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Securities and Exchange Commission
Washington, D. C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: October 29, 1997
(Date of earliest event reported): October 23, 1997
HARBINGER CORPORATION
(Exact name of Company as specified in its charter)
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GEORGIA 0-26298 58-1817306
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation or organization)
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1055 LENOX PARK BOULEVARD, ATLANTA, GEORGIA 30319
(Address of principal executive offices) (Zip Code)
(404) 467-3000
(Company's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
Effective October 23, 1997, Harbinger Corporation, a Georgia corporation
(the "Company"), acquired (the "Acquisition") all of the outstanding capital
shares of API Systems, Limited, a company organized under the laws of England,
and its affiliate (together, "Atlas"). The Acquisition was consummated in
accordance with the terms of a Share Purchase Agreement ("Share Purchase
Agreement"), dated as of October 23, 1997, among the Company, Allan Gray, Philip
Bird, Tom Reynolds, C.G. Summers and Lancashire Enterprises Venture Fund
(together, the "Shareholders").
The consideration paid by the Company in connection with the Acquisition
was approximately 311,000 shares of Harbinger common stock. In connection with
the Acquisition, which was accounted for under the pooling-of-interests method
of accounting, the Company expects to take a $3-$5 million charge in the fourth
quarter of 1997 for acquisition and integration related charges.
The total consideration paid in the Acquisition was determined through
arms-length negotiations between representatives of the Company and the
Shareholders. Neither the Company nor any of its affiliates had, nor to the
knowledge of the Company, did any director of officer or any associate of any
such director or officer of the Company have, any material relationship with
Atlas or the Shareholders prior to the Acquisition. The tangible assets acquired
in the Acquisition were used in developing EDI software and the Company intends
to use such assets for substantially the same purpose.
The acquisition of Atlas gives the Company a strong presence in the
EDI/electronic commerce industry throughout the U.K. Atlas, based in Manchester,
England, has an installed base of over 2,500 customers on PC, UNIX, NT and
DEC/VMS platforms. Atlas products are targeted to small and mid-sized
businesses, and are distributed directly and through third party channels in the
U.K., European and other markets around the world. The acquisition of Atlas
provides the Company with an enhanced customer base as well as quality
relationships in key industries including retail, finance, manufacturing and
distribution. Additionally, Atlas provides extensive EDI/electronic commerce
standards support for European and in particular the U.K., theaters.
In connection with the Acquisition, the Company entered into a
Registration Rights Agreement with the Shareholders. A copy of such agreement is
filed as Exhibit 4.1. A copy of the Share Purchase Agreement is filed as Exhibit
2.1. Such agreements are incorporated herein by reference. The Atlas acquisition
was not significant under Rule 3-05 of Regulation S-X as it relates to Item 7 of
this Form 8-K.
Item 5. Other Events.
On October 23, 1997, the Company, announced that it has executed a
definitive Merger Agreement, dated as of October 23, 1997 (the "Merger
Agreement"), in which the Company has agreed to acquire all of the capital stock
of Premenos Technology Corp., a Delaware corporation ("Premenos"). Under the
Merger Agreement, each share of Premenos common stock will be converted into .45
of a share of the Company common stock. As of October 23, 1997, there were
11,784,615 shares of Premenos common stock issued and outstanding. All Premenos
options and warrants will be converted into the Company's options and warrants
with the exercise prices and the number of shares being adjusted in accordance
with the conversion ratio. The transaction is subject to, among other things,
the parties securing necessary regulatory approvals and approval of Harbinger
shareholders and Premenos stockholders. The transaction is currently expected to
close by December 31, 1997. A complete description of the proposed transaction
is contained in the Merger Agreement filed as Exhibit 2.2 and incorporated
herein by reference.
In connection with the transaction, Harbinger entered into an
Irrevocable Proxy Agreement with each of Lew Jenkins and David Hildes. The
agreements provide, among other things, that Harbinger has the right to vote
Messrs. Jenkins and Hildes shares in favor of the Merger Agreement and the
transaction. Messrs. Jenkins and Hildes are each directors and executive
officers of Premenos who collectively own approximately 43% of the outstanding
shares of Premenos Common Stock. The Company has agreed in the agreements to
publicly release a 30-day interim financial statement covering the first full
calendar month of combined operations of the Company and Premenos as promptly as
practicable, but no later than 25 days after the end of such full calendar
month, and to deliver such statement to Messrs. Jenkins and Hildes at least five
days prior to public release. The form of
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agreements executed by each of Messrs. Jenkins and Hildes is filed as Exhibit
99.1, and is incorporated herein by reference.
The Company issued the press releases filed as Exhibits 99.2, 99.3 and
99.4.
Filed herewith as Exhibit 99.5 is the Safe Harbor Compliance Statement
for Forward-Looking Statements of Harbinger Corporation, which supersedes the
Safe Harbor Compliance Statement for Forward-Looking Statements filed as Exhibit
99.1 to the Current Report on Form 8-K dated July 16, 1997.
Item 7. Financial Statements and Exhibits.
c) Exhibits:
2.1 Share Purchase Agreement by and among Harbinger Corporation,
Allan Gray, Philip Bird, Tom Reynolds, C.G. Summers and
Lancashire Enterprises Venture Fund, dated as of October 23,
1997. The Exhibits and Disclosure Schedules, which are
referenced in the table of contents and elsewhere in the Share
Purchase Agreement, are hereby incorporated by reference. Such
Exhibits and Disclosure Schedules have been omitted for purposes
of this filing, but will be furnished supplementally to the
Commission upon request.
2.2 Merger Agreement by and among Harbinger Corporation, Olympic
Subsidiary Corporation and Premenos Technology Corp.,
dated as of October 23, 1997. The Exhibits and Disclosure
Schedules, which are referenced in the table of contents and
elsewhere in the Merger Agreement, are hereby incorporated by
reference. Such Exhibits and Disclosure Schedules have been
omitted for purposes of this filing, but will be furnished
supplementally to the Commission upon request.
4.1 Registration Rights Agreement by and among Harbinger
Corporation, Allan Gray, Philip Bird, Tom Reynolds, C.G.
Summers and Lancashire Enterprises Venture Fund, dated October
23, 1997.
99.1 Form of Irrevocable Proxy Agreement, dated as of October 23,
1997, by and between Harbinger Corporation and each of Lew
Jenkins and David Hildes.
99.2 Text of Press Release of Harbinger Corporation, dated October
23, 1997, relating to proposed merger with Premenos.
99.3 Text of Press Release of Harbinger Corporation, dated October
23, 1997, relating to 1997 third quarter operating results.
99.4 Text of Press Release of Harbinger Corporation,
dated October 23, 1997, relating to acquisition of API Systems,
Ltd.
99.5 Safe Harbor Compliance Statement for Forward-Looking Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HARBINGER CORPORATION
/s/ Joel G. Katz
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JOEL G. KATZ
Chief Financial Officer
(Principal Financial Officer;
Principal Accounting Officer)
Date: October 29, 1997
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EXHIBIT INDEX
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Exhibit Page No.
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2.1 Share Purchase Agreement by and among Harbinger Corporation, Allen Gray,
Philip Bird, Tom Reynolds, C.G. Summers and Lancashire Enterprises Venture
Fund, dated as of October 23, 1997. The Exhibits and Disclosure Schedules,
which are referenced in the table of contents and elsewhere in the Share
Purchase Agreement, are hereby incorporated by reference. Such Exhibits and
Disclosure Schedules have been omitted for purposes of this filing, but will
be furnished supplementally to the Commission upon request.
2.2 Merger Agreement by and among Harbinger Corporation, Olympic Subsidiary
Corporation and Premenos Technology Corp., dated as of October 23, 1997.
The Exhibits and Disclosure Schedules, which are referenced in the table of
contents and elsewhere in the Merger Agreement, are hereby incorporated by
reference. Such Exhibits and Disclosure Schedules have been omitted for
purposes of this filing, but will be furnished supplementally to the
Commission upon request.
4.1 Registration Rights Agreement by and among Harbinger Corporation, Allan
Gray, Philip Bird, Tom Reynolds, C.G. Summers and Lancashire Enterprises
Venture Fund, dated October 23, 1997.
99.1 Form of Irrevocable Proxy Agreement, dated as of October 23, 1997, by and
between Harbinger Corporation and each of Lew Jenkins and David Hildes.
99.2 Text of Press Release of Harbinger Corporation, dated October 23, 1997,
relating to proposed merger with Premenos.
99.3 Text of Press Release of Harbinger Corporation, dated October 23, 1997,
relating to 1997 third quarter operating results.
99.4 Text of Press Release of Harbinger Corporation, dated October 23, 1997,
relating to acquisition of API Systems, Ltd.
99.5 Safe Harbor Compliance Statement for Forward-Looking Statements.
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Exhibit 2.1
EXECUTION COPY
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT, dated as of October 23, 1997 (the
"Agreement"), by and among ALLAN W. GRAY, a resident of Lancashire, England
("Gray"), PHILIP J. BIRD, a resident of Cheshire, England ("Bird"), TOM P.C.
REYNOLDS, a resident of Warrington, England ("Reynolds"), and C.G. SUMMERS, a
resident of Surrey, England ("Summers"), and LANCASHIRE ENTERPRISES VENTURE
FUND, a limited partnership formed under the laws of England and Wales
("Lancashire") (Gray, Bird, Reynolds and Summers are sometimes referred to
herein as the "Management Sellers," and the Management Sellers and Lancashire
are sometimes referred to herein collectively as the "Sellers" and individually
as a "Seller") and HARBINGER CORPORATION, a Georgia corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Sellers own all the issued and outstanding ordinary shares and
cumulative participating preferred ordinary shares (collectively, the "Ordinary
Shares"), and 8% cumulative redeemable preference shares (the "Preference
Shares" and together with the Ordinary Shares, the "Shares"), of API Systems
Limited, a company formed under the laws of England and Wales (Reg. No. 2942785)
("Company"), being all of the outstanding share capital of Company;
WHEREAS, Company is engaged in the business of provision of information
technology worldwide (the "Business");
WHEREAS, Buyer desires to purchase from Sellers and Sellers desire to
sell to Buyer, all of the issued and outstanding Shares upon the terms and
subject to conditions set forth herein (the "Transaction"); and
WHEREAS, the parties desire that the Transaction be accounted for under
the pooling-of-interests method of accounting;
NOW THEREFORE, in consideration of the foregoing, the mutual covenants,
agreements, representation and warranties contained in this Agreement and other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
SALE OF SHARE CAPITAL; CLOSING
Section 1.1. Purchase and Sale. On the basis of the representations,
warranties, covenants and agreements set forth herein, Buyer hereby purchases
from Sellers and Sellers hereby sell, convey and assign to Buyer all of the
Shares, which Shares constitute all of the issued and outstanding share capital
of Company.
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Section 1.2. Purchase Price. In consideration of the sale of the
Shares, and the representations, warranties, covenants and agreements of Sellers
set forth herein, Buyer is paying and will issue to Sellers that number of
shares of the common stock, par value $.0001 per share, of Buyer ("Buyer's
Common Stock"), equal to U.S. $11,725,250 divided by the Average Closing Price.
For purposes of this Agreement, the "Average Closing Price" shall be the
arithmetic average of the closing price per share of Buyer's Common Stock in
U.S. dollars, as reported on the Nasdaq National Market, for each of the twenty
(20) consecutive trading days ending on the trading day immediately prior to the
Closing Date (as hereinafter defined). The shares of Buyer's Common Stock issued
to the Sellers pursuant to this Section 1.2 shall be referred to as the
"Harbinger Shares." Subject to Section 1.3 below, Buyer shall deliver to Sellers
at Closing certificates representing the Harbinger Shares in the amounts and
proportions indicated on Exhibit A hereto, registered in such names and in such
denominations as designated thereon.
Section 1.3. Deposit of Shares in Escrow. Upon issuance of the
certificates representing the Harbinger Shares, Management Sellers shall deliver
into escrow stock certificates representing 10% of the total number of Harbinger
Shares issued to Management Sellers pursuant to the terms of an Escrow Agreement
in the form Exhibit B hereto. The Escrow Agreement sets forth the conditions
under which the Escrow Shares shall be delivered to Sellers or Buyer.
Section 1.4. Closing. The Closing of the purchase and sale of the
Shares (the "Closing") is being held contemporaneously with the execution and
delivery of this Agreement at the offices of the Company, Quay West, Trafford
Wharf Road, Wharfside, Manchester, England M17 1HH, at 11:00 a.m., local time,
on the date hereof, or such other place and such other time as the parties shall
agree. The date of the Closing is referred to as the "Closing Date."
Section 1.5. Further Assurances. Sellers from time to time after the
Closing, at Buyer's request, will execute and acknowledge and deliver to Buyer
such other instruments of conveyance and transfer and will take such other
actions and execute and deliver such other documents, certifications and further
assurances as Buyer may reasonably request in order to vest more effectively in
Buyer, or to put Buyer more fully in possession of, any of the Shares. Each of
the parties hereto will cooperate with the other and execute and deliver to the
other such other instruments and documents and take such other actions as may be
reasonably requested from time to time by any party hereto as necessary to carry
out, evidence and confirm the intended purposes of this Agreement.
Section 1.6. Fractional Shares. No scrip or fractional shares of
Buyer's Common Stock shall be issued in the Transaction. All fractional shares
of Buyer's Common Stock to which a Seller immediately prior to the Closing would
otherwise be entitled pursuant to this Agreement shall be aggregated. If a
fractional share results from such aggregation, a Seller shall be entitled to
receive from Buyer an amount in cash in lieu of such fractional share, based on
the Average Closing Price.
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Section 1.7 Waiver of Preemption. Each of the Sellers hereby
irrevocably waives all and any rights of preemption which he may have under the
Articles of Association of the Company or otherwise.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF
COMPANY AND MANAGEMENT SELLERS
With such exceptions as are set forth in a letter (the "Seller
Disclosure Letter") signed and delivered by Sellers to Buyer immediately prior
to the execution hereof and attached hereto as Exhibit C, each Management Seller
hereby severally represents and warrants to Buyer as follows:
Section 2.1. Organization. Each of Company and the Company Subsidiaries
(as defined in Section 2.5 below) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Company and each of the Company Subsidiaries is duly qualified to transact
business, and is in good standing, as a foreign corporation in each jurisdiction
where the character of its activities requires such qualification, except where
the failure to so qualify would not have a Company Material Adverse Effect (as
defined below). A "Company Material Adverse Effect" means any event, condition
or change which materially and adversely affects or could reasonably be expected
to materially and adversely affect the assets, liabilities, financial results of
operations, financial condition, business or prospects of Company or any Company
Subsidiary. Company has made available to Buyer accurate and complete copies of
the Memorandum and Articles of Incorporation or other governing documents, as
currently in effect, of Company and each of the Company Subsidiaries, and has
made available to Buyer the minute books and stock records of each thereof. The
Seller Disclosure Letter contains a true and correct list of the jurisdictions
in which Company or any of the Company Subsidiaries is qualified to do business
as a foreign corporation. The Company and the Company Subsidiaries have each
complied in all material respects with their respective Memorandum and Articles
of Association.
Section 2.2. Authorization. This Agreement has been duly executed and
delivered by each of the Sellers and constitutes the legal, valid and binding
agreement of each of the Sellers, enforceable against them in accordance with
its terms, subject to applicable bankruptcy, insolvency and other similar laws
affecting the enforceability of creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies.
Section 2.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the transactions
contemplated by this Agreement and the fulfillment of and compliance with the
terms and conditions of this Agreement do not and will not, with the passing of
time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit under, or
permit the acceleration of any obligation under, (i) any term or provision of
the Memorandum and Articles of Incorporation or other governing documents of
Company or any of
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the Company Subsidiaries, (ii) any Company Material Contract (as defined in
Section 2.10 hereof), (iii) any judgment, decree or order of any court or
governmental authority or agency to which any of the Sellers, Company or any of
the Company Subsidiaries is a party or by which any of the Sellers, Company or
any of the Company Subsidiaries or any of their respective properties is bound,
or (iv) any statute, law, regulation or rule applicable to any of the Sellers,
Company or any of the Company Subsidiaries, so as, in the case of Company or the
Company Subsidiaries, to have in the case of subsections (ii) through (iv)
above, a Company Material Adverse Effect. Except for compliance with the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and applicable United Kingdom securities laws, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental agency or public or regulatory unit, agency, body or
authority with respect to Company or any of the Company Subsidiaries is required
in connection with the execution, delivery or performance of this Agreement by
Seller or the consummation of the transactions contemplated by this Agreement by
Sellers, the failure to obtain which would have a Company Material Adverse
Effect.
Section 2.4. Capitalization. The authorized share capital of Company
consists of 70,000 ordinary shares, 30,000 cumulative participating preferred
ordinary shares, and 170,000 8% cumulative redeemable preference shares. At the
date of this Agreement, there were issued and outstanding 70,000 ordinary
shares, 30,000 cumulative participating preferred ordinary shares and 85,000 8%
cumulative redeemable preference shares. At the date of this Agreement, there
were no other shares of share capital of Company authorized. Each share of
Company Shares outstanding at the date of this Agreement is duly authorized,
validly issued, fully paid and nonassessable free of preemptive rights, and is
owned by Sellers. Each Seller owns of record and beneficially the number of
shares of Company Shares issued and outstanding as set opposite the name of such
Seller in the Seller Disclosure Letter, and the Seller Disclosure Letter sets
forth for each Seller the percentage of Company Shares owned by such Seller
(referred to elsewhere herein as such Seller's "Percentage Interest"); such
Seller owns all rights, title and interest in and to such shares, free and clear
of all liens (including those for estate or inheritance taxes), claims, pledges,
options, rights of refusal or similar rights or other transfer restrictions or
adverse claims and charges of any nature whatsoever (including any arising from
existing or threatened litigation, but excluding transfer restrictions that may
arise from applicable securities laws); and such Seller's transfer of his shares
to Buyer pursuant to this Agreement will pass to Buyer all rights, title and
interest to and in such shares free of any lien or any adverse interest, claim
or charge whatsoever. The shares owned by each Seller were obtained by such
Seller in transactions in full compliance with applicable securities laws, and
each Seller has the exclusive right to vote the shares. Except as set forth
above or in the Seller Disclosure Letter, there are no shares of share capital
of Company outstanding, and there are no subscriptions, options, convertible
securities, calls, puts, rights, warrants or other agreements, claims or
commitments of any nature whatsoever obligating Company to purchase, redeem,
issue, transfer, deliver or sell, or cause to be purchased, redeemed, issued,
transferred, delivered or sold, additional shares of the share capital or other
securities of Company or obligating Company to grant, extend or enter into any
such agreement or commitment. No prior offer, issue, redemption, call, purchase,
sale, transfer, negotiation or other transaction of any nature with respect to
the share capital or equity interests of Company, or any corporation or
organization which has been merged into Company,
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has given or may give rise to any valid claim or action by any person which is
enforceable against Company or any of its affiliates and, to the best knowledge
of the Management Sellers, no fact or circumstance exists which could give rise
to any such right, claim or action on behalf of any person.
Section 2.5. Subsidiaries. The Seller Disclosure Letter sets forth a
true and complete list of all (i) corporations or other entities of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are, directly or indirectly, owned by Company, and (ii) partnerships or limited
liability companies in which Company or a Company Subsidiary (as defined below)
is (A) a general or limited partner or member or other owner and (B) entitled to
receive more than 50% of the assets of any such partnership or such limited
liability company on such partnership's or limited liability company's
dissolution (collectively, the "Company Subsidiaries"), the jurisdiction in
which each Company Subsidiary is incorporated or organized and all shares of
share capital or of the ownership interests authorized, issued and outstanding
of each Company Subsidiary. The outstanding shares of share capital or other
equity interest of each Company Subsidiary have been duly authorized and are
validly issued, fully paid and nonassessable. All shares of share capital or
other equity interest of each Company Subsidiary owned by Company or any Company
Subsidiary are set forth in the Seller Disclosure Letter and are owned by
Company, directly or indirectly, free and clear of all liens, encumbrances,
equities or claims. The Seller Disclosure Letter also sets forth a true and
complete list of all corporations, partnerships, limited liability companies,
and other entities in which Company or a Company Subsidiary owns an equity
interest having a value in excess of U.S. $10,000, other than the Company
Subsidiaries or any mutual funds or publicly traded companies. All shares of
share capital or other equity interest of each such entity are set forth in the
Seller Disclosure Letter and are owned by Company or a Company Subsidiary, as
applicable, free and clear of all liens, encumbrances, equities or claims.
Section 2.6. Financial Statements. Sellers have made available to Buyer
(i) the audited consolidated profit and loss account of Company and its
subsidiaries (to the extent that any such subsidiary existed as of such date)
and balance sheets and consolidated balance sheets as of December 31, 1996 and
1995 and the related audited consolidated profit and loss account for the
respective fiscal years then ended, including the notes thereto, examined by and
accompanied by the report of Latham Crossley & Davis, chartered accountants
("Company Accountants"), and (ii) the audited consolidated profit and loss
account of Company and its subsidiaries (to the extent that any such subsidiary
existed as of such date) and balance sheet and consolidated balance sheet (the
"Interim Balance Sheet") as of September 30, 1997 and the related audited
consolidated profit and loss account for the nine month period then ended,
including the notes thereto, examined by and accompanied by the report of KPMG
Peat Marwick LLP, chartered accountants. All of the foregoing financial
statements are collectively referred to as the "Company Financial Statements."
The Company Financial Statements have been prepared from, and are in accordance
with, the books and records of Company and its combined subsidiaries and, as
applicable, give a true and fair view and present fairly the financial position,
results of operations and changes in stockholders' equity of Company and its
combined subsidiaries as of the dates and for the periods indicated, in each
case in conformity with applicable Accounting
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Standards, consistently and reasonably applied throughout the periods covered
thereby. As of the Closing Date, Company shall have no liability or obligation
of any nature whatsoever, whether accrued, absolute, contingent or otherwise,
other than (x) current liabilities and obligations that arise or have arisen in
the ordinary course of business which are recurring in nature and not overdue on
their terms, (y) liabilities and obligations reflected in and adequately
provided for on the Interim Balance Sheet and (z) liabilities and obligations
arising in the ordinary course of business of Company which alone or in the
aggregate would not have a Company Material Adverse Effect. The Interim Balance
Sheet contains all of the assets of the Company necessary to run the Business in
the same manner after the Closing Date as before September 30, 1997. The Seller
Disclosure Letter sets forth a true and complete list of all loss contingencies
(within the meaning of Statement of Financial Accounting Standards No. 5),
except those classified as "remote" (a "Loss Contingency") of Company exceeding
U.S. $10,000 in the case of any single Loss Contingency or U.S. $100,000 in the
case of all Loss Contingencies.
Section 2.7. Absence of Certain Changes.
(a) Since September 30, 1997, there has not been (i) any
change in the assets, liabilities, results of operations, financial condition,
business or prospects of Company and the Company Subsidiaries, taken as a whole,
that has had a Company Material Adverse Effect, (ii) any damage, destruction,
loss or casualty to property or assets of Company or any of the Company
Subsidiaries, whether or not covered by insurance, which property or
assets are material to the operations or business of Company and the Company
Subsidiaries, taken as a whole, that has had a Company Material Adverse Effect,
(iii) any declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) in respect of the share capital of Company,
any redemption or other acquisition by Company of any of the share capital of
Company or any of the Company Subsidiaries or any split, combination or
reclassification of shares of share capital declared or made by Company or (iv)
any agreement to do any of the foregoing. Notwithstanding anything contained in
this Agreement to the contrary, Sellers make no representations or warranties as
to the future income or profitability of Company.
(b) Since September 30, 1997, there have not been (i) any
losses suffered which, in the aggregate, have resulted in a Company Material
Adverse Effect, (ii) except as would not have a Company Material Adverse Effect,
any assets mortgaged, pledged or made subject to any lien, charge or other
encumbrance, (iii) any material liability or obligation (absolute, accrued or
contingent) incurred or any material bad debt, contingency or other reserve
increase suffered, except, in each such case, in the ordinary course of business
and consistent with past practice, (iv) any material claims, liabilities or
obligations (absolute, accrued or contingent) paid, discharged or satisfied,
other than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of claims, liabilities and
obligations reflected or reserved against in the Company Financial Statements or
incurred in the ordinary course of business and consistent with past practice,
(v) any material guaranteed checks, notes or accounts receivable written off as
uncollectible, except write-offs in the ordinary course of business and
consistent with past practice, (vi) any write down (under Statement of
Financial
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Accounting Standards No. 121 or other applicable accounting standards or
otherwise) of the value of any material asset or investment on Company's books
or records, except for depreciation and amortization taken in the ordinary
course of business and consistent with past practice, (vii) any cancellation of
any material debts or waiver of any material claims or rights of substantial
value, or sale, transfer or other disposition of any material properties or
assets (real, personal or mixed, tangible or intangible) of substantial value,
except, in each such case, in transactions in the ordinary course of business
and consistent with past practice, which, in the aggregate, have resulted in a
Company Material Adverse Effect, (viii) any single capital expenditure or
commitment in excess of U.S. $10,000, or aggregate capital expenditures and
commitments in excess of U.S. $25,000 (on a consolidated basis, (ix) any
obligations to pay royalties or license fees in excess of $10,000, (x) any Loss
Contingency or Loss Contingencies of Company which, in the aggregate, have
resulted in a Company Material Adverse Effect, (xi) any material transactions
entered into other than in the ordinary course of business, (xii) any agreements
to do any of the foregoing, or (xiii) any other events, developments or
conditions (including any suit, action, claim, proceeding or investigation) of
any character that have had or are reasonably likely to have a Company Material
Adverse Effect.
Section 2.8. Legal Proceedings. There are no suits, actions, claims,
proceedings or investigations pending, or, to the best knowledge of Sellers,
threatened against, relating to or involving Company or any of the Company
Subsidiaries (or any of its officers or directors) or Sellers before any court,
arbitrator or administrative or governmental body. Neither Company nor any of
the Company Subsidiaries is subject to any judgment, decree, injunction, rule or
order of any court, and, to the best knowledge of Sellers, neither Company nor
any of the Company Subsidiaries is subject to any governmental restriction
applicable to Company or any of the Company Subsidiaries, which is reasonably
likely (i) to have a Company Material Adverse Effect or (ii) to cause a material
limitation on Buyer's ability to operate the business of Company and the Company
Subsidiaries after the Closing.
Section 2.9. Compliance with Law. Each of Company and the Company
Subsidiaries has all material authorizations, approvals, licenses and orders of
and from all governmental and regulatory officers and bodies necessary to carry
on its business as it is currently being conducted, to own or hold under lease
the properties and assets it owns or holds under lease and to perform all of its
obligations under the agreements to which it is a party, and each of Company and
the Company Subsidiaries has been and is in compliance with all applicable laws,
regulations and administrative orders of any country, state or municipality or
of any subdivision of any thereof to which its business and its employment of
labor or its use or occupancy of properties or any part thereof are subject, the
failure to obtain or the violation of which would have a Company Material
Adverse Effect.
Section 2.10. Material Contracts. The Seller Disclosure Letter
contains a list correct in all material respects of the following (the "Company
Material Contracts"):
(a) all bonds, debentures, notes, mortgages, indentures or
guarantees securing indebtedness in excess of U.S. $10,000 individually to which
Company or any of the Company
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Subsidiaries is a party or by which any of their properties or assets (real,
personal or mixed, tangible or intangible) are bound;
(b) all outstanding loans and credit commitments to
Company or any of the Company Subsidiaries covering indebtedness in excess of
U.S. $10,000 individually;
(c) all contracts or agreements which limit or restrict in a
substantial manner (i) Company or the Company Subsidiaries or any of the Sellers
from engaging in any business in any jurisdiction or (ii) others from competing
with Company or the Company Subsidiaries in any jurisdiction, except for
employment contracts between Company or a Company Subsidiary and a current or
former employee of Company or a Company Subsidiary;
(d) all contracts or agreements requiring Company to register
its share capital or securities under any applicable securities law;
(e) all agreements or documentation evidencing currently
outstanding loans or advances in excess of U.S. $10,000 individually made by
Company or any of the Company Subsidiaries to or on behalf of its clients, other
than accounts receivables incurred in the ordinary course of business, and
identification of all bank accounts; and
(f) all existing contracts and commitments (other than (i)
those of the type described in subparagraphs (a), (b), (c), (d) or (e) of this
Section 2.10), (ii) agreements, contracts or commitments pursuant to which
Company or any of the Company Subsidiaries provides goods or services to its
clients, (iii) the Company Benefit Plans (as defined in Section 2.14 hereof) and
(iv) any leases with respect to real or personal property) to which Company or
any of the Company Subsidiaries is a party or by which their properties or
assets may be bound involving an annual commitment or annual payment by any
party thereto of more than U.S. $10,000 individually or which by its terms
requires performance thereunder by Company for more than two years following the
Closing Date. All title deeds, agreements and other documents to which the
Company is a party or under which the Company derives benefit and all other
documents owned by or which ought to be in the possession of the Company are in
its possession and are properly stamped.
True and complete copies of all Company Material Contracts, including
all amendments thereto, have been made available to Buyer. The Company Material
Contracts are valid and enforceable in accordance with their respective terms
with respect to Company and, to the knowledge of Sellers, valid and enforceable
in accordance with their respective terms with respect to any other party
thereto, in each case to the extent material to the business and operations of
Company and the Company Subsidiaries taken as a whole and subject to applicable
bankruptcy, insolvency and other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles and the discretion of
courts in granting equitable remedies. Except for events or occurrences, the
consequences of which, individually or in the aggregate, would not have a
Company Material Adverse Effect, there is not under any of the Company Material
Contracts any existing breach, default or event of default by Company or any of
the Company Subsidiaries or event that with notice or lapse of time or both
would constitute a breach, default or event of default by Company or any of the
Company Subsidiaries, nor do the
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Sellers know of, and neither Company nor any of the Company Subsidiaries has
received notice of, or made a claim with respect to, any breach or default by
any other party thereto. Company is not a party to or subject to (i) any joint
venture contract or arrangement or any other agreement which has involved or is
expected to involve a sharing of profits, (ii) any original equipment
manufacturer ("OEM"), reseller, distribution or equivalent agreement, volume
purchase agreement, corporate end user license, sales or service agreement or
other agreement or contract pursuant to which Company has granted or received
most favored nation pricing provisions or exclusive marketing, reproduction,
publishing, licensing or distribution rights related to any product, group of
products or territory, or (iii) any agreement or contract containing a covenant
or provision purporting to limit Company's freedom to compete or transact
business in any line of business or in any geographic area. Neither Company nor
any Company Subsidiary has any liabilities under that certain Factoring
Agreement with International Factors Limited dated September 29, 1994 or any
related guarantee thereof.
Section 2.11. Company Client Contracts. The Seller Disclosure Letter
sets forth a true and complete list of all agreements, contracts or commitments
pursuant to which Company or any of the Company Subsidiaries provides goods or
services to its clients (i) which produced annual payments in the year ending
December 31, 1996 of at least U.S. $15,000 to Company or a Company Subsidiary or
(ii) from which Seller reasonably expects Company to produce annual payments in
excess of U.S. $15,000 in 1997 (the "Company Client Contracts"). Except as set
forth in the Seller Disclosure Letter, the execution, delivery and performance
of this Agreement by Sellers and the consummation of the transactions
contemplated hereby will not, with the passing of time or the giving of notice
or both, violate or constitute a default or give rise to a termination right
under any Company Client Contract. True and complete copies of all written
Company Client Contracts, including all amendments thereto, have been made
available to Buyer. The Company Client Contracts are valid and enforceable in
accordance with their respective terms with respect to Company or the Company
Subsidiaries, as applicable, and, to the knowledge of Sellers, are valid and
enforceable in accordance with their respective terms with respect to any other
party thereto, in each case except as would not have a Company Material Adverse
Effect. There is no existing breach, default or event of default by Company or
any of the Company Subsidiaries, or event that solely as a result of notice or
lapse of time or both would constitute a breach, default or event of default by
Company or any of the Company Subsidiaries under the Company Client Contracts
the consequences of which, individually or in the aggregate, would have a
Company Material Adverse Effect. To the best knowledge of Sellers, neither
Company nor any of the Company Subsidiaries has received notice of, or made a
claim with respect to, any breach or default by any other party.
Section 2.12. Tax Returns; Taxes. Each of Company and the Company
Subsidiaries has duly filed all tax returns, information returns and
governmental reports of every nature required by any Governmental Authority (as
hereinafter defined) required to be filed by it (including employment and
withholding tax returns) (collectively, "Governmental Returns") and has duly
paid or made adequate provision for the payment of all taxes which are due and
payable pursuant to such returns or pursuant to any assessment with respect to
taxes in such jurisdictions, whether or not in connection with such returns,
except as set forth in the Seller Disclosure Letter. The liability for taxes
reflected in the Interim Balance Sheet is sufficient for the payment of all
unpaid
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taxes, whether or not disputed, that are accrued or applicable for the period
ended December 31, 1996 and for all years and periods ended prior thereto. Since
the period ended December 31, 1996 neither Company nor any Company Subsidiary
has entered into any transaction which has given rise or will give rise to a
liability to tax upon it (or which would have done so or would or might do so
but for the availability of any relief, allowance, deduction or credit) other
than corporation tax on actual income (and not chargeable gains or deemed
income) of the Company or a Company Subsidiary arising from transactions entered
into in the ordinary course of business. All deficiencies asserted as a result
of any examinations by any Governmental Authority have been paid, fully settled
or adequately provided for in the Interim Balance Sheet. There are no pending
claims asserted for taxes of Company or any Company Subsidiary or outstanding
agreements or waivers extending the statutory period of limitation applicable to
any tax return of Company or any Company Subsidiary for any period. Company and
each of the Company Subsidiaries have made all estimated income tax deposits and
all other required tax payments or deposits and has complied for all prior
periods in all material respects with the tax withholding provisions of all
applicable laws. Company and each of the Company Subsidiaries have made
available to Buyer true, complete and correct copies of their income tax returns
filed with any Governmental Authority for the last three taxable years and made
available such other tax returns requested by Buyer. For purposes of this
Agreement, the term "tax" shall include all forms of taxation, duties, imposts,
levies and rates whenever imposed and whether of the United Kingdom or elsewhere
and in particular (but without prejudice to the generality of the foregoing)
includes income tax, withholding taxes, corporation tax, capital gains tax,
inheritance tax, value added tax, customs duties, excise duties, betterment
levy, development land tax, stamp duty, stamp duty reserve tax, capital duty,
general and water rates, community charge, national insurance contributions,
social security or other similar contributions and generally any other taxes,
duties, imposts, levies or other amounts (whether of a like nature or not) and
any interest, penalty or fine in connection therewith. The term "Governmental
Authority" shall mean any and all foreign, federal, state or local government,
governmental institutions, public authorities and governmental entities of any
nature whatsoever, and any subdivisions or instrumentalities thereof, including,
but not limited to, departments, boards, bureaus, commissions, agencies, courts,
administrations and panels, and any divisions or instrumentalities thereof,
whether permanent or ad hoc and whether or hereafter constituted and/or
existing. Neither the Company nor any Company Subsidiary has since December 31,
1996, knowingly engaged in or been a party to any scheme or arrangement of which
the main purpose or one of the main purposes was the avoidance of or a reduction
in liability to taxes.
Section 2.13. Officers, Directors and Employees. The Seller Disclosure
Letter contains a true and complete list of all of the officers and directors
(including shadow or alternate directors) of Company and each Company
Subsidiary, specifying their office and annual rate of compensation, and a true
and complete list of all of the employees of Company and each Company Subsidiary
as of the date hereof with whom Company or a Company Subsidiary, as applicable,
has a written employment agreement or, to the best knowledge of Sellers, to whom
Company or a Company Subsidiary, as applicable, has made verbal commitments
involving material terms which are binding on it and that involve annual
compensation to such employees individually of at least U.S. $30,000 (including
any estimated bonuses payable thereto).
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Section 2.14. Employee Benefit Plans.
(a) Definition of Benefit Plans. For purposes of this Section
2.14, the term "Company Benefit Plan" means any plan, program, arrangement,
fund, policy, practice or contract which, through which or under which Company
or any Company Subsidiary provides benefits or compensation to or on behalf of
employees or former employees of Company or any Company Subsidiary, whether
formal or informal, whether or not written, including but not limited to the
following:
(i) Arrangements - any bonus, incentive
compensation, stock option, deferred compensation, commission
severance pay, golden parachute or other compensation plan or
rabbi trust ("Specified Arrangements");
(ii) Employee Benefit Plans - any employee benefit
plan, including, but not limited to, any defined benefit plan,
profit sharing plan, pension plan, savings or thrift plan, or
any plan, fund, program, arrangement or practice providing for
medical (including post-retirement medical), hospitalization,
accident, sickness, disability, or life insurance benefits
("Employee Benefit Plans"); and
(iii) Other Employee Fringe Benefits - any stock
purchase, vacation, scholarship, sick days, day care, prepaid
legal services, dependent care or other fringe benefits plans,
programs, arrangements, contracts or practices ("Fringe
Benefit Plans").
(b) Identification of Benefits Plans. Except for Company
Benefit Plans which have been terminated and with respect to which neither
Company nor any Company Subsidiary has any current financial, administrative or
other liability, obligation or responsibility, Company does not maintain, nor
has it at any time established or maintained, nor has it at any time been
obligated to make, or otherwise made, contributions to or under or otherwise
participated in any Company Benefit Plan.
(c) Compliance. Each Company Benefit Plan maintained by
Company or a Company Subsidiary has been maintained, by its terms and in
operation, in all material respects in accordance with all applicable laws,
rules or regulations of any Governmental Authority. Further, there has been no
failure to comply with applicable laws or other requirements concerning the
filing of reports, documents and notices with the any Governmental Authority or
the furnishing of such documents to participants or beneficiaries that could
subject any Company Benefit Plan, Company or any Company Subsidiary to any
material civil or criminal sanction.
(d) Post-Retirement Medical Benefits. Neither Company nor any
Company Subsidiary maintains, nor has at any time established or maintained, nor
has at any time been obligated to make, or made, contributions to or under any
plan which provides post-retirement medical or health benefits with respect to
employees of Company or any Company. There is no lien upon any property of
Company or any Company Subsidiary outstanding in favor of any
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Company Benefit Plan. No assets of Company or any Company Subsidiary have been
provided as security for any Company Benefit Plan.
(e) Documentation. Company has made available to Buyer a true
and complete copy of the following documents, if applicable, with respect to
each Company Benefit Plan identified in Seller Disclosure Letter: (i) all
documents, including any insurance contracts and trust agreements, setting forth
the terms of Company Benefit Plan, or if there are no such documents evidencing
Company Benefit Plan, a full description of Company Benefit Plan, (ii) any
summary of plan provisions provided to participants or beneficiaries for each
such Company Benefit Plan, (iii) any annual reports filed with any Governmental
Authority for the most recent three plan years and most recent financial
statements or periodic accounting or related plan assets with respect to each
Company Benefit Plan, (iv) the most recent favorable determination, notification
letter, opinion or ruling from any Governmental Authority for each Company
Benefit Plan, the assets of which are held in trust, to the effect that such
trust is exempt from federal income tax, and any outstanding request for a
determination letter and (v) each opinion or ruling from any Governmental
Authority with respect to any such Company Benefit Plan.
(f) Qualified Status. Each Company Benefit Plan that is
funded through a trust or insurance contract has satisfied in all material
respects, by its terms and in its operation, all applicable requirements for an
exemption from federal income taxation under applicable law. Except for the
plans identified as qualified plans in the Seller Disclosure Letter (the
"Qualified Plans") neither Company nor any Company Subsidiary maintains or
previously maintained a Company Benefit Plan which meets or was intended to meet
the requirements of exemption from taxation pursuant to applicable law. Except
as would not have a Company Material Adverse Effect, any determination, opinion
or notification letter issued by any Governmental Authority to the effect that
the Qualified Plans qualify under applicable law for exemption from taxation
remains in effect and has not been revoked. Each of the Qualified Plans
currently complies in form in all material respects with the requirements for
exemption from taxation under applicable law, other than changes required by
statutes, regulations and rulings for which amendments are not yet required.
Each of the Qualified Plans has been administered according to its terms (except
for those terms which are inconsistent with the changes required by statutes,
regulations, and rulings for which changes are not yet required to be made, in
which case the Qualified Plans have been administered in accordance with the
provisions of those statutes, regulations and rulings) and in accordance with
the requirements of applicable law. The Qualified Plans have been tested for
compliance with, and in all material respects have satisfied the requirements
applicable law for qualification for exemption from taxation, if applicable, for
each plan year within the time periods permitted by law.
(g) Legal Actions. Except as would not have a Company
Material Adverse Effect, there are no actions, audits, suits or claims known to
Company which are pending or, to the knowledge of Sellers, threatened against
any Company Benefit Plan, any fiduciary of any of the Company Benefit Plans with
respect to the Company Benefit Plans or against the assets of any of the Company
Benefit Plans, except claims for benefits made in the ordinary course of the
operation of such plans.
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(h) Funding. Company and each Company Subsidiary has made in
all material respects full and timely payment of all amounts required to be
contributed under the terms of each Company Benefit Plan and applicable law or
required to be paid as expenses under such Company Benefit Plan and no excise
taxes are assessable as a result of any nondeductible or other contributions
made or not made to a Company Benefit Plan. The assets of all Company Benefit
Plans which are required under applicable laws to be held in trust are in fact
held in trust, and the assets of each such Company Benefit Plan equal or exceed
the liabilities of each such plan. The liabilities of each other plan are in all
material respects properly and accurately reported on the financial statements
and records of Company. The assets of each Company Benefit Plan are reported at
their fair market value on the books and records of each plan.
(j) Liabilities. Neither Company nor any Company Subsidiary
is subject to any material liability, tax or penalty whatsoever to any person
whomsoever as a result of Company's or any Company Subsidiary's engaging in a
prohibited transaction under applicable law governing the Company Benefit Plan,
and Company has no knowledge of any circumstances which reasonably might result
in any material liability, tax or penalty whatsoever as a result or a breach of
fiduciary duty thereunder.
(k) No Acceleration of Liability Under Benefit Plans. The
consummation of the transactions contemplated hereby will not accelerate or
increase any liability under any Company Benefit Plan because of an acceleration
or increase of any of the rights or benefits to which employees of Company or
any Company affiliate may be entitled thereunder.
Section 2.15. Employment Taxes. All amounts for payment to the Inland
Revenue, Customs & Excise in respect of income tax deductible prior to Closing
under Schedule E by virtue of the P.A.Y.E. regulations for the time being in
force and all National Insurance Contributions (both employer's and employee's)
due in respect of Company's employees as at Closing will have been duly paid.
The total liability of Company for all Income Tax (P.A.Y.E.) and National
Insurance as at September 30, 1997 did not exceed (pound)16,000. All contracts
of service with Company's employees may be terminated by not more than three
months' notice without giving rise to any claim for damages or compensation
(other than a statutory redundancy payment or statutory compensation for unfair
dismissal). No moneys or benefits other than in respect of contractual
emoluments are payable to any of Company's employees and Company is not under
any present, future of contingent liability to pay compensation for loss of
office of employment to any ex-officer or ex-employee of Company and no payments
are due under the Employment Protection (Consolidation) Act 1978. Neither
Company nor any Company Subsidiary has any liabilities outstanding under the
Transfer of Undertakings (Protection of Employment) Regulations of 1981.
