| Ranking | The notes and the note guarantees will be our and the subsidiary guarantors’ (if any) senior unsecured obligations and will: • rank senior in right of payment to all of our and the subsidiary guarantors’ (if any) existing and future subordinated indebtedness, including our subordinated convertible debentures (“Subordinated Convertible Debentures”); • rank equally in right of payment with all of our and the subsidiary guarantors’ (if any) existing and future senior indebtedness, including our obligations under our unsecured credit facility (“Unsecured Credit Facility”) and the subsidiary guarantors’ (if any) respective borrowings or guarantees thereunder; • be effectively subordinated to any of our and the subsidiary guarantors’ (if any) future secured debt to the extent of the value of the assets securing such debt; and • be structurally subordinated to all of the existing and future liabilities (including trade payables) of each of our subsidiaries that do not guarantee the notes. As of the Transaction
The merger (see page 34)
VeriSign and Illuminet have entered into a merger agreement that provides
for the merger of Illinois Acquisition Corporation, a newly formed and wholly
owned subsidiary of VeriSign, with and into Illuminet. As a result of the
merger, the separate corporate existence of Illinois Acquisition Corporation
will cease and Illuminet will survive the merger as a wholly owned subsidiary
of VeriSign.
Upon completion of the merger, Illuminet stockholders will become VeriSign
stockholders, and each outstanding share of Illuminet common stock, other than
shares held by Illuminet and its subsidiaries, will be converted into the right
to receive 0.93 shares of fully paid and nonassessable VeriSign common stock.
Also, VeriSign will convert each outstanding option to purchase Illuminet
common stock into an option to purchase shares of VeriSign common stock.
The merger agreement is attached to this prospectus/proxy statement as Annex
A. We urge you to read it carefully.
Special meeting of Illuminet stockholders (see page 31)
Illuminet will hold a special meeting of its stockholders on , ,
2001 at .m., local time, at . At the meeting, Illuminet
stockholders will consider and vote on a proposal to approve and adopt the
merger agreement and the merger. In addition, Illuminet stockholders will
consider and vote on a proposal to grant Illuminet management the discretionary
authority to adjourn the special meeting to a date not later than , 2002
in order to enable the Illuminet board of directors to continue to solicit
additional proxies in favor of the merger.
Only holders of record of Illuminet common stock at the close of business on
, 2001, the record date for the special meeting, are entitled to notice of
and to vote at the special meeting.
Votes required for approval (see page 32)
The holders of two-thirds of the outstanding shares of Illuminet common
stock must approve the merger agreement and the merger. The holders of a
majority of the votes cast on the adjournment proposal must approve the
adjournment proposal. Illuminet stockholders are entitled to cast one vote per
share of Illuminet common stock owned as of the record date for the special
meeting.
Stockholders of Illuminet that beneficially own approximately % of the
outstanding Illuminet common stock as of the record date have agreed to vote in
favor of the approval and adoption of the merger agreement and the merger.
Directors and executive officers of Illuminet collectively beneficially owned
approximately % of the outstanding Illuminet common stock as of the record
date.
Recommendation of Illuminet's board of directors (see page 36)
Illuminet's board of directors believes that the merger is fair to Illuminet
stockholders and in their best interests. The Illuminet board has voted to
approve the merger agreement and the merger and recommends that its
stockholders vote FOR the approval and adoption of the merger agreement and the
merger. The Illuminet board also recommends that Illuminet stockholders vote
FOR the adjournment proposal.
Opinion of Illuminet's financial advisor (see page 37)
In deciding to approve the merger, Illuminet's boards of directors
considered, among other things, an opinion from Robertson Stephens, Inc., its
financial advisor, as to the fairness of the exchange ratio, from a
2
financial point of view and as of the date of the opinion, to the holders of
Illuminet common stock. The opinion of Robertson Stephens, Inc. is attached as
Annex D. We urge you to read it carefully in its entirety to understand the
procedures followed, assumptions made, matters considered and limitations on
the review undertaken by Robertson Stephens in providing its opinion. The
opinion of Robertson Stephens is directed to the Illuminet board of directors
and is not a recommendation to any stockholder with respect to any matter
relating to the merger.
No other negotiations (see page 51)
Until the merger is completed or the merger agreement is terminated,
Illuminet has agreed, with limited exceptions, not to take any action, directly
or indirectly, with respect to an Acquisition Proposal, as described on page 52
of this document.
If Illuminet receives an unsolicited, written, bona fide Acquisition
Proposal that its board reasonably concludes after consultation with its
financial advisor may constitute a Superior Offer, as described on page 52 of
this document, Illuminet may furnish non-public information regarding itself
and may enter into discussions with the person or group who has made the
Acquisition Proposal if it provides written notice to VeriSign and follows
other specified procedures.
Illuminet has agreed to inform VeriSign promptly as to any Acquisition
Proposal, or request for non-public information or inquiry that it reasonably
believes would lead to an Acquisition Proposal. Illuminet has agreed to inform
VeriSign of the status and details of any Acquisition Proposal and to provide
VeriSign with a copy of all written materials provided to Illuminet in
connection with any request or inquiry.
The board of Illuminet may change its recommendation in favor of the merger
if it receives a Superior Offer and VeriSign does not respond with a
corresponding offer at least as favorable as the Superior Offer.
Conditions to completion of the merger (see page 54)
The completion of the merger depends upon meeting a number of conditions,
including:
. the merger agreement and the merger must be approved and adopted by
Illuminet's stockholders;
. no governmental entity shall have enacted a law, regulation or order that
has the effect of making the merger illegal, and the applicable waiting
periods under antitrust laws must have expired or been terminated;
. Illuminet must have received from its tax counsel an opinion to the effect
that the merger will qualify as a tax-free reorganization;
. the representations and warranties of each party in the merger agreement
must be true and correct in all material respects;
. the parties must have performed or complied in all material respects with
their respective agreements and covenants in the merger agreement;
. no material adverse effect with respect to VeriSign or Illuminet shall
have occurred;
. VeriSign shall have received from Illuminet's regulatory counsel an
opinion as to specified regulatory matters; and
. all material required approvals or consents of any governmental entity or
other person shall have been obtained and become final, and are not on
terms reasonably likely to materially affect the ownership or operations
of business by VeriSign.
3
If either VeriSign or Illuminet waives any conditions, VeriSign and
Illuminet will consider the facts and circumstances at that time and make a
determination as to whether a resolicitation of proxies from stockholders is
appropriate.
Termination of the merger agreement (see page 55)
The merger agreement may be terminated at any time prior to closing the
merger, whether before or after the requisite approval of Illuminet's
stockholders:
. by mutual written consent duly authorized by the boards of VeriSign and
Illuminet;
. by either VeriSign or Illuminet, if the merger is not completed by
September 30, 2002, except that the right to terminate the merger
agreement under this provision is not available to any party whose action
or failure to act has been a principal cause of or resulted in the failure
of the merger to occur on or by September 30, 2002, and this action or
failure to act constitutes a breach of the merger agreement;
. by VeriSign or Illuminet, if a governmental authority has issued an order,
decree or ruling or taken any other action that is final and
nonappealable, having the effect of permanently enjoining, restraining or
prohibiting the merger;
. by VeriSign or Illuminet, if the merger is not approved by the
stockholders of Illuminet, except that the right to terminate the merger
agreement under this provision is not available to Illuminet where the
failure to obtain stockholder approval was caused by an action or failure
to act by Illuminet that constitutes a breach of the merger agreement, or
a breach of the voting agreements described under "Related
Agreements--Voting Agreements";
. by VeriSign at any time prior to the adoption and approval of the merger
agreement and the merger by the required vote of stockholders of
Illuminet, if a Triggering Event, as described on page 56 of this
document, occurs; or
. by Illuminet, on the one hand, or VeriSign, on the other, upon a breach of
any representation, warranty, covenant or agreement on the part of the
other in the merger agreement, or if any of the other's representations or
warranties are or become untrue, so that the corresponding condition to
closing the merger would not be met. However, if the breach or inaccuracy
is curable by the breaching party through the exercise of its commercially
reasonable efforts, and such party continues to exercise commercially
reasonable efforts, then the other party may not terminate the merger
agreement if the breach or inaccuracy is cured within 30 days after
delivery of the notice of breach or inaccuracy.
Termination fee (see page 56)
If the merger agreement is terminated by VeriSign because of any Triggering
Event, Illuminet will be obligated to pay VeriSign a termination fee of $45.5
million.
Illuminet is also obligated to pay a termination fee equal to $45.5 million
if:
. prior to termination of the merger agreement, an Acquisition Proposal is
publicly announced;
. the merger agreement was terminated because (1) the merger did not close
by September 30, 2002; (2) approval of the merger by Illuminet's
stockholders was not obtained; or (3) of a breach of a representation,
warranty, covenant or agreement of Illuminet; and
. within 18 months of the termination of the merger agreement, Illuminet
completes an Acquisition, as described on page 56 of this document, or
enters into an agreement providing for an Acquisition and that Acquisition
is later consummated with the person with whom the agreement was entered
into, regardless of when the consummation occurs, if Illuminet had entered
into the agreement during the eighteen-month period.
4
The stock option agreement (see page 58)
VeriSign and Illuminet have entered into a stock option agreement that
grants VeriSign the right to buy shares of Illuminet common stock equal to
19.9% of the shares of Illuminet common stock outstanding on the date of
exercise at an exercise price of $35.62 per share. The option becomes
exercisable only upon the occurrence of specified events. The amount of profit
that VeriSign may realize under the option together with the termination fee is
subject to a profit cap of $65.0 million. VeriSign required Illuminet to grant
the option as a condition for entering into the merger agreement. The option
may discourage third parties who are interested in acquiring a significant
stake in Illuminet and is intended by VeriSign to increase the likelihood that
the merger will be consummated. The stock option agreement is attached to this
document as Annex B. We urge you to read it carefully.
The voting agreements (see page 59)
Illuminet stockholders, who are also directors and executive officers of
Illuminet, Roger Moore, Theodore Berns, Jack Blumenstein, Terry Kremian,
Richard Lumpkin, David Nicol, James Strand and Greg Wilkinson, entered into
voting agreements with VeriSign. The voting agreements require these
stockholders to vote all of the shares of Illuminet common stock they own in
favor of the merger and against competing proposals or proposals in opposition
to the merger. These stockholders own approximately % of the outstanding
Illuminet common stock as of the record date. The form of voting agreement is
attached to this document as Annex C. We urge you to read it carefully.
Interests of certain persons in the merger (see page 43)
When considering the recommendations of Illuminet's boards of directors, you
should be aware that some of the Illuminet directors and officers have
interests in the merger that are different from, or are in addition to, yours.
For example, Roger Moore, who is the chief executive officer and a director of
Illuminet, will become a member of the VeriSign board of directors; also, some
executive officers of Illuminet will become employees of VeriSign.
As a result, these executive officers and directors could be more likely to
vote to approve, and recommend the approval of, the merger agreement and the
merger, than if they did not hold these interests.
Government approvals required to complete the merger (see page 46)
The merger is subject to antitrust laws. We have made the required filings
with the Department of Justice and the Federal Trade Commission and we will
make any necessary filings with foreign regulatory agencies. However, the
Department of Justice or the Federal Trade Commission, as well as a foreign
regulatory agency or government, state or private person, may challenge the
merger at any time before or after its completion. We will also make filings
with the Federal Communications Commission, or FCC, to transfer two
authorizations, one of which relates to services offered through one of
Illuminet's subsidiaries, National Telemanagement Corporation, or NTC, and the
other relates to a two way radio license used internally by Illuminet.
Restrictions on the ability to sell VeriSign stock (see page 46)
All shares of VeriSign common stock received by Illuminet stockholders in
connection with the merger will be freely transferable unless the holder is
considered an affiliate of either VeriSign or Illuminet under the Securities
Act.
Listing on the Nasdaq National Market (see page 47)
VeriSign common stock is currently traded on the Nasdaq National Market
under the symbol VRSN. VeriSign will list the shares of VeriSign common stock
to be issued in the merger for trading on the Nasdaq National Market.
5
Accounting treatment of the merger (see page 46)
VeriSign intends to account for the merger as a "purchase" for financial
accounting purposes under generally accepted accounting principles.
Comparison of rights of VeriSign stockholders and Illuminet stockholders (see
page 63)
The rights of Illuminet stockholders are determined by Delaware law and
Illuminet's certificate of incorporation and bylaws. If the merger is
completed, Illuminet stockholders will receive shares of VeriSign common stock.
As stockholders of VeriSign, their rights will be governed by Delaware law and
VeriSign's amended and restated certificate of incorporation and bylaws.
Comparative market price information (see page 61)
Shares of both VeriSign and Illuminet common stock are listed on the Nasdaq
National Market. On September 21, 2001, the last full trading day prior to the
public announcement of the proposed merger, VeriSign's common stock closed at
$38.30 per share, and Illuminet's common stock closed at $34.98 per share. On
, 2001, VeriSign's common stock closed at $ per share, and Illuminet's
common stock closed at $ per share. We urge you to obtain current market
quotations.
Forward-looking statements in this prospectus/ proxy statement (see page 10)
This prospectus/proxy statement and the documents incorporated in this
document by reference contain forward-looking statements within the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995 with
respect to our financial condition, results of operations and business, and on
the expected impact of the merger on the combined company's financial
performance. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions identify
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward-looking statements. In evaluating the merger, you should carefully
consider the discussion of these and other factors in the section entitled
"Risk Factors" beginning on page 11. You are cautioned not to place undue
reliance on these forward looking statements, which reflect the views of
VeriSign's or Illuminet's management only as of the date of this
prospectus/proxy statement. Neither VeriSign nor Illuminet undertakes any
obligation to update these statements or publicly release the results of any
revisions to the forward-looking statements that they may make to reflect
events or circumstances after the date of this prospectus/proxy statement or to
reflect the occurrence of unanticipated events.
This summary may not contain all of the information that is important to
you. You should read carefully this entire document and the other documents we
refer to for a more complete understanding of the merger. In particular, you
should read the documents attached to this prospectus/proxy statement,
including the merger agreement, which is attached as Annex A, the stock option
agreement, which is attached as Annex B, the form of voting agreement, which is
attached as Annex C and the opinion of Robertson Stephens, Inc., which is
attached as Annex D.
In addition, we incorporate important business and financial information
about VeriSign and Illuminet into this prospectus/proxy statement by reference.
See "Documents incorporated by reference in this prospectus/proxy statement" on
page ii. You may obtain the information incorporated into this prospectus/proxy
statement by reference without charge by following the instructions in the
section entitled "Where you can find more information" on page iii.
6
VeriSign's Selected Historical Consolidated Financial Data
The following selected historical consolidated financial data of VeriSign
has been derived from VeriSign's historical consolidated financial statements
and related notes, and should be read together with those consolidated
financial statements and related notes that are incorporated by reference in
this prospectus/proxy statement. The consolidated statements of operations data
for the years ended December 31, 1996, 1997, 1998, 1999 and 2000 and the
consolidated balance sheet data as of December 31, 1996, 1997, 1998, 1999 and
2000 have been derived from VeriSign's audited consolidated financial
statements. The consolidated statement of operations data for the six months
ended June 30, 2000 and 2001 and the balance sheet data as of June 30, 2001
have been derived from VeriSign's unaudited condensed consolidated financial
statements. The consolidated statement of operations data for the years ended
December 31, 1996 and 1997 and the consolidated balance sheet data as of
December 31, 1996, 1997 and 1998 are derived from VeriSign's audited
consolidated financial statements that have not been incorporated by reference
in this prospectus/proxy statement. VeriSign's operating results for the six
months ended June 30, 2001 are not necessarily indicative of results for the
full year ending December 31, 2001.
Six Months Ended
Years Ended December 31, June 30, -------------------------------------------------- -----------------------
1996 1997 1998 1999 2000 2000 2001
-------- -------- -------- ------- ----------- --------- ------------
(unaudited)
(In thousands, except per share data)
Consolidated Statement2013, we had no outstanding indebtedness for money borrowed that was secured, no outstanding borrowings under our Unsecured Credit Facility and $1,356.3 million of Operations Data:
Revenues................. $ 1,356 $ 13,356 $ 38,930 $84,776 $ 474,766 $ 104,325 $ 444,610
Total coststotal outstanding indebtedness, including the $606.3 million carrying value of the liability component of the $1.25 billion aggregate principal amount of our Subordinated Convertible Debentures and expenses. 12,415 34,657 62,075 88,086 3,675,075 625,159 13,034,795
Operating loss........... (11,059) (21,301) (23,145) (3,310) (3,200,309) (520,834) (12,590,185)
Minoritythe related embedded contingent interest in net
(income) lossderivative.As of
subsidiary............. 838 1,538 1,282 836 (1,334) 90 (519)
Net income (loss)........ (10,288) (18,589) (19,743) 3,955 (3,115,474) (479,093) (12,568,107)
Basic net income (loss)
per share.............. (.52) (.65) (.24) .04 (19.57) (3.94) (62.65)
Diluted net income (loss)
per share.............. (.52) (.65) (.24) .03 (19.57) (3.94) (62.65)
December 31,
-------------------------------------------- June 30, 1996 1997 1998 1999 2000 2001
------- ------- ------- -------- ----------- -----------
(unaudited)
(In thousands)
Consolidated Balance Sheet Data:
Cash,2013, our non-guarantor subsidiaries collectively had (1) liabilities (excluding intercompany liabilities) of $316.5 million (11.3% of our consolidated total liabilities), of which $270.7 million were deferred revenues, (2) assets (excluding intercompany assets) of $1,409.2 million (55.8% of our consolidated total assets), of which $1,370.8 million were cash, cash equivalents and short-term
investments........................ $30,006 $12,893 $41,745 $156,480 $ 1,026,275 $ 798,174
Working capital...................... 24,788 6,160 31,085 140,163 520,953 358,954
Total assets......................... 36,537 26,904 64,295 341,166 19,195,222 6,768,748
Other long-term liabilities.......... -- -- -- 128 59,135 138,387
Stockholders' equity................. 28,520 13,541 40,728 298,359 18,470,608 5,972,454
7
Illuminet's Selected Historical Consolidated Financial Data
The following selected historical consolidated financial data of Illuminet
has been derived from Illuminet's historical consolidated financial statements
and related notes, and should be read together with those financial statements
and the related notes that are incorporated by reference in this
prospectus/proxy statement. The consolidated statement of operations data for
the years ended December 31, 1996, 1997, 1998, 1999 and 2000 and the
consolidated balance sheet data as of December 31, 1996, 1997, 1998, 1999 and
2000 are derived from Illuminet's audited consolidated financial statements.
The consolidated statement of operations data for the years ended December 31,
1996 and the consolidated balance sheet data as of December 31, 1996 and 1997,
have been recast from the audited financial statements for such periods to
reflect the pooling of interests with National Telemanagement Corporation. The
consolidated statement of operations data for the six-month periods ended June
30, 2000 and 2001 and the consolidated balance sheet data as of June 30, 2001
are derived from Illuminet's unaudited consolidated financial statements. The
consolidated statement of operations data for the years ended December 31, 1996
and 1997 and the consolidated balance sheet data as of December 31, 1996, 1997
and 1998 are derived from Illuminet's audited consolidated financial statements
that have not been incorporated by reference in this prospectus/proxy
statement. Illuminet's results for the six months ended June 30, 2001 are not
necessarily indicative of results for the full year ending December 31, 2001.
Six Months Ended
Years Ended December 31, June 30,
----------------------------------------- ----------------
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- -------- -------- ------- -------
(In thousands, except per share data)
Consolidated Statement of
Operations Data:
Total revenues.................... $39,146 $63,020 $82,215 $116,700 $153,141 $70,786 $91,704
Total expenses.................... 35,939 54,754 71,807 94,893 108,597 52,852 64,293
Operating income.................. 3,207 8,266 10,408 21,807 44,544 17,934 27,411
Net income........................ 2,911 7,673 5,383 13,635 30,282 11,530 18,951
Earnings per share--Basic......... .13 .33 .22 .52 .95 .36 .59
Earnings per share--Diluted....... .13 .30 .19 .45 .89 .33 .56
December 31,
----------------------------------------- June 30,
1996 1997 1998 1999 2000 2001
------- ------- ------- -------- -------- --------
(In thousands)
Consolidated Balance Sheet Data:
Cash,marketable securities primarily held by foreign subsidiaries and (3) assets (excluding cash, cash equivalents and marketable securities, and intercompany assets) of $38.4 million (7.3% of our consolidated total assets, excluding cash, cash equivalents and marketable securities). On July 31, 2013, we merged VeriSign Information Services, Inc., which was previously the sole guarantor of the original notes, into VeriSign, Inc.For the twelve months ended June 30, 2013, our non-guarantor subsidiaries collectively had Covenant Adjusted EBITDA of $215.2 million (34.4% of our consolidated Covenant Adjusted EBITDA), which includes intercompany transactions with the Company. Such intercompany transactions represent the majority of our non-guarantor subsidiaries’ aggregate expenses. The calculation of Covenant Adjusted EBITDA is based on the definition of “Adjusted EBITDA” in our Indenture as provided under “Description of Notes—Certain Definitions.”
| | | | Certain Covenants | We will issue the exchange notes under the Indenture with U.S. Bank National Association as trustee. The Indenture relating to the notes, among other things, limits our ability and the ability of our Restricted Subsidiaries to: • make restricted payments; • enter into sale/leaseback transactions; • incur liens; and • consolidate, merge or sell all or substantially all of our assets. These covenants will be subject to a number of important exceptions and qualifications. For more information, see “Description of Notes—Certain Covenants.” The limitation on restricted payments covenant will only apply when the ratio of the Company’s total debt to Covenant Adjusted EBITDA for the most recent four consecutive fiscal quarters for which financial statements are available exceeds 4.0 to 1.0. See “Description of Notes—Limitation on Restricted Payments.” As of June 30, 2013, the ratio of the Company’s total debt to Covenant Adjusted EBITDA was 3.2 to 1.0. Total debt used in calculating this ratio includes the full $1.25 billion principal amount outstanding of the Subordinated Convertible Debentures. The calculation of Covenant Adjusted EBITDA is based on the definition of “Adjusted EBITDA” in our Indenture as provided under “Description of Notes—Certain Definitions.” | | Use of Proceeds | We will not receive any proceeds from the exchange offer. In consideration for sale
securities................................. $12,622 $11,412 $13,589 $103,961 $116,889 $122,294
Working capital.............................. 5,028 9,992 12,958 107,877 124,306 138,175
Total assets................................. 75,637 84,947 98,471 197,130 231,361 253,680
Long-term obligationsissuing exchange notes, we will receive in exchange the original notes of like principal amount. The original notes surrendered in exchange for exchange notes will be retired and redeemable
preferred stock, less current portions..... 21,437 18,945 24,762 20,650 8,555 7,145
Stockholders' equity......................... 21,748 30,058 34,935 135,516 176,674 202,063
cancelled. | | Book-Entry Settlement and Clearance | The exchange notes will be issued in book-entry form and will be represented by permanent global certificates deposited with, or on behalf of the DTC and registered in the name of a nominee of DTC. Beneficial interests in any of the exchange notes will be shown on, and transfers will be effected only through, records maintained by DTC or its nominee, and any such interest may not be exchanged for certificated securities, except in limited circumstances. See “Book-Entry Settlement and Clearance.” | | Form and Denomination | The exchange notes will be issued in registered form in denominations of $2,000 and integral multiples of $1,000 in excess thereof. | | Absence of Public Market for the Exchange Notes | The exchange notes are a new issue of securities and there is currently no established trading market for the exchange notes. We do not intend to apply for a listing of the exchange notes on any securities exchange or automated dealer quotation system. Accordingly, a liquid market for the exchange notes may not develop. | | Further Issuances | We may from time to time create and issue additional notes having the same terms as the exchange notes being issued in this offering (except that such additional notes may be subject to transfer restrictions), so that such additional notes shall be consolidated and form a single series with the exchange notes. See “Description of Notes.” |
8
Comparative Historical and Unaudited Pro Forma Per Share Data
The following tables reflect (1) the historical net income and book value
per share of VeriSign common stock and the historical net income and book value
per share of Illuminet common stock in comparison with the unaudited pro forma
net loss and book value per share after giving effect
| | | | Trustee for the Exchange Notes | U.S. Bank National Association. | | Risk Factors | In evaluating an investment in the exchange notes, prospective investors should carefully consider, along with the other information contained in this prospectus and the documents incorporated by reference herein, the specific factors set forth herein under “Risk Factors” for risks involved with an investment in the exchange notes. |
RISK FACTORS Before deciding whether to the proposed merger,
and (2) the equivalent historical net loss from continuing operations and book
value per share attributable to the 0.93 shares of VeriSign common stock that
will be received for each share of common stock of Illuminet.
Neither company has paid any cash dividends.
The information presentedparticipate in the following tables should be read in
conjunction with the historical financial statements and related notes of
VeriSign and Illuminet that are incorporated by reference in this document.
Year Ended Six Months Ended
December 31, 2000 June 30, 2001
----------------- ----------------
VERISIGN
Historical per Share Data:
Net loss per share:
Basic and diluted......................................... $(19.57) $(62.65)
Book value per share(1)....................................... 92.99 29.47
ILLUMINET
Historical per Share Data:
Net income per share:
Basic..................................................... $ 0.95 $0.59
Diluted................................................... 0.89 0.56
Book value per share(1)....................................... 5.50 6.20
PRO FORMA
Combined Pro Forma per Share Data:
Net loss per share--basic and diluted......................... $(16.38) $(54.36)
Net loss per equivalent Illuminet share--basic and diluted(2). (15.23) (50.56)
Book value per share(1)....................................... 86.38 31.37
Book value per equivalent Illuminet share(2).................. 80.33 29.17
--------
(1) The historical book value per share is computed by dividing stockholders'
equity by the number of shares of common stock outstanding at December 31,
2000, split adjusted. The pro forma combined book value per share is
computed by dividing pro forma stockholders' equity by the pro forma number
of shares of common stock outstanding at December 31, 2000.
(2) The Illuminet equivalent pro forma combined per share amounts are
calculated by multiplying the VeriSign share amounts by the exchange ratio
of 0.93.
9
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This prospectus/proxy statement and the documents incorporated in this
document by reference contain forward-looking statements within the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995 with
respect to our financial condition, results of operations and business, and on
the expected impact of the merger on the combined company's financial
performance. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions identify
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward-looking statements. These risks and uncertainties include:
. the possibility that the value of the VeriSign common stock to be issued
to Illuminet stockholders in the merger will decrease prior to completion
of the merger and no corresponding adjustment to the number of shares of
VeriSign stock to be received by Illuminet stockholders will be made;
. the possibility that the merger will not be consummated;
. the possibility that the anticipated benefits from the merger cannot be
fully realized;
. the possibility that costs or difficulties related to the integration of
our businesses are greater than expected;
. the combined companies' dependence on the timely development, introduction
and customer acceptance of new telecommunications and Internet services;
. the impact of competition on revenues and margins;
. rapidly changing technology and shifting demand requirements and
telecommunications and Internet usage patterns;
. other risks and uncertainties, including the impact of competitive
services, products and prices, the unsettled conditions in
telecommunications, the Internet and other high-technology industries and
the ability to attract and retain key personnel; and
. other risk factors as may be detailed from time to time in VeriSign's and
Illuminet's public announcements and filings with the Securities and
Exchange Commission.
In evaluating the merger,offer, you should carefully consider the discussion of
these and other factors in the following section, entitled "Risk Factors."
10
RISK FACTORS
The merger involves a high degree of risk. Also, by voting in favor of the
merger, Illuminet's stockholders will be choosing to invest in VeriSign common
stock. An investment in VeriSign common stock involves a high degree of risk.
In addition to the other information contained or incorporated by reference in
this prospectus/proxy statement, Illuminet's stockholders should carefully consider the following risk factors, in deciding whether to vote for the merger.
Risks relatedaddition to the proposed merger
Illuminet's stockholders will receiveother information contained and incorporated by reference in this prospectus, including the risk factors set forth in our filings with the SEC that are incorporated by reference in this prospectus, as well as the consolidated financial statements and related notes and other information incorporated by reference into this prospectus. The risks and uncertainties described below and incorporated by reference are not the only ones we face. Additional risks and uncertainties that we do not presently know about, or that we currently believe are immaterial, may also adversely impact our business. Events relating to any of the following risks as well as other risks and uncertainties could seriously harm our business, financial condition and results of operations. In such a fixed ratio of 0.93 shares of
VeriSign common stock per share of Illuminet common stock even if there are
changes incase, the markettrading value of Illuminet common stockthe notes could decline, or VeriSign common
stock beforewe may be unable to meet our obligations under the closingnotes, which in turn could cause you to lose all or part of your investment. Risks Related to the Exchange Notes Our financial condition and results of operations could be adversely affected if we do not effectively manage our liabilities. As a result of the merger.
There will be no adjustment to the exchange ratio if the market price of
either Illuminet common stock or VeriSign common stock fluctuates. The specific
dollar value of VeriSign common stock that Illuminet stockholders will receive
upon completionsale of the merger will depend on the market value of VeriSign
common stock at the time of the merger. The share prices of both Illuminet
common stockSubordinated Convertible Debentures and VeriSign common stock are subject to price fluctuations in the
market for publicly traded equity securities andour notes, we have each experienced
significant volatility. Neither company can predict the market prices for
either Illuminet common stock or VeriSign common stock at any time before the
completion of the merger or the market price for VeriSign common stock after
the completion of the merger. VeriSign and Illuminet encourage you to obtain
current market quotations of VeriSign common stock and Illuminet common stock.
VeriSign will face technical, operational and strategic challenges that may
prevent it from successfully integrating Illuminet with VeriSign.
The merger involves risks related to the integration and management of
acquired technology, operations and personnel. The integration of VeriSign and
Illuminet will be a complex, time consuming and expensive process and may
disrupt VeriSign's business if not completed in a timely and efficient manner.
Following the merger, VeriSign and Illuminet must operate as a combined
organization utilizing common information and communication systems, operating
procedures, financial controls and human resources practices. VeriSign and
Illuminet may encounter substantial difficulties, costs and delays involved in
integrating their operations, including:
. potential incompatibility of business cultures;
. managing the combined company's growth and managing larger, more
geographically dispersed operations;
. perceived adverse changes in business focus;
. failure of the combined company to successfully manage relationships with
customers, suppliers and other important relationships;
. failure of the combined company's customers to accept new services or to
continue using the products and services of the combined company; and
. the loss of key employees and diversion of the attention of management
from other ongoing business concerns.
The acquisitions that VeriSign and Illuminet have recently completed may
increase the integration difficulties associated with the proposed merger.
The challenges of integrating the operations of VeriSign and Illuminet will
be increased by each companies' ongoing efforts associated with the continuing
integration of other recent acquisitions by VeriSign and Illuminet.
11
In addition, VeriSign anticipates that it will continue to consider other
acquisitions of businesses and assets to expand its business and to acquire
complementary technologies and personnel. The integration of multiple
organizations requires a substantial amount of management resourceslong-term debt outstanding. In addition to the Subordinated Convertible Debentures and attention. Thesethe notes, we have an Unsecured Credit Facility with a borrowing capacity of $200.0 million and the ability to request from time to time that the lenders thereunder agree on a discretionary basis to increase the aggregate commitments amount by up to $150.0 million. As of June 30, 2013, we had no borrowings under the Unsecured Credit Facility. We repaid the principal amount outstanding under the Unsecured Credit Facility with the proceeds from the offering of original notes. It is possible that we may need to incur additional indebtedness in the future in the ordinary course of business. The terms of our Unsecured Credit Facility and the Indenture governing the notes allow us to incur additional debt subject to certain limitations and will not prevent us from incurring obligations that do not constitute indebtedness under those agreements. If new debt is added to current debt levels, the risks and limitations related to our level of indebtedness could intensify. Specifically, a high level of indebtedness could have adverse effects on our flexibility to take advantage of corporate opportunities, including the following: making it more difficult for us to satisfy our debt obligations; limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements, or requiring us to make non-strategic divestitures, particularly when the availability of financing in the capital markets is limited; requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; having to repatriate cash held by foreign subsidiaries which would require us to accrue and pay additional U.S. taxes; increasing our vulnerability to general adverse economic and industry conditions; exposing us to the risk of increased interest rates as well as other potential future acquisitions,
will require VeriSigncertain of our borrowings are at variable rates of interest; limiting our flexibility in planning for and reacting to manage and integrate the acquiredchanges in our businesses and their
personnel,the markets in which arewe compete; placing us at a possible competitive disadvantage compared to other, less leveraged competitors and competitors that may have better access to capital resources; and increasing our cost of borrowing. In addition, the Indenture that governs the notes and the credit agreement that governs our Unsecured Credit Facility contain restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt.
We may not be able to generate sufficient cash to service all of our indebtedness, including the notes, and may be located in diverse geographic locations, and
will also require VeriSignforced to develop and market servicestake other actions to new markets withsatisfy our obligations under our indebtedness, which it may not be familiar.
Illuminet officerssuccessful. Our ability to make scheduled payments on or refinance our debt obligations, including the notes, depends on our financial condition and directors have different interests from yours.
The directorsoperating performance, which are subject to prevailing economic and officers of Illuminet have interestscompetitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. Moreover, in the mergerevent funds from foreign operations are needed to repay our debt obligations and participateU.S. tax has not already been provided, we would be required to accrue and pay additional U.S. taxes in arrangements thatorder to repatriate these funds. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the notes. If our cash flows and capital resources are differentinsufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness, including the notes. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. Our Unsecured Credit Facility restricts our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. In addition, we conduct a significant portion of our operations through our subsidiaries, which are in addition to,
those of Illuminet stockholders generally. These include:
. Roger Moore, who is the chief executive officer and a director of
Illuminet, will become a membernot guarantors of the VeriSign boardnotes or our other indebtedness. Repayment of directors;
. Directorsour indebtedness is substantially dependent on the generation of cash flow by us. Our non-guarantor subsidiaries do not have any obligation to pay amounts due on our indebtedness or to make funds available for that purpose. Future guarantor subsidiaries, if any, may not be able to, or may not be permitted to, on commercially reasonable terms, or at all, make distributions to enable us to make payments in respect of our indebtedness. Such subsidiaries are distinct legal entities, and, officersunder certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries on commercially reasonable terms, or at all. While our Unsecured Credit Facility limits the ability of Illuminetour subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to qualifications and exceptions. If we cannot service our debt obligations with our cash flows and domestic cash on hand, we may be required to repatriate cash from our foreign subsidiaries, which would be subject to U.S. federal income tax, or may otherwise be unable to make required principal and interest payments on our indebtedness. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our debt obligations. If we cannot make scheduled payments on our debt, we will be in default and holders of the notes could declare all outstanding principal and interest to be due and payable, the lenders under our Unsecured Credit Facility could terminate their commitments to loan money, certain holders of our Subordinated Convertible Debentures could declare all outstanding principal and interest to be due and payable and we could be forced into bankruptcy or liquidation. All of these events could result in you losing your investment in the notes. We and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks to our financial condition described above. We and our subsidiaries may be able to incur significant additional indebtedness in the future. If we incur any additional indebtedness that ranks equally with the notes, subject to collateral arrangements, the holders of that debt will be entitled to specified
indemnification rights;share ratably with you in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company. This may have the effect of reducing the amount of proceeds paid to you. Certain of this additional indebtedness may be secured debt and/or be effectively senior to the notes, as discussed below. The restrictions in the credit agreement governing our Unsecured Credit Facility and . Some executive officersthe Indenture that governs the notes also will not prevent us from incurring obligations that do not constitute indebtedness. As of IlluminetJune 30, 2013 our Unsecured Credit Facility provided for unused commitments of $200.0 million. In addition, our Unsecured Credit Facility allows us to request from time to time that the lenders thereunder agree on a discretionary basis to increase the aggregate commitments amount by up to $150.0 million. If new debt is added to our current debt levels, the related risks that we now face could intensify. The notes will become employeesbe effectively subordinated to any of VeriSign.our or our subsidiary guarantors’ secured indebtedness to the extent of the value of the collateral securing such indebtedness. The notes will not be secured by any of our or our subsidiaries’ assets. Although we do not currently have any secured indebtedness outstanding, the Indenture that governs the notes will allow us to secure at least $250.0 million of
indebtedness incurred under credit facilities, which could include our Unsecured Credit Facility, and certain other indebtedness from time to time. As a result, these executive officersthe notes and directors couldthe note guarantees will be more likelyeffectively subordinated to voteany secured indebtedness that may, in the future, be incurred by us or our subsidiary guarantors, if any. The effect of this subordination is that in the event of a bankruptcy, insolvency, liquidation, dissolution, restructuring or reorganization or any enforcement of security over collateral held by the holders of secured indebtedness involving us or a subsidiary guarantor, the proceeds from the sale of assets securing our or such subsidiary guarantor’s secured indebtedness will be available to approve, and recommendpay obligations on the approvalnotes only after all secured debt has been paid in full. As a result, the holders of the merger agreementnotes may receive less, ratably, than the holders of secured debt in the event of our or a subsidiary guarantor’s bankruptcy, insolvency, liquidation, dissolution, restructuring or reorganization. The notes will be structurally subordinated to all obligations of our existing and future subsidiaries that are not and do not become subsidiary guarantors of the notes. The notes will be guaranteed by each of our existing and future subsidiaries that is a borrower under or that guarantees our obligations under our Unsecured Credit Facility or any other credit facility or that incurs or guarantees material indebtedness. Except for such subsidiary guarantors of the notes, our subsidiaries that do not guarantee the notes, which includes all of our non-U.S. subsidiaries, will have no obligation, contingent or otherwise, to pay amounts due under the notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment. The notes and note guarantees will be structurally subordinated to all indebtedness and other obligations of any non-guarantor subsidiary such that in the event of insolvency, liquidation, reorganization, dissolution or other winding up of such non-guarantor subsidiary, all of such subsidiary’s creditors (including trade creditors) would be entitled to payment in full out of such subsidiary’s assets before we would be entitled to any payment. In addition, the Indenture that governs the notes, subject to certain limitations, permits our non-guarantor subsidiaries to incur additional indebtedness and does not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by such subsidiaries. As of June 30, 2013, our non-guarantor subsidiaries collectively had: liabilities (excluding intercompany liabilities) of $316.5 million (11.3% of our consolidated total liabilities), of which $270.7 million were deferred revenues, assets (excluding intercompany assets) of $1,409.2 million (55.8% of our consolidated total assets), of which $1,370.8 million were cash, cash equivalents and marketable securities primarily held by foreign subsidiaries, and assets (excluding cash, cash equivalents and marketable securities, and intercompany assets) of $38.4 million (7.3% of our consolidated total assets, excluding cash, cash equivalents and marketable securities). In addition, any of our subsidiaries that provide note guarantees in the future will be released from those note guarantees upon the occurrence of certain events, including the following: the designation of such subsidiary guarantor as an unrestricted subsidiary to the extent permitted by the Indenture that governs the notes; the release or discharge of any guarantee or indebtedness that resulted in the creation of the note guarantee by such subsidiary guarantor; or the sale or other disposition, including the sale of substantially all the assets, of such subsidiary guarantor (i) such that such subsidiary guarantor ceases to be our subsidiary or (ii) to a person other than us so long as such sale or disposition does not violate the Indenture that governs the notes. If any note guarantee is released, no holder of the notes will have a claim as a creditor against that subsidiary, and the merger thanindebtedness and other liabilities, including trade payables and preferred stock, if they didany, whether secured or unsecured, of that subsidiary will be effectively senior to the claim of any holders of the notes. See “Description of Notes—Subsidiary Guarantees.”
The terms of our Unsecured Credit Facility and the Indenture governing the notes restrict our current and future operations, particularly our ability to respond to changes or to take certain actions and create the risk of default on such indebtedness. The credit agreement that governs our Unsecured Credit Facility and the Indenture governing the notes contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including, subject to certain exceptions, restrictions on our ability to: permit our subsidiaries to incur or guarantee indebtedness; pay dividends or other distributions or repurchase or redeem our capital stock; prepay, redeem or repurchase certain debt; issue certain preferred stock or similar equity securities; make loans and investments; sell assets; incur liens; enter into transactions with affiliates; alter the businesses we conduct; enter into agreements restricting our subsidiaries’ ability to pay dividends; consolidate, merge or sell all or substantially all of our assets; and engage in certain sale/leaseback transactions. In addition, the restrictive covenants in our Unsecured Credit Facility require us to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we may be unable to meet them. A breach of the covenants or restrictions under our Unsecured Credit Facility or the Indenture governing the notes could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under our Unsecured Credit Facility would permit the lenders under our Unsecured Credit Facility to terminate all commitments to extend further credit under that agreement. In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may not holdhave sufficient assets to repay that indebtedness. As a result of these interests.restrictions, we may be: limited in how we conduct our business; unable to raise additional debt or equity financing to operate during general economic or business downturns; or unable to compete effectively or to take advantage of new business opportunities. These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, our substantial indebtedness and our credit ratings could adversely affect the availability and terms of our financing. Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. Any borrowings under our Unsecured Credit Facility are at variable rates of interest and expose us to interest rate risk. If interest rates were to increase, our debt service obligations on the merger's benefitsvariable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing
our indebtedness, will correspondingly decrease. Assuming all borrowings under our Unsecured Credit Facility are fully drawn, each quarter point change in interest rates would result in a $500,000 change in annual interest expense on our indebtedness under our Unsecured Credit Facility. In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk. Some of the cash, cash equivalents and marketable securities that appear on our consolidated balance sheet may not be available for use in our business or to meet our debt obligations without adverse income tax consequences. As of June 30, 2013, the amount of cash, cash equivalents and marketable securities held by our foreign subsidiaries, who are not guarantors of the notes or our other indebtedness, was $1,366.6 million. Our intent is to indefinitely reinvest outside of the United States those funds held by foreign subsidiaries that have not been previously taxed in the United States. In the event that funds from our foreign operations are needed to fund operations in the United States or to meet our debt obligations, and if U.S. tax has not already been provided, we would be required to accrue and pay additional U.S. taxes in order to repatriate those funds. As of June 30, 2013, the amount of cash, cash equivalents and marketable securities held by our foreign subsidiaries includes $7.0 million in countries such as India, China and Brazil which have currency controls that limit our ability to readily send cash out of the country. In light of the foregoing, the amount of cash, cash equivalents and marketable securities that appear on our balance sheet may overstate the amount of liquidity we have available to meet our business or debt obligations, including obligations under the notes. We may not be able to repurchase the notes upon a change of control. Upon the occurrence of specific kinds of change of control events and if the notes are rated below investment grade by both rating agencies that rate the notes, we will be required to offer to repurchase all outstanding notes at 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date. Additionally, under our Unsecured Credit Facility, a change of control (as defined therein) constitutes an event of default that permits the lenders to accelerate the maturity of borrowings under the Unsecured Credit Facility and the commitments to lend would terminate. The source of funds for any repurchase of the notes and repayment of borrowings under our Unsecured Credit Facility would be our available cash or cash generated from our subsidiaries’ operations or other sources, including borrowings, sales of assets or sales of equity. We may not be able to repurchase the notes upon a change of control because we may not have sufficient financial resources to purchase all of the debt securities that are tendered upon a change of control and repay our other indebtedness that will become due. If we fail to repurchase the notes in that circumstance, we will be in default under the Indenture that governs the notes. We may require additional financing from third parties to fund any such repurchases, and we may be unable to obtain financing on satisfactory terms or at all. Further, our ability to repurchase the notes may be limited by law. In order to avoid the obligations to repurchase the notes and events of default and potential breaches of our Unsecured Credit Facility, we may have to avoid certain change of control transactions that would otherwise be beneficial to us. In addition, certain important corporate events, such as leveraged recapitalizations, may not, under the Indenture that governs the notes, constitute a “change of control” that would require us to repurchase the notes, even though those corporate events could increase the level of our indebtedness or otherwise adversely affect our capital structure, credit ratings or the value of the notes. Additionally, holders may not be able to require us to purchase their notes in certain circumstances involving a significant change in the composition of our board of directors, including a proxy contest where our board of directors approves for purposes of the change of control provisions of the Indenture, but does not endorse, a dissident slate of directors. In this regard, decisions of the Delaware Chancery Court (not involving us or our securities) considered a change of control redemption provision contained in an indenture governing publicly traded debt securities that was substantially similar to the change of control redemption provision in the Indenture that governs the notes with respect to “continuing directors.” In these cases, the court noted that the board of directors may “approve” a dissident shareholder’s nominees solely to avoid triggering the change of control redemption provision of the indenture without supporting their election if the board determines in good faith that the election of the dissident nominees would not be materially adverse to the interests of the corporation or its stockholders (without taking into consideration the interests of the holders of debt securities in making this determination). Further, according to these decisions, the directors’ duty of loyalty to shareholders under Delaware law may, in certain circumstances, require them to give such approval. See “Description of Notes—Change of Control Triggering Event.” Furthermore, the exercise by the holders of notes of their right to require us to repurchase the notes pursuant to a change of control offer could cause a default under the agreements governing our other indebtedness, including future agreements, even if the change of control itself does not, due to the financial effect of such repurchases on us. In the event a change of control offer is required to be made at a time when we are prohibited from purchasing notes, we could attempt to
refinance the borrowings that contain such prohibitions. If we do not meetobtain a consent or repay those borrowings, we will remain prohibited from purchasing notes. In that case, our failure to purchase tendered notes would constitute an event of default under the expectationsIndenture which could, in turn, constitute a default under our other indebtedness. Finally, our ability to pay cash to the holders of notes upon a repurchase pursuant to a change of control offer may be limited by our then existing financial resources. Holders of the notes may not be able to determine when a change of control giving rise to their right to have the notes repurchased has occurred following a sale of “substantially all” of our assets. One of the circumstances under which a change of control may occur is upon the sale or industry analysts,disposition of “all or substantially all” of our assets. There is no precise established definition of the market pricephrase “substantially all” under applicable law and the interpretation of VeriSign common stock may decline.
