UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
OR
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____________ to _____________
Commission File Number: 0-26544
PREMENOS TECHNOLOGY CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0367912
(State of incorporation) (IRS Employer
Identification No.)
1000 Burnett Avenue
Concord, California 94520
(Address of principal executive offices)
510-688-2700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
The number of shares outstanding of the registrant's common stock as of
October 21, 1997 was 11,817,095.
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PREMENOS TECHNOLOGY CORP.
INDEX TO SEPTEMBER 30, 1997 FORM 10-Q
Page
PART I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations
for the three and nine month periods
ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
for the nine month periods ended
September 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - Other Information
Items 1, 2, 3, 4, 5 and 6 11
SIGNATURE 12
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PART I
Item 1
PREMENOS TECHNOLOGY CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
( in thousands )
September 30, December 31,
1997 1996
------------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $24,777 $26,638
Short-term investments 34,470 29,844
Trade accounts receivable, net of
allowances of $410 and $348 in 1997
and 1996, respectively 8,703 9,440
Income taxes recoverable 409 551
Prepaid expenses and other assets 1,054 959
Deferred income taxes 2,516 2,516
------- -------
Total current assets 71,929 69,948
Property and equipment, net 6,873 6,700
Capitalized software development costs, net 5,618 6,037
Other long-term assets 1,022 1,005
------- -------
Total assets $85,442 $83,690
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,359 $ 4,747
Deferred revenue 7,654 7,017
Current portion of long-term debt 346 597
------- -------
Total current liabilities 12,359 12,361
Long-term debt 35 240
Deferred revenue 219 385
Deferred income taxes 1,273 1,406
------- -------
Total liabilities 13,886 14,392
------- -------
Minority interest in consolidated subsidiary - 22
------- -------
Stockholders' equity:
Common stock 118 115
Additional paid-in capital 70,114 68,441
Retained earnings 1,324 720
------- -------
Total stockholders' equity 71,556 69,276
------- -------
Total liabilities and stockholders' equity $85,442 $83,690
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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PREMENOS TECHNOLOGY CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
( unaudited )
( in thousands, except per share data )
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1997 1996 1997 1996
------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $ 5,635 $ 4,986 $16,260 $14,089
Services 4,168 3,033 11,546 8,493
------- ------- ------- -------
Total revenues 9,803 8,019 27,806 22,582
------- ------- ------- -------
Cost of revenues:
Software licenses 909 1,029 3,346 2,490
Services 1,929 1,385 5,429 3,745
------- ------- ------- -------
Total cost of revenues 2,838 2,414 8,775 6,235
------- ------- ------- -------
Gross margin 6,965 5,605 19,031 16,347
------- ------- ------- -------
Operating expenses:
Product development 2,371 2,193 7,487 6,036
Sales and marketing 3,034 2,767 9,417 7,821
General and administrative 1,069 922 3,068 2,682
Acquisition-related costs - 2,484 - 4,700
------- ------- ------- -------
Total operating expenses 6,474 8,366 19,972 21,239
------- ------- ------- -------
Income (loss) from operations 491 (2,761) (941) (4,892)
Interest income 829 694 2,272 2,260
Interest expense (21) (24) (66) (119)
Other (125) - (263) -
------- ------- ------- -------
Income (loss) before provision
for income taxes and minority
interest 1,174 (2,091) 1,002 (2,751)
Provision for income taxes 446 139 380 780
Minority interest - 2 (2) 1
------- ------- ------- -------
Net income (loss) $728 $(2,232) $624 $(3,532)
======= ======= ======= =======
Net income (loss) per share $0.06 $(0.20) $0.05 $(0.33)
======= ======= ======= =======
Weighted average number of common and
common equivalent shares outstanding 12,273 10,920 11,894 10,815
======= ======= ======= =======
The accompanying notes are an integral part of these condensed consolidated financial
statements.