Section 2.16. Labor Relations. Company and each Company Subsidiary has
in relation to each of its employees (and so far as relevant to each of its
former employees) complied with: (i) all obligations imposed on it by all
statutes and regulations relevant to the relations between it and its employees
or any trade union and has maintained current adequate and suitable records
regarding the service of each of its employees; (ii) all collective agreements
and customs and practices for the time dealing with such relations or the
conditions of service of its employees;
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and (iii) all relevant orders and awards made under any relevant statute,
regulation or code of conduct and practice affecting the conditions of service
of its employees. Company is under no contractual or other obligation to make an
increase in the rates of remuneration of or to make any bonus or incentive or
other similar payments to any of its employees at any future date. Company is
not involved in any industrial or trade disputes or any dispute or negotiation
regarding a claim of material importance with any trade union or association of
trade unions or organization or body of employees. Company has complied with all
recommendations made by the Advisory Conciliation and Arbitration Service and
with all awards and declarations made by the Central Arbitration Committee. Each
of Company and the Company Subsidiaries is in compliance with all national and
local laws and regulations respecting employment and employment practices, terms
and conditions of employment, wages and hours, and is not engaged in any unfair
labor or unlawful employment practice. Except as would not result in a Company
Material Adverse Effect, individually or in the aggregate, there is no (i)
unlawful employment practice discrimination charge involving Company or any
Company Subsidiary pending before any Governmental Authority; (ii) unfair labor
practice charge or complaint against Company or any Company Subsidiary pending
before any Governmental Authority; (iii) labor strike, dispute, slowdown or
stoppage actually pending or, to the best knowledge of Sellers, threatened
against or involving or affecting Company or any Company Subsidiary; (iv)
grievance or arbitration proceeding pending against Company or any Company
Subsidiary and no written claim therefor exists; or (v) collective bargaining
agreement binding on Company or any Company Subsidiary.
Section 2.17. Insurance. Each of Company and the Company Subsidiaries
has provided to Buyer a true and complete list of its current insurance
coverages, including names of carriers, amounts of coverage and premiums
therefor. Sellers believe that each of Company and the Company Subsidiaries has
been and is insured with respect to its properties and the conduct of its
business in such amounts and against such risks as are reasonable in relation to
its business. Company is not in default under any of its insurance policies or
insurance policies under which it is covered, there are currently no claims
pending or asserted under any of these policies relating to the products or
services of Company, and Company has not been refused any insurance coverage.
Sellers have made available to Buyer true and complete copies of all insurance
policies covering each of Company and the Company Subsidiaries, their
properties, assets, employees or operations.
Section 2.18. Title to Properties and Related Matters.
(a) Each of Company and the Company Subsidiaries has good and
marketable title to or marketable leasehold interests in its properties
reflected in the Interim Balance Sheet or acquired after the date thereof but
before the Closing Date (other than properties sold or otherwise disposed of in
the ordinary course of business), and all of such properties are held free and
clear of all title defects, liens, encumbrances and restrictions, except, with
respect to all such properties, (a) mortgages and liens securing debt reflected
as liabilities on the Interim Balance Sheet and (b) (i) liens for current taxes
and assessments not in default, (ii) mechanics', carriers', workmen's,
repairmen's, statutory or common law liens either not delinquent or being
contested in good faith, and (iii) liens, mortgages, encumbrances, covenants,
rights of way, building or use
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<PAGE> 15
restrictions, easements, exceptions, variances, reservations and other matters
or limitations of any kind, if any, which either individually or in the
aggregate do not have a Company Material Adverse Effect. Since December 31,
1996, neither Company nor any Company Subsidiary has granted any security
interests or other liens upon or factored the accounts receivable of Company or
any Company Subsidiary. There are no leasehold properties in respect of which
Company or any Company Subsidiary has a contingent liability as original or
intermediate tenant.
(b) The Seller Disclosure Letter sets forth a true and
complete list of all leases and agreements of Company or any Company Subsidiary
granting possession of or rights to real or personal property with a value of at
least U.S. $25,000, or in the case of real property, which provide for annual
lease payments in excess of U.S. $25,000 (the "Scheduled Leases"). All such
Scheduled Leases are in full force and effect and constitute the legal, valid,
binding and enforceable obligations of Company or a Company Subsidiary, as
applicable, and are legal, valid, binding and, to the knowledge of Sellers,
enforceable in accordance with their respective terms with respect to each other
party thereto, in each case to the extent material to the business and
operations of Company and the Company Subsidiaries taken as a whole and subject
in each case to applicable bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies. Except
as would not have a Company Material Adverse Effect, each of Company and the
Company Subsidiaries has physical possession of all equipment and other assets
which are covered by Scheduled Leases. Except as would not have a Company
Material Adverse Effect, there are no existing defaults of Company or any
Company Subsidiary with respect to such Scheduled Leases or, to the best
knowledge of Sellers, of any of the other parties thereto (or events or
conditions which, with notice or lapse of time, or both, would constitute a
default).
Section 2.19. Environmental Matters. To the best knowledge of Sellers,
each of Company and the Company Subsidiaries is in compliance in all material
respects with all statutes, regulations and ordinances relating to the
protection of human health and the environment. There has been no release by
Company or any Company Subsidiary or, to the actual knowledge of Sellers, by any
other person of a hazardous substance into the environment at any property owned
or leased by Company or any Company Subsidiary (the "Premises") including,
without limitation, any such release in the soil or groundwater underlying the
Premises. To the actual knowledge of and without any independent investigation
by Sellers, there is no asbestos, polychlorinated biphenyls or underground
storage tanks located on the Premises and there have been no releases of
asbestos, polychlorinated biphenyls or materials stored in underground storage
tanks, including, without limitation, petroleum or petroleum-based materials.
Except as would not have a Company Material Adverse Effect, neither Company nor
any Company Subsidiary has received notice of any violation of any environmental
statute or regulation nor has it been advised of any claim or liability pursuant
to any environmental statute or regulation brought by any governmental agency or
private party (in each case, an "Environmental Notice").
Section 2.20. Patents, Trademarks, Trade Names. The Seller Disclosure
Letter sets forth a true and complete list of (i) all trademarks, trade names
(including all national and state
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registration pertaining thereto) and copyrights owned by Company or any Company
Subsidiary (collectively, the "Proprietary Intellectual Property") and (ii) all
patents, trademarks, trade names, copyrights, technology and processes used by
Company or any Company Subsidiary in their businesses which are material to
their businesses and are used pursuant to a license or other right granted by a
third party (collectively, the "Licensed Intellectual Property", and together
with the Proprietary Intellectual Property referred to as "Intellectual
Property"). A true and complete list of all such licenses and agreements with
respect to Licensed Intellectual Property is set forth in the Seller Disclosure
Letter. To the best knowledge of Sellers, each of the national, state and other
governmental registrations with any country pertaining to the Proprietary
Intellectual Property is valid and in full force and effect. Company or a
Company Subsidiary owns, or has the right to use pursuant to valid and effective
agreements, all Intellectual Property, and the consummation of the transactions
contemplated hereby will not materially adversely alter or impair any such
rights. No claims are pending against Company or a Company Subsidiary, and
Sellers are not aware of any factual basis for such a claim, by any person with
respect to the use of any Intellectual Property or challenging or questioning
the validity or effectiveness of any license or agreement relating to the same
that would be likely to result in a Company Material Adverse Effect; and to the
best of the Management Sellers' knowledge, information and belief, the current
use by Company or a Company Subsidiary of the Intellectual Property does not in
any material respect infringe upon the rights of any third party, including but
not limited to any copyright, patent, trade secret, trademark, service mark,
trade name, firm name, logo, trade dress, mask work, moral right, other
intellectual property right, right of privacy or right in personal data of any
person. The Seller Disclosure Letter sets forth a list of all jurisdictions in
which Company or a Company Subsidiary is operating under a trade name, and each
jurisdiction in which any such trade name is registered. Sellers are not aware
of any potentially interfering patent or patent application of any third party
which could reasonably be expected to interfere with the Company's intellectual
property rights.
Section 2.21. Company Computer Software and Hardware.
(a) The Seller Disclosure Letter sets forth a true and
complete list of: (i) all software and associated documentation owned by Company
material to the business of Company, other than custom-developed software
developed for and assigned to a Company customer (the "Company Proprietary
Software"); (ii) all software (other than the Company Proprietary Software and
"shrink-wrap" software) used in connection with the business of Company (the
"Company Licensed Software" and together with the Company Proprietary Software,
the "Company Software"). Company is in possession of all technical and
descriptive materials to run its business in accordance with its historical
practices, except as would not have a Company Material Adverse Effect. The
Company Proprietary Software consists of: (i) source and object code embodied in
magnetic media; and (ii) all development and procedural tools, documentation,
and manuals necessary to maintain, enhance, develop derivative works, support
and service the Company Proprietary Software, including licenses to use
compilers, assemblers, libraries and other aids. No parties other than Company
possess any current or contingent rights to any source code for the Company
Proprietary Software.
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<PAGE> 17
(b) Company has a valid right, title and interest in and to
all intellectual property rights in the Company Proprietary Software, including
all copyrights (registered and unregistered), trade secrets, and proprietary and
confidential information rights therein. Company has developed the Company
Proprietary Software entirely through its own efforts for its own account or has
acquired prior to the date hereof valid right, title and interest in the Company
Proprietary Software and the Company Proprietary Software is free and clear of
all liens, claims and encumbrances. The Seller Disclosure Letter lists all
parties other than employees of Company who have created any portion of, or
otherwise have any rights in or to, the Company Software. Company has secured
from all parties who have created any portion of, or otherwise have any rights
in or to, the Company Proprietary Software valid and enforceable written
assignments of any such work or other rights to Company and has provided true
and complete copies of such assignments to Buyer. The use of the Company
Licensed Software and the use and distribution of the Company Proprietary
Software does not breach any terms of any contract between Company and any third
party. To the best knowledge of Seller, Company has been granted under the
license agreements relating to the Company Licensed Software (the "Company
License Agreements") valid and subsisting license rights with respect to all
software comprising the Company Licensed Software and such rights may be
exercised in any jurisdiction in which Company currently conducts its business
or could reasonably be expected to conduct its business in the future. Each of
Company and the Company Subsidiaries is in compliance with each of the terms and
conditions of each of the Company License Agreements except to the extent
failure to so comply, individually or in the aggregate, would not have a Company
Material Adverse Effect. To the best knowledge of Sellers, in the case of any
commercially available "shrink-wrap" software programs (such as Lotus 1-2-3),
Company has not made and is not using any unauthorized copies of any such
software programs and, to the best knowledge of Sellers, none of the employees,
agents or representatives of Company have made or are using any such
unauthorized copies, except as would not have a Company Material Adverse Effect.
(c) The Company Proprietary Software and, to the actual
knowledge of Sellers, the Company Licensed Software do not infringe the patent,
copyright, moral rights or trade secret rights or any other intellectual
property or legal right of any third party which may exist anywhere in the
world.
(d) Neither Company nor any of the Company Subsidiaries has
granted rights in the Company Software to any third party except for rights
granted to value added resellers, distributors or customers in the ordinary
course of business pursuant to contracts with customers.
(e) To the best knowledge of Sellers, the Company Software
and the related computer hardware used by Company in its operations (the
"Company Hardware") are adequate in all material respects, when taken together
with the other assets, resources and personnel of Company and the Company
Subsidiaries, to run the business of Company and the Company Subsidiaries in the
same manner as such business has operated since December 31, 1996, except as
would not result in a Company Material Adverse Effect. The Seller Disclosure
Letter contains a summary description of any problems experienced by Company in
the past twelve months with respect to the Company Software or Company Hardware
and the provision of services to
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Company clients which have arisen outside the ordinary course of business and
could result in a Company Material Adverse Effect.
(f) The Company Proprietary Software is "Millennium
Compliant" (defined below). For the purposes of this Agreement "Millennium
Compliant" means:
(i) the functions, calculations, and other computing
processes of the Company Proprietary Software (collectively,
"Processes") perform in a consistent manner regardless of the
date in time on which the Processes are actually performed and
regardless of the date input to the Company Proprietary
Software, whether before, on, or after January 1, 2000 and
whether or not the dates are affected by leap years;
(ii) the Company Proprietary Software accepts,
calculates, compares, sorts, extracts, sequences, and
otherwise processes date inputs and date values, and returns
and displays date values, in a consistent manner regardless of
the dates used, whether before, on, or after January 1, 2000;
(iii) the Company Proprietary Software will function
without interruptions caused by the date in time on which the
Processes are actually performed or by the date input to the
Company Proprietary Software, whether before, on, or after
January 1, 2000;
(iv) the Company Proprietary Software accepts and
responds to two-digit year-date input in a manner that
resolves any ambiguities as to the century in a defined,
predetermined, and appropriate manner; and
(v) the Company Proprietary Software stores and
displays date information in ways that are unambiguous as to
the determination of the century.
(g) The Seller Disclosure Letter includes a true and complete
list and summary of principal terms concerning support and maintenance
agreements relating to the Company Software, including without limitation the
identity of the parties entitled to receive such service or maintenance, the
term of such agreements and any other provisions relating to the termination of
such agreements.
Section 2.22. Transactions with Affiliates. No officer, director or
holder of 5% or more of the outstanding share capital of Company or any Company
Subsidiary, or any person or affiliated group with whom any such stockholder,
officer or director has any direct or indirect relation by blood, marriage or
adoption, or any entity in which any such person, owns (other than through a
publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by all such persons) any beneficial interest in: (i)
any contract, arrangement or understanding or any related series of the same
involving aggregate consideration in excess of U.S. $10,000 with, or relating
to, the business or operations of Company or any Company Subsidiary; (ii) any
loan, arrangement, understanding, agreement or contract or any related series of
the same for or
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<PAGE> 19
relating to indebtedness of Company or a Company Subsidiary in excess of U.S.
$10,000 in the aggregate; or (iii) any property or related group of properties
with an aggregate value of at least U.S. $10,000 (real, personal or mixed),
tangible or intangible, used or currently intended to be used in, the business
or operations of Company or any Company Subsidiary.
Section 2.23. Customers. The Seller Disclosure Letter includes a list
of the top ten customers of Company, plus any other customer or group of related
customers from whom payments were received which equaled or exceeded five
percent (5%) of Company's gross sales for the fiscal years ended 1995 and 1996,
or from whom payments are projected to equal or exceed such percentage for the
current fiscal year (the "Large Customers"). Except as set forth on the Seller
Disclosure Letter, Sellers have no knowledge that any of the Large Customers
intends to terminate or otherwise modify adversely its relationship with Company
or to materially decrease its purchases of goods or services from Company.
Company has maintained its customer lists and related information on a
confidential and proprietary basis and has not granted to any third party any
right to use such customer lists for any purpose unrelated to the business of
Company.
Section 2.24. Brokers, Finders and Investment Bankers. None of the
Sellers, Company or the Company Subsidiaries nor any of their officers,
directors or employees has employed any broker, finder or investment banker or
incurred any liability for any investment banking fees, financial advisory fees,
brokerage fees or finders' fees in connection with the transactions contemplated
hereby, other than Latham Crossley & Davis.
Section 2.25. Disclosure. No representation, warranty or covenant made
by Sellers in this Agreement, the Seller Disclosure Letter or the Exhibits
attached hereto contains an untrue statement of a material fact or omits to
state a material fact required to be stated herein or therein or necessary to
make the statements contained herein or therein not misleading.
Section 2.26. Requirements of Securities Laws.
(a) Offshore Transaction.
(i) At the time the discussions regarding the
acquisition of Harbinger Shares originated,
Seller was outside the United States;
(ii) Seller is not a citizen of the United States;
(iii) Seller is not a U.S. person nor is the Seller
acquiring the Harbinger Shares for the
benefit of a U.S. person. The term "U.S.
Person," as defined in Regulation S, means:
(A) any natural person resident in the United
States;
(B) any partnership or corporation organized or
incorporated under the laws of the United States;
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<PAGE> 20
(C) any estate of which any executor or
administrator is a U.S. person, unless an executor or
administrator who is not a U.S. person has sole or
shared investment discretion with respect to the assets
of the estate and the estate is governed by foreign law;
(D) any trust of which any trustee is a U.S.
person, unless a professional fiduciary (trustee) who is
not a U.S. person has sole or shared investment
discretion with respect the assets of the trust and no
trust beneficiary (and no trust settlor if a revocable
trust) is a U.S. person;
(E) any agency or branch of a foreign entity
located in the United States;
(F) any non-discretionary account or similar
account (other than an estate or trust) held by a dealer
or other fiduciary for the benefit or account of a U.S.
person;
(G) any discretionary account or similar
account (other than an estate or trust) held by a dealer
or other fiduciary organized, incorporated or (if an
individual) resident in the United States; and
(H) any partnership or corporation if:
(1) organized or incorporated under
the laws of any foreign jurisdiction; and
(2) formed by a U.S. person
principally for the purpose of investing in
Harbinger Shares not registered under the
Securities Act, unless it is organized or
incorporated, and owned, by accredited
investors (as defined in Rule 501(a) under the
Securities Act) who are not natural persons,
estates or trusts;
With respect to any agencies or branches of U.S. persons
located outside the United States for valid business reasons and
engaged in the insurance or banking business, and subject to
substantive insurance or banking regulation (as applicable) in the
jurisdiction where located, the agency or branch is not considered to
be a U.S. person.
(b) Investment Representations. Seller is purchasing the
Harbinger Shares for Seller's own account and for investment purposes
and not with the view towards distribution. Seller does not have any
contract, understanding or arrangement with any person to sell,
transfer or grant participation to such person or any third person with
respect to the Harbinger Shares.
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<PAGE> 21
(c) Restrictions on Harbinger Shares.
(i) Seller understands that the Harbinger Shares have
not been registered under the Securities Act, any state
securities law or the laws of any foreign jurisdiction;
(ii) Seller understands that the Harbinger Shares are
being offered and sold to Seller in reliance on the Regulation
S safe harbor from the registration requirements of the
Securities Act and on the exemptions contained in Section 4(2)
of the Securities Act and Rule 506 promulgated thereunder, and
that Buyer is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of Seller set forth herein in order to
determine the applicability of such safe harbor and exemptions
and the suitability of Seller to acquire the Harbinger Shares;
(iii) Seller represents and warrants to Buyer that
Seller is an "accredited investor" as that term is defined in
Rule 501(a) of the Securities Act. Sellers understand that,
except as set forth in the Registration Rights Agreement (as
defined in Section 6.1(j) hereof), Buyer is under no
obligation to file a registration statement under the
Securities Act covering the Harbinger Shares or to take any
other action to enable Sellers to transfer or otherwise
dispose of the Harbinger Shares. Sellers represent that they
have consulted with counsel in regard to the Securities Act
and that they are fully familiar with the circumstances under
which they are required to hold the Harbinger Shares and the
limitations upon the transfer or other disposition thereof;
(iv) Seller agrees that from the date hereof until
the forty-first (41st) day after the issuance to Seller of the
Harbinger Shares pursuant to Regulation S (the "Restrictive
Period"), the Seller, or any successor, or any Professional
(as defined in Section 2.26(c)(v) hereof) (except for sales of
any Harbinger Shares registered under the Securities Act or
otherwise exempt from such registration) (a) will not sell any
of the Harbinger Shares to a U.S. Person or for the account or
benefit of a U.S. Person or anyone believed to be a U.S.
Person, (b) will not engage in any efforts to sell the
Harbinger Shares in the United States, and (c) will send to a
Professional acting as agent or principal, a confirmation or
other notice stating that the Professional is subject to the
same restrictions on transfer to U.S. Persons or for the
account of U.S. Persons during the Restrictive Period as
provided herein. Buyer will not honor or register and will not
be obligated to honor or register any transfer in violation of
these provisions; to assure full compliance with the
restrictions placed on the resale of Harbinger Shares offered
pursuant to Regulation S, Buyer shall place on the
certificates representing the Harbinger Shares the following
restrictive legend:
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any state, and
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<PAGE> 22
such shares may not be sold, transferred, pledged or
hypothecated unless (1) covered by an effective registration
statement under the Securities Act of 1933; or (2) in
accordance with some other transaction which is exempt from
the registration requirements of such act. Furthermore, the
shares evidenced by this certificate have been offered and
sold in reliance on the exemption from registration provided
by Regulation S and may not be sold, transferred, pledged or
hypothecated to any U.S. Person (as defined therein) except as
permitted by Regulation S. The shares represented by this
certificate were issued pursuant to a business combination
that is accounted for as a "pooling of interest" and may not
be sold, nor may the owner thereof reduce his risk relative
thereto in any way (except as permitted by SEC Staff
Accounting Bulletin No. 76), until such time as Harbinger
Corporation has published financial results covering at least
30 days of combined operations after the effective date of the
event through which the business combination was effected.
(v) A "Professional" is a "distributor" as defined in
Rule 902(c) under the Securities Act (generally any
underwriter, or other person, who participates, pursuant to a
contractual arrangement, in the distribution of the Harbinger
Shares); a dealer as defined in Section 2(12) of the
Securities Exchange Act of 1934, as amended (encompassing
those who engage in the business of trading or dealing in
Harbinger Shares as agent, broker, or principal); or a person
receiving a selling concession, fee or other remuneration in
respect of the Harbinger Shares sold.
(d) Access to Information. Seller has had access to all
material and relevant information necessary to enable Seller to make an
informed investment decision. All data requested by Seller from Buyer
or its representatives concerning the business and financial condition
of Buyer and the terms and conditions of the offering has been
furnished to Seller's satisfaction. Seller has had the opportunity to
ask questions and receive answers from Buyer concerning the terms and
conditions of this Agreement and the Harbinger Shares, and to obtain
from Buyer any additional information which Buyer possesses or may
obtain without unreasonable effort or expense. Seller understands that
there are numerous and substantial risks associated with the purchase
of the Harbinger Shares which could result in a total loss of the
Seller's investment.
(e) Understanding of Investment Risks. Seller understands
that realization of the objectives of Buyer is subject to significant
economic and business risks.
(f) No Government Recommendation or Approval. Seller
understands that no Federal, State or foreign government agency has
passed on or made any recommendation or endorsement of the Harbinger
Shares.
(g) Resales of Harbinger Shares. All subsequent offers and
sales of the Harbinger Shares shall be made in compliance with
Regulation S, pursuant to registration
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<PAGE> 23
of the Harbinger Shares under the Securities Act or pursuant to another
exemption from such registration.
(h) Reliance On Representations. Seller understands that the
issuance of the Harbinger Shares to Sellers pursuant to this Agreement
is not being registered under the Securities Act. Buyer is relying on
the rules governing offers and sales made outside the United States
pursuant to Regulation S and Seller's representations hereunder.
Section 2.27. Government Grants.
The Seller Disclosure Letter contains full details of all grants
subsidies or financial assistance applied for or received by the Company or any
Company Subsidiary from any Governmental Authority or the European Community.
Neither the Company nor any Company Subsidiary has done or omitted to do any act
or thing which could result in all or part of any investment grant, employment
subsidy or other similar payment made or due to be made to it becoming repayable
or being forfeited or withheld in whole or in part and the signature or closing
of this Agreement will not have that result.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF LANCASHIRE
With such exceptions as are set forth in a letter (the "Lancashire
Disclosure Letter") signed and delivered by Lancashire to Buyer immediately
prior to the execution hereof and attached hereto as Exhibit D, Lancashire
hereby represents and warrants to Buyer as follows:
Section 3.1. Organization. Lancashire is a limited partnership
registered under the Limited Partnership Act of 1907, is duly organized and
validly existing under such act and the other laws of the jurisdiction of its
formation, and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted.
Section 3.2. Authorization. Lancashire has power and authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Lancashire and the performance by Lancashire
of its obligations hereunder and the consummation of the transactions provided
for herein have been duly and validly authorized by all necessary action on the
part of Lancashire. This Agreement has been duly executed and delivered by
Lancashire and constitutes the legal, valid and binding agreement of Lancashire,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency and other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles and the discretion of
courts in granting equitable remedies.
Section 3.3. Ownership of Shares. Lancashire owns of record and
beneficially the number of shares of Company Shares set opposite Lancashire's
name in the Seller Disclosure Letter; Lancashire owns all rights, title and
interest in and to such shares, free and clear of all liens (including those for
estate or inheritance taxes), claims, pledges, options, rights of refusal or
similar rights or other transfer restrictions or adverse claims and charges of
any nature
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<PAGE> 24
whatsoever (including any arising from existing or threatened litigation, but
excluding transfer restrictions that may arise from applicable securities laws);
and Lancashire's transfer of its shares to Buyer pursuant to this Agreement will
pass to Buyer all rights, title and interest to and in such shares free of any
lien or any adverse interest, claim or charge whatsoever. Such shares were
obtained by Lancashire in transactions in full compliance with applicable
securities laws, and Lancashire has the exclusive right to vote its shares.
Section 3.4. No Governmental Consents Required. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
governmental authority on the part of Lancashire is required in connection with
its execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 3.5. Requirements of Securities Laws.
(a) Offshore Transaction.
(i) At the time the discussions regarding the
acquisition of Harbinger Shares originated, Lancashire was
outside the United States;
(ii) Lancashire is not a citizen of the United
States;
(iii) Lancashire is not a U.S. person nor is the
Lancashire acquiring the Harbinger Shares for the benefit of
a U.S. person. The term "U.S. Person," as defined in
Regulation S, means:
(A) any natural person resident in the United
States;
(B) any partnership or corporation organized or
incorporated under the laws of the United States;
(C) any estate of which any executor or
administrator is a U.S. person, unless an executor or
administrator who is not a U.S. person has sole or
shared investment discretion with respect to the assets
of the estate and the estate is governed by foreign law;
(D) any trust of which any trustee is a U.S.
person, unless a professional fiduciary (trustee) who is
not a U.S. person has sole or shared investment
discretion with respect the assets of the trust and no
trust beneficiary (and no trust settlor if a revocable
trust) is a U.S. person;
(E) any agency or branch of a foreign entity
located in the United States;
(F) any non-discretionary account or similar
account (other than an estate or trust) held by a dealer
or other fiduciary for the benefit or account of a U.S.
person;
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<PAGE> 25
(G) any discretionary account or similar
account (other than an estate or trust) held by a dealer
or other fiduciary organized, incorporated or (if an
individual) resident in the United States; and
(H) any partnership or corporation if:
(1) organized or incorporated under
the laws of any foreign jurisdiction; and
(2) formed by a U.S. person
principally for the purpose of investing in
Harbinger Shares not registered under the
Securities Act, unless it is organized or
incorporated, and owned, by accredited
investors (as defined in Rule 501(a) under
the Securities Act) who are not natural
persons, estates or trusts;
With respect to any agencies or branches of U.S.
persons located outside the United States for valid business reasons
and engaged in the insurance or banking business, and subject to
substantive insurance or banking regulation (as applicable) in the
jurisdiction where located, the agency or branch is not considered to
be a U.S. person.
(b) Investment Representations. Lancashire is purchasing the
Harbinger Shares for Lancashire's own account and for investment
purposes and not with the view towards distribution. Except insofar as
its limited partners have the right to call for distribution in kind
pursuant to the terms of its limited partnership agreement dated
September 20, 1991, Lancashire does not have any contract,
understanding or arrangement with any person to sell, transfer or grant
participation to such person or any third person with respect to the
Harbinger Shares.
(c) Restrictions on Harbinger Shares.
(i) Lancashire understands that the Harbinger
Shares have not been registered under the Securities Act, any
state securities law or the laws of any foreign jurisdiction;
(ii) Lancashire understands that the Harbinger
Shares are being offered and sold to Lancashire in reliance on
the Regulation S safe harbor from the registration
requirements of the Securities Act and on the exemptions
contained in Section 4(2) of the Securities Act and Rule 506
promulgated thereunder, and that Buyer is relying upon the
truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of Lancashire
set forth herein in order to determine the applicability of
such safe harbor and the suitability of Lancashire to acquire
the Harbinger Shares;
(iii) Lancashire represents and warrants to Buyer
that Lancashire is an "accredited investor" as that term is
defined in Rule 501(a) of the Securities Act. Lancashire
understands that, except as set forth in the Registration
Rights
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<PAGE> 26
Agreement (as defined in Section 6.1(j) hereof), Buyer is
under no obligation to file a registration statement under the
Securities Act covering the Harbinger Shares or to take any
other action to enable Lancashire to transfer or otherwise
dispose of the Harbinger Shares. Lancashire represents that it
has consulted with counsel in regard to the Securities Act and
that it is fully familiar with the circumstances under which
it is required to hold the Harbinger Shares and the
limitations upon the transfer or other disposition thereof.
(iv) Lancashire agrees that from the date hereof
until the forty-first (41st) day after the issuance to
Lancashire of the Harbinger Shares pursuant to Regulation S
(the "Restrictive Period"), Lancashire, or any successor, or
any Professional (as defined in Section 2.26(c)(v) hereof)
(except for sales of any Harbinger Shares registered under the
Securities Act or otherwise exempt from such registration) (a)
will not sell any of the Harbinger Shares to a U.S. Person or
for the account or benefit of a U.S. Person or anyone believed
to be a U.S. Person, (b) will not engage in any efforts to
sell the Harbinger Shares in the United States, and (c) will
send to a Professional acting as agent or principal, a
confirmation or other notice stating that the Professional is
subject to the same restrictions on transfer to U.S. Persons
or for the account of U.S. Persons during the Restrictive
Period as provided herein. Buyer will not honor or register
and will not be obligated to honor or register any transfer in
violation of these provisions; to assure full compliance with
the restrictions placed on the resale of Harbinger Shares
offered pursuant to Regulation S, Buyer shall place on the
certificates representing the Harbinger Shares the following
restrictive legend:
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any state, and such shares may
not be sold, transferred, pledged or hypothecated unless (1)
covered by an effective registration statement under the
Securities Act of 1933; or (2) in accordance with some other
transaction which is exempt from the registration requirements
of such act. Furthermore, the shares evidenced by this
certificate have been offered and sold in reliance on the
exemption from registration provided by Regulation S and may
not be sold, transferred, pledged or hypothecated to any U.S.
Person (as defined therein) except as permitted by Regulation
S. The shares represented by this certificate were issued
pursuant to a business combination that is accounted for as a
"pooling of interest" and may not be sold, nor may the owner
thereof reduce his risk relative thereto in any way (except as
permitted by SEC Staff Accounting Bulletin No. 76), until such
time as Harbinger Corporation has published financial results
covering at least 30 days of combined operations after the
effective date of the event through which the business
combination was effected.
(d) Access to Information. Lancashire has had access to all
material and relevant information necessary to enable Lancashire to
make an informed investment decision. All data requested by Lancashire
from Buyer or its representatives concerning
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<PAGE> 27
the business and financial condition of Buyer and the terms and
conditions of the offering has been furnished to Lancashire's
satisfaction. Lancashire has had the opportunity to ask questions and
receive answers from Buyer concerning the terms and conditions of this
Agreement and the Harbinger Shares, and to obtain from Buyer any
additional information which Buyer possesses or may obtain without
unreasonable effort or expense. Lancashire understands that there are
numerous and substantial risks associated with the purchase of the
Harbinger Shares which could result in a total loss of the Lancashire's
investment.
(e) Understanding of Investment Risks. Lancashire understands
that realization of the objectives of Buyer is subject to significant
economic and business risks.
(f) No Government Recommendation or Approval. Lancashire
understands that no Federal, State or foreign government agency has
passed on or made any recommendation or endorsement of the Harbinger
Shares.
(g) Resales of Harbinger Shares. All subsequent offers and
sales of the Harbinger Shares shall be made in compliance with
Regulation S, pursuant to registration of the Harbinger Shares under
the Securities Act or pursuant to another exemption from such
registration.
(h) Non-Contravention. The execution and delivery of the
Subscription Agreement and the consummation of the purchase of the
Harbinger Shares and the transactions contemplated by this Subscription
Agreement do not and will not conflict with or result in a breach by
Lancashire of any of the terms or provision of, or constitute a default
under, the organization documents (i.e., articles of incorporation and
bylaws, partnership agreement, trust indenture, or similar documents)
of Lancashire or any indenture, mortgage, deed of trust or other
material agreement or instrument to which Lancashire is a party or by
which its or any of its respective properties or assets are bound, or
any existing applicable law, rule or regulation or any applicable law,
rule or regulation or any applicable decree, judgment or order of any
court or regulatory body, administrative agency or other governmental
body having jurisdiction over Lancashire or any of its properties or
assets.
(i) Reliance On Representations. Lancashire understands that
the issuance of the Harbinger Shares to it pursuant to this Agreement
is not being registered under the Securities Act. Buyer is relying on
the rules governing offers and sales made outside the United States
pursuant to Regulation S and Lancashire's representations hereunder.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER
With such exceptions as are set forth in a letter (the "Buyer
Disclosure Letter") delivered by Buyer to Company immediately prior to the
execution hereof and attached hereto as Exhibit E, Buyer hereby represents and
warrants to Sellers as follows:
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<PAGE> 28
Section 4.1. Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Buyer is duly qualified to transact business, and is in good standing, as a
foreign corporation in each jurisdiction where the character of its activities
requires such qualification, except where the failure to so qualify would not
have a material adverse effect on the assets, liabilities, results of operations
or financial condition, business or prospects of Buyer and its subsidiaries
taken as a whole (a "Buyer Material Adverse Effect"). Buyer has delivered to
Company accurate and complete copies of the Articles or Certificate of
Incorporation and Bylaws, as currently in effect, and has made available to
Company the minute books and stock records thereof.
Section 4.2. Authorization. Buyer has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Buyer, the performance by Buyer of
its obligations hereunder and the consummation of the transactions provided for
herein have been duly and validly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been duly executed and delivered by
Buyer and constitutes the valid and binding agreement of Buyer, enforceable
against Buyer in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies.
Section 4.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the transactions
contemplated by this Agreement, and the fulfillment of and compliance with the
terms and conditions of this Agreement do not and will not, with the passing of
time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit under, or
permit the acceleration of any obligation under, (i) any term or provision of
the Articles or Certificate of Incorporation or Bylaws of Buyer, (ii) any
material contract to which Buyer is a party filed as an exhibit to Buyer's Form
10-K for the year ended December 31, 1996, or any subsequent report filed under
the Exchange Act on or before the Closing Date, (iii) any judgment, decree or
order of any court or governmental authority or agency to which Buyer is a party
or by which Buyer or any of its properties is bound, or (iv) any statute, law,
regulation or rule applicable to Buyer, so as to have, in the case of
subsections (ii) through (iv) above, a Buyer Material Adverse Effect. Except for
compliance with the applicable requirements of the Securities Act, the Exchange
Act, and applicable United Kingdom securities laws, no consent, approval, order
or authorization of, or registration, declaration or filing with, any government
agency or public or regulatory unit, agency, body or authority with respect to
Buyer is required in connection with the execution, delivery or performance of
this Agreement by Buyer or the consummation of the transactions contemplated by
this Agreement by Buyer, the failure to obtain which would have a Buyer Material
Adverse Effect.
Section 4.4. Capitalization of Buyer. The authorized capital stock of
Buyer consists of 120,000,000 shares of capital stock consisting of 100,000,000
shares of common stock, $.0001
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par value and 20,000,000 shares of preferred stock, $.0001 par value. At
September 30, 1997, there were 21,500,070 shares of Buyer Common Stock issued
and outstanding, no shares of preferred stock were issued or outstanding and
options and warrants to purchase 3,731,151 shares of Buyer Common Stock (the
"Options") were outstanding. Since September 30, 1997, no shares of Buyer Common
Stock have been issued except pursuant to the exercise of Options outstanding on
September 30, 1997. All shares of Buyer Common Stock outstanding as of the date
hereof are duly authorized, validly issued, fully paid, nonassessable and free
of pre-emptive rights. The shares of Buyer Common Stock to be issued to Seller
pursuant to this Agreement will be validly issued, fully paid, nonassessable and
free of pre-emptive rights.
Section 4.5. Buyer Commission Reports. Buyer has made available to
Company (i) Buyer's Annual Report on Form 10-K for the year ended December 31,
1996, including all exhibits thereto and items incorporated therein by
reference, (ii) Buyer's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997, including all exhibits thereto and items
incorporated therein by reference, (iii) the proxy statement relating to Buyer's
Annual Meeting of Stockholders held on May 25, 1997 and (iv) all Current Reports
on Form 8-K filed by Buyer with the Securities and Exchange Commission (the
"Commission") since January 1, 1997, including all exhibits thereto and items
incorporated therein by reference (items (i) through (iv) in this sentence being
referred to collectively as the "Buyer Commission Reports"). As of their
respective dates, the Buyer Commission Reports did not contain any untrue
statement of a material fact or omit to state any 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. Since August 22, 1995,
Buyer has filed all forms, reports and documents with the Commission required to
be filed by it pursuant to the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder, each of which complied as to form, at
the time such form, document or report was filed, in all material respects with
the applicable requirements of the Securities Act and the Exchange Act and the
applicable rules and regulations promulgated thereunder.
Section 4.6. Absence of Certain Changes. Since June 30, 1997, there has
not been (i) any change in the assets, liabilities, results of operations,
financial condition or, to the best knowledge of the Buyer Executives (as
hereinafter defined), business or prospects of Buyer and its subsidiaries taken
as a whole that has had a Buyer Material Adverse Effect, (ii) any damage,
destruction, loss or casualty to property or assets of Buyer or any of its
subsidiaries, whether or not covered by insurance that has had a Buyer Material
Adverse Effect, (iii) any declaration, setting aside or payment of any dividend
or distribution (whether in cash, stock or property) in respect of the capital
stock of Buyer or any redemption or other acquisition of any of the capital
stock of Buyer or any of its subsidiaries (except for the acquisition of Buyer
Common Stock in payment of the purchase price and related taxes upon the
exercise of stock options) or any split, combination or reclassification of
shares of capital stock declared or made by Buyer, or (iv) any agreement to do
any of the foregoing.
Section 4.7. Brokers, Finders and Investment Bankers. Neither Buyer nor
any of its officers, directors or employees, has employed any broker, finder or
investment banker or
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incurred any liability for any investment banking fees, financial advisory fees,
brokerage fees or finders' fees in connection with the transactions contemplated
hereby.
Section 4.8. Disclosure. No representation, warranty or covenant made
by Buyer in this Agreement, the Buyer Disclosure Letter or the Exhibits hereto
contains any untrue statement of a material fact or omits to state a material
fact required to be stated herein or therein or necessary to make the statements
contained herein or therein not misleading.
ARTICLE 5.
POST-CLOSING COVENANTS AND ADDITIONAL AGREEMENTS OF
SELLER AND BUYER
Section 5.1. Confidentiality. All non-public information obtained by
Buyer or Sellers or any of their representatives pursuant to this Agreement or
in connection with the matters contemplated hereby concerning the business,
operations or affairs of the other (including the Company) will be kept
confidential and will not be used for any purpose other than the consummation of
the transactions contemplated hereby, or be disclosed to any other person or
entity, except for such disclosure to its employees, agents and representatives
who have a need to know the same and who have been advised of the confidential
nature of such information and who agree to abide by the terms hereof and except
for such disclosure as may be required by applicable law, court order or
governmental agency request. The obligations of confidentiality hereunder shall
continue for a period of five years from the date of this Agreement, provided
that, with respect to any item provided hereunder which constitutes a trade
secret under applicable law, such period of confidentiality shall continue for
so long as such item constitutes a trade secret under applicable law.
Section 5.2. Employees. It is Buyer's current intention to retain the
current employees of the Company who have received satisfactory or better
reviews over the prior six months under the existing arrangements; provided that
the Management Sellers will execute new employment agreements containing
customary non-competition, non-disclosure and non-solicitation arrangements. It
is agreed that no third party beneficiary rights are conferred by this
Agreement.
Section 5.3. Reasonable Efforts; Further Assurances; Cooperation. At
any time and from time to time after the Closing, Sellers shall, at the request
of Buyer, take any and all actions and execute and deliver such documents as may
be necessary or reasonable to put Buyer in actual possession and operating
control of the Company and its assets, or to otherwise effectuate or consummate
any of the transactions contemplated hereby.
Section 5.4. Noncompete and Nonsolicitation.
(a) Coverage. The parties hereto acknowledge and agree that
Company is engaged in the Business throughout the world (the "Territory").
Management Sellers acknowledge to adequately protect the interests of Buyer in
Company, it is essential that any noncompete and nonsolicitation covenant with
respect to Company cover all of the activities currently or reasonably expected
to be undertaken by Company ("Company Activities"), all Affiliates of the
Management Sellers and the entire Territory. For purposes of this Agreement,
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the term "Affiliate" shall mean any person or entity that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under control with a party hereto.
(b) Seller Covenants. Management Sellers hereby covenant and
agree that Management Sellers and their Affiliates shall not, in any manner for
the three (3) years following the Closing Date, directly or indirectly engage
in, have any equity or profit interest in, make any loan to or for the benefit
of, or render services to, any business which engages in Company Activities in
the Territory without the prior written consent of Buyer, which consent shall be
granted or withheld in Buyer's sole discretion, except for investments in
publicly quoted stocks in which the Management Sellers' aggregate interest does
not exceed 5%.
(c) Employee Nonsolicitation. Management Sellers hereby
covenant and agree that, for a period of three (3) years after the Closing Date,
neither Management Sellers nor any of their Affiliates shall in any manner,
directly or indirectly, employ or contract with or seek to employ or contract
with on behalf of Management Sellers or their Affiliates, or on behalf of any
other person, firm or corporation, any person who was an employee of or
independent contractor to the Company during the period twelve (12) months prior
to the Closing Date or during the twelve (12) month period after the Closing
Date, without Buyer's prior written consent which may be given or withheld in
Buyer's sole discretion.
Section 5.5. Notification. Sellers shall notify the Buyer immediately
if they become aware of any circumstances whereby there may be a breach of any
representations and warranties.
ARTICLE 6.
DELIVERIES AT CLOSING
Section 6.1. Deliveries by Seller. Sellers have delivered or have
caused to be delivered to Buyer:
(a) Duly completed and signed share transfers in favor of
Buyer or as it may direct in respect of all of the Shares together with the
relative share certificates;
(b) A certificate as of the Closing Date of the Secretary of
the Company containing true and correct copies of the Memorandum and Articles of
Association (which contains or incorporates a copy of every resolution or
agreement as is referred to in the Companies Act of 1985) of each of Company and
each Company Subsidiary, and true and correct copies of the other governing
documents of the Company and each Company Subsidiary, and such other matters as
reasonably requested by Buyer;
(c) Letters of resignation effective at the Closing executed
by the officers and directors of Company listed on Exhibit F;
(d) Employment Agreements in the forms agreed by the parties
hereto;
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(e) Noncompetition Agreements executed by Gray, Bird, Reynolds
and Summers, in substantially the form attached hereto as Exhibit H;
(f) The Escrow Agreement executed by the Management Sellers;
(g) Affiliate's Agreements executed by each of the Sellers in
substantially the form attached hereto as Exhibit I;
(h) A registration rights agreement substantially in the form
attached hereto as Exhibit K (the "Registration Rights Agreement").
Section 6.2. Deliveries by Buyer. Buyer has delivered or caused to be
delivered to Sellers:
(a) A Good Standing Certificate relating to Buyer from the
State of Georgia;
(b) A Secretary's Certificate attesting to the incumbency of
the officers executing this Agreement, resolutions authorizing the transaction
and the other certificates and agreements delivered by Buyer at the Closing;
(c) Stock Certificates representing the Harbinger Shares;
(d) The Escrow Agreement, executed by Buyer and the Escrow
Agent;
(e) A letter from KPMG Peat Marwick, LLP, independent public
accountants, advising Buyer that, in accordance with generally accepted
accounting principles, the acquisition of the Shares qualifies to be treated as
a "pooling of interests" for accounting purposes; and
(f) The Registration Rights Agreement, executed by Buyer.
