafter, such holders shall be entitled to look to
the Surviving Entity (subject to abandoned property, escheat and other
similar laws) only as general creditors thereof with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates
held by them. Notwithstanding the foregoing, neither the Surviving Entity
nor the Paying Agent shall be liable to any holder of a Share for any Merger
Consideration delivered in respect of such Share to a public official
pursuant to any abandoned property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and, thereafter, there
shall be no further registration of transfers of Shares on the records of
the Company. From and after the Effective Time, the holders of Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares except as otherwise provided herein or by
Applicable Laws.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that,
except as appropriately set forth in the Company Disclosure Memorandum in a
manner that complies with SECTION 9.12 of this Agreement:
4.1 ORGANIZATION AND QUALIFICATION. Each of the Company and its
Subsidiaries (i) is a corporation, partnership or limited liability company duly
organized, validly existing and, to the extent applicable, in good standing
under the laws of the jurisdiction of its incorporation or organization;
(ii) has all requisite corporate, partnership or limited liability company power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted; and (iii) is duly qualified or licensed
to do business and, to the extent applicable, is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of its activities makes such qualification necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing has not had and is not reasonably likely to have, either individually
or in
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the aggregate, a Material Adverse Effect on the Company. Section 4.1 of the
Company Disclosure Memorandum sets forth a complete and accurate list of each of
the Company's Subsidiaries. As of the date of this Agreement, neither the
Company nor any of its Subsidiaries, directly or indirectly, owns any equity or
similar interest in, or any interest convertible into, or exchangeable or
exercisable for any Person (other than the Subsidiaries).
The Company has delivered to Parent true and complete copies of the Company
Charter and Company Bylaws in effect on the date hereof. The Company's minute
books, true and complete copies of which have been made available to Parent,
contain the minutes (or draft copies of the minutes) of all meetings of
directors and stockholders of the Company since February 1, 1997, other than the
minutes related to the transactions contemplated hereby.
4.2 AUTHORIZATION AND VALIDITY OF TRANSACTION AGREEMENTS. The Company has
all requisite corporate power and authority to enter into the Transaction
Agreements and, subject to obtaining the approval of its stockholders specified
in SECTION 4.15, to perform its obligations thereunder and consummate the
transactions contemplated thereby. The execution, delivery and performance by
the Company of the Transaction Agreements and the consummation by the Company of
the Merger have been duly and validly authorized by the Company Board and by all
other necessary corporate action on the part of the Company, subject, in the
case of the consummation by it of the Merger, to the approval of the Company's
stockholders specified in the previous sentence. Each of the Transaction
Agreements has been duly executed and delivered by the Company and is a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies).
4.3 CAPITALIZATION. The authorized capital stock of the Company consists
of 30,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, par value $0.001 per share (the "COMPANY PREFERRED STOCK"). As of
July 31, 2000, (i) 12,835,623 shares of Company Common Stock are issued and
outstanding and no shares were issued and held by the Company in its treasury or
by Subsidiaries of the Company; and (ii) no shares of Company Preferred Stock
were issued and outstanding or were issued and held by the Company in its
treasury or by Subsidiaries of the Company. All issued and outstanding shares of
Company Common Stock have been validly issued and are fully paid and
non-assessable, and have not been issued in violation of any preemptive rights
or of any federal or state securities laws. There are no issued or outstanding
bonds, debentures, notes or other Indebtedness of the Company or any of its
Subsidiaries which have the right to vote (or which are convertible into other
securities having the right to vote) on any matters on which stockholders may
vote ("VOTING DEBT"). Section 4.3 of the Company Disclosure Memorandum lists all
outstanding or authorized subscriptions, options, warrants, calls, rights,
commitments or any other agreements of any character to or by which the Company
or any of its Subsidiaries is a party or is bound that, directly or indirectly,
obligate the Company or any of its Subsidiaries to issue, deliver or sell or
cause to be issued, delivered or sold any additional shares of Company Common
Stock or any other capital stock, equity interest or Voting Debt of the Company
or any Subsidiary of the Company, any securities convertible into, or
exercisable or exchangeable for, or evidencing the right to subscribe for any
such shares, interests or Voting Debt, or any phantom shares, phantom equity
interests or stock or equity appreciation rights, or obligating the Company or
any of its Subsidiaries to grant, extend or enter into any such subscription,
option, warrant, call or right (collectively, "CONVERTIBLE SECURITIES"), other
than the Option Agreement. Neither the Company nor any Subsidiary thereof is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock. Neither the Company nor any
of its Subsidiaries has adopted, authorized or assumed any plans, arrangements
or practices for the benefit of its officers, employees or directors which
require or permit the issuance, sale, purchase or grant of any (i) capital
stock, (ii) other equity interests or Voting Debt
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of the Company or any Subsidiary of the Company, (iii) any other securities
convertible into, or exercisable or exchangeable for, any such stock, interests
or Voting Debt, or (iv) any phantom shares, phantom equity interests or stock or
equity appreciation rights, other than the Company Stock Plans (complete copies
of which have been heretofore delivered to Parent with all amendments thereto
and schedules of grants made pursuant thereto). Except as provided in
Section 4.3 of the Company Disclosure Memorandum, all shares of capital stock of
and all partnership or other equity interests in each Subsidiary of the Company
are owned by the Company free and clear of any Lien or Restriction and the
shares of capital stock of each corporate Subsidiary of the Company are validly
issued, fully paid and non-assessable. Except for the Option Agreement and
Voting Agreement and as set forth on Section 4.3 of the Company Disclosure
Memorandum, there are not, and immediately after the Effective Time, there will
not be, any outstanding or authorized subscriptions, options, warrants, calls,
rights, commitments or other agreements of any character to or by which the
Company or any of its Subsidiaries is a party or is bound that, directly or
indirectly, (x) call for or relate to the sale, pledge, transfer or other
disposition by the Company or any Subsidiary of the Company of any shares of
capital stock, any partnership or other equity interests or any Voting Debt of
any Subsidiary of the Company, or (y) relate to the voting or control of such
capital stock, partnership or other equity interests or Voting Debt.
4.4 REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports and documents, including
all Reports on Form 10-K, Form 10-Q and Form 8-K, registration statements
and proxy statements required to be filed with the Commission since May 27,
1998 (collectively, the "COMPANY SEC REPORTS"). None of the Company SEC
Reports, as of their respective dates, contained any untrue statement of
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the
consolidated balance sheets (including the related notes) included in the
Company SEC Reports presents fairly, in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of
the respective dates thereof, and the other related financial statements
(including the related notes) included in the Company SEC Reports present
fairly, in all material respects, the results of operations and the cash
flows of the Company and its Subsidiaries for the respective periods or as
of the respective dates set forth therein, all in conformity with GAAP
consistently applied during the periods involved, except as otherwise noted
therein and subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments that are not reasonably likely to
be material, either individually or in the aggregate. The Company is in
compliance with the principles of revenue recognition set forth in the
Commission's Staff Accounting Bulletin 101. All of the Company SEC Reports,
as of their respective dates, complied as to form in all material respects
with the requirements of the Exchange Act, the Securities Act and the
applicable rules and regulations thereunder.
(b) The Company and its Subsidiaries have not made any misstatements of
fact, or omitted to disclose any fact, to any Governmental Entity, or taken
or failed to take any action, which misstatements or omissions, actions or
failures to act, either individually or in the aggregate, subject or would
subject any Licenses held by the Company or any of its Subsidiaries to
revocation or failure to renew, except where such revocation or failure to
renew, either individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect on the Company.
(c) Neither the Company nor any of its Subsidiaries has guaranteed or
otherwise agreed to become responsible for any Indebtedness of any other
Person.
(d) Neither the Company nor any Subsidiary of the Company has any
obligation to contribute any additional capital to, or acquire any
additional interest in, any of its Affiliates.
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(e) Except as and to the extent set forth in the Company SEC Reports,
neither the Company nor any of its Subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
that would be required by GAAP to be reflected on a consolidated balance
sheet of the Company and its Subsidiaries (including the notes thereto),
except for liabilities or obligations (i) incurred in the ordinary course of
business since February 1, 2000; (ii) that would not, either individually or
in the aggregate, reasonably be likely to have a Material Adverse Effect on
the Company; or (iii) arising out of or relating to this Agreement or the
Option Agreement.
(f) Except as listed as an exhibit to the Company's Annual Report (or
set forth in Section 4.4(f) of the Company Disclosure Memorandum), neither
the Company nor any of its Subsidiaries is a party to or bound by any
(i) "material contracts" (as such term is defined in item 601(b)(10) of
Regulation S-K of the Commission) with respect to the Company or its
Subsidiaries; or (ii) any material agreement that restricts the ability of
the Company or its Subsidiaries to conduct its business as presently
conducted or proposed to be conducted as set forth in the Company SEC
Reports. All contracts described in clause (i) are valid and in full force
and effect except (x) to the extent they have previously expired or been
terminated in accordance with their terms (which such expired or terminated
contracts are listed in Section 4.4(f) of the Company Disclosure
Memorandum), or (y) where the failure to be in full force and effect, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries is in violation of any provision of, or has committed or failed
to perform any act which with or without notice, lapse of time or both would
constitute a default under the provisions of, any contract described in
clause (i), except in each case for those violations and defaults which,
either individually or in the aggregate, would not reasonably be likely to
result in a Material Adverse Effect on the Company.
4.5 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH INSTRUMENTS. The
execution and delivery by the Company of the Transaction Agreements do not, and
the performance by the Company of its obligations thereunder and the
consummation by the Company of the Merger and the other transactions
contemplated herein will not:
(a) assuming approval by the Company's stockholders as contemplated by
SECTION 4.15, conflict with or violate the Company Charter or Company Bylaws
or the charter or bylaws of any corporate Subsidiary of the Company or the
partnership agreement of any partnership Subsidiary of the Company;
(b) require any consent, approval, order or authorization of or other
action by any Governmental Entity (a "GOVERNMENTAL CONSENT") or any
registration, qualification, declaration or filing with or notice to any
Governmental Entity (a "GOVERNMENTAL FILING"), in each case on the part of
the Company or any Subsidiary of the Company, except for (i) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business; (ii) the
Governmental Consents and Governmental Filings with foreign, state and local
governmental authorities set forth in Section 4.5(b) of the Company
Disclosure Memorandum (the "LOCAL APPROVALS"); (iii) the Governmental
Filings required to be made pursuant to the pre-merger notification
requirements of the HSR Act and pursuant to the EC Merger Regulation, Japan
Merger Regulation and similar applicable competition, merger control,
antitrust, investment or other laws; (iv) the filing with the Commission of
a Proxy Statement (the "PROXY STATEMENT") and such reports under Sections
13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be required in
connection with this Agreement or the transactions contemplated hereby;
(v) such filings with and approvals of the NASDAQ Stock Market to permit the
shares of Company Common Stock that are to be issued pursuant to the Option
Agreement to be traded on the NASDAQ national market; and (vi) such other
Governmental Consents and Governmental Filings the absence or
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omission of which would not, either individually or in the aggregate, be
reasonably likely to have a material adverse effect on the transactions
contemplated hereby or a Material Adverse Effect on the Company or the
Surviving Entity;
(c) require, on the part of the Company or any Subsidiary of the
Company, any consent by or approval or authorization of (a "CONTRACT
CONSENT") or notice to (a "CONTRACT NOTICE") any other Person (including, in
the case of any Governmental Entity, any notice required in addition to
those listed in Section 4.5(b) of the Company Disclosure Memorandum) under
any License or other Contract, except for such Contract Consents and
Contract Notices the absence or omission of which will not, either
individually or in the aggregate, be reasonably likely to have a material
adverse effect on the transactions contemplated hereby or a Material Adverse
Effect on the Company or the Surviving Entity;
(d) assuming that the Contract Consents and Contract Notices described
in Section 4.5(c) of the Company Disclosure Memorandum are obtained and
given, conflict with or result in any violation or breach of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation, suspension, modification or acceleration
of any obligation or any increase in any payment required by, or the
impairment, loss or forfeiture of any material benefit, rights or privileges
under, or the creation of a Lien or other encumbrance on any assets pursuant
to (any such conflict, violation, breach, default, right of termination,
cancellation or acceleration, loss or creation, a "VIOLATION"), any
"CONTRACT" (which term shall mean and include any note, bond, indenture,
mortgage, deed of trust, lease, franchise, permit, authorization, license,
contract, instrument, employee benefit plan or practice, or other agreement,
obligation, commitment or concession of any nature to which the Company or
any Subsidiary of the Company is a party, by which the Company, any
Subsidiary of the Company or any of their respective assets or properties is
bound or affected or pursuant to which the Company or any Subsidiary of the
Company is entitled to any rights or benefits (including the Licenses)),
except for such Violations which would not, either individually or in the
aggregate, be reasonably likely to have a material adverse effect on the
transactions contemplated hereby or a Material Adverse Effect on the Company
or the Surviving Entity; or
(e) assuming that the Governmental Consents and Governmental Filings
specified in SECTIONS 4.5(b) AND (c) are obtained, made and given and any
applicable waiting periods have expired or been terminated, and assuming
approval of the Company's stockholders as contemplated by SECTION 6.1,
result in a Violation of, under or pursuant to any law, rule, regulation,
order, judgment or decree applicable to the Company or any Subsidiary of the
Company or by which any of their respective properties or assets are bound,
except for such Violations which would not, either individually or in the
aggregate, be reasonably likely to have a material adverse effect on the
transactions contemplated hereby or a Material Adverse Effect on the Company
and its Subsidiaries or the Surviving Entity. As used herein, the term
"GOVERNMENTAL ENTITY" means and includes any court, arbitrators,
administrative, regulatory or other governmental department, agency,
commission, authority or instrumentality, domestic or foreign.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as otherwise disclosed in the Company SEC Reports filed with
the Commission prior to the date hereof or as set forth on Section 4.6 of
the Company Disclosure Memorandum, since February 1, 2000, (i) there has not
been any adverse change in, and no event has occurred and no condition
exists which, individually or together with all other such changes, events
and conditions, has had or, insofar as the Company can reasonably foresee,
is reasonably likely to have, a Material Adverse Effect on the Company; and
(ii) other than actions that in the ordinary course of the Company's
business consistent with prior practice would not have required, and would
have been taken without, the approval of the Company Board, no action has
been taken by the
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Company or any Subsidiary of the Company which, if SECTION 6.5 had then been
in effect, would have been prohibited by such Section without the consent or
approval of Parent, and no agreements, understandings, obligations or
commitments, whether in writing or otherwise, to take any such action were
entered into during such period.
(b) Since February 1, 2000, the Company has not received a notice or
other communication (whether oral or written) from a Major Customer
indicating that such Major Customer wishes to (i) terminate or materially
amend any contract or agreement (whether written or oral) with the Company;
or (ii) otherwise terminate or materially modify such Major Customer's
business relationship with the Company.
(c) To the Company's knowledge, there are no conditions that would
likely cause a Major Customer to terminate any contract or agreement with
the Company or otherwise terminate or materially modify such Major
Customer's business relationship with the Company.
4.7 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in any
documents filed or to be filed with the Commission or any other Governmental
Entity in connection with the transactions contemplated hereby, including the
Proxy Statement, will, at the respective times such documents are filed (and
also in the case of the Proxy Statement, at the time the Proxy Statement is
first mailed to the Company's stockholders or at the time of the Company
Stockholder Meeting (as hereinafter defined)), contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading (or necessary to correct
any statement in any earlier communication), except that no representation or
warranty is made by the Company with respect to statements made or incorporated
by reference therein based on information supplied by Parent or Merger Sub in
writing specifically for inclusion or incorporation by reference therein. The
Proxy Statement will comply in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder and will comply in all
respects with the applicable requirements of the DGCL, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Merger Sub in writing specifically for inclusion or incorporation by
reference therein.
4.8 LEGAL PROCEEDINGS. There is no (i) suit, action or proceeding pending
of which the Company or any of its Subsidiaries has received notice or, to the
knowledge of the Company, any investigation pending, or any suit, action,
proceeding or investigation threatened against, involving, or (to the knowledge
of the Company) affecting the Company, any Subsidiary of the Company or any of
its or their properties or rights, which, if adversely determined, would be
reasonably likely to have, either individually or in the aggregate, a Material
Adverse Effect on the Company; (ii) judgment, order, decree, Injunction or order
of any Governmental Entity entered against and binding on the Company or any
Subsidiary of the Company of which the Company or any of its Subsidiaries has
received notice, which would be reasonably likely to have, either individually
or in the aggregate, a Material Adverse Effect on the Company; (iii) suit,
action or proceeding pending of which the Company or any of its Subsidiaries has
received notice or, to the knowledge of the Company, any investigation pending
or any suit, action, proceeding or investigation threatened, against the Company
or any Subsidiary of the Company which seeks to restrain, enjoin or delay the
consummation of the Merger or any of the other transactions contemplated hereby
or which seeks damages in connection therewith; and (iv) Injunction of any type
referred to in SECTION 7.1(c) of which the Company or any of its Subsidiaries
has received notice which has been entered or issued and is in effect. The
Company has not received from the Commission or its staff any written or oral
notice, and, to the Company's knowledge, there is no pending or threatened
formal or informal Commission investigation or inquiry of or affecting the
Company.