The market pricethat phrase will likely depend upon particular facts and circumstances. Accordingly, the ability of VeriSign common stock may declinea holder of notes to require us to repurchase its notes as a result of the
merger if:
. the integrationa sale of VeriSign and Illuminet is unsuccessful;
. VeriSign doesless than all our assets to another person may be uncertain. Because each subsidiary guarantor’s liability under its note guarantee may be reduced to zero, voided or released under certain circumstances, you may not achieve the perceived benefitsreceive any payments from some or all of the merger as rapidly
as,subsidiary guarantors. Holders of the notes may, in the future, have the benefit of guarantees of certain of our subsidiaries. However, these note guarantees will be limited to the maximum amount that any such subsidiary guarantor is permitted to guarantee under applicable law. As a result, a subsidiary guarantor’s liability under its note guarantee could be reduced to zero, depending on the amount of other obligations of such subsidiary guarantor. Furthermore, under the circumstances discussed below, a court under applicable fraudulent conveyance and transfer statutes could void the obligations under a note guarantee or further subordinate it to all other obligations of the subsidiary guarantor. As a result, a subsidiary guarantor’s liability under its note guarantee could be materially reduced or eliminated depending upon the amounts of its other obligations and upon applicable laws. In particular, in certain jurisdictions, a guarantee issued by a company that is not in the company’s corporate interests or the burden of which exceeds the benefit to the company may not be valid and enforceable. It is possible that the validity and enforceability of the note guarantee could be challenged and that the applicable court may determine that the note guarantee should be limited or voided. In the event that any note guarantees are deemed invalid or unenforceable, in whole or in part, or to the extent anticipatedthat agreed limitations on the note guarantee apply (such as the note guarantee applying only to the extent permitted by financial or industry analysts; or
.law), the effectnotes offered hereby would be effectively subordinated to all liabilities of the merger on VeriSign's financial results is not consistent
with the expectationsapplicable subsidiary guarantor, including trade payables of financial or industry analysts.
Illuminet faces risks relating to the proposed merger.
The announcement of the proposed merger may have a negative impact on
Illuminet's ability to sell its services and products, attract and retain
employees and clients, and maintain strategic relationships with third parties.
For example, its employees may experience uncertainty about their future role
with VeriSign until VeriSign's strategies with regards to Illuminet's employees
are announced or executed. The announcement may also have an adverse effect on
Illuminet's relationships with significant customers and business partners.
Failure to complete the proposed merger could adversely affect Illuminet's
and VeriSign's stock prices and future business and operations.
The merger is subject to approval by Illuminet's stockholders and regulatory
agencies, andsuch subsidiary guarantor. In particular, we cannot assure you that the mergerlimitation discussed above will protect the note guarantees from fraudulent transfer challenges or, if it does, that the remaining amount due and collectible under the note guarantees would suffice, if necessary, to pay the notes in full when due. In at least one recent bankruptcy case in the United States, this kind of provision was found to be successfully
completed.unenforceable and, as a result, did not protect the guarantees in that case from being voided as fraudulent conveyances. Federal and state fraudulent transfer laws may permit a court to void the notes and/or the note guarantees, and if that occurs, you may not receive any payments on the notes. Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the notes and the incurrence of the note guarantees. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the notes or the note guarantees could be voided as a fraudulent transfer or conveyance if we or any of the subsidiary guarantors, as applicable, (a) issued the notes or incurred the note guarantees with the intent of hindering, delaying or defrauding creditors or (b) received less than reasonably equivalent value or fair consideration in return for either issuing the notes or incurring the note guarantees and, in the case of (b) only, one of the following is also true at the time thereof: we or any of the subsidiary guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the notes or the incurrence of the note guarantees; the issuance of the notes or the incurrence of the note guarantees left us or any of the subsidiary guarantors, as applicable, with an unreasonably small amount of capital or assets to carry on the business; we or any of the subsidiary guarantors intended to, or believed that we or such subsidiary guarantor would, incur debts beyond our or such subsidiary guarantor’s ability to pay as they mature; or we or any of the subsidiary guarantors were a defendant in an action for money damages, or had a judgment for money damages docketed against us or the subsidiary guarantors if, in either case, the judgment is unsatisfied after final judgment.
As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or a valid antecedent debt is secured or satisfied. A court would likely find that a subsidiary guarantor did not receive reasonably equivalent value or fair consideration for its note guarantee to the extent that the subsidiary guarantor did not obtain a reasonably equivalent benefit directly or indirectly from the issuance of the notes. We cannot be certain as to the standards a court would use to determine whether or not we or the subsidiary guarantors were insolvent at the relevant time or, regardless of the standard that a court uses, whether the notes or the note guarantees would be subordinated to our or any of our subsidiary guarantors’ other debt. In general, however, a court would deem an entity insolvent if: the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets; the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or it could not pay its debts as they became due. If a court were to find that the issuance of the notes or the incurrence of a note guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under the notes or that note guarantee, could subordinate the notes or that note guarantee to presently existing and future indebtedness of ours or of the related subsidiary guarantor or could require the holders of the notes to repay any amounts received with respect to that note guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the mergernotes. Further, the avoidance of the notes could result in an event of default with respect to our and our subsidiaries’ other debt that could result in acceleration of such debt. Finally, as a court of equity, the bankruptcy court may subordinate the claims in respect of the notes to other claims against us under the principle of equitable subordination if the court determines that (1) the holder of notes engaged in some type of inequitable conduct, (2) the inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage upon the holders of notes and (3) equitable subordination is not successfully completed,
Illuminetinconsistent with the provisions of the bankruptcy code. Your ability to sell the notes may be limited by the absence of an active trading market for the notes. The notes will be new issues of securities for which there is no established trading market. We do not intend to list the notes on any national securities exchange or include the notes in any automated quotation system. An active market for the notes may not develop or be maintained, which could adversely affect the market price and VeriSignliquidity of the notes. Even if an active trading market for the notes does develop, the notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, our performance, the time remaining to maturity of the notes, the outstanding amount of the notes, the terms related to optional redemption of the notes and other factors. Historically, the market for non-investment grade debt, such as the notes, has been subject to severe disruptions and any such disruption may adversely affect the liquidity in that market or the prices at which you may sell the notes, meaning that you may not be able to sell your notes at a particular time or at a favorable price. A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital. Any rating assigned to our debt securities could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of our debt securities. Any lowering of our rating likely would make it more difficult or more expensive for us to obtain additional debt financing in the future. If any credit rating initially assigned to the notes is subsequently lowered or withdrawn for any reason, you may not be able to resell your notes without a significant discount.
Risks Relating to the Exchange Offer The consummation of the exchange offer may not occur. We will exchange up to the aggregate principal amount of original notes for exchange notes that are tendered in compliance with, and pursuant to, the terms and conditions of the exchange offer described in this prospectus. Accordingly, holders participating in the exchange offer may have to wait longer than expected to receive their exchange notes, during which time those holders of original notes will not be able to effect transfers of their original notes tendered in the exchange offer. We may, however, waive these conditions at our sole discretion prior to the expiration date. See “The Exchange Offer—Conditions to the Exchange Offer.” You may have difficulty selling the original notes that you do not exchange. If you do not exchange your original notes for exchange notes pursuant to the exchange offer, the original notes you hold will continue to be subject to the existing transfer restrictions. The original notes may not be offered, sold or otherwise transferred, except in compliance with the registration requirements of the Securities Act, pursuant to an exemption from registration under the Securities Act or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with applicable state securities laws. We do not anticipate that we will register the original notes under the Securities Act. After the exchange offer is consummated, the trading market for the remaining untendered original notes may be small and inactive. Consequently, you may find it difficult to sell any original notes you continue to hold or to sell such original notes at the price you desire because there will be fewer original notes outstanding. In addition, if you are eligible to exchange your original notes in the exchange offer and do not exchange your original notes in the exchange offer, you will no longer be entitled to have those outstanding notes registered under the Securities Act. Some noteholders may be required to comply with the registration and prospectus delivery requirements of the Securities Act. If you exchange your original notes in the exchange offer for the purpose of participating in a distribution of the exchange notes, you may be deemed to have received restricted securities and, if so, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In addition, a broker-dealer that purchased original notes for its own account as part of market-making activities or other trading activities must deliver a prospectus when it sells the exchange notes it receives in exchange for original notes in the exchange offer. Our obligation to keep the registration statement of which this prospectus forms a part effective is limited. Accordingly, we cannot guarantee that a current prospectus will be available at all times to broker-dealers wishing to resell their exchange notes. Late deliveries of original notes or any other failure to comply with the exchange offer procedures could prevent a holder from exchanging its original notes. Noteholders are responsible for complying with all exchange offer procedures. The issuance of exchange notes in exchange for original notes will only occur upon proper completion of the procedures described in this prospectus under “The Exchange Offer.” Therefore, holders of original notes that wish to exchange them for exchange notes should allow sufficient time for timely completion of the exchange procedure. Neither we nor the exchange agent are obligated to extend the exchange offer or notify you of any failure to follow the proper procedure.
THE EXCHANGE OFFER Purpose of the Exchange Offer In connection with our issuance of the original notes on April 16, 2013, we entered into a registration rights agreement with respect to the original notes with the initial purchasers. Under the registration rights agreement, we agreed to file a registration statement with the SEC with respect to a registered offer to exchange the original notes for exchange notes, with terms substantially identical in all material respects to the original notes (except that the exchange notes will not contain terms with respect to transfer restrictions, registration rights or any increase in annual interest rate) and to commence the exchange offer promptly after the such registration statement becomes effective. We also agreed to consummate the exchange offer within 270 days of the first issuance of the original notes and to use commercially reasonable efforts to complete the exchange offer not later than 60 days after the exchange offer registration statement becomes effective. The registration rights agreement provides that we will be required to pay additional interest to the holders of the original notes if we fail to comply with such effectiveness and offer consummation requirements. See “—Registration Rights Agreement” below for more information on the additional interest we will owe if we do not complete the exchange offer within a specified timeline. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part and is available from us upon request. See “Incorporation of Certain Documents by Reference.” Terms of the Exchange Offer Upon the terms and subject to the conditions described in this prospectus and in the accompanying letter of transmittal, we will accept for exchange original notes that are properly tendered before 11:59 p.m., New York City time, on the expiration date and not validly withdrawn as permitted below. As of the date of this prospectus, $750.0 million aggregate principal amount of the original notes is outstanding. We will issue a like principal amount of exchange notes in exchange for the principal amount of the original notes tendered and accepted under the exchange offer. Tendering holders of the original notes must tender the original notes in denominations of $2,000 and any integral multiple of $1,000 in excess thereof. We will conduct the exchange offer in accordance with the applicable requirements of the Securities Act and the Exchange Act, and the rules and regulations of the SEC thereunder. No dissenters’ rights of appraisal exist with respect to the exchange offer. Our obligation to accept original notes for exchange in the exchange offer is subject to the conditions described below under “—Conditions to the Exchange Offer.” We will be considered to have accepted validly tendered original notes if and when we have given oral or written notice to that effect to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the exchange notes from us. Our acceptance of the tender of original notes by a tendering holder will form a binding agreement upon the terms and subject to the conditions provided in this prospectus and the accompanying letter of transmittal. Any original notes not accepted for exchange will be returned to the tendering holder promptly after the expiration or termination of the exchange offer. If we successfully complete the exchange offer, any original notes which holders do not tender or which we do not accept in the exchange offer will remain outstanding and continue to accrue interest. The holders of the original notes after the exchange offer in general will not have further rights under the registration rights agreement, including any rights to additional interest. Holders wishing to transfer the original notes would have to rely on exemptions from the registration requirements of the Securities Act. The exchange offer is not being made to holders of original notes in any jurisdiction where the exchange would not comply with the securities or blue sky laws of such jurisdiction. Expiration Date; Extensions; Amendments; Termination As used in this prospectus, the term “expiration date” means , 2013, which is the twentieth business day of the offering period, subject to our right to extend that time and rate in our sole discretion, in which case “expiration date” means the latest time and date to which we extend the exchange offer. We reserve the right to extend the period of time during which the exchange offer is open. We may elect to extend the exchange offer period if less than 100% of the original notes are tendered or if any condition to consummation of the exchange offer has not been satisfied as of the expiration date and it is likely that such condition will be satisfied after such date. In addition, in the event of any material change in the exchange offer, we will extend the period of time during which
the exchange offer is open if necessary so that at least five business days remain in the offering period following notice of the material change. In the event of such extension, and only in such event, we may delay acceptance for exchange of any original notes by giving written notice of the extension to the holders of original notes as described below. During any extension period, all original notes previously tendered will remain subject to the exchange offer and may be accepted for exchange by us. We reserve the right to amend or terminate the exchange offer, and not to accept for exchange any original notes not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified below under “—Conditions to the Exchange Offer.” We will give written notice of any extension, amendment, non-acceptance or termination to the holders of the original notes as promptly as practicable. Such notice, in the case of any extension, will be issued by means of a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. Procedures for Tendering To participate in the exchange offer, you must properly tender your original notes to the exchange agent as described below. We will only issue the exchange notes in exchange for the original notes that you timely and properly tender. Therefore, you should allow sufficient time to ensure timely delivery of the original notes, and you should follow carefully the instructions on how to tender your original notes. It is your responsibility to properly tender your original notes. We have the right to waive any defects. However, we are not required to waive defects, and neither we, nor the exchange agent is required to notify you of defects in your tender. If you have any questions or need help in exchanging your original notes, please contact the exchange agent at the address or telephone numbers set forth below. If original notes are tendered in accordance with the book-entry procedures described below, at or prior to 11:59 p.m., New York City time, on the expiration date, (i) a tendering holder must transmit an agent’s message (as defined below) to U.S. Bank National Association, as the exchange agent at the address listed below under the heading “—Exchange Agent” and (ii) the exchange agent must receive a timely confirmation of book-entry transfer of the original notes into the exchange agent’s account at DTC. The term “agent’s message” means a message, transmitted to DTC and received by the exchange agent and forming a part of a book-entry transfer, that states that DTC has received an express acknowledgment that the tendering holder agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against this holder. If you are a beneficial owner whose original notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and wish to tender, you should promptly instruct the registered holder to tender on your behalf. Any registered holder that is a participant in DTC’s book-entry transfer facility system may make book-entry delivery of the original notes by causing DTC to transfer the original notes into the exchange agent’s account. Book-Entry Transfer The exchange agent will establish an account for the original notes at DTC for purposes of the exchange offer and any financial institution that is a participant in DTC’s systems must make book-entry delivery of original notes by causing DTC to transfer those original notes into the exchange agent’s account at DTC in accordance with DTC’s ATOP procedures. DTC will verify this acceptance, execute a book-entry transfer of the tendered original notes into the exchange agent’s account at DTC and then send to the exchange agent confirmation of this book-entry transfer. The confirmation of this book-entry transfer will include an agent’s message confirming that DTC has received an express acknowledgment from this participant that this participant has received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against this participant. Delivery of exchange notes issued in the exchange offer may be effected through book-entry transfer at DTC. The exchange for the original notes so tendered will only be made after a book-entry confirmation of the book-entry transfer of original notes into the exchange agent’s account, and timely receipt by the exchange agent of an agent’s message and any other required documents.
Letter of Transmittal; Representations, Warranties and Covenants of Holders of Original Notes Upon agreement to the terms of the letter of transmittal pursuant to an agent’s message, a holder, or the beneficial holder of the original notes on behalf of which the holder has tendered, will, subject to that holder’s ability to withdraw its tender, and subject to the terms and conditions of the exchange offer generally, thereby:
(1) irrevocably sell, assign and transfer to or upon our order or the order of our nominee all right, title and interest in and to, and any and all claims in respect of or arising or having arisen as a result of the holder’s status as a holder of, all original notes tendered thereby, such that thereafter the holder shall have no contractual or other rights or claims in law or equity against us or any fiduciary, trustee, fiscal agent or other person connected with the original notes arising under, from or in connection with those original notes;
(2) waive any and all rights with respect to the original notes tendered thereby, including, without limitation, any existing or past defaults and their consequences in respect of those original notes; and (3) release and discharge us and the trustee for the original notes from any and all claims the holder may have, now or in the future, arising out of or related to the original notes tendered thereby, including, without limitation, any claims that the holder is entitled to receive additional principal or interest payments with respect to the original notes tendered thereby, other than as expressly provided in this prospectus and in the letter of transmittal, or to participate in any redemption or defeasance of the original notes tendered thereby.
In addition, by tendering the original notes in the exchange offer, each holder of the original notes will represent, warrant and agree that:
(1) it has received and reviewed this prospectus;
| | | (2) | it is the beneficial owner (as defined below) of, or a duly authorized representative of one or more beneficial owners of, the original notes tendered thereby, and it has full power and authority to execute the letter of transmittal; |
| | | (3) | the original notes being tendered thereby were owned as of the date of tender, free and clear of any liens, charges, claims, encumbrances, interests and restrictions of any kind, and we will acquire good, indefeasible and unencumbered title to those original notes, free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind, when we accept the same; |
| | | (4) | it will not sell, pledge, hypothecate or otherwise encumber or transfer any original notes tendered thereby from the date of the letter of transmittal, and any purported sale, pledge, hypothecation or other encumbrance or transfer will be void and of no effect; |
| | | (5) | in evaluating the exchange offer and in making its decision whether to participate in the exchange offer by tendering its original notes, it has made its own independent appraisal of the matters referred to in this prospectus and the letter of transmittal and in any related communications and it is not relying on any statement, representation or warranty, express or implied, made to it by us or the exchange agent, other than those contained in this prospectus, as amended or supplemented through the expiration date; |
| | | (6) | the execution and delivery of the letter of transmittal shall constitute an undertaking to execute any further documents and give any further assurances that may be required in connection with any of the foregoing, in each case on and subject to the terms and conditions described or referred to in this prospectus; |
| | | (7) | the agreement to the terms of the letter of transmittal pursuant to an agent’s message shall, subject to the terms and conditions of the exchange offer, constitute the irrevocable appointment of the exchange agent as its attorney and agent and an irrevocable instruction to that attorney and agent to complete and execute all or any forms of transfer and other documents at the discretion of that attorney and agent in relation to the original notes tendered thereby in favor of us or any other person or persons as we may direct and to deliver those forms of transfer and other documents in the attorney’s and agent’s discretion and the certificates and other documents of title relating to the registration of the original notes and to execute all other documents and to do all other acts and things as may be in the opinion of that attorney or agent necessary or expedient for the purpose of, or in connection with, the acceptance of the exchange offer, and to vest in us or our nominees those original notes; |
| | | (8) | the terms and conditions of the exchange offer shall be deemed to be incorporated in, and form a part of, the letter of transmittal, which shall be read and construed accordingly; |
(9) it is acquiring the exchange notes in the ordinary course of its business;
(10) it is not participating in, does not intend to participate in and has no arrangement or understanding with anyone to participate in a distribution of the exchange notes within the meaning of the Securities Act;
(11) it is not an affiliate of ours; and
(12) if such holder is a broker-dealer that will receive exchange notes for its own account in exchange for original notes that were acquired as a result of market-making activities or other trading activities, that it will deliver a prospectus (or to the extent permitted by law, make available a prospectus to purchasers) in connection with any resale of such exchange notes.
The representations, warranties and agreements of a holder tendering the original notes will be deemed to be repeated and reconfirmed on and as of the expiration date and the settlement date. For purposes of this prospectus, the “beneficial owner” of any original notes means any holder that exercises investment discretion with respect to those original notes. Determinations Under the Exchange Offer
We will reasonably determine all questions as to the validity, form and eligibility of original notes tendered for exchange and all questions concerning the timing of receipts and acceptance of tenders. These determinations will be final and binding. We reserve the right to reject any particular original note not properly tendered, or any acceptance that might, in our judgment or our counsel’s judgment, be unlawful. We also reserve the right to waive any defects or irregularities with respect to the form or procedures applicable to the tender of any particular original note prior to the expiration date. Unless waived, any defects or irregularities in connection with tenders of original notes must be cured prior to the expiration date of the exchange offer. Neither we, the exchange agent nor any other person will be under any duty to give notification of any defect or irregularity in any tender of original notes. Nor will we, the exchange agent or any other person incur any liability for failing to give notification of any defect or irregularity. Acceptance of Original Notes for Exchange; Delivery of Exchange Notes Upon satisfaction of all of the conditions to an exchange offer, we will accept, promptly after the expiration date, all original notes properly tendered. For purposes of the exchange offer, we will be deemed to have accepted properly tendered original notes for exchange when, as and if we have given oral or written notice of such acceptance to the exchange agent. We will issue the exchange notes promptly after the expiration of the exchange offer and acceptance of the original notes. The terms of the exchange notes are identical in all material respects to the terms of the original notes, except that: (1) we have registered the exchange notes under the Securities Act and therefore these exchange notes will not bear legends restricting their transfer; and (2) specified rights under the registration rights agreement, including the provisions providing for payment of additional interest in specified circumstances relating to the exchange offer, will be eliminated for all the exchange notes. For each original note accepted for exchange, the holder of the original note will receive an exchange note having a principal amount equal to that of the surrendered original note. The exchange notes will be issued under the same indenture and will be entitled to the same benefits under that indenture as the original notes being exchanged. The original notes accepted for exchange will be retired and cancelled and not reissued. We will not pay any accrued and unpaid interest on the original notes that we acquire in the exchange offer. Instead, interest on the exchange notes will accrue (a) from the later of (i) the last interest payment date on which interest was paid on the original notes surrendered in exchange for the exchange notes or (ii) if the original notes are surrendered for exchange on a date in the period between the record date and the corresponding interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date, or (b) if no interest has been paid, from and including April 16, 2013, the original issue date of the original notes.
Except as described under “Book-Entry Settlement and Clearance,” we will issue the exchange notes in the form of one or more global notes registered in the name of DTC or its nominee, and each beneficial owner’s interest in it will be transferable in book-entry form through DTC. In all cases, issuance of exchange notes for original notes will be made only after timely receipt by the exchange agent of: a timely book-entry confirmation of the original notes into the exchange agent’s account at the book-entry transfer facility; a properly transmitted agent’s message; and all other required documents. Unaccepted or non-exchanged original notes tendered by book-entry transfer in accordance with the book-entry procedures described below will be returned or recredited promptly after the expiration of the exchange offer. Withdrawal Rights For a withdrawal to be effective, you must comply with the appropriate ATOP procedures. Any notice of withdrawal must specify the name and number of material risks,the account at DTC to be credited with withdrawn original notes and otherwise comply with the ATOP procedures. If you are a beneficial owner whose original notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and wish to withdraw, you should promptly instruct the registered holder to withdraw on your behalf. Any original notes so withdrawn will be deemed not to have been validly tendered for exchange. No exchange notes will be issued unless the original notes so withdrawn are validly re-tendered. Properly withdrawn original notes may be re-tendered by following the procedures described under “ —Procedures for Tendering” above at any time on or before 11:59 p.m., New York City time, on the expiration date. Conditions to the Exchange Offer Notwithstanding any other provision of the exchange offer, we shall not be required to accept for exchange, or to issue applicable exchange notes in exchange for, any original notes, and may terminate or amend the exchange offer, if at any time prior to 11:59 p.m., New York City time, on the expiration date we determine that: there is threatened, instituted or pending any action or proceeding before, or any injunction, order or decree issued by, any court or governmental agency that might materially impair our ability to proceed with the exchange offer; or the exchange offer or the making of any exchange by a holder of original notes would violate applicable law or any applicable interpretation of the SEC staff. In addition, we will not accept for exchange any original notes tendered, and no exchange notes will be issued in exchange for any original notes, if any stop order is threatened by the SEC or in effect relating to the registration statement of which this prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended. We are required to make commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement at the earliest possible moment. Exchange Agent We have appointed U.S. Bank National Association as the exchange agent for the exchange offer. All correspondence in connection with the exchange offer should be sent or delivered by each holder of the original notes, or a beneficial owner’s commercial bank, broker, dealer, trust company or other nominee, to the exchange agent at: U.S. Bank National Association
Corporate Trust Services
EP-MN-WS-2N
60 Livingston Avenue
St. Paul, MN 55107
Attn: Specialized Finance
Facsimile: (651) 466-7372
Telephone: (800) 934-6802
Questions concerning tender procedures should be directed to the exchange agent at the address, telephone numbers or fax number listed above. Holders of the original notes may also contact their commercial bank, broker, dealer, trust company or other nominee for assistance concerning the exchange offer. Fees and Expenses We will not make any payment to brokers, dealers or others soliciting acceptances of the exchange offer. We have agreed to pay all expenses incident to the exchange offer other than brokerage commissions and transfer taxes, if any. We have also agreed to indemnify the holders of the original notes and the exchange notes (including any broker-dealers) against certain liabilities, including liabilities under the following:
. IlluminetSecurities Act. Tendering holders of the original notes will not be required to pay any fee or commission to the exchange agent. If, however, a tendering holder handles the transaction through its commercial bank, broker, dealer, trust company or other institution, that holder may be required to pay VeriSignbrokerage fees or commissions. Accounting Treatment The exchange notes will be recorded at the same carrying value as the original notes as reflected in our accounting records on the settlement date for the exchange offer. Accordingly, we will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offer. Consequences of Exchanging or Failing to Exchange the Original Notes Holders of original notes that do not exchange their original notes for exchange notes under the exchange offer will remain subject to the restrictions on transfer of such original notes (i) as set forth in the legend printed on the original notes as a termination fee;
consequence of the issuance of the original notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws and (ii) otherwise set forth in the offering memorandum distributed in connection with the original notes offering. In general, you may not offer or sell the original notes unless they are registered under the Securities Act, or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the registration rights agreement, we do not intend to register resales of the original notes under the Securities Act. Under existing interpretations of the Securities Act by the SEC staff contained in several no-action letters to third parties, and subject to the immediately following sentence, we believe the exchange notes would generally be freely transferable by holders after the exchange offer without further registration under the Securities Act, subject to certain representations required to be made by each holder of exchange notes, as set forth below. However, any holder of original notes that is one of our affiliates or that is engaged in, has an arrangement to participate in, or intends to engage in any public distribution of the exchange notes, or any broker-dealer that purchased any of the original notes from us for resale pursuant to Rule 144A or any other available exemption under the Securities Act: will not be able to rely on the interpretation of the SEC staff; will not be able to tender its original notes in the exchange offer; and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of original notes unless such sale or transfer is made pursuant to an exemption from such requirements. See “Plan of Distribution.” We do not intend to seek our own interpretation regarding the exchange offer and there can be no assurance that the SEC staff would make a similar determination with respect to the exchange notes as it has in other interpretations to other parties, although we have no reason to believe otherwise. Registration Rights Agreement The following description is a summary of the material provisions of the registration rights agreement. It does not restate the agreement in its entirety. We urge you to read the registration rights agreement in its entirety because it, and not this description, define your registration rights as holders of the original notes. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part and is available from us upon request. See “Incorporation of Certain Documents by Reference.”
On April 16, 2013, we and the initial purchasers entered into a registration rights agreement with respect to the original notes. In the registration rights agreement, we agreed for the benefit of holders of the original notes to file a registration statement on an appropriate form under the Securities Act (an “Exchange Offer Registration Statement”) with respect to a proposed offer to exchange the original notes for the exchange notes issued under the Indenture and identical in all material respects to the original notes (except that the exchange notes will not contain terms with respect to transfer restrictions or any increase in annual interest rate). The priceWe agreed to complete the exchange offer within 270 days of Illuminet's common stockthe date of first issuance of the original notes and to use commercially reasonable efforts to complete the exchange offer not later than 60 days after the Exchange Offer Registration Statement becomes effective. In the event that (1) we determine that an exchange offer is not available or may declinenot be completed as soon as practicable after the expiration date because it would violate an applicable law or applicable interpretations of the SEC, (2) an exchange offer is not consummated for any other reason within 270 days of the first issuance of the original notes, or (3) upon receipt of a written request (a “Shelf Request”) from any initial purchaser representing that it holds original notes that are or were ineligible to be exchanged in the exchange offer, we will use commercially reasonable efforts to cause to be filed as soon as practicable after such determination, date or Shelf Request, as the case may be, a shelf registration statement on an appropriate form under Rule 415 of the Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the “Shelf Registration Statement”), providing for the sale of all the original notes by the holders thereof and to have such Shelf Registration Statement become effective.We will use our commercially reasonable efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended to the extent necessary to ensure that it is available for resales of the current market priceexchange notes by the holders, until the date when (x) a registration statement with respect to the original notes has been declared effective by the SEC and the original notes have been exchanged or disposed of pursuant to such registration statement, (y) the original notes cease to be outstanding or (z) except for its common stock reflectsoriginal notes that are held by an initial purchaser and that are ineligible to be exchanged in an exchange offer, when the exchange offer is consummated (the “Shelf Effectiveness Period”). The registration rights agreement further provides that in the event that (i) we have not completed the exchange offer on or prior to the 270th day following the first issuance of the original notes, (ii) the Shelf Registration Statement, if required by clauses (1) and (2) above, has not been declared effective by the SEC on or prior to the 270th day following the first issuance of the original notes, (iii) the Shelf Registration Statement, if required by clause (3) above pursuant to a market assumption
thatShelf Request, has not been declared effective by the proposed mergerSEC by the later of the 270th day following the first issuance of the original notes and 90 days after delivery of such Shelf Request or (iv) the Shelf Registration Statement, if required, has become effective and thereafter ceases to be effective or the prospectus therein ceases to be usable at any time during the Shelf Effectiveness Period, and such failure to remain effective or usable exists for more than 30 days (whether or not consecutive) in any 12-month period (each such event, a “Registration Default”) then the interest rate borne by the original notes will be completed;increased by (a) 0.25% per annum for the first 90-day period beginning on the day immediately following such Registration Default and . Costs related(b) an additional 0.25% per annum with respect to each subsequent 90-day period, in each case until and including the date such Registration Default ends, up to a maximum increase of 1.00% per annum. This summary of the provisions of the registration rights agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the registration rights agreement, a copy of which has been filed as an exhibit to the proposed merger, suchregistration statement of which this prospectus forms a part and is available from us upon request. See “Incorporation of Certain Documents by Reference.” Other Participation in this exchange offer is voluntary, and you should carefully consider whether to participate. You are urged to consult your financial and tax advisors in making your own decision as legal, accounting,to what action to take.
USE OF PROCEEDS We will not receive any proceeds from the exchange offer. In consideration for issuing exchange notes, we will receive in exchange the original notes of like principal amount. The original notes surrendered in exchange for exchange notes will be retired and advisory fees, mustcancelled. We have agreed to pay all expenses incident to the exchange offer other than brokerage commissions and transfer taxes, if any. RATIO OF EARNINGS TO FIXED CHARGES The following table shows our historical ratios of earnings to fixed charges for the periods indicated: | | | | | | | | | | | | | | | For the six months ended June 30, | | For the Year Ended December 31, | | | 2013 | | 2012 | | 2011 | | 2010 | | 2009 | | 2008 | | Ratio of Earnings to Fixed Charges | 8.0x | | 8.9x | | 2.3x | | 1.6x | | 3.2x | | 1.4x |
In computing the ratio of earnings to fixed charges, “earnings” is the amount resulting from adding pretax income from continuing operations before adjustment for income or loss from equity investees, fixed charges and amortization of capitalized interest, and subtracting capitalized interest, and “fixed charges” is the sum of interest expense (including amortization of debt discount and debt issuance costs), capitalized interest, and the interest component of rent expense. Interest expense does not include interest on uncertain income tax positions which is recorded as part of income tax expense. Interest component of rent expense is calculated as one-third of rent expense, which is a reasonable approximation of the interest component.
DESCRIPTION OF NOTES The following description is a summary of the terms and provisions of the exchange notes and the Indenture (as defined below) governing the exchange notes. It summarizes only those portions of the Indenture that we believe will be paid, even ifmost important to your decision to participate in the mergerexchange offer. You should keep in mind, however, that it is the Indenture, and not completed.
12
Risks related to VeriSign's business
Ifthis summary, which defines your rights as a Holder of the merger is successfully completed, holders of Illuminet's common stock
will become holders of VeriSign's common stock. VeriSign's business differs
from Illuminet's business, and VeriSign's results of operations, as well as the
price of VeriSign's common stock,exchange notes. There may be affected by factors different than
those affecting Illuminet's results of operationsother provisions in the Indenture which are also important to you. You should read the Indenture and the priceexchange notes for a full description of the terms of the exchange notes. See “Incorporation of Certain Documents by Reference” for information on how to obtain copies of the Indenture. Certain terms used in this description are defined under the subheading “—Certain Definitions.” In this section, the words “Company”, “we”, “us” and “our” refer only to VeriSign, Inc. and not any of its common
stock beforeSubsidiaries. General We issued the merger.original notes and will issue the exchange notes under the indenture, dated April 16, 2013 (the “Indenture”), among us, the Subsidiary Guarantor party thereto and U.S. Bank National Association, as Trustee (the “Trustee”). On July 31, 2013, we merged VeriSign has a limited operating history under its current business
structure.
VeriSignInformation Services, Inc., which was incorporated in April 1995, and began introducing its trusted
infrastructure services in June 1995. In addition, VeriSign completed several
acquisitions in 2000 and 2001. Therefore, VeriSign has only a limited operating
history on which to base an evaluation of its consolidated business and
prospects. VeriSign's success will depend on many factors, including, but not
limited to,previously the following:
. the successful integrationsole guarantor of the acquired companies;
. the rate and timing of the growth and use of Internet protocol, or IP,
networks for electronic commerce and communications;
. the extent to which digital certificates and domain names are used for
these communications or e-commerce;
. the continued growth in the number of web sites;
. the growth in demand for VeriSign's payment services;
. the continued evolution of electronic commerce as a viable means of
conducting business;
. the demand for VeriSign's Internet infrastructure services, digital
certificates and Web Presence Services;
. the competition for any of VeriSign's services;
. the perceived security of electronic commerce and communications over IP
networks;
. the perceived security of VeriSign's services, technology, infrastructure
and practices; and
. VeriSign's continued ability to maintain its current, and enteroriginal notes, into additional, strategic relationships.
To address these risks VeriSign, must, among other things:
. successfully market its Internet infrastructure services, its digital
certificates and its Web Presence Services to new and existing customers;
. attract, integrate, train, retain and motivate qualified personnel;
. respond to competitive developments;
. successfully introduce new Internet infrastructure services and Web
Presence Services; and
. successfully introduce enhancements to its existing Internet
infrastructure services, digital certificates and Web Presence Services to
address new technologies and standards and changing market conditions.
VeriSign cannot be certain that it will successfully address these risks.
VeriSign's business depends on the future growth of the Internet and
adoption and continued use of IP networks.
VeriSign's future success substantially depends on the continued growth in
the use of the Internet and IP networks. If the use of and interest in the
Internet and IP networksInc. The Indenture does not continuelimit the maximum aggregate principal amount of exchange notes we may issue thereunder. We may from time to grow, its business would be
harmed. To date, many businesses and consumers have been deterred from
utilizing the Internet and IP networks for a number of reasons, including, but
not limited to:
. potentially inadequate development of network infrastructure;
13
. security concerns, particularly for online payments, including the
potential for merchant or user impersonation and fraud or theft of stored
data and information communicated over IP networks;
. privacy concerns, including the potential for third parties obtaining
personally identifiable information about users to disclose or sell datatime without notice to, or the consent of, such users;
. other security concerns suchthe Holders of original notes or the exchange notes (collectively referred to in this section only as attacks on popular websites by "hackers;"
. inconsistent qualitythe “Notes”), create and issue additional notes under the Indenture (“Additional Notes”), that will be equal in rank to the exchange notes in all respects (or in all respects except for the payment of service;
. lack of availability of cost-effective, high-speed systems and service;
. limited number of local access points for corporate users;
. inabilityinterest accruing prior to integrate business applications on IP networks;
. the need to operate with multiple and frequently incompatible products;
. government regulation; and
. a lack of tools to simplify access to and use of IP networks.
The widespread acceptanceissue date of the Internet and IP networks will require a
broad acceptanceAdditional Notes, or except for the first payment of new methodsinterest following the issue date of conducting business and exchanging
information. Organizationsthe Additional Notes) so that already have invested substantial resources in
other methods of conducting businessthe Additional Notes may be reluctantconsolidated and may form a single series with the existing exchange notes and have the same terms as to adopt new methods.
Also, individuals with established patterns of purchasing goodsstatus, redemption and services
and effecting paymentsotherwise as the existing exchange notes, except that such Additional Notes may be reluctantsubject to change.
Verisign may not be abletransfer restrictions. The Notes and any Additional Notes will vote on and consent to sustain its revenue growth and VeriSign's
near-term success depends, in part, onall matters arising under the growth ofIndenture or the Web Presence
Services business.
VeriSign may not be able to sustain the revenue growth it has experienced in
recent periods. In addition, past revenue growth may not be indicative of
future operating results. If VeriSign does not successfully maintain its
current positionNotes as a leading providersingle class. The exchange notes will be issued in denominations of domain name registration services$2,000 and integral multiples of $1,000 and will be represented by one or develop or market additional value-added Web Presence Servicesmore registered notes in global form, but in certain limited circumstances may be represented by exchange notes in definitive form. See “Book-Entry Settlement and products,
its business could be harmed.
VeriSign's Web Presence Services will account for a significant portion of
its revenue in at least the near term. VeriSign's future success will depend
largely on:
. continued new domain name registrations;
. re-registration rates of its customers;
. VeriSign's ability to maintain its current position as a leading registrar
of domain names;
. the successful development, introduction and market acceptance of new Web
Presence Services that address the demands of Internet users;
. VeriSign's ability to provide robust domain name registration systems; and
. VeriSign's ability to provide a superior customer service infrastructure
for its Web Presence Services.
Issues arising from implementing agreements with ICANN and the Department of
Commerce could harm VeriSign's registration business.
Clearance.” The Department of Commerce, or DOC, has adopted a plan for a phased
transition of the DOC's responsibilities for the domain name system to the
Internet Corporation for Assigned Names and Numbers, or ICANN. VeriSign faces
risks from this transition, including the following:
. ICANN could adopt or promote policies, procedures or programs that are
unfavorable to VeriSign's role in the registration of domain names or that
are inconsistent with VeriSign's current or future plans;
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. the DOC or ICANN could terminate VeriSign's agreements to be the registry
or a registrar in the .com, .net and .org top-level domains if they find
that VeriSign is in violation of its agreements with them;
. if VeriSign's agreements to be the registry for the .com, .org or .net, or
a registrar for existing and new top-level domains are terminated, it may
not be able to sustain the revenue growth it experienced in recent
periods;
. the terms of the registrar accreditation contract could change, as a
result of an ICANN-adopted policy,exchange notes include those expressly set forth in a manner that is unfavorable
toVeriSign;
. the DOC's or ICANN's interpretation of provisions of VeriSign's agreements
with either of them described above could differ from VeriSign's;
. the DOC could revoke its recognition of ICANN, as a result of which the
DOC would take the place of ICANN for purposesIndenture and those made part of the various agreements
described above, and could take actions that are harmfulIndenture by reference to VeriSign;
. ICANN has approved new top-level domains and VeriSign may not be permitted
to actthe Trust Indenture Act of 1939, as a registrar with respect to some of those top-level domains;
amended (the “Trust Indenture Act”). the U.S. Government could refuse to transfer certain responsibilities for
domain name system administration to ICANN due to security, stability or
other reasons, resulting in fragmentation or other instability in domain
name system administration; and
. VeriSign's registry business could face legal or other challenges
resulting from the activities of registrars.
Challenges to ongoing privatization of Internet administration could harm
VeriSign's Web Presence Services business.
Risks VeriSign faces from challenges by third parties, including other
domestic and foreign governmental authorities, to VeriSign's role in the
ongoing privatizationTerms of the Internet include:
. legal, regulatory or other challenges, including challenges toExchange Notes Principal and interest on the agreements governing VeriSign's relationship with, or to the legal
authority underlying the roles and actionsexchange notes will be payable in lawful money of the DOC, ICANNUnited States. On maturity or VeriSign,
could be brought;
. Congress has held several hearings in which various issues about the
domain name system and ICANN's practices have been raised and Congress
could take action that is unfavorable to VeriSign;
. Congress has issued a Conference Report directing the General Accounting
Office to review the relationship between the DOC and ICANN and the
adequacy of security arrangements under existing DOC cooperative
agreements. An adverse report could cause Congress to take action that is
unfavorable to VeriSign or the stabilityredemption of the domain name system;
. ICANN could fail to maintain its role, potentially resultingexchange notes, we will repay the Indebtedness represented by such exchange notes by paying the Trustee in instability in domain name system administration; and
. some foreign governments and governmental authorities have in the past
disagreed with, and may in the future disagree with, the actions, policies
or programs of ICANN, the U.S. Government and VeriSign relating to the
domain name system. These foreign governments or governmental authorities
may take actions or adopt policies or programs that are harmful to
VeriSign's business.
VeriSign's quarterly operating results may fluctuate and its future revenues
and profitability are uncertain.
VeriSign's quarterly operating results have varied and may fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside its control. These factors include the following:
. continued market acceptance of its trusted infrastructure services;
15
. the long sales and implementation cycles for, and potentially large order
sizes of, some of VeriSign's Internet trust services and the timing and
execution of individual contracts;
. volume of domain name registrations through VeriSign's Web Presence
Services business and its Global Registry Service business;
. customer renewal rates for VeriSign's Internet infrastructure services and
Web Presence Services;
. competition in the Web Presence Services business from competing
registrars and registries;
. the introduction of additional alternative Internet naming systems;
. the timing of releases of new versions of Internet browsers or other
third-party software products and networking equipment that include
VeriSign's digital certificate service interface technology;
. the mix of all VeriSign's offered services sold during a quarter;
. VeriSign's success in marketing other Internet infrastructure services and
web presence value-added services to its existing customers and to new
customers;
. continued development of its direct and indirect distribution channels,
both in the U.S. and abroad;
. market acceptance of VeriSign's Internet infrastructure services and new
service offerings or its competitors' products and services;
. a decrease in the level of spending for IT related products and services
by enterprise customers;
. VeriSign's ability to expand operations;
. VeriSign's success in assimilating the operations and personnel of any
acquired businesses;
. the amount and timing of expenditures related to expansion of its
operations;
. the impact of price changes in VeriSign's Internet infrastructure services
and Web Presence Services or its competitors' products and services; and
. general economic and market conditions as well as economic and market
conditions specific to IP network and Internet industries.
In addition, VeriSign expects a significant increase in its operating
expenses as it:
. increases its sales and marketing operations and activities; and
. continues to update its systems and infrastructure.