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PREMENOS TECHNOLOGY CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
( unaudited )
( in thousands )
Nine Months Ended
September 30,
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities $ 6,015 $ 3,057
------- -------
Cash flows from investing activities:
Business acquisitions - (4,662)
Purchase of short-term investments (48,365) (29,254)
Proceeds from sale of short-term investments 43,498 51,855
Capitalized software development costs (1,129) (2,270)
Acquisition of property and equipment (2,201) (3,580)
------- -------
Net cash provided by (used in)
investing activities (8,197) 12,089
------- -------
Cash flows from financing activities:
Principal payments on long-term debt (455) (461)
Proceeds from exercise of options 288 862
Proceeds from employee stock purchase
plan stock issuance 541 684
Purchase of treasury stock (53) -
------- -------
Net cash provided by financing activities 321 1,085
------- -------
Increase (decrease) in cash and
cash equivalents (1,861) 16,231
Cash and cash equivalents, beginning of period 26,638 11,495
------- -------
Cash and cash equivalents, end of period $24,777 $27,726
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</TABLE>
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PREMENOS TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
( unaudited )
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared on the same basis as the audited annual consolidated financial
statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the Company's financial position, results of operations, and
cash flows. The results of operations for the three and nine month periods
ended September 30, 1997 are not necessarily indicative of the results to be
expected for the full year. Certain information and footnote disclosures
normally contained in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
These condensed consolidated financial statements should be read in
conjunction with the annual Consolidated Financial Statements contained in the
Company's December 31, 1996 Annual Report on Form 10-K.
Note 2. Treasury Stock
In March 1997, the Company's Board of Directors approved the repurchase of up
to one million shares of the Company's common stock. During the second
quarter of 1997, the Company repurchased 7,500 shares of its common stock at
$7.06 per share. It is not expected that any additional shares will be
repurchased. The repurchased shares were reissued under the Company's
Employee Stock Purchase Plan.
Note 3. Incentive Stock Program
On May 29, 1997, the shareholders approved an amendment to the 1995 Incentive
Stock Program (the "Program") to increase the shares reserved for issuance
thereunder by 2,000,000 shares, bringing the total number of shares issuable
under the Program to 4,630,000.
Note 4. Stock Exchange
During the quarter ended September 30, 1997, the Company issued 31,560 shares
of Premenos Technology Corp. Common stock in exchange for 24,000 shares of
Premenos Corp. common stock. This transaction was accounted for using the
purchase method of accounting and resulted in goodwill of $297,000 which is
being amortized over three years.
Note 5. Subsequent Event
On October 23, 1997, the Company entered into a definitive Merger Agreement
with Harbinger Corporation. Subject to approval of the Merger Agreement by
the stockholders of Harbinger Corporation and Premenos Technology Corp., each
share of the Company's Common Stock issued and outstanding at the time of the
Merger will be converted into the right to receive .45 of a share of Harbinger
Corporation. Common Stock. The Merger Agreement may be terminated by either
party under certain conditions.
Note 6. Recently Issued Accounting Pronouncements
In March 1997, Statement of Financial Accounting Standards No. 129 "Disclosure
of Information about Capital Structure" was issued and is effective for the
Company's year ending December 31, 1997. In June 1997, Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" and Statement of
Financial Accounting Standards No. 131 "Disclosures About Segments of an
Enterprise and Related Information" were issued and are effective for the year
ending December 31, 1998. The Company has not determined the impact of the
implementation of these pronouncements.
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Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's operating results during the period
included in the accompanying condensed consolidated financial statements.
RESULTS OF OPERATIONS
Revenues
Total revenues for the third quarter of 1997 were $9.8 million compared to
$8.0 million in the third quarter of 1996, representing an increase of 22%.
Total revenues in the first nine months of 1997 were $27.8 million compared to
$22.6 million in the same nine month period of 1996, representing an increase
of 23%.
Software Licenses. Revenues from license fees and royalties increased to $5.6
million in the third quarter of 1997 from $5.0 million in the third quarter of
1996, representing an increase of 13%. For the first nine months of 1997 and
1996, license fees and royalties grew to $16.3 million from $14.1 million, an
increase of 15%. The increases for both the three and nine month periods in
1997, as compared to the same periods in 1996, were significantly contributed
to by growth in licensing of the Company's financial encryption products,
increased revenues derived through the Company's network of international
distributors, and increased market acceptance of the Company's open systems
EDI translator product. These increases offset moderate declines in the
Company's domestic AS400-based translator revenues when compared to both
second quarter 1997 and the same quarter last year.