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4.9 LICENSES; COMPLIANCE WITH REGULATORY REQUIREMENTS. The Company and its
Subsidiaries hold all licenses, franchises, ordinances, authorizations, permits,
certificates, variances, exemptions, concessions, leases, rights of way,
easements, instruments, orders and approvals, domestic or foreign required for
the ownership of the assets and operation of the businesses of the Company or
any of its Subsidiaries, except for the failure to hold any of the foregoing as
would not be reasonably likely to have, either individually or in the aggregate,
a Material Adverse Effect on the Company (collectively, the "LICENSES"). Each of
the Company and its Subsidiaries is in compliance with, and with respect to
Environmental and Health Laws has conducted its business so as to comply with,
the terms of their respective Licenses and with all Applicable Laws, EXCEPT,
with respect to any of the foregoing, where the failure to be or have been in
such compliance would not be reasonably likely to have, either individually or
in the aggregate, a Material Adverse Effect on the Company. Without limiting the
generality of the foregoing, the Company and its Subsidiaries, (i) have all
Licenses of foreign, state and local governmental authorities required for the
operation of the facilities being operated on the date hereof by the Company or
any of its Subsidiaries (the "PERMITS"); (ii) have duly and currently filed all
reports and other information required to be filed by any other Governmental
Entity in connection with such Permits; and (iii) are not in violation of any of
such Permits, other than the lack of Permits, delays in filing reports or
possible violations which would not be reasonably be likely to have, either
individually or in the aggregate, a Material Adverse Effect on the Company.
Without limiting the generality of the foregoing, to the knowledge of the
Company, the Company and its Subsidiaries have duly complied with, and the
operation of their respective businesses, equipment and other assets and the
facilities owned or leased by them are in compliance with the provisions of all
applicable federal, state and local environmental, health and safety laws,
statutes, ordinances, rules and regulations of any governmental or a quasi
governmental authority relating to (i) violations, errors or omissions relating
to health and welfare of workers or safety in the workplace; (ii) discharges to
surface water or ground water; (iii) solid or liquid waste disposal; (iv) the
use, storage, generation, handling, transport, discharge, release or disposal of
toxic or hazardous substances or waste; (v) the emission of non-ionizing
electromagnetic radiation; or (vi) other environmental, health or safety
matters, including without limitation all matters set forth in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended by the
Superfund Amendments and Authorization Act of 1986; the Occupational Safety and
Health Act; the Resource Conservation Recovery Act of 1976; the Federal Water
Pollution Control Act of 1970; the Safe Drinking Water Act of 1974; the Toxic
Substances Control Act of 1976; the Emergency Planning Community Right to Know
Act of 1986, as amended; and the Clean Air Act, as amended (collectively
"ENVIRONMENTAL AND HEALTH LAWS"); EXCEPT, with respect to any of the foregoing,
where the failure to be or have been in such compliance would not be reasonably
likely to have, either individually or in the aggregate, a Material Adverse
Effect on the Company. To the knowledge of the Company, there are no
investigations, administrative proceedings, judicial actions, orders, claims or
notices that are pending or threatened against the Company or any of its
Subsidiaries relating to violations of the Environmental and Health Laws, except
for such matters as would not be reasonably likely to have, either individually
or in the aggregate, a Material Adverse Effect on the Company.
4.10 BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other Person is or will be entitled, by reason of any agreement, act
or statement by the Company or any of its Subsidiaries, directors, officers,
employees or Affiliates, to any financial advisory, broker's, finder's or
similar fee or commission, to reimbursement of expenses or to indemnification or
contribution in connection with any of the transactions contemplated by this
Agreement, except Chase H & Q, a division of Chase Securities, Inc., whose fees
and expenses will be paid by the Company in accordance with the Company's
agreement with such firm (copies of which have been delivered by the Company to
Parent prior to the date of this Agreement), and the Company agrees to indemnify
and hold Parent and Merger Sub harmless from and against any and all claims,
liabilities or obligations with respect to any other such fees, commissions,
expenses or claims for indemnification or contribution asserted by
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any Person on the basis of any act or statement made or alleged to have been
made by the Company or any of its Subsidiaries, directors, officers, employees
or Affiliates.
4.11 TAX MATTERS.
(a) (i) There has been duly filed by or on behalf of the Company and
each of its Subsidiaries (and each of their respective predecessors, if
any), or filing extensions from the appropriate federal, state, foreign and
local Governmental Entities have been obtained with respect to, all federal,
state, foreign and local Tax Returns and reports required to be filed on or
prior to the date hereof; (ii) payment in full or adequate provision for the
payment of all Taxes required to be paid in respect of the periods covered
by such Tax Returns and reports has been made; (iii) a reserve which the
Company reasonably believes to be adequate has been set up for the payment
of all such Taxes anticipated to be payable in respect of periods through
the most recent fiscal quarter end; (iv) the Company has not been notified
that any of the income Tax Returns required to be filed by or on behalf of
the Company and each of its Subsidiaries consolidated in such returns (the
"COMPANY CONSOLIDATED RETURNS") will be examined by the Internal Revenue
Service (the "IRS") or other Governmental Entity, and none of the Company
Consolidated Returns have been examined by or settled with the IRS or other
Governmental Entity; (v) there are no material "deferred intercompany
transactions" or "intercompany transactions" the gain or loss in which has
not yet been taken into account under the Company Consolidated Returns;
(vi) there are no Liens for material Taxes on the assets of the Company and
each of its Subsidiaries, except for statutory liens for current Taxes not
yet due and payable; (vii) there have been no claims or assessments against
the Company or any of its Subsidiaries asserted in writing by any
Governmental Entity with respect to any alleged deficiency in any Tax, other
than those claims or assessments that would not be reasonably likely to
have, either individually or in the aggregate, a Material Adverse Effect on
the Company; (viii) none of the Company and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency; (ix) none of the
Company and its Subsidiaries has filed a consent under Code Section 341
concerning collapsible corporations; and (x) none of the Company and its
Subsidiaries has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii), except, in the cases of clauses
(i), (ii) and (iii), for failures to file, obtain extensions, pay or reserve
amounts which, either individually or in the aggregate, would not have a
Material Adverse Effect on the Company. For the purpose of this Agreement,
the term "TAX" (including, with correlative meaning, the terms "TAXES" and
"TAXABLE") shall include all federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, value added, alternative or added minimum, ad
valorem, transfer, excise and other Taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts. The term "TAX RETURN" means a report,
return or other information required to be supplied to or filed with a
Governmental Entity with respect to any Tax including an information return,
claim for refund, amended Tax return or declaration of estimated Tax.
(b) No remuneration paid by the Company to any "covered employee" of
the Company (within the meaning of Section 162(m)(3) of the Code and the
regulations thereunder) prior to the Closing is or will be non-deductible by
virtue of Section 162(m) of the Code.
(c) Neither the Company nor any of its Subsidiaries (i) is a party to
any Tax allocation or Tax sharing agreement, (ii) has been a member of an
affiliated group filing a consolidated federal income Tax Return other than
a group the common parent of which was the Company or (iii) has any
liability for Taxes of any Person (other than the Company and its
Subsidiaries) under Reg. Section1.1502-6 (or any similar provision of state,
local or foreign law), as transferee or successor, by contract or otherwise.
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4.12 EMPLOYEE MATTERS.
(a) Section 4.12(a) of the Company Disclosure Memorandum contains a
true and complete list of each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay,
hospitalization, medical, life or other insurance, supplemental unemployment
benefits, profit-sharing, pension or retirement plan, program or
arrangement, and each other employee benefit plan, program or arrangement,
sponsored, maintained or contributed to or required to be contributed to
(i) by the Company or by any trade or business, whether or not incorporated
("ERISA AFFILIATE"), that together with the Company would be deemed a
"controlled group" within the meaning of Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), for the
benefit of any employee or former employee of the Company, including any
such type of plan established, maintained or contributed to under the laws
of any foreign country; or (ii) with respect to which the Company has any
actual or contingent liability which would be reasonably likely to have a
Material Adverse Effect on the Company (the "COMPANY PLANS"). The Company
has heretofore made available to Parent true and complete copies of each
Company Plan and, if the Company Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding document, the
most recent determination letter issued by the IRS with respect to each
Company Plan for which such a letter has been obtained, annual reports on
Form 5500 required to be filed with any Governmental Entity for each Company
Plan which is an employee pension benefit plan for the most recent plan year
and all required actuarial reports for the last plan year of each Company
Plan.
(b) No Company Plan is subject to Title IV of ERISA or Section 412 of
the Code and neither the Company nor any ERISA Affiliate made, or was
required to make, contributions to any employee benefit plan subject to
Title IV of ERISA during the five year period ending on the Effective Time.
(c) No Company Plan utilizes a funding vehicle described in
Section 501(c)(9) of the Code.
(d) There has been no event or circumstance which has resulted in any
liability being asserted by any Company Plan, the Pension Benefit Guaranty
Corporation ("PBGC") or any other Person under Title IV of ERISA against the
Company or any ERISA Affiliate nor, except as would not be reasonably likely
to have a Material Adverse Effect on the Company, nor is there or has there
been any event or circumstance which could reasonably be expected to result
in such liability.
(e) Neither the Company nor any Subsidiary of the Company is a party to
or bound by the terms of any collective bargaining agreement. The Company
and each of its Subsidiaries is in compliance with all Applicable Laws
respecting the employment and employment practices, terms and conditions of
employment and wage and hours of its employees and is not engaged in any
unfair labor practice, except where failure to be in compliance would not be
reasonably likely to have a Material Adverse Effect on the Company. There is
no labor strike or labor disturbance pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary of the Company,
and during the past five years neither the Company nor any Subsidiary of the
Company has experienced a work stoppage.
(f) Each Company Plan has been operated and administered in accordance
with its terms and Applicable Laws, including, but not limited to,
Section 406 of ERISA and Section 4975 of the Code, except where the failure
to so operate and administer would not be reasonably likely to have a
Material Adverse Effect on the Company.
(g) To the Company's knowledge, each Company Plan which is intended to
be "qualified" within the meaning of Section 401(a) of the Code is so
qualified and the trusts maintained thereunder are exempt from taxation
under Section 501(a) of the Code. There exists no unfunded
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Company Plan or trust arrangement thereunder for the benefit of officers,
directors or employees which would be required to be funded as a result of
the Merger.
(h) No Company Plan provides welfare benefits, including without
limitation death or medical benefits, with respect to current or former
employees or consultants of the Company or any Subsidiary of the Company
beyond their retirement or other termination of service (other than coverage
mandated by Applicable Laws).
(i) There are no material pending or, to the Company's knowledge,
threatened or anticipated claims by or on behalf of any Company Plan, by or
on behalf of any employee or beneficiary covered under any such Company Plan
with respect to such Company Plan (other than routine claims for benefits).
(j) Section 4.12(j) of the Company Disclosure Memorandum sets forth a
true and complete list as of the date hereof of each of the following
agreements, arrangements and commitments to which the Company or any of its
Subsidiaries is a party or by which any of them may be bound (true and
complete copies of which have been made available to Parent): (i) each
employment, consulting, agency or commission agreement not terminable
without liability to the Company or any of its Subsidiaries upon 60 days' or
less prior notice to the employee, consultant or agent and involving
compensation or remuneration of more than US$200,000 per annum; (ii) each
agreement with any executive officer or other key employee of the Company or
any Subsidiary of the Company the benefits of which are contingent, or the
terms of which are materially altered, upon the consummation of the
transactions contemplated by this Agreement; (iii) each agreement with
respect to any officer or other key employee of the Company or any
Subsidiary of the Company providing any term of employment or compensation
guarantee extending for a period longer than one year; and (iv) each other
material agreement or Company Plan any of the benefits of which will be
increased, or the vesting of the 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.
(k) No employee of the Company or any of its Subsidiaries will be
entitled to any additional benefits or any acceleration of the time of
payment or vesting of any benefits under any Company Plan as a result of the
consummation of the transactions contemplated by this Agreement or
otherwise. No amount payable, or economic benefit provided, by the Company
or any of its Subsidiaries (including any acceleration of the time of
payment or vesting of any benefit) could be considered an "excess parachute
payment" under Section 280G of the Code as a result of the consummation of
the transactions contemplated by this Agreement. No Person is entitled to
receive any additional payment from the Company or any of its Subsidiaries
or any other Person (a "PARACHUTE GROSS-UP PAYMENT") in the event that the
excise tax of Section 4999 of the Code is imposed on such Person. Neither
the Company nor any of its Subsidiaries has granted to any Person any right
to receive any Parachute Gross-Up Payment.
4.13 FAIRNESS OPINION. The Company Board has received the oral opinion of
Chase H & Q, a division of Chase Securities, Inc., to the effect that, as of the
date hereof, the consideration to be received in the Merger by the Company's
stockholders is fair, from a financial point of view, to the stockholders of the
Company (the "FAIRNESS OPINION"). The Company will provide Parent with a true
and complete copy of the executed Fairness Opinion as soon as practicable after
its issuance. In addition, the Company will include an executed copy of the
Fairness Opinion in the Proxy Statement.
4.14 RECOMMENDATION OF THE COMPANY BOARD. The Company Board, by vote at a
meeting duly called and held, has approved the Merger, the Transaction
Agreements and the transactions contemplated thereby, and has determined that
the Merger is fair to and in the best interests of the Company's stockholders
and has adopted resolutions recommending approval and adoption of this Agreement
and the transactions contemplated hereby to the stockholders of the Company.
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4.15 VOTE REQUIRED. Assuming that SECTION 5.9 is and remains true and
correct in all respects, the only vote of stockholders of the Company required
under the DGCL, NASDAQ Stock Market requirements and the Company Charter and
Company Bylaws in order to approve and adopt this Agreement and the Merger is
the affirmative vote of a majority of the total number of votes entitled to be
cast by the holders of the issued and outstanding shares of Company Common Stock
voting as a single class, and no other vote or approval of or other action by
the holders of any capital stock of the Company is required for such approval
and adoption.
4.16 INTANGIBLE PROPERTY; COPYRIGHTS. The Company and its Subsidiaries own
or have adequate rights to use all patents, trademarks, trade names, service
marks, brands, logos, copyrights, trade secrets, customer lists and other
proprietary intellectual property rights required for, used in or incident to
the businesses of the Company and its Subsidiaries as now conducted, except
where the failure to so own or have such rights to use, either individually or
in the aggregate, would not be reasonably likely to have a Material Adverse
Effect on the Company. The Company does not have knowledge, and the Company has
not received any notice alleging, that it or any of its Subsidiaries is
infringing upon or otherwise violating, or has in the past infringed upon or
otherwise violated, the rights of any third party with respect to any patent,
trademark, trade name, service mark or copyright.
4.17 YEAR 2000. All of the computer software, computer firmware, computer
hardware, and other similar or related items of automated, computerized, and/or
software system(s) that are used or relied upon by the Company or any of its
Subsidiaries in the conduct of their respective businesses (collectively, the
"COMPANY SYSTEMS") have not malfunctioned, ceased to function, generated
incorrect data, or provided incorrect data when processing, providing and/or
receiving (i) date-related data into and between the years 1999 and 2000 or
(ii) date-related data in connection with any valid date, in each case in a
manner that has had or would reasonably be likely to have a Material Adverse
Effect on the Company. The Company has taken all necessary steps to ensure that
all Company Systems will function properly and will be able to accurately
process, provide and receive all date-related data in connection with any valid
date in the twentieth and twenty-first centuries, except where such failure
would not reasonably be likely to have a Material Adverse Effect on the Company.
4.18 INVESTMENT SECURITIES. Section 4.18 of the Company Disclosure
Memorandum sets forth a complete and accurate list of each capital,
participating, equity or other interest owned of record or beneficially by the
Company in any corporation, partnership, joint venture or other Person, other
than the Subsidiaries of the Company listed in Section 4.1 of the Company
Disclosure Memorandum (each, an "INVESTMENT SECURITY" and collectively, the
"INVESTMENT SECURITIES"). Section 4.18 of the Company Disclosure Memorandum
includes, with respect to each Investment Security, the name of the corporation,
partnership, joint venture or other Person in respect of which such Investment
Security relates, the amount and nature of such interest, and a description of
the material terms of any Liens and Restrictions with respect to such Investment
Securities. The Company's representations in this SECTION 4.18 with respect to
any such Investment Securities are made subject to any events, Liens and
Restrictions that affect the holders of the applicable class(es) or series of
such Investment Securities generally.