ARTICLE 7.
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND INDEMNIFICATION
Section 7.1. Survival of Representations and Warranties.
(a) All representations, warranties, agreements and covenants
made or undertaken by the parties in this Agreement or the other agreements to
be executed and delivered pursuant to this Agreement (the "Other Agreements")
(i) are material, have been relied upon by the other parties hereto, shall
survive the Closing hereunder, and shall not merge in the performance of any
obligation by any party hereto, (ii) shall terminate and expire with respect to
any Claim for which notice has not been given on the first anniversary of the
Closing Date ("Claims Period"). As used in this Agreement, the term "Claim"
means any claim based upon, arising out of or otherwise in respect of any
inaccuracy in any representation or warranty or any breach of any covenant or
agreement made or to be performed by any party pursuant to this Agreement or the
Other Agreements.
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(b) Sellers acknowledge and agree that, except for matters
specifically disclosed in the KPMG Report or the Due Diligence Report (as
defined in the Seller Disclosure Letter), no due diligence or other
investigation of Company will diminish or obviate any of the representations,
warranties, covenants or agreements made or to be performed by Sellers pursuant
to this Agreement or the Other Agreements or Buyer's right to fully rely upon
such representations, warranties, covenants and agreements.
Section 7.2. Indemnification by the Management Sellers.
(a) Indemnification by Management Sellers. Subject to the
other provisions of this Agreement, each of the Management Sellers shall
severally (limited in proportion to each Management Seller's Allocation
Percentage (as defined below)) but not jointly indemnify and hold harmless Buyer
and its subsidiaries and affiliates, each of their respective officers,
directors, employees, agents and representatives, and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"Buyer Indemnified Parties"), from, against and in respect of any and all
claims, liabilities, obligations, losses, costs, expenses, penalties, fines and
other judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, reasonable
attorneys' fees and expenses) arising out of or relating to:
(i) any breach of the representations, warranties,
covenants or agreements made by Management Sellers in the
Agreement which survive Closing pursuant to their terms or
Section 7.1 of the Agreement;
(ii) any breach of the representations, warranties,
covenants or agreements made by Management Sellers in any
certificate, agreement, exhibit or schedule (the "Seller
Ancillary Documents") delivered by Management Sellers pursuant
to this Agreement, which representation, warranty, covenant or
agreement survives Closing pursuant to its terms or Section
7.1 of this Agreement;
(iii) any claims arising from goods provided, services
rendered or actions taken by the Company before the Closing
Date or otherwise arising from the operations or business of
the Company as conducted at any time before the Closing Date;
and
(iv) any fraud, willful misconduct, bad faith or
intentional breach of any representation, warranty, covenant
or agreement made by Management Sellers in any Management
Seller Ancillary Document. The claims, liabilities,
obligations, losses, costs, expenses, penalties, fines,
judgments and damages of the Buyer Indemnified Parties
described in this Section 7.2(a) as to which the Buyer
Indemnified Parties are entitled to indemnification are
referred to as "Buyer Losses" in this Agreement.
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For purposes of this Article 7, each Management Seller's
Allocation Percentage shall be determined by dividing (i) such Management
Seller's Percentage Interest (as defined in Section 2.4) by (ii) the sum of all
of the Management Sellers' Percentage Interests.
(b) Time Period for Claims. No Buyer Indemnified Party is
entitled to make any claim for indemnification under this Agreement after the
appropriate Claims Period (as defined in this Agreement); provided, however,
that if prior to the close of business on the last day of the Claims Period any
of the Sellers has been notified of a claim for indemnity under this Agreement
and such claim has not been finally resolved or disposed of at such date, the
basis for such claim shall continue to survive with respect to such claim and
shall remain a basis for indemnity under this Agreement with respect to such
claim until such claim is finally resolved or disposed of in accordance with the
terms of this Agreement; provided, further, however, that the Buyer Indemnified
Party and Sellers shall be obligated under this Agreement to exercise reasonable
efforts to resolve any such claim as quickly as is reasonably practicable.
(c) Indemnification Procedure.
(i) Promptly after receipt by a Buyer Indemnified
Party of notice by a third party of any complaint or the
commencement of any action or proceeding with respect to which
indemnification is being sought under this Agreement, such
Buyer Indemnified Party shall notify the Seller Indemnitors
Representative of such complaint or of the commencement of
such action or proceeding; provided, however, that failure to
so notify such party shall not relieve Sellers from liability
for such claims arising other than under this Agreement and
such failure to so notify the such party shall relieve Sellers
from liability which Sellers may have under this Agreement
with respect to such claim if, but only if, and only to the
extent that, such failure to notify the Sellers results in the
forfeiture by Sellers of rights and defenses otherwise
available to Sellers with respect to such claim. Sellers shall
have the right, upon written notice to the Buyer Indemnified
Party from the Seller Indemnitors Representative, to assume
the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to the Buyer
Indemnified Party and the payment of the fees and
disbursements of such counsel as incurred. If Sellers do not
elect to assume control of the defense of any such claims,
Sellers shall be bound by the results otherwise obtained with
respect to such claim. In the event, however, that Sellers
decline or fail to assume the defense of the action or
proceeding or to employ counsel reasonably satisfactory to
such Buyer Indemnified Party, in either case in a timely
manner, then such Buyer Indemnified Party may employ counsel
to represent or defend it in any such action or proceeding and
Sellers shall pay the reasonable fees and disbursements of
such counsel upon receipt of an invoice; provided, however,
that Sellers shall not be required to pay the fees and
disbursements of more than one counsel for all Buyer
Indemnified Parties in any jurisdiction in any single action
or proceeding. In any action or proceeding with respect to
which indemnification is being sought under this Agreement,
the Buyer Indemnified Parties or Sellers, whichever is not
assuming the defense of such action, shall have the right to
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participate in such litigation and to retain its own counsel
at such party's own expense. The Buyer Indemnified Parties or
Sellers, as the case may be, shall at all times use reasonable
efforts to keep Sellers or the Buyer Indemnified Parties, as
the case may be, reasonably apprised of the status of the
defense of any claim the defense of which they are
maintaining, and to cooperate in good faith with each other
with respect to the defense of any such action.
(ii) No Buyer Indemnified Party may settle or compromise
any claim or consent to the entry of any judgment with respect
to which indemnification is being sought from Sellers under
this Agreement without the prior written consent of each of
the Sellers against whom indemnification is being sought,
unless such settlement, compromise or consent includes an
unconditional release of such Sellers from all liability
arising out of such claim and does not contain any equitable
order, judgment or term which affects, restrains or interferes
with the business of such Sellers. Sellers shall not, without
the prior written consent of Buyer, settle or compromise any
claim or consent to the entry of any judgment with respect to
which indemnification is being sought under this Agreement
unless such settlement, compromise or consent includes an
unconditional release of the Buyer Indemnified Party from all
liability arising out of such claim and does not contain any
equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of Buyer, any of the
Buyer Indemnified Parties or any of their respective
affiliates.
(iii) In the event that a Buyer Indemnified Party does
claim a right to payment pursuant to Section 7.2(a) of this
Agreement, such Buyer Indemnified Party shall send written
notice of such claim to each of the Management Sellers. Such
notice shall specify the basis for such claim. As promptly as
possible after the Buyer Indemnified Party has given such
notice, such Buyer Indemnified Party and the Seller
Indemnitors Representative, shall establish the merits and
amount of such claim (by mutual agreement, litigation,
arbitration, mediation or otherwise) and, within five (5)
business days of the final determination of the merits and
amount of such claim, Sellers shall deliver to the Buyer
Indemnified Party an amount of cash in immediately available
funds in either case in an amount sufficient to satisfy and
discharge in full such claim as determined under this
Agreement; provided, however, that if Sellers still hold any
of the Harbinger Shares, Sellers shall satisfy such claim to
the maximum extent possible by delivering to the Buyer
Indemnified Party Harbinger Shares (valued for these purposes
using the Average Closing Price (as defined in Section 1.2))
and paying any balance in cash.
Section 7.3. Appointment of Management Sellers Indemnitors
Representative. Each Management Seller constitutes and appoints Allan W. Gray,
the "Management Seller Indemnitors Representative," as his true and lawful
attorney-in-fact to act for and on behalf of such Management Seller in all
matters arising out of this Article 7 and the liability or asserted liability of
such Management Seller under Section 7.2(a), including specifically, but without
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limitation, accepting and agreeing to the liability of such Management Seller
with respect to any indemnification claim for, objecting to any claim, disputing
the liability of such Management Seller, or the amount of such liability, with
respect to any claim and prosecuting and resolving such dispute as herein
provided, accepting the defense, compromise and settlement of any claim on
behalf of such Management Seller or refusing to accept the same, settling and
compromising the liability of such Management Seller hereunder, instituting and
prosecuting such actions (including arbitration proceedings) as the Management
Seller Indemnitors Representative shall deem appropriate in connection with any
of the foregoing, all for the account of the Management Seller, such Management
Seller agreeing to be fully bound by the acts, decisions and agreements of the
Management Seller Indemnitor Representative taken and done pursuant to the
authority herein granted. Each Management Seller hereby agrees to indemnify and
to save and hold harmless the Management Seller Indemnitors Representative from
any liability incurred by the Management Seller Indemnitors Representative based
upon or arising out of any act, whether of omission or commission, of the
Management Seller Indemnitors Representative pursuant to the authority herein
granted, other than acts, whether of omission or commission, of the Management
Seller Indemnitors Representative that constitute willful misconduct in the
exercise by the Management Seller Indemnitors Representative of the authority
herein granted. The death or incapacity of any Management Seller Indemnitors
Representative shall terminate the authority and agency of the Management Seller
Indemnitors Representative. In the event of the resignation of a Seller
Indemnitor Representative, the resigning Management Seller Indemnitors
Representative shall appoint a successor either from among the other Management
Sellers or who shall otherwise be acceptable to Buyer and who shall agree in
writing to accept such appointment, and the resigning Management Seller
Indemnitors Representative's resignation shall not be effective until such a
successor shall exist. If the Management Seller Indemnitor Representative is a
natural person and if such Management Seller Indemnitors Representative should
be or become incapacitated, them his successor shall be appointed within thirty
(30) days of his death or incapacity by a majority of the Management Sellers,
and such successor either shall be a Management Seller or shall otherwise be
acceptable to Buyer. The choice of a successor Management Seller Indemnitors
Representative appointed in any manner permitted above shall be final and
binding upon all of the Management Sellers. The decisions and actions of any
successor Management Seller Indemnitors Representative shall be, for all
purposes, those of a Management Seller Indemnitors Representative as if
originally named herein.
Section 7.4. Indemnification by Buyer.
(a) Subject to the other provisions of this Agreement, Buyer
shall indemnify and hold harmless Sellers and, if applicable, their subsidiaries
and affiliates, each of their respective officers, directors, employees, agents
and representatives and each of their heirs, executors, successors and assigns
(collectively, the "Seller Indemnified Parties"), from, against and in respect
of any and all claims, liabilities, obligations, losses, costs, expenses,
penalties, fines and other judgments (at equity or at law) and damages whenever
arising or incurred (including, without limitation, amounts paid in settlement,
costs of investigation and reasonable attorneys' fees and expenses) arising out
of or relating to:
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(i) any breach of the representations, warranties,
covenants or agreements made by Buyer in this Agreement which
survives Closing pursuant to its terms or Section 7.1 of this
Agreement;
(ii) any breach of the representations, warranties,
covenants or agreements made by Buyer in any certificate,
agreement, exhibit or schedule (the "Buyer Ancillary
Documents") delivered by Buyer pursuant to this Agreement,
which representation, warranty, covenant or agreement survives
Closing pursuant to its terms or Section 7.1 of this
Agreement;
(iii) unless a breach of a representation or warranty
contained in Article 2, any claim arising from goods provided,
services rendered or actions taken by the Company after the
Closing Date or otherwise arising from the operations or
business of the Company as conducted any time after the
Closing Date
(iv) any fraud, willful misconduct, bad faith or
intentional breach of any representation, warranty, covenant
or agreement made by Buyer in any Buyer Ancillary Document.
The claims, liabilities, obligations, losses, costs, expenses,
penalties, fines, judgments and damages of the Seller
Indemnified Parties described in this Paragraph 7.4(a) as to
which the Seller Indemnified Parties are entitled to
indemnification are referred to as "Seller Losses" in this
Agreement.
(b) No Seller Indemnified Party is entitled to make any
claim for indemnification under this Agreement after the appropriate Claims
Period; provided, however, that if prior to the close of business on the last
day of the Claims Period, Buyer has been notified of a claim for indemnity under
this Agreement and such claim has not been finally resolved or disposed of at
such date, the basis for such claim shall continue to survive with respect to
such claim and shall remain a basis for indemnity under this Agreement with
respect to such claim until such claim is finally resolved or disposed of in
accordance with the terms of this Agreement; provided, further, however, that
the Seller Indemnified Party and Buyer shall be obligated under this Agreement
to exercise reasonable efforts to resolve any such claim as quickly as is
reasonably practicable.
(c) Indemnification Procedure.
(i) Promptly after receipt by a Seller Indemnified
Party of notice by a third party of any complaint or the
commencement of any action or proceeding with respect to which
indemnification is being sought under this Agreement, such
Seller Indemnified Party shall notify Buyer of such complaint
or of the commencement of such action or proceeding; provided,
however, that failure to so notify Buyer does not relieve
Buyer from liability for such claim arising otherwise than
under this Agreement and such failure to so notify Buyer does
relieve Buyer from liability which Buyer may have under this
Agreement with respect to such claim if, but only if, and only
to the extent that, such failure to notify Buyer results in
the forfeiture by Buyer or any of its subsidiaries of rights
and defenses otherwise available to Buyer or any of its
subsidiaries with respect to such claim.
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Buyer will have the right, upon written notice to the Seller
Indemnified Party, to assume the defense of such action or
proceeding, including the employment of counsel reasonably
satisfactory to the Seller Indemnified Party and the payment
of the reasonable fees and disbursements of such counsel as
incurred. If Buyer does not elect to assume control of the
defense of any such claims, Buyer shall be bound by the
results otherwise obtained with respect to such claim. In the
event, however, that Buyer declines or fails to assume the
defense of the action or proceeding or to employ counsel
reasonably satisfactory to such Seller Indemnified Party, in
either case in a timely manner, then such Seller Indemnified
Party may employ counsel to represent or defend it in any such
action or proceeding and Buyer shall pay the reasonable fees
and disbursements of such counsel as incurred; provided,
however, that Buyer is not required to pay the fees and
disbursements of more than one counsel for all Seller
Indemnified Parties in any jurisdiction in any single action
or proceeding. In any action or proceeding with respect to
which indemnification is being sought under this Agreement,
the Seller Indemnified Parties or Buyer, whichever is not
assuming the defense of such action, shall have the right to
participate in such litigation and to retain its own counsel
at such party's own expense. The Seller Indemnified Parties or
Buyer, as the case may be, shall at all times use reasonable
efforts to keep Buyer or the Seller Indemnified Parties, as
the case may be, reasonably apprised of the status of the
defense of any claim the defense of which they are maintaining
and to cooperate in good faith with each other with respect to
the defense of any such action.
(ii) No Seller Indemnified Party may settle or
compromise any claim or consent to the entry of any judgment
with respect to which indemnification is being sought from
Buyer under this Agreement without the prior written consent
of Buyer, unless such settlement, compromise or consent
includes an unconditional release of Buyer and its affiliates
from all liability arising out of such claim and does not
contain any equitable order, judgment or term which in any
manner affects, restrains or interferes with the business of
Buyer, any of the Buyer Indemnified Parties or any of their
respective affiliates. Buyer shall not, without the prior
written consent of each of the Sellers, settle or compromise
any claim or consent to the entry of any judgment with respect
to which indemnification is being sought under this Agreement
unless such settlement, compromise or consent includes an
unconditional release of the Seller Indemnified Party from all
liability arising out of such claim and does not contain any
equitable order, judgment or term which in any material manner
affects, restrains or interferes with the business of the
Seller Indemnified Parties or any of their respective
affiliates.
(iii) In the event that a Seller Indemnified Party
does claim a right to payment pursuant to this Agreement, such
Seller Indemnified Party shall send written notice of such
claim to Buyer and the other Principal. Such notice shall
specify the basis for such claim. As promptly as possible
after such Seller
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Indemnified Party has given such notice, the Seller and Buyer
shall establish the merits and amount of such claim (by mutual
agreement, litigation, arbitration, mediation or otherwise)
and, within five (5) business days of the final determination
of the merits and amount of such claim, Buyer shall deliver an
amount of Buyer Common Stock, valued for these purposes using
the Average Closing Price (as defined in Section 1.2), to such
Seller Indemnified Party as appropriate to satisfy such claim.
Section 7.5. Liability Limits.
(a) Sellers shall only be liable for Buyer Losses arising
under this Agreement solely to the extent that any such Buyer Losses exceed, in
the aggregate, U.S. $30,000 (the "Seller Basket Amount"); provided, however,
that Buyer Losses arising under or pursuant to paragraph 7.2(a)(i) of this
Agreement shall not be subject to the Seller Basket Amount to the extent that
they relate to Sellers' breach of their representations and warranties in
Section 2.4 or 3.3 of the Agreement.
(b) Buyer shall only be liable for Seller Losses arising under
this Agreement solely to the extent that any such Seller Losses exceed, in the
aggregate, U.S. $30,000 (the "Buyer Basket Amount").
(c) The indemnification obligations of each Management Seller
under this Agreement shall not exceed in the aggregate an amount (the "General
Seller's Cap Amount") equal to the sum of (i) the value, as of the Closing, of
the Harbinger Shares issued to such Seller pursuant to this Agreement plus (ii)
such Management Seller's Allocation Percentage (as defined in Section 7.2(a)
hereof) multiplied by U.S. $310,350; provided, however, that Buyer Losses
arising under or pursuant to Section 7.2(a)(i) to the extent that they relate to
Management Seller's breach of its representations and warranties in Section 2.4
of this Agreement or arising from Management Seller's fraudulent conduct shall
not be subject to the General Seller's Cap Amount and there shall be no
limitation on the indemnification obligations of the Management Seller with
respect to Buyer Losses arising thereunder.
(d) Buyer's indemnification obligations under this Agreement
shall not exceed in the aggregate an amount equal to the value, as of the
Closing, of the Harbinger Shares issued to the Sellers pursuant to this
Agreement (the "Buyer Cap Amount").
(e) Once Buyer Losses exceed the Seller Basket Amount or
Seller Losses exceed the Buyer Basket Amount, as the case may be, a breach for
which a party is entitled to seek indemnification hereunder shall be deemed to
occur upon the initial Buyer Loss or series of related Buyer Losses or Seller
Loss or series of related Seller losses.
ARTICLE 8.
MISCELLANEOUS PROVISIONS
Section 8.1. Notices. All notices, communications and deliveries
hereunder shall be made in writing signed by the party making the same, shall
specify the Section hereunder
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<PAGE> 40
pursuant to which it is given or being made, and shall be delivered personally
or by telecopy transmission or sent by registered or certified mail or by any
express mail service (with postage and other fees prepaid) as follows (or to
such other representative or at such other address of a party as such party
hereto may furnish to the other parties in writing):
<TABLE>
<S> <C>
To Buyer: Harbinger Corporation
1055 Lenox Park Blvd.
Atlanta, GA 30319-5309
Attn: President
with a copy to Loren Wimpfheimer, Esq.
Director of Legal Affairs
Telecopy No.: (404) 467-3476
To Management Sellers: c/o Allan W. Gray
17 Durham Close, Westhoughton,
Lancashire, BLS 2RP, England, U.K.
Telecopy No.: 01942-814712
with a copy to: Terry Montague, Esq.
Berrymans Lace Mawer
Castle Chambers
43 Castle Street
Liverpool L2 9SU, England, U.K.
Telecopy No.: 0151-236-2585
To Lancashire: Lancashire Enterprises Venture Fund
Enterprise House
17 Ribblesdale Place
Preston PR1 3NA, England, U.K.
Attn: Richard Bamford, Director of Investment
Telecopy No.: 01772-880697
with a copy to: John V. Gavan
Laytons Solicitors
DX 14382 Manchester
LIX MAN012, England, U.K.
Telecopy No.: 0161-834-6862
</TABLE>
Section 8.2. Seller and Buyer Knowledge. As used in this Agreement, the
terms "the best knowledge of Sellers," "known to Sellers" or words of similar
import used herein with respect to Seller shall mean the actual knowledge of any
Seller, together with the knowledge a reasonable business person would have
obtained after making reasonable inquiry and after exercising reasonable
diligence with respect to the matters at hand. As used in this Agreement, the
terms "to the best knowledge of the Buyer Executives," "known to the Buyer
Executives" or
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words of similar import used herein with respect to Buyer shall mean the actual
knowledge of any Buyer Executive, together with the knowledge a reasonable
business person would have obtained after making reasonable inquiry and after
exercising reasonable diligence with respect to the matters at hand. The "Buyer
Executives" shall consist of Messrs. David T. Leach, Joel G. Katz and Loren B.
Wimpfheimer.
Section 8.3. Entire Agreement; Modifications and Amendments. This
Agreement, the Schedules, the Exhibits and the Other Agreements constitute the
entire agreement between the parties relating to the subject matter hereof and
thereof and supersede all prior oral and written agreements. This Agreement may
not be amended, supplemented or otherwise modified except by an instrument in
writing signed by each of the parties hereto and no oral waiver to this sentence
shall be valid. Whenever terms defined in this Agreement are used in any Exhibit
or Schedule hereto, such terms shall have the meanings ascribed to them herein
also ascribed to them in such Exhibit or Schedules unless they are otherwise
defined in such Exhibit or Schedule. The term "Agreement" shall mean this
instrument and all Exhibits and Schedules hereto and the words "herein,"
"hereof," "hereunder," "hereto," "hereby," and words of similar tenor shall
refer to this instrument in its entirety including the Exhibits and Schedules
hereto.
Section 8.4. Assignment; Successors-in-Interest. No assignment or
transfer by Buyer or Seller of their respective rights and obligations hereunder
shall be made except with the prior written consent of the other parties hereto.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their permitted successors and assigns, but no assignment
shall relieve any party of its obligations hereunder. Any reference hereto shall
also be a reference to a permitted successor or assign.
Section 8.5. Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other gender.
Section 8.6. Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein for convenience and for
reference only and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof. Unless otherwise specified to
the contrary, all references to Articles and Sections are references to Articles
and Sections of this Agreement and all references to Schedules and Exhibits are
references to Schedules and Exhibits to this Agreement.
Section 8.7. Controlling Law; Integration. This Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Georgia, U.S.A., without reference to Georgia's choice of law
rules. The parties hereto hereby agree that any legal proceeding instituted with
respect to this Agreement may be brought in Atlanta, Georgia, U.S.A. and the
parties hereby submit to personal jurisdiction therein and agree that venue
properly lies therein. This Agreement supersedes all negotiations, agreements
and understandings among the parties with respect to the subject matter hereof
and constitutes the entire agreement among the parties hereto.
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Section 8.8. Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law which renders any such provision prohibited or unenforceable in
any respect.
Section 8.9. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.10. Enforcement of Certain Rights. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm or corporation other than the parties hereto, and their
successors or assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, or result in such person, firm or corporation being
deemed a third party beneficiary of this Agreement.
Section 8.11. Waiver. Any agreement on the part of a party hereto to
any extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. A waiver by one party of the performance
of any covenant, agreement, obligation, condition, representation or warranty
shall not be construed as a waiver of any other covenant, agreement, obligation,
condition, representation or warranty. A waiver by any party of the performance
of any act shall not constitute a waiver of the performance of any other act or
an identical act required to be performed at a later time.
Section 8.12. Fees and Expenses. Buyer shall pay its own fees, costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including, but not limited to, the fees, costs and expenses
of its financial advisors, accountants and counsel. At Closing, Buyer shall pay
Company's and Sellers' fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, including the reasonable
fees and expenses of accountants and counsel for Company and Sellers, but such
fees, costs and expenses shall not exceed in the aggregate the sum of U.S.
$310,350. Any fees, costs and expenses of Company and/or Sellers in excess of
such amount shall be paid by the Sellers.
Section 8.13. Public Announcements. The timing and content of all
announcements regarding any aspect of this Agreement to the financial community,
government agencies, employees or the general public shall be mutually agreed
upon in advance (unless Buyer or Seller is advised by counsel that any such
announcement or other disclosure not mutually agreed upon in advance is required
to be made by law, and then only after making a reasonable attempt to comply
with the provisions of this Section).
Section 8.14. Pooling of Interests. If any provision of this Agreement
or the application of any such provision to any person or circumstance precludes
the use of "pooling of interests" accounting treatment in connection with the
Purchase Agreement, then such provision shall be of no force and effect to the
extent, and solely to the extent necessary to preserve such accounting treatment
pursuant to the Purchase Agreement, and in that event, the remainder of this
-42-
<PAGE> 43
Agreement shall not be affected, and in lieu of such provision there shall be
added as part of this Agreement a provision as similar in terms as may be
possible for the purchase pursuant to the Purchase Agreement to be treated as a
"pooling of interests" for accounting purposes.
-43-
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first above written.
"BUYER":
HARBINGER CORPORATION
By: /s/ Theodore E. Ciochon
--------------------------------------
Theodore E. Ciochon, Vice President
"SELLERS":
Lancashire Enterprises Venture Fund
By: Lancashire Enterprises General Partner
Limited
By: /s/ Richard Bamford
--------------------------------------
Title: Director of Investment
/s/ Philip J. Bird
------------------------------------------
Philip J. Bird
/s/ Allan W. Gray
------------------------------------------
Allan W. Gray
/s/ Tom P. C. Reynolds
------------------------------------------
Tom P.C. Reynolds
/s/ C.G. Summers
------------------------------------------
C.G. Summers
-44-
<PAGE> 45
EXECUTION COPY
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
ARTICLE 1. SALE OF SHARE CAPITAL; CLOSING.........................................................................1
SECTION 1.1. PURCHASE AND SALE....................................................................................1
SECTION 1.2. PURCHASE PRICE.......................................................................................2
SECTION 1.3. DEPOSIT OF SHARES IN ESCROW..........................................................................2
SECTION 1.4. CLOSING..............................................................................................2
SECTION 1.5. FURTHER ASSURANCES...................................................................................2
SECTION 1.6. FRACTIONAL SHARES....................................................................................2
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND MANAGEMENT
SELLERS...........................................................................................................3
SECTION 2.1. ORGANIZATION.........................................................................................3
SECTION 2.2. AUTHORIZATION........................................................................................3
SECTION 2.3. ABSENCE OF RESTRICTIONS AND CONFLICTS................................................................3
SECTION 2.4. CAPITALIZATION.......................................................................................4
SECTION 2.5. SUBSIDIARIES.........................................................................................5
SECTION 2.6. FINANCIAL STATEMENTS.................................................................................5
SECTION 2.7. ABSENCE OF CERTAIN CHANGES...........................................................................6
SECTION 2.8. LEGAL PROCEEDINGS....................................................................................7
SECTION 2.9. COMPLIANCE WITH LAW..................................................................................7
SECTION 2.10. MATERIAL CONTRACTS..................................................................................7
SECTION 2.11. COMPANY CLIENT CONTRACTS............................................................................9
SECTION 2.12. TAX RETURNS; TAXES..................................................................................9
SECTION 2.13. OFFICERS, DIRECTORS AND EMPLOYEES..................................................................10
SECTION 2.14. EMPLOYEE BENEFIT PLANS.............................................................................11
SECTION 2.15. EMPLOYMENT TAXES...................................................................................13
SECTION 2.16. LABOR RELATIONS....................................................................................13
SECTION 2.17. INSURANCE..........................................................................................14
SECTION 2.18. TITLE TO PROPERTIES AND RELATED MATTERS............................................................14
SECTION 2.19. ENVIRONMENTAL MATTERS..............................................................................15
SECTION 2.20. PATENTS, TRADEMARKS, TRADE NAMES...................................................................15
SECTION 2.21. COMPANY COMPUTER SOFTWARE AND HARDWARE.............................................................16
SECTION 2.22. TRANSACTIONS WITH AFFILIATES.......................................................................18
SECTION 2.23. CUSTOMERS..........................................................................................19
SECTION 2.24. BROKERS, FINDERS AND INVESTMENT BANKERS............................................................19
SECTION 2.25. DISCLOSURE.........................................................................................19
SECTION 2.26. REQUIREMENTS OF SECURITIES LAWS....................................................................19
SECTION 2.27. GOVERNMENT GRANTS..................................................................................23
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF LANCASHIRE.........................................................23
SECTION 3.1. ORGANIZATION........................................................................................23
SECTION 3.2. AUTHORIZATION.......................................................................................23
SECTION 3.3. OWNERSHIP OF SHARES.................................................................................23
SECTION 3.4. NO GOVERNMENTAL CONSENTS REQUIRED...................................................................24
SECTION 3.5. REQUIREMENTS OF SECURITIES LAWS.....................................................................24
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................27
SECTION 4.1. ORGANIZATION........................................................................................28
SECTION 4.2. AUTHORIZATION.......................................................................................28
</TABLE>
<PAGE> 46
<TABLE>
<S> <C> <C>
SECTION 4.3. ABSENCE OF RESTRICTIONS AND CONFLICTS...............................................................28
SECTION 4.4. CAPITALIZATION OF BUYER.............................................................................28
SECTION 4.5. BUYER COMMISSION REPORTS............................................................................29
SECTION 4.6. ABSENCE OF CERTAIN CHANGES..........................................................................29
SECTION 4.7. BROKERS, FINDERS AND INVESTMENT BANKERS.............................................................29
SECTION 4.8. DISCLOSURE..........................................................................................30
ARTICLE 5. POST-CLOSING COVENANTS AND ADDITIONAL AGREEMENTS OF SELLER AND
BUYER............................................................................................................30
SECTION 5.1. CONFIDENTIALITY.....................................................................................30
SECTION 5.2. EMPLOYEES...........................................................................................30
SECTION 5.3. REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION.................................................30
SECTION 5.4. NONCOMPETE AND NONSOLICITATION......................................................................30
SECTION 5.5. NOTIFICATION.......................................................................................31
ARTICLE 6. DELIVERIES AT CLOSING.................................................................................31
SECTION 6.1. DELIVERIES BY SELLER................................................................................31
SECTION 6.2. DELIVERIES BY BUYER.................................................................................32
ARTICLE 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.......................................32
SECTION 7.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................................................32
SECTION 7.2. INDEMNIFICATION BY THE MANAGEMENT SELLERS...........................................................33
SECTION 7.3. APPOINTMENT OF MANAGEMENT SELLERS INDEMNITORS REPRESENTATIVE........................................35
SECTION 7.4. INDEMNIFICATION BY BUYER............................................................................36
SECTION 7.5. LIABILITY LIMITS....................................................................................39
ARTICLE 8. MISCELLANEOUS PROVISIONS..............................................................................39
SECTION 8.1. NOTICES.............................................................................................39
SECTION 8.2. SELLER AND BUYER KNOWLEDGE..........................................................................40
SECTION 8.3. ENTIRE AGREEMENT; MODIFICATIONS AND AMENDMENTS......................................................41
SECTION 8.4. ASSIGNMENT; SUCCESSORS-IN-INTEREST..................................................................41
SECTION 8.5. NUMBER; GENDER......................................................................................41
SECTION 8.6. CAPTIONS............................................................................................41
SECTION 8.7. CONTROLLING LAW; INTEGRATION........................................................................41
SECTION 8.8. SEVERABILITY........................................................................................42
SECTION 8.9. COUNTERPARTS........................................................................................42
SECTION 8.10. ENFORCEMENT OF CERTAIN RIGHTS......................................................................42
SECTION 8.11. WAIVER............................................................................................42
SECTION 8.12. FEES AND EXPENSES..................................................................................42
SECTION 8.13. PUBLIC ANNOUNCEMENTS...............................................................................42
SECTION 8.14. POOLING OF INTERESTS...............................................................................42
</TABLE>
46
<PAGE> 47
EXECUTION COPY
EXHIBITS
Exhibit A Manner of Issuance of Harbinger Shares
Exhibit B Escrow Agreement
Exhibit C Seller Disclosure Letter
Exhibit D Lancashire Disclosure Letter
Exhibit E Buyer Disclosure Letter
Exhibit F Resigning Officers and Directors
Exhibit G [Reserved]
Exhibit H Noncompetition Agreement
Exhibit I Affiliate's Agreement
Exhibit J [Reserved]
Exhibit K Registration Rights Agreement
<PAGE> 1
Exhibit 2.2
ANNEX A
MERGER AGREEMENT
BY AND AMONG
HARBINGER CORPORATION,
OLYMPIC SUBSIDIARY CORPORATION
AND
PREMENOS TECHNOLOGY CORP.
AS OF OCTOBER 23, 1997
A-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1. THE MERGER...................................................... A-9
Section 1.1. Surviving Corporation....................................... A-9
Section 1.2. Certificate of Incorporation................................ A-9
Section 1.3. Bylaws...................................................... A-9
Section 1.4. Directors................................................... A-9
Section 1.5. Officers.................................................... A-10
Section 1.6. Effective Time.............................................. A-10
Section 1.7. Tax-Free Reorganization..................................... A-10
Section 1.8. Pooling of Interests Accounting............................. A-10
ARTICLE 2. CONVERSION OF SHARES; TREATMENT OF OPTIONS
AND DERIVATIVES............................................ A-10
Section 2.1. Premenos Common Stock....................................... A-10
Section 2.2. Fractional Shares........................................... A-10
Section 2.3. Treatment of Premenos Employee Stock Options and Derivative
Securities.................................................. A-10
Section 2.4. Exchange Agent.............................................. A-12
Section 2.5. Conversion Ratio and Adjustment Event....................... A-13
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PREMENOS...................... A-13
Section 3.1. Organization................................................ A-13
Section 3.2. Authorization............................................... A-13
Section 3.3. Absence of Restrictions and Conflicts....................... A-14
Section 3.4. Capitalization.............................................. A-14
Section 3.5. Capital Stock of Premenos Subsidiaries...................... A-14
Section 3.6. SEC Reports................................................. A-14
Section 3.7. Financial Statements........................................ A-15
Section 3.8. Absence of Certain Changes.................................. A-15
Section 3.9. Legal Proceedings........................................... A-16
Section 3.10. Compliance with Law......................................... A-16
Section 3.11. Material Contracts.......................................... A-16
Section 3.12. Tax Returns; Taxes.......................................... A-17
Section 3.13. Employee Benefit Plans...................................... A-17
Section 3.14. Labor Relations............................................. A-20
Section 3.15. Insurance................................................... A-20
Section 3.16. Title to Properties and Related Matters..................... A-20
Section 3.17. Environmental Matters....................................... A-21
Section 3.18. Patents, Trademarks, Trade Names............................ A-21
Section 3.19. Licensed Software........................................... A-21
Section 3.20. Trade Secrets............................................... A-23
Section 3.21. Proxy Statement and Registration Statement.................. A-23
Section 3.22. Pooling..................................................... A-23
Section 3.23. Transactions with Affiliates................................ A-23
Section 3.24. Brokers, Finders and Investment Bankers..................... A-23
Section 3.25. Disclosure.................................................. A-23
Section 3.26. Opinion of Financial Advisor................................ A-24
Section 3.27. No Existing Discussions..................................... A-24
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF HARBINGER..................... A-24
Section 4.1. Organization................................................ A-24
Section 4.2. Authorization............................................... A-24
Section 4.3. Absence of Restrictions and Conflicts....................... A-24
</TABLE>
A-2
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.4. Capitalization.............................................. A-25
Section 4.5. Capital Stock of Harbinger Subsidiaries..................... A-25
Section 4.6. SEC Reports................................................. A-25
Section 4.7. Financial Statements........................................ A-26
Section 4.8. Absence of Certain Changes.................................. A-26
Section 4.9. Legal Proceedings........................................... A-27
Section 4.10. Compliance with Law......................................... A-27
Section 4.11. Patents, Trademarks, Trade Names............................ A-27
Section 4.12. Licensed Software........................................... A-28
Section 4.13. Trade Secrets............................................... A-29
Section 4.14. Proxy Statement and Registration Statement.................. A-29
Section 4.15. Pooling..................................................... A-29
Section 4.16. Brokers, Finders and Investment Bankers..................... A-29
Section 4.17. Disclosure.................................................. A-29
Section 4.18. Opinion of Financial Advisor................................ A-30
Section 4.19. Interim Operations of HarbingerSub.......................... A-30
ARTICLE 5. CERTAIN COVENANTS AND AGREEMENTS................................ A-30
Section 5.1. Conduct of Business by Premenos............................. A-30
Section 5.2. Conduct of Business by Harbinger............................ A-32
Section 5.3. Inspection and Access to Information........................ A-32
Section 5.4. Proxy Statement and Registration Statement.................. A-32
Section 5.5. Harbinger and Premenos Stockholders Meetings................ A-32
Section 5.6. The Nasdaq National Market Additional Shares Notification... A-33
Section 5.7. Premenos Affiliates......................................... A-33
Section 5.8. No Solicitation............................................. A-33
Section 5.9. Reasonable Efforts; Further Assurances; Cooperation......... A-35
Section 5.10. Public Announcements........................................ A-35
Section 5.11. Financial Statements and SEC Reports........................ A-35
Section 5.12. Supplements to Disclosure Letters........................... A-35
Section 5.13. Pooling of Interests Accounting............................. A-35
Section 5.14. Accountant's Review Report.................................. A-35
Section 5.15. Indemnification of Premenos Directors and Officers.......... A-36
Section 5.16. Harbinger Board of Directors................................ A-36
Section 5.17. Employment Agreements....................................... A-36
Section 5.18. Premenos Transactional Expenses............................. A-37
Section 5.19. Severance................................................... A-37
Section 5.20. Premenos Stock Options...................................... A-37
Section 5.21. Minority Interest........................................... A-37
ARTICLE 6. CONDITIONS...................................................... A-37
Section 6.1. Conditions to Each Party's Obligations...................... A-37
Section 6.2. Conditions to Obligations of Harbinger...................... A-38
Section 6.3. Conditions to Obligations of Premenos....................... A-39
ARTICLE 7. CLOSING......................................................... A-39
ARTICLE 8. TERMINATION..................................................... A-40
Section 8.1. Termination and Abandonment................................. A-40
Section 8.2. Specific Performance and Other Remedies..................... A-40
Section 8.3. Effect of Termination....................................... A-41
Section 8.4. Fees and Expenses........................................... A-41
</TABLE>
A-3
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 9. MISCELLANEOUS PROVISIONS........................................ A-42
Section 9.1. Notices..................................................... A-42
Section 9.2. Disclosure Letters and Exhibits............................. A-43
Section 9.3. Assignment; Successors in Interest.......................... A-43
Section 9.4. Investigations; Representations and Warranties.............. A-43
Section 9.5. Number; Gender.............................................. A-43
Section 9.6. Captions.................................................... A-43
Section 9.7. Controlling Law; Integration; Amendment..................... A-43
Section 9.8. Premenos and Harbinger Knowledge............................ A-44
Section 9.9. Severability................................................ A-44
Section 9.10. Counterparts................................................ A-44
Section 9.11. Enforcement of Certain Rights............................... A-44
Section 9.12. Waiver...................................................... A-44
Section 9.13. Merger...................................................... A-44
</TABLE>
A-4
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DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
---- ----------
<S> <C>
1997 Balance Sheet.......................................... 3.7
Adjustment Event............................................ 2.5(b)
Agreement................................................... Page 1
Alternative Transaction..................................... 8.4(d)
Alternative Transaction Value............................... 8.4(b)
Anticipated Merger Transaction Value........................ 2.5(a)
Anticipated Premenos Transactional Expenses................. 5.18
Average Closing Price....................................... 2.2
Certificate................................................. 2.4(b)
Certificate of Merger....................................... Page 1
Closing..................................................... Page 39
Closing Date................................................ Page 39
Code........................................................ Page 1
Competing Offer............................................. 5.8(a)
Confidentiality Agreement................................... 5.8(a)
Conversion Ratio............................................ 2.5(a)
Coopers & Lybrand........................................... 3.7
Coopers & Lybrand Review Report............................. 5.14
DGCL........................................................ Page 1
EEOC........................................................ 3.14
Effective Time.............................................. 1.6
Employee Benefit Plan....................................... 3.13(a)(ii)
ERISA....................................................... 3.13(a)(ii)
Excess Parachute Payment.................................... 3.13(k)
Exchange Act................................................ 3.3
Exchange Fund............................................... 2.4(a)
Expense Cap................................................. 2.5(a)
Exchange Agent.............................................. 2.4(a)
GBCC........................................................ 6.1(b)
Harbinger Executives........................................ 9.8
Harbinger Licensed Intellectual Property.................... 4.9
Harbinger Disclosure Letter................................. Page 24
Harbinger Proprietary Intellectual Property................. 4.9
Harbinger Intellectual Property............................. 4.9
Harbinger Proprietary Software.............................. 4.10(a)
Harbinger Hardware.......................................... 4.10(a)
Harbinger Licensed Software................................. 4.10(b)
Harbinger Software.......................................... 4.10(b)
Harbinger License Agreements................................ 4.10(b)
Harbinger Shareholders Meeting.............................. 5.5(b)
Harbinger Subsidiaries...................................... 4.5
Harbinger SEC Reports....................................... 4.6
Harbinger Preferred Stock................................... 4.4
Harbinger Financial Statements.............................. 4.7
Harbinger................................................... Page 1
Harbinger Balance Sheet..................................... 4.7
Harbinger Capital Stock..................................... 4.4
Harbinger Common Stock...................................... 2.1(a)
HarbingerSub................................................ Page 1
</TABLE>
A-5
<PAGE> 6
<TABLE>
<CAPTION>
TERM SECTION
---- ----------
<S> <C>
Harbinger Termination Fee................................... 8.4(b)
Harbinger Topping Fee....................................... 8.4(b)
HSR Act..................................................... 3.3
Incremental Value........................................... 8.4(b)
Indemnified Parties......................................... 5.15(b)
Interim Statement........................................... 5.18
IRS......................................................... 3.13(f)
KPMG Peat Marwick........................................... 4.7
Leased Employees............................................ 3.13(n)
Merger...................................................... Page 1
Merger Transaction Value.................................... 8.4(b)
Nasdaq Additional Shares Notification....................... 5.6
NLRB........................................................ 3.14
Non-Qualified Options....................................... 2.3(a)
Old Options................................................. 2.3(a)
PBGC........................................................ 3.13(f)
Pension Benefit Plan........................................ 3.13(n)
Premises.................................................... 3.17
Proxy Agreement............................................. Page 1
Proxy Statement............................................. 3.21
Premenos.................................................... Page 1
Premenos Intellectual Property.............................. 3.18
Premenos ERISA Affiliate.................................... 3.13(b)
Premenos Disclosure Letter.................................. Page 13
Premenos Common Stock....................................... 2.1(a)
Premenos Financial Statements............................... 3.7
Premenos Licensed Intellectual Property..................... 3.18
Premenos Proprietary Intellectual Property.................. 3.18
Premenos Executives......................................... 9.8
Premenos Hardware........................................... 3.19(a)
Premenos License Agreements................................. 3.19(b)
Premenos Licensed Software.................................. 3.19(a)
Premenos Material Contracts................................. 3.11
Premenos Preferred Stock.................................... 3.4
Premenos Proprietary Software............................... 3.19(a)
Premenos SEC Reports........................................ 3.6
Premenos Software........................................... 3.19(a)
Premenos Stockholders....................................... 2.2
Premenos Subsidiaries....................................... 3.5
Premenos Benefit Plan....................................... 3.13(a)
Premenos Stockholders Meeting............................... 5.5(c)
Premenos Termination Fee.................................... 8.4(c)
</TABLE>
A-6
<PAGE> 7
<TABLE>
<CAPTION>
TERM SECTION
---- ----------
<S> <C>
Registration Statement...................................... 3.21
Reportable Event............................................ 3.13(o)
Scheduled Leases............................................ 3.16(b)
SEC......................................................... 2.3(e)
Securities Act.............................................. 3.3
SO Plan..................................................... 2.3(a)
Superior Proposal........................................... 5.8(a)
Surviving Corporation....................................... 1.1
The Best Knowledge of Premenos.............................. 9.8
The Best Knowledge of Harbinger............................. 9.8
</TABLE>
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EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- ------- --------
<S> <C>
Certificate of Merger -- Delaware........................... 1.1
Proxy Agreement............................................. 1.2
Form of King & Spalding Tax Opinion......................... 6.1(d)
Form of Bryan Cave LLP Opinion.............................. 6.2(c)
Form of King & Spalding Opinion............................. 6.3(c)
Form of Registration Rights Agreement....................... 6.3(g)
</TABLE>
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<PAGE> 9
MERGER AGREEMENT
THIS MERGER AGREEMENT, dated as of October 23, 1997 (the "Agreement"), by
and among HARBINGER CORPORATION, a Georgia corporation ("Harbinger"), OLYMPIC
SUBSIDIARY CORPORATION, a Delaware corporation and a wholly owned subsidiary of
Harbinger ("HarbingerSub"), and PREMENOS TECHNOLOGY CORP., a Delaware
corporation ("Premenos").