If the increase in VeriSign's expenses is not accompanied by a corresponding
increase in its revenues, VeriSign's operating results will suffer,
particularly as revenues from many of its services are recognized ratably over
the term of the service, rather than immediately when the customer pays for
them, unlike its sales and marketing expenditures, which are expensed in full
when incurred.
Due to all of the above factors, VeriSign's quarterly revenues and operating
results are difficult to forecast. Therefore, VeriSign believes that
period-to-period comparisons of VeriSign's operating results will not
necessarily be meaningful, and you should not rely upon them as an indication
of future performance. Also, operating results may fall below VeriSign's
expectations and the expectations of securities analysts or investors in one or
more future quarters. If this were to occur, the market price of VeriSign
common stock would likely decline.
VeriSign faces significant competition.
VeriSign anticipates that the market for services that enable trusted and
secure electronic commerce and communications over IP networks will remain
intensely competitive. VeriSign competes with larger and smaller
16
companies that provide products and services that are similar to some aspects
of its Internet infrastructure services. VeriSign's competitors may develop new
technologies in the future that are perceived as being more secure, effective
or cost efficient than the technology underlying its trust services. VeriSign
expects that competition will increase in the near term, and that its primary
long-term competitors may not yet have entered the market.
Increased competition could result in pricing pressures, reduced margins or
the failure of VeriSign's Internet trust services to achieve or maintain market
acceptance, any of which could harm its business. Several of VeriSign's current
and potential competitors have longer operating histories and significantly
greater financial, technical, marketing and other resources. As a result,
VeriSign may not be able to compete effectively.
In connection with VeriSign's first round of financing, RSA contributed
certain technology to VeriSign and entered into a non-competition agreement
with VeriSign under which RSA agreed that it would not compete with VeriSign's
certificate authority business for a period of five years. This non-competition
agreement expired in April 2000. VeriSign believes that, because RSA, which is
now a wholly owned subsidiary of RSA Security, has already developed expertise
in the area of cryptography, its barriers to entry would be lower than those
that would be encountered by VeriSign's other potential competitors should RSA
choose to enter any of VeriSign's markets. If RSA were to enter into the
digital certificate market, VeriSign's business could be materially harmed.
Seven new top-level domain registries, .aero, .biz, .coop, .info, .museum,
.name and .pro, are expected to begin accepting domain name registrations in
the near future. The commencement of registrations in these new top-level
domains could have the effect of reduced demand for .com and .net domain name
registrations. If the new top-level domains do reduce the demand for domain
name registrations in .com and .net, VeriSign's business could be materially
harmed.
The agreements among ICANN, the DOC, VeriSign and other registrars permit
flexibility in pricing for and term of registrations. VeriSign's revenues,
therefore, could be reduced due to pricing pressures, bundled service offerings
and variable terms resulting from increased competition. Some registrars and
resellers in the .com, .net and .org top-level domains are already charging
lower prices for Web Presence Services in those domains. In addition, other
entities are bundling, and may in the future bundle, domain name registrations
with other products or services at reduced rates or for free.
VeriSign's Internet infrastructure services market is new and evolving.
VeriSign targets its Internet infrastructure services at the market for
trusted and secure electronic commerce and communications over IP networks.
This is a new and rapidly evolving market that may not continue to grow.
Accordingly, the demand for VeriSign's Internet infrastructure services is very
uncertain. Even if the market for electronic commerce and communications over
IP networks grows, VeriSign's Internet infrastructure services may not be
widely accepted. The factors that may affect the level of market acceptance of
digital certificates and, consequently, VeriSign's Internet infrastructure
services include the following:
. market acceptance of products and services based upon authentication
technologies other than those VeriSign uses;
. public perception of the security of digital certificates and IP networks;
. the ability of the Internet infrastructure to accommodate increased levels
of usage; and
. government regulations affecting electronic commerce and communications
over IP networks.
Even if digital certificates achieve market acceptance, VeriSign's Internet
infrastructure services may fail to address the market's requirements
adequately. If digital certificates do not sustain or increase their
acceptance, or if VeriSign's Internet infrastructure services in particular do
not achieve or sustain market acceptance, VeriSign's business would be
materially harmed.
17
System interruptions and security breaches could harm VeriSign's business.
VeriSign depends on the uninterrupted operation of its various domain name
registration systems, secure data centers and other computer and communications
systems. VeriSign must protect these systems from loss, damage or interruption
caused by fire, earthquake, power loss, telecommunications failure or other
events beyond its control. Most of VeriSign's systems are located at, and most
of its customer information is stored in, its facilities in Mountain View,
California and Kawasaki, Japan, both of which are susceptible to earthquakes,
and Dulles and Herndon, Virginia. Though it has back-up power resources,
VeriSign's California locations are susceptible to recent electric power
shortages. All of VeriSign's Web Presence Services systems, including those
used in its domain name registry and registrar business are located at its
Dulles and Herndon, Virginia facilities. Any damage or failure that causes
interruptions in any of these facilities or VeriSign's other computer and
communications systems could materially harm its business. In addition,
VeriSign's ability to issue digital certificates and register domain names
depends on the efficient operation of the Internet connections from customers
to its secure data centers and its various registration systems as well as from
customers to VeriSign's registrar and from VeriSign's registrar and other
registrars to the shared registration system.
These connections depend upon efficient operation of web browsers, Internet
service providers and Internet backbone service providers, all of which have
had periodic operational problems or experienced outages in the past. Any of
these problems or outages could decrease customer satisfaction.
A failure in the operation of VeriSign's various registration systems,
VeriSign's domain name zone servers, the domain name root servers or other
events could result in deletion of one or more domain names from the Internet
for a period of time. A failure in the operation of VeriSign's shared
registration system could result in the inability of one or more other
registrars to register and maintain domain names for a period of time. A
failure in the operation or update of the master database that VeriSign
maintains could result in deletion of one or more top-level domains from the
Internet and the discontinuation of second-level domain names in those
top-level domains for a period of time. The inability of VeriSign's registrar
systems, including its back office billing and collections infrastructure, and
telecommunications systems to meet the demands of the increasing number of
domain name registration requests and corresponding customer e-mails and
telephone calls, including speculative, otherwise abusive and repetitive e-mail
domain name registration and modification requests, could result in substantial
degradation in VeriSign's customer support service and its ability to process,
bill and collect registration requests in a timely manner.
VeriSign retains certain confidential customer information in its secure
data centers and various registration systems. It is critical to VeriSign's
business strategy that its facilities and infrastructure remain secure and are
perceived by the marketplace to be secure. VeriSign's domain name registration
operations also depend on its ability to maintain its computer and
telecommunications equipment in effective working order and to reasonably
protect its systems against interruption and potentially on such maintenance
and protection by other registrars in the shared registration system. The root
zone servers and top-level domain name zone servers that VeriSign operates are
critical hardware to its web presence operations. Therefore, VeriSign may have
to expend significant time andlawful money to maintain or increase the security of
its facilities and infrastructure.
Despite VeriSign's security measures, its infrastructure may be vulnerable
to physical break-ins, computer viruses, and attacks by hackers or similar
disruptive problems. It is possible that VeriSign may have to expend additional
financial and other resources to address such problems. Any physical or
electronic break-ins or other security breaches or compromises of the
information stored at VeriSign's secure data centers and domain name
registration systems may jeopardize the security of information stored on its
premises or in the computer systems and networks of its customers. In such an
event, VeriSign could face significant liability and customers could be
reluctant to use its Internet infrastructure services and Web Presence
Services. Such an occurrence could also result in adverse publicity and
therefore adversely affect the market's perception of the security of
electronic commerce and communications over IP networks as well as of the
security or reliability of VeriSign's services.
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VeriSign relies on a continuous power supply to conduct its operations, and
California's current energy crisis could disrupt VeriSign's operations and
increase its expenses.
California is in the midst of an energy crisis that could disrupt VeriSign's
operations and increase its expenses. In the event of an acute power shortage,
that is, when power reserves for the State of California fall below 1.5%,
California has on some occasions implemented, and may in the future continue to
implement, rolling blackouts throughout the state. If blackouts interrupt
VeriSign's power supply, it may be temporarily unable to operate. Any such
interruption in VeriSign's ability to continue operations could delay the
development of its products. Future interruptions could damage VeriSign's
reputation, harm its ability to retain existing customers and to obtain new
customers, and could result in lost revenue, any of which could substantially
harm VeriSign's business and results of operations.
Furthermore, the deregulation of the energy industry instituted in 1996 by
the California government and shortages in wholesale electricity supplies have
caused power prices to increase. If wholesale prices continue to increase,
VeriSign's operating expenses will likely increase, as its headquarters and
many of its employees are based in California.
Acquisitions could harm VeriSign's business.
VeriSign made several acquisitions in 2000 and 2001. VeriSign could
experience difficulty in integrating the personnel, products, technologies or
operations of these companies. In addition, assimilating acquired businesses
involves a number of other risks, including, but not limited to:
. the potential disruption of VeriSign's business;
. the potential impairment of relationships with VeriSign's employees,
customers and strategic partners;
. potential additional expenses associated with a write-off of a portion of
goodwill and other intangible assets due to changes in market condition,
as was the case when VeriSign recorded a non-cash charge of $9.9 billion
related to write downs of goodwill for stock-based acquisitions;
. unanticipated costs or the incurrence of unknown liabilities;
. the need to manage more geographically-dispersed operations, such as
VeriSign's offices in Virginia, North Carolina, South Africa and Europe;
. diversion of management's resources from other business concerns;
. the inability to retain the employees of the acquired businesses;
. adverse effects on existing customer relationships of acquired companies;
. the difficulty of assimilating the operations and personnel of the
acquired businesses;
. VeriSign's inability to incorporate acquired technologies successfully
into its Internet infrastructure services; and
. the inability to maintain uniform standards, controls, procedures and
policies.
Additionally, VeriSign is required under generally accepted accounting
principles to review its intangible assets for impairment when events or
changes in circumstances indicate the carrying value may not be recoverable.
If VeriSign is unable to successfully address any of these risks for future
acquisitions, its business could be harmed.
19
Some of VeriSign's investments in other companies resulted in losses and may
result in losses in the future.
VeriSign has equity and debt investments in a number of companies. In most
instances, these investments are in the form of equity and debt securities of
private companies for which there is no public market. These companies are
typically in the early stage of development and may be expected to incur
substantial losses. Therefore, these companies may never become publicly traded
companies. Even if they do, an active trading market for their securities may
never develop and VeriSign may never realize any return on these investments.
Further, if these companies are not successful, VeriSign could incur charges
related to write-downs or write-offs of these types of assets. Due to the
recent volatility in the stock market in general, and the market prices of
securities of technology companies in particular, in the first quarter of 2001,
VeriSign determined that the decline in value of some of its public and private
equity security investments was other than temporary and recognized a loss of
$74.7 million related to the decline in value of these investments. Due to the
inherent risk associated with some of its investments, and in light of current
stock market conditions, VeriSign may incur future losses on the sales,
write-downs or write-offs of its investments.
Technological changes will affect VeriSign's business.
The emerging nature of the Internet, digital certificate business, the
domain name registration business and payment services business, and their
rapid evolution, require VeriSign continually to improve the performance,
features and reliability of its Internet infrastructure services and Web
Presence Services, particularly in response to competitive offerings. VeriSign
must also introduce any new Internet infrastructure services and Web Presence
Services, as quickly as possible. The success of new Internet infrastructure
services and Web Presence Services depends on several factors, including proper
new service definition and timely completion, introduction and market
acceptance. VeriSign may not succeed in developing and marketing new Internet
infrastructure services and Web Presence Services that respond to competitive
and technological developments and changing customer needs. This could harm
VeriSign's business.
VeriSign must manage its growth and expansion.
VeriSign's historical growth has placed, and any further growth is likely to
continue to place, a significant strain on its resources. VeriSign has grown
from 26 employees at December 31, 1995 to over 2,355 employees at June 30,
2001. In addition to internal growth, VeriSign's employee base grew through
acquisitions. VeriSign has also opened additional sales offices and has
significantly expanded its operations, both in the U.S. and abroad, during this
time period. To be successful, VeriSign will need to implement additional
management information systems, continue the development of its operating,
administrative, financial and accounting systems and controls and maintain
close coordination among its executive, engineering, accounting, finance,
marketing, sales and operations organizations. Any failure to manage growth
effectively could harm VeriSign's business.
VeriSign depends on key personnel.
VeriSign depends on the performance of its senior management team and other
key employees. VeriSign's success will also depend on its ability to attract,
integrate, train, retain and motivate these individuals and additional highly
skilled technical and sales and marketing personnel, both in the U.S. and
abroad. There is intense competition for these personnel. In addition,
VeriSign's stringent hiring practices for some of its key personnel, which
consist of background checks into prospective employees' criminal and financial
histories, further limit the number of qualified persons for these positions.
VeriSign has no employment agreements with any of its key executives that
prevent them from leaving VeriSign at any time. In addition, VeriSign does not
maintain key person life insurance for any of its officers or key employees
other than its President and Chief Executive Officer. The loss of the services
of any of its senior management team or other key employees or failure to
attract, integrate, train, retain and motivate additional key employees could
harm VeriSign's business.
20
VeriSign relies on third parties who maintain and control root zone servers
and route Internet communications.
VeriSign currently administers and operates only two of the 13 root zone
servers. The others are administered and operated by independent operators on a
volunteer basis. Because of the importance to the functioning of the Internet
of these root zone servers, VeriSign's global registry services business could
be harmed if these volunteer operators fail to maintain such servers properly
or abandon such servers which would place additional capacity on the two root
zone servers VeriSign operates.
Further, VeriSign's global registry services business could be harmed if any
of these volunteer operators fails to include or provide accessibility to the
data that it maintains in the root zone servers that it controls. In the event
and to the extent that ICANN is authorized to set policy with regard to an
authoritative root server system, as provided in the registry agreement between
ICANN and VeriSign, it is required to ensure that the authoritative root will
point to the top-level domain zone servers designated by it. If ICANN does not
do this, VeriSign's business could be harmed.
VeriSign's Web Presence Services and registry services businesses also could
be harmed if a significant number of Internet service providers decided not to
route Internet communications to or from domain names registered by it or if a
significant number of Internet service providers decided to provide routing to
a set of domain name servers that did not point to VeriSign's domain name zone
servers.
VeriSign must establish and maintain strategic and other relationships.
One of VeriSign's significant business strategies has been to enter into
strategic or other similar collaborative relationships in order to reach a
larger customer base than it could reach through its direct sales and marketing
efforts. Examples of these types of relationships include VeriSign's
arrangements with Cisco, Microsoft and RSA Security. VeriSign may need to enter
into additional relationships to execute its business plan. VeriSign may not be
able to enter into additional, or maintain its existing, strategic
relationships on commercially reasonable terms. If VeriSign fails to enter into
additional relationships, VeriSign would have to devote substantially more
resources to the distribution, sale and marketing of its Internet
infrastructure services and Web Presence Services than it would otherwise.
VeriSign's success in obtaining results from these relationships will depend
both on the ultimate success of the other parties to these relationships,
particularly in the use and promotion of IP networks for trusted and secure
electronic commerce and communications, and on the ability of these parties to
market VeriSign's Internet infrastructure services successfully.
Furthermore, VeriSign's ability to achieve future growth will also depend on
its ability to continue to establish direct seller channels and to develop
multiple distribution channels, particularly with respect to its Web Presence
Services business. To do this VeriSign must maintain relationships with
Internet access providers and other third parties. Failure of one or more of
VeriSign's strategic relationships to result in the development and maintenance
of a market for its Internet infrastructure services or Web Presence Services
could harm VeriSign's business. Many of VeriSign's existing relationships do
not, and any future relationships may not, afford it any exclusive marketing or
distribution rights. In addition, the other parties may not view their
relationships with VeriSign as significant for their own businesses. Therefore,
they could reduce their commitment to VeriSign at any time in the future. These
parties could also pursue alternative technologies or develop alternative
products and services either on their own or in collaboration with others,
including VeriSign's competitors. If VeriSign is unable to maintain its
relationships or to enter into additional relationships, this could harm its
business.
Some of VeriSign's Internet trust services have lengthy sales and
implementation cycles.
VeriSign markets many of its Internet infrastructure services directly to
large companies and government agencies. The sale and implementation of its
services to these entities typically involves a lengthy education process and a
significant technical evaluation and commitment of capital and other resources.
This process is also subject to the risk of delays associated with customers'
internal budgeting and other procedures for approving
21
large capital expenditures, deploying new technologies within their networks
and testing and accepting new technologies that affect key operations. As a
result, the sales and implementation cycles associated with certain of
VeriSign's Internet trust services can be lengthy, potentially lasting from
three to six months. VeriSign's quarterly and annual operating results could be
materially harmed if orders forecasted for a specific customer for a particular
quarter are not realized.
VeriSign's services could have unknown defects.
Services as complex as those VeriSign offers or develops frequently contain
undetected defects or errors. Despite testing, defects or errors may occur in
VeriSign's existing or new services, which could result in loss of or delay in
revenues, loss of market share, failure to achieve market acceptance, diversion
of development resources, injury to VeriSign's reputation, tort or warranty
claims, increased insurance costs or increased service and warranty costs, any
of which could harm VeriSign's business. Furthermore, VeriSign often provides
implementation, customization, consulting and other technical services in
connection with the implementation and ongoing maintenance of its services,
which typically involves working with sophisticated software, computing and
communications systems. VeriSign's failure or inability to meet customer
expectations in a timely manner could also result in loss of or delay in
revenues, loss of market share, failure to achieve market acceptance, injury to
its reputation and increased costs.
Public key cryptography technology is subject to risks.
VeriSign's Internet infrastructure services depend on public key
cryptography technology. With public key cryptography technology, a user is
given a public key and a private key, both of which are required to perform
encryption and decryption operations. The security afforded by this technology
depends on the integrity of a user's private key and that it is not lost,
stolen or otherwise compromised. The integrity of private keys also depends in
part on the application of specific mathematical principles known as
"factoring." This integrity is predicated on the assumption that the factoring
of large numbers into their prime number components is difficult. Should an
easy factoring method be developed, the security of encryption products
utilizing public key cryptography technology would be reduced or eliminated.
Furthermore, any significant advance in techniques for attacking cryptographic
systems could also render some or all of VeriSign's existing Internet trust
services obsolete or unmarketable. If improved techniques for attacking
cryptographic systems were ever developed, VeriSign would likely have to
reissue digital certificates to some or all of its customers, which could
damage VeriSign's reputation and brand or otherwise harm its business. In the
past there have been public announcements of the successful attack upon
cryptographic keys of certain kinds and lengths and of the potential
misappropriation of private keys and other activation data. This type of
publicity could also hurt the public perception as to the safety of the public
key cryptography technology included in VeriSign's digital certificates. This
negative public perception could harm VeriSign's business.
VeriSign's international operations are subject to certain risks.
Revenues from international subsidiaries and affiliates accounted for
approximately 13% of its revenues in the second quarter of 2001 and
approximately 12% of its revenues in the first six months of 2001. VeriSign
intends to expand its international operations and international sales and
marketing activities. For example, with its acquisition of THAWTE VeriSign has
additional operations in South Africa and with its acquisition of Network
Solutions, VeriSign has additional operations in Asia and Europe. Expansion
into these markets has required and will continue to require significant
management attention and resources. VeriSign may also need to tailor its
Internet infrastructure trust services and Web Presence Services for a
particular market and to enter into international distribution and operating
relationships. VeriSign has limited experience in localizing its services and
in developing international distribution or operating relationships. VeriSign
may not succeed in expanding its services into international markets. Failure
to do so could harm VeriSign's business. In addition, there are risks inherent
in doing business on an international basis, including, among others:
. competition with foreign companies or other domestic companies entering
the foreign markets in which VeriSign operates;
22
. regulatory requirements;
. legal uncertainty regarding liability and compliance with foreign laws;
. export and import restrictions on cryptographic technology and products
incorporating that technology;
. tariffs and other trade barriers and restrictions;
. difficulties in staffing and managing foreign operations;
. longer sales and payment cycles;
. problems in collecting accounts receivable;
. currency fluctuations, as all of VeriSign's international revenues from
VeriSign Japan, K.K., THAWTE (South Africa), Registrars.com (Canada),
Domainnames.com, Limited (U.K.) and the entities acquired through
VeriSign's recent Euro909 acquisition are not denominated in U.S. dollars
;
. difficulty of authenticating customer information;
. political instability;
. failure of foreign laws to protect VeriSign's U.S. proprietary rights
adequately;
. more stringent privacy policies in foreign countries;
. seasonal reductions in business activity; and
. potentially adverse tax consequences.
VeriSign has licensed to its affiliates the VeriSign Processing Center
platform, which is designed to replicate its own secure data centers and allows
the affiliate to offer back-end processing of Internet infrastructure services.
The VeriSign Processing Center platform provides an affiliate with the
knowledge and technology to offer Internet infrastructure services similar to
those offered by VeriSign. It is critical to VeriSign's business strategy that
the facilities and infrastructure used in issuing and marketing digital
certificates remain secure and VeriSign is perceived by the marketplace to be
secure. Although VeriSign provides the affiliate with training in security and
trust practices, network management and customer service and support, these
practices are performed by the affiliate and are outside of VeriSign's control.
Any failure of an affiliate to maintain the privacy of confidential customer
information could result in negative publicity and therefore adversely affect
the market's perception of the security of VeriSign's services as well as the
security of electronic commerce and communication over IP networks generally.
For further information, please see "--System interruptions and security
breaches could harm VeriSign's business."
VeriSign's Internet infrastructure services could be affected by government
regulation.
Exports of software products utilizing encryption technology are generally
restricted by the United States and various non-United States governments.
Although VeriSign has obtained approval to export its Global Server digital
certificate service, and none of VeriSign's other Internet infrastructure
services are currently subject to export controls under United States law, the
list of products and countries for which export approval is required could be
revised in the future to include more digital certificate products and related
services. If VeriSign does not obtain required approvals it may not be able to
sell specific Internet infrastructure services in international markets. There
are currently no federal laws or regulations that specifically control
certificate authorities, but a limited number of states have enacted
legislation or regulations with respect to certificate authorities. If the
market for digital certificates grows, the United States federal or state or
non-United States governments may choose to enact further regulations governing
certificate authorities or other providers of digital certificate products and
related services. These regulations or the costs of complying with these
regulations could harm VeriSign's business.
23
In July 2000, the Electronic Signatures in Global and National Commerce Act,
or "E-Sign," was signed into law. E-Sign is intended to render digital
signatures legally equivalent to those signed on paper. The execution of E-Sign
could materially and adversely affect VeriSign's digital certificates services
business. For example, there may be an increasing demand for digital signatures
and certificates as a result of the new E-Sign law. However, due to competition
or other reasons, VeriSign's services may not be adopted. If VeriSign cannot
meet market expectations or demand for its products and services do not
increase, its business may be materially and adversely affected. Furthermore, a
successful implementation of E-Sign may further encourage competitors to enter
the marketplace because of the possible increase in demand for digital
signatures and certificates. This could effectively lower barriers to entry and
increasingly flood the marketplace with competitors, which could, among other
things, result in price erosion. While VeriSign cannot assure you that E-Sign
will be effectively implemented or how this implementation will affect its
business, VeriSign must continue to meet the demand and expectations of its
customers, its failure to do so could materially and adversely harm its
business.
VeriSign faces risks related to intellectual property rights.
VeriSign's success depends on its internally developed technologies and
other intellectual property. Despite its precautions, it may be possible for a
third party to copy or otherwise obtain and use VeriSign's trade secrets or
other forms of its intellectual property without authorization. In addition, it
is possible that others may independently develop substantially equivalent
intellectual property. If VeriSign does not effectively protect its
intellectual property, its business could suffer.
In the future VeriSign may have to resort to litigation to enforce its
intellectual property rights, to protect its trade secrets or to determine the
validity and scope of the proprietary rights of others. This type of
litigation, regardless of its outcome, could result in substantial costs and
diversion of management and technical resources.
VeriSign also licenses third-party technology, such as public key
cryptography technology licensed from RSA and other technology that is used in
VeriSign's products, to perform key functions. These third-party technology
licenses may not continue to be available to VeriSign on commercially
reasonable terms or at all. VeriSign's business could suffer if it lost the
rights to use these technologies. A third party could claim that the licensed
software infringes a patent or other proprietary right. Litigation between the
licensor and a third party or between VeriSign and a third party could lead to
royalty obligations for which it is not indemnified or for which
indemnification is insufficient, or VeriSign may not be able to obtain any
additional license on commercially reasonable terms or at all. The loss of, or
its inability to obtain or maintain, any of these technology licenses could
delay the introduction of VeriSign's Internet infrastructure services until
equivalent technology, if available, is identified, licensed and integrated.
This could harm VeriSign's business.
From time to time, VeriSign has received, and may receive in the future,
notice of claims of infringement of other parties' proprietary rights.
Infringement or other claims could be made against VeriSign in the future. Any
claims, with or without merit, could be time-consuming, result in costly
litigation and diversion of technical and management personnel, cause product
shipment delays or require VeriSign to develop non-infringing technology or
enter into royalty or licensing agreements. Royalty or licensing agreements, if
required, may not be available on acceptable terms or at all. If a successful
claim of product infringement were made against VeriSign and it could not
develop non-infringing technology or license the infringed or similar
technology on a timely and cost- effective basis, VeriSign's business could be
harmed.
In addition, legal standards relating to the validity, enforceability, and
scope of protection of intellectual property rights in Internet-related
businesses are uncertain and still evolving. Because of the growth of the
Internet and Internet-related businesses, patent applications are continuously
and simultaneously being filed in connection with Internet-related technology.
There are a significant number of U.S. and foreign patents and patent
applications in VeriSign's areas of interest, and VeriSign believes that there
has been, and is likely to continue to be, significant litigation in the
industry regarding patent and other intellectual property rights.
24
VeriSign has implemented anti-takeover provisions.
VeriSign's amended and restated certificate of incorporation and bylaws,
contain provisions that could make it more difficult for a third party to
acquire VeriSign without the consent of its board of directors. These
provisions include:
. VeriSign's stockholders may only take action at a meeting and not by
written consent;
. VeriSign's board must be given advance notice regarding
stockholder-sponsored proposals for consideration at annual meetings and
for stockholder nominations for the election of directors;
. VeriSign has a classified board of directors, with the board being divided
into three classes that serve staggered three-year terms;
. vacancies on its board may be filled until the next annual meeting of
stockholders only by majority vote of the directors then in office; and
. special meetings of VeriSign's stockholders may only be called by the
Chairman of the Board, the President or by the board, not by VeriSign's
stockholders.
While VeriSign believes these provisions provide for an opportunity to
receive a higher bid by requiring potential acquirors to negotiate with its
board of directors, these provisions may apply even if the offer may be
considered beneficial by some stockholders.
Additional Risks Related to Illuminet
System failures, delays and other problems could harm Illuminet's reputation
and business, cause it to lose customers and expose it to customer
liability.
Illuminet's success depends on its ability to provide reliable services.
Illuminet's operations could be interrupted by any damage to or failure of:
. its network;
. its connections to third parties; and
. its computer hardware or software or its customers' or suppliers' computer
hardware or software.
Illuminet's systems and operations are also vulnerable to damage or
interruption from:
. power loss, transmission cable cuts and other telecommunications failures;
. fires, earthquakes, floods and other natural disasters;
. computer viruses or software defects;
. physical or electronic break-ins, sabotage, intentional acts of vandalism
and similar events; and
. errors by its employees or third-party service providers.
Any such damage or failure or the occurrence of any of these events could
disrupt the operation of Illuminet's network and the provision of its services
and result in the loss of current and potential customers.
From time to time, Illuminet experiences outages of service. For example, on
two occasions, once in 1997 and once in 1998, flaws in third-party software
caused network outages that disrupted the ability of its customers to connect
through Illuminet's network to other parts of the U.S. telecommunications
system. As a result of these outages, some of its customers reduced their usage
of its network. More recently, in June 2000, several of Illuminet's customers
in the Northeast region of the United States experienced a similar disruption
when a road maintenance crew cut a carrier's fiber cable bundle that contained
multiple links servicing Illuminet's two pairs of signal transfer points to its
SS7 network in that region. Because several of these links were routed by the
carrier
25
through the severed cable bundle, the redundant design of Illuminet's network
did not prevent a service interruption. Illuminet's emergency response
procedures were immediately activated. At other times Illuminet has experienced
minor, customer specific outages which have not had a material adverse impact
on its customer relations.
Illuminet's contracts with customers generally contain provisions designed
to limit its exposure to potential product liability claims. These provisions
include disclaimers of warranties and limitations on liability for special,
consequential and incidental damages. In addition, Illuminet's agreements
generally limit the amounts recoverable for damagesan amount equal to the amounts paid byprincipal amount of the customeroutstanding exchange notes, plus any accrued and unpaid interest thereon to, it forbut excluding, the productdate of maturity or service giving rise toredemption, as the damages. However,case may be. Interest on the exchange notes will be computed on the basis of a court or arbitrator may not enforce these contractual limitations on
liability, and Illuminet may360-day year of twelve 30-day months. The exchange notes will be subject to claims based on errorsredemption only in its
software or mistakes in performing its services. Any of those claims, including
any relating to damages to its customers' internal systems, whether or not
successful, could harm Illuminet's business by increasing its coststhe circumstances and
distracting its management.
Illuminet's reliance on third party communications infrastructure, hardware
and software exposes it to a variety of risks it cannot control.
Illuminet's success will depend on its network infrastructure, including the
capacity leased from telecommunications suppliers. In particular, Illuminet
relies on AT&T, WorldCom, Sprint and other telecommunications providers for
leased long-haul and local loop transmission capacity. These companies provide
the dedicated links that connect Illuminet's network components to each other
and to its customers.
Illuminet's business also depends upon the capacity, reliabilityterms described under “—Optional Redemption.” The exchange notes will mature on May 1, 2023. The exchange notes will bear interest at the rate per annum of 4.625%, which will be payable semi-annually on May 1 and securityNovember 1 of the infrastructure owned by third parties that is used to connect
telephone calls. Specifically, Illuminet currently leases capacity from
regional partnerseach year, commencing on seven of the thirteen mated pairs of SS7 signal transfer
points that comprise its network. Illuminet has no control over the operation,
quality or maintenance of a significant portion of that infrastructure and
whether or not those third parties will upgrade or improve their equipment.
Illuminet depends on these companies to maintain the operational integrity
of its connections. If one or more of these companies is unable or unwilling to
supply or expand its levels of service to Illuminet in the future, Illuminet's
operations could be severely interrupted. In addition, rapid changes in the
telecommunications industry have ledNovember 1, 2013, to the merging of many companies. These
mergers may causepersons in whose names the availability, pricing and quality of the services
Illuminet uses to vary and could cause the length of time it takes to deliver
the services that it uses to increase significantly.
Illuminet relies on links, equipment and software provided to it from its
vendors, the most important of whichexchange notes are gateway equipment and software from
Tekelec and Agilent Technologies, Inc. Illuminet cannot assure you that it will
be able to continue to purchase equipment from these vendors on acceptable
terms, if at all. If Illuminet is unable to maintain current purchasing terms
or ensure product availability with these vendors, it may lose customers and
experience an increase in costs in seeking alternative suppliers of products
and services.
The costs and difficulties of acquiring and integrating complementary
businesses and technologies could impede Illuminet's future growth and
adversely affect its competitiveness.
Illuminet may make investments in complementary companies, technologies or
other assets, exposing it to several risks, including:
. greater than expected costs and management time and effort involved in
identifying, completing and integrating acquisitions;
. potential disruption of its ongoing business and difficulty in maintaining
its standards, controls, information systems and procedures;
. entering into markets and acquiring technologies in areas in which it has
little experience;
26
. acquiring intellectual property which may be subject to various challenges
from others in the telecommunications industry;
. the inability to successfully integrate the services, products and
personnel of any acquisition into its operations;
. a need to incur debt, which may reduce its cash available for operations
and other uses, or issue equity securities, which may dilute the ownership
interests of existing stockholders; and
. realizing little, if any, return on its investment.
Illuminet's business depends on the acceptance of its SS7 network and the
telecommunications market's continuing use of SS7 technology.
Illuminet's future growth depends on the commercial success and reliability
of its SS7 network. Illuminet's SS7 network is a vital component of its
intelligent network services, which have been an increasing source of revenue
for it. Illuminet's business will suffer if its target customers do not use its
SS7 network. Illuminet's future financial performance will also depend on the
successful development, introduction and customer acceptance of new and
enhanced SS7-based products and services. Illuminet is not certain that its
target customers will choose its particular SS7 network solution or continue to
use its SS7 network. In the future, Illuminet may not be successful in
marketing its SS7 network or any new or enhanced products or services.
If Illuminet does not adapt to rapid technological change in the
telecommunications industry, it could lose customers or market share.
Illuminet's industry is characterized by rapid technological change and
frequent new product and service announcements. Significant technological
changes could make its technology obsolete. Illuminet must adapt to its rapidly
changing market by continually improving the responsiveness, reliability and
features of its network and by developing new network features, services and
applications to meet changing customer needs. Illuminet cannot assure you that
it will be able to adapt to these challenges or respond successfully or in a
cost-effective way to adequately meet them. Its failure to do so would
adversely affect its ability to compete and retain customers or market share.
Illuminet sells its products and services primarily to traditional
telecommunications companies. Many emerging companies are providing convergent
Internet protocol-based telecommunications services. Illuminet's future
revenues and profits, if any, could depend upon its ability to provide products
and services to these Internet protocol-based telephony providers.
The market for SS7 network services and related products is competitive and
many of Illuminet's competitors have significant advantages that could
adversely affect its business.
Illuminet competes in markets that are intensely competitive and rapidly
changing. Increased competition could result in fewer customer orders, reduced
gross margins and loss of market share, any of which could harm Illuminet's
business. Illuminet faces competition from large, well-funded regional
providers of SS7 network services and related products, such as regional Bell
operating companies, TSI and Southern New England Telephone, a unit of SBC
Communication. The prepaid wireless account management and unregistered user
services of National Telemanagement Corporation, a subsidiary of Illuminet,
face competition from Boston Communications Group, Priority Call,
InterVoice-Brite, and TSI. Illuminet is aware of major Internet service
providers, software developers and smaller entrepreneurial companies that are
focusing significant resources on developing and marketing products and
services that will compete with it. Illuminet anticipates continued growth of
competition in the telecommunications industry and the entrance of new
competitors into its business. It expects that competition will increase in the
near term and that its primary long-term competitors may not yet have entered
the market. Many of its current and potential competitors have significantly
more employees and
27
greater financial, technical, marketing and other resources than it does.
Illuminet's competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements than it can. Also, many of
Illuminet's current and potential competitors have greater name recognition and
more extensive customer bases that they can use to their advantage.
Illuminet's failure to achieve or sustain market acceptance at desired
pricing levels could impact its ability to maintain profitability or
positive cash flow.
Competition and industry consolidation could result in significant pricing
pressure and erode market share. Pricing pressure from competition could cause
large reductions in the selling price of Illuminet's services. For example,
Illuminet's competitors may provide customers with reduced communications costs
for Internet access or private network services, reducing the overall cost of
solutions and significantly increasing pricing pressures on Illuminet.
Illuminet may not be able to offset the effects of any price reductions by
increasing the number of its customers, generating higher revenues from
enhanced services or reducing its costs. Illuminet believes that the business
of providing network connectivity and related network services will likely see
increased consolidation in the future. Consolidation could decrease selling
prices and increase competition in these industries, which could erode its
market share, revenues and operating margins.
The inability of Illuminet's customers to successfully implement its
services with their existing systems could adversely affect Illuminet's
business.
Significant technical challenges exist in Illuminet's business because many
of its customers:
. purchase and implement SS7 network services in phases;
. deploy SS7 connectivity across a variety of telecommunication switches and
routes; and
. integrate its SS7 network with a number of legacy systems, third-party
software applications and engineering tools.
Customer implementation currently requires participation by Illuminet's
order management and its engineering and operations groups, each of which has
limited resources. Some customers may also require Illuminet to develop costly
customized features or capabilities, which increase Illuminet's costs and
consume a disproportionate share of its limited customer service and support
resources. Also, Illuminet typically charges one-time flat rate fees for
initially connecting a customer to its SS7 network and a monthly recurring flat
rate fee after the connection is established. If new or existing customers have
difficulty deploying Illuminet's products or require significant amounts of its
engineering service support, it may experience reduced operating margins.
Illuminet's customers' ability to deploy its network services to their own
customers and integrate them successfully within their systems depends on
Illuminet's customers' capabilities and the complexity involved. Difficulty in
deploying those services could reduce Illuminet's operating margins due to
increased customer support and could cause potential delays in recognizing
revenue until the services are implemented.
Illuminet may have difficulty attracting and retaining employees with the
requisite skills to execute its growth plans.
Illuminet's success depends, in part, on the continued service of its
existing management and technical personnel. If a significant number of those
individuals are unable or unwilling to continue in their present positions,
Illuminet will have difficulty in maintaining and enhancing its networks and
services. This may adversely affect its operating results and growth prospects.
In addition, Illuminet has experienced, and it expects to continue to
experience, some difficulty in hiring and retaining highly skilled employees.
Specifically, it centralizes a large portion of its technical operations in
geographic areas in which competition for technical talent is intense, due to
the existence of competing
28
employers seeking employees with similar sets of skills. Illuminet's continued
success depends on its ability to attract, retain and motivate highly skilled
employees, particularly engineering and technical personnel. Failure to do so
may adversely affect its ability to expand its network and enhance its products
and services.
Capacity limits on Illuminet's technology and network hardware and software
may be difficult to project and Illuminet may not be able to expand and
upgrade out systems to meet increased use.
As traffic from Illuminet's customers through its network increases, it will
need to expand and upgrade its technology and network hardware and software. It
may not be able to accurately project the rate of increase in usage on its
network. In addition, it may not be able to expand and upgrade, in a timely
manner, its systems and network hardware and software capabilities to
accommodate increased traffic on its network. If it does not appropriately
expand and upgrade its systems and network hardware and software, it may lose
customers and revenues.
Regulations affecting Illuminet's customers and future regulations to which
it may be subject may adversely affect its business.
Although Illuminet is not otherwise subject to telecommunications industry
regulations, one service provided by Illuminet's NTC subsidiary is currently
subject to Federal Communications Commission regulation, and the business of
its customers is subject to regulation that indirectly affects its business.
The U.S. telecommunications industry has been subject to continuing
deregulation since 1984, when AT&T was required to divest ownership of the Bell
telephone system. Illuminet cannot predict when, or upon what terms and
conditions, further regulation or deregulation might occur or the effect of
regulation or deregulation on its business. Several services that it offers may
be indirectly affected by regulations imposed upon potential users of those
services, which may increase Illuminet's costs of operations. In addition,
future services Illuminet may provide could be subject to direct regulation.
Fluctuations in Illuminet's quarterly operating results may negatively
impact and cause volatility in the combined company's stock price.
Illuminet's revenues and operating results may vary significantly from
quarter to quarter due to a number of factors.
Factors that could cause quarterly fluctuations include:
. seasonal fluctuations in consumer use of telecommunications services;
. varying rates at which telecommunications companies, telephony resellers
and Internet service providers use Illuminet's services;
. loss of customers through industry consolidation, or customer decisions to
deploy in-house technology;
. the timing and execution of individual contracts, particularly large
contracts;
. significant lead times before a product or service begins generating
revenues;
. volatile economic conditions specific to the telecommunications industry;
and
. an inability to collect Illuminet's accounts receivable.
Illuminet uses a strategic relationship to implement and sell its network
usage software applications. It could lose revenues or incur significant
costs to retain revenues if this relationship is terminated.
Illuminet has a non-exclusive agreement with Agilent Technologies, Inc. to
sell its network usage software applications. The agreement may be terminated
with limited notice by either party without cause or penalty. In the past,
Illuminet has received significant revenues under this agreement. There is no
guarantee that Agilent will
29
continue to market Illuminet's network usage software applications. If this
relationship is terminated or materially changes, Illuminet would be required
to devote substantial new resources to the distribution, sales and marketing,
implementation and support of its network usage software applications and its
efforts may not be as effective as those of Agilent.
There is a limited market for Illuminet's existing network usage software
applications.
Illuminet derives only a small portion of its revenues from sales and
maintenance of its network usage software applications. Current users of these
software products include most of the regional Bell operating companies, as
well as other large telecommunications carriers. With initial market sales
essentially completed, Illuminet's ability to derive continued revenue from its
network usage software applications is limited, unless it can develop new
derivative products.
30
THE ILLUMINET SPECIAL MEETING
Date, Time and Place of the Special Meeting
, 2001
________________________
________________________
________________________
________________________
Purpose of the Special Meeting
At the special meeting, Illuminet stockholders will be asked to consider and
vote upon the following items:
. a proposal to approve the merger and approve and adopt the merger
agreement and the merger;
. a proposal to grant Illuminet management the discretionary authority to
adjourn the special meeting to a date not later than , 2002 in order
to enable the Illuminet board of directors to continue to solicit
additional proxies in favor of the merger; and
. any other matters that may properly come before the special meeting or any
adjournment or postponement of the special meeting.
Recommendation of the Illuminet Board of Directors
The Illuminet board of directors:
. has approved the merger and the merger agreement;
. believes that the terms of the merger are fair to, and in the best
interests of, Illuminet's stockholders;
. recommends that the Illuminet stockholders vote FOR approval and adoption
of the merger and merger agreement; and
. recommends that the Illuminet stockholders vote FOR the adjournment
proposal.
Stockholders Entitled to Vote
You are entitled to vote at the special meeting if you owned shares of
Illuminet common stockregistered at the close of business on , 2001. This date is
called the record date.
Outstanding Shares on Record Date
As ofpreceding April 15 or October 15, as the record date, there were outstanding shares of Illuminet
common stock.
Number of Votes
Youcase may be. We will have one vote for each share you ownednot pay any accrued and unpaid interest on the recordoriginal notes that we acquire in the exchange offer. Instead, interest on the exchange notes will accrue (a) from the later of (i) the last interest payment date on which interest was paid on the original notes surrendered in exchange for the Illuminet special meeting. The proxy card indicatesexchange notes or (ii) if the number of shares you
ownedoriginal notes are surrendered for exchange on a date in the period between the record date and are eligiblethe corresponding interest payment date to vote atoccur on or after the special meeting.
Quorum Requirement
A quorumdate of stockholders is necessarysuch exchange and as to hold a valid meeting. The presence,
in personwhich interest will be paid, the date of such interest payment date, or by proxy,(b) if no interest has been paid, from and including April 16, 2013, the original issue date of the holdersoriginal notes.
Ranking The Notes will be our general unsecured senior obligations and will rank equally with all of shares representing aour existing and future unsecured and unsubordinated obligations, including under our Unsecured Credit Agreement. The Notes will be senior in right of payment to all of our existing and future subordinated Indebtedness, including our Subordinated Convertible Debentures, and will be effectively subordinated to all of our future secured Indebtedness to the extent of the assets securing such secured Indebtedness. Each Subsidiary Guarantee of the Notes will be the unsecured senior obligation of the applicable Subsidiary Guarantor and will rank equally with all of the existing and future unsecured senior Indebtedness of the applicable Subsidiary Guarantor, including its guarantee in respect of Indebtedness under the Unsecured Credit Agreement. Each Subsidiary Guarantee will be senior in right of payment to all of the future subordinated indebtedness of the applicable Subsidiary Guarantor and will be effectively subordinated to all of the existing and future secured indebtedness of the applicable Subsidiary Guarantor, to the extent of the value of the assets securing such secured indebtedness. As of June 30, 2013: • we had no outstanding indebtedness for money borrowed that was secured and there were no outstanding borrowings under our Unsecured Credit Agreement, and • we had $1,356.3 million of outstanding indebtedness, including the $606.3 million carrying value of the liability component of the Subordinated Convertible Debentures, including the related embedded contingent interest derivative. The outstanding principal amount of the Subordinated Convertible Debentures on June 30, 2013 was $1,250.0 million. As of June 30, 2013, our Subsidiaries that are not Subsidiary Guarantors collectively had: • liabilities (excluding intercompany liabilities) of $316.5 million (11.3% of our consolidated total liabilities), of which $270.7 million were deferred revenues, • assets (excluding intercompany assets) of $1,409.2 million (55.8% of our consolidated total assets), of which $1,370.8 million were cash, cash equivalents and marketable securities primarily held by foreign subsidiaries, and • assets (excluding cash, cash equivalents and marketable securities, and intercompany assets) of $38.4 million (7.3% of our consolidated total assets, excluding cash, cash equivalents and marketable securities). On July 31, 2013, we merged VeriSign Information Services, Inc., which was previously the sole guarantor of the original notes, into VeriSign, Inc. For the twelve months ended June 30, 2013, our Subsidiaries that are not Subsidiary Guarantors collectively had Adjusted EBITDA of $215.2 million (34.4% of our consolidated Adjusted EBITDA), which includes intercompany transactions with the Company and the initial Subsidiary Guarantor. Such intercompany transactions represent the majority of such Subsidiaries’ aggregate expenses. The Indenture does not limit us or our Subsidiaries from Incurring additional indebtedness (other than secured indebtedness and indebtedness of our Subsidiaries that are not Subsidiary Guarantors) under the outstanding shares of Illuminet common stock is a quorum.