4.19 TRANSACTIONS WITH AFFILIATES AND CERTAIN AGREEMENTS. Section 4.19 of
the Company Disclosure Memorandum sets forth an accurate and complete listing,
as of the date hereof: (i) of all contracts, leases, agreements or
understandings, whether written or oral, between the Company and any Affiliate
of the Company (except for such contracts, leases, agreements or understandings
regularly entered into by the Company in the ordinary course of its business
prior to the date hereof); (ii) of all contracts, leases, agreements or
understandings, whether written or oral, to which the Company or any of its
Subsidiaries is a party, or by which the Company, any of its Subsidiaries or any
of their respective assets is bound, which contain any material restrictions or
limitation on the ability of the Company or any of its Subsidiaries or
Affiliates to engage in any business anywhere in the world; and (iii) of all
contracts, agreements or understandings, whether written or oral, with any
foreign sales agents.
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4.20 NO INVESTMENT COMPANY. The Company is not an "investment company"
subject to the registration requirements of, and regulation as an investment
company under, the Investment Company Act of 1940, as amended.
4.21 STATE TAKEOVER STATUTES. The Company Board has approved the Merger,
this Agreement and the transactions contemplated hereby, and assuming that
SECTION 5.9 is and remains true and correct in all respects, such approvals are
sufficient to render inapplicable to the Merger, this Agreement and the
transactions contemplated hereby the restrictions of Section 203 of the DGCL. To
the Company's knowledge, no other state takeover statute or similar statute or
regulation applies or purports to apply to the Merger, this Agreement or to the
transactions contemplated hereby.
4.22 UNLAWFUL PAYMENTS. Neither the Company, nor to its knowledge, any of
the Company's or its Subsidiaries' directors, officers, employees,
representatives, agents, or Affiliates, have, since the date of the Company's
incorporation, knowingly offered, promised, authorized or made, directly or
indirectly, payment of money or anything of value to any (i) Foreign Official or
(ii) any Person while knowing that all or a portion of such payment or thing of
value will be offered, given or promised, directly or indirectly to any Foreign
Official in violation of any Applicable Laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company as
follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Merger Sub (i) is a
corporation duly organized, validly existing and, to the extent applicable, in
good standing under the laws of the States of Maryland and Delaware,
respectively; (ii) has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted;
and (iii) is duly qualified or licensed to do business and, to the extent
applicable, is in good standing, in each jurisdiction in which the properties
owned, leased or operated by it or the nature of its activities makes such
qualification necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing has not had and is not
reasonably likely to have, either individually or in the aggregate, a Material
Adverse Effect on Parent or Merger Sub, respectively.
5.2 AUTHORIZATION AND VALIDITY OF TRANSACTION AGREEMENTS WITH RESPECT TO
PARENT. Parent has all requisite corporate power and authority to enter into
the Transaction Agreements and has all requisite corporate power and authority
to perform its obligations thereunder and to consummate the transactions
contemplated thereby. The execution, delivery and performance by Parent of the
Transaction Agreements and the consummation by Parent of the transactions
contemplated thereby have been duly and validly authorized by all necessary
corporate action on the part of Parent. Each of the Transaction Agreements has
been duly executed and delivered by Parent and is a legal, valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
5.3 AUTHORIZATION AND VALIDITY OF AGREEMENT WITH RESPECT TO MERGER
SUB. Merger Sub has all requisite corporate power and authority to enter into
this Agreement and has all requisite corporate power and authority to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Merger Sub of this Agreement
and the consummation by Merger Sub of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of Merger Sub. This Agreement has been duly executed and delivered by Merger Sub
and is a legal, valid and binding obligation of Merger Sub, enforceable against
Merger Sub in accordance with its terms (except insofar as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies).
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5.4 NO CONFLICT WITH INSTRUMENTS. The execution and delivery by Parent and
Merger Sub of this Agreement do not, and the performance by Parent and Merger
Sub of their respective obligations hereunder, and the consummation by Parent
and Merger Sub of the Merger and the other transactions contemplated herein will
not, conflict with or violate the charter or bylaws of Parent or Merger Sub or
the charter or bylaws of any corporate Subsidiary of Parent or the partnership
agreement of any partnership Subsidiary of Parent.
5.5 NO PRIOR ACTIVITIES OF MERGER SUB. Merger Sub was formed by Parent
solely for the purpose of engaging in the transactions contemplated hereby, and
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
5.6 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Parent or Merger Sub for inclusion or incorporation by reference in
any documents filed or to be filed with the Commission or any other Governmental
Entity in connection with the transactions contemplated hereby, including the
Proxy Statement, will, at the respective times such documents are filed (and
also in the case of the Proxy Statement, at the date the Proxy Statement is
first mailed to the Company's stockholders or at the time of the Company
Stockholder Meeting (as hereinafter defined)), contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading (or necessary to correct
any statement in any earlier communication), except that no representation is
made by Parent or Merger Sub with respect to information supplied by the Company
in writing specifically for inclusion or incorporation by reference therein.
5.7 BROKERS. No broker, investment banker, financial advisor or other
Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Merger
Sub, and Parent agrees to indemnify and hold the Company harmless from and
against any and all claims, liabilities or obligations with respect to any other
such fees, commissions, expenses or claims for indemnification or contribution
asserted by any Person.
5.8 FINANCING. Parent has, or will have available to it at the time Merger
Sub is required to pay for Shares under the terms of the Merger, and will make
available to Merger Sub or another Affiliate of Parent, sufficient funds to
permit Merger Sub (or such other Affiliate of Parent) to acquire all of the
Shares in the Merger and to consummate the transactions contemplated herein,
including those contemplated by SECTION 3.4.
5.9 OWNERSHIP OF COMPANY CAPITAL STOCK. Neither Parent nor Merger Sub is,
nor at any time during the last three years has it been, an "interested
stockholder" of the Company as defined in Section 203 of the DGCL (other than as
contemplated by this Agreement). Neither Parent nor Merger Sub owns (directly or
indirectly, beneficially or of record) or is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, any shares of capital stock of the Company (other
than as contemplated by this Agreement).
5.10 LEGAL PROCEEDINGS. There is no (i) suit, action or proceeding pending
of which Parent, Merger Sub, or any of Parent's Subsidiaries has received notice
or, to the knowledge of Parent or Merger Sub, any investigation pending or any
suit, action, proceeding or investigation threatened, against Parent, Merger
Sub, or any Subsidiary of Parent which seeks to restrain, enjoin or delay the
consummation of the Merger or any of the other transactions contemplated hereby
or which seeks damages in connection therewith; or (ii) Injunction of any type
referred to in SECTION 7.1(C) of which Parent, Merger Sub, or any of Parent's
Subsidiaries has received notice which has been entered or issued and is in
effect.
5.11 GOVERNMENT CONSENTS. The execution and delivery by Parent of the
Transaction Agreements do not, and the performance by Parent of its obligations
thereunder and the consummation of the
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Merger and the other transactions contemplated herein will not require any
Governmental Consent or any Governmental Filing on the part of Parent or any
Subsidiary of Parent, except for (i) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business; (ii) the Local Approvals; (iii) the Governmental Filings
required to be made pursuant to the pre-merger notification requirements of the
HSR Act and pursuant to the EC Merger Regulation, Japan Merger Regulation and
similar applicable competition, merger control, antitrust, investment or other
laws; (iv) the filings by Parent with the Commission of such reports as may be
required by Section 13(d) of the Exchange Act; and (v) such other Governmental
Consents and Government Filings the absence or omission of which would not,
either individually or in the aggregate, be reasonably likely to have a material
adverse effect on the transactions contemplated hereby or a Material Adverse
Effect on Parent or the Surviving Entity.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 STOCKHOLDER MEETING.
(a) The Company shall, as soon as practicable following the execution of
this Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "COMPANY STOCKHOLDER MEETING") for the purpose of
approving and adopting this Agreement (the "COMPANY STOCKHOLDER APPROVAL").
The Company will, through its board of directors, recommend to its
stockholders that the Company Stockholder Approval be given (the "COMPANY
RECOMMENDATION") and shall not (i) withdraw, modify or qualify (or propose
to withdraw, modify or qualify) in any manner adverse to Parent or Merger
Sub such Company Recommendation, or (ii) take any action or make any
statement in connection with the Company Stockholder Meeting inconsistent
with such Company Recommendation (collectively, a "CHANGE IN COMPANY
RECOMMENDATION"); PROVIDED, HOWEVER, any action or statement under
clause (ii) will not be deemed to be a Change in Company Recommendation
provided such action is taken or made in good faith taking into account
advice from the Company's financial and legal advisers to the effect that
the failure to do so would be inconsistent with the Company Board's
fiduciary duties under Applicable Laws. Without limiting the generality of
the foregoing, the Company agrees that its obligations pursuant to the first
sentence of this SECTION 6.1(A) shall not be affected by (i) the
commencement, public proposal, public disclosure or communication to the
Company of any Alternative Proposal, or (ii) the withdrawal or modification
by the Company Board of its approval or recommendation of this Agreement or
the Merger.
(b) The Company shall, as soon as practicable following the execution of
this Agreement, prepare and file a preliminary Proxy Statement with the
Commission and will use its reasonable best efforts to respond to any
comments of the Commission and to cause the Proxy Statement to be mailed to
the Company's stockholders as promptly as practicable after responding to
all such comments to the satisfaction of the Commission. The Company will
notify Parent promptly of the receipt of any comments from the Commission
and of any request by the Commission for amendments or supplements to the
Proxy Statement or for additional information and will supply Parent with
copies of all correspondence between the Company or any of its
representatives, on the one hand, and the Commission, on the other hand,
with respect to the Proxy Statement or the Merger. If at any time prior to
the Company Stockholder Meeting there shall occur any event that should be
set forth in an amendment or supplement to the Proxy Statement, the Company
will promptly prepare and mail to its stockholders such an amendment or
supplement. The Company will not mail any Proxy Statement, or any amendment
or supplement thereto, to which Parent reasonably objects after being
afforded the opportunity to review the same. Parent and Merger Sub shall
cooperate with the Company in the preparation of the Proxy Statement and in
responding to
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comments of the Commission, and Parent and Merger Sub shall promptly notify
the Company if any information supplied by them for inclusion in the Proxy
Statement shall have become false or misleading, and shall cooperate with
the Company in disseminating the Proxy Statement as so amended or
supplemented, to correct any such false or misleading information.
6.2 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, upon reasonable notice, the
Company will (and will use reasonable efforts to cause each of its Subsidiaries
to) afford to the officers, employees, counsel, accountants and other authorized
representatives of Parent reasonable access during normal business hours to all
its properties, personnel, books and records and furnish promptly to such
Persons such financial and operating data and other information concerning its
business, properties, personnel and affairs as such Persons will from time to
time reasonably request and instruct the officers, directors, employees,
counsel, accountants and financial advisors of the Company to discuss the
business operations, affairs and assets of the Company (including without
limitation affording Parent access to the independent accountant's work papers)
and otherwise fully cooperate with Parent in its investigation of the business
of the Company. Parent shall make reasonable efforts to minimize disruption to
the business of the Company and its Subsidiaries which may result from the
requests for data and information hereunder. All requests for access and
information shall be coordinated through senior executives of the Company or
their designees. Parent (and all of its agents and Affiliates and any employees,
directors or officers thereof) shall contact and communicate with the employees,
customers, suppliers and licensors of the Company or any Subsidiary in
connection with the transactions contemplated hereby only with the consent of
the Company, which consent shall not be unreasonably withheld but may be
conditioned upon an officer of the Company or one of its Subsidiaries being
present. Parent agrees that it will not, and will cause its officers, employees,
counsel, accountants and other authorized representatives not to, use any
information obtained pursuant to this SECTION 6.2 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement. No
investigation pursuant to this SECTION 6.2 will affect any representation or
warranty given by the Company to Parent hereunder.
6.3 CONFIDENTIALITY. Except as otherwise agreed to in writing by the Party
disclosing (or whose Representatives disclosed) the same (a "DISCLOSING PARTY"),
and notwithstanding the termination of this Agreement, each other Party (a
"RECEIVING PARTY") will, and will cause its Affiliates, directors, officers,
employees, agents and controlling Persons (such Affiliates and other Persons
with respect to any Party being collectively referred to as such Party's
"REPRESENTATIVES") to: (i) keep all Confidential Information of the Disclosing
Party confidential and not disclose or reveal any such Confidential Information
to any Person other than those Representatives of the Receiving Party who are
participating in effecting the transactions contemplated hereby or who otherwise
need to know such Confidential Information; (ii) use such Confidential
Information only in connection with consummating the transactions contemplated
hereby and enforcing the Receiving Party's rights hereunder; and (iii) not use
Confidential Information in any manner detrimental to the Disclosing Party. In
the event that a Receiving Party is requested pursuant to, or required by,
Applicable Laws or regulation or by legal process to disclose any Confidential
Information of the Disclosing Party, the Receiving Party will provide the
Disclosing Party with prompt notice of such request(s) to enable the Disclosing
Party to seek an appropriate protective order. A Party's obligations hereunder
with respect to Confidential Information that (x) is disclosed to a third party
with the Disclosing Party's written approval; (y) is required to be produced
under order of a court of competent jurisdiction or other similar requirements
of a governmental agency; or (z) is required to be disclosed by Applicable Laws,
will, subject in the case of clauses (y) and (z) above to the Receiving Party's
compliance with the preceding sentence, cease to the extent of the disclosure so
consented to or required, except to the extent otherwise provided by the terms
of such consent or covered by a protective order. If a Receiving Party uses a
degree of care to prevent disclosure of the Confidential Information that is at
least as great as the care it normally takes to preserve its own information of
a similar nature, it will not be liable for any
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disclosure that occurs despite the exercise of that degree of care, and in no
event will a Receiving Party be liable for any indirect, punitive, special or
consequential damages unless such disclosure resulted from its willful
misconduct or gross negligence in which event it will be liable in damages for
the Disclosing Party's lost profits resulting directly and solely from such
disclosure. In the event this Agreement is terminated, each Party will, if so
requested by another Party, promptly return or destroy all of the Confidential
Information of such other Party, including all copies, reproductions, summaries,
analyses or extracts thereof or based thereon in the possession of the Receiving
Party or its Representatives; PROVIDED, HOWEVER, that the Receiving Party will
not be required to return or cause to be returned summaries, analyses or
extracts prepared by it or its Representatives, but will destroy (or cause to be
destroyed) the same upon request of the Disclosing Party.
For purposes of this SECTION 6.3, "CONFIDENTIAL INFORMATION" of a Party
means all confidential or proprietary information about such Party that is
furnished by it or its Representatives to another Party or another Party's
Representatives, regardless of the manner in which it is furnished.
"Confidential Information" does not include, however, information which (i) has
been or in the future is published or is now or in the future is otherwise in
the public domain through no fault of the Receiving Party or its
Representatives; (ii) was available to the Receiving Party or its
Representatives on a non-confidential basis prior to its disclosure by the
Disclosing Party; (iii) becomes available to the Receiving Party or its
Representatives on a non-confidential basis from a Person other than the
Disclosing Party or its Representatives who is not otherwise bound by a
confidentiality agreement with the Disclosing Party or its Representatives, or
is not otherwise prohibited from transmitting the information to the Receiving
Party or its Representatives; or (iv) is independently developed by the
Receiving Party or its Representatives through Persons who have not had, either
directly or indirectly, access to or knowledge of such information.
6.4 PUBLIC ANNOUNCEMENTS. The Company and Parent shall use commercially
reasonable efforts to develop a joint communications plan and each Party hereto
shall use reasonable efforts to ensure that all press releases and other public
statements made by it with respect to the transactions contemplated hereby shall
be consistent with such joint communications plan. Unless otherwise required by
Applicable Laws or by obligations pursuant to any listing agreement with or
rules of any securities exchange, the National Association of Securities
Dealers, Inc. or the NASDAQ Stock Market, each Party shall use commercially
reasonable efforts to consult with, and use commercially reasonable efforts to
accommodate the comments of the other Parties before issuing any press release
or otherwise making any public statement with respect to this Agreement or the
transactions contemplated hereby.