Services. Revenues from services were $4.2 million and $3.0 million for the
third quarters of 1997 and 1996, respectively, representing an increase of
37%. Services revenues include product support revenues of $3.1 million and
$2.5 million for the third quarters of 1997 and 1996, respectively,
representing an increase of 24%. Revenues from services also grew for the
nine months ended September 30, 1997 compared to the same nine month period in
1996, to $11.5 million from $8.5 million, or 36%. Product support revenues
for the first nine months of 1997 and 1996 were $9.0 million and $7.1 million,
respectively, representing an increase of 26%. Consulting services revenues
have more than tripled for the 1997 periods, in comparison to the 1996
periods, reflecting increased revenues from software integration and
professional consulting services. Product support revenues have increased
also as a result of the growth in the Company's installed base of products.
Cost of Revenues
Cost of revenues for the third quarters of 1997 and 1996 were $2.8 million and
$2.4 million, representing 29% and 30% of total revenues, respectively. For
the first nine months of 1997 and 1996, cost of revenues were $8.8 million and
$6.2 million, representing 32% and 28% of total revenues, respectively.
Cost of licenses includes royalties paid to third parties for licensed
software incorporated into the Company's products, amortization of capitalized
software development costs, business partner co-marketing fees, documentation,
and costs associated with product distribution. Cost of licenses were
$909,000 and $1.0 million for the third quarters of 1997 and 1996,
respectively, representing 16% and 21% of software license revenues,
respectively. For the first nine months of 1997 and 1996, cost of licenses
were $3.3 million and $2.5 million, representing 21% and 18% of software
licenses revenues, respectively. For the nine month periods, cost of licenses
have increased from 1996 to 1997 due to several factors including increased
amortization of capitalized software costs relating to the Company's EDI
translator and Templar products and to its two acquisitions in 1996, and
increased costs relating to the sublicensing from third parties of
technologies embedded in the Company's broadening range of product offerings.
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Effective in the third quarter of 1997, cost of licenses were lowered by the
Company's re-negotiation of a major business partner arrangement.
Cost of services for the third quarters of 1997 and 1996 were $1.9 million and
$1.4 million, respectively, representing 46% of services revenues for both
periods. For the first nine months of 1997 and 1996, cost of services were
$5.4 million and $3.7 million, representing 47% and 44% of services revenues,
respectively. The increase in costs reflects the Company's increasing
emphasis on providing software integration and professional consulting
services to its customers.
Operating Expenses
Product Development. Product development expenditures consist primarily of
personnel and equipment costs required to conduct the Company's research and
development efforts, including project engineers, product documentation,
internal testing and development, standards and quality assurance. Product
development expenses, net of capitalized software development expenditures,
were $2.4 million and $2.2 million for the third quarters of 1997 and 1996,
representing 24% and 27% of total revenues, respectively. For the first nine
months of 1997 and 1996, product development expenses, net of capitalized
software development expenditures, were $7.5 million and $6.0 million,
representing 27% for both periods. The Company capitalized software
development expenditures of $358,000 and $843,000 in the third quarters of
1997 and 1996, respectively, in accordance with Statement of Financial
Accounting Standards No. 86. The amounts capitalized represented 13% and 28%
of gross development expenditures of $2.7 million and $3.0 million for the
third quarters of 1997 and 1996, respectively. The decrease in gross product
development expenditures reflects the Company's continuing gain of
efficiencies in the management of product development teams across product
lines while integrating the development teams from the 1996 acquisitions. For
the first nine months of 1997 and 1996, the Company capitalized $1.1 million
and $2.3 million, or 13% and 27%, of gross development expenditures of $8.6
million and $8.3 million, respectively. The Company believes that research
and development expenditures are essential to maintaining its competitive
position and expects these costs to continue to constitute a significant
percentage of revenues. Product development expense and the capitalization
rate may fluctuate from period to period depending in part upon the number and
status of software development projects in process.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and commissions of sales personnel, costs of marketing personnel, and
outside marketing and promotional expenses. Sales and marketing expenses for
the third quarters of 1997 and 1996 were $3.0 million and $2.8 million,
representing 31% and 35% of total revenues, respectively. For the first nine
months of 1997 and 1996, sales and marketing expenses increased to $9.4
million from $7.8 million, representing 34% and 35% of total revenues,
respectively. The Company continues to place significant emphasis on direct
sales through building its own sales force. In addition, the Company is
continuing to pursue marketing its products through indirect channels in order
to increase revenues and market share while reducing distribution costs.