31
If you submit a properly executed proxy card, even if you abstain from voting,
you will be considered partIndenture, the Unsecured Credit Agreement or any other financing agreement that we may enter into in the future. Listing of the quorum. Broker non-votes will also count as
present atExchange Notes We do not intend to apply for the special meeting for establishing a quorum. A broker non-vote
occurs with respect to any proposal when a broker is not permitted to vote on
that proposal without instruction from the beneficial ownerlisting of the shares and
no instruction is given.
Shares Beneficially Owned by Illuminet Directors and Executive Officers asexchange notes on any securities exchange or for the quotation of the Record Date
As ofexchange notes in any dealer quotation system. The exchange notes are new securities for which there is currently no public market. We cannot assure you that any active or liquid market will develop for the record date, directors and executive officers of Illuminet and
their affiliates beneficially owned shares of Illuminet common stock, or
approximately % of the outstanding shares.
Vote Necessary to Approve the Proposals
Two-thirds of the total votes represented by the outstanding shares of
Illuminet common stock on the record date are necessary to approve the merger
and approve and adopt the merger agreement. Broker non-votes and abstentions
have the same effectexchange notes. Optional Redemption Except as a vote against the merger and the merger agreement.
A majority of the votes cast on the adjournment proposal are necessary to
approve the adjournment proposal.
Voting of Proxies
The proxy card accompanying this prospectus/proxy statement is solicited on
behalf of the Illuminet board of directors for use at the meeting. You may vote
in person at the Illuminet meeting or by proxy. Illuminet recommends that you
vote by proxy even if you plan to attend the meeting. You can always change
your vote at the meeting.
How to Vote by Proxy
Voting instructions are included on the proxy card accompanying this
prospectus/proxy statement. If you properly give your proxy and submit it to
Illuminet in time to vote, one of the individuals named as your proxy (the
individuals named on the proxy card) will vote your shares as you have
directed. You may vote for or against the proposals or abstain from voting.
Please complete, sign, date and return the accompanying proxy card in the
enclosed envelope. If you submit your proxy card but do not make specific
choices, your proxy will follow the board's recommendations and vote your
shares FOR approval and adoption of the merger agreement and the merger and FOR
the adjournment proposal.
Revoking Your Proxy
You may revoke your proxy before it is voted by:
. notifying Illuminet's Secretary in writing before the meeting that you
have revoked your proxy (contact Illuminet Holdings, Inc., 4501 Intelco
Loop SE, P.O. Box 2909, Olympia, Washington 98503, Fax: (360) 923-3440,
Attention: Secretary);
. submitting a new proxy card with a later date; or
. voting in person at the meeting.
Voting in Person
If you plan to attend the meeting and wish to vote in person, Illuminet will
give you a ballot at the meeting. You should realize that attendance at a
stockholders meeting, however, will not in and of itself constitute a
revocation of a proxy.
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Effect of Abstaining
You may abstain from voting on the proposal required for approval of the
merger and the proposal required for adjournment of the meeting. Illuminet will
count a properly executed proxy marked "ABSTAIN" as present for purposes of
determining whether a quorum is present, but the shares represented by that
proxyset forth below, we will not be votedentitled to redeem the Notes at our option prior to May 1, 2018.
On and after May 1, 2018, we will be entitled at our option on one or more occasions to redeem all or a portion of the Notes (which, for the avoidance of doubt, includes Additional Notes, if any) at the special meeting. Becauseredemption prices (expressed in percentages of principal amount on the affirmative voteredemption date), plus accrued and unpaid interest to the redemption date (subject to the right of two thirdsHolders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on May 1 of the outstanding sharesyears set forth below: | | | | | Period | Redemption
Price | | 2018 | 102.313 | % | | 2019 | 101.542 | % | | 2020 | 100.771 | % | | 2021 and thereafter | 100.000 | % |
In addition, any time prior to May 1, 2016, we will be entitled at our option on one or more occasions to redeem the Notes (which, for the avoidance of Illuminet common stockdoubt, includes Additional Notes, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Notes (which, for the avoidance of doubt, includes Additional Notes, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 104.625%, plus accrued and unpaid interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), with the Net Cash Proceeds from one or more Qualified Equity Offerings; provided, however, that | | | (1) | at least 65% of such aggregate principal amount of Notes (which, for the avoidance of doubt, includes Additional Notes, if any) remains outstanding immediately after the occurrence of each such redemption (other than Notes held, directly or indirectly, by the Company or its Affiliates); and |
| | | (2) | each such redemption occurs within 90 days after the date of the related Qualified Equity Offering. |
Prior to May 1, 2018, we will be entitled at our option to redeem all or a portion of the Notes (which, for the avoidance of doubt, includes Additional Notes, if any) at a redemption price equal to 100% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest to, the redemption date (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date). Any redemption notice may, at our discretion, be subject to one or more conditions precedent, including completion of an Equity Offering, refinancing transaction or other corporate transaction. Selection and Notice of Redemption If we are redeeming less than all the Notes at any time, the Trustee will select Notes by lot or on a pro rata basis to the extent practicable, or on such other basis as the Trustee shall deem fair and appropriate, unless another method is required by law or applicable exchange or depositary requirements. We will redeem Notes of $2,000 or less in whole and not in part. We will cause notices of redemption to approve and adoptbe mailed by first-class mail (or otherwise delivered in accordance with the merger agreement andapplicable procedures of DTC) at least 30 but not more than 60 days before the merger,redemption date to each Holder of Notes to be redeemed at its registered address, except that redemption notices may be mailed (or otherwise delivered in accordance with the applicable procedures of DTC) more than 60 days prior to the redemption date if you mark your proxy
"ABSTAIN," it will have the effect ofnotice is issued in connection with a vote against approval and adoptiondefeasance of the merger agreementNotes or a satisfaction and discharge of the merger. BecauseIndenture. Any inadvertent defect in the notice of redemption, including an inadvertent failure to give notice, to any Holder selected for redemption will not impair or affect the validity of the redemption of any other Note redeemed in accordance with provisions of the Indenture. If any Note is to be redeemed in part only, votes castthe notice of redemption that relates to that Note will state the portion of the principal amount thereof to be redeemed. We will issue a new Note in a principal amount equal to the unredeemed portion of the original Note in the name of the Holder upon cancellation of the original Note. Notes called for redemption become due on the adjournment
proposal will determinedate fixed for redemption. Notes held in certificated form must be surrendered to the outcome of any vote onPaying Agent in order to collect the adjournment proposal, if
you mark your proxy "ABSTAIN," your proxy will have no effect onredemption price. Unless the adjournment proposal.
Broker Non-Vote
If you are an Illuminet stockholder and your broker holds sharesCompany defaults in its
name, the broker cannot vote your shares on the proposal without your
instructions. This is a "broker non-vote." You should follow the directions
provided by your broker regarding how to instruct your broker to vote your
shares. Your broker cannot vote your shares of Illuminet common stock without
specific instructions from you. Because the affirmative vote of two thirdspayment of the outstanding sharesredemption price, on and after the redemption date, interest ceases to accrue on Notes or portions of Illuminet common stock isthem called for redemption.
Mandatory Redemption; Offers to Purchase; Open Market Purchases We are not required to approve and
adopt the merger agreement and the merger, if you do not instruct your broker
how to vote, it will have the effect of a vote against approval and adoption of
the merger agreement. Because only votes cast on the adjournment proposal will
determine the outcome ofmake any vote on the adjournment proposal, if you do not
instruct your broker how to vote, your proxy will have no effect on the
adjournment proposal.
Voting shares in person that are held through brokers
If your shares are held by your brokermandatory redemption or another nominee and you wish to
vote those shares in person at the special meeting, you must obtain from the
nominee holding your Illuminet common stock a properly executed legal proxy
identifying you as an Illuminet stockholder, authorizing you to act on behalf
of the nominee at the special meeting and identifying the number of shares with
respect to which the authorization is granted.
Proxy Solicitation
Illuminet will pay its own costs of soliciting proxies. Illuminet has
retained , to aid in the solicitation of proxies and to verify records
relating to the solicitations. will receive customary fees and expense
reimbursement for these services. The extent to which these proxy soliciting
efforts will be necessary depends entirely upon how promptly proxies are
received. Directors, officers and employees of Illuminet may solicit proxies,
without additional remuneration, by telephone, facsimile, electronic mail and
in person. You should send in your proxy by mail without delay. Illuminet also
reimburses brokers and other custodians, nominees and fiduciaries for their
expenses in sending these materials to you and getting your voting
instructions.
Do not send in any stock certificates with your proxy. The exchange agent
will mail transmittal forms with instructions for the surrender of stock
certificates for Illuminet common shares to former Illuminet stockholders as
soon as practicable after the completion of the merger.
No Appraisal Rights
Illuminet stockholders are not entitled to dissenters' rights or appraisal
rightssinking fund payments with respect to the merger.
Other Business
Illuminet is not currently awareNotes. However, under certain circumstances, we may be required to offer to purchase Notes as described under “—Change of Control Triggering Event.” We may at any other business to be acted upon at
the Illuminet special meeting. If, however, any other matters are properly
brought before the meeting, or any adjourned meeting, the persons named on the
proxy card,time and acting under that proxy, will have discretion to vote or act on
those matters in accordance with their best judgment.
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PROPOSAL ONE--THE MERGER
This section of the prospectus/proxy statement describes certain aspects of
the proposed merger and the merger agreement. While we believe that the
description covers the material terms of the merger and the related
transactions, this summary may not contain all of the information that is
important to you. You should read this entire document and the other documents
we refer to carefully for a more complete understanding of the merger. In
addition, we incorporate important business and financial information about
each of us into this prospectus/proxy statement by reference. See "Documents
Incorporated by Reference in this Prospectus/Proxy Statement" on page ii. You
may obtain the information incorporated by reference into this prospectus/proxy
statement without charge by following the instructions in the section entitled
"Where You Can Find More Information" on page iii.
Background of the merger
Fromfrom time to time during 2000purchase Notes in the open market or otherwise. Subsidiary Guarantees Each Subsidiary Guarantor that is either a borrower under or that guarantees the obligations under the Unsecured Credit Agreement will Guarantee the Notes on the Issue Date. On the Issue Date, there was one Subsidiary Guarantor. This Subsidiary Guarantor subsequently merged into and early 2001, the management teams of
VeriSign and Illuminet had exploratory discussions regarding the possibility of
a business relationship or strategic transaction. None of the discussions
resulted in a strategic relationship between the two companies.
From late July 2001, Mr. Stratton Sclavos, President and Chief Executive
Officer of VeriSign, had independent discussions with Mr. Roger Moore,
President and Chief Executive Officer of Illuminet, about the possibility of a
potential business combination between VeriSign and Illuminet.
On May 4, 2001, at a meeting of the Illuminet board of directors, Mr. Moore
informed the Illuminet board of the nature and scope of the conversations
between him and Mr. Sclavos. Also, representatives of Robertson Stephens, Inc.
were present for a portion of the meeting and discussed generally VeriSign's
business and financial condition.
On May 30, June 28 and July 26, 2001, telephonic meetings of the Illuminet
board of directors or its Executive Committee were held during which the
Illuminet directors were updated regarding the discussions with VeriSign.
On August 3, 2001, during an Illuminet board meeting, Mr. Moore and
representatives of Robertson Stephens made a detailed presentation to the
Illuminet board about VeriSign's operations, business, competitive position,
financial condition and management team. The Illuminet board authorized Mr.
Moore to pursue discussions with VeriSign about a potential merger.
On August 24, 2001, Illuminet's board held a telephonic meeting during which
Mr. Moore provided a status report on discussions with VeriSign. Mr. Moore
reported that he would continue to discuss a possible merger and keep the
Illuminet board informed of his progress.
On September 4, 2001, Illuminet's board held a special meeting in Chicago at
which the status of discussions with VeriSign and the general terms of a
possible business combination were reviewed with the board by Illuminet's
management and legal advisors, as well as its financial advisor, Robertson
Stephens. In addition, Mr. Sclavos, Ms. Dana Evan, Chief Financial Officer of
VeriSign, and Mr. Robert Korzeniewski, Executive Vice President of VeriSign,
were invited to participate in part of the meeting. Mr. Sclavos madeCompany. As a presentation on VeriSign's business. Following significant discussion, the
board authorized management to proceed with further discussions and due
diligence in connection with the potential merger.
34
From September 4, 2001 through September 22, 2001, VeriSign and its legal
and financial advisors conducted a business, legal and financial due diligence
review of Illuminet, and Illuminet and its legal and financial advisors
conducted a business, legal and financial due diligence review of VeriSign.
Also during this period, senior management of both companies and their
respective legal advisors held numerous discussions regarding various business,
financial, operational and technical issues involved in combining the
companies. On September 11, 2001, VeriSign's legal counsel provided Illuminet's
legal counsel with a draft merger agreement and ancillary transaction
agreements. During the following eleven days,senior management of both
companies and their respective legal advisors negotiated the terms of the
merger agreement and ancillary agreements.
On September 18, 2001, Illuminet's board held a special meeting by telephone
conference call. At this meeting Mr. Moore reported on the preliminary results
of the due diligence review of VeriSign. He informed the Illuminet board that a
draft merger agreement would be presented to the Illuminet board later in the
week.
On September 20, 2001, the VeriSign board of directors held a meeting to
discuss the results of the business, legal and financial due diligence review
of Illuminet and to discuss with VeriSign's management the strategic rationale
and specific terms of the proposed business combination.
On September 22, 2001, Illuminet's board held a special meeting in San Jose,
California at which its legal advisors reviewed the principal terms of the
merger and Robertson Stephens summarized the financial analyses it had
performed relating to the proposed transaction and rendered its oral opinion to
the Illuminet board, subsequently confirmed in writing as of September 23,
2001, thatresult, there are no Subsidiary Guarantors as of the date of this prospectus. One or more of our other Restricted Subsidiaries may be required to become a Subsidiary Guarantor to the extent required under “—Future Subsidiary Guarantors.” We may elect to make any Restricted Subsidiary a Subsidiary Guarantor. The Subsidiary Guarantors will jointly and severally guarantee, on a senior unsecured basis, our obligations under the Notes. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are designed to be limited as necessary to prevent that Subsidiary Guarantee from constituting a fraudulent conveyance under applicable law, and, therefore, such opinionSubsidiary Guarantee is specifically limited to an amount that such Subsidiary Guarantor could guarantee without such Subsidiary Guarantee constituting a fraudulent conveyance. This limitation, however, may not be effective to prevent such Subsidiary Guarantee from constituting a fraudulent conveyance. If a Subsidiary Guarantee were rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and, depending on the amount of such indebtedness, a Subsidiary Guarantor’s liability on its Subsidiary Guarantee could be reduced to zero. See “Risk Factors—Risks Related to the Exchange Notes—Federal and state fraudulent transfer laws may permit a court to void the notes and/or the note guarantees, and if that occurs, you may not receive any payments on the notes” and “—Because each subsidiary guarantor’s liability under its note guarantee may be reduced to zero, voided or released under certain circumstances, you may not receive any payments from some or all of the subsidiary guarantors.” Each Subsidiary Guarantor that makes a payment under its Subsidiary Guarantee will be entitled upon payment in full of all guaranteed obligations under the Indenture to a contribution from each other Subsidiary Guarantor in an amount equal to such other Subsidiary Guarantor’s pro rata portion of such payment based on the matters consideredrespective net assets of all the Subsidiary Guarantors at the time of such payment determined in accordance with GAAP. The Subsidiary Guarantee of a Subsidiary Guarantor will be released upon: | | | (1) | (a) the designation of such Subsidiary Guarantor as an Unrestricted Subsidiary to the extent permitted by the Indenture; |
| | | (b) | the release of such Subsidiary Guarantor from its obligations in respect of its obligations as a Guarantor or borrower under the Unsecured Credit Agreement or in respect of such other debt that caused it to become a Subsidiary Guarantor under “—Certain Covenants—Future Subsidiary Guarantors,” so long as such Subsidiary Guarantor would not then otherwise be required to be a Subsidiary Guarantor pursuant to such covenant; |
| | | (c) | the sale, issuance or other disposition of Capital Stock of such Subsidiary Guarantor (including by way of merger or consolidation) such that such Subsidiary Guarantor ceases to be a Subsidiary of the Company, or the sale of all or substantially all of the assets of such Subsidiary Guarantor to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary, so long as the sale, issuance or other disposition does not violate the covenant described under “—Certain Covenants—Consolidation, Merger and Sale of Assets”; |
| | | (d) | immediately prior to or following the dissolution of such Subsidiary Guarantor; and |
| | | (e) | the Company exercising its defeasance or covenant defeasance option as described under “—Defeasance” or if our obligations under the Indenture are discharged in accordance with the terms of the Indenture; and |
| | | (2) | such Subsidiary Guarantor delivering to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions provided for in the Indenture relating to such transaction have been complied with. |
Change of Control Triggering Event Upon the occurrence of a Change of Control Triggering Event, each Holder shall have the right to require that the Company repurchase such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). Within 30 days following any Change of Control Triggering Event unless we have previously or concurrently mailed a redemption notice with respect to all outstanding Notes as described under “—Optional Redemption,” we will mail a notice by first-class mail (or otherwise delivered in accordance with the applicable procedures of DTC) to each Holder with a copy to the Trustee (the “Change of Control Offer”) stating: | | | (a) | that a Change of Control Triggering Event has occurred and that such Holder has the right to require us to purchase such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); |
| | | (b) | the circumstances and relevant facts regarding such Change of Control Triggering Event; |
| | | (c) | the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and |
| | | (d) | the instructions, as determined by us, consistent with the covenant described hereunder, that a Holder must follow in order to have its Notes purchased. |
We will not be required to make a Change of Control Offer following a Change of Control Triggering Event if: (a) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by us and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer) or (b) a notice of redemption that is or has become unconditional has been given pursuant to the Indenture as described above under the caption “Optional Redemption.” A Change of Control Offer may be made in advance of a Change of Control Triggering Event, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control Triggering Event at the time of making of the Change of Control Offer. We will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes as a result of a Change of Control Triggering Event. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, we will comply with the applicable securities laws and regulations and shall not be deemed to have breached our obligations under the covenant described hereunder by virtue of our compliance with such securities laws or regulations. The Change of Control Triggering Event purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of the Company and, thus, the removal of incumbent management. The Change of Control Triggering Event purchase feature is a result of negotiations between the Company and the Initial Purchasers. We have no present intention to engage in a transaction involving a Change of Control Triggering Event, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control Triggering Event under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to Incur additional Indebtedness are contained in the review undertakencovenant described under “—Certain Covenants—Limitation on Liens.” Such restrictions can only be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture does not contain any covenants or provisions that may afford Holders of the Notes protection in the event of a highly leveraged transaction. In addition, Holders of the Notes may not be entitled to require the Company to repurchase their Notes in certain circumstances involving a significant change in the composition of the Company’s board of directors, including in connection with a proxy contest. Our ability to repurchase Notes pursuant to a Change of Control Offer may be limited by a number of factors. The occurrence of certain of the events that constitute a Change of Control would also constitute a change of control under the Unsecured Credit Agreement which would automatically terminate the lenders’ commitments under the Unsecured Credit
Agreement and cause any outstanding Obligations under the Unsecured Credit Agreement to automatically become immediately due and payable. In addition, certain events that may constitute a change of control under the Unsecured Credit Agreement and cause that agreement to terminate may not constitute a Change of Control under the Indenture. Future indebtedness of us and our Subsidiaries may contain prohibitions of certain events that would constitute a Change of Control or require such indebtedness to be repaid or repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require us to repurchase the Notes could cause a default under such indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on us. Finally, our ability to pay cash to the Holders of Notes following the occurrence of a Change of Control Triggering Event may be limited by our then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases. The definition of “Change of Control” includes a disposition of all or substantially all of the assets of the Company to any Person. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “all or substantially all” of the assets of the Company. As a result, it may be unclear as to whether a Change of Control or Change of Control Triggering Event has occurred and whether a Holder of Notes may require the Company to make an offer to repurchase the Notes as described above. The provisions under the Indenture relative to our obligation to make an offer to repurchase the Notes as a result of a Change of Control Triggering Event may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes. Certain Covenants The Indenture contains covenants including, among others, the following: Limitation on Restricted Payments (a) Following the first day (such date, a “Restricted Payment Limitation Date”) that the Company’s Consolidated Leverage Ratio exceeds 4.0 to 1.0, the Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment either (1) or (2) below would have occurred. If at any time following a Restricted Payment Limitation Date, the Company’s Consolidated Leverage Ratio is less than or equal to 4.0 to 1.0 (such date, a “Restricted Payment Limitation Suspension Date”), then this covenant will no longer apply to the Company until the first day that the Company’s Consolidated Leverage Ratio would again exceed 4.0 to 1.0. | | | (1) | a Default shall have occurred and be continuing (or would result from the making of such Restricted Payment); or |
| | | (2) | the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date (except as otherwise provided in clauses (b) and (c) below) would exceed the sum of (without duplication): |
| | | (A) | 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from April 1, 2013 to the end of the most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); plus |
| | | (B) | 100% of the aggregate Net Cash Proceeds or Fair Market Value of any asset (other than cash) received by the Company either (x) from the issuance or sale of its Qualified Capital Stock subsequent to the Issue Date or (y) as a contribution in respect of its Qualified Capital Stock from its shareholders subsequent to the Issue Date, but excluding in each case any Net Cash Proceeds that are used to redeem Notes in accordance with the third paragraph under “—Optional Redemption”; plus |
| | | (C) | the amount by which the principal amount of Indebtedness of the Company (other than Indebtedness owing to a Subsidiary) is reduced upon the conversion or exchange subsequent to the Issue Date of any Indebtedness of the Company convertible or exchangeable for Qualified Capital Stock of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange); provided, however, that the |
foregoing amount shall not exceed the Net Cash Proceeds received by the Company or any Restricted Subsidiary from the sale of such Indebtedness (excluding Net Cash Proceeds from sales to a Subsidiary of the Company or to an employee stock ownership plan or a trust established by the Company or any of its Subsidiaries for the benefit of their employees); plus | | | (D) | an amount equal to the sum of (x) the aggregate amount of cash and the Fair Market Value of any asset (other than cash) received by the Company or any Restricted Subsidiary subsequent to the Issue Date with respect to Investments (other than Permitted Investments) made by the Company or any Restricted Subsidiary in any Person (other than the Company or any Restricted Subsidiary) and resulting from repurchases, repayments or redemptions of such Investments by such Person, or proceeds realized on the sale of such Investment, and (y) in the event that the Company redesignates an Unrestricted Subsidiary to be a Restricted Subsidiary, the portion (proportionate to the Company’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary (other than to the extent the Company’s Investment in such Unrestricted Subsidiary constituted a Permitted Investment); provided, however, that the foregoing sum shall not exceed, in the case of any such Person or Unrestricted Subsidiary, the amount of Investments (excluding Permitted Investments) previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. |
(b) The preceding provisions will not prohibit: | | | (1) | any Restricted Payment made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange for, Qualified Capital Stock of the Company or a substantially concurrent cash capital contribution received by the Company from its shareholders with respect to its Qualified Capital Stock; provided, however, that (A) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale or such cash capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under clause (2)(B) of paragraph (a) above; |
| | | (2) | any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Company or a Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent Incurrence of, Indebtedness of such Person so long as: |
| | | (A) | the principal amount of such Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on, the Subordinated Obligations being so purchased, repurchased, redeemed, defeased or acquired or retired for value, plus the amount of any premium required to be paid under the terms of the instrument governing the Subordinated Obligations being so purchased, repurchased, redeemed, defeased or acquired or retired or any tender premiums and other fees and expenses Incurred pursuant to a tender offer for such Subordinated Obligations and any reasonable fees and expenses Incurred in connection with the issuance of such new Indebtedness; |
| | | (B) | such Indebtedness is subordinated to the Notes or the applicable Guarantee at least to the same extent as such Subordinated Obligations so purchased, repurchased, redeemed, defeased or acquired or retired for value; |
| | | (C) | such Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Obligations being so purchased, repurchased, redeemed, defeased or acquired or retired; and such Indebtedness has a weighted average life to maturity equal to or greater than the remaining weighted average life to maturity of the Subordinated Obligations being so purchased, repurchased, redeemed, defeased or acquired or retired; |
provided, however, that such Restricted Payments shall be excluded in the calculation of Restricted Payments;
| | | (3) | the payment of any dividend, distribution or redemption of any Capital Stock or Subordinated Obligation within 60 days after the date of declaration thereof or call for redemption if, at such date of declaration or call for redemption, such payment or redemption was permitted by the provisions of paragraph (a) of this covenant (the declaration of such payment will be deemed a Restricted Payment under paragraph (a) of this covenant as of the date of declaration and the payment itself will be deemed to have been paid on such date of declaration and will not also be deemed a Restricted Payment under paragraph (a) of this covenant); provided, however, that any Restricted Payment made in reliance on this clause (3) shall reduce the amount available for Restricted Payments pursuant to clause (a)(2) above only once; |
| | | (4) | so long as no Default has occurred and is continuing, the purchase, redemption or other acquisition or retirement for value of shares of Capital Stock of the Company or any of its Subsidiaries held by any officers, former officers, employees, former employees, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such officers, former officers, employees, former employees, directors or former directors), pursuant to any management equity plan or employee stock option plan or any other management or employee benefit plan or agreement; provided, however, that the aggregate amount of such Restricted Payments (excluding amounts representing cancellation of Indebtedness) shall not exceed $10.0 million in the aggregate for any fiscal year; provided further that the Company may carry over and make in a subsequent fiscal year, in addition to the amounts permitted for such fiscal year, the amount of such purchases, redemptions or other acquisitions or retirements permitted to have been made but not made in the preceding fiscal years; provided further, however, that such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments; |
| | | (5) | repurchases of Capital Stock deemed to occur (i) upon exercise of stock options if such Capital Stock represents a portion of the exercise price of such options or (ii) for purposes of satisfying any required tax withholding obligation upon the exercise or vesting of a grant or award that was granted or awarded to an employee; provided, however, that such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments; |
| | | (6) | cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Company; provided, however, that any such cash payment shall not be for the purpose of evading the limitation of the covenant described under this subheading (as reasonably determined in good faith by the Company); provided further, however, that such payments shall be excluded in the calculation of the amount of Restricted Payments; |
| | | (7) | in the event of a Change of Control, and if no Default shall have occurred and be continuing, the payment, purchase, redemption, defeasance or other acquisition or retirement of Subordinated Obligations of the Company or any Subsidiary Guarantor, in each case, at a purchase price not greater than 101% of the principal amount of such Subordinated Obligations, plus any accrued and unpaid interest thereon; provided, however, that prior to such payment, purchase, redemption, defeasance or other acquisition or retirement, the Company (or a third party to the extent permitted by the Indenture) has made a Change of Control Offer (or a tender offer on the same terms as a Change of Control Offer if no Change of Control Offer is required to be made in connection with such Change of Control) with respect to the Notes as a result of (or in connection with) such Change of Control and has repurchased all Notes validly tendered and not withdrawn in connection with such Change of Control Offer (or equivalent tender offer); provided further, however, that such payments, purchases, redemptions, defeasances or other acquisitions or retirements shall be excluded in the calculation of the amount of Restricted Payments; |
| | | (8) | Restricted Payments in an aggregate amount which, when taken together with all Restricted Payments made pursuant to this clause (8), does not exceed the greater of (a) $100.0 million and (b) 5% of the Company’s Consolidated Net Tangible Assets measured at the time of making any Restricted Payment under this clause (8) and net of any reductions in Investments made under this clause; provided, however, that no Default has occurred and is continuing or would otherwise result therefrom; provided further, however, that such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments; |
| | | (9) | to the extent constituting Restricted Payments, payments of intercompany Indebtedness between or among the Company and its Subsidiaries; provided however, that such payments shall be excluded in the calculation of the amount of Restricted Payments; |
| | | (10) | repurchases of Capital Stock made out of the Net Cash Proceeds of the issuance of the Notes as described under “Use of Proceeds” in the Offering Memorandum; provided, however, that such Restricted Payments shall be excluded in the calculation of Restricted Payments; or |
| | | (11) | (a) so long as no Event of Default has occurred and is continuing, (i) any payment of cash by the Company to a holder of the Subordinated Convertible Debentures or Subordinated Convertible Debentures Refinancing Indebtedness upon conversion or exchange of such Subordinated Convertible Debentures or Subordinated Convertible Debentures Refinancing Indebtedness, which cash payment is made at the election of the Company or (ii) the purchase of any Permitted Bond Hedge Transaction or any cash payment made in connection with the exercise or early termination of any Permitted Warrant Transaction and (b) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Convertible Debentures or Subordinated Convertible Debentures Refinancing Indebtedness with the proceeds of or in exchange for any Subordinated Convertible Debentures Refinancing Indebtedness; provided, however, that such Restricted Payments shall be excluded in the calculation of Restricted Payments. |
(c) Calculations made after a Restricted Payment Limitation Date of the amount available to be made as Restricted Payments under this covenant will be made as though this covenant had been in effect since the Issue Date. Accordingly, Restricted Payments made prior to a Restricted Payment Limitation Date will reduce the amount available to be made as Restricted Payments under the first paragraph of this covenant; provided, however, that Restricted Payments made prior to a Restricted Payment Limitation Date will not reduce the amount available for Restricted Payments under the first paragraph of this covenant to be less than $0. (d) For purposes of determining compliance with the provisions set forth above, in the event that a Restricted Payment or Permitted Investment meets the criteria for more than one of the types of Restricted Payments or Permitted Investments described in the opinion,above clauses (a) and (b) or the exchange ratiodefinition of Permitted Investments, the Company, in its sole discretion, will be permitted to classify such items (or portion thereof) in any matter that complies with this covenant. In addition, the Company will, in its sole discretion, be permitted from time to time to reclassify (based on circumstances existing at the time of such reclassification) such Restricted Payment or Permitted Investment (or portion thereof) such that it will be deemed to apply pursuant to any of the provisions of clause (a) or (b) above or of the definition of Permitted Investments to the extent it could be made pursuant to such provision at the time of such reclassification. (e) Promptly following the date upon which the financial statements for any fiscal quarter during which any Restricted Payment Limitation Date or any Restricted Payment Limitation Suspension Date has occurred are available, the Company will provide an Officers’ Certificate to the Trustee regarding such occurrence. The Trustee shall have no obligation to independently determine or verify if a Restricted Payment Limitation Date or Restricted Payment Limitation Suspension Date has occurred or to notify the Holders of any Restricted Payment Limitation Date or Restricted Payment Limitation Suspension Date. The Trustee may provide a copy of such Officers’ Certificate to any Holder of the Notes upon request. There can be no assurance that a Restricted Payment Limitation Date will ever occur. Consolidation, Merger and Sale of Assets The Company will not consolidate with or merge with or into any other Person or convey, transfer or lease its properties and assets substantially as an entirety, in one transaction or a series of related transactions, directly or indirectly, to any Person, and will not permit any Person to consolidate with or merge with or into the Company, unless: the Company will be the surviving company in any merger or consolidation, or, if the Company consolidates with or merges into another Person or conveys or transfers or leases its properties and assets substantially as an entirety, in one transaction or a series of related transactions, directly or indirectly, to any Person, such successor Person is an entity organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia; provided that in the merger was faircase where such successor Person is not a corporation, a co-obligor of the Notes is a corporation; the successor Person, if other than the Company, expressly assumes all of the Company’s obligations in respect of the Indenture and the Notes pursuant to a supplemental indenture;
each Subsidiary Guarantor (unless it is the other party to the holderstransactions above) shall have by supplemental indenture confirmed that its Subsidiary Guarantee shall apply to such successor Person’s obligations in respect of Illuminet common stock,
from a financial point of view. Following discussion, the Illuminet board
approved the merger agreementIndenture and the Notes; immediately after giving effect to the consolidation, merger, conveyance, transfer or lease, there exists no Default or Event of Default; and other conditions, including the delivery of an Officers’ Certificate and determinedan Opinion of Counsel, described in the Indenture are met. This covenant would not apply to recommend that
Illuminet's stockholders votethe direct or indirect conveyance, transfer or lease of all or any portion of the stock, assets or liabilities of any Restricted Subsidiary of the Company to approvethe Company or to any of the Company’s other Restricted Subsidiaries. Subject to the foregoing sentence, any debt which becomes an obligation of the Company or any Subsidiary of the Company as a result of any transaction described by this covenant will be treated as having been Incurred by the Company or such Subsidiary at the time of such transaction. For purposes of this covenant, the sale, lease, conveyance, assignment, transfer, or other disposition of all or substantially all of the properties and adoptassets of one or more of the mergerCompany’s Subsidiaries, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. The predecessor person will be released from its obligations under the Indenture and the merger
agreement.
On September 22, 2001, VeriSign's boardsuccessor person will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, but, in the case of a lease of all or substantially all its assets, the predecessor person will not be released from the obligation to pay the principal of and interest on the Notes. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “all or substantially all” of the property or assets of a person. As a result, it may be unclear as to whether a sale of substantially all of the Company’s assets in breach of this covenant has occurred and whether a Holder of Notes would have any applicable rights under the Indenture. Limitation on Liens (a) Except as provided in clause (b) below, neither the Company nor any of its Restricted Subsidiaries may create, Incur, assume or otherwise have outstanding any Lien, upon any Principal Property or Intellectual Property belonging to the Company or to any of its Restricted Subsidiaries, or upon the shares of capital stock or debt of any of its Restricted Subsidiaries, whether such Principal Property, Intellectual Property, shares or debt are owned by the Company or its Restricted Subsidiaries on the Issue Date or acquired in the future, to secure any Indebtedness of the Company or any of its Restricted Subsidiaries. (b) The Company or any Restricted Subsidiary may create, Incur, assume or otherwise have outstanding any Lien if the Notes or the relevant Subsidiary Guarantee, as the case may be, will be secured by a Lien equally and ratably with or in priority to the new secured Indebtedness, so long as such new secured Indebtedness shall be so secured. In this event, the Company and its Restricted Subsidiaries may also provide that any of its other Indebtedness, including Indebtedness Guaranteed by the Company or by any of its Restricted Subsidiaries, will be secured equally with or in priority to the new secured Indebtedness. In addition, the restrictions in clause (a) on creating, Incurring, assuming or having outstanding any Lien will not apply to: | | | (1) | Liens securing Indebtedness and other obligations of the Company or its Restricted Subsidiaries under any Credit Facilities in an aggregate principal amount at any one time outstanding not to exceed the greater of (A) $250.0 million and (B) 0.5 times Adjusted EBITDA determined on a Pro Forma Basis for the relevant Reference Period measured at the time of Incurrence of any Indebtedness or other obligations secured by a Lien under this clause (1)(B); |
| | | (2) | Liens in favor of the Company or any Restricted Subsidiary; |
| | | (3) | any Lien to secure a Purchase Money Obligation, so long as the Lien does not apply to other property or assets owned by the Company or any Restricted Subsidiary at the time of the commencement of the construction or improvement of, or immediately prior to the consummation of the acquisition of, the property or assets that is subject to the Purchase Money Obligation; |
| | | (4) | Liens existing upon any property or asset of a company which is merged with or into, amalgamated with, or is consolidated into, or substantially all the assets or shares of capital stock of which are acquired by, the Company or any of its Restricted Subsidiaries, at the time of such merger, amalgamation, consolidation or acquisition, so long as any such Lien (A) does not extend to any other property or asset, other than improvements to the property or asset subject to such Lien and (B) was not created in anticipation of such merger, amalgamation, consolidation or acquisition; |
| | | (5) | any Lien required to be given or granted by any Restricted Subsidiary pursuant to the terms of any agreement entered into by such Restricted Subsidiary prior to the date on which it became a Restricted Subsidiary; |
| | | (6) | Liens existing as of the Issue Date; |
| | | (7) | extensions, renewals, alterations, refinancings or replacements of any Lien referred to in the preceding clauses (3) through (6) above; provided, however, that the principal amount of Indebtedness secured thereby shall not exceed the principal amount of Indebtedness so secured at the time of such extension, renewal, alteration or replacement plus accrued and unpaid interest thereon together with any reasonable fees, premiums (including tender premiums) and expenses relating to such extension, renewal, alteration or replacement and provided, further, however, that such extension, renewal, alteration refinancing or replacement shall be limited to all or a part of the property or assets which secured the Lien so extended, renewed, altered or replaced (plus improvements on such property or assets); |
| | | (8) | Liens on assets of Foreign Subsidiaries that are not Subsidiary Guarantors to secure obligations of any Foreign Subsidiary that is not a Subsidiary Guarantor permitted under clause (b) of “—Future Subsidiary Guarantors”, |
| | | (9) | carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing Obligations that are not overdue by more than 30 days or are being contested in good faith; |
| | | (10) | Liens solely on any cash earnest money deposits, escrow arrangements or similar arrangements made by the Company or any Subsidiary in connection with any letter of intent or purchase agreement for any acquisition or other transaction permitted hereunder; |
| | | (11) | Liens on cash or Temporary Cash Investments securing Hedging Obligations not entered into for speculative purposes and letters of credit entered into in the ordinary course of business; |
| | | (12) | Liens that are contractual rights of set-off; |
| | | (13) | pledges and deposits made (i) in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws and (ii) in respect of letters of credit, bank guarantees or similar instruments issued for the account of the Company or any Subsidiary in the ordinary course of business supporting Obligations of the type set forth in clause (i) above; |
| | | (14) | pledges and deposits made (i) to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other Obligations of a like nature, in each case in the ordinary course of business and (ii) in respect of letters of credit, bank guarantees or similar instruments issued for the account of the Company or any Subsidiary in the ordinary course of business supporting Obligations of the type set forth in clause (i) above; and |
| | | (15) | a Lien (including successive extensions, renewals, alterations or replacements thereof) not excepted by clauses (1) through (14) above; provided that after giving effect thereto, Exempted Debt does |
not exceed 15.0% of Consolidated Net Tangible Assets of the Company measured at the date of any Incurrence of Exempted Debt. In the event that a Lien meets the criteria of more than one of clauses of (1) through (15) above, the Company, in its sole discretion, will be permitted to classify such Lien (or portion thereof) at the time of its Incurrence in any manner that complies with this covenant. In addition, any Lien (or portion thereof) originally classified as Incurred pursuant any of clauses (1) through (15) above may later be reclassified by the Company, in its sole discretion, such that it (or any portion thereof) will be deemed to be Incurred pursuant to any other of such clauses to the extent that such reclassified Lien (or portion thereof) could be Incurred pursuant to such clause at the time of such reclassification. (c) For purposes of this covenant: | | | (1) | accrual of interest, accrual of dividends, the accretion of accreted value or original issue discount, the amortization of debt discount and the payment of interest in the form of additional Indebtedness will not be deemed to be an Incurrence of the Indebtedness secured by the relevant Lien; |
| | | (2) | in determining compliance with any U.S. dollar-denominated restriction on the securing of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based upon the relevant currency exchange rate in effect on the date such Indebtedness was Incurred; provided, however, that if such Indebtedness is Incurred to refinance or replace other Indebtedness denominated in a foreign currency, and such refinancing or replacement would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing or replacement, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing or replacement Indebtedness does not exceed the principal amount of such Indebtedness being refinanced or replaced; and |
| | | (3) | the maximum amount of Indebtedness that the Company and its Restricted Subsidiaries may secure shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies. |
Limitation on Sale/Leaseback Transactions (a) Neither the Company nor any of its Restricted Subsidiaries may engage in a transaction with any Person (other than the Company or a Restricted Subsidiary) providing for the leasing by the Company or any Restricted Subsidiary of any Principal Property of the Company or such Restricted Subsidiaries or any property which together with any other property subject to the same transaction or series of related transactions would in the aggregate constitute a Principal Property of the Company or such Restricted Subsidiaries, except for leases which will not exceed three years, including renewals, which property has been or is to be sold or transferred by the Company or any Restricted Subsidiary to such Person (other than the Company or a Restricted Subsidiary) more than six months after the acquisition, completion of construction, or commencement of operations of such property, with the intention of taking back a lease of such property (a “Sale/Leaseback Transaction”), unless the net proceeds of the sale or transfer of the property to be leased are at least equal to the fair market value of such property and unless: | | | (1) | the Indenture would have allowed the Company or any of its Restricted Subsidiaries to create a Lien on such property to secure debt in an amount at least equal to the Attributable Debt in respect of such Sale/Leaseback Transaction without securing the Notes pursuant to the terms of the covenant described under “—Limitation on Liens”; or |
| | | (2) | within 360 days, the Company or any Restricted Subsidiary applies an amount equal to the net proceeds of such sale or transfer to: |
| | | (A) | the voluntary retirement of any Indebtedness of the Company or its Restricted Subsidiaries maturing by its terms more than one year from the date of issuance, assumption or guarantee thereof, or which is extendible or renewable at the sole option of the obligor in such manner that it may become payable more than one year from the date of issuance, assumption or guarantee, which is senior to or ranks equally with the Notes in right of |
payment and owing to a Person other than the Company or any Affiliate of the Company; or | | | (B) | the purchase of additional property, facilities or equipment that will constitute or form a part of Principal Property, and which has a fair market value at least equal to the net proceeds of such sale or transfer. |
| | | (3) | Notwithstanding the provisions of clauses (1) and (2) above, the Company and its Restricted Subsidiaries may enter into a Sale/Leaseback Transaction in addition to those permitted by clauses (1) and (2) above, provided, however, that after giving effect thereto, Exempted Debt does not exceed 15.0% of Consolidated Net Tangible Assets of the Company measured as of the date of Incurrence of any Exempted Debt. |
(b) For purposes of this covenant: | | | (1) | in determining compliance with any U.S. dollar-denominated restriction on the entering into of any Sale/Leaseback Transaction, the U.S. dollar-equivalent principal amount of Attributable Debt denominated in a foreign currency shall be calculated based upon the relevant currency exchange rate in effect on the date such Attributable Debt in respect of such Sale/Leaseback Transaction was Incurred; provided, however, that if such Attributable Debt is Incurred to refinance or replace other Attributable Debt denominated in a foreign currency, and such refinancing or replacement would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing or replacement, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing or replacement Attributable Debt does not exceed the principal amount of such Attributable Debt being refinanced or replaced; and |
| | | (2) | the maximum amount of Attributable Debt that the Company or any Restricted Subsidiary may Incur in respect of any Sale/Leaseback Transaction shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies. |
Future Subsidiary Guarantors (a) The Company will not cause or permit any of its Restricted Subsidiaries that is not a Subsidiary Guarantor: (i) to Guarantee the obligations of, or become a co-borrower with, the Company or any Subsidiary Guarantor, under any Credit Facility or (ii) to create, assume, Incur, issue or Guarantee any Material Indebtedness, unless, in the case of clause (i) or (ii), within 30 days thereof, the Company causes such Restricted Subsidiary to become a Subsidiary Guarantor by executing and delivering a Guarantee Agreement. (b) Clause (a)(ii) above shall not apply to the following items of Indebtedness: | | | (1) | Indebtedness of a Person existing at the time such Person is merged with or into, amalgamated with, or is consolidated into, a Restricted Subsidiary, or which is assumed by a Restricted Subsidiary in connection with an acquisition of substantially all the assets of such Person, so long as such Indebtedness was not created in anticipation of such merger, amalgamation, consolidation or acquisition, and refinancing or replacement Indebtedness in respect thereof, so long as (A) the principal amount thereof does not exceed the principal amount of the Indebtedness being refinanced or replaced plus accrued and unpaid interest thereon together with any reasonable fees, premiums (including tender premiums) and expenses relating to such refinancing or replacement and (B) such refinancing or replacement Indebtedness is Incurred by the same Person(s) as the Indebtedness being refinanced or replaced; |
| | | (2) | Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary, so long as such Indebtedness was not Incurred in anticipation of such Person becoming a Restricted Subsidiary, and refinancing or replacement Indebtedness in respect thereof, so long as (A) the principal amount thereof does not exceed the principal amount of the Indebtedness being refinanced or replaced plus accrued and unpaid interest thereon together with any reasonable fees, premiums (including tender premiums) and expenses relating to such refinancing or replacement |
and (B) such refinancing or replacement Indebtedness is Incurred by the same Person(s) as the Indebtedness being refinanced or replaced; | | | (3) | Purchase Money Obligations and refinancing or replacement Indebtedness in respect thereof, so long as (A) the principal amount thereof does not exceed the principal amount of the Indebtedness being refinanced or replaced plus accrued and unpaid interest thereon together with any reasonable fees, premiums (including tender premiums) and expenses relating to such refinancing or replacement and (B) such refinancing or replacement Indebtedness is Incurred by the same Person(s) as the Indebtedness being refinanced or replaced; |
| | | (4) | Indebtedness of the Company owing to and held by any Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by the Company or any other Restricted Subsidiary; |
| | | (5) | Indebtedness of Foreign Subsidiaries in an aggregate principal amount at any one time outstanding not to exceed 0.5 times Adjusted EBITDA determined on a Pro Forma Basis for the relevant Reference Period measured at the time of Incurrence of any Indebtedness under this clause (5); |
| | | (6) | Indebtedness owed in respect of any overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing-house transfers of funds; provided that such Indebtedness shall be repaid in full within five Business Days of the Incurrence thereof; |
| | | (7) | Indebtedness in respect of letters of credit, bank guarantees and similar instruments issued for the account of any Subsidiary in the ordinary course of business supporting obligations under (i) workers’ compensation, unemployment insurance and other social security laws and (ii) bids, trade contracts, leases (other than Capitalized Lease Obligations or Synthetic Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and obligations of a like nature; |
| | | (8) | Hedging Obligations entered into other than for speculative purposes and the financing of insurance premiums; and |
| | | (9) | Indebtedness not excepted by clauses (1) through (8) above; provided that after giving effect thereto, Exempted Debt does not exceed 15.0% of Consolidated Net Tangible Assets of the Company measured as of the date of Incurrence of any Exempted Debt. |
In the event that Indebtedness meets the criteria of more than one of clauses of (1) through (9) above, the Company, in its sole discretion, will be permitted to classify such Indebtedness (or portion thereof) at the time of its Incurrence in any manner that complies with this covenant. In addition, any Indebtedness (or portion thereof) originally classified as Incurred pursuant any of clauses (1) through (9) above may later be reclassified by the Company, in its sole discretion, such that it (or any portion thereof) will be deemed to be Incurred pursuant to any other of such clauses to the extent that such reclassified Indebtedness (or portion thereof) could be Incurred pursuant to such clause at the time of such reclassification. Indebtedness Incurred under any of clauses (1) to (9) above by a Restricted Subsidiary that subsequently becomes a Subsidiary Guarantor will cease to be outstanding under such clause at such time as it becomes a Subsidiary Guarantor until such time, if any, that the Company, in its sole discretion, elects to classify or re-classify such Indebtedness as Incurred under any of such clauses to permit the release of such Subsidiary Guarantor’s Subsidiary Guarantee as permitted under “—Subsidiary Guarantees.” (c) For purposes of this covenant: | | | (1) | accrual of interest, accrual of dividends, the accretion of accreted value or original issue discount, the amortization of debt discount and the payment of interest in the form of additional Indebtedness will not be deemed to be an Incurrence of Indebtedness; |
| | | (2) | in determining compliance with any U.S. dollar-denominated restriction on the Incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based upon the relevant currency exchange rate in effect on the date |
such Indebtedness was Incurred; provided, however, that if such Indebtedness is Incurred to refinance or replace other Indebtedness denominated in a foreign currency, and such refinancing or replacement would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing or replacement, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing or replacement Indebtedness does not exceed the principal amount of such Indebtedness being refinanced or replaced; and | | | (3) | the maximum amount of Indebtedness that the Company and its Restricted Subsidiaries may Incur shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies. |
Reports Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC within the time periods set forth below: | | | (1) | within 90 days after the end of each fiscal year, all financial information that would be required to be contained in an annual report on Form 10-K, or any successor or comparable form, filed with the SEC, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and a report on the annual financial statements by the Company’s independent registered public accounting firm; |
| | | (2) | within 45 days after the end of each of the first three fiscal quarters of each fiscal year, all financial information that would be required to be contained in a quarterly report on Form 10-Q, or any successor or comparable form, filed with the SEC, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section; and |
| | | (3) | within 15 days after the applicable number of days specified in the SEC’s rules and regulations, all current reports that would be required to be filed with the SEC on Form 8-K, or any successor or comparable form, if the Company were required to file such reports, |
in each case in a manner that complies in all material respects with the requirements specified in such form. Notwithstanding the foregoing, the Company will not be obligated to file such reports with the SEC if the SEC does not permit such filing, so long as the Company provides such information to the Trustee and the Holders and makes available such information to prospective purchasers of the Notes, in each case at the Company’s expense and by the applicable date the Company would be required to file such information pursuant to the preceding paragraph. In addition, to the extent not satisfied by the foregoing, for so long as any Notes are outstanding, the Company shall furnish to Holders and to securities analysts and prospective purchasers of the Notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. The reports required by this covenant need not include any separate financial statements of Subsidiary Guarantors or information required by Rule 3-10 or 3-16 of Regulation S-X (or any successor regulation). The requirements set forth in this paragraph and the preceding paragraph may be satisfied by posting copies of such information on a website (which may be nonpublic and may be maintained by the Company or a third party) to which access is given to the Trustee, Holders and prospective purchasers of the Notes. The Trustee shall not be deemed to have constructive notice of any information contained, or determinable from information contained, in any reports referred to above, including the Company’s compliance with any of its covenants in the Indenture (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates). In addition, no later than five Business Days after the date the annual and quarterly financial information for the prior fiscal period have been filed or furnished pursuant to clauses (1) or (2) above, the Company shall also hold live quarterly conference calls with the opportunity to ask questions of management. No fewer than ten Business Days prior to the date such conference call is to be held, the Company shall issue a special meeting by telephonepress release to the appropriate U.S. wire services announcing such quarterly conference call for the benefit of the Trustee, the Holders, beneficial owners of the Notes, prospective purchasers of the Notes, securities analysts and market making financial institutions, which press release shall contain the time and the date of such conference call and approveddirect the merger and merger agreement,recipients thereof to contact an individual at the creationCompany (for whom contact information shall be provided in such notice) to obtain information on how to access such quarterly conference call.