WHEREAS, the Board of Directors of Harbinger, HarbingerSub and Premenos
deem it advisable and in the best interests of each corporation and its
respective shareholders or stockholders, as applicable, that Harbinger and
Premenos combine in order to advance the long-term business strategies, goals
and interests of Harbinger and Premenos;
WHEREAS, the Board of Directors of Harbinger, HarbingerSub and Premenos
each have approved this Agreement and the merger (the "Merger"), pursuant to
this Agreement and the certificate of merger in the form attached hereto as
Exhibit 1.1 (the "Certificate of Merger") of HarbingerSub with and into Premenos
on the terms and conditions contained in this Agreement and in accordance with
the Delaware General Corporation law (the "DGCL");
WHEREAS, Harbinger, as the sole stockholder of HarbingerSub, has approved
this Agreement, the Merger and the transactions contemplated by this Agreement
pursuant to action taken by unanimous written consent in accordance with the
requirements of the DGCL and the Certificate of Incorporation and Bylaws of
HarbingerSub;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Harbinger's willingness to enter into this
Agreement, David Hildes and Lew Jenkins have each duly executed and delivered to
Harbinger an irrevocable proxy agreement in the form attached hereto as Exhibit
1.2 (the "Proxy Agreements");
WHEREAS, the parties to this Agreement intend that the Merger qualify as a
"reorganization" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, the parties to this Agreement intend that the Merger be accounted
for as a pooling of interests pursuant to APB Opinion No. 16 and related
pronouncements thereunder.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the parties agree as follows:
ARTICLE 1
THE MERGER
Section 1.1. Surviving Corporation. Subject to the provisions of this
Agreement and the DGCL, at the Effective Time, HarbingerSub shall be merged with
and into Premenos, and the separate corporate existence of HarbingerSub shall
cease. Premenos shall be the surviving corporation in the Merger (sometimes
called the "Surviving Corporation") and shall continue its corporate existence
under the laws of the State of Delaware. The Merger shall have the effects set
forth in Section 259 of the DGCL.
Section 1.2. Certificate of Incorporation. The Certificate of
Incorporation of Premenos shall be the Certificate of Incorporation of the
Surviving Corporation until amended after the Effective Time.
Section 1.3. Bylaws. The Bylaws of Premenos shall be the Bylaws of the
Surviving Corporation until amended after the Effective Time.
Section 1.4. Directors. The directors of the Surviving Corporation shall
consist of the directors of HarbingerSub immediately prior to the Effective
Time, such directors to hold office from the Effective Time until their
respective successors are duly elected and qualify.
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Section 1.5. Officers. The officers of the Surviving Corporation shall
consist of the officers of HarbingerSub immediately prior to the Effective Time,
such officers to hold office from the Effective Time until their respective
successors are duly elected and qualify.
Section 1.6. Effective Time. If all of the conditions set forth in
Article 6 have been fulfilled or waived in accordance with the terms of this
Agreement and this Agreement has not been terminated in accordance with Article
8, the parties shall cause the Certificate of Merger to be properly executed and
filed on the Closing Date with the Secretary of State of the State of Delaware.
The Merger shall become effective as of the time of filing of a properly
executed Certificate of Merger. The date and time when the Merger becomes
effective is referred to as the Effective Time.
Section 1.7. Tax-Free Reorganization. The Merger is intended to be a
reorganization within the meaning of Section 368 of the Code, and this Agreement
is intended to be a "plan of reorganization" within the meaning of the
regulations promulgated under Section 368 of the Code.
Section 1.8. Pooling of Interests Accounting. The Merger is intended to
be accounted for as a pooling of interests within the meaning of APB Opinion No.
16 and related pronouncements thereunder.
ARTICLE 2
CONVERSION OF SHARES; TREATMENT OF OPTIONS
AND DERIVATIVES
Section 2.1. Premenos Common Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of any Premenos Stockholder:
(a) Subject to Section 2.2, each share of common stock, par value $.01
per share, of Premenos ("Premenos Common Stock") issued and outstanding
immediately prior to the Effective Time (except for treasury shares and any
shares held by Harbinger or a direct or indirect subsidiary of Harbinger)
shall be converted, without any further action, into the right to receive
such fraction of a share of Common Stock, par value $.0001 per share, of
Harbinger ("Harbinger Common Stock") as is equal to the Conversion Ratio.
(b) Each share of Premenos Common Stock issued immediately prior to
the Effective Time that is then held in Premenos's treasury shall be
canceled and retired and all rights in respect of such stock shall cease to
exist, without any conversion thereof or payment of any consideration
therefor.
(c) Each share of common stock, par value $.0001 per share, of
HarbingerSub that is issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common stock, par value
$.0001 per share, of the Surviving Corporation.
Section 2.2. Fractional Shares. No scrip or fractional shares of
Harbinger Common Stock shall be issued in the Merger. All fractional shares of
Harbinger Common Stock to which a holder of Premenos Common Stock (each a
"Premenos Stockholder") immediately prior to the Effective Time would otherwise
be entitled at the Effective Time shall be aggregated. If a fractional share
results from such aggregation, a Premenos Stockholder shall be entitled, after
the later of (a) the Effective Time or (b) the surrender of such Premenos
Stockholder's Certificate(s) that represent such shares of Premenos Common
Stock, to receive from Harbinger an amount in cash in lieu of such fractional
share, based on the Average Closing Price. For purposes of this Agreement, the
"Average Closing Price" shall be the arithmetic average of the closing price per
share of Harbinger Common Stock, as reported on the Nasdaq National Market, for
each of the ten consecutive trading days ending on the fifth trading day
immediately prior to the date of the Premenos Stockholders Meeting.
Section 2.3. Treatment of Premenos Employee Stock Options and Derivative
Securities. (a) At the Effective Time, Harbinger shall assume all of Premenos's
rights and obligations with respect to the outstanding stock options held by
certain employees and non-employee directors of Premenos pursuant to Premenos's
1995 Incentive Program, as amended (the "SO Plan"), as set forth in the Premenos
Disclosure
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Letter, which are outstanding and unexercised at the Effective Time (the "Old
Options"), whether or not the Old Options are then exercisable. Promptly
following such assumption, Harbinger shall substitute for the Old Options
options to be granted under the Harbinger 1996 Stock Option Plan (the "Harbinger
Options"), which Harbinger Options will contain vesting terms and conditions
matching those contained in the Old Options. Harbinger agrees to issue incentive
stock options under the Harbinger 1996 Stock Option Plan in substitution for
each Old Option that qualified as an incentive stock option prior to the
Effective Time and to issue non-qualified stock options under the Harbinger 1996
Stock Option Plan in substitution for each Old Option that constituted a
non-qualified stock option prior to the Effective Time. Each Harbinger Option
shall thereafter evidence the right to purchase the number of shares of
Harbinger Common Stock equal to the product (rounded up or down as appropriate
to a whole share) of (i) the number of shares of Premenos Common Stock covered
by such Old Option immediately prior to the Effective Time, multiplied by (ii)
the Conversion Ratio. The exercise price of such Harbinger Options for each
share of Harbinger Common Stock subject to such options shall be equal to the
quotient (rounded up or down as appropriate to a whole cent) obtained by
dividing (i) the per-share exercise price for shares of Premenos Common Stock
subject to such Old Option immediately prior to the Effective Time, by (ii) the
Conversion Ratio. It is intended that the assumption and substitution of the
Harbinger Options for the Old Options, as set forth herein, shall (i) not give
to any holder thereof any benefits in addition to those which any such holder
had prior to such assumption and substitution so that the assumption and
substitution by Harbinger of the Old Options will comply with the requirements
of Section 424(a) of the Code and (ii) be undertaken in a manner that will not
constitute a "Modification" as defined in Section 424(b) of the Code as to any
Old Option which is an incentive stock option.
(b) At the Effective Time, Harbinger shall assume all of Premenos's rights
and obligations with respect to certain outstanding warrants and other rights to
acquire Premenos Common Stock as set forth in the Premenos Disclosure Letter
(which description in the Premenos Disclosure Letter shall include the number of
shares of Premenos Common Stock obtainable upon exercise and the strike price of
each such warrant or right) which are outstanding and unexercised at the
Effective Time (the "Premenos Derivative Securities"), whether or not the
Premenos Derivative Securities are then exercisable. Immediately following such
assumption and in accordance with the terms and conditions of the Premenos
Derivative Securities, each such Premenos Derivative Security shall thereafter
evidence the right to purchase: (i) the number of shares of Harbinger Common
Stock equal to the product (rounded up or down as appropriate to the next whole
share) of (W) the number of shares of Premenos Common Stock covered by such
Premenos Derivative Security immediately prior to the Effective Time multiplied
by (X) the Conversion Ratio; and (ii) the exercise price of such assumed
Premenos Derivative Security shall thereafter be equal to the quotient obtained
by dividing (Y) the per share exercise price for shares of Premenos Common Stock
subject to such Premenos Derivative Security immediately prior to the Effective
Time, by (Z) the Conversion Ratio. From and after the Effective Time, the number
of shares of Harbinger Common Stock subject to such Premenos Derivative
Securities and the exercise price for such shares shall be subject to further
adjustment in accordance with the provisions of such Premenos Derivative
Securities.
(c) As soon as practicable after the Effective Time, Harbinger shall
deliver to each holder of an Old Option an appropriate written notice and option
agreement setting forth Harbinger's assumption of the Old Option and
substitution of the Harbinger Option in accordance with the terms of this
Section 2.3. The form of such notice and option agreement shall be delivered to
Premenos prior to the Effective Time and shall be subject to its reasonable
approval. Premenos shall not grant any options under the SO Plan or otherwise
after the date of this Agreement.
(d) As soon as practicable after the Effective Time, Harbinger shall
deliver to each holder of a Premenos Derivative Security such additional
documentation as may be required pursuant to the express terms of such Premenos
Derivative Security to properly evidence Harbinger's assumption of Premenos's
rights and obligations thereunder.
(e) Harbinger agrees to cause the shares of Harbinger Common Stock issuable
upon exercise of the Harbinger Options to be registered with the Securities and
Exchange Commission (the "SEC") on a Form S-8 Registration Statement as promptly
following the Effective Time as is reasonably practicable.
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(f) Approval by the Premenos Stockholders of this Agreement shall
constitute authorization and approval of any and all of the actions described in
this Section 2.3.
(g) The offering period under Premenos's 1995 Employee Stock Purchase Plan
(the "Stock Plan") which ends December 31, 1997, shall be the final offering
period under the Stock Plan, and the Board of Directors of Premenos shall
terminate the Stock Plan as of the earlier to occur of the Effective Time or
December 31, 1997, in accordance with its terms. Employees of Premenos who
participate in the final offering period of the Stock Plan shall have shares of
Premenos purchased on their behalf prior to the termination of the Stock Plan in
accordance with its terms.
Section 2.4. Exchange Agent. (a) Harbinger shall authorize First Union
National Bank of North Carolina to serve as exchange agent hereunder (the
"Exchange Agent"). Promptly after the Effective Time, Harbinger shall deposit or
shall cause to be deposited in trust with the Exchange Agent certificates
representing the number of whole shares of Harbinger Common Stock to which the
holders of Premenos Common Stock (other than treasury shares and other than
Harbinger or a direct or indirect subsidiary of Harbinger) are entitled pursuant
to Section 2.1, together with cash sufficient to pay for fractional shares then
known to Harbinger pursuant to Section 2.2 (such cash amounts and certificates
being hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions received from Harbinger, deliver the number
of shares and pay the amounts of cash provided for in Sections 2.1 and 2.2 out
of the Exchange Fund. Additional amounts of cash, if any, needed from time to
time by the Exchange Agent to make payments for fractional shares shall be
provided by Harbinger and shall become part of the Exchange Fund.
(b) As soon as is reasonably practicable after the Effective Time, the
Exchange Agent shall make available to each record holder (other than treasury
shares and other than Harbinger or a direct or indirect subsidiary of Harbinger)
who, as of the Effective Time, was a holder of an outstanding certificate or
certificates which immediately prior to the Effective Time represented shares of
Premenos Common Stock (the "Certificate" or "Certificates"), a form of letter of
transmittal and instructions for use in effecting the surrender of the
Certificates for payment therefor and conversion thereof. Delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and the form of letter
of transmittal shall so reflect. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor (i) one or
more certificates as requested by the holder (properly issued, executed and
countersigned, as appropriate) representing that number of whole shares of
Harbinger Common Stock to which such holder of Premenos Common Stock shall have
become entitled pursuant to the provisions of Section 2.1, and (ii) as to any
fractional share, a check representing the cash consideration to which such
holder shall have become entitled pursuant to Section 2.1, and the Certificate
so surrendered shall forthwith be canceled. No interest will be paid or accrued
on the cash payable upon the surrender of the Certificates. If any portion of
the consideration to be received pursuant to Sections 2.1 and 2.2 upon exchange
of a Certificate (whether a certificate representing shares of Harbinger Common
Stock or a check representing cash for a fractional share) is to be issued or
paid to a person other than the person in whose name the Certificate surrendered
in exchange therefor is registered, it shall be a condition of such issuance and
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
exchange shall pay in advance any transfer or other taxes required by reason of
the issuance of a certificate representing shares of Harbinger Common Stock or a
check representing cash for a fractional share to such other person, or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or that no such tax is applicable. From the Effective Time until surrender in
accordance with the provisions of this Section 2.4, each Certificate shall
represent for all purposes only the right to receive the consideration provided
in Sections 2.1 and 2.2. All payments in respect of shares of Premenos Common
Stock that are made in accordance with the terms hereof shall be deemed to have
been made in full satisfaction of all rights pertaining to such securities.
(c) In the case of any lost, mislaid, stolen or destroyed Certificate, the
holder may be required, as a condition precedent to delivery to such holder of
the consideration described in Sections 2.1 and 2.2, to deliver to Harbinger a
bond in such reasonable sum or a reasonably satisfactory indemnity agreement as
Harbinger
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may direct as indemnity against any claim that may be made against Harbinger or
the Surviving Corporation with respect to the Certificate alleged to have been
lost, mislaid, stolen or destroyed.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the shares of Premenos Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
transfer, they shall be canceled and exchanged for the consideration described
in Sections 2.1 and 2.2.
(e) Any shares of Harbinger Common Stock or cash due former Premenos
Stockholders pursuant to Sections 2.1 and 2.2 that remains unclaimed by such
former Premenos Stockholder for six months after the Effective Time shall be
held by Harbinger; and any former Premenos Stockholder who has not prior to
those dates complied with Section 2.4(b) can thereafter look only to Harbinger
for issuance of the number of shares of Harbinger Common Stock and other
consideration to which such holder has become entitled pursuant to the
provisions of Sections 2.1 and 2.2; except that neither Harbinger nor any other
party to this Agreement shall be liable to a former Premenos Stockholder for any
amount required to be paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 2.5. Conversion Ratio and Adjustment Event. (a) The "Conversion
Ratio" shall be equal to .45.
(b) In the event of any change in Harbinger Common Stock or Premenos Common
Stock between the date of this Agreement and the Effective Time by reason of any
stock dividend, subdivision, reclassification, recapitalization, combination,
exchange of shares or the like (an "Adjustment Event"), the Conversion Ratio
shall be appropriately adjusted so each holder of Premenos Common Stock will
receive in the Merger the amount of Harbinger Common Stock such holder would
have been entitled to receive if the Effective Time had been immediately prior
to such Adjustment Event.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PREMENOS
With such exceptions as are set forth in a letter (the "Premenos Disclosure
Letter") delivered by Premenos to Harbinger prior to the date of this Agreement,
Premenos represents and warrants to Harbinger as follows:
Section 3.1. Organization. Premenos and each of its subsidiaries are each
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and have all requisite corporate power and
authority to own, lease and operate their respective properties and to carry on
their respective businesses as now being conducted. Premenos and its
subsidiaries are each qualified to transact business, and are in good standing,
as a foreign corporation in each jurisdiction where the character of their
activities requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the assets, liabilities, results of
operations, financial condition, business or prospects of Premenos. Premenos has
made available to Harbinger accurate and complete copies of the Certificate of
Incorporation and Bylaws, as currently in effect, of Premenos, the minute books
and stock records of Premenos and the same documents of each subsidiary. The
Premenos Disclosure Letter contains a true and correct list of the jurisdictions
in which Premenos or its subsidiaries is qualified to do business as a foreign
corporation.
Section 3.2. Authorization. Premenos has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement and to consummate the Merger and the other transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
Premenos and the performance by Premenos of its obligations under this Agreement
and the consummation of the Merger and the other transactions provided for by
this Agreement have been duly and validly authorized by all necessary corporate
action on the part of Premenos. The Board of Directors of Premenos has approved
the execution, delivery and performance of this Agreement and the consummation
of the Merger and the other transactions contemplated by this Agreement. This
Agreement has been duly executed and delivered by Premenos and constitutes the
legal, valid and binding agreement of Premenos, enforceable against it in
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accordance with its terms, subject to applicable bankruptcy, insolvency and
other similar laws affecting the enforceability of creditors' rights generally,
general equitable principles and the discretion of courts in granting equitable
remedies.
Section 3.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the Merger and
the other transactions contemplated by this Agreement and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, result in the loss of any
material benefit under, or permit the acceleration of any obligation under, (i)
any term or provision of the Certificate of Incorporation or Bylaws of Premenos,
(ii) any Premenos Material Contract, (iii) any judgment, decree or order of any
court or governmental authority or agency to which Premenos or any of its
subsidiaries is a party or by which Premenos or its subsidiaries or any of their
respective properties is bound, or (iv) any statute, law, regulation or rule
applicable to Premenos or its subsidiaries, so as to have in the case of
subsections (ii) through (iv) above, a material adverse effect on the assets,
liabilities, results of operations or financial condition, of Premenos. Except
for compliance with the applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of
1934, as amended (the "Exchange Act"), applicable state securities laws and the
filing and recordation of the Certificate of Merger as required by the DGCL, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental agency or public or regulatory unit, agency, body
or authority with respect to Premenos or its subsidiaries is required in
connection with the execution, delivery or performance of this Agreement by
Premenos or the consummation of the transactions contemplated by this Agreement
by Premenos, the failure to obtain which would have a material adverse effect
upon the assets, liabilities, results of operations or financial condition of
Premenos.
Section 3.4. Capitalization. The authorized capital stock of Premenos
consists of 25,000,000 shares of common stock, $.01 par value per share and
1,000,000 shares of preferred stock, $.01 par value per share (the "Premenos
Preferred Stock"). As of October 23, 1997, there were 11,784,615 shares of
Premenos Common Stock issued and outstanding, 1,838,079 shares of Premenos
Common Stock reserved for issuance upon exercise of outstanding stock options,
472,101 shares of Premenos Common Stock reserved for issuance under the Premenos
Employee Stock Purchase Plan and no shares of Premenos Preferred Stock issued
and outstanding. Each share of Premenos Common Stock outstanding as of the date
of this Agreement is duly authorized, validly issued, fully paid and
nonassessable and free of pre-emptive rights. Except as set forth in this
Section 3.4, there are no shares of Premenos Common Stock outstanding, and there
are no subscriptions, options, convertible securities, calls, puts, rights,
warrants or other agreements, claims or commitments of any nature whatsoever
obligating Premenos or any of its Subsidiaries to purchase, redeem, issue,
transfer, deliver or sell, or cause to be purchased, redeemed, issued,
transferred, delivered or sold, additional shares of the capital stock or other
securities of Premenos or obligating Premenos to grant, extend or enter into any
such agreement or commitment.
Section 3.5. Capital Stock of Premenos Subsidiaries. The Premenos
Disclosure Letter sets forth a true and complete list of all corporations,
partnerships and other entities in which Premenos owns an equity interest (such
corporations, partnerships and other entities being hereinafter referred to as
the "Premenos Subsidiaries"), the jurisdiction in which each Premenos Subsidiary
is incorporated or organized, and all shares of capital stock or other ownership
interests authorized, issued and outstanding of each Premenos Subsidiary. The
outstanding shares of capital stock or other equity interests of each Premenos
Subsidiary have been duly authorized and are validly issued, fully paid and
nonassessable. All shares of capital stock or other equity interests of each
Premenos Subsidiary owned by Premenos or any of its subsidiaries are set forth
in the Premenos Disclosure Letter and are owned by Premenos, either directly or
indirectly, free and clear of all liens, encumbrances, equities or claims
(except for applicable restrictions under the securities laws).
Section 3.6. SEC Reports. Premenos has made available to Harbinger (i)
Premenos's Annual Report on Form 10-K for the year ended December 31, 1996,
including all exhibits and items incorporated by reference, (ii) Premenos's
Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30,
1997, including all exhibits and items incorporated by reference, (iii) the
proxy statement relating to
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Premenos's Annual Meeting of Stockholders on May 29, 1997 and (iv) all Current
Reports on Form 8-K filed by Premenos with the SEC since January 1, 1997,
including all exhibits and items incorporated by reference (items (i) through
(iv) in this sentence being referred to collectively as the "Premenos SEC
Reports"). As of their respective dates, the Premenos SEC Reports did not
contain any untrue statement of a material fact or omit to state any 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. Since
December 31, 1995, Premenos has filed all forms, reports and documents with the
SEC required to be filed by it pursuant to the Securities Act and the Exchange
Act and the rules and regulations promulgated under such acts, each of which
complied as to form, at the time such form, document or report was filed, in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act and the applicable rules and regulations promulgated under such
acts.
Section 3.7. Financial Statements. Premenos has made available to
Harbinger: (i) the audited balance sheets of Premenos as of December 31, 1995
and 1996, and the related audited statements of income, changes in stockholders'
equity and cash flows for the respective fiscal years then ended, including the
notes to such financial statements, examined by and accompanied by the report of
Coopers & Lybrand LLP ("Coopers & Lybrand"), independent public accountants; and
(ii) the unaudited balance sheet of Premenos as of September 30, 1997 (the "1997
Balance Sheet") and the unaudited statements of income and cash flows for the
9-month period then ended and unaudited statement of changes in stockholders'
equity for the 6-month period ended June 30, 1997. All of the foregoing
financial statements are collectively referred to as the "Premenos Financial
Statements." The Premenos Financial Statements have been prepared from, and are
in accordance with, the books and records of Premenos and its consolidated
subsidiaries and, as applicable, present fairly the consolidated financial
position, consolidated results of operations, changes in stockholders' equity
and consolidated cash flows of Premenos and its subsidiaries as of the date and
for the periods indicated in conformity with generally accepted accounting
principles, consistently applied. The Premenos Disclosure Letter sets forth a
true and complete list of all loss contingencies (within the meaning of
Statement of Financial Accounting Standards No. 5) of Premenos recorded during
the period covered by the Premenos Financial Statements and exceeding $25,000 in
the case of any single loss contingency or $50,000 in the case of all loss
contingencies.
Section 3.8. Absence of Certain Changes. (a) Since December 31, 1996 and
except for items specifically disclosed in the Premenos SEC Reports filed
subsequent to December 31, 1996, there has not been (i) any material adverse
change in the assets, liabilities, results of operations, financial condition,
business or prospects of Premenos, (ii) any damage, destruction, loss or
casualty to property or assets of Premenos, whether or not covered by insurance,
which property or assets are material to the operations or business of Premenos,
(iii) any declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) in respect of the capital stock of
Premenos, any redemption or other acquisition by Premenos of any of the capital
stock of Premenos or any split, combination or reclassification of shares of
capital stock declared or made by Premenos or (iv) any agreement to do any of
the foregoing.
(b) Since December 31, 1996 and except for items specifically disclosed in
the Premenos SEC Reports filed subsequent to December 31, 1996, there have not
been (i) any extraordinary losses suffered, (ii) any material assets mortgaged,
pledged or made subject to any lien, charge or other encumbrance, (iii) any
material liability or obligation (absolute, accrued or contingent) incurred or
any material bad debt, contingency or other reserve increase suffered, except,
in each such case, in the ordinary course of business and consistent with past
practice, (iv) any claims, liabilities or obligations (absolute, accrued or
contingent) paid, discharged or satisfied, other than the payment, discharge or
satisfaction, in the ordinary course of business and consistent with past
practice, of claims, liabilities and obligations reflected or reserved against
in the Premenos Financial Statements or incurred in the ordinary course of
business and consistent with past practice, (v) any material guaranteed checks,
notes or accounts receivable written off as uncollectible, except write-offs in
the ordinary course of business and consistent with past practice, (vi) any
write down (under Statement of Financial Accounting Standards No. 121 or
otherwise) of the value of any material asset or investment on Premenos's books
or records, except for depreciation and amortization taken in the ordinary
course of business and consistent with past practice, (vii) any cancellation of
any material debts or waiver of
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any material claims or rights of substantial value, or sale, transfer or other
disposition of any material properties or assets (real, personal or mixed,
tangible or intangible) of substantial value, except, in each such case, in
transactions in the ordinary course of business and consistent with past
practice and which in any event do not exceed $50,000 in the aggregate, (viii)
any single capital expenditure or commitment in excess of $50,000 for additions
to property or equipment, or aggregate capital expenditures and commitments in
excess of $250,000 (on a consolidated basis) for additions to property or
equipment or for capitalized research and development, (ix) any transactions
entered into other than in the ordinary course of business, (x) any agreements
to do any of the foregoing, or (xi) any other events, developments or conditions
of any character that have had or are reasonably likely to have a material
adverse effect on the assets, liabilities, results of operations, financial
condition, business or prospects of Premenos.
Section 3.9. Legal Proceedings. There are no suits, actions, claims,
proceedings or investigations pending, or, to the best knowledge of Premenos,
threatened against, relating to or involving Premenos or any of its subsidiaries
(or any of their officers or directors) before any court, arbitrator or
administrative or governmental body, which, if finally determined adversely, are
reasonably likely, individually or in the aggregate, to have a material adverse
effect on the assets, liabilities, results of operations or financial condition
of Premenos. All pending suits, actions, claims, proceedings or investigations
relating to or involving Premenos or its subsidiaries (or any of their officers
or directors) before any court, arbitrator or administrative or governmental
body are adequately provided for in the 1997 Balance Sheet if and to the extent
such a provision is required by generally accepted accounting principles.
Neither Premenos nor any of its subsidiaries is subject to any judgment, decree,
injunction, rule or order of any court, and, to the best knowledge of Premenos,
neither Premenos nor any of its subsidiaries is subject to any governmental
restriction applicable to Premenos, which is reasonably likely (i) to have a
material adverse effect on the assets, liabilities, results of operations or
financial condition of Premenos or any of its subsidiaries or (ii) to cause a
material limitation on Harbinger's ability to operate the business of Premenos
or any of its subsidiaries after the Closing.
Section 3.10. Compliance with Law. Premenos and each of its subsidiaries
have all material authorizations, approvals, licenses and orders of and from all
governmental and regulatory offices and bodies necessary to carry on their
businesses as they are currently being conducted, to own or hold under lease the
properties and assets they own or hold under lease and to perform all of their
obligations under the agreements to which they are a party, and each has been
and is in compliance with all applicable laws, regulations and administrative
orders of any country, state or municipality or of any subdivision of any
thereof to which its business and its employment of labor or its use or
occupancy of properties or any part thereof are subject, the failure to obtain
or the violation of which would have a material adverse effect upon the assets,
liabilities, results of operations or financial condition of Premenos.
Section 3.11. Material Contracts. The Premenos Disclosure Letter contains
a correct and complete list of the following (the "Premenos Material
Contracts"):
(a) all bonds, debentures, notes, loans, mortgages, indentures or
guarantees to which Premenos or its subsidiaries is a party or by which any
of its properties or assets (real, personal or mixed, tangible or
intangible) is bound;
(b) all leases to which Premenos or its subsidiaries is a party or by
which any of its properties or assets (real, personal or mixed, tangible or
intangible) is bound involving an annual rental payment in excess of
$25,000 individually;
(c) all credit or loan commitments to Premenos or its subsidiaries
which are outstanding, together with a brief description of such
commitments and the name of each financial institution granting the same;
(d) all contracts or agreements which limit or restrict Premenos, its
subsidiaries or any of the Premenos Executives from engaging in any
business in any jurisdiction and all contracts or agreements that limit or
restrict others from competing with Premenos or its subsidiaries in any
jurisdiction;
(e) all contracts or agreements requiring Premenos or its subsidiaries
to register its capital stock or securities under federal or state
securities law; and
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(f) all existing contracts and commitments (other than those described
in subparagraphs (a), (b), (c), (d) or (e) of this Section 3.11 and the
Premenos Benefit Plans) to which Premenos or any of its subsidiaries is a
party or by which its properties or assets may be bound involving an annual
commitment or annual payment by any party to such contract or commitment of
more than $50,000 individually.
True and complete copies of all Premenos Material Contracts, including all
amendments, have been made available to Harbinger. The Premenos Material
Contracts are valid and enforceable in accordance with their respective terms
with respect to Premenos and valid and, to the best knowledge of Premenos,
enforceable in accordance with their respective terms with respect to any other
party to a Premenos Material Contract, in each case to the extent material to
the business and operations of Premenos and subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies. To the best knowledge of Premenos and except for
events or occurrences, the consequences of which, individually or in the
aggregate, would not have a material adverse effect on the assets, liabilities,
results of operations or financial condition of Premenos, there is not under any
of the Premenos Material Contracts any existing breach, default or event of
default by Premenos or its subsidiaries or event that with notice or lapse of
time or both would constitute a breach, default or event of default by Premenos
or its subsidiaries, nor has Premenos received notice of, or made a claim with
respect to, any breach or default by any other party to a Premenos Material
Contract.
Section 3.12. Tax Returns; Taxes. Premenos and each of its subsidiaries
have duly filed all federal, state, local and foreign tax returns required to be
filed by them and have duly paid or made adequate provision for the payment of
all taxes which are due and payable pursuant to such returns or pursuant to any
assessment with respect to taxes in such jurisdictions, whether or not in
connection with such returns. The liability for taxes reflected in the 1997
Balance Sheet is sufficient for the payment of all unpaid taxes, whether or not
disputed, that are accrued or applicable for the period ended September 30, 1997
and for all years and periods ended prior to that date. All deficiencies
asserted as a result of any examinations by the Internal Revenue Service or any
other taxing authority have been paid, fully settled or adequately provided for
in the 1997 Balance Sheet. There are no pending claims asserted for taxes of
Premenos or its subsidiaries or outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return of Premenos or its
subsidiaries for any period. Each of Premenos and its subsidiaries has made all
estimated income tax deposits and all other required tax payments or deposits
and has complied for all prior periods in all material respects with the tax
withholding provisions of all applicable federal, state, local, foreign and
other laws. Premenos has made available to Harbinger true, complete and correct
copies of its federal income tax returns for the last three taxable years and
made available all other tax returns requested by Harbinger.
Section 3.13. Employee Benefit Plans. (a) Definition of Benefit Plans.
For purposes of this Section 3.13, the term "Premenos Benefit Plan" means any
plan, program, arrangement, fund, policy, practice or contract which, through
which or under which Premenos or any Premenos ERISA Affiliate provides or has an
obligation to provide benefits or compensation to or on behalf of employees or
former employees of Premenos or any Premenos ERISA Affiliate, whether formal or
informal, whether or not written, including but not limited to the following:
(i) Arrangements -- any bonus, incentive compensation, stock option,
deferred compensation, commission, severance pay, golden parachute or other
compensation plan or rabbi trust;
(ii) ERISA Plans -- any "employee benefit plan" (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), including, but not limited to, any multiemployer plan (as
defined in Section 3(37) and Section 4001(a) (3) of ERISA), defined benefit
plan, profit sharing plan, money purchase pension plan, 401(k) plan,
savings or thrift plan, or any plan, fund, program, arrangement or practice
providing for medical (including post-retirement medical), hospitalization,
accident, sickness, disability, or life insurance benefits; and
(iii) Other Employee Fringe Benefits -- any stock purchase, vacation,
scholarship, sick days, day care, prepaid legal services, dependent care or
other fringe benefits plans, programs, arrangements, contracts or
practices.
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(b) Premenos ERISA Affiliate. For purposes of this Section 3.13, the term
"Premenos ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with Premenos is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code.
(c) Identification of Benefits Plans. Except as set forth in the Premenos
Disclosure Letter and except for Premenos Benefit Plans which have been
terminated and with respect to which neither Premenos nor any Premenos ERISA
Affiliate has any financial, administrative or other liability, obligation or
responsibility, Premenos does not maintain, nor has it at any time established
or maintained, nor has it at any time been obligated to make, or otherwise made,
contributions to or under or otherwise participated in any Premenos Benefit
Plan.
(d) Compliance With All Statutes, Orders and Rules. Premenos and each
Premenos ERISA Affiliate is in compliance with the requirements prescribed by
and all statutes, orders and governmental rules and regulations applicable to
Premenos Benefit Plans and all reports and disclosures relating to Premenos
Benefit Plans required to be filed with or furnished to any governmental entity,
participants or beneficiaries prior to the Closing Date have been or will be
properly completed and filed or furnished in a timely manner and in accordance
with applicable laws. Each Premenos Benefit Plan has been administered according
to its terms (except for those terms which are inconsistent with the changes
required by statutes, regulations, and rulings for which changes are not yet
required to be made, in which case the plan has been administered in accordance
with the provisions of those statutes, regulations and rulings) and applicable
law.
(e) MEPPA Liability/Post-Retirement Medical Benefits. Neither Premenos nor
any Premenos ERISA Affiliate maintains, or has at anytime established or
maintained, or has at any time been obligated to make, or made, contributions to
or under any multiemployer plan (as defined in Section 3(37) and Section
4001(a)(3) of ERISA). Premenos does not maintain, nor has at any time
established or maintained, nor has at any time been obligated to make, or made,
contributions to or under any plan which provides post-retirement medical or
health benefits with respect to former employees of Premenos. There is no lien
upon any property of Premenos or any Premenos ERISA Affiliate outstanding
pursuant to Section 412(n) of the Code in favor of any Premenos Benefit Plan. No
assets of Premenos or any Premenos ERISA Affiliate have been provided as
security for any Premenos Benefit Plan pursuant to Section 401(a) (29) of the
Code.
(f) Documentation. Premenos has made available to Harbinger a true and
complete copy of the following documents, if applicable, with respect to each
Premenos Benefit Plan identified in Premenos Disclosure Letter: (1) all
documents, including any insurance contracts and trust agreements, setting forth
the terms of Premenos Benefit Plan, or if there are no such documents evidencing
Premenos Benefit Plan, a full (in all material respects) description of Premenos
Benefit Plan, (2) any required ERISA summary plan description and any other
summary of plan provisions provided to participants or beneficiaries for each
such Premenos Benefit Plan, (3) any required annual reports filed for the most
recent three plan years and most recent financial statements or periodic
accounting or related plan assets with respect to each Premenos Benefit Plan,
(4) each favorable determination letter, opinion or ruling from the Internal
Revenue Service ("IRS") for each Premenos Benefit Plan, the assets of which are
held in trust, to the effect that such trust is exempt from federal income tax,
including any outstanding request for a determination letter and (5) each
opinion or ruling from the Department of Labor or the Pension Benefit Guaranty
Corporation ("PBGC") with respect to any such Premenos Benefit Plan.
(g) Qualified Status. Each Premenos Benefit Plan identified in the
Premenos Disclosure Letter that is funded through a trust or insurance contract
has at all times satisfied in all material respects, by its terms and in its
operation, all applicable requirements for an exemption from federal income
taxation under Section 501(a) of the Code. Except for the Premenos 401(k)
Savings & Retirement Plan (the "Premenos 401(k) Plan") neither Premenos nor any
Premenos ERISA Affiliate maintains or previously maintained a Premenos Benefit
Plan which meets or was intended to meet the requirements of Section 401(a) of
the Code. Any determination letter issued by the IRS to the effect that the
Premenos 401(k) Plan qualifies under Section 401(a) of the Code and that the
related trust is exempt from taxation under Section 501(a) of the Code remains
in effect and has not been revoked.
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The Premenos 401(k) Plan has been tested for compliance with, and has
satisfied the requirements of, Section 401(k)(3), 401(m)(2) and 415 of the Code
for each plan year ending prior to the Closing Date.
(h) Legal Actions. There are no actions, audits, suits or claims known to
Premenos which are pending or threatened against any Premenos Benefit Plan, any
fiduciary of any of the Premenos Benefit Plans with respect to the Premenos
Benefit Plans or against the assets of any of the Premenos Benefit Plans, except
claims for benefits made in the ordinary course of the operation of such plans.
(i) Funding. Premenos and each Premenos ERISA Affiliate has made
fully and timely payment of all amounts required to be contributed under
the terms of each Premenos Benefit Plan and applicable law or required to
be paid as expenses under such Premenos Benefit Plan and no excise taxes
are assessable as a result of any nondeductible or other contributions made
or not made to a Premenos Benefit Plan. The assets of all Premenos Benefit
Plans which are required under applicable laws to be held in trust are in
fact held in trust, and the assets of each such Premenos Benefit Plan equal
or exceed the liabilities of each such plan. The liabilities of each other
Premenos Benefit Plan are properly and accurately reported on the financial
statements and records of Premenos. The assets of each Premenos Benefit
Plan are reported at their fair market value on the books and records of
each plan.
(ii) Liabilities. Neither Premenos nor any Premenos ERISA Affiliate
is subject to any material liability, tax or penalty whatsoever to any
person whomsoever as a result of Premenos's or any Premenos ERISA
Affiliate's engaging in a breach of fiduciary duty or a prohibited
transaction under ERISA or the Code, and Premenos has no knowledge of any
circumstances which reasonably might result in any such material liability,
tax or penalty as a result of any breach of fiduciary duty under ERISA or
in any duty to indemnify any other person for any such liability.
(i) Excess Parachute Payments. No payment required to be made to any
employee associated with Premenos as a result of the transactions contemplated
hereby under any contract or otherwise will, if made, constitute an "excess
parachute payment" within the meaning of Section 280G of the Code.
(j) COBRA. Premenos and each Premenos ERISA Affiliate have complied in all
material respects with the continuation coverage requirements of Section 4980B
of the Code and ERISA Sections 601 through 608.
(k) No Acceleration of Liability Under Benefit Plans. The consummation of
the transactions contemplated hereby will not accelerate or increase any
liability under any Premenos Benefit Plan because of an acceleration or increase
of any of the rights or benefits to which employees of Premenos or any Premenos
ERISA Affiliate may be entitled thereunder.
(l) Leased Employees. Premenos has made no representations or warranties
(whether written or oral, express or implied) contractually or otherwise to any
client or customer of Premenos that Premenos employees rendering services to
such client or customer cannot be treated as "leased employees" (within the
meaning of Section 414(n) of the Code) of such client or customer or that such
employees would not be required to participate under any pension benefit plan
(within the meaning of Section 3(2) of ERISA) (a "Pension Benefit Plan") of such
client or customer of Premenos.
(m) Defined Benefit Plans/Money Purchase Plans. With respect to any
Premenos Benefit Plan, no termination liability to the PBGC has been or is
expected to be incurred or would be incurred if such Premenos Benefit Plan were
terminated on the Closing Date and the current present value of all projected
benefit liabilities under each of the Premenos Benefit Plans subject to Title IV
of ERISA would not, as of the Closing Date, exceed the then current value of the
assets of such Premenos Benefit Plan. No Premenos Benefit Plan which is subject
to Section 302 of ERISA or Section 412 of the Code has suffered any accumulated
funding deficiency within the meaning of Section 302 of ERISA and Section 412 of
the Code. Neither Premenos nor any Premenos ERISA Affiliate has any outstanding
liability under Section 4971 of the Code. As of the Closing Date, all required
premium payments for Premenos Benefit Plans have been made, when due, to the
PBGC, and all required premium payments for the Premenos Benefit Plans for plan
years commencing in the plan year which would include the Closing Date have been
made to the PBGC. No event or condition exists with respect to any Premenos
Benefit Plan which could be deemed a "reportable event" as
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defined in Section 4043 of ERISA, with respect to which the 30-day notice
requirement has not been waived and which could result in a liability to
Harbinger, and no condition exists which would subject Harbinger to a fine under
Section 4071 of ERISA. There is no lien upon any property of Premenos or any
Premenos ERISA Affiliate outstanding pursuant to Section 4068 of ERISA in favor
of the PBGC.
Section 3.14. Labor Relations. Each of Premenos and its subsidiaries is
in compliance in all material respects with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours, and is not engaged in any unfair labor or unlawful
employment practice. There is no unlawful employment practice discrimination
charge involving Premenos or its subsidiaries pending before the Equal
Employment Opportunity Commission ("EEOC"), EEOC recognized state "referral
agency" or any other governmental agency. There is no unfair labor practice or
similar charge or complaint against Premenos or its subsidiaries pending before
the National Labor Relations Board ("NLRB") or any other governmental agency.
There is no labor strike, dispute, slowdown or stoppage actually pending or, to
the best knowledge of the executive officers of Premenos, threatened against or
involving or affecting Premenos or its subsidiaries and no NLRB or other labor
union representation question exists respecting any employees of Premenos or its
subsidiaries. No grievance or arbitration proceeding is pending against Premenos
or its subsidiaries and no written claim therefor exists. There is no collective
bargaining agreement that is binding on Premenos or its subsidiaries.
Section 3.15. Insurance. Premenos has provided to Harbinger a true and
complete list of its current insurance coverages for Premenos and its
subsidiaries, including names of carriers, amounts of coverage and premiums
therefor. Each of Premenos and its subsidiaries believes that such corporation
has been and is insured with respect to its properties and the conduct of its
business in such amounts and against such risks as are reasonable in relation to
its business and will use its reasonable efforts to maintain such insurance at
least through the Effective Time. Premenos has made available to Harbinger true
and complete copies of all insurance policies covering Premenos or its
subsidiaries, their properties, assets, employees or operations.