6.5 CONDUCT OF THE COMPANY'S BUSINESS PRIOR TO EFFECTIVE TIME. Except as
set forth in Section 6.5 of the Company Disclosure Memorandum, the Company will,
and will use its reasonable best efforts to cause each of its Subsidiaries to,
except as permitted, required or specifically contemplated by this Agreement,
including without limitation SECTION 6.5 hereof, or consented to or approved in
writing by Parent, during the period commencing on the date hereof and ending at
the Effective Time:
(a) conduct its business only in, and not take any action except in, the
ordinary and usual course of its business and consistent with past
practices;
(b) use reasonable efforts to preserve intact its business organization,
to preserve its Licenses in full force and effect, to keep available the
services of its present officers and key employees, and to preserve the
goodwill of those having business relationships with it;
(c) not (i) terminate or materially amend any contract or agreement
(whether written or oral) with a Major Customer, (ii) otherwise terminate or
materially modify a business relationship with a Major Customer; or
(iii) seek to do any of the foregoing;
(d) not (i) make any change or amendments in its charter, bylaws or
partnership agreement (as the case may be); (ii) issue, grant, sell or
deliver any shares of its capital stock or any of its
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other equity interests or securities (other than shares of Company Common
Stock issued upon the exercise of any Options or outstanding warrants) or
any Convertible Securities, or any phantom shares, phantom equity interests
or stock or equity appreciation rights (other than options to purchase
shares of Company Common Stock at fair market value granted to new
employees, up to a maximum of 20,000 shares; (iii) split, combine or
reclassify the outstanding shares of its capital stock or any of its other
outstanding equity interests or securities or issue any capital stock or
other equity interests or securities in exchange for any such shares or
interests; (iv) redeem, purchase or otherwise acquire, directly or
indirectly, any shares of capital stock or any other securities of the
Company or any Subsidiary of the Company; (v) amend or modify any
outstanding options, warrants, or rights to acquire, or securities
convertible into shares of its capital stock or other equity interests or
securities, or any phantom shares, phantom equity interests or stock or
equity appreciation rights, or adopt or authorize any other stock or equity
appreciation rights, restricted stock or equity, stock or equity purchase,
stock or equity bonus or similar plan, arrangement or agreement; (vi) make
any changes in its equity capital structure; (vii) declare, set aside, pay
or make any dividend or other distribution or payment (whether in cash,
property or securities) with respect to its capital stock or other
securities, except for dividends by a Subsidiary of the Company, as the case
may be (provided in the case of any non-wholly owned Subsidiary of the
Company that the other stockholders of or partners in such Subsidiary are
not officers, directors, employees or Affiliates of the Company or any of
its Subsidiaries); (viii) sell, transfer or otherwise dispose of, or pledge
any stock, equity or partnership interest owned by it in any Subsidiary of
the Company, except for dispositions permitted by SECTION 6.5(g) hereof;
(ix) create or permit to exist any Lien or Restriction thereon not listed in
Section 4.18 of the Company Disclosure Memorandum (other than any sale, Lien
or Restriction arising from any change or transaction affecting the holders
of such securities generally); or (x) enter into or assume any contract,
agreement, obligation, commitment or arrangement with respect to any of the
foregoing;
(e) not (i) terminate, modify or change in any material respect any
material License or other material Contract, other than in the ordinary
course of business; (ii) enter into any new employment, consulting, agency
or commission agreement, make any amendment or modification to any existing
such agreement or grant any increases in compensation, in each case other
than in the ordinary course of business and consistent with past practice
and with or granted to Persons who are not executive officers or directors
of the Company or any Subsidiary of the Company on the date hereof;
(iii) establish, amend or modify any employee benefit plan of any kind
referred to in SECTION 4.12(a), except to the extent required by any
Applicable Laws, the existing terms of any such plan or the provisions of
this Agreement; (iv) secure any of its outstanding unsecured Indebtedness,
provide additional security for any of its outstanding secured Indebtedness
or grant, create or suffer to exist any Lien on or with respect to any
property, assets or rights of the Company or any Subsidiary of the Company,
except in any such case for Permitted Encumbrances; (v) pay, discharge or
satisfy claims, liabilities or obligations (absolute, accrued, contingent or
otherwise), other than any payment, discharge or satisfaction in the
ordinary course of business consistent with past practice; (vi) cancel any
Indebtedness or waive any claims or rights, except in the ordinary course of
business and consistent with past practice; (vii) make any material capital
expenditures in excess of $50,000 individually and $250,000 in the aggregate
(other than in accordance with the capital expenditure budget for the year
2000 (the "2000 BUDGET") in effect on the date hereof, a copy of which has
been delivered to Parent) or make any change in the Company's accounting
policies or practices other than as required by GAAP; (viii) accelerate the
payment of, or otherwise prepay, any existing outstanding Indebtedness
except in the ordinary course of business consistent with past practice;
(ix) other than as contemplated or otherwise permitted by this Agreement and
other than the normal cash management practices of the Company and its
Subsidiaries conducted in the ordinary and usual course of their business
and consistent with past practice, make any advance or loan to or engage in
any material transaction
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with any director, officer, partner or Affiliate not required by the terms
of an existing Contract described in Section 4.19 of the Company Disclosure
Memorandum; (x) guarantee or otherwise become responsible for any
Indebtedness of any other Person; or (xi) enter into or assume any contract,
agreement, obligation, commitment or arrangement with respect to any of the
foregoing;
(f) not acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to otherwise acquire any assets (other than
assets acquired in the ordinary course of business) which are material,
either individually or in the aggregate, to the Company and its Subsidiaries
taken as a whole, or enter into any letter of intent with respect to any of
the foregoing;
(g) except (i) as described in Section 6.5 of the Company Disclosure
Memorandum; (ii) for the Asset Sale, the terms and conditions of which shall
be approved by Parent in writing prior to the execution of any agreements in
connection with such sale (which approval shall not be unreasonably
withheld, delayed or conditioned in the event of a sale to a non-Affiliate);
and (iii) for dispositions in the ordinary course of business consistent
with prior practice, not sell, lease or encumber or otherwise voluntarily
dispose of, or agree to sell, lease, encumber or otherwise dispose of, any
of its assets which are material, either individually or in the aggregate,
to the Company and its Subsidiaries taken as a whole;
(h) not incur any Indebtedness in excess of $250,000, other than
borrowings under a Company bank clearing credit facility with Barclays Bank
PLC as described in Section 6.5 of the Company Disclosure Memorandum;
(i) not take any action that would cause its representations and
warranties contained in SECTION 4.1 to be untrue in any respect or, except
as otherwise contemplated by this Agreement, make any changes to the
corporate structure of the Company and its Subsidiaries (including the
structure of the ownership by the Company of the direct and indirect
interests in its Subsidiaries and of the ownership by the Company and its
Subsidiaries of their respective businesses, properties and assets);
(j) not enter into any agreement that would (after the Effective Time)
purport to bind Parent or any of its Subsidiaries (other than the Surviving
Entity or any of its Subsidiaries);
(k) not settle or compromise any pending or threatened suit, action or
claim which is material or which relates to the Merger;
(l) advise Parent of and, if in writing, provide Parent with a copy of,
any notice or communication (whether oral or written) described in
SECTION 4.6(b); and
(m) promptly advise Parent orally and in writing of any change in its
business which would reasonably be likely to have a Material Adverse Effect
on the Company, and promptly provide to Parent (or its counsel) copies of
all filings made by the Company with any federal, state, foreign or
supranational Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
Nothing contained in this SECTION 6.5 or elsewhere in this Agreement shall
give to Parent, directly or indirectly, rights to control or direct the
Company's operations prior to the Effective Time. Prior to the Effective Time,
the Company shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision of its operations. Notwithstanding
this SECTION 6.5, but subject to the provisions of SECTION 6.6 (to the extent
applicable), the foregoing provisions of this SECTION 6.5 shall not prohibit or
restrict in any way the Company from entering into an agreement with respect to
a Superior Proposal.
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6.6 NO SOLICITATION.
(a) After the date hereof and prior to the Effective Time, the Company
will not, directly or indirectly, through any Subsidiary, Affiliate,
officer, director, employee, agent or representative or otherwise
(i) solicit or initiate the submission of proposals or offers from any
Person relating to any Alternative Proposal; (ii) cooperate with, or furnish
or cause to be furnished any non-public information concerning the business,
properties, or assets of the Company or any of its Subsidiaries, to any
Person in connection with any Alternative Proposal; (iii) negotiate with any
Person with respect to any Alternative Proposal; (iv) approve, recommend or
permit the Company or any Subsidiary to enter into an agreement or
understanding with any Person relating to any Alternative Proposal; or
(v) vote for, execute a written consent (or equivalent instrument) in favor
of, or otherwise approve or enter into any agreements or understandings with
respect to any of the foregoing; PROVIDED, HOWEVER, that this
SECTION 6.6(a) shall not prohibit the Company or the Company Board, to the
extent the Company Board determines in its good faith judgment that the
failure to take such action would be inconsistent with its fiduciary duties
to its stockholders under Applicable Laws, after taking into account the
advice of outside legal counsel, from providing information to,
participating in discussions or negotiating with any third party that
delivers an Alternative Proposal that was not solicited in violation of this
SECTION 6.6(A), subject to the and provided that the Company shall comply
with all of the following:
(x) In the event that the Company Board decides to entertain an Alternative
Proposal by taking any of the actions referred to in clauses (ii) or
(iii), above, the Company shall immediately orally notify Parent to such
effect, and shall furnish to Parent an Alternative Proposal Notice in
accordance with SECTION 6.6(d);
(y) Prior to the expiration of ten business days following delivery of an
Alternative Proposal Notice to Parent, the Company shall either
(A) cease to entertain the Alternative Proposal, discontinuing
discussions with respect thereto, and notify Parent to such effect, or
(B) notify Parent that the Company Board has determined that the
Alternative Proposal is a Superior Proposal and deliver to Parent the
terms and conditions thereof (a "SUPERIOR PROPOSAL NOTICE");
(z) Within five business days following Parent's receipt of a Superior
Proposal Notice, Parent shall have the right to either (A) propose terms
alternative to the Superior Proposal, which the Company Board shall then
consider in accordance with their fiduciary duties, and advise Parent of
the Company's acceptance or rejection thereof within five business days,
or (B) terminate this Agreement without any further obligation to the
Company, or (C) notify the Company that Parent elects neither (A) nor
(B), in which case the other terms of this SECTION 6.6, including
subsection (c), shall remain in effect and shall govern.
In the case of any Alternative Proposal, the Company and Parent shall
consult in good faith regarding the merits of any Alternative Proposal or
Superior Proposal. In no event shall the Company make available any
information to a Person involving an Alternative Proposal that has not
previously been made available or is not concurrently made available to
Parent.
(b) Nothing contained in this Agreement shall prevent the Company Board
from complying with Rule 14e-2 and Rule 14d-9 under the Exchange Act with
regard to an Alternative Proposal, provided that the Company Board shall not
recommend that the stockholders of the Company tender their shares in
connection with a tender offer except to the extent the Company Board
determines in its good faith judgment that the failure to make such a
recommendation would be inconsistent with its fiduciary duties to its
stockholders under Applicable Laws, after taking into account the advice of
outside legal counsel (it being understood that disclosure by the Company of
its receipt of an Alternative Proposal and the terms thereof shall not alone
constitute a withdrawal or modification of such position or an approval or
recommendation of such Alternative Proposal).
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(c) Notwithstanding the foregoing, at any time before the Company
Stockholder Approval, in response to a Superior Proposal which was
unsolicited and which did not otherwise result from a breach of
SECTION 6.6(a), the Company Board may (subject to this sentence), if it
determines in good faith after consultation with outside legal counsel that
the failure to take such action would be inconsistent with its fiduciary
duties to the Company's stockholders under Applicable Laws, terminate this
Agreement and concurrently with such termination cause the Company to enter
into a definitive acquisition agreement with respect to such Superior
Proposal (the determination of whether a proposal is a Superior Proposal to
be made after consideration of any modification proposed by Parent), but
only (i) at a time that is following Parent's receipt of the form of such
definitive agreements containing the material terms and conditions of such
Superior Proposal and identifying the Person making such Superior Proposal,
and (ii) after the Company has made payment of the Termination Fee and
Expenses required by SECTION 8.2.
(d) The Company shall both notify Parent orally and provide Parent with
a written notice promptly (but in no event later than 24 hours) after
receipt by the Company (or any of its advisors) of any Alternative Proposal
or of any request (other than in the ordinary course of business and not
related to an Alternative Proposal) for non-public information relating to
the Company or any of its Subsidiaries or for access to the properties,
books or records of the Company or any Subsidiary thereof by any Person who
is known to be considering making, or has made, an Alternative Proposal (an
"ALTERNATIVE PROPOSAL NOTICE"). The Alternative Proposal Notice shall
identify the Person making, and the terms and conditions of, any such
Alternative Proposal, indication or request. The Company shall keep Parent
fully informed, on a prompt basis (but in any event no later than
24 hours), of the status and details of any such Alternative Proposal,
indication or request.
(e) The Company shall, and shall cause its Subsidiaries and the
directors, employees and other agents of the Company and its Subsidiaries
to, cease immediately and cause to be terminated all activities, discussions
or negotiations, if any, with any Persons conducted prior to the date hereof
with respect to any Alternative Proposal.
6.7 REASONABLE EFFORTS.
(a) Each of the Company, Parent and Merger Sub agree to use reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement as soon
as reasonably practicable, including such actions or things as any Party
hereto may reasonably request in order to cause any of the conditions to any
other Party's obligation to consummate such transactions specified in
Article VII to be fully satisfied, and to promptly cooperate with and
furnish information to each other in connection with any requirements
imposed upon any of them with respect thereto. Without limiting the
generality of the foregoing, the Parties shall (and shall cause their
respective directors, officers and Subsidiaries, and use their reasonable
efforts to cause their respective Affiliates, employees, agents, attorneys,
accountants and representatives, to) consult and fully cooperate with and
provide reasonable assistance to each other in (i) the preparation and
filing of any documents with the Commission contemplated hereby (including
any necessary amendments or supplements); (ii) the preparation and filing of
any documents with the NASDAQ Stock Market to permit the shares of Company
Common Stock that are to be issued pursuant to the Option Agreement to be
traded on the NASDAQ national market; (iii) using commercially reasonable
efforts to obtain all necessary consents, approvals, waivers, licenses,
permits, authorizations, registrations, qualifications, or other permission
or action by, and giving all necessary notices to and making all necessary
filings with and applications and submissions to, any Governmental Entity or
other Person required to be obtained or made by Parent, Merger Sub, the
Company or any of their Subsidiaries in connection with the Merger or the
taking of any action contemplated thereby or by this Agreement or the Option
Agreement;
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(iv) timely filing all pre-merger notification and report forms required
under the HSR Act, EC Merger Regulation and Japan Merger Regulation and
responding to any requests for additional information made by any
Governmental Entity pursuant to the HSR Act, EC Merger Regulation, and Japan
Merger Regulation; (v) using commercially reasonable efforts to lift any
Injunction of any type referred to in SECTION 7.1(c); (vi) modifying the
structure of the Merger as contemplated by SECTION 3.1(a); (vii) providing
all such information about such Party, its Subsidiaries and its officers,
directors, partners and Affiliates and making all applications and filings
as may be necessary or reasonably requested in connection with any of the
foregoing; and (viii) in general, using commercially reasonable efforts to
consummate and make effective the transactions contemplated thereby;
PROVIDED, HOWEVER, that in making any such filing and in order to obtain any
consent, approval, waiver, license, permit, authorization, registration,
qualification, or other permission or action or the lifting of any
Injunction referred to in this sentence, (A) no Party shall be required to
pay any consideration, to divest itself of, or otherwise rearrange the
composition of, any of its assets or to agree to any of the foregoing or any
other condition or requirement that is materially adverse or burdensome; and
(B) without Parent's prior consent, the Company shall not, and shall not
permit any of its Subsidiaries to, amend any License or Contract, pay any
consideration or make any agreement or reach any understanding or
arrangement other than in the ordinary course of business consistent with
prior practice. Prior to making any application to or filing with any
Governmental Entity or other Person in connection with this Agreement, each
Party shall provide the other Parties, to the extent permitted by Applicable
Laws, with drafts thereof and afford the other Parties a reasonable
opportunity to comment on such drafts. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each Party
to this Agreement then in office shall use their reasonable best efforts to
take all such action.
(b) In its capacity as the sole stockholder of Merger Sub, Parent will
cause Merger Sub to approve and adopt this Agreement and to take all
corporate action necessary on its part to consummate the transactions
contemplated hereby and Merger Sub's obligations under this Agreement.
Except as contemplated by this Agreement, Merger Sub will not conduct any
other business, and will have no other assets or liabilities.
(c) The Company shall not, and shall not permit any of its Subsidiaries
to, take any action that would result in any of the representations and
warranties of the Company set forth in this Agreement from being untrue in
any respect (subject to the Company's right to take actions specifically
permitted by SECTION 6.5).