General and Administrative. General and administrative expenses for the third
quarters of 1997 and 1996 were $1.1 million and $922,000, representing 11% of
total revenues for both periods. For the first nine months of 1997 and 1996,
general and administrative expenses were $3.1 million and $2.7 million,
representing 11% and 12% of total revenues, respectively.
Acquisition-Related Costs
Included in acquisition-related costs for the three and nine month periods
ended September 30, 1996 were charges for purchased in-process product
development arising from the acquisitions of Don Valley Technology Corporation
in the second quarter of 1996 and Prime Factors, Inc. in the third quarter of
1996. In addition, the nine month period ended September 30, 1996 included a
charge of $232,000 related primarily to the exchange of Premenos Corp. stock
options for Premenos Technology Corp. stock options.
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Other Income (Expense), Net
Other income (expense) consists of interest income, interest expense and other
non-operating expenses. Net other income was $683,000 and $670,000 for the
third quarters of 1997 and 1996, representing 7% and 8% of total revenues,
respectively. For the first nine months of 1997 and 1996, net other income
was $1.9 million and $2.1 million, representing 7% and 9% of total revenues,
respectively. The decrease in net other income for the nine month period
comparison is primarily due to the investment of $125,000 in each of the first
and third quarters of 1997 to Trailblazer Systems, Inc. pursuant to their
achievement of the first two of three agreed-upon technical milestones.
Provision for Income Taxes
The Company's provision for income taxes for the three and nine month periods
ended September 30, 1997 was $446,000 and $380,000, representing effective
income tax rates of 38% for both periods. The provision for income taxes for
the three and nine month periods ended September 30, 1996 were $139,000 and
$780,000 representing effective income tax rates of 35% and 40%, respectively,
excluding the non-deductible acquisition-related costs. The effective income
tax rates fluctuate from period to period primarily due to the timing of and
changes in effective dates of federal tax laws relating to research and
experimentation credits.
Minority Interest
Minority interest represents the minority stockholders' proportionate share of
the net income (loss) of the Company's subsidiary, Premenos Corp. In the
third quarter of 1997, the Company entered into agreements with all remaining
stockholders whereby such minority stockholders received 1.315 shares of
Premenos Technology Corp. in exchange for each share of Premenos Corp.,
thereby eliminating minority interest during the quarter ended September 30,
1997. This exchange resulted in goodwill of $297,000 which is being amortized
over three years. For the first nine months of 1997 and 1996, the minority
shareholders' proportionate share of the reported net income (loss) was
$(2,000) and $1,000, respectively.
Net Income (Loss) and Net Income (Loss) per Share
Net income (loss) for the third quarters of 1997 and 1996 were $728,000 and
$(2.3) million, representing 7% and (28)% of total revenues, respectively, and
net income (loss) per share of $0.06 and $(0.20), respectively. Excluding the
acquisition-related costs, net income for the third quarter of 1996 would have
been $252,000, or $0.02 per share. For the first nine months of 1997 and
1996, net income (loss) was $624,000 and $(3.5) million, respectively, and net
income (loss) per share were $0.05 and $(0.33), respectively. Excluding the
acquisition-related costs, net income for the nine months ended September 30,
1996 would have been $1.1 million, or $0.10 per share.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had working capital in excess of $59
million. Cash and short-term investments totaled $59.2 million, representing
69% of total assets.
Cash flows from operating activities were $6.0 million and $3.1 million for
the nine months ended September 30, 1997 and 1996, respectively. For both
periods, cash provided by operating activities resulted from adjustments to
net income (loss), primarily depreciation, amortization, other noncash
charges, and changes in operating assets and liabilities.
Cash provided by (used in) investing activities was $(8.2) million and $12.1
million for the first nine months of 1997 and 1996, respectively. During
1997, the purchase of securities with maturities over 90 days, which were
reported as short-term investments, resulted in the use of cash. Conversely,
the shift of short-term investments to cash equivalents with maturities less
than 90 days provided cash during 1996. In addition, cash used in investing
activities for both the 1997 and 1996 periods includes the acquisition of
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equipment and the capitalization of software development costs, and in 1996
also included cash paid of $4.7 million relating to acquisitions.