If any of the Merger SubCompany’s Subsidiaries is not a Subsidiary Guarantor and such Subsidiaries, either individually or collectively, would otherwise have been a Significant Subsidiary for any fiscal year, on an annual basis within the purposetime period specified above for annual reports, the Company will provide in the annual report for such fiscal year or in a report filed or furnished on Form 8-K (or posted, if applicable), financial information with respect to such Subsidiaries that are not Subsidiary Guarantors collectively consistent with the financial information included in the prospectus with respect to Subsidiaries that are not Subsidiary Guarantors. If the Company has designated any of effectingits Subsidiaries as Unrestricted Subsidiaries and such Unrestricted Subsidiaries, either individually or collectively, would otherwise have been a Significant Subsidiary, then on an annual basis within the mergertime period specified above for annual reports, the Company will provide in the annual report for such fiscal year or in a report filed or furnished on Form 8-K (or posted, if applicable), financial information with respect to the Unrestricted Subsidiaries collectively consistent with the financial information included in the prospectus with respect to Subsidiaries that are not Subsidiary Guarantors. In the event that any direct or indirect parent company of the Company becomes a Guarantor of the Notes, the Company may satisfy its obligations under this covenant to provide consolidated financial information of the Company by furnishing consolidated financial information relating to such parent; provided that (1) such financial statements are accompanied by consolidating financial information for such parent and the issuance of
shares of VeriSign common stockCompany in the merger.
On September 23, 2001,manner prescribed by the parties executed the merger agreement and the
stock option agreement, and certain officers and directors of Illuminet
executed voting agreements. PriorSEC or (2) such parent is not engaged in any business in any material respect other than such activities as are incidental to the openingits ownership, directly or indirectly, of the financial markets on
September 24, 2001,Capital Stock of the parties publicly announced their agreement to merge.
Illuminet's reasons for the merger
The Illuminet board has determined thatCompany. Events of Default Under the terms of the merger agreement
and the merger are fair to and in the best interestsIndenture, each of Illuminet and its
stockholders. In the course of reaching its decision to approve the merger
agreement and the merger, the Illuminet board consulted with Illuminet's
management, as well as its outside legal counsel and financial advisors, and
considered the following material factors:
. that this combination brings to the forefront Illuminet's stated growth
strategiesconstitutes an Event of expanding into new markets and positioning the company for a
leading role in softswitch/IP-based network services;
. that by combining complementary operations, jointly developing services
and leveraging the expertise of each company, the combined company would
have better opportunities for future growth;
. the ability of the combined company to take advantage of the product
development and expertise of both companies in order to bring new products
to the market;
. information concerning the business, earnings, operations, competitive
position and prospects of Illuminet and VeriSign both individually and on
a combined basis;
. the ability of the combined company to capitalize on each company's strong
customer and other relationships;
. analyses and other informationDefault with respect to Illuminet and VeriSign
including, without limitation,the Notes: | | | (1) | default for 30 days in the payment of any interest on the Notes when due; |
| | | (2) | default in the payment of principal or premium, if any, on the Notes when due; |
| | | (3) | default in the performance, or breach, of any covenant or warranty in the Indenture with respect to the Notes for 60 days after written notice, as provided below; |
| | | (4) | the Subsidiary Guarantee of a Significant Subsidiary ceases to be in full force and effect except as otherwise permitted under the Indenture or is declared null and void in a judicial proceeding or is disaffirmed by the Subsidiary Guarantor; |
| | | (5) | certain events of bankruptcy, insolvency or reorganization; |
| | | (6) | default under any Lien, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or any of its Restricted Subsidiaries other than Indebtedness owed to the Company or a Restricted Subsidiary, whether such Indebtedness now exists, or is created after the Issue Date, which default (A) is caused by a failure to pay principal of, or premium, if any, on such Indebtedness at the Stated Maturity thereof (“principal payment default”) or (B) results in the acceleration of such Indebtedness prior to its maturity (“cross acceleration provision”) and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a principal payment default or the maturity of which has been so accelerated, aggregates $75.0 million (or its equivalent in other currencies) or more; and |
| | | (7) | the taking or entering against the Company or any of its Restricted Subsidiaries of a judgment or decree for the payment of money in excess of $75.0 million (or its equivalent in other currencies) in the aggregate, if the Company or such Restricted Subsidiary, as the case may be, fails to file an appeal therefrom within the applicable appeal period or, if the Company or such Restricted Subsidiary, as the case may be, does file an appeal therefrom within such period, such judgment or decree is not within a period of 60 days from the date thereof, and does not remain, vacated, discharged or stayed. |
However, a discussiondefault under clause (3) of this paragraph will not constitute an Event of Default until the Trustee or the Holders of 25% in principal amount of the complementary natureoutstanding Notes notify the Company of such default and we do not cure such default within the time specified in clause (3) of this paragraph after receipt of such notice. The Company will be required to furnish the Trustee annually an Officers’ Certificate as to the fulfillment of its obligations under the Indenture. In addition, the Company is required to deliver to the Trustee, within 30 days after it obtains knowledge of the businessesoccurrence thereof, written notice of Illuminetany event which would constitute certain Defaults, their status and VeriSign;
35
. the risks and potential rewards associatedwhat action it is taking or propose to take in respect thereof. If a Default occurs with continuing to execute
Illuminet's strategic plan as an independent entity as an alternativerespect to the merger, including, among others, risks associatedNotes, the Trustee must mail to each Holder of Notes notice of the Default within 90 days after it occurs; provided, however, that in the case of a Default specified in clause (3) above with remaining
independentrespect to such Notes, no such notice shall be given until at least 30 days after the occurrence thereof. The Indenture provides that the Trustee may withhold notice to Holders of the Notes of any Default, except in respect of the payment of principal or interest on the Notes, if it considers it in the interests of the Holders of the Notes to do so. Effect of an Event of Default If an Event of Default exists (other than an Event of Default described in clause (5) above), the Trustee or the Holders of not less than 25% in aggregate principal amount of the outstanding Notes may declare the principal amount (or, if the Notes are original issue discount securities, the portion of the principal amount as may be specified in the terms of the Notes) of and rewards associatedpremium, if any, and accrued but unpaid interest and any other monetary obligations on the Notes to be due and payable immediately, by a notice in writing to the Company, and to the Trustee if given by Holders. Upon that declaration, the principal (or specified) amount, premium, if any, and interest will become immediately due and payable. However, at any time after a declaration of acceleration has been made, but before a judgment or decree for payment of the money due has been obtained, the Holders of not less than a majority in aggregate principal amount may, subject to conditions specified in the Indenture, rescind and annul that declaration and its consequences. In the event of a declaration of acceleration of the Notes because an Event of Default described in clause (5) above has occurred and is continuing, the declaration of acceleration of the Notes will be automatically annulled if the default triggering such Event of Default pursuant to clause (5) is remedied or cured by the Company or a Restricted Subsidiary or waived by the holders of the relevant Indebtedness within 20 days after the declaration of acceleration with respect thereto and if (1) the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction and (2) all existing Events of Default, except nonpayment of principal, premium or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived. If an Event of Default in the case of certain events of bankruptcy, insolvency or reorganization exists, the principal (or specified) amount of and premium, if any, accrued but unpaid interest and any other monetary obligations on all of the outstanding Notes will automatically, and without any declaration or other action on the part of the Trustee or any Holder of such outstanding Notes, become immediately due and payable. Subject to the provisions of the Indenture relating to the duties of the Trustee, if an Event of Default then exists, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture (other than the payment of any amounts on the Notes furnished to it pursuant to the Indenture) at any Holder’s (or any other person’s) request, order or direction, unless such Holder has (or such other person has) offered to the Trustee security or indemnity satisfactory to the Trustee. Subject to the provisions for the security or indemnification of the Trustee, the Holders of a majority in aggregate principal amount of outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee in connection with the opportunityNotes. Legal Proceedings and Enforcement of Right to Payment Unless a Holder has previously given to the Trustee written notice of a continuing Event of Default with respect to the Notes, no Holder will have any right to institute any proceeding for existing
Illuminet stockholdersthe Notes in connection with the Indenture or for any remedy under the Indenture. In addition, the Holders of at least 25% in aggregate principal amount of the outstanding Notes must have made a written request, and offered security or indemnity satisfactory to participatethe Trustee to institute that proceeding as Trustee, and, within 60 days following the receipt of such notice, the Trustee must not have received from the Holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with that request, and the Trustee must have failed to institute a proceeding within such 60 day period. However, Holders will have an absolute and unconditional right to receive payment of the principal of, premium, if any, and interest on the Notes on or after the due dates
expressed in the future growthNotes (or, in the case of Illuminet;
.redemption, on or after the presentationsredemption date) and to institute a suit for the enforcement of Robertson Stephensthat payment. Modification of the Indenture The Company, the Subsidiary Guarantors and the opinionTrustee may, without the consent of Robertson
Stephens that, asany Holders of the dateNotes, enter into supplemental indentures that amend, waive or supplement the terms of the opinion, and based onIndenture, the matters
consideredNotes and the limitations onSubsidiary Guarantees for specified purposes. The purposes for which the review undertaken described inIndenture, the opinion,Notes and the exchange ratio inSubsidiary Guarantees thereof can be amended without the merger was fairconsent of any Holders will include the following: to evidence the succession of another Person to the Illuminet
stockholders, from a financial point of view. The opinion of Robertson
Stephens is described in detailCompany or any Subsidiary Guarantor under the heading "--Opinion of
Illuminet's financial advisor";
.Indenture, the amount and form of the consideration to be received by Illuminet
stockholders in the merger and information on the historical trading
ranges of Illuminet common stock and VeriSign common stock;
. the expectation that the merger will qualify as a tax-free reorganization;
. the financial and other terms and conditions of the mergerNotes and the merger
agreement, including, without limitation:
.Subsidiary Guarantees; to add guarantees with respect to the limited conditions to VeriSign's obligation to closeNotes or release a Subsidiary Guarantor from its obligations under its Subsidiary Guarantee or the merger; and
. the ability of Illuminet's board of directors, in the exercise of its
fiduciary dutiesIndenture in accordance with the merger agreement, to authorize
Illuminet to provide information to, engage in negotiations with, and,
subject to paymentapplicable provisions of the termination fee, enter into a transaction
with, another party as described under "The Merger Agreement - No other
negotiations";
.Indenture; to convey, transfer, assign, mortgage or pledge any property to the possible effectsTrustee; to surrender any right or power the Indenture may confer on the Company; to add to the covenants made in the Indenture for the benefit of the public announcementHolders of all Notes; to make any change that does not adversely affect the merger on
Illuminet's relationships with customers, suppliersrights of any Holder of Notes; to add any additional Events of Default; to secure the Notes; to evidence and employers; and
.provide for the interests that certain executive officers and directorsacceptance of Illuminet
may haveappointment by an additional or successor Trustee with respect to the merger in addition Notes; to their interests as
stockholders of Illuminet generally as described in "--Interests of
certain personscure any ambiguity, defect or inconsistency in the merger."
In viewIndenture, or to make any other provisions with respect to matters or questions arising under the Indenture as the Company and the Trustee may deem necessary and desirable, so long as the rights of any Holder of the numberNotes are not adversely affected in any material respect; to conform the text of the Indenture, the Notes or the Subsidiary Guarantees to any provision of this “Description of Notes” to the extent that such provision in this “Description of Notes” was intended to be a verbatim recitation of a provision of the Indenture, the Notes or the Subsidiary Guarantees; or to obtain or maintain the qualification of the Indenture under the Trust Indenture Act or other applicable law. The Company, the Subsidiary Guarantors and wide varietythe Trustee may modify and amend any of factors consideredthe Indenture, the Notes and the Subsidiary Guarantees thereof with the consent of the Holders of not less than a majority in aggregate principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with its evaluationa purchase of, or tender offer or exchange offer for, such Notes). However, no modification or amendment may, without the consent of the merger,Holder of each outstanding Note affected thereby: change the stated maturity of the principal of, or any installment of interest payable on, the outstanding Notes; reduce the principal amount of, or the rate of interest on, any outstanding Notes or the premium, if any, payable upon the redemption thereof, or the amount of principal of an original issue discount Note, that would be due and payable upon redemption of such Note or would be provable in bankruptcy, or adversely affect any right of repayment of the complexityHolder of these matters, the Illuminet boardoutstanding Notes; reduce the premium payable upon the repurchase of directors did not find it practicable to, nor did it attempt
to, quantify, rankany Note or change the time at which any Note may be repurchased as described under “—Change of Control Triggering Event,” whether through an amendment or waiver of provisions in the covenants, definitions or otherwise assign relative weights(except amendments to the specific factors
it considered. In addition,definition of “Change of Control Triggering Event” (or any other definitions included therein));
reduce the Illuminet board did not undertake to make any
specific determination as to whether any particular factor was favorable or
unfavorable to its ultimate determination or assign any particular weight to
any factor, but conducted an overall analysisamount of principal of Notes payable upon acceleration of the factors described above,
including thorough discussions with and questioningmaturity thereof; change the place of Illuminet's management
and management's analysispayment or the coin or currency in which the principal of or premium, if any, or the proposed merger based on information received
from Illuminet's legal, financial and accounting advisors. In considering the
factors described above, individual members of the board of directors may have
given different weight to different factors. Illuminet's board of directors
considered all these factors together and,interest on the whole, considered themoutstanding Notes is payable; impair any Holder’s right to be
favorablereceive payment of principal, premium, if any, and interest on the outstanding Notes on or after the due dates therefor or any Holder’s right to and to support, its determination.
Recommendationinstitute suit for the enforcement of Illuminet's board of directors
The board of directors of Illuminet believes that the terms of the merger
are fair to and in the best interests of Illuminet and its stockholders and
recommends to its stockholders that they vote "FOR" the proposal to approve the
merger and approve and adopt the merger agreement.
In considering the recommendation of the Illuminet board of directorsany payment on or with respect to the merger, you should be aware that certain directors and officers
of Illuminet have certain interestsoutstanding Notes; modify the Subsidiary Guarantees in the merger that are different from, or
are in additionany manner adverse to the interests of Illuminet's stockholders generally. Please
see the section entitled "--Interests of certain persons in the merger."
36
Opinion of Illuminet's financial advisor
Under a letter agreement dated as of August 7, 1998, as amended on May 4,
2001, Illuminet engaged Robertson Stephens to provide financial advisory and
investment banking services in connection with the proposed merger and to
render an opinion as to the fairnessHolders of the exchange ratio, from a financial
pointNotes (but, for the avoidance of view,doubt, not including modifications to the holders of Illuminet common stock.
On September 22, 2001, at a meetingany of the Illuminet board of directors held
to evaluate the proposed merger, Robertson Stephens delivered to Illuminet's
board of directors its oral opinion (subsequently confirmed in writing on
September 23, 2001) that, as of September 23, 2001 and based on the matters
considered and the limitations on the review undertaken described in the
opinion, the 0.93x exchange ratio, or the Exchange Ratio, was fair from a
financial point of view to the holders of Illuminet common stock. The Exchange
Ratio was determined through negotiations between the respective managements of
Illuminet and VeriSign. Although Robertson Stephens assisted the management of
Illuminet in those negotiations, Robertson Stephens was not asked by, and did
not recommend to, Illuminet that any specific exchange ratio constituted the
appropriate exchange ratio for the merger.
You should consider the following when reading the discussion of the opinion
of Robertson Stephens in this document:
. You should read carefully the entire opinion of Robertson Stephens, which
is set forth in Annex D to this prospectus/proxy statement and is
incorporated herein by reference.
. The following description of the Robertson Stephens opinion is qualified
by reference to the full opinion located in Annex D to this
prospectus/proxy statement. The full opinion sets forth, among other
things, the assumptions made by Robertson Stephens, the matters it
considered and the limitations on the review undertaken.
. The Robertson Stephens opinion was prepared for the benefit and use of the
Illuminet board of directors in its consideration of the merger and does
not constitute a recommendation to stockholders of Illuminet as to how
they should vote at the special meeting, or take any other action, in
connection with the merger.
. The Robertson Stephens opinion does not address the relative merits of the
merger and any other transactions or business strategies discussed by the
Illuminet board of directors as alternatives to the merger agreement or
the underlying business decision of the Illuminet board of directors to
proceed with or effect the merger.
Although developments following the date of the Robertson Stephens opinion
may affect the opinion, Robertson Stephens assumed no obligation to update,
revise or reaffirm its opinion. The Robertson Stephens opinion is necessarily
based upon market, economic and other conditions that were in effect on, and
information made available to Robertson Stephens as of, the date of the
opinion. You should understand that subsequent developments may affect the
conclusion expressed in the Robertson Stephens opinion and that Robertson
Stephens disclaims any undertaking or obligation to advise any person of any
change in any fact or matter affecting its opinion. The Robertson Stephens
opinion is limited to the fairness, from a financial point of view and as of
September 23, 2001, of the Exchange Ratio to the holders of Illuminet common
stock.
Opinion and Analysis of Robertson Stephens
In connection with the preparation of the Robertson Stephens opinion,
Robertson Stephens:
. reviewed certain publicly available financial statements and other
business and financial information of Illuminet and VeriSign;
. reviewed with Illuminet and VeriSign certain publicly available estimates
of research analysts relating to Illuminet and VeriSign;
37
. held discussions with the respective managements of Illuminet and VeriSign
concerning the businesses, past and current operations, financial
conditions and future prospects of both Illuminet and VeriSign,
independently and combined, including discussions with the managements of
Illuminet and VeriSign concerning their views regarding the strategic
rationale for the merger;
. reviewed the financial terms and conditionsprovisions set forth in the merger
agreement dated September 23, 2001;
. reviewedlast paragraph under “—Subsidiary Guarantees” or under “Certain Covenants—Future Subsidiary Guarantors”); reduce the stock pricepercentage of the Holders of the outstanding Notes necessary to modify or amend the Indenture, to waive compliance with any provision of the Indenture or certain defaults and trading historyconsequences of Illuminet common stock and
VeriSign common stock;
. compared the financial performancedefaults or to reduce the quorum or voting requirements set forth in the Indenture; or modify any of Illuminet and VeriSign andthese provisions or any of the prices and trading activity of Illuminet common stock and VeriSign common
stock with thatprovisions relating to the waiver of certain other publicly traded companies comparable with
Illuminet and VeriSign, respectively;
. compared the financial termspast defaults or provisions of the merger withIndenture, except to increase the financial terms,required percentage to effect such action or to provide that certain other provisions may not be modified or waived without the extent publicly available, of other transactions that it deemed
relevant;
. reviewed the pro forma impact of the merger on VeriSign's revenue per
share and revenue growth rates, and earnings per share and earnings growth
rates, respectively;
. prepared an analysis of the relative contributions of Illuminet and
VeriSign to the combined company;
. prepared a discounted cash flow analysis of each of Illuminet and
VeriSign;
. participated in discussions and negotiations among representatives of
Illuminet and VeriSign and their financial and legal advisors; and
. made such other studies and inquiries, and reviewed such other data, as it
deemed relevant.
In its review and analysis, and in arriving at its opinion, Robertson
Stephens assumed and relied upon the accuracy and completenessconsent of all of the financial and other information provided to itHolders of Notes. The Holders of not less than a majority in aggregate principal amount of the outstanding Notes may, on behalf of the Holders of all the Notes, waive (including, information furnished
to it orallywithout limitation, by consent obtained in connection with a purchase of, or otherwise discussed with ittender offer or exchange offer for, such Notes) compliance by the managementsCompany with any provision of Illuminet and
VeriSign)the Indenture. The Holders of not less than a majority in aggregate principal amount of the outstanding Notes may, on behalf of the Holders of all the Notes, waive (including, without limitation, by consent obtained in connection with a purchase of, or publicly available and neither attempted independentlytender offer or exchange offer for, such Notes) past defaults by the Company under certain covenants of the Indenture which relate to verify,
nor assumed responsibility for verifying,the Notes. However, a default in the payment of the principal of, premium, if any, or interest on, any of such information. Robertson
Stephens relied upon the assurancesNotes or relating to a provision which under the Indenture cannot be modified or amended without the consent of the managementsHolder of Illumineteach outstanding Note affected cannot be so waived. Defeasance and VeriSignCovenant Defeasance The Indenture provides that they were not awarethe Company may discharge all of any facts that would make the information,
in light of the circumstances under which it was provided, inaccurate or
misleading. Furthermore, Robertson Stephens did not obtain or make, or assume
responsibility for obtaining or making, any independent evaluation or appraisal
of the properties, assets or liabilities (contingent or otherwise) of Illuminet
or VeriSign, nor was it furnished with any such evaluation or appraisal.
With respect to the discussions which Robertson Stephens had with the
respective management teams relating to estimates of future performance (and
the assumptions and bases therefor) for Illuminet and VeriSign, Robertson
Stephens assumed that:
. such assumptions, estimates and forecasts have been reasonably prepared in
good faith on the basis of reasonable assumptions;
. such estimates and forecasts reflect the best currently available
estimates and judgments of the managements of Illuminet and VeriSign,
respectively,its obligations, other than as to transfers and exchanges and certain other specified obligations, under the future financial condition and performance of
Illuminet and VeriSign, respectively; and
Notes at any time (“defeasance”). such estimates and forecasts will be realized in the amounts and in the
periods currently estimated.
In addition, Robertson Stephens assumed that:
. the merger will be consummated upon the terms set forth in the merger
agreement dated September 23, 2001 without material alteration thereof,
including, among other things,The Indenture also provides that the merger willCompany may be accounted for as a
"purchase method" business combination in accordancereleased from its obligations described above under “—Limitation on Restricted Payments,” “—Limitation on Liens,” “—Limitation on Sale/Leaseback Transactions,” “—Future Subsidiary Guarantors” and “—Reports,” and certain aspects of its obligations described above under “—Consolidation, Merger and Sale of Assets,” and from certain other obligations, and elect not to comply with United States
generally accepted accounting principles, or GAAP,those sections and obligations without creating an Event of Default, and that the mergerCompany may terminate the operation of the cross-default upon a principal payment default, cross acceleration provisions and the Subsidiary Guarantor provision in “—Events of Default” (“covenant defeasance”). If the Company exercises its defeasance or covenant defeasance option, the Subsidiary Guarantees in effect at such time will be treated as a tax free reorganization pursuant to the Internal
Revenue Code of 1986, as amended;terminate. Defeasance and 38
. the historical financial statements of each of Illuminet and VeriSign
reviewed by it were prepared and fairly presented in accordance with GAAP.
Robertson Stephens relied as to all legal matters relevant to rendering its
opinion on the advice of its legal counsel.
Robertson Stephens expressed no opinion as to:
. the value of any employee agreement or other arrangement entered into in
connection with the merger;
. any tax or other consequences that may result from the merger; or
. what the value of VeriSign common stock will be when issued to Illuminet's
stockholders in connection with the merger or the price at which shares of
VeriSign common stockcovenant defeasance may be traded in the future.
The following is a summary of the material financial analyses performed by
Robertson Stephens in connection with rendering its opinion. The summary of the
financial analyses is not a complete description of all of the analyses
performed by Robertson Stephens. Certain information in this section is
presented in tabular form.
IN ORDER TO BETTER UNDERSTAND THE FINANCIAL ANALYSES PERFORMED BY ROBERTSON
STEPHENS, THESE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE
ROBERTSON STEPHENS OPINION IS BASED ON THE TOTALITY OF THE VARIOUS ANALYSES
THAT IT PERFORMED, AND NO PARTICULAR PORTION OF THE ANALYSIS HAS ANY MERIT
STANDING ALONE.
Exchange Ratio Analysis
Robertson Stephens reviewed the ratios of the closing prices of Illuminet
common stock to the corresponding closing prices of VeriSign common stock over
various periods from September 21, 2000 through September 21, 2001. Robertson
Stephens examined the premiums represented by the Exchange Ratio over the
averages of these implied exchange ratios over various periods:
Transaction
Period Average Exchange Ratio
Exchange Ratio Premium
-------------- --------------
Spot (September 21, 2001).............. 0.913x 1.8%
10-day................................. 0.893x 4.1%
30-day................................. 0.749x 24.2%
60-day................................. 0.648x 43.5%
90-day................................. 0.612x 52.0%
Last 12 Months......................... 0.447x 107.9%
39
Comparable Company Analysis
Using publicly available information, Robertson Stephens compared certain
financial information of Illuminet with publicly available information for
selected companies comparable to the business or businesses of Illuminet. The
following table lists the relevant comparable companies analyzed by Robertson
Stephens:
Illuminet Comparable Companies
. Ulticom Inc. . Convergys Corp.
. CSG Systems International, Inc. . Comverse Technology, Inc.
. Amdocs Ltd. . Lightbridge, Inc.
. Micromuse Inc. . Openwave Systems Inc.
. OPNET Technologies, Inc. . Boston Communications Group,
Inc.
Revenues and Earnings
As set forth in the following table, applying a range of multiples for these
companies for calendar year 2001 and 2002 to Illuminet's corresponding
publicly-available research estimates for calendar year 2001 and 2002 revenue
and earnings resulted in the following range of implied equity values and
implied exchange ratios:
Implied
Implied Equity Exchange
Methodology Multiple Range Value (MM) (a) Ratio (b)
----------- -------------- -------------- -----------
Without Control Premium
CY 2001 Revenues............... 2.75x-3.75x $ 612-$ 802 0.45x-0.59x
CY 2002 Revenues............... 2.00x-3.00x $ 581-$ 828 0.43x-0.61x
CY 2001 Earnings............... 20.00x-25.00x $ 786-$ 982 0.58x-0.73x
CY 2002 Earnings............... 16.00x-21.00x $ 801-$1,052 0.59x-0.78x
With Control Premium of 30%
CY 2001 Revenues............... 2.75x-3.75x $ 795-$1,043 0.59x-0.77x
CY 2002 Revenues............... 2.00x-3.00x $ 755-$1,076 0.56x-0.80x
CY 2001 Earnings............... 20.00x-25.00x $1,021-$1,277 0.76x-0.95x
CY 2002 Earnings............... 16.00x-21.00x $1,042-$1,367 0.77x-1.01x
------------- -----------
MEAN........................... $ 903-$1,191 0.67x-0.88x
--------
(a) Equity Value excludes a net debt of ($87.1) MM.
(b) Based on VeriSign's closing stock price of $38.30 as of September 21, 2001.
Selected Precedent Transactions Analysis
Robertson Stephens analyzed the aggregate value and implied transaction
value multiples paid or proposed to be paid in selected precedent transactions
including:
. Geneva Technology Ltd./Convergys Corp.
. InvoiceLink Corp./BCE Emergis Inc.
. National Telemanagement Corp./Illuminet Holdings Inc.
. Network Solutions Inc./VeriSign, Inc.
. Solect Technology Group, Inc./Amdocs Ltd.
. TransPoint LLC/CheckFree Corp.
40
. Signio Inc./VeriSign, Inc.
. Transaction Network Services, Inc./PSINet Inc.
. Brite Voice Systems, Inc./InterVoice Inc.
. IEX Corp./Tekelec
Robertson Stephens compared, among other things, the aggregate values in
these transactions as a multiple of the preceding twelve months', or LTM,
actual revenues and the following twelve months', or NTM, publicly-available
research estimates for revenues. Applying these multiples to similar revenue
figures for Illuminet resulted in the following range of implied equity values
and implied exchange ratios. Robertson Stephens also applied the premium paid
to the share price of the target the day prior to and one month prior to the
announcement of these transactions to the share price of Illuminet the day
prior to and one month prior to the announcement of the merger, which resulted
in the following implied equity values and implied exchange ratios. LTM and/or
NTM earnings data was either not publicly available or was negative/not
applicable for a number of the target companies represented in the selected
precedent transactions and therefore was not considered an appropriate metric.
Implied
Multiple Implied Equity Exchange
Range Value (a) Ratio (b)
----------- -------------- -----------
LTM Revenues........................... 5.00x-6.00x $947-$1,119m 0.70x-0.83x
NTM Revenues........................... 3.75x-4.75x $908-$1,126m 0.67x-0.83x
Premium to 1 Month Prior Stock Price... 40%-60% $1,536-$1,755m 1.14x-1.30x
Premium to 1 Day Prior Stock Price..... 20%-40% $1,481-$1,727m 1.10x-1.28x
-------------- -----------
MEAN................................... $1,218-$1,432m 0.90x-1.06x
--------
(a) Equity Value excludes a net debt of ($87.1) MM.
(b) Based on VeriSign's closing stock price of $38.30 as of September 21, 2001.
No company, transaction or business used in the Comparable Company Analysis
or the Selected Precedent Transaction Analysis as a comparison is identical to
Illuminet or the merger. Accordingly, an analysis of the results of the
foregoing is not entirely mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the acquisition, public
trading and other values of the comparable companies or the business segment,
company or transactions to which they are compared.
Contribution Analysis
Robertson Stephens analyzed the respective contributions of Illuminet and
VeriSign to the publicly-available research estimates for revenues, earnings
before interest and taxes, or EBIT, and earnings of the combined company
(without consideration of any synergies) for calendar years 2002, 2003 and
2004, as supplemented by discussions with the respective managements of
Illuminet and VeriSign as to growth and margin assumptions. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
41
The contribution analysis for calendar years 2002, 2003 and 2004 resulted in
the following implied exchange ratios and implied equity values:
Suggested Pro-Forma Ownership
-----------------------------
Implied
Calendar Year Illuminet VeriSign Exchange Ratio (a)
------------- ----------- ----------- ------------------
2002E Revenues................ 13.7% 86.3% 0.95x-0.95x
2002E EBIT.................... 18.9% 81.1% 1.40x-1.40x
2002E Earnings................ 18.2% 81.8% 1.33x-1.33x
2003E Revenues................ 13.1% 86.9% 0.91x-0.91x
2003E EBIT.................... 15.4% 84.6% 1.09x-1.09x
2003E Earnings................ 15.2% 84.8% 1.07x-1.07x
2004E Revenues................ 12.8% 87.2% 0.89x-0.89x
2004E EBIT.................... 13.6% 86.4% 0.95x-0.95x
2004E Earnings................ 13.7% 86.3% 0.95x-0.95x
----------- ----------- -----------
MEAN (b)...................... 13.4%-15.0% 85.0%-86.6% 0.93x-1.06x
--------
(a) Based on VeriSign's closing stock price of $38.30 as of September 21, 2001.
(b) Based on the mean of 2004 only at the low end of the range and the average
of 2002-2004 at the high end of the range.
Discounted Cash Flow Analysis
Robertson Stephens performed a discounted cash flow analysis using
publicly-available research analyst estimates as supplemented by assumptions as
to long-term revenue growth rates and operating margins, based on discussions
with the management of Illuminet, of Illuminet's unlevered free cash flows and
publicly-available research analyst estimates of VeriSign's unlevered free cash
flows, assuming that both Illuminet and VeriSign were to continue to operate on
a stand-alone basis and without giving effect to the merger. Robertson Stephens
calculated the discounted cash flow using discount rates ranging from 15.0% to
17.0% for Illuminet, and discount rates ranging from 22.0% to 24.0% for
VeriSign. The discounted cash flow was comprised of the sum of the present
values of the projected unlevered free cash flows for calendar years 2002
through 2006, and the assumed future 2006 exit value based upon assumed
multiples of 2007 net income ranging from 16.0x to 21.0x for Illuminet and
27.5x to 33.5x for VeriSign.
This analysis implies a range of Illuminet equity values of $1,019 million
to $1,083 million, with the corresponding implied exchange ratios ranging from
0.75x to 0.80x.
Other Factors
While this summary describes the analyses and factors that Robertson
Stephens deemed material in its presentation to the Illuminet board of
directors, it is not a comprehensive description of all analyses and factors
considered by Robertson Stephens. The preparation of a fairness opinion is a
complex process that involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances. Therefore, a fairness opinion is not readily
susceptible to partial analysis or summary description. In arriving at its
opinion, Robertson Stephens did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as
to the significance and relevance of each analysis and factor. Accordingly,
Robertson Stephens believes that its analyses must be considered as a whole and
that selecting portions of its analyses and of the factors considered by it,
without considering all analyses and factors, could create a misleading or
incomplete view of the evaluation process underlying its opinion. Several
analytical methodologies were employed and no one method of analysis should be
regarded as critical to the overall conclusion reached by Robertson Stephens.
Each analytical technique has inherent strengths and weaknesses, and the nature
of the available information may further affect the value of particular
techniques. The conclusion reached by Robertson Stephens is based on all
analyses and factors taken
42
as a whole and also on application of Robertson Stephens' own experience and
judgment. This conclusion may involve significant elements of subjective
judgment and qualitative analysis. Robertson Stephens gives no opinion as to
the value or merit standing alone of any one or more parts of the analyses it
performed. In performing its analyses, Robertson Stephens made numerous
assumptions with respect to industry performance, general business and other
conditions and matters, many of which are beyond the control of Illuminet or
Robertson Stephens. Any estimates contained in these analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by these analyses. Accordingly, analyses relating to the value of businesses do
not purport to be appraisals or to reflect the prices at which these businesses
actually may be sold in the future, and these estimates are inherently subject
to uncertainty. Furthermore, no opinion is being expressed as to the prices at
which shares of VeriSign common stock may be traded at any future time.
Illuminet's engagement letter with Robertson Stephens provides that, for its
services, Robertson Stephens is entitled to receive a fee for delivering its
opinion, whether or not the opinion is favorable, as well as an additional fee
for its financial advisory and investment banking services contingent upon
consummation of the merger. Illuminet has also agreed to reimburse Robertson
Stephens for its out-of-pocket expenses and to indemnify and hold harmless
Robertson Stephens and its affiliates and any other person, director, employee
or agent of Robertson Stephens or any of its affiliates, or any person
controlling Robertson Stephens or its affiliates, for certain losses, claims,
damages, expenses and liabilities relating to or arising out of services
provided by Robertson Stephens as financial advisor to Illuminet. The terms of
the fee arrangements with Robertson Stephens, which Illuminet and Robertson
Stephens believe are customary in transactions of this nature, were negotiated
at arm's length between Illuminet and Robertson Stephens, and the Illuminet
board of directors was aware of these fee arrangements.
Robertson Stephens was retained based on Robertson Stephens' experience as a
financial advisor in connection with mergers and acquisitions and in securities
valuations generally, as well as Robertson Stephens' investment banking
relationship and familiarity with Illuminet. Robertson Stephens has provided
financial advisory services to Illuminet from time to time. In the ordinary
course of business, Robertson Stephens may actively trade the securities of
Illuminet and VeriSign for its own account and for the account of its customers
and, accordingly, may at any time hold a long or short position in these
securities.
Robertson Stephens is an internationally recognized investment banking firm.
As part of its investment banking business, Robertson Stephens is frequently
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
securities, private placements and other purposes.
Interests of certain persons in the merger
When considering the recommendations of Illuminet's boards of directors, you
should be aware that some of the Illuminet directors and officers have
interests in the merger that are different from, or are in addition to, yours
as stockholders. These interests include:
. Roger Moore, who is the chief executive officer and a director of
Illuminet, will become a member of the VeriSign board of directors;
. Directors and officers of Illuminet are entitled to specified
indemnification rights, as described in "The Merger
Agreement--Indemnification of Illuminet Directors and Officers" on page
53; and
. Some executive officers of Illuminet will become employees of VeriSign.
As a result, these executive officers and directors could be more likely to
vote to approve, and recommend the approval of, the merger agreement and the
merger, than if they did not hold these interests.
43
Completion and effectiveness of the merger
The merger will be completed when all of the conditions to completion of the
merger are satisfied or waived, including approval and adoption of the merger
agreement and approval of the merger by the stockholders of Illuminet. The
merger will become effective upon the filing of a certificate of merger with
the State of Delaware.
Structure of the merger and conversion of Illuminet common stock and stock
options
Illinois Acquisition Corporation, a newly formed and wholly owned subsidiary
of VeriSign, will be merged with and into Illuminet. As a result of the merger,
the separate corporate existence of Illinois Acquisition Corporation will cease
and Illuminet will survive the merger as a wholly owned subsidiary of VeriSign.
Upon completion of the merger, each outstanding share of Illuminet common
stock, other than shares held by VeriSign and its subsidiaries and Illuminet
and its subsidiaries, will be converted into the right to receive 0.93 shares
of fully paid and nonassessable VeriSign common stock. Upon completion of the
merger, each outstanding option to purchase Illuminet common stock will be
converted into an option to purchase the number of shares of VeriSign common
stock equal to 0.93 times the number of shares of Illuminet common stock that
could have been obtained before the merger upon the exercise of the option and
the exercise price will be adjusted to reflect the exchange ratio. The number
of shares of VeriSign common stock issuable in the merger will be
proportionately adjusted for any stock split, stock dividend or similar event
with respect to VeriSign common stock or Illuminet common stock effected
between the date of the merger agreement and the completion of the merger.
No certificate or scrip representing fractional shares of VeriSign common
stock will be issued in connection with the merger. Instead, Illuminet's
stockholders will receive cash, without interest, in lieu of a fraction of a
share of VeriSign common stock.
Exchange of Illuminet stock certificates for VeriSign stock certificates
When the merger is completed, VeriSign's exchange agent will mail to
Illuminet stockholders a letter of transmittal and instructions for use in
surrendering Illuminet stock certificates in exchange for VeriSign stock
certificates. When you deliver your Illuminet stock certificates to the
exchange agent along with an executed letter of transmittal and any other
required documents, your Illuminet stock certificates will be canceled and you
will receive VeriSign stock certificates representing the number of full shares
of VeriSign common stock to which you are entitled under the merger agreement.
You will also receive payment in cash, without interest, in lieu of any
fractional shares of VeriSign common stock that would have been otherwise
issuable to you in the merger.