(d) The Company shall give prompt notice to Parent, and Parent shall
give prompt notice to the Company, of (i) the occurrence, or non-occurrence,
of any event the occurrence, or non-occurrence, of which would be likely to
cause any representation or warranty contained in this Agreement to be
untrue or inaccurate and (ii) any failure of the Company, Parent or Merger
Sub, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; PROVIDED,
HOWEVER, that the delivery of any notice pursuant to this SECTION 6.7(d)
shall not limit or otherwise affect the remedies available hereunder to the
Party receiving such notice.
(e) The Company will take all reasonable steps to (i) exempt the Merger
from the requirements of any applicable state takeover law and (ii) assist
in any challenge by Parent to the validity or applicability to the Merger of
any state takeover law.
6.8 CERTAIN LITIGATION.
(a) Each of the Company and Parent agrees to vigorously defend against
all actions, suits or proceedings in which such Party is named as a
defendant which seek to enjoin, restrain or prohibit the transactions
contemplated hereby or seek damages with respect to such transactions. The
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Company will not settle any such action, suit or proceeding or fail to
perfect on a timely basis any right to appeal any judgment rendered or order
entered against the Company therein without the consent of Parent (which
consent will not be withheld or delayed unreasonably). Each of Parent and
the Company further agrees to use its reasonable efforts to cause each of
its Affiliates, directors and officers to vigorously defend any action, suit
or proceeding in which such Affiliate, director or officer is named as a
defendant and which seeks any such relief to comply with this SECTION 6.8 to
the same extent as if such Person were a Party hereto.
(b) The Company will not voluntarily cooperate with any third party
which has sought or may hereafter seek to restrain or prohibit or otherwise
oppose the Merger and will cooperate with Parent and Merger Sub to resist
any such effort to restrain or prohibit or otherwise oppose the Merger,
unless the board of directors of the Company determines in good faith, after
consultation with counsel, that failing so to cooperate with such third
party or cooperating with Parent or Merger Sub, as the case may be, would be
reasonably likely to result in a breach of the Board's fiduciary duties
under Applicable Laws.
6.9 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) From and after the Effective Time, Parent and the Surviving Entity
will jointly and severally indemnify, defend and hold harmless the present
and former officers, directors and employees of the Company and any of its
Subsidiaries, and any Person who is or was serving at the request of the
Company as an officer, director or employee or agent of another Person
(each, an "INDEMNIFIED EMPLOYEE" and together, the "INDEMNIFIED EMPLOYEES")
(and will also, subject to SECTION 6.9(b), advance expenses as incurred to
the fullest extent permitted under the DGCL, provided that the Person to
whom expenses are advanced provides an undertaking to repay such advances if
it is ultimately determined that such Person is not entitled to
indemnification), against (i) all losses, costs, expenses, claims, damages,
judgments or liabilities arising out of, or in connection with, any claim,
action, suit, proceeding or investigation based in whole or in part on the
fact that the Indemnified Employee is or was an officer, director or
employee of the Company or any of its Subsidiaries, or is or was serving at
the request of the Company as an officer, director or employee or agent of
another Person, pertaining to any matter existing or occurring before or at
the Effective Time and whether asserted or claimed before, at or after, the
Effective Time (the "EMPLOYEE INDEMNIFIED LIABILITIES"); and (ii) all
Employee Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or pertaining to this Agreement, the Merger or any
other transactions contemplated hereby or thereby, in each case to the
fullest extent permitted under the Company Charter. Parent and Merger Sub
agree that all rights to indemnification, including provisions relating to
advances of expenses incurred in defense of any action, suit or proceeding,
whether civil, criminal, administrative or investigative (each a "CLAIM"),
existing in favor of the Indemnified Employees as provided in the Company
Charter or Company Bylaws or pursuant to other agreements, or certificates
of incorporation or bylaws or similar documents of any Subsidiaries of the
Company, as in effect as of the date hereof, with respect to matters
occurring through the Effective Time, will survive the Merger and will
continue in full force and effect, and Parent shall cause the Certificate of
Incorporation and Bylaws of Surviving Entity and its Subsidiaries to include
provisions for the limitation of liability of directors and indemnification
of the Indemnified Employees to the fullest extent permitted under
Applicable Laws and, subject to the foregoing, shall not permit the
amendment of such provision in any manner adverse to the Indemnified
Employees, as the case may be without the prior consent of such persons, for
a period of six years from and after the Closing Date. The Surviving Entity
shall, and Parent shall cause the Surviving Entity to, maintain in effect
for not less than six years after the Effective Time the current policies of
directors' and officers' liability insurance maintained by the Company and
the Company's Subsidiaries with respect to matters occurring prior to or at
the Effective Time; PROVIDED, HOWEVER, that (i) the Surviving Entity may
substitute therefor policies of at least the same
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coverage containing terms and conditions which are no less advantageous to
the Indemnified Employees with an insurance company or companies, the claims
paying ability of which is substantially equivalent to the claims paying
ability of the insurance company or companies providing currently such
insurance coverage for directors and officers of the Company, and (ii) the
Surviving Entity shall not be required to pay an annual premium for such
insurance in excess of two times the last annual premium paid prior to the
date hereof, but in such case shall purchase as much coverage as possible
for such amount.
(b) If any Claim relating hereto or to the transactions contemplated by
this Agreement is commenced before the Effective Time, the Company, Parent
and the Surviving Entity agree to cooperate and use their respective
reasonable efforts to vigorously defend against and respond thereto. Any
Indemnified Employee wishing to claim indemnification under paragraph (a) of
this SECTION 6.9, upon learning of any such claim, action, suit, proceeding
or investigation (whether arising before, at or after the Effective Time),
will promptly notify Parent thereof (but the failure so to notify will not
relieve the Company, Parent or the Surviving Entity from any liability which
it may have under this SECTION 6.9 except to the extent such failure
materially prejudices such Party), whereupon Parent or the Surviving Entity
will have the right, from and after the Effective Time, to assume from such
Indemnified Employee and control the defense thereof on behalf of such
Indemnified Employee, provided that the Surviving Entity's counsel is
reasonably acceptable to the Indemnified Employees, and upon such
assumption, the Surviving Entity will not be liable to such Indemnified
Employees for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Employees in connection with the
defense thereof. Notwithstanding the foregoing, if counsel for the
Indemnified Employees advises that there are issues which raise conflicts of
interest between Parent or the Surviving Entity and the Indemnified
Employees, the Indemnified Employees may retain separate counsel and Parent
will pay or cause to be paid all reasonable fees and expenses of such
counsel; provided that Parent will not be obligated pursuant to this
SECTION 6.9(b) to pay or cause to be paid for more than one firm or counsel
to represent all Indemnified Employees in any jurisdiction unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified
Employees. Neither Parent nor the Surviving Entity will be liable for any
settlement effected without its prior written consent, which consent,
however, will not be unreasonably withheld or delayed.
(c) Any determination to be made as to whether any Indemnified Employee
has met any standard of conduct imposed by Applicable Laws shall be made in
good faith by the Parent Board after taking into consideration the advice of
such outside legal counsel (such outside counsel to be reasonably acceptable
to such Indemnified Employee).
(d) In the event that, in response to a Claim, the Parent Board finds
that an Indemnified Employee is not entitled to indemnification under this
SECTION 6.9 and such Indemnified Employee subsequently initiates and
prevails in an legal proceeding in a court of competent jurisdiction against
Parent to enforce the indemnity provided for in this SECTION 6.9, then
Parent shall reimburse such Indemnified Employee for the reasonable
attorneys' fees incurred by such Indemnified Employee in such action.
(e) This SECTION 6.9 shall survive consummation of the Merger and is
intended to benefit the Indemnified Employees, and shall be enforceable by
each Indemnified Employee, as well as his or her and representatives, and
shall be binding on all successors and assigns of Parent, Merger Sub and the
Surviving Entity.
6.10 COMPANY STOCK OPTIONS. Prior to the Effective Time, the Parties shall
take all such actions as shall be necessary to effectuate the provisions of
SECTION 3.5.
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6.11 EMPLOYEE MATTERS.
(a) From and after the Effective Time, Parent shall, or shall cause the
Surviving Entity or its Subsidiaries, as applicable, to honor, pay, perform
and satisfy any and all liabilities, obligations and responsibilities to or
in respect of each Company Plan (the "ASSUMED COMPANY BENEFIT PLANS") and
each employment agreement or arrangement, other than Company Plans,
employment agreements or arrangements with respect to which employees waive
the right to claim benefits. From and for a period of one year after the
Closing, Parent shall, or shall cause the Surviving Entity or its
Subsidiaries, as applicable, to provide each employee of the Company or its
Subsidiaries immediately prior to the Closing (the "EMPLOYEES") with
compensation and benefits which are substantially comparable in the
aggregate to the compensation and benefits provided to such Employee
immediately prior to the Closing, with the exception of stock options or
other employee awards with respect to the common stock of Parent. Nothing in
this SECTION 6.11 shall preclude Parent or the Surviving Entity or its
Subsidiaries from, at any time following the Closing, (i) amending,
modifying or terminating any particular Assumed Company Benefit Plan
pursuant to the relevant provision of such Assumed Company Benefit Plan,
provided that the covenants set forth in this SECTION 6.11 are satisfied; or
(ii) terminating the employment of any Employee, so long as any such
terminated Employee receives severance and other termination benefits upon
or in connection with such termination in an amount which is at least equal
to the severance and other termination benefits which would have been
provided to such Employee if his or her employment had been terminated for
the same reason immediately prior to the Closing, with respect to service
prior to the Closing.
(b) After a period of one year from the Closing, Parent shall cause the
Surviving Entity to provide pension, health and welfare benefits to
Employees who continue their employment after the Effective Time which are
generally comparable in the aggregate to such benefits provided to other
similarly situated employees of Parent and its Subsidiaries. From and after
the Effective Time, Employees shall be given credit for all service with the
Company and its Subsidiaries for purposes of eligibility, benefit accrual
and vesting, to the same extent as such service was credited for such
purpose by the Company under any Company Plan prior to the Closing Date,
under each employee benefit plan, program or arrangement of Parent or any of
its Subsidiaries in which the Employees are eligible to participate,
provided, HOWEVER, that (i) in no event shall the employees be entitled to
any credit to the extent that it would result in a duplication of benefits
with respect to the same period of service, and (ii) in no event shall the
employees be entitled to benefit service credit under defined benefit
pension plans of the Parent or its Subsidiaries for service with the Company
prior to the Closing, unless such benefit service credit is fully funded by
assets of a Company defined benefit pension plan that is merged with,
transferred to, or otherwise combined with a plan of the Parent or its
Subsidiaries.
(c) From and after the Effective Time, Parent shall take, and shall
cause the Surviving Entity and its Subsidiaries to take, the following
action: waive any limitations regarding pre-existing conditions and
eligibility waiting periods under any welfare benefit plan maintained by any
of them for the benefit of the Employees (and their dependents) to the
extent such pre-existing condition or waiting period did not apply to the
Employee (or such dependents) under a comparable plan of the Company
immediately prior to the Closing, and for any Employee in the United States
whose health care coverage changes in mid-year due to the Merger, provide a
cash payment to such Employee equal to any resulting duplicate co-payments
and deductible incurred by such Employee.
6.12 ASSET SALE.
(a) INFORMATION. Upon the execution of this Agreement, the Company
shall promptly provide Parent with all information reasonably requested by
Parent relating to any proposed Asset Sale and provide Parent with true and
correct copies of all documents in the possession of the Company and its
Subsidiaries relating to any proposed Asset Sale.
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(b) SALE. Upon the execution of this Agreement, the Company shall use
commercially reasonable efforts to complete the Asset Sale pursuant to terms
and conditions which shall be approved by Parent in writing prior to the
execution of any agreements in connection with such Asset Sale (which
approval shall not be unreasonably withheld, delayed or conditioned in the
event of a sale to a non-Affiliate).
6.13 COMPANY KEY EMPLOYEES. Prior to the Closing, the Company shall enter
into (i) employment agreements ("EMPLOYMENT CONTRACTS"), in a form substantially
similar as that attached hereto as EXHIBIT D, with the Terry Burt and Mark
McVeigh; and (ii) retention agreements ("RETENTION CONTRACTS"), in a form
approved by Parent, with six of the following nine employees: Nick Grossman,
Samantha Kinstrey, Chris Hervey, Alain Sanjaume, Tong Chhor, Luciano Bruno,
Gabrielle Quadrelli, Peter Roquist and Henk Van Kranen.
6.14 INTEGRATION TEAM. Parent and the Company shall, as soon as reasonably
practicable after the signing of this Agreement, create a task force comprised
of key employees of Parent and the Company which shall review the policies and
procedures of Parent and the Company and make recommendations for the successful
integration of the business of the Company into the business of Parent.
6.15 SECTION 16 MATTERS. Prior to the Effective Time, the Company shall
take all such steps as may be required to cause any dispositions of Company
Common Stock (including derivative securities with respect to the Company Common
Stock) resulting from the transactions contemplated by this Agreement by each
individual who is subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to the Company to be exempt under Rule 16b-3
promulgated under the Exchange Act, such steps to be taken in accordance with
the No-Action Letter, dated January 12, 1999, issued by the Commission to
Skadden, Arps, Slate, Meagher & Flom LLP.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 CONDITIONS TO THE MERGER. The respective obligations of each Party to
effect the Merger shall be subject to the satisfaction or waiver at or prior to
the Effective Time of all of the following conditions and only the following
conditions (in addition to those set forth in SECTIONS 7.2 AND 7.3, as
applicable):
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
been approved and adopted by the requisite affirmative vote of the
stockholders of the Company to the extent required by Delaware Law
(including Section 203 thereof) and the Company Charter.
(b) HSR ACT; EC MERGER REGULATION; JAPAN MERGER REGULATION. Any
waiting period (and any extension thereof) applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated, and any
required approvals of the European Commission or Government of Japan shall
have been obtained pursuant to EC Merger Regulation and Japan Merger
Regulation, respectively.
(c) NO ORDER. No Injunction by any court or other Government Entity of
competent jurisdiction, or other legal restraint or prohibition, shall be in
effect preventing consummation of the Merger or challenging the validity,
enforcement or performance of any of the Transaction Agreements, or
permitting such consummation, enforcement or performance only subject to any
condition or restriction that has had or would reasonably likely have (i) a
material adverse effect on the Merger or the transactions contemplated by
the Transaction Agreements, or (ii) a Material Adverse Effect on Parent or
the Surviving Entity.
(d) THIRD PARTY CONSENTS. All Contract Consents and Contract Notices
which are referred to in SECTION 4.5 or otherwise required in connection
with the consummation of the Merger or the transactions contemplated by the
Transaction Agreements and which, if not obtained or given, would have
(either individually or in the aggregate) a material adverse effect on the
Merger or the transactions contemplated by the Transaction Agreements or a
Material Adverse Effect on the Company, Parent or the Surviving Entity shall
have been obtained and given.
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(e) GOVERNMENT CONSENTS. Other than the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and filings due
after the Effective Time, all Local Approvals, and all other Government
Consents as are required in connection with the Merger and the consummation
of the other transactions contemplated by the Transaction Agreements shall
have been obtained and shall be in full force and effect, all Governmental
Filings as are required in connection with the consummation of such
transactions shall have been made, and all waiting periods, if any,
applicable to the consummation of such transactions imposed by any
Governmental Entity shall have expired, other than those which, if not
obtained, in force or effect, made or expired (as the case may be) would not
(either individually or in the aggregate) have (i) a material adverse effect
on the Merger or the transactions contemplated by the Transaction
Agreements, or (ii) a Material Adverse Effect on the Company, Parent or
Surviving Entity.
(f) RESIGNATION OF CERTAIN OFFICERS. Anil J. Doshi and Mark Ellis
shall each have delivered to the Company a resignation letter, substantially
in the form as that attached hereto as EXHIBIT E, whereby, among other
things, each shall resign from their respective offices and employment by
the Company.
7.2 CONDITIONS TO PARENT AND MERGER SUB'S OBLIGATIONS TO EFFECT THE
MERGER. The obligation of Parent and Merger Sub to effect the Merger shall be
subject to the satisfaction or waiver at or prior to the Effective Time of all
of the following conditions and only the following conditions (in addition to
those set forth in SECTION 7.1):
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company set forth in this Agreement shall be true and correct in all
material respects (except to the extent the representation or warranty is
already qualified by materiality and/or the phrase "Material Adverse
Effect," in which case it shall be true and correct in all respects) without
giving effect to any amendment, modification or supplement to the Company
Disclosure Memorandum after the date hereof, on and as of the Closing Date
with the same effect as though such representations and warranties had been
made on and as of such date (other than any representations and warranties
made as of a specific date, in which case as of such earlier date), except
where the failure of such representations and warranties to be true and
correct would not, either individually or in the aggregate, have a Material
Adverse Effect on the Company; and Parent shall have received an omnibus
certificate of the appropriate officers of the Company to such effect.