Cash provided by financing activities was $321,000 and $1.1 million for the
first nine months of 1997 and 1996, respectively. Cash provided by financing
activities resulted from the exercise of options and from employee stock
purchase plan stock issuance during both periods. Cash used in financing
activities for both the 1997 and 1996 periods included principal payments on
long-term debt, and in the 1997 period included the purchase of treasury
shares.
The Company's principal commitments consist of leases on its office facilities
and obligations under its bank term loan facilities and capital leases. The
Company currently has no material commitments for capital expenditures. In
March 1997, the Company's Board of Directors approved the repurchase of up to
one million shares of the Company's common stock on the open market from time
to time. The Company has repurchased 7,500 shares to date under this program.
It is not expected that any additional shares will be repurchased.
On October 23, 1997, the Company entered into a definitive Merger Agreement
with Harbinger Corporation. Subject to approval of the Merger Agreement by
the stockholders of Harbinger Corporation and Premenos Technology Corp., each
share of the Company's Common Stock issued and outstanding at the time of the
Merger will be converted into the right to receive .45 of a share of Harbinger
Corporation Common Stock. The Merger Agreement may be terminated by either
party under certain conditions. The Company does not believe that termination
of the Merger Agreement would have a material adverse effect on the Company's
liquidity.
The Company believes that its current cash and short-term investments and cash
flow from operations will be sufficient to meet its working capital and
capital expenditure requirements through the foreseeable future.
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Part II
PREMENOS TECHNOLOGY CORP.
Other Information
Items 1, 2, 3 and 4
The above items have been omitted as inapplicable.
Item 5. Other Information
On October 23, 1997, the Company entered into a definitive Merger Agreement
with Harbinger Corporation. Subject to approval of the Merger Agreement by
the stockholders of Harbinger Corporation and Premenos Technology Corp., each
share of the Company's Common Stock issued and outstanding at the time of the
Merger will be converted into the right to receive .45 of a share of Harbinger
Corporation Common Stock. The Merger Agreement may be terminated by either
party under certain conditions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2 - Merger Agreement by and among Harbinger Corporation, Olympic
Subsidiary Corporation and Premenos Technology Corp. as
of October 23, 1997
11 - Statement of Computation of Earnings Per Common Share
27 - Financial Data Schedule (included with SEC electronic filing only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30,
1997.
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PREMENOS TECHNOLOGY CORP.
SIGNATURE
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 thereunto duly authorized.
PREMENOS TECHNOLOGY CORP.
By:
/s/ H. Ward Wolff
- -------------------------------------
H. Ward Wolff
Senior Vice President of Finance and Administration
(Principal Financial and Accounting Officer)
Date: October 28, 1997
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MERGER AGREEMENT
by and among
HARBINGER CORPORATION,
OLYMPIC SUBSIDIARY CORPORATION
and
PREMENOS TECHNOLOGY CORP.
As of October 23, 1997
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TABLE OF CONTENTS
ARTICLE 1. THE MERGER 2
Section 1.1. Surviving Corporation 2
Section 1.2. Certificate of Incorporation 2
Section 1.3. Bylaws 2
Section 1.4. Directors 2
Section 1.5. Officers 2
Section 1.6. Effective Time 2
Section 1.7. Tax-Free Reorganization 2
Section 1.8. Pooling of Interests Accounting 2
ARTICLE 2. CONVERSION OF SHARES; TREATMENT OF
OPTIONS AND DERIVATIVES 3
Section 2.1. Premenos Common Stock 3
Section 2.2. Fractional Shares 3
Section 2.3. Treatment of Premenos Employee Stock
Options and Derivative Securities 3
Section 2.4. Exchange Agent 5
Section 2.5. Conversion Ratio and Adjustment Event 7
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF Premenos 8
Section 3.1. Organization 8
Section 3.2. Authorization 8
Section 3.3. Absence of Restrictions and Conflicts 8
Section 3.4. Capitalization 9
Section 3.5. Capital Stock of Premenos Subsidiaries 9
Section 3.6. SEC Reports 10