You should not submit your Illuminet stock certificates for exchange unless
and until you receive the transmittal instructions and a form of letter of
transmittal from the exchange agent.
Illuminet stockholders are not entitled to receive any dividends or other
distributions on VeriSign common stock until the merger is completed and they
have surrendered their Illuminet stock certificates in exchange for VeriSign
stock certificates. In addition, VeriSign does not anticipate paying any
dividends with respect to its stock.
VeriSign will only issue Illuminet stockholders a VeriSign stock certificate
or a check in lieu of a fractional share in a name in which the surrendered
Illuminet stock certificate is registered. If you wish to have your certificate
issued in another name you must present the exchange agent with all documents
required to show and effect the unrecorded transfer of ownership and show that
you paid any applicable stock transfer taxes.
Material United States federal income tax consequences of the merger
The following discussion summarizes the material United States federal
income tax consequences of the merger. This discussion is based on the Internal
Revenue Code, the related regulations promulgated thereunder, existing
administrative interpretations and court decisions, all of which are subject to
change, possibly with
44
retroactive effect. This discussion assumes that Illuminet stockholders hold
their shares of Illuminet common stock as capital assets within the meaning of
section 1221 of the Internal Revenue Code. This discussion does not address all
aspects of United States federal income taxation that may be important to you
in light of your particular circumstances or if you are subject to special
rules. These special rules include rules relating to:
. stockholders who are not citizens or residents of the United States;
. financial institutions;
. tax-exempt organizations;
. insurance companies;
. dealers in securities;
. stockholders who acquired their shares of Illuminet common stock through
the exercise of options or similar derivative securities or otherwise as
compensation; or
. stockholders who hold their shares of Illuminet common stock as part of a
straddle, conversion or other integrated transaction.
Illuminet's obligations to complete the merger are conditioned on the
delivery of an opinion to Illuminet from Blackwell Sanders Peper Martin, LLP
regarding the qualification of the merger as a reorganization within the
meaning of section 368(a) of the Internal Revenue Code and that each of
VeriSign and Illuminet will be a party to the reorganization within the meaning
of section 368(a) of the Internal Revenue Code.
VeriSign and Illuminet believe, based on the advice of counsel, that the
merger will have the United States federal income tax consequences discussed
below. The opinion of counsel referred to above (1) will assume the absence of
changes in existing facts and (2) will rely on assumptions, representations and
covenants including those contained in certificates executed by officers of
VeriSign and Illuminet. The opinion referred to above neither binds the IRS nor
precludes the IRS from adopting a position contrary to that expressed in the
opinions, and no assurance can be given that contrary positions will not be
successfully asserted by the IRS or adopted by a court if the positions were
litigated. Neither VeriSign nor Illuminet intends to obtain a ruling from the
IRS with respect to the tax consequencesNotes only if, among other things: the Company irrevocably deposits with the Trustee money or U.S. Government Obligations or a combination thereof, as trust funds in an amount certified to be sufficient to pay on each date that they become due and payable, the principal of, premium, if any, and interest on all outstanding Notes; the Company delivers to the Trustee an opinion of counsel in the United States to the effect that: the Holders of the merger.
Tax consequences to Illuminet stockholders. Except as discussed below,
current stockholders of IlluminetNotes will not recognize gain or loss for United
States federal income, tax purposes on the exchange of Illuminet common stock
for VeriSign common stock in the merger. The aggregate tax basis of the
VeriSign common stock received as a result of the merger will be the same as
the aggregate tax basis in the Illuminet common stock surrendered in the
exchange, reduced by the tax basis of any fractional shares of VeriSign common
stock for which cash is received. The holding period of the VeriSign common
stock received as a result of the exchange will include the period during which
the Illuminet common stock exchanged in the merger was held. Illuminet
stockholders will recognize gain or loss for United States federal income tax
purposes with respect to the cash they receive instead of a fractional share
interest in VeriSign common stock. The gain or loss will be measured by the
difference between the amount of cash they receive and the portion of the tax
basis of their shares of Illuminet common stock allocable to the shares of
Illuminet common stock exchanged for the fractional share interest. This gain
or loss will be capital gain or loss and will be a long-term capital gain or
loss if the shares of Illuminet common stock have been held for more than one
year at the time the merger is completed.
Tax consequences to VeriSign and Illuminet. VeriSign, including its merger
subsidiary, and Illuminet will not recognize gain or loss for United States federal income tax purposes as a result of the merger.
This discussion is only intended to provide you with a general summary,defeasance or covenant defeasance; and
it is the defeasance or covenant defeasance will not intended to be a complete analysis or description of all potentialotherwise alter those Holders’ United States federal income tax consequencestreatment of principal and interest payments on the Notes; (in the case of defeasance, this opinion must be based on a ruling of the merger. In addition, this
discussion does not address tax consequences that may vary with,Internal Revenue Service or are
contingent on, your individual circumstances. Moreover, this discussion does
not address any non-income
45
tax or any foreign, state or local tax consequences of the merger. Accordingly,
you are strongly urged to consult with your tax advisor to determine the
particulara change in United States federal income tax law occurring after the Issue Date);
no Default or Event of Default under the Indenture has occurred and is continuing after giving effect to such defeasance or covenant defeasance; the Company is not “insolvent” within the meaning of the U.S. Bankruptcy Code or applicable state locallaw on the date of such deposit; such defeasance or foreign incomecovenant defeasance does not result in a breach or violation of, or constitute a default under, any indenture or other tax
consequencesagreement or instrument for borrowed money to youwhich the Company is a party or by which the Company is bound; such defeasance or covenant defeasance does not result in the trust arising from such deposit constituting an investment company within the meaning of the merger.
Accounting treatmentInvestment Company Act of the merger
In July 2000, the Financial Accounting Standards Board, or FASB, issued
Statements No. 141, "Business Combinations," or Statement 141, and No. 142,
"Goodwill and Other Intangible Assets," or Statement 142. Under the
transitional provisions of Statement No. 141, business combinations initiated
after June 30, 2001 are required to be accounted for under the purchase method
of accounting. Additionally, although the methodology for determining the
purchase price, or the aggregate merger consideration, is largely unchanged,
the methodology for allocating the purchase price to certain intangible assets
has changed. The allocation of the purchase price to intangible assets and
goodwill will still be based on the fair value of the assets and liabilities
assumed. These allocations will be made based upon valuations and other studies
that have not yet been finalized.
Statement 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually in accordance with the provisions of Statement
142. Statement 142 will also require that intangible assets with estimable
useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for Impairment in accordance with FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived assets and for
Long-Lived Assets to Be Disposed of."
Regulatory filings and approvals required to complete the merger
The merger is subject to the requirements of the Hart-Scott-Rodino Antitrust
Improvements1940, as amended (the “Investment Company Act which prevents certain transactions from being completed
until required information and materials are furnished to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and the
appropriate waiting periods end or expire. We are filing the required
information and materials with the Department of Justice and the Federal Trade
Commission. The requirements of Hart-Scott-Rodino will be satisfied if the
merger is completed within one year from the termination of the waiting period.
The Antitrust Division of the Department of Justice or the Federal Trade
Commission may challenge the merger on antitrust grounds either before or after
expiration of the waiting period. Accordingly, at any time before or after the
completion of the merger, either the Antitrust Division of the Department of
Justice or the Federal Trade Commission could take action under the antitrust
laws. Certain other persons could take action under the antitrust laws,
including seeking to enjoin the merger. Additionally, at any time before or
after the completion of the merger, notwithstanding that the applicable waiting
period expired or ended, any state could take action under the antitrust laws.
A challenge to the merger could be made and if a challenge is made we may not
prevail.
The merger contemplates the transfer of control of the FCC authorization
held by Illuminet's subsidiary, NTC, and the radio license used internally by
Illuminet. These transfers are subject to the prior approval of the FCC.
Neither of us is aware of any other material governmental or regulatory
approval required for completion of the merger, other than the effectiveness of
the registration statement of which this prospectus/proxy statement is a part,
and compliance with applicable corporate law of Delaware.
Restrictions on sales of shares by affiliates of Illuminet and VeriSign
The shares of VeriSign common stock to be issued in the merger will”), unless such trust shall be registered under the Securities Act. These shares will be freely transferable
under the Securities Act, except for shares of VeriSign common stock issued to
any person who is an affiliate of either of us. Persons who may be deemed to be
affiliates include individuals or entities that control, are controlled by, or
are under common control of either of us and may
46
include some of our officers and directors, as well as our principal
stockholders. Affiliates may not sell their shares of VeriSign common stock
acquired in the merger except pursuant to (1) an effective registration
statement under the Securities Act covering the resale of those shares, (2) an
exemption under paragraph (d) of Rule 145 under the SecuritiesInvestment Company Act or (3) any
other applicable exemption under exempt from registration thereunder; the Securities Act.
Listing on the Nasdaq National Market of VeriSign common stock to be issued in
the merger
It is a conditionCompany delivers to the closingTrustee an Officers’ Certificate and an Opinion of the mergerCounsel, each stating that the shares of VeriSign
common stock to be issued in the merger be approved for listing on the Nasdaq
National Market, subject to official notice of issuance.
Delisting and deregistration of Illuminet common stock after the merger
If the merger is completed, Illuminet common stock will be delisted from the
Nasdaq National Market and will be deregistered under the Securities Exchange
Act.
47
THE MERGER AGREEMENT
This section of the document describes the merger agreement. While we
believe that the description covers the material terms of the merger agreement,
this summary may not contain all of the information that is important to you.
The merger agreement is attached to this document as Annex A and we urge you to
carefully read this document in its entirety.
The merger
The merger agreement provides for the merger to be effected through the
merger of Illinois Acquisition Corporation, a newly formed and wholly owned
subsidiary of VeriSign, with and into Illuminet. As a result of the merger, the
separate corporate existence of Illinois will cease and Illuminet will survive
the merger as a wholly owned subsidiary of VeriSign.
Upon completion of the merger, Illuminet stockholders will become VeriSign
stockholders, and each outstanding share of Illuminet common stock, other than
shares held by Illuminet and its subsidiaries, will be converted into the right
to receive 0.93 shares of fully paid and nonassessable VeriSign common stock.
VeriSign also will assume each outstanding option to purchase Illuminet common
stock and convert it into an option to purchase shares of VeriSign common
stock. The merger is expected to qualify as a tax-free reorganization under the
IRC, and Illuminet stockholders will recognize no gain or loss, and pay no tax,
on their receipt of VeriSign shares.
Representations and warranties
We each made representations and warranties in the merger agreement
regarding aspects of our respective businesses, financial condition and other
facts pertinent to the merger, including representations and warranties by each
company as to:
Illuminet's representations and warranties:
Illuminet's representations and warranties include representations as to:
. its corporate organization, good standing and qualification to do
business;
. its subsidiaries and ownership interests in other entities;
. its and its subsidiaries' certificates of incorporation and bylaws;
. its capitalization;
. its authority to enter into the merger agreement;
. required consents, waivers and approvals;
. regulatory approvals required to complete the merger;
. regulation of Illuminet by communications regulatory agencies;
. the effect of the merger on its outstanding obligations;
. Illuminet's filings and reports with the Securities and Exchange
Commission;
. its financial statements and liabilities;
. changes in its business since its most recent financial statements;
. its taxes;
. title to the properties it owns and leases;
48
. its intellectual property, intellectual property that it uses and
infringement of other intellectual property;
. its compliance with applicable laws;
. permits required to conduct its business and compliance with those
permits;
. litigationconditions precedent with respect to Illuminet;
. its employee benefit plans;
. its hazardous material activitiessuch defeasance or covenant defeasance have been complied with; and environmental liabilities;
. its agreements, contractsother conditions specified in the Indenture have been met. In the event that a petition for relief under the U.S. Bankruptcy Code or applicable state law is filed with respect to the Company within 91 days after the deposit referred to above and commitments;
. its customer contactsthe Trustee is required to return to the Company or any other Person the money or U.S. Government Obligations or combination thereof then held as trust funds, then the obligations of the Company under the Notes and network operations;
. brokers' and finders' feesthe Indenture that were discharged or released in connection with such defeasance or covenant defeasance, as applicable, shall not be deemed so discharged or released. Satisfaction and Discharge The Indenture provides that when, among other things, all the merger;
. its insurance;
. information suppliedNotes not previously delivered to the Trustee for cancellation: have become due and payable; will become due and payable at their stated maturity within one year; or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by itthe Trustee in this documentthe Company’s name and at the Company’s expense, and the related registration
statement filed by VeriSign;
. approval by its boardCompany or a Subsidiary Guarantor deposits or causes to be deposited with the Trustee, in trust, an amount of directors;
. the fairness opinion received by Illuminet from its financial advisor;
. the inapplicability of specified lawsmoney or U.S. Government Obligations, or a combination thereof (such amount to the merger and the
inapplicability of Illuminet's stockholder rights plan; and
. identification of their affiliates and transactions with related parties.
VeriSign's representations and warranties
VeriSign's representations and warranties include representations as to:
. its and the merger subsidiary's corporate organization and its authority
and qualification to do business;
. its and the merger subsidiary's certificate of incorporation and bylaws;
. its and the merger subsidiary's capitalization;
. authorization, execution and delivery of the merger agreement by it and
the merger subsidiary;
. required consents, waivers and approvals;
. regulatory or other approvals required to complete the merger;
. VeriSign's filings and reports with the Securities and Exchange
Commission;
. its financial statements and liabilities;
. changes in its business since its most recent financial statements;
. its taxes;
. absence of breaches of specified agreements;
. litigation with respect to it;
. brokers' and finders' fees in connection with the merger;
. information supplied by it in this document;
. approval by its board of directors; and
. it not being an "interested stockholder" of Illuminet under Delaware law.
49
The representations and warrantiescertified in the merger agreement are complicatedcase of U.S. Government Obligations) sufficient to pay and aredischarge the entire Indebtedness on Notes not easily summarized. We urge you to read the articles of the merger
agreement entitled "Representations and Warranties of Company," and
"Representations and Warranties of Parent and Merger Sub" carefully.
Conduct of Illuminet's business before the closing of the merger
Illuminet has agreed that until the closing of the merger, or unless
VeriSign consents in writing, it and its subsidiaries will carry on their
business in the usual, regular and ordinary course and in compliance in all
material respects with applicable legal requirements, and pay its debts and
taxes when due. Illuminet has also agreed to use its commercially reasonable
efforts consistent with past practices and policies to:
. preserve intact its present business organization;
. keep available the services of its present officers and employees; and
. preserve its relationships with customers, suppliers, licensors,
licensees, and others with which it has business dealings.
In addition, Illuminet must notify VeriSign of any material event involving
its business, operations or financial condition.
Illuminet has also agreed that until the closing of the merger, or unless
VeriSign consents in writing, Illuminet and each of its subsidiaries will
conduct its business in compliance with specific restrictions relatingpreviously delivered to the following:
. waiving restrictions on, accelerating or modifyingTrustee for cancellation, for the terms of or payment
for options granted, restricted stock purchased under its stock plans, or
repricing of stock options granted under its stock plans;
. grantingprincipal and premium, if any, severance or termination pay except under written agreements
then in effect or in an amount equal to four months' salary of the
terminated person;
. transferring or licensing intellectual property;
. declaring or paying dividends or making other distributions with respect
to its capital stock;
. purchasing or redeeming shares of its capital stock except repurchases of
unvested shares in connection with employee terminations;
. issuing securities other than upon exercise of options outstanding on the
date of the merger agreement, or issuances under Illuminet's employee
stock purchase plan or to VeriSign under its stock option agreement;
. amending its certificate of incorporation or bylaws;
. acquiring or agreeing to merge with or acquire the assets of, or making
equity investments in, other entities, or entering into any material joint
venture agreements;
. selling, leasing, licensing, encumbering or disposing of property or
assets that are material to the business of Illuminet and its
subsidiaries;
. incurring or guaranteeing indebtedness except in connection with the
financing of ordinary course trade payables or under existing credit
facilities;
. adopting or amending any employee benefit plan;
. making any material capital expenditures other than those contained in
Illuminet's capital budget approved priorinterest to the date of the merger
agreement;
. materially modifying, amendingdeposit or terminating material contractsto the stated maturity or waiving, releasing or assigning any material rightsredemption, as the case may be, then the Indenture will cease to be of further effect, and the Company will be deemed to have satisfied and discharged the Indenture. However, the Company will continue to be obligated to pay all other sums due under the contract;
50
. entering into specified typesIndenture and to provide the Officers’ Certificates and Opinions of contracts other thanCounsel described in the ordinaryIndenture. Payment and Paying Agents The Company will pay principal of and premium, if any, and interest on the Notes at the office of the Trustee in the City of New York or at the office of any paying agent that the Company may designate. The Company may at any time designate additional paying agents or rescind the designation of any paying agent. The Company must maintain a paying agent in each place of payment for the Notes. The Company will pay any interest on the Notes to the registered owner of the Notes at the close of business on the regular record date for the interest, except in the case of defaulted interest. Any moneys deposited with the Trustee or any paying agent, or then held by the Company in trust, for the payment of the principal of and premium, if any, and interest on any Notes that remain unclaimed for two years after the principal, premium or interest has become due and payable will, at the Company’s request, be repaid to the Company. After repayment to the Company, Holders of the Notes are entitled to seek payment only from the Company as a general unsecured creditor. Governing Law The Notes and the Indenture are governed by, and construed in accordance with, the laws of the State of New York.
Information Concerning the Trustee The Trustee under the Indenture has all the duties and responsibilities of an indenture trustee specified in the Trust Indenture Act. The Trustee is not required to expend or risk its own funds or otherwise incur financial liability in performing its duties or exercising its rights and powers if it reasonably believes that it is not reasonably assured of repayment or indemnity satisfactory to it. U.S. Bank National Association is the Trustee under the Indenture. The Trustee’s current address is Corporate Trust Services, 633 West Fifth Street, 24th Floor, Los Angeles, California 90071. The Trustee under the Indenture acts as depositary for funds of, makes loans to, and/or performs other services for, the Company and its Subsidiaries in the normal course of business. Certain Definitions “Acquisition” means any acquisition (in one transaction or a series of related transactions, including by way of merger or consolidation) of (a) Capital Stock in any Person if, after giving effect thereto, such Person will become a Subsidiary of the Company or (b) assets comprising all or substantially all the assets of (or all or substantially all the assets constituting a business consistent with past practice;
. changing accounting practicesunit, division, product line or revaluing assets;
. entering intoline of business of) any agreement regardingPerson. “Additional Notes” has the acquisition, distributionmeaning given to it under “—General.” “Adjusted EBITDA” for any period means the sum of Consolidated Net Income, plus the following to the extent deducted in calculating such Consolidated Net Income: | | | (1) | all income tax expense of the Company and its consolidated Restricted Subsidiaries; plus |
| | | (2) | Consolidated Interest Expense; plus |
| | | (3) | all amounts attributable to depreciation and amortization of intangible assets for such period (excluding amortization expense attributable to a prepaid item that was paid in cash in a prior period); plus |
| | | (4) | any non-cash charges for such period (excluding any additions to bad debt reserves or bad debt expense, any writedown or writeoff of marketable securities and any non-cash charge to the extent it represents an accrual of or a reserve for cash expenditures in any future period); plus |
| | | (5) | non-recurring cash charges or expenses for such period incurred in connection with any Asset Disposition or Acquisition, |
less, any non-cash items of income (excluding any non-cash items of income (A) in respect of which cash was received in a prior period or licensingwill be received in a future period or (B) that represents the reversal of Illuminet's intellectual property other thanany accrual made in a prior period for anticipated cash charges, but only to the extent such accrual reduced Adjusted EBITDA for such prior period); in each case for such period. In the event any Subsidiary shall be a Subsidiary that is not a Wholly-Owned Subsidiary, all amounts added back in computing Adjusted EBITDA for any period, and all amounts subtracted in computing Adjusted EBITDA, to the extent such amounts are, in the ordinary
course;
. taking any action that would cause any of its representationsreasonable judgment a responsible financial or warranties in the merger agreement to become untrue or inaccurate; or
. engaging in any action with the intent to directly or indirectly adversely
impact anyaccounting Officer of the transactions contemplatedCompany, attributable to such Subsidiary, shall be adjusted by the merger agreement.
The agreements relatedportion thereof that is attributable to the conduct of Illuminet's businessnon-controlling interest in the merger
agreement are complicated and not easily summarized. We urge you to read the
sections of the merger agreement entitled "Conduct Prior to the Effective Time"
carefully.
No Dividends by VeriSign
VeriSign has also agreed that until the closing of the merger, or unless
Illuminet consents in writing, VeriSign will not declare or pay dividends or
make other distributions with respect to its capital stock or split, combine or
reclassify any of its capital stock.
No other negotiations
Until the merger is completed or the merger agreement is terminated,
Illuminet has agreed not to take any of the following actions directly or
indirectly:
. solicit, initiate, seek, entertain, encourage, facilitate, support or
induce any Acquisition Proposal, as defined below;
. participate in any discussions or negotiations regarding any Acquisition
Proposal;
. furnish any non-public informationsuch Subsidiary. “Adjusted Treasury Rate” means, with respect to any Acquisition
Proposal;
redemption date, (i) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15(519)” or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after May 1, 2018, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal
to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, in each case calculated on the third Business Day immediately preceding the redemption date, plus 0.50%. take “Affiliate” of any specified Person means any other action to facilitate any inquiriesPerson, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the makingpurposes of any
Acquisition Proposal;
. engage in discussions with any personthis definition, “control” when used with respect to any Acquisition
Proposal;
. approve, endorsePerson means the power to direct the management and policies of such Person, directly or recommend any Acquisition Proposal;indirectly, whether through the ownership of voting securities, by contract or . enter into any letter of intent or similar document or any contract,
agreement or commitment relating to any Acquisition Proposal.
However, if Illuminet receives an unsolicited, written, bona fide
Acquisition Proposal prior to its stockholders' meeting that its board
reasonably concludes after consultation with its financial advisor may
constitute a Superior Offer, as defined below, Illuminet may furnish non-public
information regarding it and may enter into discussions with the person or
group who has made that Acquisition Proposal, if:
. neither Illuminet nor its representatives shall have violated the
provisions relating to any other negotiations;
. Illuminet's board of directors concludes in good faith after consultation
with outside legal counsel that this action is required for the board of
directors to comply with its fiduciary obligations to its stockholders
under applicable law;
. prior to furnishing non-public information to, or entering into any
discussions with, a party making the Acquisition Proposal, Illuminet gives
VeriSign written notice of the Acquisition Proposal, including the
51
identity of the party making the Acquisition Proposalotherwise; and the material
terms “controlling” and conditions of the Acquisition Proposal;
. Illuminet furnishes the non-public information to VeriSign at the same
time that Illuminet furnishes this information“controlled” have meanings correlative to the party makingforegoing. “Applicable Premium” means with respect to a Note at any redemption date the Acquisition Proposalexcess of (if any) (A) the present value at such redemption date of (1) the redemption price of such Note on May 1, 2018 (such redemption price being described in the second paragraph in this “—Optional Redemption” section exclusive of any accrued interest) plus (2) all required remaining scheduled interest payments due on such Note through May 1, 2018 (but excluding accrued and the information furnishedunpaid interest to the other party is
subject to an agreement requiring the confidential treatment of that
information; and
. Illuminet gives VeriSign at least three business days' advance notice of
its intent to furnish non-public information to or enter into discussions.
Illuminet has agreed to inform VeriSign promptly as to any Acquisition
Proposal, request for non-public information that Illuminet reasonably believes
would lead to an Acquisition Proposal or inquiry that Illuminet reasonably
should believe would lead to an Acquisition Proposal, the identity of the party
making the Acquisition Proposal, request or inquiry, and the material terms of
the Acquisition Proposal, request or inquiry. Illuminet also has agreed to keep
VeriSign informed asredemption date), computed using a discount rate equal to the statusAdjusted Treasury Rate, over (B) the principal amount of any Acquisition Proposal, request or
inquiry and to provide VeriSign a copy of all written materials provided to
Illuminet in connection with any request or inquiry.
An Acquisition Proposal is any offer or proposal by a third party relating
to:
. the acquisition or purchase of more than a 20% interest in the total
outstanding voting securities of Illuminet or any of its subsidiaries;
. any tender offer or exchange offer, that, if consummated, would result in
any person or group beneficially owning 20% or more of the total
outstanding voting securities of Illuminet or any of its subsidiaries;
. any merger, consolidation, business combination or similar transaction
involving Illuminet under which stockholders of Illuminet immediately
prior to the acquisition hold less than 80% of the equity interest in the
resulting entity;
.such Note on such redemption date. “Asset Disposition” means any sale, lease outside the ordinary course of business, exchange,
transfer, license outside the ordinary course of business, or acquisition
or disposition of any material portion of the assets of Illuminet; or
. any liquidation or dissolution of Illuminet.
A Superior Offer with respect to Illuminet is(other than an unsolicited, bona fide
written proposal made by a third party to complete any of the following
transactions:
. a merger or consolidation involving Illuminet under which the stockholders
of Illuminet immediately preceding the transaction hold less than 50% of
the equity interest in the surviving entity of the transaction; or
. the acquisition by any person or group, including by way of a tender offer
or an exchange offer or a two step transaction involving a tender offer
followed with reasonable promptness by a merger involving the company,
directly or indirectly, of ownership of 100% of the then outstanding
shares of capital stock of Illuminet
on terms that the board of Illuminet determines, in its reasonable judgment,
after consultation with its financial advisor, to be more favorable to
Illuminet's stockholders from a financial point of view than the terms of the
merger. An offer will not be a Superior Offer if any financing required to
complete the transaction is not committed or is not likely in the reasonable
judgment of Illuminet's board of directors, after consultation with its
financial advisor, to be obtained on a timely basis.
Illuminet's board may, without breaching the merger agreement, withhold,
withdraw, amend or modify its recommendation in favor of the merger proposal
if:
. a Superior Offer is made to Illuminet and is not withdrawn;
. Illuminet provides written notice to VeriSign, including the identity of
the party making the Superior Offer and specifying the material terms and
conditions of the Superior Offer;
52
. VeriSign does not, within five business days after receiving this written
notice, make an offer that the board of Illuminet determines by majority
vote in its good faith judgment, after consultation with its financial
advisor, to be at least as favorable to Illuminet's stockholders as the
Superior Offer;
. Illuminet's board concludes in good faith, after consultation with its
outside legal counsel, that the withholding, withdrawal, amendment or
modification of its recommendation is required for the board to comply
with its fiduciary obligations to Illuminet's stockholders under
applicable law; and
. Illuminet has not violated specified provisions in the merger agreement.
Illuminet also agreed to provide VeriSign with prior notice of any meeting
of its board at which Illuminet's board is reasonably expected to consider any
Acquisition Proposal to determine whether it is a Superior Offer. Even if the
board's recommendation is withheld, withdrawn, amended or modified, Illuminet
must nevertheless hold and convene the stockholders meeting.
Public disclosure
Each of us will consult with the other and, to the extent practicable, agree
before issuing any press release or making any public statement with respect to
the merger, the merger agreement, or any Acquisition Proposal.
Employee benefit plans
VeriSign and Illuminet will work together to agree upon mutually acceptable
employee benefit and compensation arrangements. Illuminet will terminate its
severance, separation, retention and salary continuation plans, programs or
arrangements prior to the effective time of the merger, subject to specified
exceptions. The merger agreement also provides that Illuminet employees will
also be granted credit for service with Illuminet for purposes of VeriSign
employment plans for which they are eligible.
Treatment of Illuminet stock options
Upon completion of the merger, each outstanding option to purchase Illuminet
common stock will be converted, in accordance with its terms, into an option to
purchase the number of shares of VeriSign common stock equal to 0.93 times the
number of shares of Illuminet common stock that could have been obtained before
the merger upon the exercise of each option, rounded down to the nearest whole
share. The exercise price will be equal to the exercise price per share of
Illuminet common stock subject to the option before conversion divided by 0.93,
rounded to the nearest whole cent.
The other terms of each option referred to above will continue to have
substantially the same terms and conditions that the options had prior to the
merger. The vesting of outstanding options under Illuminet's option plans will
accelerate in full upon approval of the merger by the stockholders of
Illuminet. Upon completion of the merger, each outstanding award, including
restricted stock, stock equivalents and stock units, under any employee
incentive or benefit plans, programs or arrangements maintained by Illuminet
which provide for grants of equity-based awards will be amended or converted
into a similar instrument of VeriSign, with certain adjustments to preserve
their value. The other terms of each Illuminet award, and the plans or
agreements under which they were issued, will continue to apply in accordance
with their terms, including any provisions providing for acceleration.
VeriSign will file a registration statement on Form S-8 for the shares of
VeriSign common stock issuable with respect to converted Illuminet options and
will maintain the effectiveness of that registration statement on a basis
comparable to registration statements applicable to other outstanding stock
options of VeriSign.
Indemnification of Illuminet Directors and Officers
After the merger, VeriSign will honor indemnification agreements between
Illuminet and its directors and officers in effect at the time of the merger
and will substantially maintain the indemnification provisions of Illuminet's
certificate of incorporation and bylaws as in effect at the time of the merger
agreement for a period of six years following the merger. For six years
following the merger, VeriSign will maintain liability insurance for
Illuminet's directors and officers on terms comparable to that provided by
Illuminet to its directors and officers, subject to a maximum expense of two
times the amount paid by Illuminet for such coverage.
53
Conditions to completion of the merger
Our obligations to complete the merger are subject to the satisfaction or
waiver of each of the following conditions before closing the merger:
. the merger agreement and the merger must be approved by stockholders of
Illuminet;
. VeriSign's registration statement, of which this proxy
statement/prospectus is a part, must be effective, no stop order
suspending its effectiveness may be in effect and no proceedings for
suspending its effectiveness may be pending before or threatened by the
SEC;
. no governmental entity shall have enacted or issued any law, regulation or
order that has the effect of making the merger illegal, otherwise
prohibiting the closing of the merger;
. all applicable waiting periods under applicable antitrust laws must have
expired or been terminated; and
. the shares of VeriSign common stock to be issued in the merger must be
authorized for quotation on the Nasdaq National Market, subject to notice
of issuance.
Illuminet's obligations to complete the merger are subject to the
satisfaction or waiver of each of the following additional conditions:
. VeriSign's representations and warranties must be true and correct in all
material respects at and as of the date the merger is to be completed as
if made at and as of that time, except VeriSign's representations and
warranties that address matters only as of a particular date, which must
be true and correct, in all material respects as of that date;
. VeriSign must have performed or complied in all material respects with all
of its agreements and covenants required by the merger agreement to be
performed or complied with by it at or before closing the merger;
. no material adverse effect with respect to VeriSign shall have occurred
since September 23, 2001 and be continuing; and
. Illuminet must receive from its tax counsel an opinion to the effect that
the merger will constitute a tax-free reorganization within the meaning of
section 368(a) of the Internal Revenue Code.
VeriSign's obligations to complete the merger are subject to the
satisfaction or waiver of each of the following additional conditions:
. Illuminet's representations and warranties must be true and correct in all
material respects as of the date the merger is to be completed as if made
at and as of that time, except Illuminet's representations and warranties
that address matters only as of a particular date must be true and correct
in all material respects, as applicable, as of that date;
. Illuminet must have performed or complied in all material respects with
all of its agreements and covenants required by the merger agreement to be
performed or complied with by Illuminet at or before the closing of the
merger;
. no material adverse effect with respect to Illuminet shall have occurred
since September 23, 2001 and be continuing;
. VeriSign shall have received from Illuminet's regulatory counsel an
opinion as to specified regulatory matters;
. all material required approvals or consents of any governmental entity or
other person shall have been obtained and become final, including the FCC
and the FTC, and are not on terms reasonably likely to materially affect
the ownership or operations of business by VeriSign; and
54
. there shall not be instituted or pending any action or proceeding by a
governmental entity seeking to:
. restrain or prohibit the ownership or operation by VeriSign of all or
any portion of Illuminet's business or for VeriSign to dispose of any
business or assets of Illuminet;
. seeking to impose limitations on the ability of VeriSign to exercise
full ownership rights of the Illuminet stock it acquires; or
. seeking to require VeriSign to divest the assets or shares of Illuminet
it acquires.
A material adverse effect is defined to be any change, event, violation,
inaccuracy, circumstance or effect that is, or is reasonably likely to be,
materially adverse to (1) the business, assets, capitalization, regulatory
environment, financial condition, operations or results of operations of the
company taken as a whole with its subsidiaries or (2) the ability of the
parties to consummate the merger within the time frame the merger would
otherwise be consummated. A material adverse effect does not include a change,
event, violation, inaccuracy, circumstance or effect that directly and
primarily results from:
. changes in general economic conditions so long as the change does not
affect the company in a disproportionate manner;
. changes affecting the company's industry generally, so long as the change
does not affect the company in a disproportionate manner; or
. changes in the market price of VeriSign or Illuminet common stock.
Termination of the merger agreement
The merger agreement may be terminated at any time prior to closing the
merger, whether before or after the requisite stockholder approval:
. by mutual consent duly authorized by the boards of VeriSign and Illuminet;
. by either VeriSign or Illuminet, if the merger is not completed by
September 30, 2002, except that the right to terminate the merger
agreement under this provision is not available to any party whose action
or failure to act has been a principal cause of or resulted in the failure
of the merger to occur on or by September 30, 2002, and this action or
failure to act constitutes a breach of the merger agreement;
. by VeriSign or Illuminet, if a governmental authority has issued an order,
decree or ruling or taken any other action that is final and
nonappealable, having the effect of permanently enjoining, restraining or
prohibiting the merger;
. by VeriSign or Illuminet, if the merger is not approved by the
stockholders of Illuminet, except that the right to terminate the merger
agreement under this provision is not available to Illuminet where the
failure to obtain stockholder approval was caused by an action or failure
to act by Illuminet that constitutes a breach of the merger agreement, or
a breach of the voting agreements described under "Related
Agreements--Voting Agreement";
. by VeriSign at any time prior to the adoption and approval of the merger
agreement and the merger by the required vote of stockholders of
Illuminet, if a Triggering Event, as described below, occurs; or
. by Illuminet, on the one hand, or VeriSign, on the other, upon a breach of
any representation, warranty, covenant or agreement on the part of the
other in the merger agreement, or if any of the other's representations or
warranties are or become untrue, so that the corresponding condition to
closing the applicable merger would not be met. However, if the breach or
inaccuracy is curable by the breaching party through the exercise of its
commercially reasonable efforts, and the breaching party continues to
exercise commercially reasonable efforts, then the other may not terminate
the merger agreement if the breach or inaccuracy is cured within 30 days
after delivery of the notice of breach or inaccuracy.
55
A Triggering Event will occur if:
. Illuminet's board of directors or any committee withdraws or amends or
modifies in a manner adverse to VeriSign its recommendation in favor of
the adoption and approval of the merger agreement and the approval of the
merger;
. Illuminet fails to include in this prospectus/proxy statement the
recommendation of its board of directors in favor of the adoption and
approval of the merger agreement and the approval of the merger;
. Illuminet's board of directors fails to reaffirm its recommendation in
favor of adoption and approval of the merger agreement and the approval of
the merger within 10 business days after VeriSign requests in writing that
this recommendation be reaffirmed at any time after the public
announcement of an Acquisition Proposal;
. Illuminet's board of directors approves or publicly recommends any
Acquisition Proposal;
. Illuminet enters into a letter of intent or agreement accepting an
Acquisition Proposal;
. Illuminet shall have materially breached the non-solicitation provisions
of the merger agreement or the provisions of the merger agreement relating
to holding the Illuminet's stockholders meeting; or
. if a tender offer or exchange offer relating to the securities of
Illuminet is commenced by a person or entity unaffiliated with VeriSign,
and Illuminet does not send to its stockholders within 10 business days
after the tender offer or exchange offer is first commenced a statement
disclosing that Illuminet recommends rejection of the tender offer or
exchange offer.
Termination fee
Illuminet is obligated to pay VeriSign a termination fee equal to $45.5
million in immediately available funds if VeriSign terminates the merger
agreement at any time prior to approval of the merger by Illuminet's
stockholders because a Triggering Event has occurred.
Illuminet is obligated to pay a termination fee equal to $45.5 million if:
. prior to termination of the merger agreement an Acquisition Proposal is
publicly announced;
. if the merger agreement was terminated because:
. the merger fails to close by September 30, 2002;
. Illuminet or VeriSign terminates the merger agreement because the
required approval of the merger by Illuminet's stockholders was not
obtained; or
. VeriSign terminates the merger agreement due to a breach of a
representation, warranty covenant or agreement of Illuminet; and
. within 18 months of the termination of the merger agreement, Illuminet
completes an Acquisition or enters into an agreement providing for an
Acquisition and that Acquisition is later completed with the person with
whom the agreement wasoperating lease entered into regardless of when the completion
occurs, if Illuminet had entered into the agreement during the
eighteen-month period.
An Acquisition is any of the following:
. a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the company in
which Illuminet's stockholders immediately preceding the transaction hold
less than 50% of the aggregate equity interests in the surviving entity of
the transaction;
. a sale or other disposition by Illuminet of assets representing in excess
of 50% of the aggregate fair market value of its business immediately
prior to the sale; or
. the acquisition by any person or group, including by way of a tender offer
or an exchange offer or issuance by Illuminet, directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 50% of the voting power of the then outstanding
shares of capital stock of Illuminet.
56
Amendment, extension and waiver of the merger agreement
We may amend the merger agreement before closing the merger by execution of
a written instrument signed by each of us, provided that we comply with
applicable state law in amending the agreement. Either of us may extend the
other's time for the performance of any of the obligations or other acts under
the merger agreement, waive any inaccuracies in the other's representations and
warranties and waive compliance by the other with any of the agreements or
conditions contained in the merger agreement.
57
RELATED AGREEMENTS
This section of the prospectus/proxy statement describes agreements related
to the merger agreement including the stock option agreement and the voting
agreements. While we believe that these descriptions cover the material terms
of these agreements, these summaries may not contain all of the information
that is important to you. The stock option agreement is attached as Annex B,
and the form of voting agreement is attached as Annex C, and we urge you to
read them carefully.
The stock option agreement
The stock option agreement grants VeriSign the right to buy up to a number
of shares of Illuminet common stock equal to 19.9% of the issued and
outstanding shares of Illuminet common stock as of the date, if any, after
which the option is exercisable and on which VeriSign delivers an exercise
notice to Illuminet, at an exercise price of $35.62 per share. Based on the
number of shares of Illuminet common stock outstanding on September 20, 2001,
the option would be exercisable for approximately 6,499,649 shares of Illuminet
common stock. VeriSign required Illuminet to grant this stock option as a
prerequisite to entering into the merger agreement.
The option is intended to increase the likelihood that the merger will be
completed. Certain aspects of the stock option agreement may have the effect of
discouraging persons who might be interested in acquiring all or a significant
interest in Illuminet or its assets before completion of the merger. The option
is not currently exercisable.
Until the option's termination, as described below, VeriSign may exercise
the option, in whole or part, and from time to time after any of the following:
. a triggering event, as described above on page 56, occurs;
. the board amends the Rights Agreement or takes any other action with
regard to corporate laws impeding business combinations in connection with
any acquisition proposal, as described above on page 52;
. the failure of Illuminet to convene its stockholders' meeting within 45
days of the effectiveness of the registration statement of which this
prospectus/proxy statement is a part;
. the public announcement of the acquisition by any person or group of more
than 20% of the total outstanding voting securities of Illuminet or any of
its subsidiaries;
. the public announcement of any tender offer or exchange offer that, if
consummated, would result in any person or group owning 20% or more of the
total outstanding voting securities of Illuminet or any of its
subsidiaries;
. the public announcement of a bona fide proposal or offer by a person
reasonably able to consummate a merger, consolidation, business
combination, or other similar transaction after which, the Illuminet
stockholders immediately before the merger or business combination will
own less than 80% of the surviving entity's equity interests;
. a sale, lease, exchange, transfer, license (other than in the ordinary course of business), acquisitiontransfer or other disposition, including the exclusive license of (or series of related sales, leases, transfers, dispositions or exclusive licenses) by the Company or any material assetsRestricted Subsidiary, including any disposition by means of Illuminet;a merger, consolidation or .similar transaction (each referred to for the purposes of this definition as a solicitation“disposition”), of: | | | (1) | any shares of Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary); |
| | | (2) | all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary; or |
| | | (3) | any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary. |
“Attributable Debt” in respect of Illuminet's stockholdersa Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended); provided, however, that if such Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of “Capital Lease Obligation.” “Board of Directors” means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board or, in the case of a Person that is commenced seeking to alternot a corporation, the compositiongroup exercising the authority generally vested in a board of Illuminet's board.
VeriSigndirectors of a corporation. “Business Day” means each day which is not a Saturday, a Sunday or a day on which banking institutions are not required to terminatebe open in the merger agreement before exercisingState of New York. “Capital Lease Obligation” means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the option.
The optionamount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. For purposes of the covenant described under “—Certain Covenants—Limitation on Liens,” a Capital Lease Obligation will terminatebe deemed to be secured by a Lien on the property being leased. “Capital Stock” of any Person means any and will not be exercisable uponall shares, interests (including partnership, membership, beneficial or other ownership interests), rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. “Change of Control” means the earliestoccurrence of any of the following:
| | | (1) | any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets), other than by the imposition of a holding company, the beneficial owners of whose Voting Stock would not have caused a Change of Control if such beneficial owners had directly held the Voting Stock of the Company held by such holding company; |
| | | (2) | the adoption of a plan relating to the liquidation or dissolution of the Company; |
| | | (3) | the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or |
| | | (4) | the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale, lease, transfer, conveyance or other disposition (other than by way or merger or consolidation, in one or a series of related transactions) of all or substantially all the assets of the Company (determined on a consolidated basis) to another Person other than a transaction, in the case of a merger or consolidation transaction, following which holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least 50% of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction. |
“Change of Control Offer” has the meaning given to occur:
. completionit under “—Change of Control.” “Change of Control Triggering Event” means, with respect to the Notes, (i) the consummation of a Change of Control and (ii) the Notes are rated below an Investment Grade Rating by each of the merger; or
. 12 monthsRating Agencies on any date during the period commencing on the first public announcement by us of any Change of Control (or pending Change of Control) and ending 30 days following the terminationconsummation of such Change of Control (which period will be extended following consummation of a Change of Control for so long as any of the merger agreement.
58
The amountRating Agencies has publicly announced that it is considering a possible ratings downgrade). For the avoidance of profit that VeriSign may realize under the option, together
with any termination fee, is subjectdoubt, no Change of Control Triggering Event will be deemed to a profit cap. This "profit cap" is
$65.0 million. If the sum of any termination fee received by VeriSign, plus all
proceeds received by VeriSignhave occurred in connection with any sales or other
dispositionsparticular Change of Control unless and until such Change of Control has actually been consummated. “Code” means the Internal Revenue Code of 1986, as amended. “Comparable Treasury Issue” means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the option or shares acquired upon exerciseNotes from the redemption date to May 1, 2018, that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a maturity most nearly equal to May 1, 2018. “Comparable Treasury Price” means, with respect to any redemption date, if clause (ii) of the option,Adjusted Treasury Rate is applicable, the average of three, or such lesser number as is obtained by the Trustee, Reference Treasury Dealer Quotations for such redemption date. “Consolidated Interest Expense” means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries, without duplication: | | | (1) | interest expense attributable to Capital Lease Obligations, the interest portion of rent expense associated with Attributable Debt in respect of the relevant lease giving rise thereto, determined as if such lease were a capitalized lease in accordance with GAAP, and the interest component of any deferred payment obligations; |
| | | (2) | amortization of debt discount (including the amortization of original issue discount resulting from the issuance of Indebtedness at less than par) and debt issuance cost; |
| | | (3) | contingent interest on the Subordinated Convertible Debentures or Subordinated Convertible Debentures Refinancing Indebtedness; |
| | | (5) | non-cash interest expense; provided, however, that any non-cash interest expense or income attributable to the movement in the mark-to-market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP shall be excluded from the calculation of Consolidated Interest Expense); |
| | | (6) | commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing Incurred pursuant to any Credit Facility; |
| | | (7) | the product of (a) all dividends accrued in respect of all Disqualified Stock of the Company and all Preferred Stock of any Restricted Subsidiary, in each case, held by Persons other than the Company or a Restricted Subsidiary (other than dividends payable solely in Capital Stock (other than Disqualified Stock) of the Company), times (b) a fraction of the numerator of which is one and the denominator of which is one minus the effective combined tax rate of the issuer of such Disqualified Stock or Preferred Stock (expressed as a decimal) for such period (as estimated by a responsible accounting or financial officer of the Company in good faith); and |
| | | (8) | to the extent a payment is made by the Company or a Restricted Subsidiary under a Guarantee of Indebtedness of any other Person, interest accruing on such Indebtedness to the extent such Indebtedness is Guaranteed by (or secured by a Lien on the assets of) the Company or any Restricted Subsidiary. |
“Consolidated Leverage Ratio” as of any dividends received by VeriSigndate of determination means the ratio of (x) without duplication, the aggregate amount of Indebtedness of the Company and its Restricted Subsidiaries determined on its option shares, is greatera consolidated basis (excluding Hedging Obligations entered into other than for speculative purposes) as of such date of determination to (y) Adjusted EBITDA of the profit cap, then VeriSign must promptly remit the excess in cash to Illuminet.