(b) COVENANTS. The Company and its Subsidiaries shall have performed
in all material respects all obligations, and shall have complied in all
material respects with all agreements and covenants, of the Company and its
Subsidiaries to be performed or complied with by it under this Agreement,
and Parent shall have received an omnibus certificate of the appropriate
officers of the Company to such effect.
(c) ABSENCE OF MATERIAL ADVERSE EFFECT. Since the date hereof, there
shall have been no Material Adverse Effect with respect to the Company.
(d) OTHER AGREEMENTS. (i) Parent and the Company shall have entered
into the Stock Option Agreement, and Parent, the Company and the Voting
Stockholders shall have entered into the Voting Agreement; and (ii) Parent
shall have entered into a Non-Competition and Non-Solicitation Agreement
with each of Anil J. Doshi and Mark Ellis, substantially in a form as that
attached hereto as Exhibit F.
(e) ACCOUNTANTS' ASSURANCES. The Company shall cause its independent
public accountants to deliver to Parent two letters from such independent
public accountants, one dated approximately the date on which the definitive
Proxy Statement is first mailed to the stockholders of the Company, and one
dated the Closing Date, each addressed Parent, in form reasonably
satisfactory to Parent, to the effect that in the course of such
accountants' review of the Company's
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interim financial statements for the period included in the Proxy Statement,
nothing came to such accountants' attention and nothing has since come to
their attention that would indicate that such interim financial statements
were not prepared in accordance with GAAP, consistently applied, or that the
Company's accounting treatment was not appropriate, or that such interim
statements did not fairly and accurately present the financial condition and
operating results of the Company (subject to normal year-end adjustments)
for the period included in the Proxy Statement.
(f) CLOSING OPINION; CERTIFICATES. Parent shall have received the
closing opinion of Nicholson, Graham & Jones, counsel for the Company, in
the form and substance previously agreed to by Parent and Nicholson,
Graham & Jones, together with such other certificates, documents and further
assurances of the Company as Parent shall reasonably request and which are
reasonable and customary for a transaction involving two publicly-traded
companies, such as the Merger.
(g) DISSENTING SHARES. The number of Dissenting Shares shall not
exceed or be equal to 5% of the number of Shares.
7.3 CONDITIONS TO COMPANY OBLIGATION TO EFFECT THE MERGER.
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Merger Sub set forth in this Agreement shall be true and
correct in all material respects (except to the extent the representation or
warranty is already qualified by materiality and/or the phrase "Material
Adverse Effect," in which case it shall be true and correct in all respects)
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (other
than any representations and warranties made as of a specific date, in which
case as of such earlier date), except where the failure of such
representations and warranties to be true and correct would not, either
individually or in the aggregate, have a Material Adverse Effect on Parent;
and the Company shall have received an omnibus certificate of the
appropriate officers of the Company to such effect.
(b) COVENANTS. Parent and Merger Sub shall have performed in all
material respects all obligations, and shall have complied in all material
respects with all agreements and covenants, to be performed or complied with
by them, respectively, under this Agreement, and the Company shall have
received an omnibus certificate of the appropriate officers of Parent and
Merger Sub to such effect.
ARTICLE VIII
TERMINATION
8.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated and the
Merger and the other transactions contemplated by the Transaction Agreements may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement and the transactions
contemplated hereby by the stockholders of the Company:
(a) By mutual written consent duly authorized by the boards of directors
of Parent, Merger Sub and the Company prior to the Effective Time; or
(b) By either Parent or the Company, if the Effective Time shall not
have occurred on or before the earlier of (i) March 31, 2001, or
(ii) twenty business days following the satisfaction of the conditions to
Closing set forth in SECTION 7.1(a), (b), (d) AND (e) (the "TERMINATION
DATE"); PROVIDED, HOWEVER, that the right to terminate this Agreement under
this SECTION 8.1(b) shall not be available to any Party whose failure to
fulfill any obligation under this Agreement (including without limitation
such Party's obligations set forth in SECTION 6.7) has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before the
Termination Date; or
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(c) By either Parent or the Company, if any Governmental Entity
(i) shall have issued an order, decree or ruling or taken any other action
(which the Parties shall have used their reasonable best efforts to resist,
resolve or lift, as applicable, in accordance with SECTION 6.7) restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable; or (ii) shall have failed to issue an order, decree
or ruling or to take any other action, and such denial of a request to issue
such order, decree, ruling or take such other action shall have become final
and nonappealable (which order, decree, ruling or other action the Parties
shall have used their reasonable best efforts to obtain, in accordance with
SECTION 6.7), in the case of each of clauses (i) and (ii) which is necessary
to fulfill the conditions set forth in SECTION 7.1(b) OR (e), as applicable;
PROVIDED, HOWEVER, that the right to terminate this Agreement under this
SECTION 8.1(c) shall not be available to any Party whose failure to comply
with SECTION 6.7 has been the cause of such action or inaction; or
(d) By either Parent or the Company, if the approval of the stockholders
of the Company contemplated by this Agreement shall not have been obtained
by reason of the failure to obtain the required vote at a duly held meeting
of stockholders or of any adjournment thereof at which the vote was taken;
or
(e) By Parent, if the Company shall have (i) failed to make the Company
Recommendation or effected a Change in Company Recommendation (or resolved
to take any such action), whether or not permitted by the terms hereof; or
(ii) breached its obligations under this Agreement by reason of a failure to
call the Company Stockholder Meeting in accordance with SECTION 6.1(A) or a
failure to prepare and mail to its stockholders the Proxy Statement in
accordance with SECTION 6.1(b); or
(f) By Parent, if the Company or its Affiliates shall have materially
breached or failed to perform any of its representations, warranties,
covenants or other agreements contained in this Agreement, such that the
conditions set forth in SECTION 7.2(a) OR (b) are not capable of being
satisfied on or before the Termination Date; or
(g) By Parent, in accordance with SECTION 6.6(a), provided that Parent
has complied with all of the provisions of SECTION 6.6(a); or
(h) By Parent, after five days following the filing with the Commission
of the Company's Report on Form 10-Q for the quarterly period ended
July 31, 2000, if the consolidated sales and revenues of the Company for the
second quarter of fiscal year 2001, after taking in account currency
fluctuations, do not exceed those of the first quarter of fiscal year 2001;
or
(i) By the Company, if Parent or Merger Sub shall have breached or
failed to perform any of their respective representations, warranties,
covenants or other agreements contained in this Agreement, such that the
conditions set forth in SECTION 7.3(a) OR (b) are not capable of being
satisfied on or before the Termination Date; or
(j) By the Company in accordance with SECTION 6.6(c), provided that the
Company has complied with all of the provisions of SECTIONS 6.6(a) AND (c).
The Party desiring to terminate this Agreement pursuant to this
SECTION 8.1 (other than pursuant to SECTION 8.1(a)) shall give notice of
such termination to the other Party.
8.2 TERMINATION FEE; EFFECTS OF TERMINATION.
(a) The Company shall pay, or cause to be paid, in same day funds to
Parent the sum of (x) Parent's Expenses (as hereinafter defined) up to a
maximum of $1,000,000 and (y) $6,902,500 (the "TERMINATION FEE") upon demand
if (i) Parent terminates this Agreement pursuant to SECTION 8.1(e) OR
(f) based on a willful breach; or (ii) prior to any termination of this
Agreement,
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an Alternative Proposal shall have been made and within 12 months of such
termination, a transaction constituting an Alternative Proposal is
consummated or the Company enters into an agreement with respect to,
approves or recommends or takes any action to facilitate such proposal.
(b) "EXPENSES" means all reasonable out-of-pocket expenses and fees
(including, without limitation, fees and expenses payable to all banks,
investment banking firms, other financial institutions and other Persons and
their respective agents and counsel for arranging, committing to provide or
providing any financing for the Merger or structuring the Merger and all
fees of counsel, accountants, experts and consultants to Parent and Merger
Sub, and all printing and advertising expenses) actually incurred or accrued
by either of them or on their behalf in connection with the Merger,
including, without limitation, the financing thereof, and actually incurred
or accrued by banks, investment banking firms, other financial institutions
and other Persons and assumed by Parent and Merger Sub in connection with
the negotiation, preparation, execution and performance of this Agreement,
the structuring and financing of the Merger and any financing commitments or
agreements relating thereto.
(c) Except as set forth in this SECTION 8.2, all costs and expenses
incurred in connection with this Agreement and the Merger shall be paid by
the Party incurring such expenses, whether or not the Merger is consummated.
The costs of filing under the HSR Act, EC Merger Regulation and Japan Merger
Regulation, and the costs of filing, printing and mailing the Proxy
Statement will be borne one-half by Parent and one-half by the Company.
(d) In the event that the Company shall fail to pay the Termination Fee
or any Expenses when due, the Company shall pay the costs and expenses
(including legal fees and expenses) incurred in connection with any action,
including the prosecution of any lawsuit or other legal action, taken to
collect payment, together with interest on such unpaid Termination Fee and
Expenses, commencing on the date that the Termination Fee or such Expenses
became due, at a rate equal to the rate of interest publicly announced by
the Bank of New York from time to time, in the City of New York, as such
bank's prime rate plus 1.00%.
(e) In the event of the termination of this Agreement pursuant to
SECTION 8.1, this Agreement shall forthwith become void, and there shall be
no liability on the part of any Party hereto, except as set forth in and
subject to (i) SECTIONS 4.10, 5.7, 6.3 AND 8.2, (ii) the penultimate
sentence of SECTION 6.2, and (iii) Article IX, and nothing herein shall
relieve any Party from liability for any breach hereof.
ARTICLE IX
MISCELLANEOUS
9.1 NO WAIVER OR SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. The respective representations and warranties of Parent, Merger
Sub, and the Company contained herein or in any certificate or other instrument
delivered pursuant hereto prior to or at the Closing shall not be deemed waived
or otherwise affected by any investigation made by any Party hereto. All
representations and warranties made by each of the Parties herein shall expire
at the Effective Time or termination of the Agreement, as the case may be, and
shall thereafter be of no further force or effect. The respective covenants and
agreements of the Parties contained herein or in any other documents delivered
prior to or at the Closing shall survive execution and delivery of this
Agreement and shall only terminate in accordance their respective terms.
9.2 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
(by courier service or otherwise) or mailed, certified or registered mail with
postage prepaid, or sent by confirmed telecopier, as follows:
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(a) If to Parent or Merger Sub:
NCR Corporation
1700 South Patterson Boulevard
Dayton, OH 45479
Attention: General Counsel
Facsimile: (937) 445-0801
with a copy to (which shall not constitute notice):
Baker Botts L.L.P.
The Warner
1299 Pennsylvania Avenue, N.W.
Washington, DC 20004-2400
Attention: James R. Doty
Facsimile: (202) 639-7890
(b) If to the Company:
4Front Technologies, Inc.
6300 Syracuse Way, Suite 293
Englewood, CO 80111
Attention: Anil J. Doshi, Chairman
Facsimile: (011) 44-20-7269-5843
with a copy to (which shall not constitute notice):
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, NY 10103
Attention: Gregg J. Berman
Facsimile: (212) 752-5958
or to such other Person or address as any Party shall specify by notice in
writing to the other Parties. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery if
delivered on a business day, on the business day following delivery if not
delivered on a business day, or on the third business day after the mailing
thereof, except that any notice of a change of address shall be effective only
upon actual receipt thereof.
9.3 ENTIRE AGREEMENT. This Agreement (including the Exhibits and other
documents referred to herein) constitutes the entire agreement among the Parties
and supersedes all prior agreements and understandings, oral and written, among
the Parties with respect to the subject matter hereof.
9.4 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement nor any of
the rights, benefits or obligations hereunder may be assigned by any Party
(whether by operation of law or otherwise) without the prior written consent of
the other Parties. 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. Except for the provisions of
ARTICLE III and SECTIONS 6.9 AND 6.11, nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the Parties or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.5 AMENDMENT. This Agreement may be amended by action of all the Parties,
by action taken or authorized by their respective boards of directors, at any
time before or after approval and adoption of this Agreement and the Merger by
the stockholders of the Company, but, after any such approval by
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the stockholders of the Company, no amendment shall be made which by law
requires further approval by such stockholders of the Company without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the Parties.
9.6 EXTENSION; WAIVER. At any time prior to the Effective Time, the
Parties, by action taken or authorized by each such Party's board of directors,
may, to the extent legally allowed, (i) extend the time specified herein for the
performance of any of the obligations of any other Party; (ii) waive any
inaccuracies in the representations and warranties of any other Party contained
herein or in any document delivered pursuant hereto; (iii) waive compliance by
any other Party with any of the agreements or covenants of such other Party
contained herein or (iv) waive any condition to such waiving Party's obligation
to consummate the transactions contemplated hereby or to any of such waiving
Party's other obligations hereunder. Any agreement on the part of a Party hereto
to any such extension or waiver shall be valid only if set forth in a written
instrument signed by such Party. Any such extension or waiver by any Party shall
be binding on such Party but not on any other Party entitled to the benefits of
the provision of this Agreement affected unless such other Party also has agreed
to such extension or waiver. No such waiver shall constitute a waiver of, or
estoppel with respect to, any subsequent or other breach or failure to strictly
comply with the provisions of this Agreement. The failure of any Party to insist
on strict compliance with this Agreement or to assert any of its rights or
remedies hereunder or with respect hereto shall not constitute a waiver of such
rights or remedies. Whenever this Agreement requires or permits consent or
approval by any Party, such consent or approval shall be effective if given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in this SECTION 9.6.
9.7 HEADINGS. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.
9.9 APPLICABLE LAW. This Agreement and the legal relations between the
Parties hereunder shall be governed by and construed in accordance with the laws
of the State of Delaware, without regard to the conflict of laws rules thereof.
9.10 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each Party agrees that, should
any court or other competent governmental authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any Party
to take any action inconsistent herewith or not to take any action required
herein, the other Parties shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach thereof or of any other provision of this Agreement or
part hereof as a result of such holding or order.
9.11 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provisions of this Agreement, or the application thereof to any Person or entity
or any circumstance, is invalid or unenforceable, (i) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision, and (ii) the remainder of this Agreement and the application of such
provision to other Persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
9.12 COMPANY DISCLOSURE MEMORANDUM. The Parties acknowledge that the
Company Disclosure Memorandum (i) relates to certain matters concerning the
disclosures required and transactions contemplated by this Agreement; (ii) is
qualified in its entirety by reference to specific provisions of
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this Agreement; and (iii) is not intended to constitute and shall not be
construed as indicating that such matter is required to be disclosed, nor shall
such disclosure be construed as an admission that such information is material
with respect to the Company or any of its Subsidiaries or will have or is
reasonably likely to have a Material Adverse Effect on the Company or Parent.
Disclosure of the information contained in one section of the Company Disclosure
Memorandum shall be deemed as proper disclosure for other sections thereof only
if appropriately cross-referenced or if the relevance thereof is reasonably
apparent from the context in which it appears. No amendment, modification, or
supplement to the Company Disclosure Memorandum following the date hereof shall
be deemed to amend, modify or supplement any representation or warranty made by
the Company herein.
9.13 ENFORCEMENT. The Parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Parties shall be entitled to seek an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
in Delaware state court, this being in addition to any other remedy to which
they are entitled at law or in equity.
9.14 SUBMISSION TO JURISDICTION; WAIVERS. Each Party irrevocably agrees
that any legal action or proceeding with respect to this Agreement or for
recognition and enforcement of any judgment in respect hereof brought by any
other Party hereto or its successors or assigns may be brought and determined in
the Chancery or other Courts of the State of Delaware, and each Party hereby
irrevocably submits with regard to any such action or proceeding for itself and
in respect to its property, generally and unconditionally, to the nonexclusive
jurisdiction of the aforesaid courts. Each Party hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense, counterclaim or otherwise,
in any action or proceeding with respect to this Agreement, (i) any claim that
it is not personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to lawfully serve process; (ii) that it or its
property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise); (iii) to the fullest extent permitted by
Applicable Laws, that (x) the suit, action or proceeding in any such court is
brought in an inconvenient forum, (y) the venue of such suit, action or
proceeding is improper, and (z) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts; and (iv) any right to a trial by jury.
9.15 PERSONAL LIABILITY. Neither this Agreement nor any other document
delivered in connection with this Agreement (other than the Voting Agreement)
shall create or be deemed to create or permit any personal liability or
obligation on the part of any officer or director of Parent, the Company or any
Subsidiary of Parent or the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
42
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement and Plan
of Merger as of the date first above written.