Section 3.7. Financial Statements 10
Section 3.8. Absence of Certain Changes 10
Section 3.9. Legal Proceedings 11
Section 3.10. Compliance with Law 12
Section 3.11. Material Contracts 12
Section 3.12. Tax Returns; Taxes 13
Section 3.13. Employee Benefit Plans 14
Section 3.14. Labor Relations 17
Section 3.15. Insurance 17
Section 3.16. Title to Properties and Related Matters 18
Section 3.17. Environmental Matters 18
Section 3.18. Patents, Trademarks, Trade Names 19
Section 3.19. Licensed Software 20
Section 3.20. Trade Secrets 21
<PAGE>
Section 3.21. Proxy Statement and Registration Statement 22
Section 3.22. Pooling 22
Section 3.23. Transactions with Affiliates 22
Section 3.24. Brokers, Finders and Investment Bankers 22
Section 3.25. Disclosure 22
Section 3.26. Opinion of Financial Advisor 23
Section 3.27. No Existing Discussions 23
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF HARBINGER 24
Section 4.1. Organization 24
Section 4.2. Authorization 24
Section 4.3. Absence of Restrictions and Conflicts 24
Section 4.4. Capitalization 25
Section 4.5. Capital Stock of Harbinger Subsidiaries 25
Section 4.6. SEC Reports 26
Section 4.7. Financial Statements 26
Section 4.8. Absence of Certain Changes 27
Section 4.9. Legal Proceedings 28
Section 4.10. Compliance with Law 28
Section 4.11. Patents, Trademarks, Trade Names 28
Section 4.12. Licensed Software 29
Section 4.13. Trade Secrets 30
Section 4.14. Proxy Statement and Registration Statement 31
Section 4.15. Pooling 31
Section 4.16. Brokers, Finders and Investment Bankers 31
Section 4.17. Disclosure 31
Section 4.18. Opinion of Financial Advisor 32
Section 4.19. Interim Operations of HarbingerSub 32
ARTICLE 5. CERTAIN COVENANTS AND AGREEMENTS 33
Section 5.1. Conduct of Business by Premenos 33
Section 5.2. Conduct of Business by Harbinger 35
Section 5.3. Inspection and Access to Information 36
Section 5.4. Proxy Statement and Registration Statement 36
Section 5.5. Harbinger and Premenos Stockholders
Meetings 37
Section 5.6. The Nasdaq National Market Additional
Shares Notification 37
Section 5.7. Premenos Affiliates 38
Section 5.8. No Solicitation 38
Section 5.9. Reasonable Efforts; Further Assurances;
Cooperation 39
Section 5.10. Public Announcements 40
Section 5.11. Financial Statements and SEC Reports 40
Section 5.12. Supplements to Disclosure Letters 41
Section 5.13. Pooling of Interests Accounting 41
Section 5.14. Accountant's Review Report 41
<PAGE>
Section 5.15. Indemnification of Premenos Directors
and Officers 41
Section 5.16. Harbinger Board of Directors 42
Section 5.17. Employment Agreements 42
Section 5.18. Premenos Transactional Expenses 43
Section 5.19. Severance 43
Section 5.20. Premenos Stock Options 43
Section 5.21. Minority Interest 43
ARTICLE 6. CONDITIONS 44
Section 6.1. Conditions to Each Party's Obligations 44
Section 6.2. Conditions to Obligations of Harbinger 45
Section 6.3. Conditions to Obligations of Premenos 46
ARTICLE 7. CLOSING 48
ARTICLE 8. TERMINATION 49
Section 8.1. Termination and Abandonment 49
Section 8.2. Specific Performance and Other Remedies 50
Section 8.3. Effect of Termination 50
Section 8.4. Fees and Expenses 50
ARTICLE 9. MISCELLANEOUS PROVISIONS 53
Section 9.1. Notices 53
Section 9.2. Disclosure Letters and Exhibits 53
Section 9.3. Assignment; Successors in Interest 54
Section 9.4. Investigations; Representations and
Warranties 54
Section 9.5. Number; Gender 54
Section 9.6. Captions 54
Section 9.7. Controlling Law; Integration; Amendment 54
Section 9.8. Premenos and Harbinger Knowledge 54
Section 9.9. Severability 55
Section 9.10. Counterparts 55
Section 9.11. Enforcement of Certain Rights 55
Section 9.12. Waiver 55
Section 9.13. Merger 56
<PAGE>
DEFINED TERMS
Term Section
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 47
Closing Date Page 47
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)
<PAGE>
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
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 Intellectual Property 3.18
Premenos ERISA Affiliate 3.13(b)
Premenos Disclosure Letter Page 8
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)
<PAGE>
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)
Premenos Page 1
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
<PAGE>
EXHIBITS
Exhibit Number
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)
<PAGE>
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:
<PAGE>
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.