In addition, VeriSign may require Illuminet to repurchase the option if the
option becomes exercisable, for a purchase priceCompany for the remainderrelevant Reference Period; provided, however, that if since the beginning of such Reference Period the Company or any Restricted Subsidiary has: | | | (1) | repaid, repurchased, defeased or otherwise discharged (including through any Material Disposition) or Incurred any Indebtedness (including through any Material Investment or any Material Acquisition), other than, in each case, Indebtedness Incurred under a revolving credit facility, Adjusted EBITDA will be calculated for such Reference Period as if such transaction had occurred on the first day of such Reference Period; |
| | | (2) | made any Material Disposition, the Adjusted EBITDA for such Reference Period shall be reduced by an amount equal to the Adjusted EBITDA (if positive) directly attributable to the assets which are the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Adjusted EBITDA (if negative) directly attributable thereto for such Reference Period; |
| | | (3) | made any Material Investment or any Material Acquisition, Adjusted EBITDA for the Reference Period shall be calculated after giving pro forma effect thereto as if such Material Investment or Material Acquisition, as applicable, had occurred on the first day of such Reference Period; and |
| | | (4) | designated any Restricted Subsidiary as an Unrestricted Subsidiary or designated any Unrestricted Subsidiary to be a Restricted Subsidiary, Adjusted EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such designation had occurred on the first day of the Reference Period. |
For purposes of this definition, whenever pro forma effect is to be given to any transaction described above, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the unexercised option calculated by subtractingCompany as if such transaction had occurred on the exercise pricefirst day of the option
fromperiod of four consecutive fiscal quarters ending with the higher of:
.most recent fiscal quarter for which financial statements shall have been delivered to the highest price paid by an acquiring person for an Illuminet shareTrustee pursuant to the covenant described under “Certain Covenants—Reports”, all in accordance with Article 11 of Regulation S-X under the Securities Act. If the transaction triggeringgiving rise to the exercisabilityneed to calculate the Consolidated Leverage Ratio is an Incurrence of Indebtedness, the amount of such Indebtedness shall be calculated after giving effect on a pro forma basis to such Indebtedness. “Consolidated Net Income” means, for any period, the net income of the option;Company and its consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP for such period; provided, however, that there will not be included in such Consolidated Net Income on an after-tax basis: | | | (1) | any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that: |
| | | (A) | subject to the limitations contained in clauses (3) through (7) below, the Company’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, for the purposes of the calculation of the amount under paragraph (a)(2) of the covenant described under “Certain Covenants—Limitation on Restricted Payments” only, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (2) below); and |
| | | (B) | the Company’s equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income only to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary; |
| | | (2) | for the purposes of the calculation of the amount under paragraph (a)(2) of the covenant described under “Certain Covenants––Limitation on Restricted Payments” only, any net income of any Restricted Subsidiary, to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its net income is not at the date of determination permitted without any prior governmental approval (which approval has not been obtained or which approval cannot be obtained within 90 of days of a request for such approval (as reasonably determined in good faith by the Company)) or by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, except that: |
| | | (A) | subject to the limitations contained in clauses (3) through (7) below, the Company’s equity in the net income of any such Restricted Subsidiary for such period shall be included (to the extent not already included therein) up to the aggregate amount of cash actually distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, for the purposes of the calculation of the amount under paragraph (a)(2) of the covenant described under “Certain Covenants––Limitation on Restricted Payments” only, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause); and |
| | | (B) | the Company’s equity in a net loss of any such Restricted Subsidiary for such period shall be included (to the extent not already included therein) in determining such Consolidated Net Income; |
| | | (3) | extraordinary, unusual or nonrecurring gains or losses and any impairment, writedown or writeoff of goodwill or any other property or assets; |
| | | (4) | the cumulative effect of a change in accounting principles; |
| | | (5) | any net gain (or loss) attributable to the early retirement or conversion of Indebtedness or early termination of Hedging Obligations or any unrealized gains and losses attributable to the application of “mark-to-market” accounting in respect of Hedging Obligations, the contingent interest derivative on the Subordinated Convertible Debentures or any Subordinated Convertible Debentures Refinancing Indebtedness or any Permitted Convertible Debt Call Transaction; |
| | | (6) | any non-cash compensation expense; and |
| | | (7) | the net income or loss of any consolidated Restricted Subsidiary that is not wholly owned by the Company to the extent such income or loss or such amounts are attributable to the non-controlling interest in such consolidated Restricted Subsidiary, |
in each case, for such period. Notwithstanding the foregoing, for the purposes of the calculation of the amount under paragraph (a)(2) of the covenant described under “Certain Covenants––Limitation on Restricted Payments” only, there shall be excluded from Consolidated Net Income any repurchases, repayments or ifredemptions of Investments, proceeds realized on the
transaction is a sale of Illuminet'sInvestments or return of capital to the Company or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(2)(D) thereof.
“Consolidated Net Tangible Assets” means, with respect to any Person, the total of all assets appearing on the most recently available consolidated balance sheet of such Person, less the sum of the total price
paid forfollowing amounts appearing on such consolidated balance sheet: amounts, if any, at which goodwill, trademarks, trade names, copyrights, patents and other similar intangible assets, plus and debt issuance costs, shall appear as assets; all amounts at which investments in Persons which are not being consolidated shall appear on such consolidated balance sheet as assets; the valueamount of all liabilities appearing on such consolidated balance sheet as current liabilities (other than deferred revenues, deferred taxes, the remaining assetscurrently maturing portion of Illuminet,
divided by the number of Illuminet shares then outstanding;long-term debt or . the highest closing price of Illuminet common stock for the thirty trading
days ending the trading day before the date of the VeriSign request;
and multiplying the difference by the number of shares of Illuminet common
stock that VeriSign could still acquire at that time under the option.
The stock option agreement grants registration rights to VeriSign with
respect to the shares of Illuminet common stock represented by the option.
Voting Agreements
VeriSign required the following Illuminet stockholders, officers and
directors Roger Moore, Theodore Berns, Jack Blumenstein, Terry Kremian, Richard
Lumpkin, David Nicol, James Strand and Greg Wilkinson to enter into voting
agreements. These voting agreements require these Illuminet stockholders to
vote all of the shares of Illuminet common stock beneficially owned by them in
favor of the merger and against any competing acquisition proposal or superior
offer, eachConvertible Debt appearing as described above, and against any action or agreement that would
result in a breach of any covenant, representation or warranty or any other
obligation of Illuminet under the merger agreement or of the stockholder under
his voting agreement. The voting agreements apply only to the exercise of
voting rights attaching to Illuminet shares and shall not limit the discretion
of any stockholder who is a director of Illuminet with respect to his dutiescurrent liabilities as a directorresult of Illuminet.
In addition, each Illuminet stockholder who isconversion rights); and any minority interest appearing on such consolidated balance sheet, all as determined on a party to a voting agreement
agreed not to sell the Illuminet stock and options owned, controlled or
acquired, either directly or indirectly, by that person until the termination
of the voting agreement or the record date for the Illuminet stockholders'
meeting.
The Illuminet stockholders' voting agreements will terminate upon the
earliest to occur of the termination of the merger agreementconsolidated basis in accordance with its terms or the completionGAAP. “Continuing Directors” means, as of any date of determination, any member of the merger.
AsBoard of Directors of the record date, the Illuminet stockholders who entered into voting
agreements collectively beneficially owned sharesCompany who: (1) was a member of outstanding
Illuminet common stock, which represented approximately %such Board of the outstanding
Illuminet common stock. None of the Illuminet stockholders who are parties to
the voting agreements were paid additional consideration in connection with
them.
59
PROPOSAL TWO--ADJOURNMENT OF THE SPECIAL MEETING
If at the Illuminet special meeting on , 2001, the number of shares of
Illuminet common stock present or represented and voting in favor of approval
of the merger is insufficient to approve the merger under Delaware law and
under Illuminet's certificate of incorporation, Illuminet management intends to
move to adjourn the special meeting in order to enable the Illuminet board of
directors to continue to solicit additional proxies in favor of the merger. In
that event, Illuminet will ask its stockholders to vote only upon the
adjournment proposal, and not the proposal regarding the approval and adoption
of the merger agreement and the merger.
In this proposal, Illuminet is asking you to authorize the holder of any
proxy solicited by the Illuminet board of directors to vote in favor of
adjourning the special meeting, and any later adjournments, to a date or dates
not later than , 2002, in order to enable the Illuminet board of
directors to solicit additional proxies in favor of the merger. If the
stockholders approve the adjournment proposal, Illuminet could adjourn the
special meeting, and any adjourned session of the special meeting, to a date
not later than , 2002 and use the additional time to solicit additional
proxies in favor of the merger, including the solicitation of proxies from
stockholders that have previously voted against the merger. Among other things,
approval of the adjournment proposal could mean that, even if Illuminet had
received proxies representing a sufficient number of votes against the merger
to defeat the merger proposal, Illuminet could adjourn the special meeting
without a voteDirectors on the merger proposalIssue Date; or (2) was nominated for upelection or elected to days and seek during that
period to convince the holderssuch Board of those shares to change their votes to votes
in favor of the merger.
Under Illuminet's certificate of incorporation and bylaws, the adjournment
proposal requiresDirectors with the approval of a majority of the votes castContinuing Directors who were members of such Board of Directors at the time of such nomination or election. “Convertible Debt” means debt securities issued by the Company that are convertible into common stock of the Company. “Cooperative Agreement” means that certain Cooperative Agreement No. NCR-92-18742 between VeriSign, Inc. (as successor to Network Solutions, Incorporated) and the United States Department of Commerce (as successor to the National Science Foundation), entered into as of January 1, 1993 (as amended from time to time). “Credit Facilities” means one or more debt facilities (including the Unsecured Credit Agreement), commercial paper facilities or similar agreements, in each case, with banks or other institutional lenders or investors providing for revolving loans, term loans, receivables financing (including through the sale of receivables to lenders or to special purpose entities formed to borrow from lenders against such receivables), letters of credit or any related notes, guarantees, collateral documents, instruments and agreement executed in connection therewith, and, in each case, as amended, restated, replaced (whether upon or after termination or otherwise), refinanced, supplemented, modified or otherwise changed (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time. “Default” means any event which is, or after notice or passage of time or both would be, an Event of Default. “Disqualified Stock” means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the Holder) or upon the happening of any event: | | | (1) | matures or is mandatorily redeemable (other than redeemable only for Capital Stock of such Person which is not itself Disqualified Stock) pursuant to a sinking fund obligation or otherwise; |
| | | (2) | is convertible or exchangeable at the option of the Holder for Indebtedness or Disqualified Stock; or |
| | | (3) | is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part; |
in each case on or prior to the proposal.
Broker non-votesday that is 91 days after the Stated Maturity of the Notes; provided, however, that only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable prior to such date will be deemed to be Disqualified Stock; provided further, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an “asset disposition” or a “change of control” (each defined in a substantially identical manner to the corresponding definitions in the Indenture) shall not constitute Disqualified Stock if the terms of such Capital Stock (and all such securities into which it is convertible or for which it is ratable or exchangeable) provide that such
Person may not repurchase or redeem any such Capital Stock (and all such securities into which it is convertible or for which it is ratable or exchangeable) pursuant to such provisions prior to compliance by such Person with the provisions of the Indenture described under the caption “—Change of Control Triggering Event” and abstentionssuch repurchase or redemption complies with the covenant described under “—Certain Covenants—Limitation on Restricted Payments.” “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended. “Exempted Debt” means, without duplication, (A) all Indebtedness of the Company and its Restricted Subsidiaries which is secured by a Lien incurred and outstanding under clause (a)(15) of “Certain Covenants—Limitation on Liens,” (B) all Attributable Debt in respect of Sale/Leaseback Transactions Incurred and outstanding under clause (a)(3) of “Certain Covenants—Limitation on Sale/Leaseback Transactions” and (C) all Indebtedness of Restricted Subsidiaries of the Company that are not Subsidiary Guarantors Incurred and outstanding under clause (b)(9) of “Certain Covenants—Future Subsidiary Guarantors.” “Fair Market Value” means the price that could be negotiated in an arm’s-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction, as reasonably determined in good faith by a responsible accounting or financial officer of the Company with respect to valuations not in excess of $75.0 million or reasonably determined in good faith by the Board of Directors of the Company with respect to valuations equal to or in excess of $75.0 million, which determination will be conclusive (unless otherwise provided in the Indenture). “Foreign Subsidiary” means a Restricted Subsidiary of the Company that is not organized under the laws of the United States of America or any State thereof or the District of Columbia. “GAAP” means generally accepted accounting principles in the United States as in effect from time to time, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants (or any successor thereto), the statements and pronouncements of the Financial Accounting Standards Board (or any successor thereto) or the statements and pronouncements of the Securities Exchange Commission, in each case applicable to companies subject to reporting under Section 13 or 15(d) of the Exchange Act. Unless otherwise specified, all ratios and computations, contained in the Indenture will be computed in conformity with GAAP, except that the Company may elect to treat for any determination under the Indenture as an operating lease any arrangement, whether entered into on or after the Issue Date, that would have noconstituted an operating lease under GAAP in effect on the outcomeIssue Date notwithstanding any change in its treatment under GAAP after the Issue Date. At any time after the Issue Date, the Company may elect to apply International Financial Reporting Standards as issued by the International Accounting Standards Board or any successor thereto applicable to companies subject to reporting under Section 13 or 15(d) of the voteExchange Act (“IFRS”) in lieu of GAAP and, upon any such election, references herein to GAAP shall thereafter be construed to mean IFRS on the adjournment proposal. No proxydate of such election; provided that any calculation or determination in the Indenture that requires the application of GAAP for periods that include fiscal quarters ended prior to Company’s election to apply IFRS shall remain as previously calculated or determined in accordance with GAAP. “Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person: | | | (1) | to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or |
| | | (2) | entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); |
provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning. The term “Guarantor” shall mean any Person Guaranteeing any obligation. “Guarantee Agreement” means a supplemental indenture to the Indenture, in the form set forth in the Indenture, pursuant to which a Subsidiary Guarantor guarantees the Company’s obligations with respect to the Notes on the terms provided for in the Indenture.
“Hedging Obligations” of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or any foreign exchange contract, currency swap agreement or other similar agreement with respect to currency values. “Holder” means the Person in whose name a Note is registered on the Registrar’s books. “IFRS” has the meaning given to it under the definition of “GAAP.” “Incur” means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The term “Incurrence” when used as a noun shall have a correlative meaning. “Indebtedness” means, with respect to any Person on any date of determination (without duplication): | | | (1) | the principal in respect of indebtedness of such Person for money borrowed, including any indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable; |
| | | (2) | all Capital Lease Obligations and Synthetic Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person; |
| | | (3) | all obligations of such Person in respect of the deferred purchase price of property (excluding (i) accounts payable or other liabilities to trade creditors arising in the ordinary course of business and (ii) any purchase price adjustment or earnout incurred in connection with an Acquisition to the extent such payment is determined by a final closing balance sheet or such payment depends on the performance of such business after the closing; provided, however, that, at the time of closing, the amount of any such payment is not determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is paid within 60 days thereafter); |
| | | (4) | all obligations of such Person for the reimbursement of any obligor on any letter of credit, bankers’ acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the twentieth Business Day following payment on the letter of credit); |
| | | (5) | the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of such Person or, with respect to any Preferred Stock of any Subsidiary of such Person, the amount of such Preferred Stock to be determined in accordance with the Indenture (but excluding, in each case, any accrued dividends); |
| | | (6) | all Guarantees by such Person of obligations of the type referred to in clauses (1) through (5); |
| | | (7) | all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the Fair Market Value of such property or assets and the amount of the obligation so secured; |
| | | (8) | to the extent not otherwise included in this definition, the net Hedging Obligations of such Person (the amount of any such obligations to be equal at any time to the termination value of such agreement or arrangement giving rise to such obligation that would be payable by such Person at such time); and |
| | | (9) | to the extent not otherwise included in this definition, the amount of obligations outstanding under the legal documents entered into as part of a securitization transaction or series of securitization transactions that would be characterized as principal if such transaction were structured as a secured lending transaction rather than as a purchase relating to a securitization transaction or series of securitization transactions. |
The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all obligations as described above; provided, however, that in the case of Indebtedness sold at a discount, the amount of such Indebtedness at any time will be the accreted value thereof at such time. The amount of any Preferred Stock that has a fixed redemption, repayment or repurchase price will be calculated in accordance with the terms of such Preferred Stock as if such Preferred Stock were redeemed, repaid or repurchased on any date on which the amount of such Preferred Stock is to be determined pursuant to the Indenture; provided, however, that if such Preferred Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be calculated as of the first date thereafter on which such Preferred Stock could be required to be so redeemed, repaid or repurchased. If any Preferred Stock does not have a fixed redemption, repayment or repurchase price, the amount of such Preferred Stock will be its maximum liquidation value. “Intellectual Property” means the Registry Agreements, the Cooperative Agreement, all intellectual and similar property of every kind and nature now owned or hereafter acquired by the Company or any Subsidiary of the Company, including inventions, designs, patents, copyrights, trademarks, trade secrets, domain names, confidential or proprietary technical and business information, know-how, show-how or other similar data or information, software and databases and all embodiments or fixations thereof and related documentation, all additions, improvements and accessions to any of the foregoing and all registrations for any of the foregoing. “Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement with respect to exposure to interest rates. “Investment” by any Person means any advance, loan (other than advances made in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extensions of credit (including by way of Guarantees of Indebtedness) by such Person to another Person, or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) another Person, or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by another Person. If the Company or any Restricted Subsidiary issues, sells or otherwise disposes of any Capital Stock of a Person that is specifically marked "AGAINST"
approvala Restricted Subsidiary such that, after giving effect thereto, such Person is no longer a Restricted Subsidiary, any Investment by the Company or any Restricted Subsidiary in such Person remaining after giving effect thereto will be deemed to be a new Investment at such time. The acquisition by the Company or any Restricted Subsidiary of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person at such time. Except as otherwise provided for herein, the amount of an Investment shall be its Fair Market Value at the time the Investment is made and without giving effect to subsequent changes in value. For purposes of the merger agreementdefinition of “Unrestricted Subsidiary,” the definition of “Restricted Payment” and the covenant described under “—Certain Covenants––Limitation on Restricted Payments”: | | | (1) | “Investment” shall include the portion (proportionate to the Company’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary equal to an amount (if positive) equal to the Company’s “Investment” in such Subsidiary at the time of such redesignation less the portion (proportionate to the Company’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and |
| | | (2) | any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer. |
“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent), the case of Moody’s, BBB- (or the equivalent), in the case of S&P, or an equivalent rating, in the case of any other applicable Rating Agency. “Issue Date” means the first date of issuance of the original notes under the Indenture. “Lien” any mortgage or deed of trust, charge, pledge, lien (statutory or otherwise), security interest, assignment, easement, hypothecation, claim, preference, priority or other encumbrance upon or with respect to any priority of any kind (including any conditional sale, capital lease or other title retention agreement) real or personal, moveable or immovable, now owned or hereafter acquired; provided, however, that in no event shall an operating lease be deemed to constitute a Lien. A
Person will be voteddeemed to own subject to a Lien any property which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease Obligation or other title retention agreement. “Material Acquisition” means any acquisition or series of related acquisitions by the Company or any Restricted Subsidiary of: (a) Capital Stock of any Person if, after giving effect thereto, such Person becomes a Subsidiary or is merged with or consolidated into the Company or a Subsidiary, (b) assets comprising all or substantially all the assets of any Person or (c) assets comprising all or substantially all the assets constituting a business unit, division, product line or line of business of any Person; provided that, in favorthe case of clauses (a) and (b), such Subsidiary (or Person merged with or consolidated into the Company or a Subsidiary) or the assets so acquired (if such assets constituted a new Subsidiary) would be a “significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act, and in the case of clause (c), if such business unit, division, product line or line of business constituted a new Subsidiary, it would be a “significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act. “Material Disposition” means any sale, issuance, transfer or other disposition, or series of related sales, issuances, transfers or other dispositions, by the Company or any Restricted Subsidiary of (a) Capital Stock of any Person (including by way of merger with or consolidation into another Person) such that it ceases to be a Subsidiary of the adjournment
proposal, unlessCompany, (b) assets comprising all or substantially all the assets of any Person or (c) assets comprising all or substantially all the assets constituting a business unit, division, product line or line of business of any Person; provided that, in the case of clauses (a) and (b), such Person was a “significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act, and in the in case of clause (c), if such business unit, division, product line or line of business constituted a Subsidiary, it would be a “significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act. “Material Indebtedness” means, without duplication, any Indebtedness in an aggregate principal amount equal to or greater than $75.0 million. “Material Investment” means any Investment by the Company or any Restricted Subsidiary (other than an Investment in the Company or a Restricted Subsidiary, any Temporary Cash Investment or any Hedging Obligation) in one or a series of related transactions in excess of $100.0 million. “Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency business. “Net Cash Proceeds” means, with respect to any issuance or sale of Capital Stock or Indebtedness, means the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. “Obligations” means, with respect to any Indebtedness, all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements and other amounts payable pursuant to the documentation governing such Indebtedness. “Offering Memorandum” means the offering memorandum dated April 11, 2013 related to the offer and sale of the original notes. “Officer” means the Chairman of the Board, the President, the Chief Executive Officer, the Chief Financial Officer, any Executive Vice President, any Senior Vice President, the Treasurer, the Assistant Treasurer, the Secretary or any Assistant Secretaries of the Company. Officer of any Subsidiary has a correlative meaning. “Officers’ Certificate” means a certificate signed by two Officers, at least one of whom must be the Chairman of the Board, the President, the Chief Executive Officer, the Chief Financial Officer, any Executive Vice President, any Senior Vice President, the Treasurer or the Secretary. “Opinion of Counsel” means a written opinion from legal counsel who is specifically marked "FOR"reasonably acceptable to the discretionary authorityTrustee (who may be an employee of or counsel to adjourn the special meetingCompany or the Trustee), subject to a later date.
The board of directors believes that ifcustomary assumptions and qualifications. “Permitted Bond Hedge Transaction” means any net-settled call or capped call option (or substantively equivalent derivative transaction) on the number of shares of IlluminetCompany’s common stock presentunderlying Convertible Debt purchased by the Company in connection, and concurrently, with the bona fide issuance of such Convertible Debt (other than to the Company or represented atany of its Affiliates) to hedge the special meeting and voting in favor
of the merger is insufficientCompany’s obligations to approve the merger agreement, it is in the
best interests of the stockholders of Illuminet to enable the board, for a
limited period of time, to continue to seek to obtain a sufficient number of
additional votes in favor of the merger to bring about its approval.
The board of directors of Illuminet believes deliver common stock (and/or pay cash) under such Convertible Debt;
provided that the terms of such call or capped call option (or substantively equivalent derivative transaction) are customary for “call spread” transactions entered into in connection with the adjournment proposal are fairissuance of convertible or exchangeable debt securities. “Permitted Convertible Debt Call Transaction” means any Permitted Bond Hedge Transaction and any Permitted Warrant Transaction. “Permitted Investment” means an Investment by the Company or any Restricted Subsidiary in: | | | (1) | the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; |
| | | (2) | another Person if, as a result of such Investment, such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to, the Company or a Restricted Subsidiary; |
| | | (3) | cash and Temporary Cash Investments; |
| | | (4) | receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; |
| | | (5) | payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; |
| | | (6) | loans or advances to directors and employees of the Company or any Subsidiary made in the ordinary course of business; |
| | | (7) | stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; |
| | | (8) | any Investment acquired by the Company or any of its Restricted Subsidiaries (A) in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (B) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; |
| | | (9) | any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers’ compensation, performance and other similar deposits made in the ordinary course of business by the Company or any Restricted Subsidiary; |
| | | (10) | any Person to the extent such Investments consist of Hedging Obligations or Guarantees of Indebtedness; |
| | | (11) | any Person to the extent such Investment exists on the Issue Date, or is required pursuant to any agreement or obligation of the Company or any Restricted Subsidiary in effect on the Issue Date, and any extension, modification or renewal of any such Investments existing on the Issue Date, but only to the extent not involving additional advances, contributions or other Investments of cash or other assets or other increases thereof (other than as a result of the accrual or accretion of interest or original issue discount or the issuance of pay-in-kind securities, in each case, pursuant to the terms of such Investment as in effect on the Issue Date); |
| | | (12) | any Person to the extent of the payment for such Investment that consists of an issuance of Capital Stock (other than Disqualified Stock) of the Company; provided, however, that such issuance of Capital Stock shall not increase the amount available for Restricted Payments under clause (a)(2) under the covenant described under “—Certain Covenants––Limitation on Restricted Payments”; |
| | | (13) | any Person to the extent such Investment consists of the licensing or contribution of Intellectual Property pursuant to joint marketing arrangements with other Persons; |
| | | (14) | any Person to the extent such Investment consists of guarantees of performance obligations under service contracts entered into in the ordinary course of business; |
| | | (15) | any Person to the extent such Investments consist of extensions of trade credit in the ordinary course of business; |
| | | (16) | any Person to the extent such Investments consist of Investments of a Restricted Subsidiary acquired after the Issue Date or of an entity merged into the Company or merged into or consolidated with a Restricted Subsidiary after the Issue Date in accordance with the covenant described under “—Certain Covenants––Consolidation, Merger and Sale of Assets,” in each case, to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation; |
| | | (17) | any Person to the extent such Investments consist of cash earnest money deposits required to be made by the Company or any Restricted Subsidiary in connection with a purchase agreement, letter of intent or other acquisitions permitted under the Indenture; |
| | | (18) | joint ventures or Unrestricted Subsidiaries to the extent such Investments, when taken together with all other Investments made pursuant to this clause (18) (including the Fair Market Value of any assets transferred thereto), do not exceed the greater of (a) $150.0 million and (b) 8.5% of the Company’s Consolidated Net Tangible Assets, measured at the time of any Investment under this clause (18) and net of any reductions in Investments made under this clause; |
| | | (19) | any Persons to the extent such Investments, when taken together with all other Investments made pursuant to this clause (19) and outstanding on the date such Investment is made, do not exceed the greater of (a) $150.0 million and (b) 8.5% of the Company’s Consolidated Net Tangible Assets, measured at the time of any Investment under this clause (19) and net of any reductions in Investments made under this clause; and |
| | | (20) | any Investments constituting consideration received in respect of: (a) any Asset Disposition so long as the Fair Market Value of such Investment does not exceed in the aggregate 25% of the Fair Market Value of the assets or other property disposed of in such Asset Disposition, (b) any disposition of assets or property in a single or series of related transactions with an aggregate Fair Market Value not in excess of $15.0 million or (c) any disposition of Capital Stock of a Person that is not a Restricted Subsidiary of the Company. |
“Permitted Warrant Transaction” means any call option, warrant or right to purchase (or substantively equivalent derivative transaction) on the Company’s common stock sold by the Company substantially concurrently with any purchase by the Company of a related Permitted Bond Hedge Transaction. “Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. “Preferred Stock”, as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. “principal” of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time. “Principal Facility” means any primary secure data center or resolution site, office space or other facility owned or leased as of the Issue Date or acquired or leased by the Company or any Subsidiary of the Company after such date, other than any facility the Fair Market Value of which as determined in good faith by a responsible accounting or financial officer of the Company does not exceed 1.0% of Consolidated Net Tangible Assets of the Company. “Principal Property” means, as the context may require, any real or immovable property forming part of or constituting any or all of any Principal Facility.
“Pro Forma Basis” means, for the determination of Adjusted EBITDA for any Reference Period, after giving effect to the pro forma adjustments applicable to such Reference Period described under the definition of “Consolidated Leverage Ratio,” whether or not the Consolidated Leverage Ratio is required to be calculated in connection with such determination. “Purchase Money Obligation” means Indebtedness (including Capital Lease Obligations and Synthetic Lease Obligations) (1) consisting of the deferred purchase price of property or assets, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds or similar Indebtedness or (2) Incurred to finance the acquisition, construction or improvement of any property or assets; provided, however, that (x) such Indebtedness is Incurred within 360 days after such acquisition, construction or improvement of such assets and (y) the principal amount of such Indebtedness does not exceed the cost of acquiring, constructing or improving such property or assets, including fees and expenses incurred in connection with the Incurrence of such Indebtedness. “Qualified Capital Stock” of a Person means Capital Stock of such Person other than Disqualified Stock; provided, however, that such Capital Stock shall not be deemed Qualified Capital Stock to the extent sold to a Subsidiary of such Person or financed, directly or indirectly, using funds (1) borrowed from such Person or any Subsidiary of such Person or (2) contributed, extended, guaranteed or advanced by such Person or any Subsidiary of such Person (including, in respect of any employee stock ownership or benefit plan). “Qualified Equity Offering” means any public or private issuance and sale of the Company’s common stock by the Company. Notwithstanding the foregoing, the term “Qualified Equity Offering” shall not include: | | | (1) | any issuance and sale with respect to common stock registered on Form S-4 or Form S-8; or |
| | | (2) | any issuance and sale to any Subsidiary of the Company. |
“Quotation Agent” means the Reference Treasury Dealer selected by the Company and identified to the Trustee by written notice from the Company. “Rating Agencies” means Moody’s and S&P or if Moody’s or S&P or both shall not make a rating publicly available on the Notes, or, in the best interestscase of Illuminetthe definition of “Temporary Cash Investments,” the relevant security, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company (with prior notice to the Trustee) which shall be substituted for Moody’s or S&P or both, as the case may be. “Reference Period” means, for any date of determination, the most recent four consecutive fiscal quarters for which financial statements of the Company are available. “Reference Treasury Dealer” means each of J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and their respective successors and assigns and one other nationally recognized investment banking firm selected by the Company and identified to the Trustee by written notice from the Company that is a primary U.S. Government securities dealer. “Reference Treasury Dealer Quotations” means with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue, expressed in each case as a percentage of its stockholdersprincipal amount, quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 11:59 p.m., New York City time, on the third Business Day immediately preceding such redemption date. “Registry Agreements” means those certain Registry Agreements between VeriSign, Inc. and recommendsthe Internet Corporation for Assigned Names and Numbers, entered into as of June 27, 2011 and November 29, 2012, respectively. “Restricted Payment” with respect to any Person means: | | | (1) | the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than (A) dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock), (B) dividends or distributions payable solely to the Company or a Restricted Subsidiary and (C) pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation)); |
| | | (2) | the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Capital Stock of the Company held by any Person (other than by a Restricted Subsidiary), including in connection with any merger or consolidation and including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock); |
| | | (3) | the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations of the Company or any Subsidiary Guarantor (other than (A) from the Company or a Restricted Subsidiary, (B) the purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase, redemption, defeasance or other acquisition or retirement or (C) any portion thereof purchased, repurchased, redeemed defeased or otherwise acquired or retired for value in exchange for Capital Stock of the Company that is not Disqualified Stock); or |
| | | (4) | the making of any Investment by the Company or any Restricted Subsidiary (other than a Permitted Investment) in any Person. |
The amount of any Restricted Payment if made otherwise than in cash will be Fair Market Value of the assets subject thereto. “Restricted Subsidiary” means any Subsidiary of the Company that is not an Unrestricted Subsidiary. “Sale/Leaseback Transaction” has the meaning given to it under “—Certain Covenants—Limitation on Sale/Leaseback Transactions.” “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor to its stockholdersrating agency business. “SEC” means the Securities and Exchange Commission. “Significant Subsidiary” means any Restricted Subsidiary that they vote "FOR" the
proposal to authorize the adjournmentwould be a “significant subsidiary” of the special meetingCompany within the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act and, for purposes of determining whether an Event of Default has occurred, any group of Subsidiary Guarantors that combined would be such a Significant Subsidiary. “Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the Holder thereof upon the happening of any contingency unless such contingency has occurred). “Subordinated Convertible Debentures” means the Company’s 3.25% Convertible Debentures due August 15, 2037, issued under the Subordinated Convertible Debentures Indenture, and the Indebtedness represented thereby. “Subordinated Convertible Debentures Indenture” means the Indenture dated as of August 20, 2007, between the Company and U.S. Bank National Association, as trustee. “Subordinated Convertible Debentures Refinancing Indebtedness” means any Indebtedness of the Company that refinances, in whole or in part, the Subordinated Convertible Debentures or any subsequent Subordinated Convertible Debentures Refinancing Indebtedness; provided that: | | | (a) | the principal amount of such Indebtedness does not exceed the principal amount of the Subordinated Convertible Debentures or subsequent Subordinated Convertible Debentures Refinancing Indebtedness so being refinanced except by an amount no greater than accrued and unpaid interest with respect to such Subordinated Convertible Debentures or subsequent Subordinated Convertible Debentures Refinancing Indebtedness and any reasonable fees, premium (including tender premiums) and expenses relating to such refinancing; |
| | | (b) | the Stated Maturity of such Indebtedness will not be earlier than the date 180 days after the Stated Maturity of the Notes and shall not be subject to any conditions that could result in Stated Maturity occurring on a |
date that precedes the Stated Maturity of the Notes (it being understood that equity conversion rights or acceleration or mandatory repayment, prepayment, redemption or repurchase of such Indebtedness upon the occurrence of an event of default, a change in control or other fundamental change, an event of loss or an asset disposition shall not be deemed to constitute a change in the Stated Maturity thereof); | | | (c) | such Indebtedness shall not be required to be repaid, prepaid, redeemed, repurchased or defeased, whether on one or more fixed dates, upon the occurrence of one or more events or at the option of any holder thereof (except, in each case, upon the occurrence of an event of default or as and to the extent such repayment, prepayment, redemption, repurchase or defeasance would have been required pursuant to the terms of the Subordinated Convertible Debentures, and excluding any conversion rights) prior to the date 180 days after the Stated Maturity of the Notes; |
| | | (e) | such Indebtedness is not Guaranteed by any Subsidiary of the Company that does not Guarantee the Notes on a basis senior to the Guarantee of such Indebtedness and is not secured by Liens on any assets of the Company or any Subsidiary of the Company except to the extent that the Notes are secured by Liens on such assets on a senior basis to the Liens securing such Indebtedness; and |
| | | (f) | such Indebtedness is subordinated to the Notes on terms not materially less favorable taken as a whole to the Holders than the subordination terms set forth in the Subordinated Convertible Debentures and the Subordinated Convertible Debentures Indenture. |
“Subordinated Obligation” means, with respect to a date or dates
not later than , 2002.
60
COMPARATIVE PER SHARE MARKET PRICE DATA
VeriSign common stock has been tradedPerson, any Indebtedness of such Person (whether outstanding on the Nasdaq National MarketIssue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes or a Subsidiary Guarantee of such Person, as the case may be, pursuant to a written agreement to that effect. “Subsidiary” means, with respect to any Person, any corporation, association, partnership or other business entity: (a) the accounts of which are required to be consolidated with those of such Person in accordance with GAAP or (b) of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by: | | | (2) | such Person and one or more Subsidiaries of such Person; or |
| | | (3) | one or more Subsidiaries of such Person. |
“Subsidiary Guarantor” means each Subsidiary of the Company that guarantees the Notes pursuant to the terms of the Indenture until such time as its Subsidiary Guarantee is released in accordance with the terms of the Indenture. “Subsidiary Guarantee” means a Guarantee by a Subsidiary Guarantor of the Company’s obligations with respect to the Notes. “Synthetic Lease” means, as to any Person, any lease (including leases that may be terminated by the lessee at any time) of real or personal property, or a combination thereof, (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee is deemed to own the property so leased for U.S. Federal income tax purposes, other than any such lease under which such Person is the lessor. “Synthetic Lease Obligations” means, as to any Person, an amount equal to the capitalized amount of the remaining lease payments under any Synthetic Lease (determined, in the case of a Synthetic Lease providing for an option to purchase the leased property, as if such purchase were required at the end of the term thereof) that would appear on a balance sheet of such Person prepared in accordance with GAAP if such obligations were accounted for as Capital Lease Obligations. For purposes of the covenant described under “—Certain Covenants—Limitation on Liens,” a Synthetic Lease Obligation shall be deemed to be secured by a Lien on the property being leased and such property shall be deemed to be owned by the lessee. “Temporary Cash Investments” means any of the following: | | | (1) | any investment in U.S. Government Obligations; |
| | | (2) | investments in demand and time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is |
organized under the symbol VRSN since January 29, 1998,laws of the United States of America, any State thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $200.0 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated “AA-” (or such similar equivalent rating) or higher by at least one Rating Agency or any money-market fund sponsored by a registered broker dealer or mutual fund distributor; | | | (3) | repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above; |
| | | (4) | investments in commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of “P-1” (or higher) according to Moody’s or “A-1” (or higher) according to S&P; |
| | | (5) | investments in securities with maturities of three years or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated not less than “A3” by Moody’s or “A-” by S&P; |
| | | (6) | investments in money market funds that invest substantially all their assets in securities of the types described in clauses (1) through (5) above; |
| | | (7) | in the case of any Foreign Subsidiary, other short-term investments that are analogous to the foregoing clauses (1) through (6) above, are of comparable credit quality and are customarily used by companies in the jurisdiction of such Foreign Subsidiary for cash management purposes; and |
| | | (8) | investments in corporate debt with a final scheduled maturity of three years or less from the date of acquisition and rated not less than “A3” by Moody’s or “A-” by S&P. |
“Treasury Rate” means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the date fixed for redemption (or, if such Statistical Release is no longer published, any publicly available source of VeriSign's initial public
offering. Illuminet common stock has been traded onsimilar market data)) most nearly equal to the Nasdaq National Market
underthen remaining average life to May 1, 2018, provided, however, that if the symbol ILUM since October 8, 1999,average life to May 1, 2018, of the dateNotes is not equal to the constant maturity of Illuminet's initial
public offering.
The following table sets forth, for the calendar quarters indicated, the
high and low sale prices per share of VeriSign common stock and Illuminet
common stock as reported on the Nasdaq National Market.
VeriSign Illuminet
Common Stock Common Stock
--------------- -------------
Calendar Period High Low High Low
--------------- ------- ------- ------ ------
1999:
First Quarter............................ $ 39.00 $ 13.50 $ -- $ --
Second Quarter........................... 47.06 22.88 -- --
Third Quarter............................ 58.88 27.25 -- --
Fourth Quarter........................... 212.00 48.81 62.13 25.50
2000:
First Quarter............................ $258.50 $141.00 $94.00 $43.00
Second Quarter........................... 200.50 91.00 58.50 30.63
Third Quarter............................ 214.38 136.38 52.38 25.88
Fourth Quarter........................... 207.88 65.38 29.75 14.00
2001:
First Quarter............................ $ 97.75 $ 29.88 $28.00 $19.00
Second Quarter........................... 67.94 26.25 33.16 13.06
Third Quarter............................ 63.22 32.53 39.30 25.10
Fourth Quarter (through October 5, 2001). 49.80 39.90 45.30 36.31
The following table sets forth the closing prices per share of VeriSign
common stock and Illuminet common stock as reported on the Nasdaq National
Market on (1) September 21, 2001, the business day preceding public
announcement that VeriSign and Illuminet had entered into the merger agreement
and (2) , 2001, the last full trading daya United States Treasury security for which closing prices werea weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the average life to May 1, 2018, of the Notes is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. “Trustee” means U.S. Bank National Association until a successor replaces it and, thereafter, means the successor. “Trust Indenture Act” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb), as amended. “Unrestricted Subsidiary” means: | | | (1) | any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and |
| | | (2) | any Subsidiary of an Unrestricted Subsidiary. |
The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary if (A) such Subsidiary shall, as at the end of the then most recently completed fiscal quarter of the Company, have Consolidated Net Tangible Assets representing less than 5% of the Company’s Consolidated Net Tangible Assets (including such Subsidiary) as of the end of the most recently ended fiscal quarter for which financial statements are available at the time of such designation; and (B) immediately after such Subsidiary becomes an Unrestricted Subsidiary, no Default or Event of Default shall exist.
The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that no Default shall have occurred and be continuing. Any such designation by the printingBoard of this prospectus/proxy statement.
This table also sets forth the equivalent price per share of Illuminet
common stock on those dates. The equivalent price per share is equalDirectors shall be evidenced to the closing priceTrustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions. “Unsecured Credit Agreement” means the Credit Agreement, dated as of November 22, 2011, among the Company, the borrowing subsidiaries party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and J.P. Morgan Europe Limited, as London Agent, as amended, modified or restated from time to time (including, without limitation, to change the amount thereof or to add or change agents, lenders, borrowers or guarantors or to add collateral). “U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer’s option. “Voting Stock” of a sharePerson means all classes of VeriSign common stock on that date multipliedCapital Stock of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. “Wholly Owned Subsidiary” means a Restricted Subsidiary all the Capital Stock of which (other than directors’ qualifying shares) is owned by 0.93, the number of shares of VeriSign common stock toCompany or one or more other Wholly Owned Subsidiaries.
BOOK-ENTRY SETTLEMENT AND CLEARANCE General The exchange notes will be issued in fully registered global form. The exchange notes initially will be represented by one or more global certificates without interest coupons (the “global notes”). The global notes will be deposited upon issuance with the trustee as custodian for DTC and registered in the name of DTC or its nominee for credit to the accounts of direct or indirect participants in DTC, as described below under “—Depositary Procedures.” The global notes will be deposited on behalf of the acquirers of the exchange notes for credit to the respective accounts of the acquirers or to such other accounts as they may direct. Except as described below, the global notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may not be exchanged for the exchange notes in certificated form except in the limited circumstances described below under “—Exchange of Book-Entry Notes for Certificated Notes.” Transfers of beneficial interests in the global notes will be subject to the applicable rules and procedures of DTC and its direct or indirect participants, which may change from time to time. Depositary Procedures The following description of the operations and procedures of DTC is provided solely as a matter of convenience. These operations and procedures are solely within the control of DTC and are subject to changes by DTC. We take no responsibility for these operations and procedures and urge investors to contact DTC or its participants directly to discuss these matters. DTC has advised us that it is: a limited purpose trust company organized under the New York State Banking Law; a “banking organization” within the meaning of the New York State Banking Law; a member of the U.S. Federal Reserve System; a “clearing corporation” within the meaning of the New York Uniform Commercial Code; and a “clearing agency” registered under Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations (collectively, the “participants”) and facilitate the clearance and settlement of transactions in those securities between participants through electronic book-entry changes in accounts of its participants. The participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Access to DTC’s system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly (collectively, the “indirect participants”). Persons who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants. DTC has no knowledge of the identity of beneficial owners of securities held by or on behalf of DTC. DTC’s records reflect only the identity of participants to whose accounts securities are credited. The ownership interests and transfer of ownership interests of each sharebeneficial owner of Illuminet common stock.
Illuminet VeriSign Equivalent
Common Common per Share
Stock Stock Price
--------- -------- ----------
September 21, 2001................ $34.98 $38.30 $35.62
October [ ], 2001................