<TABLE>
<S> <C> <C>
NCR CORPORATION
By: /s/ PAUL H. THURMAN
-----------------------------------------
Paul H. Thurman
VICE PRESIDENT, BUSINESS DEVELOPMENT,
QUALITY AND SUPPORT
NCR MERGER SUB INC.
By: /s/ PAUL H. THURMAN
-----------------------------------------
Paul H. Thurman
VICE PRESIDENT
4FRONT TECHNOLOGIES, INC.
By: /s/ ANIL J. DOSHI
-----------------------------------------
Anil J. Doshi
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
43
<PAGE>
ANNEX B
DELAWARE GENERAL CORPORATION LAW
Section 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a non stock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a non stock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
B-1
<PAGE>
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the merger
or consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series
of stock of such constituent
B-2
<PAGE>
corporation that are entitled to appraisal rights of the effective date of
the merger or consolidation or (ii) the surviving or resulting corporation
shall send such a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such
second notice need only be sent to each stockholder who is entitled to
appraisal rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be not
more than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whomagreements as to the value of their shares have not been reached by the
surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
B-3
<PAGE>
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trialupon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses ofexperts, to be charged pro rata against the value of all the
shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
B-4
<PAGE>
ANNEX C
CHASE H&Q
A Division of Chase Securities Inc.
One Bush Street
San Francisco, CA 94104
Tel 415-371-3000
August 2, 2000
Confidential
The Board of Directors
4Front Technologies, Inc.
6300 South Syracuse Way
Suite 293
Englewood, Colorado 80111
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock (the "Common
Stock") of 4Front Technologies, Inc. ("4Front" or the "Company") of the
consideration to be received by such shareholders in connection with the
proposed merger of NCR Merger Sub Inc. ("Merger Sub"), a subsidiary of NCR
Corporation ("NCR"), with and into 4Front (the "Proposed Transaction") pursuant
to the Agreement and Plan of Merger to be dated as of August 2, 2000, among NCR,
Merger Sub, and 4Front (the "Agreement").
We understand that the terms of the Agreement provide, among other things,
that each issued and outstanding share of Common Stock shall be cancelled and
shall be converted automatically into the right to receive eighteen U.S. dollars
and fifty cents in cash (the "Per Share Amount"), as more fully set forth in the
Agreement. For purposes of this opinion, we have assumed that the Proposed
Transaction will be accounted for as a purchase. We have not given consideration
to the tax effect of the Proposed Transaction on the shareholders of the Company
or the Company in the United States or any other jurisdiction.
Chase H&Q, a division of Chase Securities Inc. ("Chase H&Q"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions, strategic
transactions, corporate restructurings, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. We have acted as a financial
advisor to the Board of Directors of 4Front in connection with the Proposed
Transaction, and we will receive a fee, a substantial portion of which is
conditioned on the consummation of the Proposed Transaction, for our services,
which include the rendering of this opinion.
In the past, we have provided investment banking and other financial
advisory services to 4Front, including as lead manager in 4Front's follow-on
offering in July 1998, and have received fees for rendering these services. In
the ordinary course of business, Chase H&Q acts as a market maker and broker in
the publicly traded securities of 4Front and receives customary compensation in
connection
[LOGO]
San Francisco - New York - Boston - Atlanta - Newport
Beach - San Diego
MEMBERS NEW YORK STOCK EXCHANGE - AMERICAN STOCK
EXCHANGE - PACIFIC EXCHANGE
<PAGE>
The Board of Directors
4Front Technologies, Inc.
Page 2
therewith, and has in the past provided research coverage for 4Front. In the
ordinary course of business, Chase H&Q also actively trades in the equity and
derivative securities of 4Front for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. Chase H&Q may in the future provide additional investment
banking or other financial advisory services to 4Front or NCR.
In connection with our review of the Proposed Transaction, and in arriving
at our opinion, we have, among other things:
(i) reviewed the publicly available consolidated financial statements of
4Front for recent years and interim periods to date and certain other
relevant financial and operating data of 4Front made available to us
from published sources, including Wall Street analysts' research
reports, and from the internal records of 4Front;
(ii) reviewed certain internal financial and operating information relating
to 4Front prepared by the senior management of 4Front;
(iii) discussed the business, financial condition and prospects of 4Front
with certain members of senior management;
(iv) reviewed the recent reported prices and trading activity for the common
stock of 4Front and compared such information and certain financial
information for 4Front with similar information for certain other
companies engaged in businesses we consider comparable;
(v) reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
(vi) reviewed a draft of the Agreement dated July 31, 2000; and
(vii) performed such other analyses and examinations and considered such
other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning 4Front considered in
connection with our review of the Proposed Transaction, and we have not assumed
any responsibility for independent verification of, and did not independently
verify, such information. We have not prepared any independent valuation or
appraisal of any of the assets or liabilities of 4Front, nor have we conducted a
physical inspection of the properties, facilities or other assets of 4Front.
With respect to the financial forecasts and projections made available to us and
used in our analysis, we have assumed that they reflect the best currently
available estimates and judgments of the expected future financial performance
of 4Front. In rendering our opinion, we express no view as to the reasonableness
of such forecasts and projections or the assumptions on which they are based.
For purposes of this opinion, we have assumed that neither NCR nor 4Front is a
party to any pending transactions, including external financings,
recapitalizations or material merger discussions, other than the Proposed
Transaction and those activities undertaken in the ordinary course of conducting
their respective businesses. Our opinion is necessarily based upon market,
economic, financial and other conditions as they exist and can be evaluated as
of the date of this letter and any change in such conditions would require a
reevaluation of this opinion. We express no opinion as to the price at which the
Common Stock will trade. In rendering this opinion, we have assumed that the
proposed merger will be consummated substantially on the terms discussed in the
Agreement, without any waiver of any material terms or conditions by any party
thereto.
It is understood that this letter is for the information of the Board of
Directors only and may not be used for any other purpose without our prior
written consent; provided, however, that this letter may be reproduced in full
in any proxy statement filed by 4Front in connection with the Proposed
Transaction. This letter does not constitute a recommendation to any stockholder
of 4Front as to how such stockholder should vote on the Proposed Transaction.
<PAGE>
The Board of Directors
4Front Technologies, Inc.
Page 3
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the Per Share Amount to be received by the holders of the Common Stock in the
Proposed Transaction is fair to such holders from a financial point of view.
Very truly yours,
CHASE H&Q
A Division of Chase Securities Inc.
<TABLE>
<S> <C>
By: /s/ PAUL B. CLEVELAND
------------------------------------
Paul B. Cleveland
Managing Director
</TABLE>
<PAGE>
ANNEX D
Below is the text of the Company's 1996 Equity Incentive Plan as proposed to
be amended pursuant to Proposal No. 3. Proposed language to the 1996 Equity
Incentive Plan is set forth in bold print and the language to be deleted is set
forth in brackets.
4FRONT TECHNOLOGIES, INC.
1996 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of the Plan is to provide incentives to attract, retain and
motivate eligible persons whose present and potential contributions are
important to the success of the Company and its Subsidiaries and Affiliates, by
offering them an opportunity to participate in the Company's future performance
through awards of Options.
Capitalized terms not defined in the text are defined in Section 20.
2. SHARES SUBJECT TO THE PLAN
2.1. NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2 and 14, the
total number of Shares reserved and available for grant and issuance
pursuant to the Plan shall be [1,100,000] 2,000,000 Shares, provided,
however, that the maximum number of Shares that may be issued under the Plan
to members of the Board of Directors of the Company who are not employees of
the Company is up to 200,000 Shares. Subject to Sections 2.2 and 14, Shares
reserved for issuance pursuant to Options granted under this Plan shall
again be available for grant and issuance, in connection with future Options
under the Plan, that: (a) are subject to issuance upon exercise of an
Option, but cease to be subject to such Option for any reason other than
exercise of such Option, or (b) are subject to an Option that otherwise
terminates without such Shares being issued and for which the participant
did not receive any benefits of ownership.
2.2. ADJUSTMENT OF SHARES. In the event that the number of outstanding
shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision,
combination, reclassification or similar change in the capital structure of
the Company without consideration, then: (a) the number of Shares reserved
for issuance under the Plan, and (b) the Exercise Prices of and number of
Shares subject to outstanding Options, shall be proportionately adjusted,
subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however,
that fractions of a Share shall not be issued, but shall either be paid in
cash at Fair Market Value or shall be rounded up to the nearest Share, as
determined by the Committee; and provided, further, that the Exercise Price
of any Option may not be decreased to below the par value of the Shares.
3. ELIGIBILITY
ISOs (as defined in Section 5.1 below) may be granted only to employees
(including officers and directors who are also employees) of the Company or of a
Subsidiary of the Company. NQSOs (as defined in Section 5 below) may be granted
to employees, directors (subject to Section 5.1 hereof), officers, consultants,
independent contractors and advisers of the Company or any Subsidiary or
Affiliate of the Company; provided, however, that such consultants, contractors
and advisers render bona fide services not in connection with the offer and sale
of securities in a capital-raising transaction. A person may be granted both
ISOs and NQSOs under the Plan.
D-1
<PAGE>
4. ADMINISTRATION
4.1. COMMITTEE AUTHORITY. The Plan shall be administered by the
Committee or the Board acting as the Committee. Subject to the purposes,
terms and conditions of the Plan, and to the direction of the Board, the
Committee shall have full power to implement and carry out the Plan,
provided, however, that all grants of Options to Directors shall be effected
strictly in accordance with the terms of Section 5.1 hereof. Except as
otherwise provided pursuant to Section 5 hereof, the Committee shall have
the authority to:
(a) construe and interpret the Plan, any Option Agreement and any
other agreement or document executed pursuant to the Plan;
(b) prescribe, amend and rescind rules and regulations relating to
the Plan:
(c) select persons to receive Options;
(d) determine the form and terms of Options;
(e) determine the number of Shares or other consideration subject to
Options;
(f) determine whether Options will be granted singly, in combination
or in tandem with, in replacement of, or as alternatives to, other
Options under the Plan or any other incentive or compensation plan of the
Company or any Subsidiary or Affiliate of the Company;
(g) grant waivers of Plan or Option conditions;
(h) determine the vesting, exercisability and payment of Options and
to accelerate the vesting and/or exercisability of Options, as provided
herein;
(i) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Option or any Option Agreement;
(j) determine whether an Option has been earned; and
(k) make all other determinations necessary or advisable for the
administration of the Plan.
4.2. COMMITTEE DISCRETION. Any determination permitted to be made by
the Committee under the Plan with respect to any Option shall be made in its
sole discretion at the time of grant of the Option or, unless in
contravention of any express term of the Plan or Option, at any later time,
and such determination shall be final and binding on the Company and all
persons having an interest in any Option under the Plan.
4.3. EXCHANGE ACT REQUIREMENTS. If two or more members of the Board
are Outside Directors and Disinterested Persons, the Committee shall be
comprised of at least two members of the Board, all of whom are Outside
Directors and Disinterested Persons. It is the intent of the Company that
the Plan and Options hereunder satisfy and be interpreted in a manner that,
in the case of Participants who are or may be Insiders, satisfies the
applicable requirements of Rule 16b-3 (or its successor) of the Exchange
Act. If any provision of the Plan or of any Option would otherwise conflict
with the intent expressed in this Section 4.3, that provision, to the extent
possible, shall be interpreted and deemed amended so as to avoid such
conflict.
5. GRANT AND EXERCISE OF OPTIONS
5.1. GRANT OF OPTIONS. Except as otherwise limited herein, the
Committee may grant Options to eligible persons pursuant to this Section 5
and shall determine whether such Options shall be Incentive Stock Options
within the meaning of the Code ("ISOs") or Nonqualified Stock Options
("NQSOs"). Directors who are not employees of the Company may be granted
Options
D-2
<PAGE>
for an aggregate of up to 200,000 shares upon approval of the Plan by the
Board of Directors; provided, however, that Directors who are not employees
of the Company may only be granted NQSOs. The Committee shall determine the
number of Shares subject to the Option, the Exercise Price of the Option,
the period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:
5.1.1. FORM OF OPTION GRANT. Each Option granted shall be evidenced
by an Option Agreement, which shall expressly identify the Option as an
ISO or NQSO, and be in such form and contain such provisions (which need
not be the same for each Participant receiving an Option) as the
Committee shall from time to time approve, and which shall comply with
and be subject to the terms and conditions of the Plan. The Committee may
in its discretion include in any NQSO granted under the Plan a condition
that the Participant shall agree to remain in the employ of, and to
render services to, the Company or any of its Subsidiaries for a period
of time (specified in the agreement) following the date the NQSO is
granted.
5.1.2. DATE OF GRANT. The date of grant of an Option shall be the
date on which the Committee makes the determination to grant such Option.
The Option Agreement and a copy of the Plan will be delivered to the
Participant within a reasonable time after the granting of such Option.
5.1.3. EXERCISE PERIOD. Options shall be exercisable within the
times or upon the events determined by the Committee as set forth in the
Option Agreement; provided, however:
(a) no Option shall be exercisable after the expiration of ten
(10) years from the date the Option is granted;
(b) subject to Sections 4.1(h) and 5.2, no Option shall be
exercisable less than six (6) months after the date of grant or prior
to stockholder approval of the Plan;
(c) Each Option granted under the Plan shall be exercisable only
with respect to one-third of the total number of Shares subject to
such Option upon the expiration of six (6) months after the date of
grant, with the balance being exercisable, one-half upon the
expiration of eighteen (18) months from the date of such grant, and
one-half upon the expiration of thirty (30) months from the date of
such grant; and
(d) no ISO granted to a person who directly or by attribution
owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Subsidiary of the
Company ("Ten Percent Stockholder") shall be exercisable after the
expiration of five (5) years from the date the Option is granted.
5.1.4. EXERCISE PRICE. The Exercise Price shall be determined by
the Committee when an Option is granted, provided, however, that:
(i) the Exercise Price of an ISO OR AN NQSO shall be not less than 100%
of the Fair Market Value of the Shares on the date of grant, and
(ii) the Exercise Price of any ISO granted to a Ten Percent Stockholder
shall not be less than 110% of the Fair Market Value of the Shares
on the date of grant.
Payment for the Shares purchased may be made in accordance with
Section 6 of the Plan.
5.1.5. METHOD OF EXERCISE. Options may be exercised only by
delivery to the Company of a written stock option exercise form stating
the number of Shares being purchased, the restrictions imposed on the
Shares, if any, and containing such representations and agreements
regarding the Participant's investment intent, access to information and
other matters, if any, as may be required or desirable by the Company to
comply with applicable securities laws, together with payment in full of
the Exercise Price for the number of Shares being purchased.
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As a further condition to exercise, the Participant must pay or make
arrangements satisfactory to the Company for payment of any applicable
withholding taxes.
5.1.6. TERMINATION. Notwithstanding the exercise periods set forth
in the Option Agreement, exercise of an Option shall always be subject to
the following:
(a) If the Participant is Terminated for any reason except death
or Disability, then the Participant may exercise such Participant's
Options, only to the extent that such Options would have been
exercisable upon the Termination Date, no later than thirty
(30) days after the Termination Date, but in any event, no later than
the expiration date of the Options.
(b) If the Participant is Terminated because of death or
Disability, then the Participant's Options which are ISOs may be
exercised, only to the extent that such Options would have been
exercisable by the Participant on the Termination Date, and must be
exercised by the Participant (or the Participant's legal
representative or authorized assignee) no later than one hundred
eighty (180) days after the Termination Date, but in any event no
later than the expiration date of the Options.
5.1.7. LIMITATIONS ON EXERCISE. The Committee may specify a
reasonable minimum of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent a Participant
from exercising the Option for the full number of Shares for which it is
then exercisable.
5.1.8. LIMITATIONS ON ISOS. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs
are exercisable for the first time by a Participant during any calendar
year (under the Plan or under any other incentive stock option plan of
the Company or any Affiliate or Subsidiary of the Company) shall not
exceed $100,000. If the Fair Market Value of Shares on the date of grant
with respect to which ISOs are exercisable for the first time by a
Participant during any calendar year exceeds $100,000, the Options for
the first $100,000 worth of Shares to become exercisable in such calendar
year shall be ISOs and the Options for the amount in excess of $100,000
that become exercisable in that calendar year shall be NQSOs. In the
event that the Code or the regulations promulgated thereunder are amended
after the Effective Date of the Plan to provide for a different limit on
the Fair Market Value of Shares permitted to be subject to ISOs, such
different limit shall be automatically incorporated herein and shall
apply to any Options granted after the effective date of such amendment.