Section 3.16. Title to Properties and Related Matters. (a) Premenos and
its subsidiaries have good and valid title to or valid leasehold interests in
its properties reflected in the 1997 Balance Sheet or acquired after the date of
the 1997 Balance Sheet (other than properties sold or otherwise disposed of in
the ordinary course of business), and all of such properties are held free and
clear of all title defects, liens, encumbrances and restrictions, except, with
respect to all such properties, (a) mortgages and liens securing debt reflected
as liabilities on the 1997 Balance Sheet and (b) (i) liens for current taxes and
assessments not in default, (ii) mechanics', carriers', workmen's, repairmen's,
statutory or common law liens either not delinquent or being contested in good
faith, and (iii) liens, mortgages, encumbrances, covenants, rights of way,
building or use restrictions, easements, exceptions, variances, reservations and
other matters or limitations of any kind, if any, which either individually or
in the aggregate do not have a material adverse effect on Premenos's or any of
its subsidiaries' use of the property affected. The provisions of this Section
3.16 do not apply to intellectual property rights.
(b) The Premenos Disclosure Letter sets forth a true and complete list of
all leases and agreements of Premenos or its subsidiaries granting possession of
or rights to real or personal property and involving an annual commitment or
annual payment of more than $10,000 individually in the case of any real
property and $25,000 individually in the case of any personal property (the
"Scheduled Leases"). All such Scheduled Leases are in full force and effect and
constitute the legal, valid, binding and enforceable obligations of Premenos or
its subsidiaries, and, to the best knowledge of Premenos, are legal, valid,
binding and enforceable in accordance with their respective terms with respect
to each other party to a Scheduled Lease, in each case to the extent material to
the business and operations of Premenos taken as a whole and subject in each
case to applicable bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally, general equitable principles and the
discretion of courts in granting equitable remedies. Premenos or one of its
subsidiaries has physical possession of all real property, equipment and other
assets which are covered by Scheduled Leases. Except for events and occurrences,
the consequences of which, individually or in the aggregate, would not have a
material adverse effect on the assets, liabilities, results of operations or
financial position of Premenos, there are no existing defaults of Premenos or
its subsidiaries with respect to
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such Scheduled Leases or, to the best knowledge of Premenos, any of the other
parties to such Scheduled Leases (or events or conditions which, with notice or
lapse of time, or both, would constitute a default).
Section 3.17. Environmental Matters. To the best knowledge of Premenos,
Premenos is in compliance in all material respects with all statutes,
regulations and ordinances relating to the protection of human health and the
environment including, without limitation, the Clean Water Act, 33 U.S.C.
sec. 1251 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
sec. 6901 et seq., the Clean Air Act, 42 U.S.C. sec. 7401 et seq., the Toxic
Substances Control Act, 15 U.S.C. sec. 2601 et seq., the Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. sec. 11001 et seq., the regulations
developed pursuant to these statutes and the corresponding state and local
statutes, ordinances and regulations. There has been no release by Premenos, its
subsidiaries or, to the best knowledge of Premenos, by any other person of a
hazardous substance as that term is defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. sec. 9601(14), into
the environment at any property owned or leased by Premenos or its subsidiaries
(the "Premises") including, without limitation, any such release in the soil or
groundwater underlying the Premises the liability for which could have a
material adverse effect on the assets, liabilities, results of operations or
financial position of Premenos and its subsidiaries. To the best knowledge of
Premenos, there is no asbestos, polychlorinated biphenyls or underground storage
tanks located on the Premises and there have been no releases of asbestos,
polychlorinated biphenyls or materials stored in underground storage tanks,
including, without limitation, petroleum or petroleum-based materials. Neither
Premenos nor any of its subsidiaries has received notice of any violation of any
environmental statute or regulation nor has it been advised of any claim or
liability pursuant to any environmental statute or regulation brought by any
governmental agency or private party.
Section 3.18. Patents, Trademarks, Trade Names. The Premenos Disclosure
Letter sets forth a true and complete list of (i) all patents, trademarks, trade
names (including all U.S. federal and state registrations and foreign
registrations and applications pertaining thereto) and registered copyrights
owned by Premenos or its subsidiaries (collectively, the "Premenos Proprietary
Intellectual Property") and (ii) all patents, trademarks, trade names,
copyrights, technology and processes used by Premenos or its subsidiaries in its
business which are material to its business and are used pursuant to a license
or other right granted by a third party (collectively, the "Premenos Licensed
Intellectual Property", and together with the Premenos Proprietary Intellectual
Property referred to as "Premenos Intellectual Property"). A true and complete
list of all such licenses with respect to Premenos Licensed Intellectual
Property is set forth in the Premenos Disclosure Letter. Neither Premenos nor
any of its subsidiaries has granted any right, license or other interest in the
Premenos Proprietary Intellectual Property to any third party, except for
enduser licenses granted by Premenos to its customers in the ordinary course.
Each of the federal, state and foreign registrations pertaining to the Premenos
Proprietary Intellectual Property is valid and in full force and effect. All
required filings in association with such registrations have been properly made
and all required fees have been paid. Premenos and its subsidiaries own, or have
the right to use pursuant to valid and effective agreements, all Premenos
Intellectual Property, free and clear of any lien, claim or encumbrance, and the
consummation of the transactions contemplated by this Agreement will not alter
or impair any such rights. No claims are pending against Premenos or any of its
subsidiaries by any person with respect to the use of any Premenos Intellectual
Property or challenging or questioning the validity or effectiveness of any
license or agreement relating to the same, and the current use by Premenos and
its subsidiaries of the Premenos Intellectual Property does not, to the best
knowledge of Premenos, infringe on the rights of any third party. The conduct by
Premenos and its subsidiaries of their respective business, including the
provision of services to customers, as currently conducted and as proposed to be
conducted by Premenos, does not and will not conflict with or infringe upon any
patent, copyright, trade secret, trademark or other intellectual property right
of any third party, and Premenos has not received notice of any such alleged
infringement. The Premenos Disclosure Letter sets forth a list of all
jurisdictions in which Premenos or any of its subsidiaries is operating under a
trade name, and each jurisdiction in which any such trade name is registered.
Section 3.19. Licensed Software. (a) The Premenos Disclosure Letter sets
forth a true and complete list of: (i) all software owned by Premenos and each
of its subsidiaries and used in connection with the business of Premenos and its
subsidiaries or licensed to third parties (the "Premenos Proprietary Software");
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and (ii) all software (other than the Premenos Proprietary Software) used in
connection with the business of Premenos and its subsidiaries (the "Premenos
Licensed Software" and together with the Premenos Proprietary Software, the
"Premenos Software"). Premenos's proprietary software products may incorporate
Premenos Proprietary Software (that is, software owned by Premenos and
identified as such in the Premenos Disclosure Letter) and code software that is
owned by third parties and licensed to Premenos (all of such third party
software is included in the Premenos Licensed Software and identified as such in
the Premenos Disclosure Letter). The Premenos Proprietary Software consists of:
(i) source and object code embodied in magnetic media; and (ii) all development
and procedural tools necessary to maintain the Premenos Proprietary Software,
including licenses to use compilers, assemblers, libraries and other aids.
Premenos and each of its subsidiaries employ individuals who are qualified to
maintain the Premenos Software and the related computer hardware used by such
corporation in its operations (the "Premenos Hardware").
(b) Premenos and each of its subsidiaries have all right, title and
interest in and to all intellectual property rights in the Premenos Proprietary
Software (other than any defects in title which are not, individually or in the
aggregate, material), and subject to the rights of end-user licensees under
licenses granted by Premenos to its customers in the ordinary course of
business. The Premenos Proprietary Software is free and clear of all liens,
claims and encumbrances (other than any liens, claims or encumbrances which are
not, individually or in the aggregate, material). The use of the Premenos
Licensed Software and the use and distribution of the Premenos Proprietary
Software does not breach any material terms of any material contract between
Premenos and any of its subsidiaries and any third party. The Premenos
Disclosure Letter sets forth a true and complete list of all license agreements
in favor of Premenos or any of its subsidiaries relating to the Premenos
Licensed Software (the "Premenos License Agreements"). To the best knowledge of
Premenos, Premenos and each of its subsidiaries have been granted under the
Premenos License Agreements valid and subsisting license rights with respect to
all software comprising the Premenos Licensed Software. Premenos and each of its
subsidiaries are in compliance in all material respects with each of the terms
and conditions of each of the Premenos License Agreements. In the case of any
commercially available "shrink-wrap" software programs (such as Lotus 1-2-3),
Premenos and its subsidiaries have not made and are not using any unauthorized
copies of any such software programs and none of the employees, agents or
representatives of Premenos or its subsidiaries have made or are using any such
unauthorized copies.
(c) To the best knowledge of Premenos, the Premenos Proprietary Software
and the Premenos Licensed Software does not infringe any patent, copyright, or
trade secret or any other intellectual property right of any third party. The
source code for the Premenos Proprietary Software has been maintained in
confidence.
(d) The Premenos Proprietary Software was developed by Premenos entirely
for its own account, and the Premenos Proprietary Software was: (i) developed by
Premenos's employees working within the scope of their employment at the time of
such development; (ii) developed by agents, consultants, contractors or others
who have executed appropriate instruments of assignment in favor of Premenos as
assignee that have conveyed to Premenos ownership of all of their intellectual
property rights in the Premenos Proprietary Software; or (iii) acquired by
Premenos in connection with acquisitions in which Premenos obtained appropriate
representations and warranties from the transferring party relating to the title
to such Premenos Proprietary Software. Neither Premenos nor any of its
subsidiaries has received notice from any third party claiming any right, title
or interest in the Premenos Proprietary Software.
(e) There are no agreements or arrangements in effect with respect to the
marketing, distribution, licensing or promotion of the Premenos Proprietary
Software by any independent sales person, distributor, sublicensee or other
remarketer or sales organization.
(f) Neither Premenos nor any of its subsidiaries has granted any rights or
licenses in or to the Premenos Software to any third party, except for end-user
license agreements granted by Premenos to its customers in the ordinary course
of business.
(g) The Premenos Software and the Premenos Hardware are adequate in all
material respects with the other assets of Premenos and its subsidiaries to run
the business of Premenos and its subsidiaries in the same manner as such
business has operated since September 30, 1996. The Premenos Disclosure Letter
contains a summary description of any problems experienced by Premenos or its
subsidiaries in the past twelve months
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with respect to the Premenos Software or Premenos Hardware and the provision of
services to Premenos clients which resulted, or reasonably could be expected to
result, in a material disruption of the provision of services by Premenos or its
subsidiaries to clients generally for a period equal to or exceeding five days.
(h) All Premenos Software is year 2000 compliant (that is, (i) the Premenos
Software is capable of correctly processing, providing and receiving data within
and between the 20th and 21st centuries (including accounting for all required
leap year calculations) and (ii) all date fields in the Premenos Software used
for (4) digit year fields).
Section 3.20. Trade Secrets. To the best knowledge of Premenos, no third
party has claimed that any officer, director or former or present employee of
Premenos or any of its subsidiaries has, in respect of his or its activities on
behalf of Premenos or any of its subsidiaries to date, violated any of the terms
or conditions of his or her employment contract with such third party, or
disclosed or utilized any trade secrets or proprietary information or
documentation of such third party, or interfered in the employment relationship
between such third party and any of his or her or its employees nor has any such
violation, disclosure or utilization occurred. Neither Premenos or any of its
subsidiaries nor, to the best knowledge of Premenos, any of their officers,
directors or employees have wrongfully utilized any trade secrets or any
information or documentation proprietary to any other person or entity,
including, but not limited to, confidential business information, and neither
Premenos or its subsidiaries nor, to the best knowledge of Premenos, any of its
officers, directors or employees has violated any obligations of confidentiality
with any third party in connection with the development, manufacture and sale of
any products or services of Premenos or any of its subsidiaries.
Section 3.21. Proxy Statement and Registration Statement. The information
with respect to Premenos, its officers, directors and affiliates in the
definitive proxy statement to be furnished to the stockholders of Premenos and
Harbinger (the "Proxy Statement") that will form a part of the Registration
Statement on Form S-4 relating to the shares of Harbinger Common Stock to be
issued in the Merger (the "Registration Statement") or in the Registration
Statement will not, in the case of the Proxy Statement, on the date the Proxy
Statement is first mailed to stockholders of Premenos or on the date of the
stockholders meetings referred to in Section 5.5, or, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, as such Proxy Statement or Registration Statement is then amended or
supplemented, 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 were
made, not misleading.
Section 3.22. Pooling. Coopers & Lybrand has advised Premenos that based
upon inquiries and their examination of the financial statements of Premenos
they believe that the criteria for pooling accounting treatment relative to
Premenos has been satisfied.
Section 3.23. Transactions with Affiliates. No stockholder, officer or
director of Premenos or its subsidiaries, or any person with whom any such
stockholder, officer or director has any direct or indirect relation by blood,
marriage or adoption, or any entity in which any such person, owns any
beneficial interest (other than a publicly held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than 1% of the stock of which is beneficially owned by all such persons)
has any interest in: (i) any contract, arrangement or understanding with, or
relating to, the business or operations of Premenos or its subsidiaries; (ii)
any loan, arrangement, understanding, agreement or contract for or relating to
indebtedness of Premenos or its subsidiaries; or (iii) any property (real,
personal or mixed), tangible or intangible, used or currently intended to be
used in, the business or operations of Premenos or its subsidiaries.
Section 3.24. Brokers, Finders and Investment Bankers. Neither Premenos
nor any of its officers, directors or employees has employed any broker, finder
or investment banker or incurred any liability for any investment banking fees,
financial advisory fees, brokerage fees or finders' fees in connection with the
transactions contemplated by this Agreement, other than Premenos employing
Hambrecht & Quist LLC and The Great Circle Group LLC, the fees and expenses of
which will be paid by Premenos.
Section 3.25. Disclosure. No representation, warranty or covenant made by
Premenos in this Agreement, the Premenos Disclosure Letter or the Exhibits
attached to this Agreement contains an untrue
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statement of a material fact or omits to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein not misleading.
Section 3.26. Opinion of Financial Advisor. The financial advisor of
Premenos, Hambrecht & Quist LLC, has delivered to Premenos an opinion dated the
date of this Agreement to the effect that the consideration to be received by
the holders of Premenos Common Stock in the Merger is fair to Premenos from a
financial point of view.
Section 3.27. No Existing Discussions. As of the date hereof, Premenos is
not engaged, directly or indirectly, in any negotiations or discussions with any
other party with respect to a Competing Offer (as defined in Section 5.8).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF HARBINGER
With such exceptions as are set forth in a letter (the "Harbinger
Disclosure Letter") delivered by Harbinger to Premenos prior to the execution of
this Agreement, Harbinger represents and warrants to Premenos as follows:
Section 4.1. Organization. Each of Harbinger and its two material
operating subsidiaries identified in the Harbinger Disclosure Letter (the
"Harbinger Subsidiaries") is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each of
Harbinger and the Harbinger Subsidiaries is duly qualified to transact business,
and is in good standing, as a foreign corporation in each jurisdiction where the
character of its activities requires such qualification, except where the
failure to so qualify would not have a material adverse effect on the assets,
liabilities, results of operations or financial condition of Harbinger and the
Harbinger Subsidiaries taken as a whole. Harbinger has delivered to Premenos
accurate and complete copies of the Articles or Certificate of Incorporation and
Bylaws, as currently in effect, of Harbinger and the Harbinger Subsidiaries, and
has made available to Premenos the minute books and stock records of Harbinger
and the Harbinger Subsidiaries. The Harbinger Disclosure Letter contains a true
and correct list of all of the jurisdictions in which each of Harbinger or the
Harbinger Subsidiaries is qualified to do business as a foreign corporation.
Section 4.2. Authorization. Each of Harbinger and HarbingerSub has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement and to consummate the Merger and
the other transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Harbinger and HarbingerSub, the performance by
each of Harbinger and HarbingerSub of its respective obligations under this
Agreement and the consummation of the Merger and the other transactions provided
for in this Agreement have been duly and validly authorized by all necessary
corporate action on the part of Harbinger and HarbingerSub. The Boards of
Directors of Harbinger and HarbingerSub have approved the execution, delivery
and performance of this Agreement and the consummation of the Merger and the
other transactions provided for in this Agreement. This Agreement has been duly
executed and delivered by each of Harbinger and HarbingerSub and constitutes the
valid and binding agreement of each of Harbinger and HarbingerSub, enforceable
against each of Harbinger and HarbingerSub in accordance with its terms, subject
to applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles and
the discretion of courts in granting equitable remedies.
Section 4.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the Merger and
the other transactions contemplated by this Agreement, and the fulfillment of
and compliance with the terms and conditions of this Agreement do not violate or
conflict with, constitute a breach of or default under, result in the loss of
any material benefit under, or permit the acceleration of any obligation under,
(i) any term or provision of the Articles or Certificate of Incorporation or
Bylaws of Harbinger or the Harbinger Subsidiaries, (ii) any material Harbinger
contract, (iii) any judgment, decree or order of any court or governmental
authority or agency to which Harbinger or any of the Harbinger
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Subsidiaries is a party or by which Harbinger, the Harbinger Subsidiaries or any
of their respective properties is bound, or (iv) any statute, law, regulation or
rule applicable to Harbinger, the Harbinger Subsidiaries, so as to have, in the
case of subsections (ii) through (iv) above, a material adverse effect on the
assets, liabilities, results of operations or financial condition of Harbinger
and the Harbinger Subsidiaries taken as a whole. Except for compliance with the
applicable requirements of the HSR Act, the Securities Act, the Exchange Act,
applicable Canadian law, applicable state securities laws and filing and
recordation of the Certificate of Merger as required by the DGCL no consent,
approval, order or authorization of, or registration, declaration or filing
with, any government agency or public or regulatory unit, agency, body or
authority with respect to Harbinger and the Harbinger Subsidiaries is required
in connection with the execution, delivery or performance of this Agreement by
Harbinger or HarbingerSub or the consummation of the transactions contemplated
by this Agreement by Harbinger or HarbingerSub , the failure to obtain which
would have a material adverse effect upon the assets, liabilities, results of
operations or financial condition of Harbinger and the Harbinger Subsidiaries
taken as a whole.
Section 4.4. Capitalization. The authorized capital stock of Harbinger
consists of (i) 100,000,000 shares of common stock, $.0001 par value per share,
(ii) 20,000,000 shares of preferred stock, $.0001 par value per share
("Harbinger Preferred Stock"), 4,000,000 shares of which have been designated
Zero Coupon Preferred Stock, (iii) 395,000 shares of Preferred Stock, Series B,
$10.00 par value per share (the "Series B Preferred Stock"), and (iv) 250,000
shares of Preferred Stock, Series C, par value $10.00 per share (the "Series C
Preferred Stock" and, together with Harbinger Common Stock, Harbinger Preferred
Stock and Series B Preferred Stock "Harbinger Capital Stock"). At September 30,
1997, there were 21,500,070 shares of Harbinger Common Stock issued and
outstanding, 4,000,000 shares of Zero Coupon Preferred Stock issued and
outstanding, no shares of Series B preferred stock issued and outstanding and no
shares of Series C Preferred Stock issued and outstanding. All shares of
Harbinger Capital Stock outstanding as of the date hereof are duly authorized,
validly issued, fully paid, nonassessable and free of pre-emptive rights. The
shares of Harbinger Common Stock to be issued in the Merger will be validly
issued, fully paid, nonassessable and free of pre-emptive rights. Except as set
forth in this Section 4.4, there are no shares of capital stock of Harbinger
outstanding, and there are no subscriptions, options, convertible securities,
calls, rights, warrants or other agreements, claims or commitments of any nature
whatsoever obligating Harbinger or the Harbinger Subsidiaries to issue,
transfer, deliver or sell, or cause to be issued, transferred, delivered or
sold, additional shares of the capital stock or obligating Harbinger or the
Harbinger Subsidiaries to grant, extend or enter into any such agreement or
commitment.
Section 4.5. Capital Stock of Harbinger Subsidiaries. The Harbinger
Disclosure Letter sets forth a true and complete list of the Harbinger
Subsidiaries, the jurisdiction in which each Harbinger Subsidiary is
incorporated or organized, and all shares of capital stock or other ownership
interests authorized, issued and outstanding of each Harbinger Subsidiary. The
outstanding shares of capital stock or other equity interests of each Harbinger
Subsidiary have been duly authorized and are validly issued, fully paid and
nonassessable. All shares of capital stock or other equity interests of each
Harbinger Subsidiary owned by Harbinger or the Harbinger Subsidiaries are owned
by Harbinger, either directly or indirectly, free and clear of all liens,
encumbrances, equities or claims.
Section 4.6. SEC Reports. Harbinger has made available to Premenos (i)
Harbinger's Annual Report on Form 10-K for the year ended December 31, 1996,
including all exhibits and items incorporated by reference, (ii) Harbinger's
Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30,
1997, including all exhibits and items incorporated by reference, (iii) the
proxy statement relating to Harbinger's Annual Meeting of Shareholders held on
April 25, 1997 and (iv) all Current Reports on Form 8-K filed by Harbinger with
the SEC since January 1, 1997, including all exhibits and items incorporated by
reference (items (i) through (iv) in this sentence being referred to
collectively as the "Harbinger SEC Reports"). As of their respective dates, the
Harbinger SEC Reports did not contain any untrue statement of a material fact or
omit to state any 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. Since December 31, 1995, Harbinger has filed all forms,
reports and documents with the SEC required to be filed by it pursuant to the
Securities Act and the Exchange Act and the rules and regulations promulgated
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under such acts, each of which complied as to form, at the time such form,
document or report was filed, in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the applicable rules
and regulations promulgated under such acts.
Section 4.7. Financial Statements. Harbinger has delivered to Premenos
(i) the audited consolidated balance sheets of Harbinger and its subsidiaries as
of December 31, 1996 and its audited consolidated statements of operations,
changes in shareholders' equity and cash flows for the fiscal years then ended,
including the notes thereto, examined by and accompanied by the report of KPMG
Peat Marwick LLP ("KPMG Peat Marwick"), independent public accountants and (ii)
the unaudited consolidated balance sheet of Harbinger and its subsidiaries as of
September 30, 1997, (the "Harbinger Balance Sheet") and its unaudited
consolidated statements of operations, stockholders' equity and cash flows for
the nine-month period then ended (all of the financial statements referred to in
this Section 4.7 are collectively referred to as the "Harbinger Financial
Statements"). The Harbinger Financial Statements have been prepared from, and
are in accordance with, the books and records of Harbinger and its consolidated
subsidiaries and, as applicable, present fairly the consolidated financial
position, consolidated results of operations, changes in stockholders' equity
and consolidated cash flows of Harbinger and its consolidated subsidiaries as of
the dates and for the periods indicated, in each case in conformity with
generally accepted accounting principles, consistently applied. The Harbinger
Disclosure Letter sets forth a true and complete list of all loss contingencies
(within the meaning of Statement of Financial Accounting Standards No. 5) of
Harbinger recorded during the period covered by the Harbinger Financial
Statements and exceeding $100,000 in the case of any single loss contingency or
$250,000 in the case of all loss contingencies.
Section 4.8. Absence of Certain Changes. (a) Since December 31, 1996 and
except for items specifically disclosed in the Harbinger SEC Reports filed
subsequent to December 31, 1996, there has not been (i) any material adverse
change in the assets, liabilities, results of operations, financial condition
or, to the best knowledge of Harbinger, business or prospects of Harbinger and
the Harbinger Subsidiaries taken as a whole, (ii) any damage, destruction, loss
or casualty to property or assets of Harbinger or the Harbinger Subsidiaries,
whether or not covered by insurance, which property or assets are material to
the operations or business of Harbinger and the Harbinger Subsidiaries taken as
a whole, (iii) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) in respect of the capital
stock of Harbinger or any redemption or other acquisition of any of the capital
stock of Harbinger or the Harbinger Subsidiaries (except for the acquisition of
Harbinger Common Stock in payment of the purchase price and related taxes upon
the exercise of stock options) or any split, combination or reclassification of
shares of capital stock declared or made by Harbinger, or (iv) any agreement to
do any of the foregoing.
(b) Since December 31, 1996 and except for items specifically disclosed in
the Harbinger SEC Reports filed subsequent to December 31, 1996, there have not
been (i) any extraordinary losses suffered, (ii) any material assets mortgaged,
pledged or made subject to any lien, charge or other encumbrance, (iii) any
material liability or obligation (absolute, accrued or contingent) incurred or
any material bad debt, contingency or other reserve increase suffered, except,
in each such case, in the ordinary course of business and consistent with past
practice, (iv) any material claims, liabilities or obligations (absolute,
accrued or contingent) paid, discharged or satisfied, other than the payment,
discharge or satisfaction, in the ordinary course of business and consistent
with past practice, of claims, liabilities and obligations reflected or reserved
against in Harbinger Financial Statements or incurred in the ordinary course of
business and consistent with past practice, (v) any material guaranteed checks,
notes or accounts receivable written off as uncollectible, except write-offs in
the ordinary course of business and consistent with past practice, (vi) any
write down of the value of any material asset or investment on Harbinger's books
or records, except for depreciation and amortization taken in the ordinary
course of business and consistent with past practice, (vii) any cancellation of
any material debts or waiver of any material claims or rights of substantial
value, or sale, transfer or other disposition of any properties or assets (real,
personal or mixed, tangible or intangible) of substantial value, except, in each
such case, in transactions in the ordinary course of business and consistent
with past practice and which in any event do not exceed $250,000 in the
aggregate, (viii) any single capital expenditure or commitment in excess of
$500,000 for additions to property or equipment, or aggregate capital
expenditures and commitments in excess of $10,000,000 (on a consolidated basis)
for additions to property or equipment,
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(ix) any transactions entered into other than in the ordinary course of
business, (x) any agreements to do any of the foregoing, or (xi) any other
events, developments or conditions of any character that has had or is
reasonably likely to have a material adverse effect on the assets, liabilities,
results of operations, financial condition or the business or prospects of
Harbinger and the Harbinger Subsidiaries taken as a whole.
Section 4.9. Legal Proceedings. There are no suits, actions, claims,
proceedings or investigations pending, or, to the best knowledge of Harbinger,
threatened against, relating to or involving Harbinger or the Harbinger
Subsidiaries (or any of their officers or directors) before any court,
arbitrator or administrative or governmental body, which, if finally determined
adversely, are reasonably likely, individually or in the aggregate, to have a
material adverse effect on the assets, liabilities, results of operations or
financial condition of Harbinger. All pending suits, actions, claims,
proceedings or investigations relating to or involving Harbinger or the
Harbinger Subsidiaries (or any of their officers or directors) before any court,
arbitrator or administrative or governmental body are adequately provided for in
the Harbinger Balance Sheet if and to the extent such a provision is required by
generally accepted accounting principles. Neither Harbinger nor the Harbinger
Subsidiaries is subject to any judgment, decree, injunction, rule or order of
any court, and, to the best knowledge of Harbinger, neither Harbinger nor the
Harbinger Subsidiaries is subject to any governmental restriction applicable to
Harbinger, which is reasonably likely (i) to have a material adverse effect on
the assets, liabilities, results of operations or financial condition of
Harbinger or the Harbinger Subsidiaries or (ii) to cause a material limitation
on Harbinger's ability to operate the business of Harbinger or the Harbinger
Subsidiaries after the Closing.
Section 4.10. Compliance with Law. Harbinger and the Harbinger
Subsidiaries have all material authorizations, approvals, licenses and orders of
and from all governmental and regulatory offices and bodies necessary to carry
on their businesses as they are currently being conducted, to own or hold under
lease the properties and assets they own or hold under lease and to perform all
of their obligations under the agreements to which they are a party, and each
has been and is in compliance with all applicable laws, regulations and
administrative orders of any country, state or municipality or of any
subdivision of any thereof to which its business and its employment of labor or
its use or occupancy of properties or any part thereof are subject, the failure
to obtain or the violation of which would have a material adverse effect upon
the assets, liabilities, results of operations or financial condition of
Harbinger.
Section 4.11. Patents, Trademarks, Trade Names. The Harbinger Disclosure
Letter sets forth a true and complete list of (i) all patents, trademarks, trade
names (including all U.S. federal and state registrations and foreign
registrations and applications pertaining thereto) and registered copyrights
owned by Harbinger or the Harbinger Subsidiaries (collectively, the "Harbinger
Proprietary Intellectual Property") and (ii) all patents, trademarks, trade
names, copyrights, technology and processes used by Harbinger or the Harbinger
Subsidiaries in their respective businesses which are material to their
respective businesses and are used pursuant to a license or other right granted
by a third party (collectively, the "Harbinger Licensed Intellectual Property",
and together with the Harbinger Proprietary Intellectual Property referred to as
"Harbinger Intellectual Property"). A true and complete list of all such
licenses with respect to Harbinger Licensed Intellectual Property is set forth
in the Harbinger Disclosure Letter. Neither Harbinger nor any of the Harbinger
Subsidiaries has granted any right, license or other interest in the Harbinger
Proprietary Intellectual Property to any third party, except for end-user
licenses granted by Harbinger to its customers in the ordinary course. Each of
the federal, state and foreign registrations pertaining to the Harbinger
Proprietary Intellectual Property is valid and in full force and effect. All
required filings in association with such registrations have been properly made
and all required fees have been paid. Harbinger and each of the Harbinger
Subsidiaries own, or have the right to use pursuant to valid and effective
agreements, all Harbinger Intellectual Property, free and clear of any lien,
claim or encumbrance, and the consummation of the transactions contemplated by
this Agreement will not alter or impair any such rights. No claims are pending
against Harbinger or the Harbinger Subsidiaries by any person with respect to
the use of any Harbinger Intellectual Property or challenging or questioning the
validity or effectiveness of any license or agreement relating to the same, and
to the best knowledge of Harbinger, the current use by Harbinger and the
Harbinger Subsidiaries of the Harbinger Intellectual Property does not infringe
on the rights of any third party. The conduct by Harbinger and the Harbinger
Subsidiaries of their respective businesses, including the provision of
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services to customers, as currently conducted and as proposed to be conducted,
does not and will not conflict with or infringe, to the best knowledge of
Harbinger, upon any patent, copyright, trade secret, trademark or other
intellectual property right of any third party, and Harbinger has not received
notice of any such alleged infringement. The Harbinger Disclosure Letter sets
forth a list of all jurisdictions in which Harbinger or the Harbinger
Subsidiaries is operating under a trade name, and each jurisdiction in which any
such trade name is registered.
Section 4.12. Licensed Software. (a) The software owned by Harbinger for
license to or use in connection with the business of Harbinger (the "Harbinger
Proprietary Software") consists of: (i) source and object code embodied in
magnetic media; and (ii) all development and procedural tools necessary to
maintain the Harbinger Proprietary Software, including licenses to use
compilers, assemblers, libraries and other aids. Harbinger employs individuals
who are familiar with the business of Harbinger and who are qualified to
maintain the Harbinger Proprietary Software and the related computer hardware
used by Harbinger in its operations (the "Harbinger Hardware").
(b) Harbinger has all right, title and interest in and to all intellectual
property rights in the Harbinger Proprietary Software (other than any defects in
title which are not, individually or in the aggregate, material), and subject to
the rights of end-user licensees under licenses granted by Harbinger to its
customers in the ordinary course of business). The Harbinger Proprietary
Software is free and clear of all liens, claims and encumbrances (other than any
liens, claims or encumbrances which are not, individually or in the aggregate,
material). The use of the software (other than the Harbinger Proprietary
Software) used by Harbinger in connection with the business of Harbinger (the
"Harbinger Licensed Software" and together with the Harbinger Proprietary
Software, the "Harbinger Software") and the use and distribution of the
Harbinger Proprietary Software does not breach any material terms of any
material contract between Harbinger and any third party. Harbinger proprietary
software products may incorporate Harbinger Proprietary Software (that is,
software owned by Harbinger) and code software that is owned by third parties
and licensed to Harbinger (all of which such third party software is included in
the Harbinger Licensed Software). To the best knowledge of Harbinger, Harbinger
has been granted under the license agreements relating to the Harbinger Licensed
Software (the "Harbinger License Agreements") valid and subsisting license
rights with respect to all software comprising the Harbinger Licensed Software.
Harbinger is in compliance in all respects with each of the terms and conditions
of each of the Harbinger License Agreements. In the case of any commercially
available "shrink-wrap" software programs (such as Lotus 1-2-3), Harbinger has
not made and is not using any unauthorized copies of any such software programs
and none of the employees, agents or representatives of Harbinger have made or
are using any such unauthorized copies.
(c) To the best knowledge of Harbinger, the Harbinger Proprietary Software
and the Harbinger Licensed Software do not infringe any United States patent,
copyright, or trade secret or any other intellectual property right of any third
party. The source code for the Harbinger Proprietary Software has been
maintained in confidence.
(d) The Harbinger Proprietary Software was developed by Harbinger for its
own account, and the Harbinger Proprietary Software was: (i) developed by
Harbinger employees working within the scope of their employment at the time of
such development; (ii) developed by agents, consultants, contractors or others
who have executed appropriate instruments of assignment in favor of Harbinger as
assignee that have conveyed to Harbinger ownership of all of their intellectual
property rights in the Harbinger Proprietary Software; or (iii) acquired by
Harbinger in connection with acquisitions in which Harbinger obtained
appropriate representations and warranties from the transferring party relating
to the title to such Harbinger Proprietary Software. Harbinger has not received
notice from any third-party claiming any right, title or interest in the
Harbinger Proprietary Software.
(e) There are no agreements or arrangements in effect with respect to the
marketing, distribution, licensing or promotion of the Harbinger Proprietary
Software by any independent sales person, distributor, sublicensee or other
remarketer or sales organization.
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(f) Harbinger has not granted any rights or licenses in or to the Harbinger
Software to any third party, except for end-user license agreements granted by
Harbinger to its customers in the ordinary course of business.
(g) The Harbinger Software and the Harbinger Hardware are adequate in all
material respects with the other assets of Harbinger to run the business of
Harbinger in the same manner as such business has operated since September 30,
1996. The Harbinger Disclosure Letter contains a summary description of any
problems experienced by Harbinger in the past twelve months with respect to the
Harbinger Software or Harbinger Hardware and the provision of services to
Harbinger's clients which resulted, or reasonably could be expected to result,
in any material disruption of the provision of services by Harbinger to clients
generally for a period equal to or exceeding five days.
(h) All Harbinger Software is year 2000 compliant (that is, (i) the
Harbinger Software is capable of correctly processing, providing and receiving
data within and between the 20th and 21st centuries (including accounting for
all required leap year calculations) and (ii) all date fields in the Harbinger
Software used for (4) digit year fields).
Section 4.13. Trade Secrets. To the best knowledge of Harbinger, no third
party has claimed that any officer, director or former or present employee of
Harbinger or the Harbinger Subsidiaries has, in respect of his or its activities
on behalf of Harbinger or the Harbinger Subsidiaries to date, violated any of
the terms or conditions of his or her employment contract with such third party,
or disclosed or utilized any trade secrets or proprietary information or
documentation of such third party, or interfered in the employment relationship
between such third party and any of his or her or its employees nor has any such
violation, disclosure or utilization occurred. Neither Harbinger or the
Harbinger Subsidiaries nor, to the best knowledge of Harbinger, any of their
officers, directors or employees have wrongfully utilized any trade secrets or
any information or documentation proprietary to any other person or entity,
including, but not limited to, confidential business information, and neither
Harbinger or the Harbinger Subsidiaries nor, to the best knowledge of Harbinger,
any of its officers, directors or employees has violated any obligations of
confidentiality with any third party in connection with the development,
manufacture and sale of any products or services of Harbinger or the Harbinger
Subsidiaries.
Section 4.14. Proxy Statement and Registration Statement. The information
with respect to Harbinger and the Harbinger Subsidiaries and each of their
respective officers, directors and affiliates in the Proxy Statement or in the
Registration Statement, will not, in the case of the Proxy Statement, on the
date the Proxy Statement is first mailed to stockholders of Premenos or on the
date of the stockholders' meetings referred to in Section 5.5, or, in the case
of the Registration Statement, at the time it becomes effective and at the
Effective Time, as such Proxy Statement or Registration Statement is then
amended or supplemented, 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 were made, not misleading. The Registration Statement and the Proxy
Statement will comply as to form with the applicable provisions of the
Securities Act and the Exchange Act.
Section 4.15. Pooling. KPMG Peat Marwick has advised Harbinger that, in
accordance with generally accepted accounting principles, the Merger qualifies
to be treated as a "pooling of interests" for accounting purposes.
Section 4.16. Brokers, Finders and Investment Bankers. Neither Harbinger
nor any of the Harbinger Subsidiaries, nor any of their respective officers,
directors or employees, has employed any broker, finder or investment banker or
incurred any liability for any investment banking fees, financial advisory fees,
brokerage fees or finders' fees in connection with the transactions contemplated
by this Agreement, other than Harbinger employing BT Alex. Brown Incorporated
and Endeavor Capital Management, the fees and expenses of which will be paid by
Harbinger.
Section 4.17. Disclosure. No representation, warranty or covenant made by
Harbinger in this Agreement, the Harbinger Disclosure Letter or the Exhibits
hereto contains any untrue statement of a material fact
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or omits to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not misleading.
Section 4.18. Opinion of Financial Advisor. The financial advisor of
Harbinger, BT Alex. Brown Incorporated, has delivered to Harbinger an opinion
dated the date of this Agreement to the effect that the Conversion Ratio is fair
to Harbinger from a financial point of view.
Section 4.19. Interim Operations of HarbingerSub. HarbingerSub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS
Section 5.1. Conduct of Business by Premenos. From the date of this
Agreement to the Effective Time, Premenos will and will cause each of its
subsidiaries to, except as required in connection with the Merger and the other
transactions contemplated by this Agreement and except as otherwise specifically
permitted hereunder or disclosed in the Premenos Disclosure Letter or consented
to in writing by Harbinger:
(a) Carry on its businesses in the ordinary course in substantially
the same manner as previously conducted and not engage in any new line of
business or enter into any agreement, transaction or activity or make any
commitment except those in the ordinary course of business and not
otherwise prohibited under this Section 5.1;
(b) Neither change nor amend its Certificate of Incorporation or
Bylaws;
(c) Other than pursuant to the exercise of employee stock options,
warrants and other convertible securities outstanding on the date hereof
and set forth in the Premenos Disclosure Letter, not issue, sell or grant
options, warrants or rights to purchase or subscribe to, or enter into any
arrangement or contract with respect to the issuance or sale of any of the
capital stock of Premenos or any of its subsidiaries or rights or
obligations convertible into or exchangeable for any shares of the capital
stock of Premenos or any of its subsidiaries and not make any changes (by
split-up, stock dividend, combination, reorganization or otherwise) in the
capital structure of Premenos or any of its subsidiaries;
(d) Not declare, pay or set aside for payment any dividend or other
distribution in respect of the capital stock or other equity securities of
Premenos or any of its subsidiaries and not redeem, purchase or otherwise
acquire any shares of the capital stock or other securities of Premenos or
any of its subsidiaries or rights or obligations convertible into or
exchangeable for any shares of the capital stock or other securities of
Premenos or any of its subsidiaries or obligations convertible into such,
or any options, warrants or other rights to purchase or subscribe to any of
the foregoing;
(e) Not acquire or enter into an agreement to acquire, by merger,
consolidation or purchase of stock or assets, any business or entity;
(f) Use its reasonable efforts to preserve intact the corporate
existence, goodwill and business organization of Premenos and its
subsidiaries, to keep the officers and employees of Premenos and its
subsidiaries available to Harbinger and to preserve the relationships of
Premenos and its subsidiaries with customers, suppliers and others having
business relations with Premenos or any of its subsidiaries;
(g) Not (i) create, incur or assume any long-term debt (including
obligations in respect of capital leases which individually involve annual
payments in excess of $10,000) or, except in the ordinary course of
business under existing lines of credit, create, incur or assume any
short-term debt for borrowed money, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice, (iii) make any loans
or advances to any other person, except in the ordinary course of business
and consistent with past practice, (iv) make any capital contributions to,
or investments in, any person, except in the ordinary course of business
and consistent with past practices
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with respect to investments, or (v) make any capital expenditure involving
in excess of $50,000 in the case of any single expenditure or $250,000 in
the case of all capital expenditures;
(h) Not enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers or directors or
grant any increase in the compensation of officers or directors, whether
now or in the future payable, including any increase pursuant to any
option, bonus, stock purchase, pension, profit-sharing, deferred
compensation, retirement or other plan, arrangement, contract or
commitment;
(i) Perform in all material respects all of its obligations under all
Premenos Material Contracts (except those being contested in good faith),
not enter into, assume or amend any contract or commitment that would be a
Premenos Material Contract other than contracts to provide products and
services entered into in the ordinary course of business;
(j) Use its reasonable efforts to maintain in full force and effect
and in the same amounts policies of insurance comparable in amount and
scope of coverage to that now maintained by Premenos;
(k) Use its reasonable efforts to continue to collect its accounts
receivable and pay its accounts payable in the ordinary course of business
and consistent with past practices;
(l) Prepare and file all federal, state, local and foreign returns for
taxes and other tax reports, filings and amendments thereto required to be
filed by it, and allow Harbinger, at its request, to review all such
returns, reports, filings and amendments at Premenos's offices prior to the
filing thereof, which review shall not interfere with the timely filing of
such returns;
(m) Not take any action the effect of which would be to cause the
Merger to be treated as a taxable transaction; and
(n) Not take any action the effect of which would be to cause the
Merger to be accounted for on a basis other than a pooling of interests.
In connection with the continued operation of the business of Premenos and
its subsidiaries between the date of this Agreement and the Effective Time,
Premenos shall confer in good faith on a regular and frequent basis with one or
more representatives of Harbinger designated in writing with respect to the
ongoing operations of Premenos. Premenos acknowledges that Harbinger does not
and will not waive any rights it may have under this Agreement as a result of
such consultations.
Section 5.2. Conduct of Business by Harbinger. From the date of this
Agreement to the Effective Time, Harbinger will, and will cause each of its
subsidiaries to, except as required in connection with the Merger and the other
transactions contemplated by this Agreement and except as otherwise specifically
permitted hereunder or disclosed in the Harbinger Disclosure Letter or consented
to in writing by Premenos:
(a) Carry on its businesses in the ordinary course in substantially
the same manner as heretofore conducted;
(b) Neither change nor amend its Articles or Certificate of
Incorporation or Bylaws;
(c) Other than pursuant to the exercise of employee stock options or
warrants outstanding on the date of this Agreement, not issue, sell or
grant options, warrants or rights to purchase or subscribe to, or enter
into any arrangement or contract with respect to the issuance or sale of
any of the capital stock of Harbinger or any of its subsidiaries or rights
or obligations convertible into or exchangeable for any shares of the
capital stock of Harbinger or any of its subsidiaries and not alter the
terms of any presently outstanding options or make any changes (by
split-up, combination, reorganization or otherwise) in the capital
structure of Harbinger or any of its subsidiaries; provided, however, that
Harbinger shall have the right to: (i) issue Harbinger Common Stock and
options, warrants or rights to acquire Harbinger Common Stock to employees
and consultants in transactions approved in good faith by the Board of
Directors of Harbinger or a committee thereof; and (ii) issue Harbinger
Common Stock or options or rights to acquire Harbinger Common Stock in any
Specified Acquisition as defined in the Harbinger Disclosure Letter;
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(d) Not take any action the effect of which would be to cause the
Merger to be treated as a taxable transaction;
(e) Not take any action the effect of which would be to cause the
Merger to be accounted for on a basis other than a pooling of interests;
and
(f) Use its reasonable efforts to preserve intact the corporate
existence, goodwill and business organization of Harbinger and the
Harbinger Subsidiaries.