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.
Page 2
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Section 1.8. Pooling of Interests. 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.
Page 3
<PAGE>
ARTICLE 2.
CONVERSION OF SHARES; TREATMENT OF OPTIONS
AND DERIVATIVES
Section 2.1. Premenos Common. 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.
Page 4
<PAGE>
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 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
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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.
(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.
Page 6
<PAGE>
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.l, 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
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<PAGE>
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 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.
Page 8
<PAGE>
ARTICLE 30
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. 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 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
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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
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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 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. 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
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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 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
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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. 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;
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(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
(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
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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.
(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.
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(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
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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.
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.
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(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
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.
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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.
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(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 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. 1251 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq.,
the Clean Air Act, 42 U.S.C. 7401 et seq., the Toxic Substances
Control Act, 15 U.S.C. 2601 et seq., the Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. 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. 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.
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Section3.18. 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 end-user 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.
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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"); 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
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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 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
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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
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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 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).
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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.
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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 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,
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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. 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 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
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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
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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, (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. 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.
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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 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").
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(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.
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(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.
(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
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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. 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 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.
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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
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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 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;
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(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;
(d) Not take any action the effect of which would be to
cause the Merger to be treated as a taxable transaction;
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(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.
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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, 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
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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.
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(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, 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.
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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
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
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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.
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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 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).
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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. 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.
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. 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
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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.
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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).
(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
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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.
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(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 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.
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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).
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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
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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 made by such party
in this Agreement, the non-breaching 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.
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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
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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 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
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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.
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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
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.
Page 57
<PAGE>
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 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.
Page 58
<PAGE>
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 pro-
hibition 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
Page 59
<PAGE>
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.
Page 60
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed, as of the date first above written.
HARBINGER CORPORATION
[Corporate Seal]
Attest: By: /s/ James C. Davis
-------------------------------------
Title: President and Chief Operating Officer
----------------------------------
By: /s/Joel G. Katz
------------------------
Title: Secretary
------------------------
OLYMPIC SUBSIDIARY CORPORATION
[Corporate Seal]
Attest: By: /s/ James C. Davis
-------------------------------------
Title: President and Chief Operating Officer
----------------------------------
By: /s/Joel G. Katz
------------------------
Title: Secretary
------------------------
PREMENOS TECHNOLOGY CORP.
[Corporate Seal]
Attest: By: /s/ Lew Jenkins
----------------------------------
Title: Chairman of the Board of Directors
----------------------------------
By: /s/Dale W. Marquart
------------------------
Title: General Counsel
------------------------
<TABLE>
<CAPTION>
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
1997 1996 1997 1996
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Weighted average number of common shares
outstanding 11,793,915 10,920,449 11,710,534 10,815,498
Shares issuable pursuant to warrants and
employee stock option plan, less shares
assumed repurchased at the average fair
value during the period (1) 479,022 - 183,061 -
---------- ----------- ---------- -----------
Number of shares for computation of
earnings per share 12,272,937 10,920,449 11,893,595 10,815,498
========== =========== ========== ===========
Net income (loss) $ 728,000 $(2,232,000) $ 624,000 $(3,532,000)
========== =========== ========== ===========
Net income (loss) per share (2) $0.06 $(0.20) $0.05 $(0.33)
========== =========== ========== ===========
(1) Excluded in loss periods as impact would be anti-dilutive.
(2) There is no difference between primary and fully diluted net income (loss) per share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contains summary financial information extracted from Form
10Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 24,777
<SECURITIES> 34,470
<RECEIVABLES> 8,703
<ALLOWANCES> 410
<INVENTORY> 0
<CURRENT-ASSETS> 71,929
<PP&E> 13,488
<DEPRECIATION> 6,615
<TOTAL-ASSETS> 85,442
<CURRENT-LIABILITIES> 12,359
<BONDS> 0
0
0
<COMMON> 118
<OTHER-SE> 71,438
<TOTAL-LIABILITY-AND-EQUITY> 85,442
<SALES> 27,806
<TOTAL-REVENUES> 27,806
<CGS> 8,775
<TOTAL-COSTS> 19,972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66
<INCOME-PRETAX> 1,002
<INCOME-TAX> 380
<INCOME-CONTINUING> 624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 624
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