5.1.9. MODIFICATION, EXTENSION OR RENEWAL. The Committee may
modify, extend or renew outstanding Options and authorize the grant of
new Options in substitution therefor, provided that any such action may
not, without the written consent of a Participant, impair any of such
Participant's rights under any Option previously granted. The Committee
may reduce the Exercise Price of outstanding Options without the consent
of Participants affected, by a written notice to them; provided, however,
that the Exercise Price may not be reduced below the minimum Exercise
Price that would be permitted under Section 5.1.4 of the Plan for Options
granted on the date the action is taken to reduce the Exercise Price;
provided, further, that the Exercise Price shall not be reduced below the
par value of the Shares.
5.2. ACCELERATED VESTING.
5.2.1. Notwithstanding Section 5.1.3(b), the Committee shall have
the authority to accelerate the exercisability of Options granted
pursuant to the terms of this Plan, provided however, that the
acceleration of exercisability shall be conditioned upon inclusion in the
Option Agreements with Participants of such provisions and restrictions
as are necessary to
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permit stock issued upon exercise of such Options to continue to qualify
for the exception from Section 16(b) of the Securities Act as is provided
under Rule 16b-3(a), (b) and (c).
5.2.2. Notwithstanding anything herein to the contrary, if a Change
in Control of the Company occurs or if the Committee determines in its
sole discretion that an Acceleration Event has occurred, then all Options
shall become fully exercisable as of the date such Change in Control
occurred or the Committee determines that an Acceleration Event has
occurred, provided however, that the acceleration of exercisability shall
be subject to the imposition of such restrictions on transferability of
shares of Common Stock subject to such Options, as are necessary to
permit stock issued upon exercise of such Options to continue to qualify
for the exception from Section 16(b) of the Securities Act as is provided
under Rule 16b-3(a), (b) and (c).
6. PAYMENT FOR SHARE PURCHASES
6.1. PAYMENT. Payment for Shares purchased pursuant to the Plan may be
made in cash (by check) or, where expressly approved by the Committee and
permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock that
(1) either have been owned by the Participant for more than six
(6) months and have been paid for within the meaning of Rule 144 of the
Securities Act or were obtained by the Participant in the public market;
and, (2) are clear of all liens, claims, encumbrances or security
interests;
(c) by waiver of compensation due or accrued to the Participant for
services rendered:
(d) provided that a public market for the Company's stock exists and
subject to the ability of the Participant to sell Shares in compliance
with applicable securities laws;
(i) through a "same day sale" commitment from the Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Participant
irrevocably elects to exercise the Option and to sell a portion
of the Shares so purchased in order to pay the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the Exercise Price directly to the
Company; or
(ii) through a "margin" commitment from the Participant and an NASD
Dealer whereby Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the Company;
or
(e) by any combination of the foregoing.
Notwithstanding the foregoing, the Exercise Price of an Option held by a
Director who is not an employee shall be paid either (i) in cash; or
(ii) pursuant to subsection (a) of this Section 6.1, or (iii) by any
combination of the foregoing (i) and (ii).
7. PRIVILEGES OF STOCK OWNERSHIP
(a) VOTING AND DIVIDENDS. No Participant shall have any of the rights
of a stockholder with respect to any Shares until the Shares are issued to
the Participant. After Shares are issued to the Participant, the Participant
shall be a stockholder and have all the rights of a stockholder with
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respect to such Shares, including the right to vote and receive all
dividends or other distributions made or paid with respect to such Shares.
(b) FINANCIAL STATEMENTS. The Company shall provide financial
statements to each Participant annually during the period such Participant
has Options outstanding, provided, however, that the Company shall not be
required to provide such financial statements to Participants whose services
in connection with the Company assure them access to equivalent information.
8. TRANSFERABILITY
Options granted under the Plan, and any interest therein, shall not be
transferable or assignable by a Participant, and may not be made subject to
execution, attachment or similar process, otherwise than by will or by the laws
of descent and distribution or as consistent with the specific Plan and Option
Agreement provisions relating thereto. During the lifetime of the Participant,
an Option shall be exercisable only by the Participant, and any elections with
respect to an Option may be made only by the Participant.
9. CERTIFICATES
All certificates for Shares or other securities delivered under the Plan
shall be subject to such stock transfer orders, legends and other restrictions
as the Committee may deem necessary or advisable, including restrictions under
any applicable federal, state or foreign securities law, or any rules,
regulations and other requirements of the Securities and Exchange Commission
(the "SEC") or any stock exchange or automated quotation system upon which the
Shares may be listed.
10. EXCHANGE AND BUYOUT OF OPTIONS
The Committee may, at any time or from time to time, authorize the Company,
with the consent of the respective Participants, to issue new Options in
exchange for the surrender and cancellation of any or all outstanding Options.
The Committee may at any time buy from a Participant an Option previously
granted with payment in cash, Shares or other consideration, based on such terms
and conditions as the Committee and the Participant shall agree.
11. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE
An Option shall not be effective unless such Option is in compliance with
all applicable federal and state securities laws, rules and regulations of any
governmental body, and the requirements of any stock exchange or automated
quotation system upon which the Shares may then be listed, as they are in effect
on the date of grant of the Option and also on the date of exercise or other
issuance. Notwithstanding any other provision in the Plan, the Company shall
have no obligation to issue or deliver certificates for Shares under the Plan
prior to: (a) obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable, and/or (b) completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company shall be under no obligation to register the
Shares with the SEC or to effect compliance with the registration, qualification
or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company shall have no liability for any
inability or failure to do so.
12. NO OBLIGATION TO EMPLOY
Nothing in the Plan or any Option granted under the Plan shall confer or be
deemed to confer on any Participant any right to continue in the employ of, or
to continue any other relationship with, the Company, or any Subsidiary or
Affiliate of the Company or limit in any way the right of the Company
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or any Subsidiary or Affiliate of the Company to terminate Participant's
employment or other relationship at any time, with or without cause.
13. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE
The existence of outstanding Options shall not affect in any way the right
or power of the Company or its stockholders to make or authorize all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any other corporate act or
proceeding, whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of its Common Stock outstanding, without
receiving compensation therefor in money, services or property, then (i) the
number, class and per share price of Shares subject to outstanding Options
hereunder shall be appropriately adjusted in such a manner as to entitle a
Participant to receive upon exercise thereof (and, if relevant, for the same
aggregate cash consideration), the same total number and class of shares as such
Participant would have received had such Participant exercised such Option in
full immediately prior to such event; and (ii) the number and class of shares
with respect to which Options may be granted under the Plan shall be adjusted by
substituting for the total number of shares of Common Stock then reserved that
number and class of shares of stock that would have been received by the owner
of an equal number of outstanding shares of Common Stock as the result of the
event requiring the adjustment.
After a merger of one or more corporations into the Company, or after a
consolidation of the Company and one or more corporations in which the Company
shall be the surviving corporation, each holder of an outstanding Option shall,
at no additional cost, be entitled to receive upon exercise of such Option
(subject to any required action by stockholders of the Company) in lieu of the
number of Shares as to which such Option shall then be so exercisable, the
number and class of shares of stock or other securities to which such holder
would have been entitled pursuant to the terms of the agreement of merger or
consolidation if, immediately prior to such merger or consolidation, such holder
had been the holder of record of a number of shares of Common Stock equal to the
number of shares as to which such Option shall be so exercised.
If the Company is merged into or consolidated with another corporation under
circumstances where the Company is not the surviving corporation, or if the
Company is liquidated, or sells or otherwise disposes of substantially all its
assets to another corporation while unexercised Options remain outstanding under
the Plan, (i) subject to the provisions of clause (ii) below, after the
effective date of such merger, consolidation or sale, as the case may be, each
holder of an outstanding Option shall be entitled to receive upon exercise of
such Option in lieu of shares of Common Stock, shares of such stock or other
securities, cash or property as the holders of shares of Common Stock received
pursuant to the terms of the merger, consolidation or sale; or (ii) all
outstanding Options may be canceled by the Board as of the effective date of any
such merger, consolidation, liquidation or sale provided that: (x) notice of
such cancellation shall be given to each holder of an Option, and (y) each
holder of an Option shall have the right to exercise such Option to the extent
that the same is then exercisable or, if the Board shall have accelerated the
time for exercise of all unexercised and unexpired Options, in full during the
30-day period preceding the effective date of such merger, consolidation,
liquidation or sale.
Except as expressly provided above, the issue by the Company of shares of
stock of any class, securities convertible into shares of stock of any class,
for cash, property or services, either upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of shares or
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obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of Shares then subject to outstanding Options.
14. ADOPTION AND STOCKHOLDER APPROVAL
The Plan shall become effective on the date that it is adopted by the Board
(the "Effective Date"). The Company shall submit the Plan for approval by the
stockholders of the Company at the next annual meeting of stockholders of the
Company to obtain the advantages under NASD, Internal Revenue Code, SEC and
other regulations that approval of stockholders may bestow, provided however,
that Options granted under the Plan shall be conditioned upon stockholder
approval of the Plan within one year of adoption by the Board.
15. TERM OF PLAN
The Plan will terminate ten (10) years from the Effective Date.
16. AMENDMENT OR TERMINATION OF PLAN
The Board may at any time terminate or amend the Plan in any respect,
including without limitation amendment of any form of Option Agreement or
instrument to be executed pursuant to the Plan; provided, however, that the
Board shall not, without the approval of the stockholders of the Company, amend
the Plan in any manner that requires such stockholder approval pursuant to the
Code or the regulations promulgated thereunder as such provisions apply to ISO
plans or pursuant to the Exchange Act or Rule 16b-3 (or its successor), as
amended, thereunder.
17. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board, the submission of the Plan to
the stockholders of the Company for approval, nor any provision of the Plan
shall be construed as creating any limitations on the power of the Board to
adopt such additional compensation arrangements as it may deem desirable,
including, without limitation, the granting of stock options and bonuses
otherwise than under the Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.
18. GOVERNING LAW
The Plan and all agreements, documents and instruments entered into pursuant
to the Plan shall be governed by and construed in accordance with the internal
laws of the State of Delaware, excluding that body of law pertaining to conflict
of laws.
19. DEFINITIONS
As used in the Plan, the following terms shall have the following meanings:
"ACCELERATION EVENT" means but is not limited to, any Change of Control of
the Company or other event determined in the discretion of the Committee.
"AFFILIATE" means any corporation that directly, or indirectly through one
or more intermediaries, controls or is under common control with, another
corporation, where "control" (including the terms "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
cause the direction of the management and policies of the corporation, whether
through the ownership of voting securities, by contract or otherwise.
"BOARD" means the Board of Directors of the Company.
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"CHANGE IN CONTROL" means the occurrence of any of the following events:
(A) when the Company acquires actual knowledge that any person (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the beneficial owner (as defined in Rule 13d-3 of the Exchange Act) directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then-outstanding securities;
(B) upon the first purchase of Common Stock pursuant to a tender or
exchange offer (other than a tender or exchange offer made by the Company);
(C) upon the approval by the Company's shareholders of: (i) a merger or
consolidation of the Company with or into another corporation, which does
not result in any capital reorganization or reclassification or other change
in the Company's then-outstanding shares of Common Stock, (ii) a sale or
disposition of all or substantially all of the Company's assets, or (iii) a
plan of liquidation or dissolution of the Company;
(D) if during any period of two consecutive years, the individuals who
at the beginning of such period constitute the Board of Directors of the
Company cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the Company's
shareholders, of each new director is approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; or
(E) if the Board of Directors or any designated committee determines,
in its sole discretion, that any person (such as that term is used in
Sections 13(d) and 14(d) of the Exchange Act) directly or indirectly
exercises a controlling influence over the management or policies of the
Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to administer the
Plan, or if no committee is appointed, the Board.
"COMPANY" means 4Front Technologies, Inc., a corporation organized under the
laws of the State of Delaware, or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent, partial or
total, within the meaning of Section 22(e)(3) of the Code, as determined by the
Committee.
"DISINTERESTED PERSON" means a Director who has not, during the period that
person is a member of the Committee and for one year prior to service as a
member of the Committee, been granted Options pursuant to the Plan or any other
plan of the Company, any Subsidiary or Affiliate of the Company, except in
accordance with the requirements set forth in Rule 16b-3(c)(2)(i) (and any
successor regulation thereto) as promulgated by the SEC under Section 16(b) of
the Exchange Act, as such rule is amended from time to time and as interpreted
by the SEC.
"EFFECTIVE DATE" means the date the Plan is adopted by the Board.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXERCISE PRICE" means the price at which a holder of an Option may purchase
the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National Market
System, its last reported sale price on the Nasdaq National Market or, if no
such reported sale takes place on such date, the average of the closing bid
and asked prices;
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(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, the last reported sale price or, if no such
reported sale takes place on such date, the average of the closing bid and
asked prices on the principal national securities exchange on which the
Common Stock is listed or admitted to trading;
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on such
date, as reported by the Wall Street Journal, for the over-the-counter
market; or
(d) if none of the foregoing is applicable, by the Board of Directors
of the Company in good faith.
"INSIDER" means an officer or director of the Company or other person whose
transactions in the Company's Common Stock are subject to Section 16 of the
Exchange Act.
"OPTION" means an option to purchase Shares of Common Stock of the Company
pursuant to Section 5.
"OPTION AGREEMENT" means, with respect to each Option, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Option.
"OUTSIDE DIRECTOR" means any outside director as defined in Section 162(m)
of the Code and the regulations issued thereunder.
"PARTICIPANT" means a person who receives an Option under the Plan.
"PLAN" means this 4Front Technologies, Inc. 1996 Equity Incentive Plan, as
amended from time to time.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock, $.001 par value per
share, reserved for issuance under the Plan, as adjusted pursuant to Sections 2
and 14, and any security issued in respect thereto or in replacement therefor.
"SUBSIDIARY" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if, at the time of granting of
the Option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of the Plan with respect
to a Participant, that the Participant has ceased to provide services as an
employee, director, consultant, independent contractor or adviser to the Company
or a Subsidiary or Affiliate of the Company, except in the case of sick leave,
military leave, or any other leave of absence approved by the Committee,
provided that such leave is for a period of not more than ninety (90) days, or
reinstatement upon the expiration of such leave is guaranteed by contract or
statute. The Committee shall have sole discretion to determine whether a
Participant has ceased to provide services and the effective date on which the
Participant ceased to provide services (the "Termination Date").
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4FRONT TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2000
Anil Doshi and Mark Ellis, and each of them, as the true and lawful attorneys,
agents and proxies of the undersigned, with full power of substitution, are
hereby authorized to represent and to vote all shares of Common Stock of 4Front
Technologies, Inc. held of record by the undersigned on , 2000, at
the Annual Meeting of Stockholders to be held at 11:00 A.M. on ,
, 2000, at the offices of Fulbright & Jaworski L.L.P., 666 Fifth
Avenue, New York, New York 10103 and any adjournment thereof. Any and all
proxies heretofore given are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED FOR PROPOSAL NO. 2 BELOW, THE PROXY WILL
BE VOTED FOR EACH OF THE NOMINEES FOR DIRECTOR LISTED BELOW.
1. Proposal No. 1--Approval of the Merger Agreement
Proposal to approve and adopt the Agreement and Plan of Merger, dated as of
August 2, 2000, among the Company, NCR Corporation and NCR Merger
Sub, Inc., and the transactions contemplated by the Agreement and Plan of
Merger, pursuant to which NCR Merger Sub, Inc. will merge with and into the
Company and the Company will continue as the surviving corporation and
become a wholly-owned subsidiary of NCR Corporation.
/ / FOR / / AGAINST / / ABSTAIN
2. Proposal No. 2--Election of Directors--Nominees are:
Anil Doshi, Mark Ellis, Terence Burt, Craig Kleinman, Brian V. Murray and
Arthur Keith Ross.
/ / FOR all listed nominees (except do not vote for the
nominee(s) whose name(s) appears(s) below):
/ / WITHHOLD AUTHORITY to vote for the listed nominees.
3. Proposal No. 3--Amendment to the Company's 1996 Equity Incentive Plan to
increase the number of options available for grant thereunder to 2,000,000.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
Discretionary authority is hereby granted with respect to such other matters
as may properly come before the meeting.
IMPORTANT: PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. EACH JOINT OWNER SHALL
SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC. SHOULD GIVE FULL TITLE AS SUCH.
IF SIGNOR IS A CORPORATION, PLEASE GIVE FULL CORPORATE NAME BY DULY AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
Dated ______________________________, 2000
__________________________________________
Signature
__________________________________________
Signature if held jointly
THE ABOVE-SIGNED ACKNOWLEDGES RECEIPT OF
THE NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND THE PROXY STATEMENT
FURNISHED THEREWITH.
PLEASE SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