In connection with the continued operation of the business of Harbinger and
the Harbinger Subsidiaries between the date of this Agreement and the Effective
Time, Harbinger shall confer in good faith on a regular and frequent basis with
one or more representatives of Premenos designated in writing with respect to
the ongoing operations and acquisition activity of Harbinger. Harbinger
acknowledges that Premenos does not and will not waive any rights it may have
under this Agreement as a result of such consultations.
Section 5.3. Inspection and Access to Information. (a) Between the date
of this Agreement and the Effective Time, each party to this Agreement will
provide each other party and its accountants, counsel and other authorized
representatives full access, during reasonable business hours and under
reasonable circumstances to any and all of its premises, properties, contracts,
commitments, books, records and other information (including tax returns filed
and those in preparation) and will cause their respective officers to furnish to
the other party and its authorized representatives any and all financial,
technical and operating data and other information pertaining to its business,
as each other party shall from time to time reasonably request.
(b) All non-public information obtained by Harbinger or Premenos or any of
their representatives pursuant to this Agreement or in connection with the
matters contemplated by this Agreement concerning the business, operations or
affairs of the other will be kept confidential and will not be used for any
purpose other than the consummation of the transactions contemplated by this
Agreement, or be disclosed to any other person or entity, except for disclosure
to its employees, agents and representatives who have a need to know the same,
who have been advised of the confidential nature of such information and who
agree to abide by the terms of this Section 5.3(b) and except for such
disclosure as may be required by applicable law, court order or governmental
agency request. In the event Harbinger or Premenos is required by law to
disclose information of a confidential nature, the disclosing party shall
provide the non-disclosing party with prompt notice of any such request or
requirement (written if practical) so that the nondisclosing party may have the
opportunity to seek an appropriate protective order, otherwise contest the
disclosure, or waive compliance with this Section 5.3(b). If this Agreement is
terminated in accordance with its terms, any non-public information furnished by
any party to any other party to this Agreement will be promptly returned.
Section 5.4. Proxy Statement and Registration Statement. Harbinger shall
prepare and file with the SEC as soon as is reasonably practicable the
Registration Statement and shall use all reasonable, best efforts to have the
Registration Statement declared effective by the SEC as promptly as is
practicable. Harbinger also shall take any action required to be taken under
state Blue Sky or securities laws in connection with the issuance of the
Harbinger Common Stock pursuant to the Merger. Harbinger and Premenos will
furnish each other with all information concerning themselves, their
subsidiaries, directors, officers and stockholders and such other matters as may
be necessary or advisable for the Registration Statement, the Proxy Statement,
the Nasdaq Additional Shares Notification, filings under the Blue Sky laws, and
any other statement or application made by or on behalf of Harbinger or Premenos
to any governmental body in connection with the Merger and the other
transactions contemplated by this Agreement.
Section 5.5. Harbinger and Premenos Stockholders Meetings. (a) Each of
Harbinger and Premenos shall call a meeting of its shareholders or stockholders,
as applicable, to be held as soon as practicable after the date hereof for the
purpose of voting upon the matters relating to this Agreement. The meeting of
Harbinger's shareholders shall be held prior to or contemporaneously with the
meeting of Premenos's stockholders.
(b) Harbinger will use its reasonable, best efforts to hold its
shareholders meeting as promptly as practicable and will, through its Board of
Directors, recommend to its shareholders approval of the Merger and this
Agreement at such shareholders meeting (the "Harbinger Shareholders Meeting");
provided, however,
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that the Board of Directors of Harbinger may withdraw such recommendation if the
Harbinger Board of Directors determines in good faith (after consultation with
and based upon the advice of its outside legal counsel and after providing
notice to Premenos and giving Premenos the opportunity to consult with Harbinger
with regard to such withdrawal) that the fiduciary duties of the Harbinger Board
of Directors to its shareholders under applicable law require that the Harbinger
Board of Directors withdraw such recommendation. Unless otherwise required to
comply with the fiduciary duties of the Board of Directors of Harbinger, as
determined by the Harbinger Board of Directors in good faith (after consultation
with and based upon the advice of its outside legal counsel), Harbinger shall
use reasonable, best efforts to solicit from its shareholders proxies in favor
of all matters to be voted upon at the Harbinger Shareholders Meeting.
(c) Premenos will use its reasonable, best efforts to hold its stockholders
meeting as promptly as practicable and will, through its Board of Directors,
recommend to its stockholders approval of the Merger and this Agreement at such
stockholders meeting (the "Premenos Stockholders Meeting"); provided, however,
that the Board of Directors of Premenos may withdraw such recommendation if the
Premenos Board of Directors determines in good faith (after consultation with
and based upon the advice of its outside legal counsel and after providing
notice to Harbinger and giving Harbinger the opportunity to consult with
Premenos with regard to such withdrawal) that the fiduciary duties of the
Premenos Board of Directors to its stockholders under applicable law require
that the Premenos Board of Directors withdraw such recommendation. Unless
otherwise required to comply with the fiduciary duties of the Board of Directors
of Premenos, as determined by the Board of Directors of Premenos in good faith
(after consultation with and based upon the advice of its outside legal
counsel), Premenos shall use its reasonable, best efforts to solicit from its
stockholders' proxies in favor of all matters to be acted upon at the Premenos
Stockholders Meeting.
Section 5.6. The Nasdaq National Market Additional Shares
Notification. Harbinger will file an additional shares notification with The
Nasdaq National Market (the "Nasdaq Additional Shares Notification") to approve
for listing, subject to official notice of its issuance, the shares of Harbinger
Common Stock to be issued in connection with the Merger. Harbinger shall
exercise reasonable good faith efforts to cause the shares of Harbinger Common
Stock to be issued in the Merger to be approved for listing on The Nasdaq
National Market, subject to official notice of issuance, prior to the Effective
Time.
Section 5.7. Premenos Affiliates. (a) Premenos shall deliver to Harbinger
a letter identifying all persons who are, at the time the Merger is submitted to
a vote to the stockholders of Premenos, "affiliates" of Premenos for purposes of
Rule 145 under the Securities Act. Premenos shall cause each person who is
identified as an "affiliate" in such letter to deliver to Harbinger on or prior
to the Effective Time a written statement, in form satisfactory to Harbinger and
Premenos, that such person will not offer to sell, transfer or otherwise dispose
of any of the shares of Harbinger Common Stock issued to such person pursuant to
the Merger, except (i) in accordance with the applicable provisions of the
Securities Act and the rules and regulations thereunder and (ii) until such time
as financial results covering at least thirty (30) days of combined operations
of Harbinger and Premenos have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies. Harbinger
shall be entitled to place legends on any certificates of Harbinger Common Stock
issued to such affiliates to restrict transfer of such shares as set forth
above.
(b) Harbinger shall identify all persons who are, at the time the Merger is
submitted to a vote to the shareholders of Harbinger, "affiliates" of Harbinger
for purposes of Rule 145 under the Securities Act. Harbinger shall cause each
person who is identified as an "affiliate" to deliver to Harbinger on or prior
to the Effective Time a written statement that such person will not offer to
sell, transfer or otherwise dispose of any shares of Harbinger Common Stock
owned by such affiliate, except (i) in accordance with the applicable provisions
of the Securities Act and the rules and regulations thereunder and (ii) until
such time as financial results covering at least thirty (30) days of combined
operations of Harbinger and Premenos have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies.
Section 5.8. No Solicitation. (a) Premenos agrees that it shall not,
directly or indirectly, through any officer, director, employee, representative
or agent (i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer for
a merger, consolidation,
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business combination, sale of substantial assets, sale of shares of capital
stock (including, without limitation, by way of a tender offer) or similar
transactions involving Premenos or any of its subsidiaries, other than the
transactions contemplated or permitted by this Agreement (any of the foregoing
inquiries or proposals being referred to in this Agreement as a "Competing
Offer"), (ii) engage in negotiations or discussions concerning, or provide any
non-public information to any person or entity relating to, any Competing Offer,
or (iii) agree to, approve or recommend any Competing Offer; provided, however,
that nothing contained in this Agreement shall prevent Premenos or its Board of
Directors from furnishing non-public information to, or entering into
discussions or negotiations with, any person or entity in connection with an
unsolicited bona fide written Competing Offer by such person or entity or
recommending such an unsolicited bona fide written Competing Offer to the
stockholders of Premenos, if and only to the extent that (1) the Board of
Directors of Premenos determines in good faith (after consultation with and
based upon the written advice of its financial advisor) that such Competing
Offer would, if consummated, result in a transaction more favorable to Premenos
stockholders than the transaction contemplated by this Agreement (and any such
more favorable Competing Offer being referred to in this Agreement as a
"Superior Proposal") and that the person or entity making such Superior Proposal
has the financial means, or the ability to obtain the necessary financing, to
conclude such transaction, (2) the Board of Directors of Premenos determines in
good faith (after consultation with and based upon the advice of its outside
legal counsel), that the fiduciary duties of the Premenos Board of Directors to
its stockholders under applicable law require that Premenos take such action,
and (3) prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such person or entity, the Premenos Board of
Directors receives from such person or entity an executed confidentiality
agreement with confidentiality covenants not materially less favorable to
Premenos than those contained in the Confidentiality Agreement by and between
Harbinger and Premenos dated June 27, 1996.
(b) Premenos shall notify Harbinger no later than twenty-four (24) hours
after receipt by Premenos (or its agents or advisors) of any Competing Offer or
any requests for non-public information in connection with a Competing Offer or
for access to the properties, books or records of Premenos by any person or
entity that informs Premenos that it is considering making, or has made, a
Competing Offer. Such notice to Harbinger shall be made orally and in writing
and shall indicate in reasonable detail the identity of the person or entity
making such proposal, inquiry or contact and the terms and conditions thereof;
provided, however, to the extent Premenos's outside legal counsel shall advise
Premenos's Board of Directors that complying with such notification requirements
will result in a breach of the terms of any confidentiality agreement executed
by Premenos on or prior to the date hereof, then Premenos shall be entitled to
comply with such notice requirement to the maximum extent possible without
breaching the terms of such confidentiality agreement.
Section 5.9. Reasonable Efforts; Further Assurances; Cooperation. Subject
to the other provisions of this Agreement, the parties hereto shall each use
their reasonable, good faith efforts to perform their obligations herein and to
take, or cause to be taken or do, or cause to be done, all things necessary,
proper or advisable under applicable law to obtain all regulatory approvals and
satisfy all conditions to the obligations of the parties under this Agreement
and to cause the Merger and the other transactions contemplated by this
Agreement to be effected on or prior to December 31, 1997 in accordance with the
terms of this Agreement and shall cooperate fully with each other and their
respective officers, directors, employees, agents, counsel, accountants and
other designees in connection with any steps required to be taken as a part of
their respective obligations under this Agreement, including without limitation:
(a) Premenos and Harbinger shall promptly make their respective
filings and submissions and shall take, or cause to be taken, all actions
and do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to obtain any required approval of
any other federal, state or local governmental agency or regulatory body
with jurisdiction over the transactions contemplated by this Agreement.
(b) If any claim, action, suit, investigation or other proceeding by
any governmental body or other person is commenced which questions the
validity or legality of the Merger or any of the other transactions
contemplated by this Agreement or seeks damages in connection with this
Agreement, the parties agree to cooperate and use all reasonable efforts to
defend against such claim, action, suit, investigation or other proceeding
and, if an injunction or other order is issued in any such action, suit or
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other proceeding, to use all reasonable efforts to have such injunction or
other order lifted, and to cooperate reasonably regarding any other
impediment to the consummation of the transactions contemplated by this
Agreement.
(c) Each party shall give prompt written notice to the other of (i)
the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty of Premenos
or Harbinger, whether such occurrence or failure is with respect to its own
representations or warranties, or with respect to the other party's
representations and warranties, contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this
Agreement to the Effective Time or that will or may result in the failure
to satisfy any of the conditions specified in Article 6 and (ii) any
failure of Premenos or Harbinger, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement.
(d) Without the prior written consent of Harbinger and except as set
forth in the Premenos Disclosure Letter, Premenos will not terminate any
employee if such termination would result in the payment of any amounts
pursuant to "change in control" provisions of any employment agreement or
arrangement.
Section 5.10. Public Announcements. The timing and content of all
announcements regarding any aspect of this Agreement or the Merger to the
financial community, government agencies, employees or the general public shall
be mutually agreed upon in advance (unless Harbinger or Premenos is advised by
counsel that any such announcement or other disclosure not mutually agreed upon
in advance is required to be made by law or applicable rule of The Nasdaq
National Market and then only after making a reasonable attempt to comply with
the provisions of this Section 5.10 and providing notice to the non-disclosing
party simultaneously with such disclosure). This Section 5.10 shall not apply to
disclosures made to senior managers prior to the date of this Agreement in
accordance with the understanding of Harbinger and Premenos.
Section 5.11. Financial Statements and SEC Reports. Prior to the
Effective Time, each party to this Agreement shall deliver to the other, as soon
as available but in no event later than 45 days after the end of each fiscal
quarter (or 90 days after the end of a fiscal year), a consolidated balance
sheet as of the last day of such fiscal period and the consolidated statements
of income, stockholders' equity and cash flows of such party and its
subsidiaries for the fiscal period then ended prepared in accordance with
generally accepted accounting principles and the requirements of Form 10-Q (or
Form 10-K as the case may be) under the Exchange Act. Prior to the Effective
Time, each party to this Agreement shall deliver to the other, as soon as
available, a copy of each form, report and other document filed by such party
with the SEC.
Section 5.12. Supplements to Disclosure Letters. From time to time prior
to the Effective Time, Premenos and Harbinger will each promptly supplement or
amend the respective disclosure letters which they have delivered pursuant to
this Agreement with respect to any matter arising after the date of this
Agreement which, if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in any such disclosure letter or
which is necessary to correct any information in any such disclosure letter
which has been rendered inaccurate by such matter. No supplement or amendment to
any such disclosure letter shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Sections 6.2(a) or 6.3(a).
Section 5.13. Pooling of Interests Accounting. Except for other actions
specifically permitted to be taken hereunder and from and after the date of this
Agreement and until the Effective Time, neither Harbinger nor Premenos nor any
of their respective subsidiaries or other affiliates shall take, or fail to
take, any action that would jeopardize the treatment of Harbinger's acquisition
of Premenos as a "pooling of interests" for accounting purposes. Following the
Effective Time, Harbinger shall use its reasonable efforts to conduct the
business of Harbinger in a manner that would not jeopardize the characterization
of the Merger as a "pooling of interests" for accounting purposes.
Section 5.14. Accountant's Review Report. Premenos agrees to exercise
reasonable efforts to cause Coopers & Lybrand to deliver to Harbinger prior to
the filing of the Registration Statement a limited review
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report covering the unaudited financial statements of Premenos included in the
Registration Statement in form and substance reasonably acceptable to Harbinger
(the "Coopers & Lybrand Review Report").
Section 5.15. Indemnification of Premenos Directors and
Officers. (a) Harbinger and the Surviving Corporation agree that the
indemnification obligations set forth in Premenos's Certificate of Incorporation
and Bylaws, in each case as of the date hereof, shall survive the Merger and
shall not be amended, repealed or otherwise modified for a period of six (6)
years after the Effective Time in any manner that would adversely affect the
rights thereunder of the individuals who on or prior to the Effective Time, were
directors, officers, employees or agents of Premenos or any of its subsidiaries.
(b) After the Effective Time, Harbinger and the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director or officer of Premenos and each of
its subsidiaries and each such person who served at the request of Premenos or
any of its subsidiaries as a director, officer, trustee, partner, fiduciary,
employee or agent of Premenos or any of its subsidiaries or of another
corporation, partnership, joint venture, trust, pension or other employee
benefit plan or enterprise (collectively, the "Indemnified Parties") against all
costs and expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and settlement amounts paid in connection
with any claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), whether civil, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer, director, employee, agent or other person to whom this
Section 5.15 applies, in each case occurring before the Effective Time
(including the transactions contemplated by this Agreement).
(c) In the event Harbinger or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity in
such consolidation or merger, or (ii) transfers all or substantially all of its
properties to any person, then, and in each case, proper provision shall be made
so that the successors and assigns of Harbinger or the Surviving Corporation, as
the case may be, honor the indemnification obligations set forth in this Section
5.15.
(d) The obligations of Harbinger and the Surviving Corporation under this
Section 5.15 shall not be terminated or modified in such a manner as to
adversely affect any director, officer, employee, agent or other person to whom
this Section 5.15 applies without the consent of such affected director,
officer, employee, agent or other person (it being expressly agreed that each
such director, officer, employee, agent or other person to whom this Section
5.15 applies shall be a third-party beneficiary of this Section 5.15).
Section 5.16. Harbinger Board of Directors. Harbinger shall take all
actions reasonably necessary to elect David Hildes to Harbinger's Board of
Directors in the class of directors with the longest unexpired term at the time
of his election, such election to be effective as of the Effective Time. If the
unexpired term of the class of directors to which David Hildes is elected is
less than one year, then Harbinger agrees to use its reasonable, best efforts to
(i) nominate David Hildes for election as a director at the next annual meeting
of Harbinger's shareholders and (ii) recommend his election to Harbinger's
shareholders.
Section 5.17. Employment Agreements. As promptly as reasonably
practicable after the date of this Agreement, Harbinger shall deliver to
Premenos a list of names of key senior managers of Premenos that Harbinger
requests to sign two-year employment agreements on terms which shall include
customary compensation, non-competition, non-solicitation and non-disclosure
provisions. Harbinger and Premenos agree to cooperate in using their reasonable
best efforts to cause such key senior managers to enter into such agreements at
the Effective Time. Harbinger further agrees to engage in discussions with the
Chairman of Premenos regarding establishing an appropriate transition role for
the Chairman of Premenos after the Effective Time and future business
relationships between Harbinger and the Chairman of Premenos on terms which will
include non-competition provisions prohibiting competition by the Chairman in
the electronic data interchange ("EDI") and value-added networks ("VAN")
businesses and non-solicitation and non-disclosure provisions as are customary
in the business of Harbinger; provided that such roles or relationships shall
not include full-time employment. The Chairman of Premenos shall execute and
deliver to Harbinger an agreement containing such non-competition,
non-solicitation and non-disclosure provisions in a form reasonably satisfactory
to Harbinger on or prior to the Closing Date.
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Section 5.18. Premenos Transactional Expenses. Premenos agrees that the
aggregate amount of fees, costs and expenses to be incurred by Premenos in
connection with this Agreement and transactions contemplated hereby, including,
without limitation, the fees, costs and expenses of financial advisors,
accountants and counsel shall not exceed Two Million Three Hundred Thousand
Dollars ($2,300,000). Premenos further agrees to periodically apprise Harbinger
of the aggregate amount of the transaction fees and expenses incurred and
anticipated to be incurred in connection with this Agreement and the matters
contemplated hereby.
Section 5.19. Severance. Harbinger agrees to honor the severance policy
of Premenos set forth in the Premenos Disclosure Letter with respect to any
Premenos employees whose employment is terminated during the twelve (12) month
period following the Effective Time.
Section 5.20. Premenos Stock Options. Premenos will cause holders of Old
Options representing at least 95% of the shares of Premenos Common Stock
issuable pursuant to Old Options to execute and deliver to Harbinger prior to
the Closing option assumption agreements in form mutually satisfactory to
Harbinger and Premenos to effect the conversion of such Old Options to Harbinger
Options as contemplated in Section 2.3.
Section 5.21. Minority Interest. Premenos shall use its reasonable best
efforts to effectuate the share exchanges with the stockholders of Premenos
Corp. as set forth in the Premenos Disclosure Letter as quickly as reasonably
practicable, and such share exchanges shall become effective and there shall be
no further minority interests in Premenos Corp. on the Closing Date.
ARTICLE 6
CONDITIONS
Section 6.1. Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions:
(a) Premenos Stockholder Approval. The Merger, this Agreement and the
transactions contemplated by this Agreement shall have been approved at the
meeting of Premenos Stockholders duly called and held in accordance with
the DGCL by the holders of a majority of the outstanding shares of Premenos
Common Stock having the right to vote on such matters.
(b) Harbinger Shareholder Approval. The Merger, this Agreement and
the transactions contemplated by this Agreement, including the issuance of
shares of Harbinger Common Stock pursuant to the Merger and the amendment
of the Harbinger 1996 Stock Option Plan increasing the number of shares of
Harbinger Common Stock available for grant thereunder to facilitate the
conversion of the Old Options as contemplated in Section 2.3 shall have
been approved at the Harbinger Shareholders Meeting duly called and held in
accordance with the Georgia Business Corporation Code ("GBCC") by the
holders of a majority of the outstanding shares of Harbinger Common Stock
having the right to vote on such matters.
(c) Injunction. At the Effective Time there shall be no effective
injunction, writ or preliminary restraining order or any order of any
nature issued by a court or governmental agency of competent jurisdiction
to the effect that the Merger may not be consummated as provided in this
Agreement, no proceeding or lawsuit shall have been commenced by any
governmental or regulatory agency for the purpose of obtaining any such
injunction, writ or preliminary restraining order and no written notice
shall have been received from any such agency indicating an intent to
restrain, prevent, materially delay or restructure the transactions
contemplated by this Agreement.
(d) Tax Opinion. Premenos and Harbinger shall each have received a
written opinion of King & Spalding concerning certain federal income tax
consequences of the Merger, substantially in the form attached as Exhibit
6.1(d).
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(e) Registration Statement. The Registration Statement shall be
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceedings for such purpose, or under the proxy rules of the SEC pursuant
to the Exchange Act and with respect to the transactions contemplated by
this Agreement, shall be pending before or threatened by the SEC. All
applicable state securities laws shall have been complied with in
connection with the issuance of Harbinger Common Stock to be issued
pursuant to the Merger, and no stop order suspending the effectiveness of
any qualification or registration of such Harbinger Common Stock under such
state securities laws shall have been issued and pending or threatened by
the authorities of any such state. The joint proxy statement/prospectus
that comprises part of the Registration Statement shall have been mailed or
sent to Premenos Stockholders and Harbinger shareholders not less than
twenty business days prior to the meetings described in Section 6.1(a) and
Section 6.1(b), respectively, as the term "business days" is defined for
purposes of Form S-4 under the Securities Act.
(f) Pooling. Harbinger shall have been advised in writing, as of the
Effective Time, by KPMG Peat Marwick that, in accordance with generally
accepted accounting principles, the Merger qualifies to be treated as a
"pooling of interests" for accounting purposes. Premenos shall have been
advised in writing, as of the Effective Time, by Coopers & Lybrand that,
based on inquiries and their examination of the financial statements of
Premenos, they believe that the criteria for pooling accounting treatment
relative to Premenos has been satisfied.
(g) The Nasdaq National Market Additional Shares Notification. The
Harbinger Common Stock to be issued pursuant to this Agreement shall have
been approved for listing on The Nasdaq National Market, subject only to
official notice of issuance by Harbinger.
(h) HSR Act. The applicable waiting periods shall have expired or
been terminated early under the HSR Act.
Section 6.2. Conditions to Obligations of Harbinger. The obligation of
Harbinger to effect the Merger shall be subject to the fulfillment at or prior
to the Closing of each of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of Premenos set forth in Article 3 of this Agreement shall be
true and correct as of the date of this Agreement and as of the Effective
Time as though made on and as of the Effective Time.
(b) Performance of Obligations of Premenos. Premenos shall have
performed in all material respects all covenants and agreements required to
be performed by it under this Agreement.
(c) Opinion of Premenos Counsel. Harbinger shall have received an
opinion of Bryan Cave LLP, dated the Closing Date, substantially in the
form attached as Exhibit 6.2(c).
(d) Authorization of Merger. All corporate action necessary by
Premenos to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement shall have been duly and validly taken.
(e) Consents. All consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental commission, board or
other regulatory body required in connection with the execution, delivery
and performance of this Agreement shall have been obtained or made, except
for filing of the Delaware Certificate of Merger and any other documents
required to be filed after the Effective Time and except where the failure
to have obtained or made any such consent, authorization, order, approval,
filing or registration would not have a material adverse effect on the
business of Harbinger and Premenos following the Effective Time.
(f) Certificates. Premenos shall have furnished Harbinger with a
certificate of its appropriate officers as to compliance with the
conditions set forth in Sections 6.2(a), (b) and (d).
(g) Accountant's Review Report and Letter. Harbinger shall have
received: (i) the Coopers & Lybrand Review Report in accordance with
Section 5.14 and (ii) a letter from Coopers & Lybrand dated the effective
date of the Registration Statement under the Securities Act, with respect
to certain financial
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and statistical information concerning Premenos included in the
Registration Statement in form and substance customary in transactions of
the nature of the Merger.
(h) Material and Client Contracts. Harbinger shall have received
consents to assignment of all Premenos Material Contracts or written
waivers of the provisions of any Premenos Material Contracts requiring the
consents of third parties as set forth in the Premenos Disclosure Letter
except where the failure to have received any such consent would not have a
material adverse effect on the business of Harbinger and Premenos following
the Effective Time.
(i) Resignation Letters. Each of the directors of Premenos shall have
tendered to Harbinger resignation letters in form and substance reasonably
acceptable to Harbinger on or prior to the Closing Date, such resignations
to be effective immediately following the Closing Date.
Section 6.3. Conditions to Obligations of Premenos. The obligation of
Premenos to effect the Merger shall be subject to the fulfillment at or prior to
the Closing of each of the following additional conditions:
(a) Representations and Warranties. The representations and
warranties of Harbinger set forth in Article 4 of this Agreement shall be
true and correct as of the date of this Agreement and as of the Effective
Time as though made on and as of the Effective Time.
(b) Performance of Obligations by Harbinger. Harbinger shall have
performed in all material respects all covenants and agreements required to
be performed by it under this Agreement.
(c) Opinion of Harbinger Counsel. Premenos shall have received an
opinion of King & Spalding, counsel to Harbinger, substantially in the form
of Exhibit 6.3(c).
(d) Authorization of Merger. All corporate action necessary by
Harbinger to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement shall have been duly and validly taken.
(e) Consents. All consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental commission, board or
other regulatory body required in connection with the execution, delivery
and performance of this Agreement shall have been obtained or made, except
for filing of the Delaware Certificate of Merger and any other documents
required to be filed after the Effective Time and except where the failure
to have obtained or made any such consent, authorization, order, approval,
filing or registration would not have a material adverse effect on the
business of Harbinger and Premenos following the Effective Time.
(f) Certificates. Harbinger shall have furnished Premenos with a
certificate of its appropriate officers as to compliance with the
conditions set forth in Sections 6.3(a), (b) and (d).
(g) Harbinger shall have executed and delivered the registration
rights agreement substantially in the form of Exhibit 6.3(g).
ARTICLE 7
CLOSING
The consummation of the transactions contemplated by this Agreement is
referred to as the "Closing." The "Closing Date" is the date on which the
Closing occurs. The Closing shall occur as soon as possible following the
Harbinger and Premenos stockholders meetings described in Section 5.5 as is
reasonably practicable and in any event within three business days of the
satisfaction or waiver of the other conditions set forth in Article 6. The
Closing shall take place at the offices of King & Spalding, 191 Peachtree
Street, Atlanta, Georgia, or at such other place as Premenos and Harbinger may
mutually agree.
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ARTICLE 8
TERMINATION
Section 8.1. Termination and Abandonment. This Agreement may be
terminated at any time prior to the Closing Date, whether before or after
approval by the shareholders and stockholders of Harbinger and Premenos,
respectively:
(a) by mutual agreement of the Boards of Directors of Harbinger and
Premenos;
(b) by Harbinger, if the conditions set forth in Sections 6.1 and 6.2
are not complied with or performed and such noncompliance or nonperformance
has not been cured or eliminated (or by its nature cannot be cured or
eliminated) by Premenos on or before March 31, 1998; and
(c) by Premenos, if the conditions set forth in Sections 6.1 and 6.3
are not complied with or performed and such noncompliance or nonperformance
has not been cured or eliminated (or by its nature cannot be cured or
eliminated) by Harbinger on or before March 31, 1998;
(d) by Harbinger or Premenos if, at the Harbinger Shareholders Meeting
or the Premenos Stockholders Meeting (including any adjournment or
postponement thereof), the requisite vote of the stockholders in favor of
this Agreement and the Merger shall not have been obtained; provided,
however, that the right to terminate this Agreement under this Section
8.1(d) shall not be available to any party which has not complied with its
obligations under Section 5.5;
(e) by Harbinger if, (i) the Board of Directors of Premenos shall have
withdrawn or modified its recommendation of this Agreement or the Merger in
a manner adverse to Harbinger or shall have resolved or publicly announced
or disclosed to any third party its intention to do so, (ii) an Alternative
Transaction involving Premenos shall have taken place or the Board of
Directors of Premenos shall have recommended such an Alternative
Transaction (or a proposal or offer therefor) to the stockholders of
Premenos or shall have resolved or publicly announced or disclosed to any
third party its intention to recommend or engage in such an Alternative
Transaction, or (iii) a tender offer or exchange offer for twenty percent
(20%) or more of the outstanding shares of Premenos Common Stock shall have
been commenced or a registration statement with respect thereto shall have
been filed (other than by Harbinger or an affiliate thereof), and the Board
of Directors of Premenos shall have (A) recommended (or shall have resolved
or publicly announced or disclosed to any third party its intention to
recommend) that the stockholders of Premenos tender their shares in such
tender or exchange offer or (B) resolved or publicly announced or disclosed
to any third party its intention to take no position with respect to such
tender or exchange offer;
(f) by Premenos if, the Board of Directors of Harbinger shall have
withdrawn or modified its recommendation of this Agreement or the Merger in
a manner adverse to Premenos or shall have resolved or publicly announced
or disclosed to any third party its intention to do so;
(g) by Harbinger, if the Board of Directors of Harbinger shall have
determined to withdraw its recommendation of this Agreement or the Merger
in accordance with Section 5.5(b) hereof;
(h) by Premenos, if the Board of Directors of Premenos shall have
withdrawn its recommendation of this Agreement or the Merger in accordance
with Section 5.5(c);
(i) by Premenos, if Harbinger breaches the covenant set forth in
Section 5.2(c) hereof; and
(j) by Harbinger if either David Hildes or Lew Jenkins sells any
shares of Premenos Common Stock subject to the Proxy Agreements on or prior
to the Closing Date.
Section 8.2. Specific Performance and Other Remedies. The parties each
acknowledge that the rights of each party to consummate the transactions
contemplated by this Agreement are special, unique and of extraordinary
character, and that, if any party violates or fails or refuses to perform any
covenant or agreement made by it in this Agreement, the non-breaching party may
be without an adequate remedy at law. The parties each agree, therefore, that if
either party violates or fails or refuses to perform any covenant or agreement
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made by such party in this Agreement, the nonbreaching party or parties may,
subject to the terms of this Agreement and in addition to any remedies at law
for damages or other relief, institute and prosecute an action in any court of
competent jurisdiction to enforce specific performance of such covenant or
agreement or seek any other equitable relief.
Section 8.3. Effect of Termination. In the event of termination of this
Agreement pursuant to this Article 8, this Agreement shall forthwith become void
and there shall be no liability on the part of any party or its respective
officers, directors or shareholders or stockholders, as applicable, except for
obligations under Section 5.3(b), Section 5.10, Section 8.4, and this Section,
all of which shall survive the termination. Notwithstanding the foregoing,
nothing contained in this Section 8.3 shall relieve any party from liability for
any breach of any covenant or agreement in this Agreement.
Section 8.4. Fees and Expenses. (a) Except as set forth in this Section
8.4 and in Section 2.5(a), all fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated;
provided, however, that Harbinger and Premenos shall share equally all fees and
expenses, other than attorneys' and accounting fees and expenses, incurred in
relation to the printing and filing of the Proxy Statement and the Registration
Statement and any amendments or supplements thereto and the fees required to be
paid in connection with filing(s) required under the HSR Act in connection with
the transactions contemplated by this Agreement.
(b) If this Agreement is terminated (i) by Harbinger pursuant to Section
8.1(e), (ii) by Premenos pursuant to Section 8.1(h), (iii) by Harbinger pursuant
to Section 8.1(d) as a result of the failure to receive the requisite vote for
approval of this Agreement and the Merger at the Premenos Stockholders Meeting
and at the time of the Premenos Stockholders Meeting an Alternative Transaction
involving Premenos shall have been announced which shall not have been
absolutely and unconditionally withdrawn and abandoned, or (iv) by Harbinger
pursuant to Section 8.1(j), then Premenos shall pay to Harbinger a termination
fee of Four Million Dollars ($4,000,000) in cash (the "Harbinger Termination
Fee") to reimburse and compensate Harbinger for its time, expenses and lost
opportunity costs of pursuing the Merger, which Harbinger Termination Fee shall
be paid to Harbinger within two (2) days of the termination of this Agreement
pursuant to such Sections. If Premenos shall enter into a definitive agreement
to consummate an Alternative Transaction within one (1) year of the payment of
the Harbinger Termination Fee, then Premenos shall pay to Harbinger the
Harbinger Topping Fee, which fee shall be payable in cash and shall be paid
within two (2) days of Premenos's having entered into such definitive agreement
to consummate an Alternative Transaction. The Harbinger Topping Fee shall be
equal to the product obtained by multiplying (a) twenty five percent (25%), by
(b) the Incremental Value, but in no case shall the Harbinger Topping Fee be
less than Four Million Dollars ($4,000,000). The Incremental Value shall be
equal to the amount by which the Alternative Transaction Value shall exceed the
Merger Transaction Value. The Alternative Transaction Value shall mean the
aggregate value of the Alternative Transaction to the stockholders of Premenos,
valued as of the date of the definitive agreement relating to such Alternative
Transaction and calculated in accordance with generally recognized and accepted
valuation methodologies employed by nationally recognized investment banking
firms for valuing comparable transactions. The Merger Transaction Value shall
mean the aggregate value of the Merger to the stockholders of Premenos, valued
as of the date of the termination of this Agreement and calculated in accordance
with generally recognized and accepted valuation methodologies employed by
nationally recognized investment banking firms for valuing comparable
transactions. In the event that the parties do not agree as to the Alternative
Transaction Value or the Merger Transaction Value, Harbinger and Premenos shall
negotiate with one another in good faith for a period of ten days to resolve
such dispute. If, after the expiration of such ten-day period, the parties do
not agree as to the Alternative Transaction Value or the Merger Transaction
Value, Harbinger and Premenos shall each engage a nationally-recognized
investment banking firm to calculate the Alternative Transaction Value or the
Merger Transaction Value, or both, as the case may be. In the event that such
investment banking firms do not agree as to such disputed valuation(s) after 30
days, such firms shall together appoint a third nationally-recognized investment
banking firm to resolve such dispute by calculating the disputed valuation(s).
The calculation of such third investment banking firm shall be conclusive as to
the disputed valuation(s). Each party shall bear the fees and expenses of
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the investment banking firm engaged by it pursuant to this Section, and the fees
and expenses of a third investment banking firm, if necessary, shall be borne
equally by Harbinger and Premenos.
(c) If this Agreement is terminated (i) by Premenos pursuant to Section
8.1(f) or (ii) by Harbinger pursuant to 8.1(g), then Harbinger shall pay to
Premenos a termination fee of Four Million Dollars ($4,000,000) in cash (the
"Premenos Termination Fee") to reimburse and compensate Premenos for its time,
expenses and lost opportunity costs of pursuing the Merger, which Premenos
Termination Fee shall be paid to Premenos within two (2) days of the termination
of this Agreement pursuant to such Sections.
(d) As used in this Agreement, an "Alternative Transaction" shall mean (i)
a transaction or series of transactions pursuant to which any person or group
(as such term is defined under the Exchange Act) other than Harbinger, Premenos
or any affiliate thereof as of the date hereof (a "Third Party") acquires or
would acquire (upon completion of such transaction or series of transactions)
shares (or securities exercisable for or convertible into shares) representing
more than fifty percent (50%) of the outstanding shares of Premenos Common
Stock, pursuant to a tender offer or exchange offer or otherwise, (ii) a merger,
consolidation, share exchange or other business combination involving Premenos
or any of its subsidiaries, upon completion of such merger, consolidation, share
exchange or other business combination such Third Party owns or would own more
than fifty percent (50%) of the outstanding equity securities of Premenos or any
of its subsidiaries or the entity surviving such merger or business combination
or resulting from such consolidation, (iii) any other transaction or series of
transactions pursuant to which any Third Party acquires or would acquire (upon
completion of such transaction or series of transactions) control of assets of
Premenos or any of its subsidiaries (including, for this purpose, outstanding
equities securities of Premenos's subsidiaries) having a fair market value equal
to or more than fifty percent (50%) of the fair market value of all consolidated
assets of Premenos and its subsidiaries immediately prior to such transaction or
series of transactions, or (iv) any transaction or series of transactions
pursuant to which any Third Party acquires or would acquire (upon completion of
such transaction or series of transactions) control of the Board of Directors of
Premenos or by which nominees of any Third Party are (or would be) elected or
appointed to a majority of the seats on the Board of Directors of Premenos.
(e) In no event shall Harbinger or Premenos, as the case may be, be
required to pay any fee pursuant to this Section 8.4 if, immediately prior to
the applicable termination of this Agreement, the party that otherwise would be
entitled to receive such fee pursuant to this Section 8.4 was in material breach
of any of its obligations under this Agreement.
(f) If one party fails to promptly pay to the other any fee or expense due
hereunder, the defaulting party shall pay the costs and expenses (including
reasonable attorneys' fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on any unpaid fee at the publicly announced
prime rate of First Union National Bank of North Carolina from the date such fee
was required to be paid.
ARTICLE 9
MISCELLANEOUS PROVISIONS
Section 9.1. Notices. Each notice, communication and delivery under this
Agreement must be made in writing signed by the party making the same, must
specify the Section pursuant to which it is given or being made, and must be
delivered personally or by telecopy transmission, by recognized overnight
courier or sent by registered or certified mail or by any express mail service
(with postage and other fees prepaid) as follows:
To Harbinger:
Harbinger Corporation
1055 Lenox Park Boulevard
Atlanta, Georgia 30319-5309
Attn: C. Tycho Howle
Telecopy No.: (404) 848-2861
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with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attn: William R. Spalding, Esq.
Telecopy No.: (404) 572-5145
To Premenos:Premenos Technology Corp.
1000 Burnett Avenue
Concord, California 94520
Attn: Lew Jenkins
Telecopy No.: (510) 825-9184
with a copy to:
Bryan Cave LLP
245 Park Avenue
New York, New York 10167
Attn: Stephan Mallenbaum, Esq.
Telecopy No.: (212) 692-1900
or to such other representative or at such other address of a party as such
party may furnish to the other parties in writing.
Section 9.2. Disclosure Letters and Exhibits. The Premenos Disclosure
Letter and the Harbinger Disclosure Letter and all Exhibits are hereby
incorporated into this Agreement and are made a part of this Agreement as if set
out in full in this Agreement.
Section 9.3. Assignment; Successors in Interest. No assignment or
transfer by Harbinger, HarbingerSub or Premenos of their respective rights and
obligations under this Agreement prior to the Closing shall be made except with
the prior written consent of the other parties. This Agreement shall be binding
upon and shall inure to the benefit of the parties and their permitted
successors and assigns, and any reference to a party shall also be a reference
to a permitted successor or assign.
Section 9.4. Investigations; Representations and Warranties. The
representations and warranties of Harbinger and Premenos set forth in this
Agreement shall terminate immediately after Closing. The covenants and
agreements of each of Harbinger, HarbingerSub and Premenos set forth in this
Agreement and the exhibits to this Agreement shall survive the Closing and shall
remain in full force and effect until performed or satisfied by the applicable
party responsible for the same in this Agreement or the exhibits to this
Agreement. The respective representations and warranties of Harbinger,
HarbingerSub and Premenos contained in this Agreement or in any certificate, or
other document delivered by any party prior to Closing shall not be deemed
waived or otherwise affected by any investigation made by a party.
Section 9.5. Number; Gender. Whenever this Agreement so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
Section 9.6. Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision of this Agreement. Unless
otherwise specified to the contrary, all references to Articles and Sections are
references to Articles and Sections of this Agreement and all references to
Exhibits are references to Exhibits to this Agreement and the Premenos
Disclosure Letter and the Harbinger Disclosure Letter.
Section 9.7. Controlling Law; Integration; Amendment. (a) This Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of Delaware without reference to Delaware's choice of law
rules and the parties agree that any legal proceeding instituted with respect to
this Agreement shall be brought exclusively in any state or federal court in the
State of Delaware and the parties submit to personal jurisdiction therein and
agree that venue properly lies in any such court in the State of
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Delaware. This Agreement supersedes all negotiations, agreements and
understandings among the parties with respect to the subject matter of this
Agreement and constitutes the entire agreement among the parties.
(b) This Agreement may not be amended, modified or supplemented except by
written agreement of the parties.
Section 9.8. Premenos and Harbinger Knowledge. As used in this Agreement,
the terms "the best knowledge of Premenos," "known to Premenos" or words of
similar import used herein with respect to Premenos shall mean the actual
knowledge of any Premenos Executive, together with the knowledge a reasonable
business person would have obtained after making reasonable inquiry and after
exercising reasonable diligence with respect to the matters at hand. The
"Premenos Executives" shall consist of Messrs. Lew Jenkins, David Hildes,
Timothy A. Dreisbach, and H. Ward Wolff. As used in this Agreement, the terms
"the best knowledge of Harbinger," "known to Harbinger" or words of similar
import used herein with respect to Harbinger shall mean the actual knowledge of
any Harbinger Executive, together with the knowledge a reasonable business
person would have obtained after making reasonable inquiry and after exercising
reasonable diligence with respect to the matters at hand. The "Harbinger
Executives" shall consist of Messrs. C. Tycho Howle, David T. Leach, James C.
Davis and Joel G. Katz.
Section 9.9. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction will not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by law, the parties waive any provision of law which renders any such
provision prohibited or unenforceable in any respect.
Section 9.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one of such counterparts.
Section 9.11. Enforcement of Certain Rights. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
person, firm or corporation other than the parties, and their permitted
successors or assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, or result in such person, firm or corporation being
deemed a third party beneficiary of this Agreement.
Section 9.12. Waiver. At any time prior to the Effective Time, the
parties, by or pursuant to action taken by their respective Boards of Directors,
may, to the extent legally permitted: (i) extend the time for the performance of
any of the obligations or other acts of any other party; (ii) waive any
inaccuracies in the representations or warranties of any other party contained
in this Agreement or in any document or certificate delivered pursuant to this
Agreement; (iii) waive compliance or performance by any other party with any of
the covenants, agreements or obligations of such party contained in this
Agreement; and (iv) waive the satisfaction of any condition that is precedent to
the performance by the party so waiving of any of its obligations under this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. A waiver by one party of the performance of any covenant, agreement,
obligation, condition, representation or warranty shall not be construed as a
waiver of any other covenant, agreement, obligation, condition, representation
or warranty. A waiver by any party of the performance of any act shall not
constitute a waiver of the performance of any other act or an identical act
required to be performed at a later time.
Section 9.13. Merger. Harbinger, HarbingerSub and Premenos each
acknowledges and agrees that it has not relied on, or been induced to enter into
this Agreement on account of, any representation or warranty of any kind,
whether oral or written, express or implied, except for such representations and
warranties of Harbinger, HarbingerSub and Premenos as are set forth in this
Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the date first above written.
<TABLE>
<S> <C>
HARBINGER CORPORATION
[Corporate Seal]
Attest: By: JAMES C. DAVIS
-------------------------------------------------
Title: President and Chief Operating Officer
-------------------------------------------
By: /s/ JOEL G. KATZ
---------------------------------------------------
Title: Secretary
---------------------------------------------
OLYMPIC SUBSIDIARY CORPORATION
[Corporate Seal]
Attest: By: JAMES C. DAVIS
-------------------------------------------------
Title: President and Chief Operating Officer
-------------------------------------------
By: /s/ JOEL G. KATZ
---------------------------------------------------
Title: Secretary
---------------------------------------------
PREMENOS TECHNOLOGY CORP.
[Corporate Seal]
Attest: By: LEW JENKINS
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Title: Chairman
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By: /s/ H. WARD WOLFF
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Title: Secretary
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</TABLE>
A-45
<PAGE> 1
Exhibit 4.1
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") dated as of the 23rd
day of October, 1997, is made by and between Harbinger Corporation, a Georgia
corporation (the "Company"), and the holders of the common stock of the Company
listed in Schedule I, attached hereto (the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders are the owners of the shares of Common Stock
of the Company listed on Schedule I hereto;
WHEREAS, it is a condition to the consummation of the transactions
contemplated by that certain Share Purchase Agreement, dated as of the date
hereof, by and among the Company and the Shareholders (the "Purchase
Agreement"), that this Agreement be executed by the parties hereto;
WHEREAS, pursuant to the Purchase Agreement, the Company has acquired
all of the share capital of API Systems Limited, a company formed under the laws
of England and Wales (Reg. No. 2942785) ("API") in consideration of the issuance
of certain shares of Common Stock of the Company to the Shareholders; and
WHEREAS, the parties are willing to execute this Agreement and to be
bound by the provisions hereof.
NOW, THEREFORE, in consideration of the mutual agreements and promises
contained herein, in the Purchase Agreement and in the other agreements
contemplated thereby, and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Shareholders and the Company,
each with the other, do hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
"Common Stock" means the common stock, $0.0001 par value per share, of
the Company.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
<PAGE> 2
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Holder" means any Shareholder and any permitted transferee of
Shareholder's rights under this Agreement pursuant to Section 2.8.
"Lancashire Holder" means Lancashire Enterprise Ventures Limited and
any transferee of Lancashire Enterprise Ventures Limited's rights under this
Agreement pursuant to Section 2.8.
"Lancashire Holder Representative" means Lancashire Enterprise Ventures
Limited.
"Management Holder" means any Shareholder other than Lancashire
Enterprise Ventures Limited and any permitted transferee of any such
Shareholder's rights under this Agreement pursuant to Section 2.8.
"Management Holder Representative" means Allan W. Gray or, such time
that he no longer owns any Registrable Securities, the Management Holder who
owns the largest number of Registrable Securities.
"Registrable Securities" means the Shares as the same may be adjusted
from time to time to reflect any stock split, stock dividend or other
distribution of capital stock in respect thereof, or issuance of capital stock
in replacement thereof or exchange therefor. The term "Registrable Securities"
does not include shares of Common Stock that have been registered, as defined
below, and sold pursuant to such registration.
The terms "register," "registered," and "registration" refer to a
registration effected by preparing the filing of a registration statement in
compliance with the Securities Act, and the declaration or order by the
Commission of the effectiveness of such registration statement.
"Requesting Lancashire Holders" has the meaning assigned to it in
Section 2.2.
"Requesting Management Holders" has the meaning assigned to it in
Section 2.1.
"Restricted Period" means the period beginning on the Closing Date (as
defined in the Purchase Agreement) and ending on the earlier of (i) the date of
filing by the Company with the Commission of the Company's annual report on Form
10-K, quarterly report on Form 10-Q or other filing with the Commission, or (ii)
the date of dissemination by the Company of a press release, that reports the
combined financial results of the Company and API covering at least 30 days of
combined operations of the Company and API within the meaning of Section 201.01
of the Commission's Codification of Financial Reporting Policies.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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"Shareholders" means the persons listed on Schedule I attached hereto.
"Shares" means the shares of Common Stock of the Company listed on
Schedule I hereto. In the event the Company shall declare a stock split, stock
dividend or other distribution of capital stock in respect of, or issue capital
stock in replacement of or exchange for, the Shares, such additional shares
shall be Shares within the meaning of this Agreement.
"Underwritten Public Offering" means a public offering of Common Stock
for cash which is offered and sold in a registered transaction on a firm
commitment underwritten basis through one or more underwriters, all pursuant to
an underwriting agreement between the Company and any selling shareholders on
the one hand and such underwriters on the other hand.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1 Demand Registration Rights of Management Holders.
(a) Upon written notice delivered by the Management Holder
Representative (as defined below) to the Company following the expiration of the
Restricted Period, the Company agrees to effect on behalf of the Management
Holders designated in the written notice (the "Requesting Management Holders")
on one occasion a registration with respect to such number of Registrable
Securities of the Requesting Management Holders as designated in the written
notice, subject to the terms hereof, on a "shelf" registration statement for
sale in the open market for a period not to exceed 45 days as provided in this
Section 2.1; provided, however, that the parties shall agree in good faith to a
reasonable number of days for the "shelf" registration statement to be effective
for sale in the open market for a reasonable period in excess of 45 days if the
"shelf" registration statement offers in excess of one million shares of Common
Stock of the Company. Such registration statement shall be on Form S-3 if the
Company is eligible to use such form. The fees and expenses of such registration
and offering pursuant to this Section 2.1 shall be borne by the Company;
provided, however, that the Requesting Management Holders will pay all of the
underwriting discounts and commissions, transfer taxes and the expenses,
disbursements and charges of their own counsel with respect to the Registrable
Securities and, in the case of an Underwritten Public Offering, the expenses of
the Company, including travel expenses, incurred in connection with the
marketing of the Registrable Securities; provided, however, that if the Company
includes any securities to be offered and sold by it in such registration
statement, then the Company shall pay its relative percentage (equal to its
percentage of the total number of shares being registered) of all out-of-pocket
expenses (including travel expenses) incurred by the Company in connection with
the marketing of the Registrable Securities. Each Management Holder agrees that
the Management Holder Representative shall have the authority to act, or to
forebear from acting, pursuant to this Agreement as he or she may determine in
his or her discretion.
(b) Whenever required under this Section 2.1 to effect the registration
of the Registrable Securities, the Company shall use its reasonable best efforts
to:
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(i) As promptly as reasonably practicable, prepare and
file with the Commission a registration statement
with respect to all of the Registrable Securities,
cause such registration statement to become effective
as promptly as reasonably practicable, and keep such
registration statement effective for the earlier of
(A) forty-five (45) days or such longer period as is
agreed upon by the Company and the Management Holder
Representative for registration of in excess of one
million shares or (B) until all such shares are sold;
and
(ii) Prepare and file with the Commission such amendments
and supplements to such registration statement and
the prospectus used in connection with such
registration statement (including documents
incorporated therein) as may be necessary to comply
with the provisions of the Securities Act with
respect to the disposition of all Registrable
Securities covered by such registration statement.
(c) The Management Holder Representative may request that the offer and
sale of Registrable Securities by the Requesting Management Holders be made in
an Underwritten Public Offering and shall include in its request made pursuant
to this Section 2.1 the name of the managing underwriter or underwriters, if
any, that the Management Holder Representative would propose to employ in
connection with the public offering proposed to be made pursuant to the
registration requested. The Company may reasonably object to any managing
underwriter or underwriters proposed by the Management Holder Representative, in
which case the Management Holder Representative shall propose another managing
underwriter or underwriters that is or are reasonably acceptable to the Company.
The Company and each Requesting Management Holder shall use its reasonable
efforts to enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting in the manner set
forth above. The Company will take such reasonable actions as are necessary to
comply with the terms and obligations of such underwriting agreement and will
furnish such underwriters and their respective representatives full access to
all information reasonably requested in connection with their due diligence
review of the Company and its operations.
(d) The Company shall be entitled to defer for a reasonable period of
time, but not exceeding one hundred twenty (120) days, the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to this Section 2.1 if the Company's Board of Directors determines in
good faith that such deferral is necessary to avoid a requirement to disclose
prematurely information regarding a possible merger or acquisition transaction
or they otherwise determine in good faith that such registration would be
materially opposed to the best interests of the Company and its shareholders;
provided that such right to defer registration shall be exercised no more than
one time in any six month period. If the Company shall so postpone the filing of
a registration statement, the Management Holder Representative shall have the
right to withdraw such request for registration by giving written notice to the
Company within fifteen (15) days after receipt of notice from the Company of
such postponement. In the event of such withdrawal, such request shall not be
counted for purposes of Section 2.1 hereof.
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<PAGE> 5
(e) The Company shall be entitled to include in any registration
statement referred to in this Section 2.1, for sale in accordance with the
method of disposition specified by the Management Holder Representative, shares
of the Company's Common Stock to be sold by the Company for its own account, or
other shareholders for their own account (except as and to the extent that, in
the opinion of the managing underwriter if such method of disposition shall be
effected as an Underwritten Public Offering, such inclusion would result in any
of the Registrable Securities being excluded from the offering or would
materially adversely affect the marketing of the Registrable Securities).
(f) Anything in this Section 2.1 to the contrary notwithstanding, the
Company shall not be required to file a registration statement requested
pursuant to this Section 2.1 which would be declared effective after the last
day of a fiscal year of the Company and prior to the date on which the Company's
audited financial statements for such fiscal year are first available, if such
registration would require the inclusion of audited financial statements other
than such audited financial statements.
(g) No request for registration under this Section 2.1 may be made
within three (3) months after the effective date of any other registration
statement filed by the Company, provided that the Holders were eligible to
participate in such registration and were permitted to include in such
registration all Registrable Securities sought to be included therein. A
registration statement requested pursuant to this Section 2.1 which does not
become effective after the Company has commenced preparation of such
registration statement by reason of the withdrawal from such registration (other
than pursuant to Section 2.1(d)), prior to effectiveness, by Holders of a
majority of the Registrable Securities participating in such registration (other
than a withdrawal based on advice of counsel relating to a matter primarily with
respect to disclosure relating to the Company) shall be deemed to satisfy the
Company's obligation to register once upon the request of the Holders unless
such Holders shall have elected to pay or reimburse all costs and expenses
incurred by the Company in connection with such registration. Notwithstanding
the foregoing, such obligation shall be deemed not satisfied (i) if the offering
is prevented by any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court for any reason other than by
reason of some act or omission of any Holder of Registrable Securities
participating in such registration, or (ii) if the conditions to closing agreed
to be the Company specified in any underwriting agreement entered into in
connection with such registration are not satisfied by reason of a breach by the
Company of its covenants contained therein.
Section 2.2 Demand Registration Rights of Lancashire Holders. (a) Upon
written notice delivered by the Lancashire Holder Representative (as defined
below) to the Company following the expiration of the Restricted Period, the
Company agrees to effect on behalf of the Lancashire Holders designated in the
written notice (the "Requesting Lancashire Holders") on one occasion a
registration with respect to such number of Registrable Securities of the
Requesting Lancashire Holders as designated in the written notice, subject to
the terms hereof, on a "shelf" registration statement for sale in the open
market for a period not to exceed 45 days as provided in this Section 2.2;
provided, however, that the parties shall agree in good faith to a reasonable
number of days for the "shelf" registration statement to be effective for sale
in the
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<PAGE> 6
open market for a reasonable period in excess of 45 days if the "shelf"
registration statement offers in excess of one million shares of Common Stock of
the Company. Such registration statement shall be on Form S-3 if the Company is
eligible to use such form. The fees and expenses of such registration and
offering pursuant to this Section 2.2 shall be borne by the Company; provided,
however, that the Requesting Lancashire Holders will pay all of the underwriting
discounts and commissions, transfer taxes and the expenses, disbursements and
charges of their own counsel with respect to the Registrable Securities and, in
the case of an Underwritten Public Offering, the expenses of the Company,
including travel expenses, incurred in connection with the marketing of the
Registrable Securities; provided, however, that if the Company includes any
securities to be offered and sold by it in such registration statement, then the
Company shall pay its relative percentage (equal to its percentage of the total
number of shares being registered) of all out-of-pocket expenses (including
travel expenses) incurred by the Company in connection with the marketing of the
Registrable Securities. Each Lancashire Holder agrees that the Lancashire Holder
Representative shall have the authority to act, or to forebear from acting,
pursuant to this Agreement as he or she may determine in his or her discretion.
(b) Whenever required under this Section 2.2 to effect the registration
of the Registrable Securities, the Company shall use its reasonable best efforts
to:
(i) As promptly as reasonably practicable, prepare and
file with the Commission a registration statement
with respect to all of the Registrable Securities,
cause such registration statement to become effective
as promptly as reasonably practicable, and keep such
registration statement effective for the earlier of
(A) forty-five (45) days or such longer period as is
agreed upon by the Company and the Lancashire Holder
Representative for registration of in excess of one
million shares or (B) until all such shares are sold;
and
(ii) Prepare and file with the Commission such amendments
and supplements to such registration statement and
the prospectus used in connection with such
registration statement (including documents
incorporated therein) as may be necessary to comply
with the provisions of the Securities Act with
respect to the disposition of all Registrable
Securities covered by such registration statement.
(c) The Lancashire Holder Representative may request that the offer and
sale of Registrable Securities by the Requesting Lancashire Holders be made in
an Underwritten Public Offering and shall include in its request made pursuant
to this Section 2.2 the name of the managing underwriter or underwriters, if
any, that the Lancashire Holder Representative would propose to employ in
connection with the public offering proposed to be made pursuant to the
registration requested. The Company may reasonably object to any managing
underwriter or underwriters proposed by the Holder Representative, in which case
the Holder Representative shall propose another managing underwriter or
underwriters that is or are reasonably acceptable to the Company. The Company
and each Requesting Holder shall use its reasonable efforts to
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<PAGE> 7
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting in the manner set forth above. The
Company will take such reasonable actions as are necessary to comply with the
terms and obligations of such underwriting agreement and will furnish such
underwriters and their respective representatives full access to all information
reasonably requested in connection with their due diligence review of the
Company and its operations.
(d) The Company shall be entitled to defer for a reasonable period of
time, but not exceeding one hundred twenty (120) days, the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to this Section 2.2 if the Company's Board of Directors determines in
good faith that such deferral is necessary to avoid a requirement to disclose
prematurely information regarding a possible merger or acquisition transaction
or they otherwise determine in good faith that such registration would be
materially opposed to the best interests of the Company and its shareholders;
provided that such right to defer registration shall be exercised no more than
one time in any six month period. If the Company shall so postpone the filing of
a registration statement, the Holder Representative shall have the right to
withdraw such request for registration by giving written notice to the Company
within fifteen (15) days after receipt of notice from the Company of such
postponement. In the event of such withdrawal, such request shall not be counted
for purposes of Section 2.2 hereof.
(e) The Company shall be entitled to include in any registration
statement referred to in this Section 2.2, for sale in accordance with the
method of disposition specified by the Holder Representative, shares of the
Company's Common Stock to be sold by the Company for its own account, or other
shareholders for their own account (except as and to the extent that, in the
opinion of the managing underwriter if such method of disposition shall be
effected as an Underwritten Public Offering, such inclusion would result in any
of the Registrable Securities being excluded from the offering or would
materially adversely affect the marketing of the Registrable Securities).
(f) Anything in this Section 2.2 to the contrary notwithstanding, the
Company shall not be required to file a registration statement requested
pursuant to this Section 2.2 which would be declared effective after the last
day of a fiscal year of the Company and prior to the date on which the Company's
audited financial statements for such fiscal year are first available, if such
registration would require the inclusion of audited financial statements other
than such audited financial statements.
(g) No request for registration under this Section 2.2 may be made
within three (3) months after the effective date of any other registration
statement filed by the Company, provided that the Holders were eligible to
participate in such registration and were permitted to include in such
registration all Registrable Securities sought to be included therein. A
registration statement requested pursuant to this Section 2.2 which does not
become effective after the Company has commenced preparation of such
registration statement by reason of the withdrawal from such registration (other
than pursuant to Section 2.2(d)), prior to effectiveness, by Holders of a
majority of the Registrable Securities participating in such registration (other
than a withdrawal based on advice of counsel relating to a matter primarily with
respect to
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disclosure relating to the Company) shall be deemed to satisfy the Company's
obligation to register once upon the request of the Holders unless such Holders
shall have elected to pay or reimburse all costs and expenses incurred by the
Company in connection with such registration. Notwithstanding the foregoing,
such obligation shall be deemed not satisfied (i) if the offering is prevented
by any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason other than by reason of some
act or omission of any Holder of Registrable Securities participating in such
registration, or (ii) if the conditions to closing agreed to be the Company
specified in any underwriting agreement entered into in connection with such
registration are not satisfied by reason of a breach by the Company of its
covenants contained therein.
Section 2.3 "Piggyback" Registration Rights. If the Company, at any
time after the expiration of the Restricted Period and prior to the earlier of
(i) the date on which all Registrable Securities shall have been disposed of by
the Holders thereof or (ii) one year after the date of this Agreement, proposes
to register under the Securities Act any class of the Company's equity or debt
securities for sale to the public on a registration statement on Form S-1, S-2,
S-3 or any successor form for the sale of equity securities to the public, then
and in each such case the Company shall give fifteen (15) days prior written
notice of such proposed registration to the Management Holder Representative and
the Lancashire Holder Representative and shall cause such number of Registrable
Securities as shall be requested by the Holder Representatives on behalf of the
Holders included in such request within ten (10) days thereafter to be included,
upon the same terms (including the method of distribution), in any such
offering. The Company may, without the consent of the Management Holder
Representative and/or the Lancashire Holder Representative, as applicable,
withdraw any such registration and abandon any proposed offering if in the
reasonable good faith belief of the Board of Directors of the Company such
withdrawal and abandonment appears to be in the Company's best interests. The
failure of any Holder to exercise its rights hereunder with respect to any
registration shall not constitute a waiver of its rights to participate in any
other registration. The foregoing obligations shall be subject to the following
conditions and limitations:
(i) The Company shall not be required to give such notice
or include any Registrable Securities in any form of
registration statement unless such Registrable
Securities of such Holder are eligible for inclusion
in the applicable form of registration statement as
described above;
(ii) In an Underwritten Public Offering of the Registrable
Securities, each Holder shall agree (a) to have the
Registrable Securities sold to or by such underwriter
or managing agent on terms substantially equivalent
to the terms upon which the Company is selling the
securities so registered by it, and (b) to delay the
sale of any securities of the Company not sold by it
in such registration statement for the period
requested by such underwriter or managing agent up to
180 days (or such lesser amount of time if permitted
by such underwriter or managing agent) following the
effective date of such registration statement,
provided that the length of time which the Company
shall be required to maintain the effectiveness of
any shelf
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registration statement which shall then be effective
pursuant to Section 2.1 or Section 2.2 shall be
extended by the number of days of such delay;
(iii) If any underwriter in such Underwritten Public
Offering shall advise the Company that it declines to
include a portion of the Registrable Securities
requested by the Holders to be included in the
registration statement, then in case of an exclusion
as to a portion of such Registrable Securities, such
portion shall be allocated among the Holders in
proportion to the respective number of shares of
common stock requested to be registered by such
Holders of the Company's securities. The Holders
hereby acknowledge and agree that the Holders shall
be subordinate in priority of registration to any
person to whom the Company has granted registration
rights prior to the date hereof, and the Company
hereby acknowledges and agrees that the Holders shall
rank pari passu in priority of registration to any
person to whom the Company may grant rights to
registration after the date hereof and that the
Company shall not grant any "piggyback" or incidental
registration rights after the date hereof which shall
be superior in priority of registration to the rights
of the Holders; and
(iv) The fees and expenses of the offering shall be borne
by the Company; provided, however, that the Holders
will pay all of the underwriting discounts and
commissions, transfer taxes, transfer agent fees and
the expenses, disbursements and charges of their own
counsel with respect to the Registrable Securities.
Section 2.4 Undertakings of Holders. As a condition of the registration
provided for in this Section 2, each Holder who includes Registrable Securities
in such registration shall (a) furnish such information concerning itself and
the terms of its proposed offering to the Company as requested in connection
with such registration; (b) agree to indemnify the Company (and each of its
officers and directors who have signed the registration statement relating to
the registration) and each person, if any, who controls the Company within the
meaning of the Securities Act, the underwriters and each person, if any, who
controls such underwriter within the meaning of the Securities Act, to the
extent customary and reasonably deemed necessary by the Company with respect to
the accuracy of any information so furnished by such Holder; and (c) reasonably
cooperate with the Company and its representatives to cause such registration to
become effective at the earliest practicable time.
Section 2.5 Additional Undertakings of the Company. Without limiting
the generality of the provisions of this Section 2, if and whenever the Company
is under an obligation to effect the registration of any Registrable Securities,
the Company shall at its sole cost and expense:
(i) furnish to the Holder such numbers of each prospectus
(including each preliminary prospectus and prospectus
supplement) in conformity with the requirements of
the Securities Act, and such other documents as are
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reasonably requested by the Holder to facilitate the
public offering of its Registrable Securities; and
(ii) use its reasonable efforts to register or qualify the
Registrable Securities covered by such registration
under the securities or blue sky laws of such
jurisdictions (and shall do any and all other acts or
things) as is reasonable to enable the Holder to
consummate the public sale or the disposition of its
Registrable Securities; provided, however, that the
Company shall not be required in connection therewith
or as a condition thereto to qualify to do business
or to file a general consent to service of process in
any such states or jurisdictions.
Section 2.6 Indemnification.
(a) In the case of each registration effected by the Company pursuant
to this Agreement in which any Holder's Registrable Securities are included, the
Company agrees to indemnify and hold harmless such Holder against any and all
losses, claims, damages or liabilities to which they or any of them may become
subject under the Securities Act or any other statute or common law, including
any amount paid in settlement of any litigation, commenced or threatened, if
such settlement is effected with the written consent of the Company, and to
reimburse them for any reasonable legal or other reasonable expenses incurred by
them in connection with the investigation of any claims and defenses of any
actions (subject to Section 2.6(c)), insofar as any such losses, claims,
damages, liabilities or actions arise out of or are based upon: any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto or any document incorporated by
reference therein, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the indemnification agreement
contained in this Section 2.6(a) shall not apply to such losses, claims,
damages, liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged omission,
if such statement or omission was made in reliance upon and in conformity with
information furnished to the Company in writing by a Holder for use in
connection with the preparation of the registration statement or any preliminary
prospectus or final prospectus contained in the registration statement or any
such amendment thereof or supplement thereto or any document incorporated by
reference therein.
(b) In the case of each registration effected by the Company pursuant
to this Agreement in which any Holder's Registrable Securities are included,
such Holder shall be obligated, in the same manner and to the same extent as set
forth in Section 2.6(a), to indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, its directors and officers, with respect to any statement or
alleged untrue statement in, or omission or alleged omission from, such
registration statement or any post-effective amendment thereof or any
preliminary prospectus or final prospectus (as amended or supplemented, if
amended or supplemented as aforesaid) contained in such registration statement,
if such statement or omission was made in reliance upon and in
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conformity with information furnished in writing to the Company by such
indemnifying person for use in connection with the preparation of such
registration statement or any preliminary prospectus or final prospectus
contained in such registration statement or any such amendment thereof or
supplement thereto; provided, however, that the liability of each Holder
hereunder shall be limited to the proceeds received by each Holder from the sale
of Registrable Securities covered by such registration statement, amendment,
supplement or prospectus, as the case may be.
(c) Each person to be indemnified pursuant to this Section 2.6 shall,
promptly after its receipt of written notice of the commencement of any action
against such indemnified person in respect of which indemnity may be sought from
an indemnifying person under this Section 2.6, notify the indemnifying person in
writing of the commencement thereof. The omission of any indemnified person to
so notify an indemnifying person of the commencement of any such action shall
not relieve the indemnifying person from any liability in respect of such action
which it may have to such indemnified person on account of the indemnity
agreement contained in this Section 2.6 except to the extent the indemnifying
person shall be prejudiced thereby. If any such action shall be brought against
any indemnified person and it shall notify an indemnifying person of the
commencement thereof, the indemnifying person shall be entitled to participate
therein and, to the extent it may desire, jointly with any other indemnifying
persons similarly notified, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified person, and after notice from the
indemnifying person to such indemnified person of its election so to assume the
defense thereof, the indemnifying person shall not be liable to such indemnified
person under this Section 2.6 for any legal or other expenses subsequently
incurred by such indemnified person in connection with the defense thereof other
than reasonable costs of investigation unless (i) the indemnified party shall
have employed counsel in an action in which the indemnified party and
indemnifying party are both defendants and there is a conflict of interest
between such parties that would prevent counsel from adequately representing
both parties, (ii) the indemnifying party shall not have employed counsel
satisfactory within the exercise of reasonable judgment of the indemnified party
to represent the indemnified party within a reasonable time after the notice of
the commencement of the action or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party. The undertaking contained in this Section 2.6 shall be in
addition to any liabilities which the indemnifying person may have pursuant to
law.
(d) If the indemnification provided for in this Section 2.6 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 2.6 (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative fault of the Company and the Holders in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by
11
<PAGE> 12
the Company or the Holders and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
Section 2.7 Rule 144 Requirements. For a period commencing on the date
of this Agreement ending upon the first to occur of (i) the second anniversary
of the date of this Agreement or (ii) the sale of all Registrable Securities by
the Holders, with a view to making available to each Holder the benefits of Rule
144 (or any successor rule thereto) promulgated under the Securities Act, the
Company agrees to file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act. Each Holder's right to require the Company to register the
Registrable Securities pursuant to Sections 2.1, 2.2 and 2.3 shall expire at
such time as the Registrable Securities held by such Holder are eligible for
sale in the open market pursuant to Rule 144 (or any successor rule thereto)
under the Securities Act or Section 4(1) thereof.
Section 2.8 Transfer of Registration Rights. The registration rights
described in this Section 2 shall not be transferable without the prior consent
of the Company; provided, however, that a Holder may transfer such registration
rights to a permitted transferee of Shares so long as (i) such transfer of
Shares is conducted in compliance with all applicable transfer restrictions,
whether imposed by contract, applicable law or otherwise, and (ii) such
transferee is (a) a member of the Holder's immediate family or is a trust or
family limited partnership established for the benefit of such a family member
or (b) an affiliate, partner or shareholder of any Holder that is not a natural
person; provided further, that such registration rights shall not be
transferable by any transferee contemplated by the foregoing proviso who is a
natural person.
ARTICLE III
TRANSFERABILITY
Section 3.1 Transferability. Transfer of the Shares shall be made only
on the books of the Company by the holders of record thereof or by their legal
representatives who shall furnish proper evidence of authority to transfer, or
by their attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Company, subject to the restrictions set forth
in the Purchase Agreement and the documents and agreements contemplated thereby.
The Holder(s) in whose name the Shares stand on the books of the Company shall
be deemed by the Company to be owner(s) thereof for all purposes.
Section 3.2 Restrictive Legends. Unless and until otherwise permitted
by this Section, each instrument evidencing Shares shall contain or otherwise be
imprinted with a suitable legend in substantially the following form:
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any state, and such shares may
not be sold, transferred, pledged or hypothecated unless (1)
covered by an effective registration statement under the
Securities Act of 1933; (2) in accordance with Rule 144 of
the rules and regulations of such act; or (3) in accordance
with some other transaction which is exempt from the
registration requirements of such act. Furthermore, the
shares evidenced by this certificate
12
<PAGE> 13
have been offered and sold in reliance on the exemption from
registration provided by Regulation S and/or other exemptions
promulgated under the Securities Act of 1933.
The shares represented by this certificate were issued
pursuant to a business combination that is accounted for as a
"pooling of interest" and may not be sold, nor may the owner
thereof reduce his risk relative thereto in any way (except
as permitted by SEC Staff Accounting Bulletin No. 76), until
such time as Harbinger Corporation has published financial
results covering at least 30 days of combined operations
after the effective date of the event through which the
business combination was effected.
The Company is hereby authorized to place "stop transfer" instructions on its
records or to instruct any transfer agent to prevent the transfer of such shares
except in conformity with this Article. Upon the request of the Holder, the
Company shall cause the certificates representing the Shares to be reissued free
of any legend relating to restrictions or transfer, as soon as practicable after
the Company has been furnished evidence satisfactory to it that the restrictions
of Regulation S are no longer applicable or, if the issuance of such shares was
not pursuant to Regulation S, that the shares can be transferred pursuant to
Rule 144(k).
Section 3.3 Restriction on Transfer. No Shares may be transferred prior
to the expiration of the Restricted Period. In addition, no Shareholder may
transfer Shares other than under Sections 2.1, 2.2 and 2.3 until it has
delivered written notice to the Company describing briefly the manner of any
such proposed transfer and until (i) the Company has received from the
Shareholder's counsel an opinion (reasonably satisfactory in form and substance
to the Company's counsel) that such transfer can be made without compliance with
the registration provisions of the Securities Act or any state securities law,
or (ii) such transfer complies with Rule 144 or Regulation S (or comparable
successor provisions) promulgated under the said Securities Act and applicable
state securities act requirements, or (iii) a registration statement filed by
the Company is declared effective by the SEC and under applicable state
securities laws or steps necessary to perfect exemptions from such registration
are completed.
Notwithstanding anything to the contrary herein, in the event that
there is an Underwritten Public Offering of securities of the Company pursuant
to a registration covering Registrable Securities and a Holder of Registrable
Securities does not sell his Registrable Securities to the underwriters of the
Company's securities in connection with such offering, such Holder shall refrain
from selling such Registrable Securities during the period of distribution of
the Company's securities by such underwriters and the period in which the
underwriting syndicate participates in the after market; provided, however, that
such Holder shall, in any event, be entitled to sell its Registrable Securities
commencing on the ninetieth (90th) day after the effective date of such
registration statement in accordance with the terms hereof or such other amount
of time that may be required by the underwriter of similarly situated holders of
the Company's securities and provided further that the length of time which the
Company shall be required to maintain the effectiveness of any shelf
registration statement which shall then be
13
<PAGE> 14
effective pursuant to Section 2.1 or Section 2.2 shall be extended by the number
of days of which the Holders shall be required to refrain from selling pursuant
to this paragraph.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Notices. All notices, communications and deliveries hereunder
shall be made in writing signed by the party making the same, shall specify the
Section hereunder pursuant to which it is given or being made, and shall be
delivered personally or by telecopy transmission or sent by registered or
certified mail or by any express mail service (with postage and other fees
prepaid) as follows:
If to Company: Harbinger Corporation
1055 Lenox Park Blvd.
Atlanta, Georgia 30319-5309
Attn: President
Telecopy No.: 404/467-3476
with a copy to: Harbinger Corporation
1055 Lenox Park Boulevard
Atlanta, Georgia 30319-5309
Attn: Mr. Loren B. Wimpfheimer
Telecopy No. 404/467-3476
and a copy to: Morris, Manning & Martin, L.L.P.
3343 Peachtree Road, N.E.
Suite 1600
Atlanta, Georgia 30326
Attn: John C. Yates, Esq.
Telecopy No.: 404/365-9532
If to the Management Holders: c/o Allan W. Gray
17 Durham Close, Westhoughton,
Lancashire, BLS 2RP, England, U.K.
Telecopy No.: 01942 814712
If to the Lancashire Holders: c/o Lancashire Enterprise Ventures Limited
17 Ribblesdale Place
Preston PR1 3NA, England, U.K.
Attn: Mr. Richard Bamford
Telecopy No.: 011-44-1772-880697
14
<PAGE> 15
with a copy to: LAYTONS
22 St. John Street
Manchester M3 4EB, England, U.K.
Attn: John Gavan
Telecopy No.: 011-44-161-834-6862
Section 4.2 Remedies. Each party hereto acknowledges that a remedy at
law for any breach or attempted breach of this Agreement will be inadequate,
agrees that each other party hereto shall be entitled to specific performance
and injunctive and other equitable relief in case of any such breach or
attempted breach, and further agrees to waive any requirement for the securing
or posting of any bond in connection with the obtaining of any such injunctive
or any other equitable relief.
Section 4.3 Effect of Sale. Any Holder who sells all of his Registrable
Securities pursuant to the terms of this Agreement shall cease to be a party to
this Agreement and shall have no further rights or obligations hereunder.
Section 4.4 Amendment. This Agreement may not be modified or amended
except in a writing signed by the Company and the holders of 66-2/3% of the
total Registrable Securities outstanding at such time (with any shares of
Registrable Securities issuable upon conversion of other securities deemed to be
outstanding for these purposes).
Section 4.5 Governing Law. This Agreement shall be subject to and
governed by the laws of the State of Georgia, U.S.A.
Section 4.6 Jurisdiction. All legal actions to enforce or interpret the
provisions of this Agreement shall be filed in a court of the State of Georgia
or of the United States District Court having jurisdiction over Fulton County,
Georgia. All parties irrevocably waive any objection they may have to the laying
of venue of any suit, action or proceeding arising out of or relating hereto
brought in any such court, irrevocably waive any claim that any such suit,
action or proceeding so brought has been brought in an inconvenient forum and
further waive the right to object that such court does not have jurisdiction
over such party. No party shall bring a suit, action or proceeding in respect of
this Agreement in any other jurisdiction than as aforesaid.
Section 4.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the parties contained in this Agreement and their respective
heirs, executors, distributees, successors (including successors by merger) and
permitted assigns.
Section 4.8 Invalid Provisions. Should any portion of this Agreement be
adjudged or held to be invalid, unenforceable or void, such holding shall not
have the effect of invalidating or voiding the remainder of this Agreement and
the parties hereby agree that the portion so held invalid, unenforceable or void
shall, if possible, be deemed amended or reduced in scope, or to otherwise be
stricken from this Agreement to the extent required for the purposes of validity
and enforcement thereof.
15
<PAGE> 16
Section 4.9 Section Headings. The section and paragraph headings
contained herein are for reference purposes only and shall not in any way affect
the meaning and interpretation of this Agreement.
Section 4.10 Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed and delivered
shall be deemed an original, and such counterparts together shall constitute
only one instrument.
Section 4.11 Entire Agreement. This Agreement constitutes the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof.
Section 4.12 Time of the Essence. Time is of the essence with respect
to every provision of this Agreement.
Section 4.13 Pooling of Interests. If any provision of this Agreement
or the application of any such provision to any person or circumstance precludes
the use of "pooling of interests" accounting treatment in connection with the
Purchase Agreement, then such provision shall be of no force and effect to the
extent, and solely to the extent necessary to preserve such accounting treatment
pursuant to the Purchase Agreement, and in that event, the remainder of this
Agreement shall not be affected, and in lieu of such provision there shall be
added as part of this Agreement a provision as similar in terms as may be
possible for the purchase under the Purchase Agreement to be treated as a
"pooling of interests" for accounting purposes.
Section 4.14 Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other gender.
16
<PAGE> 17
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed by its duly
authorized officers and the Shareholders have executed this Agreement, as of the
day and year first above written.
HARBINGER CORPORATION
By:
----------------------------------------
Name: Theodore E. Ciochon
Title: Vice President
SHAREHOLDERS:
LANCASHIRE ENTERPRISE VENTURES LIMITED
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
--------------------------------------------
Philip J. Bird
--------------------------------------------
Allan W. Gray
--------------------------------------------
Tom P.C. Reynolds
--------------------------------------------
C.G. Summers
17
<PAGE> 18
Schedule I
<TABLE>
<CAPTION>
Shareholder Number of Shares
----------- ----------------
<S> <C>
Lancashire Enterprise
Ventures Limited 84,837
Philip J. Bird 84,152
Allan W. Gray 84,152
Tom P.C. Reynolds 29,129
C.G. Summers 29,129
</TABLE>
18
<PAGE> 1
EXHIBIT 99.1
IRREVOCABLE PROXY AGREEMENT
THIS PROXY AGREEMENT (the "Agreement"), dated as of October 23, 1997,
by and between _______________, a stockholder ("Premenos Stockholder") of
Premenos Technology Corp., a Delaware corporation ("Premenos"), and HARBINGER
CORPORATION, a Georgia corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company, Premenos and Olympic Subsidiary Corporation, a
Delaware corporation and a wholly owned subsidiary of the Company ("Merger
Sub"), have entered into an Merger Agreement, dated as of October 23, 1997 (the
"Merger Agreement"), pursuant to which Merger Sub will be merged with and into
Premenos with Premenos as the surviving corporation (the "Merger");
WHEREAS, Premenos Stockholder is the owner of the number of shares (the
"Shares") of Common Stock, par value $.01 per share, of Premenos (the "Premenos
Common Stock") set forth on Annex I (the term "Shares" shall also include any
shares of Premenos Common Stock of which Premenos Stockholder currently has
beneficial ownership (including sole voting power) or obtains beneficial
ownership during the term of this Agreement);
WHEREAS, concurrently with the execution and delivery of the Merger
Agreement and as a condition and inducement to the Company's willingness to
enter into the Merger Agreement, Premenos Stockholder desires to grant to the
Company an irrevocable proxy to vote the Shares;
NOW, THEREFORE, in consideration of the premises and the agreements
herein contained and intending to be legally bound, the parties agree as
follows:
1. Proxy. Subject to the terms and conditions hereof, Premenos
Stockholder hereby appoints the Company, with full power of substitution, as
proxy holder (the duly authorized officers of the Company hereinafter referred
to as the "Proxy Committee"), to represent and to vote the Shares in favor of
the Merger Agreement and the Merger, at any meeting (whether special or annual,
and whether or not adjourned) or by written action of stockholders of Premenos;
the authority granted hereunder (the "Proxy") shall be irrevocable during the
term of this Agreement and deemed to be coupled with an interest sufficient in
law as required by Section 212(e) of the Delaware General Corporation Law.
2. Changes in Shares. For all purposes of this Agreement, the Shares
shall include any securities issued or exchanged with respect to such Shares
upon any recapitalization, reclassification, merger, consolidation, spin-off,
partial or complete liquidation, stock dividend, split-up or combination of the
securities of Premenos or any other change in Premenos's capital structure.
1
<PAGE> 2
3. Representations and Warranties of Premenos Stockholder. Premenos
Stockholder represents and warrants to the Company as follows:
3.1 Ownership of the Shares. Premenos Stockholder has valid and
marketable title to the Shares listed on Annex I, free and clear of all security
interests, liens, claims, pledges, assessments, options, equities, charges and
encumbrances whatsoever, and with no proxies or restrictions on the voting
rights or other incidents of record or beneficial ownership pertaining thereto
(except for the Proxy being granted pursuant to this Agreement, the Voting
Agreement dated July 12, 1995 between David Hildes and Lew Jenkins (the "Voting
Agreement") and any applicable restrictions under the securities laws) and there
are no outstanding options, warrants or rights to purchase or acquire or
agreements relating to any of such Shares. Such Shares are validly issued and
outstanding, fully paid and non-assessable with no personal liability attaching
to the ownership thereof.
3.2 Valid and Binding Agreement; No Violation. This Agreement
constitutes a valid and binding agreement of Premenos Stockholder, enforceable
in accordance with its terms. Neither the execution of this Agreement, the
granting of the Proxy, nor the voting of the Shares by the Proxy Committee, will
constitute a violation of, or conflict with, or result in a default under, any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which Premenos Stockholder is a party or by which Premenos
Stockholder is bound or to which Premenos Stockholder's Shares are subject.
4. Representations and Warranties of the Company. The Company
represents and warrants to Premenos Stockholder as follows:
4.1 Authorization. The execution and delivery of this Agreement by the
Company has been duly authorized by all requisite corporate action.
4.2 Valid and Binding Agreement. This Agreement constitutes a valid and
binding agreement of the Company, enforceable in accordance with its terms.
5. Impact on Voting Agreement. Premenos Stockholder hereby acknowledges
that, during the term of this Agreement, this Agreement supersedes the Voting
Agreement with respect to all matters governed by this Agreement.
6. Publication of Interim Financial Results. The Company agrees to: (a)
publicly release a thirty (30) day interim financial statement (that includes
the combined operations of the Company and Premenos) covering the first full
calendar month of combined operations following the Closing (as defined in the
Merger Agreement) within the meaning of Section 201.01 of the SEC Codification
of Financial Reporting Policies as promptly as reasonably practicable, but in
any event no later than twenty-five (25) days following the end of such first
full calendar month (the "Interim Statement"); and (b) to deliver the Interim
Statement to Premenos Stockholder at least five (5) days prior to its public
release.
2
<PAGE> 3
7. Covenants of Premenos Stockholder. Premenos Stockholder hereby
covenants and agrees as follows:
7.1 Inquires or Proposals. From the date of execution of this Agreement
to termination hereof, Premenos Stockholder shall not, directly or indirectly,
through any officer, director, employee, representative or agent (i) solicit,
initiate, or encourage any inquiries or proposals that constitute, or could
reasonably be expected to lead to, a "Competing Offer" (as defined in the Merger
Agreement), or (ii) engage in negotiations or discussions concerning, or provide
any non-public information to any person or entity relating to, any Competing
Offer.
7.2 Legend. Until termination of this Agreement, each certificate
representing the Shares (the "Certificates") shall include a legend (the
"Legend") in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
IRREVOCABLE PROXY AGREEMENT, DATED AS OF OCTOBER 23, 1997, A
COPY OF WHICH IS ON FILE AT THE OFFICE OF THE CORPORATION. NO
VOTE OR TRANSFER OF ANY SHARES REPRESENTED BY THIS CERTIFICATE
SHALL BE VALID UNLESS MADE IN ACCORDANCE WITH THE TERMS OF
SUCH AGREEMENT.
Within 10 days of the execution of this Agreement, Premenos Stockholder
shall deliver the Certificates to the Company for purposes of affixing the
Legend. The Legend shall be removed upon the termination of this Agreement
pursuant to Section 8.8 hereof.
7.3 Stockholder Capacity. Premenos Stockholder has executed this
Agreement in his capacity as a Stockholder of Premenos and not in his capacity
as an officer or director of Premenos. Without limiting the foregoing, nothing
herein shall limit or affect any actions taken by Premenos Stockholder in his
capacity as an officer or director of Premenos in exercising Premenos's rights
under the Merger Agreement.
8. Miscellaneous.
8.1 Expenses. All costs and expenses (including legal fees) incurred in
connection with this Agreement shall be paid by the party incurring such
expense.
8.2 Survival of Representations. Notwithstanding any provision of this
Agreement, all representations, warranties, covenants and agreements made by
Premenos Stockholder and the Company in this Agreement shall survive until the
earlier of (a) the closing of the Merger or (b) the termination of the Merger
Agreement in accordance with its terms; provided, however, if the Merger is
closed in accordance with the terms of the Merger Agreement, Section 6 of this
Agreement shall survive termination of this Agreement until satisfied in
accordance with the terms thereof.
8.3 Further Assurance and Cooperation. From time to time, and without
further consideration, each party will execute and deliver to the other such
documents and take such action
3
<PAGE> 4
as the other may reasonably request in order to consummate more effectively the
terms of this Agreement.
8.4 Parties in Interest; Complete Agreement; Amendment. All authority
herein conferred or agreed to be conferred by Premenos Stockholder shall survive
Premenos Stockholder's death, incapacity, dissolution, liquidation or
termination. This Agreement constitutes the sole understanding of the parties
hereto with respect to the subject matter hereof; provided, however, that this
provision is not intended to abrogate any other written agreement between or
among the parties executed with or after this Agreement or any written agreement
pertaining to another subject matter. No amendment of this Agreement shall be
binding unless made in writing and duly executed by the Company and Premenos
Stockholder. This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
Company (if such assigning party is Premenos Stockholder) or Premenos
Stockholder (if such assigning party is the Company).
8.5 Specific Performance. Each party acknowledges that its obligations
hereunder are unique, and agrees that the other shall have the right, in
addition to any other rights it may have at law, to specific performance or
equitable relief by way of injunction if it shall fail to perform any of its
obligations hereunder.
8.6 Law Governing; Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware. Unless
otherwise expressly provided herein, all references in this Agreement to
Section(s) shall refer to the Section(s) of this Agreement. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
8.7 Consent to Jurisdiction; Venue. Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the state courts of
Delaware and to the jurisdiction of the United States District Court for the
District of Delaware, for the purpose of any action or proceeding arising out of
or relating to this Agreement, and each of the parties hereto irrevocably agrees
that all claims in respect to such action or proceeding may be heard and
determined exclusively in any state or federal court sitting in Wilmington,
Delaware. Each of the parties hereto agrees that a final judgment in any action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Each of the parties
hereto irrevocably consents to the service of any summons and complaints and any
other process in any other action or proceeding relating to this Agreement, on
behalf of itself or its property, by the personal delivery of copies of such
process to such party. Nothing in this Section 6.7 shall affect the right of any
party hereto to serve legal process in any other manner permitted by law.
4
<PAGE> 5
8.8 Term of the Agreement. This Agreement shall terminate upon the
first to occur of (i) the termination of the Merger Agreement in accordance with
its terms, or (ii) the closing of the Merger.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HARBINGER CORPORATION
By:
-------------------------
Name:
-------------------
PREMENOS STOCKHOLDER
-----------------------------
6
<PAGE> 7
Annex I
<TABLE>
<CAPTION>
Name Shares
<S> <C>
</TABLE>
7
<PAGE> 1
EXHIBIT 99.2
Contacts: Harbinger Corporation Premenos Corporation
Joel Katz, CFO Ward Wolff, SVP/CFO
Phone: 404-467-3011 510-688-2718
Email: [email protected] [email protected]
For Immediate Release...
HARBINGER AND PREMENOS SIGN DEFINITIVE MERGER AGREEMENT
LEADING MARKET POSITION INCREASES TO SERVE OVER 50,000 ELECTRONIC COMMERCE AND
EDI CUSTOMERS.
Atlanta, GA and Concord, CA - October 23, 1997 - Harbinger Corporation
(NASDAQ:HRBC), the world's leading provider of single-source Electronic Commerce
and EDI solutions, announced today that it has executed a definitive agreement
to acquire Premenos Corporation (NASDAQ:PRMO), the market leader for midrange
EDI software and Internet-based EC solutions. Harbinger will issue 0.45 share of
Harbinger common stock in exchange for each share of Premenos common stock. All
Premenos options and warrants will be converted into Harbinger options and
warrants, and adjusted in accordance with the exchange ratio. The transaction is
subject to, among other things, Harbinger and Premenos shareholder approvals,
and necessary regulatory approvals. The company expects the transaction to be
accounted for as a pooling of interests. Harbinger also expects to take a 4Q97
charge between $20-30 million for expenses related to the transaction which is
expected to close on or before December 31, 1997. The company anticipates that
the combination will be accretive to Harbinger shareholders in 1998.
The announcement marks Harbinger's fourth transaction this year and
continues a series of related activities over the last several years to solidify
its rank as the leading independent supplier of standards-based Electronic
Commerce software and services.
C. Tycho Howle, Harbinger Chairman and Lew Jenkins, Premenos Chairman
expressed their enthusiasm for the combination in terms of shared vision,
improved distribution, market leadership and operating efficiencies. The
Harbinger and Premenos merger builds on an already formidable presence in the
EDI/EC industry. Harbinger is the largest supplier of EDI software and services
by customer count that includes over 35,000 desktop installations. The combined
company also becomes the world's largest supplier of EDI software to the
midrange systems market (AS/400, UNIX and NT) with more than 8,000 installs. The
combined company, with over 1,000 employees and projected revenues in excess of
$120 million on a pro forma basis for 1997, will serve over 50,000 worldwide
customers.
"Premenos is clearly a leader in the midrange EDI software market and
we have always maintained great respect for their work in pioneering
Internet-based EC and EDI," said Howle. "We were impressed with Premenos'
technologies throughout the due diligence process, particularly in view of the
synergies to be gained from our own work in standards-based software for the
Internet and Value-Added Networks (VAN). Premenos was first to introduce a
robust EDI encryption product for secure Internet transactions, Templar, now the
industry leader with
<PAGE> 2
full-strength exportable encryption. Premenos followed Templar's introduction
with PowerDox and WebDox, forms-based EDI products for VANs and the Web.
Together, we can offer the marketplace the industry's most popular EDI solutions
as a single-source supplier for desktop, midrange or mainframe systems, with
delivery over the Internet and/or VAN," continued Howle.
Jenkins noted, "Our companies share a common vision for Electronic
Commerce, both for the Internet and VAN paradigms. We see a large opportunity to
improve our distribution through Harbinger channels - in software sales as well
as in offering mass deployment and network services to Premenos' client base,
many of whom are hubs or mini-hubs. Coupling Harbinger's services with EDI/Open,
EDI/400 and Templar presents us with an opportunity to offer fully integrated
solutions to new customers, as well as to our 5,000+ current customers."
"As a larger entity we will benefit from increased operating leverage
in R&D, support, administration, and professional services," said David Leach,
Harbinger CEO. "Harbinger has grown revenue at a compound annual rate of more
than 50% for the last seven years and at annual rates of approximately 70% and
80% during 1995 and 1996, respectively. It's difficult to attract rapidly the
experienced people required to service these growth rates. Premenos brings us a
core team of over 275 talented, capable people with many years of collective EC
and EDI experience. I'm confident that the Premenos team will play a major role
in our continued growth and make significant contributions to our progress in
many areas," added Leach.
Premenos President and CEO Tim Dreisbach commented, "It has been a
privilege to bring Premenos to this next phase of growth. I am especially proud
of our loyal customers and employees, in particular the current management team
who has executed a profit-oriented financial strategy while continuing our
commitment to product quality, customer service, and investments for growth.
With the considerable synergies between Premenos and Harbinger, we will be able
to move even faster towards accomplishing these common goals."
About Harbinger
Harbinger Corporation is a world-leading, single-source provider of
Electronic Commerce and EDI solutions servicing over 46,000 software and network
customers. The company is dedicated to providing comprehensive and scalable
EC/EDI software and Value-Added Network services from desktops to mainframes,
and additionally meeting emerging market needs for Internet- and Web-based
commerce solutions. In addition to millions of EDI transactions, over $1.5
billion in Automated Clearing House (ACH) transfers flow through the Harbinger
Network each month. Harbinger is headquartered in Atlanta, Georgia and provides
worldwide support to customers with over 750 experienced employees in multiple
U.S. and overseas operations facilities. For information on Harbinger's full
line of products and services, please visit the World Wide Web at
www.Harbinger.com.
About Premenos
Premenos (NASDAQ: PRMO) is a leading provider of electronic commerce
solutions for established and emerging trading communities. Its standards-based
business applications leverage the strengths of traditional EDI systems, TCP/IP
networks, secure information and Web technologies. Premenos has a history of
market-proven innovation, including the first open-network technology for
secure, auditable data transmission over the Internet. Through partnerships
with leading application and integrated solutions vendors, Premenos empowers
businesses to
<PAGE> 3
lower costs, shorten trading cycles and increase competitive advantage.
Premenos' renowned Electronic Commerce Resource Guide can be reached at
www.Premenos.com.
This press release contains statements which may constitute
"forward-looking statements" within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. 15 U.S.C.A. Sections 77Z-2 and 18U-5 (Supp.
1996). Those statements include statements regarding the intent, belief or
current expectations of Harbinger Corporation and members of its management as
well as the assumptions on which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those contemplated by such
forward-looking statements. Important factors currently known to management that
could cause actual results to differ materially from those in forward-looking
statements are set forth in the Safe Harbor Compliance Statement for
Forward-Looking Statements included as Exhibit 99.1 to the Company's Current
Report on Form 8-K dated and filed July 16, 1997. The Company undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
###
Harbinger and the Harbinger logo are registered trademarks of Harbinger
Corporation. Premenos, EDI/Open and Templar are the trademarks of Premenos Corp.
All other company and product names referenced herein are registered trademarks
or trademarks of their respective owners.
<PAGE> 1
EXHIBIT 99.3
Contact: Joel Katz, CFO
404-467-3011
[email protected]
For Immediate Release...
HARBINGER CORPORATION ANNOUNCES
RECORD THIRD QUARTER REVENUES AND OPERATING INCOME
Atlanta, GA - October 23, 1997 - Harbinger Corporation (NASDAQ:HRBC) is
pleased to announce record revenues and operating income for the quarter ended
September 30, 1997. Unless otherwise noted, all comparisons with prior periods
reflect the effect of the retroactive restatement resulting from a
pooling-of-interests transaction with SupplyTech Inc., and affiliates ("STI")
which was completed on January 3, 1997. Revenues for the third quarter increased
37% to $21.5 million compared to pooled revenues of $15.7 million for the same
period last year. The net loss applicable to common shareholders for the third
quarter was $9.7 million or ($0.47) per share compared to the pooled net loss
applicable to common shareholders of $1.2 million or ($0.07) per share in the
same period in 1996. Operating income for the third quarter (excluding charges
for in-process product development and acquisitions) increased to $4.9 million
compared to pooled operating income of $849,000 a year ago. Net income from the
Company's core business (excluding the aforementioned charges, and the equity in
loss of Harbinger NET Services, LLC ("HNS") in 1996, net of related income
taxes) was $3.3 million or $0.15 per share as compared to pooled income of
$498,000 or $0.03 per share in the prior year.
Compared to Harbinger Corporation's third quarter 1996 performance as
originally reported, revenue increased 93% from $11.2 million to $21.5 million
and operating income (excluding charges for in-process product development and
acquisitions) increased 171% from $1.8 million to $4.9 million. Net income for
the period from core operations (excluding the aforementioned charges, and the
equity in loss of HNS in 1996, net of related income taxes) as compared to
amounts originally reported increased 197% to $3.3 million or $0.15 per share
from $1.1 million or $0.06 per share one year earlier.
Operating margins, excluding charges for in-process product development
and acquisitions, increased from 5.4% on a pooled basis and 16.1% as originally
reported in the third quarter of 1996 to 22.6% in the third quarter of 1997
primarily reflecting both increased operating leverage on higher revenues and
operating synergies realized from the STI merger. Active revenue generating
customers, representing customers to whom Harbinger provides products and
services on an ongoing basis, also reached a new record, increasing 74% over the
last 12 months to more than 46,000 at the end of the third quarter. This
increase includes approximately 9,000 additional customers as the result of the
STI merger.
"We are pleased to announce another record quarter. "Not only did most
of our business units have a strong quarter, but Harbinger successfully raised
$60 million in a secondary offering and acquired ACQUION, Inc., a leading
supplier of Electronic Procurement Catalogs to major corporations," said C.
Tycho Howle, Chairman. Added Harbinger CEO David Leach, "While our revenue was
impacted somewhat by currency fluctuations and
<PAGE> 2
softness in some European markets, we are pleased we were able to meet our
earnings targets. Our SupplyTech and Enterprise Solutions Divisions, in
particular had strong growth rates over the prior years."
About Harbinger
Harbinger Corporation is a world-leading, single-source provider of
Electronic Commerce and EDI solutions servicing over 46,000 software and network
customers. The company is dedicated to providing comprehensive and scalable
EC/EDI software and Value-Added Network services from desktops to mainframes,
and additionally meeting emerging market needs for Internet- and Web-based
commerce solutions. In addition to millions of EDI transactions, over $1.5
billion in Automated Clearing House (ACH) transfers flow through the Harbinger
Network each month. Harbinger is headquartered in Atlanta, Georgia and provides
worldwide support to customers with over 750 experienced employees in multiple
U.S. and overseas operations facilities. For information on Harbinger's full
line of products and services, please visit the World Wide Web at
www.Harbinger.com.
This press release contains statements which may constitute
"forward-looking statements" within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. 15 U.S.C.A. Sections 77Z-2 and 18U-5 (Supp.
1996). Those statements include statements regarding the intent, belief or
current expectations of Harbinger Corporation and members of its management as
well as the assumptions on which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those contemplated by such
forward-looking statements. Important factors currently known to management that
could cause actual results to differ materially from those in forward-looking
statements are set forth in the Safe Harbor Compliance Statement for
Forward-Looking Statements included as Exhibit 99.1 to the Company's Current
Report on Form 8-K dated and filed July 16, 1997. The Company undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
###
Harbinger and the Harbinger logo are registered trademarks of Harbinger
Corporation. All other company and product names referenced herein are
registered trademarks or trademarks of their respective owners.
<PAGE> 1
EXHIBIT 99.4
Contacts: Joel Katz, CFO Rebecca Metzger, Public Relations
404-467-3011 404-467-3211
[email protected] [email protected]
For Immediate Release...
HARBINGER CORPORATION ACQUIRES ATLAS PRODUCTS INTERNATIONAL LIMITED
Harbinger to become major EC player in the U.K. market.
Atlanta, GA - October 23, 1997 - Harbinger Corporation (NASDAQ: HRBC),
the world's leading provider of single-source Electronic Commerce and Electronic
Data Interchange (EDI) solutions, today announced the acquisition of Atlas
Products International Limited, a leading provider of EDI translation software
in the U.K.
The acquisition of Atlas gives Harbinger a strong presence in the
EC/EDI industry throughout the U.K. Atlas, based in Manchester, England, has an
install base of over 2,500 customers on PC, UNIX and DEC/VMS platforms. Atlas
products are targeted to small and mid-sized businesses, and are distributed
directly and through third party channels in the U.K., European and other
markets around the world. The acquisition of Atlas brings with it a substantial
customer base as well as quality relationships in key industries including
retail, finance, manufacturing and distribution. Additionally, Atlas' products
provide extensive EC/EDI standards support for European, and in particular the
U.K., theaters.
Harbinger acquired Atlas for $11.8 million payable in Harbinger common
stock. Harbinger will issue approximately 313,000 new shares of Harbinger common
stock, in exchange for 100% of the capital stock of privately held Atlas. The
transaction will be accounted for as a pooling of interests. Harbinger expects
to take a 4Q97 charge for acquisition and integration related expenses of
between $3-5 million related to this transaction, and expects that the
transaction will be non-dilutive to earnings in the fourth quarter 1997 and
accretive in calendar year 1998, exclusive of the charge.
"Atlas' products, infrastructure and customer base, combined with
Harbinger's existing European operations, products and IVAS-based services
enables us to quickly become a major player in the U.K. market," said David
Leach, CEO, Harbinger Corporation.
"This is an exciting opportunity for us to market Atlas' products and
services using Harbinger's channels throughout Europe, and to make Harbinger's
TrustedLink Enterprise solutions available in the U.K.," said Allan Gray,
Managing Director, Atlas. "Harbinger's mass deployment engine will provide hub
companies with the ability to rapidly grow their trading communities in Europe."
"Atlas is an essential element of Harbinger's European expansion
strategy," said Willem van Nieuwenhuyzen, GM Europe, Middle East and Africa.
"Atlas provides Harbinger with an established suite of EC products tailored to
the needs of the European market and the U.K. in particular. As one of the UK's
leading vendors of desktop EDI translation software, Atlas has successfully
expanded into the Windows NT and UNIX
<PAGE> 2
markets. This strength, combined with our existing operations in the U.K., make
Harbinger a major player in the market with the ability to offer a complete
suite of EC software and services across all platforms from the desktop to the
mainframe."
About Harbinger
Harbinger Corporation is a world-leading, single-source provider of
Electronic Commerce and EDI solutions servicing over 46,000 software and network
customers. The company is dedicated to providing comprehensive and scalable
EC/EDI software and Value-Added Network services from desktops to mainframes,
and additionally meeting emerging market needs for Internet- and Web-based
commerce solutions. In addition to millions of EDI transactions, over $1.5
billion in Automated Clearing House (ACH) transfers flow through the Harbinger
Network each month. Harbinger is headquartered in Atlanta, Georgia and provides
worldwide support to customers with over 750 experienced employees in multiple
U.S. and overseas operations facilities. For information on Harbinger's full
line of products and services, please visit the World Wide Web at
www.Harbinger.com.
This press release contains statements which may constitute
"forward-looking statements" within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. 15 U.S.C.A. Sections 77Z-2 and 18U-5 (Supp.
1996). Those statements include statements regarding the intent, belief or
current expectations of Harbinger Corporation and members of its management as
well as the assumptions on which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those contemplated by such
forward-looking statements. Important factors currently known to management that
could cause actual results to differ materially from those in forward-looking
statements are set forth in the Safe Harbor Compliance Statement for
Forward-Looking Statements included as Exhibit 99.1 to the Company's Current
Report on Form 8-K dated and filed July 16, 1997. The Company undertakes no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
###
Harbinger and the Harbinger logo are registered trademarks, and TrustedLink a
trademark of Harbinger Corporation. Atlas and ____are the trademarks of Atlas
<PAGE> 1
EXHIBIT 99.5
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. Harbinger Corporation ("Harbinger" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe harbor
provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of Harbinger. the Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, Harbinger undertakes no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time. This Safe Harbor Statement supersedes that certain Safe Harbor Statement
filed as Exhibit 99.1 to the Company's Current Report on Form 8-K dated July 16,
1997.
Harbinger provides the following risk factor disclosure in connection
with its continuing effort to qualify its written and oral forward-looking
statements for the safe harbor protection of the Reform Act and any other
similar safe harbor provisions. Important factors currently known to management
that could cause actual results to differ materially from those in
forward-looking statements include the following:
<PAGE> 2
Integration of Recent Acquisitions; Future Acquisitions. Harbinger
Corporation ("Harbinger" or "Company") has completed a number of acquisitions
since January 1, 1996, including the acquisitions of Atlas Products
International, Limited and it affiliate ("Atlas"), Acquion, Inc. ("Acquion"),
SupplyTech, Inc. and its affiliated entities (collectively, "SupplyTech"), and
the minority interests of Harbinger NET Services, LLC ("HNS"). Acquion,
SupplyTech and HNS have historically reported significant operating losses. In
addition, the proposed acquisition of Premenos Technology Corp. ("Premenos")
represents Harbinger's largest acquisition to date and will require significant
management time and attention to successfully integrate the business and
operation of the two companies. Harbinger's acquisitions present a number of
risks and challenges, including the historical operating losses of Acquion,
SupplyTech and HNS, the integration of the software products of the acquired
companies into Harbinger's current suite of products, the integration of the
sales forces of acquired companies into Harbinger's existing sales operations,
the coordination of customer support services, the integration of international
operations of acquired companies with Harbinger's international affiliates, and
the diversion of management's attention from other business concerns. In
connection with its prior acquisitions, Harbinger has experienced the following
effects during the periods subsequent to such acquisitions: integration costs
and expenses associated with such acquisition transactions; refinement of the
acquired companies business operations to conform to Harbinger's mission and
strategy, and the discontinuance of the non-core business operations of the
acquired company; and elimination of certain revenue opportunities as a result
of product overlap, channel conflict, or other competitive overlap. Management
of Harbinger currently anticipates that all or certain of the foregoing factors
may impact future operating results of Harbinger following consummation of the
Merger of Premenos (the "Merger") including, but not limited to, growth in
revenue and operating income in future periods. Several of the newly acquired
products address the same markets as, and may therefore be competitive with, or
redundant with, existing Harbinger products. There can be no assurance that
Harbinger can successfully assimilate its operations and integrate its software
products with these recently acquired operations, software products and
technologies, that Harbinger will be successful in repositioning its products on
a timely basis to achieve market acceptance or that the integration efforts
associated with recent acquisitions will not have a material adverse effect upon
Harbinger's business or results of operations in future periods. Any delay in
such integration efforts or adverse developments associated therewith could have
a material adverse effect on Harbinger.
Harbinger's growth has been significantly enhanced through acquisitions of
other businesses, products and licenses. There can be no assurance that in the
future Harbinger will be able to identify suitable acquisition candidates
available for sale at reasonable prices, consummate any acquisition or
successfully integrate any acquired business into Harbinger's operations.
Operational and software integration problems may arise if Harbinger undertakes
future acquisitions of complementary products, technologies or businesses.
Future acquisitions may also result in potentially dilutive issuances of equity
securities, the incurrence of additional debt, the write-off of in-process
product development and capitalized product costs, integration costs, and the
amortization of expenses related to goodwill and other intangible assets, all of
which could have a material adverse effect on Harbinger. Acquisitions involve
numerous additional risks, including difficulties in the assimilation of the
operations, products and personnel of the acquired company, differing company
cultures, the diversion of management's attention from other business concerns,
risks of entering markets in which Harbinger has little or no direct prior
experience, and the potential loss of key employees of the acquired company.
Customer satisfaction or performance problems at a single acquired firm could
have a material adverse impact on the reputation of Harbinger as a whole.
Although Harbinger expects to have cash resources of approximately $100 million
upon conclusion of the Merger, to the extent Harbinger desires to finance a
future acquisition, there can be no assurance that Harbinger will be able to
secure financing for such a transaction on reasonable terms or at all. See
"Ability to Manage Growth."
Factors Affecting Operating Results; Potential Fluctuations in Quarterly
Results. Although Harbinger has been able to grow its revenue and operating
income (before special charges) in the past, there can be no assurance that
Harbinger will be able to continue to grow its revenue and operating income at
historical levels in the future or that fluctuations in revenue or operating
income growth will not occur in future periods. Factors currently known to
management that could impact rate of growth in revenue or operating income in
<PAGE> 3
future periods include, but are not limited to, the management time and effect
currently anticipated in connection with the integration of recently acquired
businesses, and a slow down in the rate of growth of AS/400 EDI sales. In
addition, Harbinger's quarterly operating results have in the past and may in
the future vary or decrease significantly depending on factors such as revenue
from software sales, the timing of new product and service announcements,
changes in pricing policies by Harbinger and its competitors, market acceptance
of new and enhanced versions of Harbinger's products, the size and timing of
significant orders, changes in operating expenses, changes in Harbinger's
strategy, personnel changes, government regulation, the introduction of
alternative technologies, the effect of acquisitions and general economic
factors. Harbinger has limited or no control over many of these factors.
Harbinger has experienced losses in the past, and at September 30, 1997,
Harbinger had an accumulated deficit of approximately $44.3 million. Harbinger
operates with virtually no software product order backlog because its software
products typically are shipped shortly after orders are received. As a result,
revenues in any quarter are substantially dependent on the quantity of purchases
of services requested and product orders received in that quarter. Quarterly
revenues also are difficult to forecast because the market for electronic
commerce and EDI software products is rapidly evolving and Harbinger's revenues
in any period may be significantly affected by the announcements and product
offerings of Harbinger's competitors as well as alternative technologies.
Harbinger's IVAS product is more complex and expensive compared to Harbinger's
other electronic commerce and Internet products introduced to date, and will
generally involve significant investment decisions by prospective customers.
Accordingly, Harbinger expects that in selling its IVAS product it will
encounter risks typical of companies that rely on large dollar purchase
decisions, including the reluctance of purchasers to commit to major investments
in new products and protracted sales cycles, both of which add to the difficulty
of predicting future revenues and may result in quarterly fluctuations.
Harbinger's expense levels are based, in part, on its expectations as to future
revenues. If revenue levels are below expectations, Harbinger may be unable or
unwilling to reduce expenses proportionately and operating results are likely to
be adversely affected. As a result, Harbinger believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. Due to all of
the foregoing factors, it is likely that in some future quarter or quarters
Harbinger's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Harbinger Common Stock
will likely be adversely affected in a material manner.
Harbinger recognizes revenues for software license fees upon shipment, net
of estimated returns. Customers using Harbinger's PC products are permitted to
return products after delivery for a specified period, generally 60 days.
Harbinger generally has experienced returns of approximately 20% to 30% of the
PC product license fees, and Harbinger records revenues after a deduction for
estimated returns. Any material increase in Harbinger's return experience could
have an adverse effect on its operating results. See "Integration of Recent
Acquisitions; Future Acquisitions."
Acquisition-Related and Other Charges; Expected Loss in Year Ending
December 31, 1997. In the first quarter of 1997, Harbinger incurred
approximately $16.3 million in acquisition related charges and $2.4 million in
losses on early debt extinguishment. In the third quarter, Harbinger incurred
aggregate charges of approximately $14.9 million. Harbinger currently
anticipates that it will incur charges in the range of $20.0 to $30.0 million in
the fourth quarter of 1997 relating primarily to the Merger and certain costs
and charges associated therewith. To the extent that the Merger is not
consummated in the fourth quarter of 1997, approximately $2.0 to $3.0 million of
integration activity costs associated with such acquisition will be incurred in
the fourth quarter of 1997, with the remaining Merger-related costs occurring in
the period in which the transaction closes. Of the charges incurred in the first
and third quarters of 1997, $17.6 million consisted of charges for integration
activities associated with acquisitions consummated in such periods. As a result
of these charges, Harbinger incurred a net loss for the first and third quarters
of 1997 and expects to incur a net loss for the year ending December 31, 1997.
Certain of the costs and expenses incurred in connection with these integration
activities and reflected in such charges included internal expense allocations
which may recur in other expense categories in the future and may result in an
increase in some expense categories in Harbinger's results of operations in
future periods.
2
<PAGE> 4
Ability to Manage Growth. Harbinger has recently experienced significant
growth in revenue, operations and personnel as it has made strategic
acquisitions, added subscribers to the Harbinger VAN and IVAS and increased the
number of licensees of its software products. This growth may increase as a
result of the contemplated transactions with Premenos. This growth could
continue to place a significant strain on Harbinger's management and operations,
including its sales, marketing, customer support, research and development,
finance and administrative operations. Achieving and maintaining profitability
during a period of expansion will depend, among other things, on Harbinger's
ability to successfully expand its products, services and markets and to manage
its operations and acquisitions effectively. Difficulties in managing growth,
including difficulties in obtaining and retaining talented management and
product development personnel, especially following an acquisition, could have a
material adverse effect on Harbinger.
Ability to Respond to Rapid Change. Harbinger's future success will depend
significantly on its ability to enhance its current products and develop or
acquire and market new products which keep pace with technological developments
and evolving industry standards as well as respond to changes in customer needs.
The market for EDI products and services, VAN services and Internet software
products and services is characterized by rapidly changing technology, evolving
industry standards and customer demands, and frequent new product introductions
and enhancements. There can be no assurance that Harbinger will be successful in
developing or acquiring product enhancements or new products to address changing
technologies and customer requirements adequately, that it will introduce such
products on a timely basis, or that any such products or enhancements will be
successful in the marketplace. Harbinger's delay or failure to develop or
acquire technological improvements or to adapt its products to technological
change would have a material adverse effect on Harbinger's business, results of
operations and financial condition. In addition, there is no assurance that the
Premenos' products and services will not undergo diminished market acceptance
due to the rapidly evolving technologies and the development of technological
enhancements by competing products and services and that, as a result, the
combined company's position in the marketplace will decline. The failure of
Harbinger's management team to respond effectively to and manage rapidly
changing technological and business conditions as well as the growth of its own
business, should it occur, could have a material adverse impact on Harbinger's
business, results of operations and prospects.
Intense Competition. The electronic commerce, EDI and network services and
products businesses are intensely competitive, and Harbinger has many
competitors with substantially greater financial, marketing, personnel and
technological resources than Harbinger. Other companies offer products and
services that may be considered by customers to be acceptable alternatives to
Harbinger's products and services. Certain companies also operate private
computer networks for transacting business with their trading partners and
Harbinger expects other companies to offer products and services competitive
with the Templar, TrustedLink Guardian and IVAS products and services. It is
expected that other companies may develop and implement similar
computer-to-computer networks, some of which may be "public" networks such as
Harbinger's and others may be "private," providing services only to a specific
group of trading partners, thereby reducing Harbinger's ability to increase
sales of its network services. In addition, several companies offer PC-based,
midrange NT and UNIX, and mainframe and Internet computer software products
which compete with Harbinger's software products. Advanced operating systems and
applications software from Microsoft and other vendors also may offer electronic
commerce functions that limit Harbinger's ability to sell its software products.
Harbinger believes that the continuing acceptance of electronic commerce and EDI
will attract new competitors, including software applications and operating
systems companies that may bundle electronic commerce solutions with their
programs, and alternative technologies that may be more sophisticated and cost
effective than Harbinger's products and services. Competitive companies may
offer certain electronic commerce products or services, such as communications
software or network transactional services, at no charge or a deeply discounted
charge, in order to obtain the sale of other products or services. Since
Harbinger's agreements with its network subscribers are terminable upon 30 days'
notice, Harbinger does not have the contractual right to prevent its customers
from changing to a competing network. See "Dependence on New Products; Industry
Standards." Competitors that offer products and/or services that compete with
various of Harbinger's products and services include, among others, Advantis
Systems, Inc.; AT&T; Computer Associates International, Inc.; EDS; General
Electric Information Systems; QuickResponse Services, Inc.; Sterling Commerce,
Inc. and a joint venture between British Telecommunications Plc and
3
<PAGE> 5
MCI Communications Corporation; as well as the internal programming staffs of
various businesses engaging in electronic commerce.
Emergence of Electronic Commerce Over the Internet. The Internet provides
an alternative means of providing electronic commerce to business trading
partners. The market for Internet software and services is both emerging and
highly competitive, ranging from small companies with limited resources to large
companies with substantially greater financial, technical and marketing
resources than Harbinger. In addition to Harbinger's Internet related products
and services, several existing competitors of Harbinger have introduced their
own Internet electronic commerce products and services. Moreover, new
competitors, which may include telephone companies and media companies, are
likely to increase the provision of business-to-business data transmission
services using the Internet. There is no assurance that the Internet will become
an accepted method of electronic commerce. There is no assurance that
Harbinger's TrustedLink Guardian end user software and IVAS or Premenos' Templor
Products, which enable electronic commerce over the Internet, will be accepted
in the Internet market or can be competitive with other products based on
evolving technologies. If the Internet becomes an accepted method of electronic
commerce, Harbinger could lose network customers from its VAN which would reduce
recurring revenue from network services and have a material adverse effect on
Harbinger. Even if customers choose Harbinger's Internet solutions, the revenue
gained from the sale of these solutions may not offset the loss of revenue from
the sale of Harbinger's traditional EDI solutions.
The use of Harbinger's and Premenos' Internet electronic commerce products
and services will depend in large part upon the continued development of the
infrastructure for providing Internet access and services. Use of the Internet
for business-to-business electronic commerce services raises numerous issues
that greatly impact the development of this market. These issues include
reliability, data security and data integrity, timely transmission, and pricing
of products and services. Because global commerce and online exchange of
information on the Internet is new and evolving, it is difficult to predict with
any assurance whether the Internet will prove to be a viable commercial
marketplace. The Internet has experienced, and is expected to continue to
experience, substantial growth in the number of users and the amount of traffic.
There can be no assurance that the Internet will continue to be able to support
the demands placed on it by this continued growth. In addition, the Internet
could lose its viability due to delays in the adoption of new standards and
protocols to handle increased levels of Internet activity, or due to increased
governmental regulation. There can be no assurance that the infrastructure or
complementary services necessary to make the Internet a viable commercial
marketplace will be developed, or, if developed, that the Internet will become a
viable commercial marketplace for products and services such as those offered by
Harbinger and Premenos. If the necessary infrastructure or complementary
services or facilities are not developed, or if the Internet does not become a
viable commercial marketplace, Harbinger's business, operating results or
financial condition will be materially adversely affected.
Dependence on New Products; Industry Standards. The electronic commerce
industry is characterized by rapid technological change, frequent new product
and service introductions and evolving industry standards. Harbinger's future
success will depend in significant part on its ability to anticipate industry
standards, continue to apply advances in electronic commerce product and service
technologies, enhance existing products and services and introduce and acquire
new products and services on a timely basis to keep pace with technological
developments. There can be no assurance that Harbinger will be successful in
developing,acquiring or marketing new or enhanced products or services that
respond to technological change or evolving industry standards, that Harbinger
will not experience difficulties that could delay or prevent the successful
development, acquisition or marketing of such products or services or that its
new or enhanced products and services will adequately meet the requirements of
the marketplace and achieve market acceptance. In the past, Harbinger has
experienced delays in the commencement of commercial shipments of new products
and enhancements, resulting in delays or losses of product revenues. Such delays
or failure in the introduction of new or enhanced products or services, or the
failure of such products or services to achieve market acceptance, could have a
material adverse effect on the business, results of operations and financial
condition of Harbinger.
4
<PAGE> 6
Investment in International Subsidiaries; International Growth and
Operations. Harbinger believes that its continued growth and profitability will
require expansion of its international operations through its international
subsidiaries, including Atlas, NTEX Holding, B.V. and INOVIS GmbH & Co. in
Germany as well as the international operations of SupplyTech in the United
Kingdom, Italy and Mexico (collectively, the "International Subsidiaries"). The
combined company will also have an office in Paris, France. This expansion will
require financial resources and significant management attention, particularly
by certain members of the management of Harbinger. Harbinger's ability to
successfully expand its business internationally will also depend upon its
ability to attract and retain both talented and qualified managerial, technical
and sales personnel and electronic commerce services customers outside the
United States and its ability to continue to effectively manage its domestic
operations while focusing on international expansion. Certain of the
International Subsidiaries have experienced operating losses in their recent
histories and some have experienced significant operating losses in their recent
histories. To the extent that the International Subsidiaries are unable to
penetrate international markets in a timely and profitable manner, Harbinger's
growth, if any, in international sales will be limited, and Harbinger could be
materially adversely affected. During the third quarter of 1997, Harbinger's
growth in revenue was adversely affected by a fluctuation in currency exchange
rates, management issues associated with its European operations, and general
softness in demand in the European markets. Moreover, Harbinger's ability to
successfully implement its international strategy may require installation and
operation of a value-added network and implementation of its IVAS software in
other countries, as well as additional improvements to its infrastructure and
management information systems, including its international customer support
systems. In addition, there can be no assurance that Harbinger will be able to
maintain or increase international market demand for Harbinger's products or
services.
International operations are subject to certain inherent risks, including
unexpected changes in regulatory requirements and tariffs, longer payment
cycles, increased difficulties in collecting accounts receivable and potentially
adverse tax consequences. To the extent international sales are denominated in
foreign currencies, gains and losses on the conversion to U.S. dollars of
revenues, operating expenses, accounts receivable and accounts payable arising
from international operations may contribute to fluctuations in Harbinger's
results of operations. Harbinger has not entered into any hedging or other
arrangements for the purpose of guarding against the risk of currency
fluctuation. In addition, sales in Europe and certain other parts of the world
typically are adversely affected in the third calendar quarter of each year
because many customers reduce their business activities in the summer months.
Dependence on Key Management and Personnel; Ability to Attract and Retain
Qualified Personnel. Harbinger's success is largely dependent upon its executive
officers and key sales and technical personnel, the loss of one or more of whom
could have a material adverse effect on Harbinger. The future success of
Harbinger will depend in large part upon its ability to attract and retain
talented and qualified personnel. In particular, Harbinger believes that it will
be important for Harbinger to hire experienced product development and sales
personnel. Competition in the recruitment of highly-qualified personnel in the
computer software and electronic commerce industries is intense. The inability
of Harbinger to locate and retain such personnel may have a material adverse
effect on Harbinger. No assurance can be given that Harbinger can retain its key
employees or that it can attract qualified personnel in the future. Harbinger
currently carries key-person life insurance policies on the lives of Messrs.
Howle, Leach and Davis.
Dependence on Alliance Partners. Harbinger has various agreements with
alliance partners for the distribution and marketing of certain software
products of Harbinger. These alliance partners pay Harbinger royalties
representing a percentage of fees generated from the sale of software licensed
from Harbinger. For the years ended December 31, 1995 and 1996, revenues from
one of these alliance partners were approximately $1.4 million and $5.7 million,
respectively, which equaled the contractual minimum royalty during those years.
There is no minimum royalty obligation after 1996, and Harbinger has experienced
and believes that revenues from this alliance partner will substantially decline
in 1997 as compared to 1996. Further, based on recent amendments to the
arrangement, Harbinger has experienced and believes that the average collection
period related to cash flows derived from royalty revenues earned from this
alliance partner will lengthen substantially. In addition, Premenos is dependent
on a distribution partner for approximately 6% of its
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revenues, arising principally from this partner's distribution efforts in Europe
and other overseas locations. There can be no assurance that this partner will
continue to distribute Premenos products after the Merger, or that such
distribution efforts, if continued, will achieve the same degree of results.
Risks of Product Development. Software products as complex as those
offered by Harbinger may contain undetected errors or failures when first
introduced or when new versions are released. If software errors are discovered
after introduction, Harbinger could experience delays or lost revenues during
the period required to correct these errors. There can be no assurance that,
despite testing by Harbinger and by current and potential customers, errors will
not be found in new products or releases after commencement of commercial
shipments, resulting in loss of or delay in market acceptance, additional and
unexpected expenses to fund further product development or to add programming
personnel to complete a development project, and loss of revenue because of the
inability to sell the new product on a timely basis, any one or more of which
could have a material adverse effect on Harbinger.
Dependence on Data Centers. The network service operations of Harbinger
are dependent upon the ability to protect computer equipment and the information
stored in Harbinger's data centers against damage that may be caused by fire,
power loss, telecommunication failures, unauthorized intrusion, computer viruses
and disabling devices and other similar events. Notwithstanding precautions
Harbinger has taken, there can be no assurance that a fire or other natural
disaster, including national, regional or local telecommunications outages,
would not result in a prolonged outage of Harbinger's network services. In the
event of a disaster, and depending on the nature of the disaster, it may take
from several hours to several days before Harbinger's off-site computer system
can become operational for all of Harbinger's customers, and use of the
alternative off-site computer would result in substantial additional cost to
Harbinger. In the event that an outage of Harbinger's network extends for more
than several hours, Harbinger will experience a reduction in revenues by reason
of such outage. In the event that such outage extends for one or more days,
Harbinger could potentially lose many of its customers, which may have a
material adverse effect on Harbinger.
Dependence upon Certain Licenses. Harbinger relies on certain technology
that it licenses from third parties and other products that are integrated with
internally developed software and used in Harbinger's products to perform key
functions or to add important features. There can be no assurance that Harbinger
will be successful in negotiating third-party technology licenses on suitable
terms or that such licenses will not be terminated in the future. Moreover, any
delay or product problems experienced by such third party suppliers could result
in delays in introduction of Harbinger's products and services until equivalent
technology, if available, is identified, licensed and integrated, which could
have a material adverse effect on Harbinger's business, operating results and
financial condition.
Limited Protection of Proprietary Technology; Risks of
Infringement. Harbinger relies primarily on a combination of copyright, patent
and trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights. Harbinger seeks to protect its
software, documentation and other written materials principally under trade
secret and copyright laws, which afford only limited protection. Harbinger
presently has one patent for an electronic document interchange test facility
and a patent application pending for an EDI communication system. Despite
Harbinger's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy aspects of Harbinger's products or to obtain and use information
that Harbinger regards as proprietary. There can be no assurance that
Harbinger's means of protecting its proprietary rights will be adequate or that
Harbinger's competitors will not independently develop similar technology. In
distributing many of its products, Harbinger relies primarily on "shrink wrap"
licenses that are not signed by licensees and, therefore, may be unenforceable
under the laws of certain jurisdictions. In addition, Harbinger has licensed it
products to users and distributors in other countries, and the laws of some
foreign countries do not protect Harbinger's proprietary rights to as great an
extent as the laws of the United States. Harbinger does not believe that any of
its products infringe the proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim infringement by Harbinger
with respect to current or future products, and Harbinger has agreed to
indemnify many of its customers against such claims. Harbinger expects that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in electronic commerce grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit,
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could be time-consuming, result in costly litigation, cause product shipment
delays or require Harbinger to enter into royalty or licensing agreements and
indemnify its customers against resulting liability, if any. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
Harbinger or at all, which could have a material adverse effect on Harbinger.
Government Regulatory and Industrial Policy Risks. Harbinger's network
services are transmitted to its customers over dedicated and public telephone
lines. These lines are governed by Federal and state regulations establishing
the rates, terms and conditions for their use. Changes in the legislative and
regulatory environment relating to online services, EDI or the Internet access
industry, including regulatory or legislative changes which directly or
indirectly affect telecommunication costs, restrict content or increase the
likelihood of competition from regional telephone companies or others, could
have a material adverse effect on Harbinger's business. The Telecommunications
Act of 1996 ("Act") amended the federal telecommunications laws by lifting
restrictions on regional telephone companies and others competing with Harbinger
and imposed certain restrictions regarding obscene and indecent content
communicated to minors over the Internet or through interactive computer
services. The Act set in motion certain events that will lead to the elimination
of restrictions on regional telephone companies providing transport between
defined geographic boundaries associated with the provision of their own
information services. This will enable regional telephone companies to more
readily compete with Harbinger by packaging information service offerings with
other services and providing them on a wider geographic scale. While provisions
of the Act prohibiting the use of a telecommunications device or interactive
computer service to send or display indecent material to minors have been held
by the U.S. Supreme Court to be unconstitutional, there can be no assurance that
future legislative or regulatory efforts to limit use of the Internet in a
manner harmful to Harbinger will not be successful. The Clinton administration
has announced an initiative to establish a framework for global electronic
commerce. Also, some countries such as Germany have adopted laws regulating
aspects of the Internet, and there are a number of bills currently being
considered in the United States at the federal and state levels involving
encryption and digital signatures, all of which may impact Harbinger. Harbinger
cannot predict the impact, if any, that the Act and future court opinions,
legislation, regulations or regulatory changes in the United States or other
countries may have on its business. Management believes that Harbinger is in
compliance with all material applicable regulations. Harbinger's Trusted Link
Guardian product and the Templar product both incorporate encryption technology
which is subject to U.S. export control regulations. Although both products are
currently exportable under licenses granted by the Commerce Department,
government regulation in this area is subject to frequent change and there can
be no assurance that these products will remain exportable.
Shares Eligible for Future Sale; Possible Adverse Effect on Future Market
Prices. Sales of substantial numbers of shares of Harbinger Common Stock in the
public market could adversely affect the market price of the Harbinger Common
Stock and make it more difficult for Harbinger to raise funds through equity
offerings in the future. Two of Premenos' principal stockholders will hold, and
several current Harbinger shareholders do hold, in excess of 1 million shares of
the outstanding Harbinger Common Stock and a sale by one or more of these
stockholders of a substantial portion of their shares could adversely affect the
market price of the Harbinger Common Stock.
Anti-Takeover Provisions. The Harbinger Board has authority to issue up to
20,000,000 shares of preferred stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of the preferred stock
without further vote or action by Harbinger Shareholders. The rights of the
holders of Harbinger Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any preferred stock that may be issued
in the future. While Harbinger has no present intention to issue additional
shares of preferred stock, such issuance, while providing desired flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of Harbinger. In addition, the Harbinger Charter
and the Harbinger Bylaws contain provisions that may discourage proposals or
bids to acquire Harbinger. This could limit the price that certain investors
might be willing to pay in the future for shares of Harbinger Common Stock. The
Harbinger Charter provides for a classified board of directors with three-year,
staggered terms for its members. The classification of the Harbinger Board could
have the effect of making it more difficult for a third party to acquire control
of Harbinger.
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