VeriSign and Illuminet believe that Illuminet common stock presently tradeseach security held by or on behalf of DTC are recorded on the basisrecords of the valueparticipants and indirect participants. DTC has also advised us that, pursuant to procedures established by DTC, ownership of interests in the global notes will be shown on, and the transfer of ownership of such interest will be effected only through, records maintained by DTC (with respect to the participants) or by the participants and the indirect participants (with respect to other owners of beneficial interests in the global notes). Investors in the global notes may hold their interests therein directly through DTC if they are participants in such system or indirectly through organizations that are participants or indirect participants in such system. All interests in the global notes will be subject to the procedures and requirements of DTC. The laws of some states require that certain persons take physical delivery of certificates evidencing securities they own. Consequently, the ability to transfer beneficial interests in the global notes to such persons will be limited to that extent. Because DTC can act only on behalf of participants, which in turn act on behalf of indirect participants, the ability of beneficial owners of interests in the global notes to pledge such interests to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the global notes will not have exchange notes registered in their names, will not receive physical delivery of the VeriSign common stockexchange notes in certificated form and will not be considered the registered owners or holders thereof under the Indenture for any purpose. Payments in respect of the principal of and premium, if any, and interest on the global notes registered in the name of DTC or its nominee will be payable by the trustee (or the paying agent if other than the trustee) to DTC in its capacity as the registered holder under the Indenture. We and the trustee will treat the persons in whose names the exchange notes, including the global notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, none of us, the trustee or any agent of ours or the trustee has or will have any responsibility or liability for: any aspect of DTC’s records or any participant’s or indirect participant’s records relating to or payments made on account of beneficial ownership interests in the global notes, or for maintaining, supervising or reviewing any of DTC’s records or any participant’s or indirect participant’s records relating to the beneficial ownership interests in the global notes; or any other matter relating to the actions and practices of DTC or any of its participants or indirect participants. DTC has advised us that its current practice, upon receipt of any payment in respect of securities such as the exchange notes (including principal and interest), is to credit the accounts of the relevant participants with the payment on the payment date in amounts proportionate to their respective holdings in the principal amount of the relevant security as shown on the records of DTC, unless DTC has reason to believe it will not receive payment on such payment date. Payments by the participants and the indirect participants to the beneficial owners of exchange notes will be governed by standing instructions and customary practices and will be the responsibility of the participants or the indirect participants and will not be the responsibility of DTC, the trustee or us. Neither we nor the trustee will be liable for any delay by DTC or any of its participants in identifying the beneficial owners of the exchange notes, and we and the trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Interests in the global notes are expected to be issuedeligible to trade in DTC’s Same-Day Funds Settlement System and secondary market trading activity in such interests will therefore settle in immediately available funds, subject in all cases to the rules and procedures of DTC and its participants. DTC has advised us that it will take any action permitted to be taken by a holder of exchange notes only at the direction of one or more participants to whose account with DTC interests in the global notes are credited and only in respect of such portion of the aggregate principal amount of the exchange notes as to which such participant or participants has or have given such direction. Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in the global notes among participants in DTC, it is under no obligation to perform or to continue to perform such procedures, and the procedures may be discontinued at any time. Neither we nor the trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. The information in this section concerning DTC and its book-entry system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy thereof. Exchange of Book-Entry Notes for Certificated Notes If (i) DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by us within 90 days, (ii) DTC has ceased to be a clearing agency registered under the Exchange Act, (iii) we, at our option, notify the trustee in writing that we elect to cause the issuance of the notes in the form of certificated notes, or (iv) an event of default has occurred and is continuing, upon request by the holders of the notes, we will issue notes in certificated form in exchange for global securities. The Indenture permits us to determine at any time and in our sole discretion that notes shall no longer be represented by global securities. DTC has advised us that, under its current practices, it would notify its participants of our request, but will only withdraw beneficial interests from the Illuminet common stockglobal security at the request of each DTC participant. We would issue definitive certificates in exchange for any beneficial interests withdrawn.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES To ensure compliance with Treasury Department Circular 230, prospective investors are hereby notified that: (a) any discussion of U.S. federal tax issues contained or referred to in this prospectus is not intended or written to be used, and cannot be used, by prospective investors for the purpose of avoiding penalties that may be imposed on them under the U.S. Internal Revenue Code of 1986, as amended (the “Code”), (b) such discussion is written for use in connection with the promotion or marketing of the transactions or matters addressed herein, and (c) prospective investors should seek advice based on their particular circumstances from an independent tax advisor. This section summarizes certain U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the purchase, ownership and disposition of notes, but does not purport to be a complete analysis of all potential tax consequences and considerations. This section is based on U.S. federal income tax law as currently in effect, changes to which subsequent to the date of this prospectus may affect the tax consequences described herein, possibly with retroactive effect. This summary deals only with notes that are held as capital assets by Non-U.S. Holders pursuant to this offer to exchange. A “Non-U.S. Holder” is a beneficial owner of notes that is an individual, corporation, estate or trust other than: (1) an individual who is a citizen or resident of the United States; (2) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the merger, discounted primarily forUnited States or under the uncertainties associated with the merger. Apart from the publicly disclosed
information concerning VeriSign that is included and incorporated by reference
in this prospectus/proxy statement, VeriSign cannot state with certainty what
factors account for changes in the market pricelaws of the VeriSign common stock.
61
Illuminet stockholders are advisedUnited States or any subdivision thereof; (3) an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; and (4) a trust if (a) a court within the United States is able to obtain current market quotationsexercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (b) such trust has a valid election in effect under applicable Treasury regulations to be treated as a United States person. This summary does not describe all of the U.S. federal income tax consequences that may be relevant to the purchase, ownership and disposition of notes by a prospective Non-U.S. Holder in light of that investor’s particular circumstances, including the consequences of notes held by a “controlled foreign corporation,” a “passive foreign investment company,” a person that owns (actually or constructively, within the meaning of specified Code provisions) 10% or more of the total combined voting power of all classes of our voting stock, a U.S. expatriate, a former long-term resident of the United States, or an entity treated as a partnership for VeriSign common stock and Illuminet common stock. No assurance can be givenU.S. federal income tax purposes. In addition, this summary does not address other U.S. federal taxes (such as gift or estate taxes or alternative minimum taxes) or state, local or foreign taxes. Please consult your own tax advisor as to the market pricesparticular tax consequences to you of VeriSign common stock or Illuminet common stock atpurchasing, holding and disposing of notes in your particular circumstances under U.S. federal income tax law and the laws of any time before the consummation of the merger or asother taxing jurisdiction. Exchange Pursuant to the market priceOffer to Exchange
The exchange of VeriSign common stock at any time after the merger. Because theoriginal notes for exchange ratio
is fixed, thenotes in this offer to exchange ratio will not be adjusteda taxable event for U.S. federal income tax purposes. U.S. Federal Withholding Tax
U.S. federal withholding tax will not apply to compensate Illuminet
stockholders for decreasesany payment of principal or interest on the notes, provided that in the market pricecase of VeriSign common stockinterest, you provide your name, address and certain other information on a properly completed and executed Internal Revenue Service (“IRS”) Form W-8BEN (or other applicable form), and certify, under penalties of perjury, that could occur beforeyou are not a United States person. U.S. Federal Income Tax
You will not be subject to U.S. federal income tax on interest received on the merger becomes effective.notes (including interest received on redemption or retirement) unless you are engaged in a trade or business in the United States (and, if a tax treaty applies, you maintain a permanent establishment within the United States) and such interest is effectively connected with the conduct of such trade or business (and, if a tax treaty applies, attributable to such permanent establishment), in which case such interest will be subject to U.S. federal income tax on a net income basis in generally the same manner as if you were a United States person. In addition, in certain circumstances, if you are a foreign corporation, you may be subject to an additional 30% (or, if a tax treaty applies, such lower rate as provided) branch profits tax. A Non-U.S. Holder that is subject to U.S. federal income tax on interest received on the eventnotes should provide a properly completed and executed IRS Form W-8ECI (or successor form), instead of Form W-8BEN, to avoid withholding tax on the market priceinterest.
Any gain or income, other than interest which is taxable as set forth above, realized on the disposition of VeriSign common stock decreasesa note (including a redemption or increases priorretirement) will generally not be subject to U.S. federal income tax unless: such gain or income is effectively connected with your conduct of a trade or business in the consummationUnited States (and, if a tax treaty applies, is also attributable to a U.S. permanent establishment maintained by you); or you are an individual who is present in the United States for 183 days or more in the taxable year of the merger, the value of the VeriSign common stock to be receiveddisposition and certain other conditions are met. A Non-U.S. Holder described in the merger
in exchange for Illuminet common stock would correspondingly decrease or
increase.
VeriSign and Illuminet have never paid cash dividendsfirst bullet point above will generally be subject to U.S. federal income tax on their respective
shares of capital stock. Under the merger agreement, each of VeriSign and
Illuminet has agreed not to pay dividends pending the consummation of the
merger, without written consent of the other. If the merger is not consummated,
the Illuminet board presently intends that it would continue its policy of
retaining all earnings to finance the expansion of its business. The VeriSign
board presently intends to retain all earnings for use in its business and has
no present intention to pay cash dividends before or after the merger.
62
COMPARISON OF RIGHTS OF HOLDERS OF
VERISIGN COMMON STOCK AND ILLUMINET COMMON STOCK
This section of the prospectus/proxy statement describes differences between
VeriSign common stock and Illuminet common stock. While we believe that the
description covers the material differences between the two, this summary may
not contain all of the information that is important to you, including the
certificates of incorporation and bylaws of each company. You should read this
entire document and the other documents we refer to carefully forgain on a more
complete understanding of the differences between VeriSign common stock and
Illuminet common stock. You may obtain the information incorporated by
reference into this prospectus/proxy statement without charge by following the
instructions in the section entitled "Where you can find more information" on
page iii.
After the merger, the holders of Illuminet common stock will become
stockholders of VeriSign. Because VeriSign and Illuminet are both Delaware
corporations, the Delaware General Corporation Law, or the DGCL, will continue
to govern the rights of the stockholders. The Illuminet certificate of
incorporation and the Illuminet bylaws currently govern the rights of the
stockholders of Illuminet. As stockholders of VeriSign after the merger, the
VeriSign certificate of incorporation, and the VeriSign bylaws, will instead
govern their rights following the merger. The following paragraphs summarize
differences between the rights of VeriSign stockholders and Illuminet
stockholders under the certificates of incorporation and bylaws of VeriSign and
Illuminet, as applicable. The following discussion is qualified by the actual
provisions of each company's certificate of incorporation and bylaws.
Voting
Each stockholder of Illuminet and VeriSign has the right to one vote for
each share of stock held by the stockholder.
Special meeting of stockholders
The VeriSign bylaws provide that only a majority of the members of the board
of directors, chairman of the board or president may call special meetings of
the stockholders.
The Illuminet bylaws provide that special meetings of the stockholders may
be called by the chairman of the board, the president or the board of
directors, or by written demand of at least one-third of the stock entitled to
vote at the meeting.
Action by written consent in lieu of a stockholder's meeting
VeriSign stockholders do not have the ability to take action by written
consent.
Illuminet stockholders have the ability to take action by written consent of
the holders of outstanding shares of Illuminet so long as the action is signed
by the holders having the minimum number of shares to approve the action if the
action were taken at a meeting at which all outstanding shares of common stock
were present and voting.
Voting by written ballot
Both the VeriSign and Illuminet certificates of incorporation contain
provisions not requiring written ballots for the election of directors. The
Illuminet bylaws provide that upon the demand of any stockholder, the vote for
directors shall be by ballot.
Record date for determining stockholders
The VeriSign bylaws provide that the board of directors may fix a record
date that shall not be more than 60 nor less than 10 days before the date of
the stockholder meeting nor more than 60 days prior to any other action.
63
The VeriSign bylaws provide that if the board of directors does not fix a
record datenet income basis in the manner described above then:
(1) the record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding the day on
which the meeting is held; and
(2) the record date for determining stockholders for any other purpose shall
be at the close of business on the same day on which the board of
directors adopts the related resolution.
The Illuminet bylaws provide that the board of directors may fix a record
date that shall not be more than 60 nor less than 10 days before the date of
the stockholder meeting nor more than 60 days prior to any other action.
Notice of board nomination and other stockholder business-annual meetings
The VeriSign bylaws require that nominations of persons for election to the
board of directors and the proposal of business to be considered at an annual
meeting of stockholders must be generally made by the board of directors. If
made by a stockholder, the proposal or nomination must be made by advance
written notice given to VeriSign between 60 and 90 days prior to the first
anniversary of the preceding year's annual meeting of stockholders. However, if
the date of the annual meeting at which the nomination or business is proposed
by a stockholder is more than 30 days before or more than 60 days after that
anniversary, then the notice may be given by the stockholder no earlier than
the 90th day prior to the meeting and not later than the later of 60 days prior
to the meeting or the 10th day following the first public announcement of the
meeting. These notice provisions are subject to certain exceptions with respect to electing directorseffectively connected interest income. In addition, if a Non-U.S. Holder is a foreign corporation, such effectively connected income may, under certain circumstances, be subject to fill board seats resulting from increasesan additional branch profits tax at a 30% rate, or such lower rate as may be specified under an applicable income tax treaty. If a Non-U.S. Holder is described in the sizesecond bullet point above, any gain realized from the taxable disposition of the boardnotes will generally be subject to U.S. federal income tax at a 30% rate (or lower applicable treaty rate), which may be offset by certain U.S. source capital losses. Backup Withholding and Information Reporting
Payments of directorsinterest on the notes, and the gross proceeds from the sale or other disposition of notes, may be subject to information reporting and backup withholding, unless paid to an exempt recipient. The certification procedures required to claim the exemption from withholding tax on interest (described above) generally will satisfy the certification requirements necessary to avoid backup withholding. Backup withholding is not publicly announced at least 70 days prioran additional tax. Any amounts so withheld under the backup withholding rules may be refunded or credited against your U.S. federal income tax liability, if any, provided you timely furnish the required information to the annual meting. In addition, certain other information regardingIRS.
PLAN OF DISTRIBUTION Based on existing interpretations of the business
proposedSecurities Act by the SEC staff set forth in several no-action letters to third parties, and subject to the immediately following sentence, we believe exchange notes issued under the exchange offer in exchange for discussion mustoriginal notes may be includedoffered for resale, resold and otherwise transferred by the holders thereof (other than holders that are broker-dealers) without further compliance with the registration and prospectus delivery provisions of the Securities Act. However, any holder of original notes that is an affiliate of ours or that intends to participate in the stockholder notice to VeriSign.
The Illuminet bylaws require that annual meetings of stockholdersexchange offer for the electionpurpose of directors and for other business must be specified indistributing the notice of
meeting given byexchange notes, or at the directionany broker-dealer that purchased any of the board, otherwise properly brought
beforeoriginal notes from us for resale pursuant to Rule 144A or any other available exemption under the meeting by or atSecurities Act, (i) will not be able to rely on the directioninterpretations of the board. No business other than
that stated in the notice shall be transacted at any meeting without the
consent of the majority of stockholders entitled to vote at the meeting.
Notice of board nomination and other stockholder business-special meetings
The VeriSign bylaws provide that, at special meetings of stockholders, the
only business that can be conducted will be the items of businessSEC staff set forth in the noticeabove-mentioned no-action letters, (ii) will not be entitled to tender its original notes in the exchange offer, and (iii) must comply with the registration and prospectus delivery requirements of the special meeting. The bylaws also provideSecurities Act in connection with any sale or transfer of the original notes unless such sale or transfer is made pursuant to an exemption from such requirements. Each broker-dealer that nominationsreceives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of candidates for directors at a special meeting at which directors aresuch exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be elected shall be made (1) by the board of directors or (2) if the board of
directors has determined that directors will be elected at the meeting,used by a stockholder meeting certain qualifications who gives VeriSign advance written
noticebroker-dealer in connection with resales of the nominations no earlier than 90exchange notes received in exchange for original notes where such original notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days prior to that special meeting
and no later than the later of (A) 60 days before the special meeting, or (B)
the 10th day after the first public announcementexpiration date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the meeting and the
nominees proposed by the board of directors to be elected at the meeting.
The Illuminet bylaws provide that the business thatexchange offer may be conducted at any
special meeting shall be confinedsold from time to the purposes stated in the notice of the
special meeting.
Number of directors
The VeriSign bylaws provide that the board of directors shall consist of not
fewer than six and not more than nine directors.
The Illuminet bylaws provide that the board of directors shall consist of
not fewer than five and not more than sixteen directors.
64
Election of directors
The holders of VeriSign common stock and Illuminet common stock elect all
members of the respective company's board of directors.
The VeriSign certificate of incorporation and bylaws provide for a staggered
board of directors divided into three classes with the term of office of the
first class, Class I, to expire at the annual meeting of the stockholders held
in 2004; the term of office of the second class, Class II, to expire at the
annual meeting of stockholders held in 2003; the term of office of the third
class, Class III, to expire at the annual meeting of stockholders held in 2002;
and after for each term to expire at each third succeeding annual meeting of
stockholders after the corresponding election.
The Illuminet certificate of incorporation and bylaws provide for a
staggered board of directors divided into three classes with the term of office
of the first class, Class I, to expire at the annual meeting of the
stockholders held in 2003; the term of office of the second class, Class II, to
expire at the annual meeting of stockholders held in 2004; the term of office
of the third class, Class III, to expire at the annual meeting of stockholders
held in 2002; and after for each term to expire at each third succeeding annual
meeting of stockholders after the corresponding election.
Removal of directors
The VeriSign bylaws provide that any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors of VeriSign.
The Illuminet bylaws provide that any director or directors may be removed
from office only for cause and only by the vote of 80% of the voting power of
all the shares entitled to vote generally in the election of directors.
Board of directors vacancies
The VeriSign bylaws provide that vacancies may be filled by the
stockholders, by a majority of the directors then in office or by a sole
remaining director. The Illuminet bylaws provide that vacancies may be filled
by a majority vote of the directors remaining in office.
Notice of special meetings of the board of directors
The VeriSign bylaws provide that the chairman of the board, the president or
one-third of the directors then in office may call a special meeting of the
board of directors. The bylaws require that written notice of the time and
place of these meetings be given at least four days before the meeting if the
notice is mailed, or at least 48 hours before the meeting if notice is given by
hand, telegram, telecopy or telex, unless this notice requirement is waived in
writing by each member of the board of directors.
The Illuminet bylaws provide that the chairman of the board, the president
or the secretary on the written request of any four directors may call a
special meeting of the board of directors. The bylaws require at least four
days' prior notice to each director. The meeting shall be held at such place or
places as may be determined by the board or as stated in the notice of the
meeting.
Board action-generally
The VeriSign bylaws provide that, except as required by the DGCL, the vote
of a majority of the directors present at a meeting at which a quorum is
present or a written consent to action executed by all members of the board of
directors shall be the act of the board of directors of VeriSign.
65
The Illuminet bylaws provide that, except as required by the DGCL, the vote
of majority of the directors present at a meeting at which a quorum is present
or a written consent to action executed by all members of the board of
directors shall be the act of the board of directors of Illuminet.
Action by committees
Both the VeriSign bylaws and the Illuminet bylaws authorize their respective
boards of directors to establish committees by resolution setting forth the
powers and duties of these committees.
Preferred stock
Both the VeriSign and Illuminet certificates of incorporation authorize the
respective board of directors to issue shares of preferred stock in one or more seriestransactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers that may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to fixbe an “underwriter” within the designations, preferences, powers and rightsmeaning of the sharesSecurities Act and any profit on any such resale of exchange notes and any commission or concessions received by any such persons may be deemed to be included in each series.underwriting compensation under the Securities Act. The VeriSign certificateletter of incorporation
reserves for issuance 5,000,000 shares of preferred stocktransmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the Illuminet
certificate of incorporation reserves for issuance 100,000 shares of preferred
stock.
Indemnification
The VeriSign certificate of incorporation and bylaws and the Illuminet
certificate of incorporation provide that its respective directors and officers
shall be indemnified to the full extent authorized by Delaware law against all
expenses, liabilities and losses reasonably incurred by that person in
connection with any action, proceeding or suit brought against that person by
reasonmeaning of the factSecurities Act. For a period of 180 days after the expiration date we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that he or she is or was a director or officerrequests such documents in the letter of VeriSign
or Illuminet, as the case may be, or is or was serving at the request of
VeriSign or Illuminet, as the case may be, as a director or officer of another
corporation, partnership, joint venture, trust or similar entity. The VeriSign
bylaws and Illuminet bylaws require the respective corporationstransmittal. We have agreed to pay all expenses incurred by a director or officer in defending any proceeding within
the scope of the indemnification provisions as these expenses are incurred in
advance of its final disposition.
Limitation on liability
Both the VeriSign certificate of incorporation and Illuminet certificate of
incorporation provide that a director of the respective corporation shall not
be personally liableincident to the respective corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (a) for any breach of the director's duty of loyaltyexchange offer other than brokerage commissions and transfer taxes, if any. We have also agreed to the
Corporation and its stockholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or knowing violations of law; (c) under
section 174 of the DGCL; or (d) for any transaction from which the director
derived an improper personal benefit.
Interested directors
The VeriSign bylaws require that in order for a transaction between VeriSign
and an interested director or officer not to be void or voidable solely for
this reason, there must be full disclosure of material facts as to the
interested director's relationship or interest to the transaction as well as
one of the following:
. approval by a majority of disinterested directors, even though the
disinterested directors may be less than a quorum;
. approval by a good faith vote of the stockholders entitled to vote
thereon; or
. the transaction must be fair to VeriSign as of the time it is authorized,
approved or ratified by the board of directors, a committee thereof, or
the stockholders.
Because the Illuminet certificate of incorporation and bylaws do not contain
a provision expressly addressing interested director transactions, Illuminet is
subject to section 144 of the DGCL.
66
Dividends
VeriSign and Illuminet stockholders are entitled to receive dividends,
subject to preferences of any outstanding preferred stock, out of assets
legally available for dividend distribution at times and in amounts as the
respective boards of directors may from time to time determine.
Liquidation
In the event of a liquidation, dissolution or winding up of either VeriSign
or Illuminet, after payment of any amounts owed to creditors, subject to
preferences of any outstanding preferred stock, the remaining assets of
VeriSign or Illuminet will be divided equally, on a share for share basis, toindemnify the holders of the common stock of VeriSign or Illuminet, respectively.
Amendment of bylaws
The VeriSign bylaws provide that stockholders holding a majority of
VeriSign's outstanding voting stock may adopt, amend or repealoriginal notes and the bylaws. The
VeriSign certificate of incorporation and bylaws provide that the board of
directors has the power to adopt, amend or repeal the bylaws.
The Illuminet bylaws provide that the bylaws may be amended atexchange notes (including any meeting
of the stockholders or at a special meeting of the stockholders, by the
affirmative vote of a majority of the stock issued and outstanding or by the
Board of Directors at any meeting of directors.
Delaware takeover statute
Because the VeriSign and Illuminet certificates of incorporation and bylaws
do not contain a provision expressly electing for either company to not be
governed by section 203 of the DGCL, VeriSign and Illuminet are subject to the
Delaware takeover statute.
Stockholder rights plan
VeriSign has not adopted a stockholders rights plan.
Illuminet has a stockholder rights plan that would significantly discourage,
delay or prevent a merger or acquisition. The rights become exercisable if a
person or group acquires or makes a tender offer for more than 20% of Illuminet
outstanding common stock. Upon the occurrence of such an event, each right
entitles the holder, other than the acquiror, to purchase for $150 Illuminet
common stock or, in some instances, stock of the acquiring entity, that would
be worth $300. The rights expire on November 20, 2008, unless redeemed earlier
by Illuminet. This plan has been amended so as not to be triggered by the
merger.
67
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS,
MANAGEMENT AND DIRECTORS OF ILLUMINET
The following table lists information with respect to the beneficial
ownership of Illuminet's common stock as of September 30, 2001 by: (1) each
person known by Illuminet to beneficially own more than 5% of Illuminet's
outstanding common stock, (2) each of Illuminet's directors, (3) Illuminet's
four "most highly compensated" executive officersbroker-dealers) against certain liabilities, including liabilities under SEC rules, and (4) all
of Illuminet's executive officers and directors as a group. Unless otherwise
indicated, the person or persons named have sole voting and investment power
and that person's address is c/o Illuminet, 4501 Intelco Loop, S.E., Lacey,
Washington 98503. In determining the number and percentage of shares
beneficially owned by each person, shares that may be acquired by that person
under options exercisable within 60 days of September 30, 2001 are deemed
beneficially owned by that person and are deemed outstanding for purposes of
determining the total number of outstanding shares for that person and are not
deemed outstanding for that purpose for all other stockholders.
Shares Beneficially
Owned
------------------
Name and Address of Beneficial Owner Number Percent
------------------------------------ --------- -------
TDSI Corporation(1).................................................. 2,541,556 7.8%
Suite 4000
30 N. LaSalle St
Chicago, IL 60602
Waddell & Reed Investment Management Company(2)...................... 1,681,700 5.2
6300 Lamar Avenue
Overland Park, KS 66202
Theodore D. Berns(3)................................................. 62,615 *
Jack W. Blumenstein(4)............................................... 3,611 *
Richard A. Lumpkin(5)................................................ 450,380 1.4
James W. Strand(6)................................................... 37,759 *
Gregory J. Wilkinson(7).............................................. 1,855 *
Roger H. Moore(8).................................................... 900,907 2.7
Daniel E. Weiss(9)................................................... 86,594 *
George F. Lebus...................................................... 374,302 1.2
F. Terry Kremian(10)................................................. 130,380 *
David J. Nicol(11)................................................... 111,014 *
Bruce E. Johnson(12)................................................. 91,833 *
Executive officers and directors as a group (11 persons)............. 2,251,250 6.6
--------
* Less than 1%
(1) Includes 51,544 shares issuable under options exercisable within 60 days
after September 30, 2001, the rights of which have been assigned by
Gregory J. Wilkinson, director.
(2) Holdings based on the June 30, 2001 Schedule 13F filed by the stockholder
with the Securities and Exchange Commission.
(3) Includes 51,147 shares issuableAct. Notwithstanding the foregoing, we may suspend the use of this prospectus by broker-dealers under options exercisable within 60 days
after September 30, 2001.
(4) Includes 2,411 shares issuable under options exercisable within 60 days
after September 30, 2001.
(5) As a voting memberspecified circumstances. We will not receive any proceeds from the issuance of SKL Investment Group, LLC, Mr. Lumpkin may be deemed
the beneficial owner of 437,584 shares of Illuminet common stock owned by
SKL. The figuresexchange notes in the table for Mr. Lumpkin also include 12,796 shares
issuable under options exercisable within 60 days after September 30,
2001.
(6) Includes 31,055 shares issuable under options exercisable within 60 days
after September 30, 2001.
(7) Includes 1,655 shares issuable under options exercisable within 60 days
after September 30, 2001.
(8) Includes 900,000 shares issuable under options exercisable within 60 days
after September 30, 2001.
(9) Includes 85,350 shares issuable under options exercisable within 60 days
after September 30, 2001.
(10) Includes 127,250 shares issuable under options exercisable within 60 days
after September 30, 2001.
(11) Includes 104,000 shares issuable under options exercisable within 60 days
after September 30, 2001.
(12) Includes 70,000 shares issuable under options exercisable within 60 days
after September 30, 2001.
68
ILLUMINET STOCKHOLDER PROPOSALS
Under Rule 14a-8 of the Exchange Act, Illuminet stockholders may present
proper proposals for inclusion in Illuminet's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting
those proposals to Illuminet in a timely manner. As noted in Illuminet's proxy
statement relating to its 2001 annual meeting of stockholders, in order to be
included for the 2002 annual meeting, stockholder proposals must be received by
Illuminet at its executive offices no later than November 26, 2001, and must
comply with the Securities and Exchange Commission regulations regarding the
inclusion of stockholder proposals in Company-sponsored proxy materials. In the
event the merger is approved at the special meeting, Illuminet does not intend
to hold an annual meeting in 2002.
exchange offer.
LEGAL OPINION
MATTERS The validity of the shares of VeriSign common stockexchange notes offered by this
prospectus/proxy statementhereby will be passed upon for VeriSign by FenwickCleary Gottlieb Steen & WestHamilton LLP. EXPERTS
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from the Illuminet
Holdings, Inc. Annual Report on Form 10-K for the year ended December 31, 2000
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements and financial statement schedule of
Illuminet Holdings, Inc. as of December 31, 1999, and for each of the two years
in the period ended December 31, 1999 incorporated in this prospectus/proxy
statement and Registration Statement by reference from the 2000 Annual Report
on Form 10-K of Illuminet filed with the Commission on March 9, 2001 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing therein which, are based in part on the reports of
PricewaterhouseCoopers LLP, independent accountants relative to the 1998 and
1999 financial statements of National Telemanagement Corporation (not
separately presented in the aforementioned Form 10-K). The financial statements
referred to above are incorporated by reference in reliance upon such reports
given on the authority of such firms as experts in accounting and auditing.
The consolidated financial statements of National Telemanagement Corporation
and subsidiary as of December 31, 1999 and for each of the two years in the
period ended December 31, 1999 have been audited by PriceWaterhouseCoopers LLP,
independent accountants, whose report thereon appears in the Annual Report on
Form 10-K of Illuminet Holdings, Inc. for the year ended December 31, 2000,
which Form 10-K has been incorporated by reference in this prospectus/proxy
statement. Such financial statements are not separately presented in the
aforementioned Form 10-K and to the extent they have been included in the
financial statements of Illuminet Holdings, Inc. as of December 31, 2000 and
1999 and for each of the three years in the period ended December 31, 2000,
have been so included in reliance on the report of PricewaterhouseCoopers LLP
given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of VeriSign, Inc. and subsidiaries as of December 31, 20002012 and 1999,2011, and for each of the years in the three-year period ended December 31, 2000,2012, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2012, have been incorporated by reference herein in reliance upon the reportreports of KPMG LLP, independent certifiedregistered public accountants,accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
69
ANNEX A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VERISIGN, INC.,
ILLINOIS ACQUISITION CORPORATION
AND
ILLUMINET HOLDINGS, INC.
September 23, 2001
================================================================================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER............................................. A-1
1.1 The Merger............................................. A-1
1.2 Effective Time; Closing................................ A-1
1.3 Effect of the Merger................................... A-1
1.4 Certificate of Incorporation; Bylaws................... A-2
1.5 Directors and Officers................................. A-2
1.6 Effect on Capital Stock................................ A-2
1.7 Exchange of Certificates............................... A-3
1.8 No Further Ownership Rights in Company Common Stock.... A-5
1.9 Restricted Stock....................................... A-5
1.10 Tax Consequences....................................... A-5
1.11 Alternative Transaction Structure...................... A-5
1.12 Taking of Necessary Action; Further Action............. A-6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY.............. A-6
2.1 Organization; Subsidiaries............................. A-6
2.2 Company Capitalization................................. A-7
2.3 Obligations With Respect to Capital Stock.............. A-8
2.4 Authority; Non-Contravention........................... A-8
2.5 SEC Filings; Company Financial Statements.............. A-10
2.6 Absence of Certain Changes or Events................... A-10
2.7 Taxes.................................................. A-11
2.8 Title and Operation of Properties...................... A-12
2.9 Intellectual Property.................................. A-13
2.10 Compliance with Laws................................... A-14
2.11 Litigation............................................. A-15
2.12 Employee Benefit Plans................................. A-15
2.13 Environmental Matters.................................. A-18
2.14 Certain Agreements..................................... A-19
2.15 Customer Contracts and Network Operations.............. A-20
2.16 Brokers' and Finders' Fees............................. A-21
2.17 Insurance.............................................. A-21
2.18 Disclosure............................................. A-21
2.19 Board Approval......................................... A-21
2.20 Fairness Opinion....................................... A-21
2.21 DGCL Section 203 and Rights Agreement.................. A-21
2.22 Affiliates............................................. A-22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB A-22
3.1 Organization of Parent and Merger Sub.................. A-22
3.2 Parent and Merger Sub Capitalization................... A-23
3.3 Obligations With Respect to Capital Stock.............. A-23
3.4 Authority; Non-Contravention........................... A-23
3.5 SEC Filings; Parent Financial Statements............... A-24
3.6 Absence of Certain Changes or Events................... A-25
3.7 Taxes.................................................. A-25
3.8 Intellectual Property.................................. A-25
3.9 Litigation............................................. A-26
3.10 Disclosure............................................. A-26
A-i
Page
----
3.11 Parent Contracts............................................................... A-26
3.12 Brokers' and Finders' Fees..................................................... A-26
3.13 Board Approval................................................................. A-26
3.14 DGCL Section 203............................................................... A-26
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME............................................ A-26
4.1 Conduct of Business by Company................................................. A-26
4.2 No Parent Dividend............................................................. A-28
ARTICLE V ADDITIONAL AGREEMENTS.......................................................... A-29
5.1 Proxy Statement/Prospectus; Registration Statement; Antitrust and Other Filings A-29
5.2 Meeting of Company Stockholders................................................ A-30
5.3 No Solicitation................................................................ A-31
5.4 Confidentiality; Access to Information......................................... A-32
5.5 Public Disclosure.............................................................. A-33
5.6 Reasonable Efforts; Notification............................................... A-33
5.7 Third Party Consents........................................................... A-34
5.8 Stock Options and ESPP......................................................... A-34
5.9 Form S-8....................................................................... A-34
5.10 Indemnification................................................................ A-34
5.11 Nasdaq Listing................................................................. A-35
5.12 Letter of Company's Accountants................................................ A-35
5.13 Takeover Statutes; Company Rights Agreement.................................... A-35
5.14 Certain Employee Benefits...................................................... A-35
5.15 Section 16 Matters............................................................. A-36
5.16 Company Affiliates; Restrictive Legend......................................... A-36
ARTICLE VI CONDITIONS TO THE MERGER....................................................... A-36
6.1 Conditions to Obligations of Each Party to Effect the Merger................... A-36
6.2 Additional Conditions to Obligations of Company................................ A-37
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.............. A-37
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.............................................. A-38
7.1 Termination.................................................................... A-38
7.2 Notice of Termination; Effect of Termination................................... A-40
7.3 Fees and Expenses.............................................................. A-40
7.4 Amendment...................................................................... A-41
7.5 Extension; Waiver.............................................................. A-41
ARTICLE VIII GENERAL PROVISIONS............................................................. A-41
8.1 Non-Survival of Representations and Warranties................................. A-41
8.2 Notices........................................................................ A-41
8.3 Interpretation; Certain Defined Terms.......................................... A-42
8.4 Counterparts................................................................... A-43
8.5 Entire Agreement; Third Party Beneficiaries.................................... A-43
8.6 Severability................................................................... A-43
8.7 Other Remedies; Specific Performance........................................... A-44
8.8 Governing Law.................................................................. A-44
8.9 Rules of Construction.......................................................... A-44
8.10 Assignment..................................................................... A-44
8.11 Waiver of Jury Trial........................................................... A-44
A-ii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
Offer to Exchange $750,000,000 aggregate principal amount of 4.625% Senior Notes due May 1, 2023 (CUSIP Nos. 92343E AE2 and entered
into asU9221B AA4) for $750,000,000 aggregate principal amount of September 23, 2001, among VeriSign, Inc., a Delaware corporation
("Parent"), Illinois Acquisition Corporation, a Delaware corporation and a
wholly owned first-tier subsidiary of Parent ("Merger Sub"), and Illuminet
Holdings, Inc., a Delaware corporation ("Company").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and Company have
approved this Agreement, and declared advisable the merger of Merger Sub with
and into Company (the "Merger") upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law of the State
of Delaware ("Delaware Law").
B. For United States federal income tax purposes, the Merger is intended to
qualify as a "reorganization" pursuant to the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
C. Concurrently with the execution of this Agreement, and as a condition and
inducement to Parent's willingness to enter into this Agreement, certain
stockholders of Company are entering into a Voting Agreement with Parent in the
form of Exhibit A (the "Voting Agreement").
D. Concurrently with the execution of this Agreement, and as a condition and
inducement to Parent's willingness to enter into this Agreement, Parent and
Company are entering into a Stock Option Agreement in the form of Exhibit B
(the "Stock Option Agreement").
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement and the applicable provisions of Delaware Law, at the Effective Time,
Merger Sub shall be merged with and into Company, the separate corporate
existence of Merger Sub shall cease, and Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger, in such appropriate form as determined by the parties,
with the Secretary of State of the State of Delaware in accordance with the
relevant provisions of Delaware Law (the "Certificate of Merger") (the time of
such filing (or such later time as may be agreed in writing by Company and
Parent and specified in the Certificate of Merger) being the "Effective Time")
as soon as practicable on or after the Closing Date. The closing of the Merger
(the "Closing") shall take place at the offices of Fenwick & West LLP, located
at Two Palo Alto Square, Palo Alto, California, at a time and date to be
specified by the parties, which shall be no later than the second business day
after the satisfaction or waiver of the conditions set forth in Article VI, or
at such other time, date and location as the parties hereto agree in writing
(the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, at the
Effective Time, all the property, rights, privileges, powers and franchises of
Company and Merger Sub shall
A-1
vest in the Surviving Corporation, and all debts, liabilities and duties of
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Certificateof Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Company
shall be amended and restated in its entirety to be identical to the
Certificate of Incorporation of Merger Sub, as in effect immediately prior
to the Effective Time, until thereafter amended in accordance with Delaware
Law and as provided in such Certificate of Incorporation; provided, however,
4.625% Senior Notes due May 1, 2023 (CUSIP No. 92343E AF9) that at the Effective Time, Article I of the Certificate of Incorporation of
the Surviving Corporation shall be amended and restated in its entirety to
read as follows: "The name of the corporation is "Illuminet Holdings, Inc."
(b) At the Effective Time, the Bylaws of Company shall be amended and
restated in their entirety to be identical to the Bylaws of Merger Sub, as
in effect immediately prior to the Effective Time, until thereafter amended
in accordance with Delaware Law and as provided in such Bylaws.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the
following securities:
(a) Conversion of Company Common Stock. Each share of common stock, par
value $0.01 per share, of Company, including each attached right ("Company
Right") issued pursuant to the Rights Agreement dated November 20, 1998
("Company Rights Agreement"), between Company and UMB Bank, N.A., as rights
agent ("Company Common Stock") issued and outstanding immediately prior to the
Effective Time, other than any shares of Company Common Stock to be canceled
pursuant to Section1.6(a), will be canceled and extinguished and automatically
converted (subject to Section1.6(d)) into the right to receive 0.93 (the
"Exchange Ratio") of a share of common stock, par value $0.001 per share, of
Parent ("Parent Common Stock") upon surrender of the certificate representing
such share of Company Common Stock in the manner provided in Section1.7. No
fraction of a share of Parent Common Stock will be issued by virtue of the
Merger, but in lieu thereof, a cash payment shall be made pursuant to
Section1.7(d). Company Common Stock that is Company Restricted Stock (as
defined in Section 1.9) shall be subject to the provisions of Section 1.9.
(b) Cancellation of Company-Owned and Parent-Owned Stock. Each share of
Company Common Stock held by Company or owned by Merger Sub, Parent or any
direct or indirect wholly owned subsidiary of Company or of Parent immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Stock Options; Employee Stock Purchase Plan. At the Effective Time, all
options to purchase Company Common Stock then outstanding under (i) Company's
1997 Equity Incentive Plan (the "Company Stock Option Plan") and (ii) the
option granted to Roger Moore shall be converted in accordance with Section5.7
of this Agreement. Rights outstanding under Company's 1999 Employee Stock
Purchase Plan (the "Company ESPP") shall be treated as set forth in Section 5.7
of this Agreement.
(d) Capital Stock of Merger Sub. Each share of common stock, par value
$0.00001 per share, of Merger Sub (the "Merger Sub Common Stock"), issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock, $0.00001
par value per share, of the Surviving Corporation. Following the Effective
Time, each certificate evidencing ownership of shares of Merger Sub common
stock shall evidence ownership of such shares of capital stock of the Surviving
Corporation.
A-2
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted
to reflect appropriately the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to Parent Common Stock or Company Common Stock occurring on or after
the date hereof and prior to the Effective Time.
1.7 Exchange of Certificates.
(a) Exchange Agent. Parent shall select an institution reasonably
acceptable to Company to act as the exchange agent (the "Exchange Agent") in
the Merger.
(b) Exchange Fund. Promptly after the Effective Time, Parent shall make
available to the Exchange Agent for exchange in accordance with this Article
I, the shares of Parent Common Stock (such shares of Parent Common Stock,
together with cash in lieu of fractional shares and any dividends or
distributions with respect thereto, are hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 1.5 in exchange for
outstanding shares of Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time, Parent shall
instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates ("Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive shares of Parent Common
Stock pursuant to Section 1.5, (i) a letter of transmittal in customary form
(that shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall contain such other provisions
as Parent may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of Certificates for
cancellation to the Exchange Agent together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions
thereto, and such other documents as may reasonably be required by the
Exchange Agent, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of Parent Common Stock (after aggregating all Certificates
surrendered by such holder) into which such holder is entitled pursuant to
Section 1.6(a)(which shall be in uncertificated book entry form unless a
physical certificate is requested or required by applicable law or
regulation), payment in lieu of fractional shares that such holders have the
right to receive pursuant to Section1.7(d) and any dividends or
distributions payable pursuant to Section1.7(c), and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered, outstanding
Certificates will be deemed from and after the Effective Time, for all
corporate purposes, to evidence only the ownership of the number of full
shares of Parent Common Stock into which such shares of Company Common Stock
shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with
Section1.7(d) and any dividends or distributions payable pursuant to
Section1.7(c). No interest will be paid or accrued on any cash in lieu of
fractional shares of Parent Common Stock or on any unpaid dividends or
distributions payable to holders of Certificates. In the event of a transfer
of ownership of shares of Company Common Stock that is not registered in the
transfer records of Company, a certificate representing the proper number of
shares of Parent Common Stock may be issued to a transferee if the
Certificate representing such shares of Company Common Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer
taxes have been paid.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time
will be paid to the holders of any unsurrendered Certificates with respect
to the shares of Parent Common Stock represented thereby until the holders
of record of such Certificates shall surrender such Certificates. Subject to
applicable law, following surrender of any such Certificates, the Exchange
Agent shall deliver to the record holders thereof, without interest, (i)
promptly after such surrender, the amount of any cash payable with respect
to a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section1.7(d) and the amount of dividends or other
distributions with a record date
A-3
after the Effective Time theretofore paid with respect to such whole shares
of Parent Common Stock, and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective
Time but prior to surrender and a payment date occurring after surrender,
payable with respect to such whole shares of Parent Common Stock.
(e) Fractional Shares. (i) As promptly as practicable following the
Effective Time, the Exchange Agent shall determine the excess of (A) the
number of full shares of Parent Common Stock delivered to the Exchange Agent
pursuant to Section1.7(a), over (B) the aggregate number of full shares of
Parent Common Stock to be distributed to holders of Company Common Stock
pursuant to Section1.7(b) (such excess, the "Excess Shares"). Following the
Effective Time, the Exchange Agent, as agent for the holders of Company
Common Stock, shall sell the Excess Shares at then prevailing prices on the
Nasdaq Stock Market in the manner set forth in paragraph (ii) of this
Section1.7(d).
(ii) The sale of the excess shares by the Exchange Agent shall be
executed on the Nasdaq Stock Market and shall be executed in round lots
to the extent practicable. The Exchange Agent shall use all commercially
reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's reasonable
judgment, is practicable consistent with obtaining the best execution of
such sales in light of prevailing market conditions. Until the net
proceeds of such sales have been distributed to the holders of Company
Common Stock, the Exchange Agent will hold such proceeds in trust for
the holders of Company Common Stock. The Exchange Agent will determine
the portion of such net proceeds to which each holder of Company Common
Stock shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds by a fraction the numerator of which is the
amount of the fractional share interest to which such holder of Company
Common Stock is entitled (after aggregating all shares of Parent Common
Stock to be issued to such holder) and the denominator of which is the
aggregate amount of fractional share interests to which all holders of
Company Common Stock are entitled. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of
Company Common Stock with respect to fractional share interests, the
Exchange Agent shall promptly pay such amounts to such holders of
Company Common Stock in accordance with the terms of Section1.7(b).
(iii) Notwithstanding the provisions of paragraphs (i) and (ii) of
this Section1.7(d), Parent may decide, at its option, exercised prior to
the Effective Time, in lieu of the issuance and sale of Excess Shares
and the making of the payments contemplated in such paragraphs, that
Parent shall pay to the Exchange Agent an amount sufficient for the
Exchange Agent to pay each holder of Company Common Stock the amount
such holder would have received pursuant to Section1.7(e)(ii) assuming
that the sales of Parent Common Stock were made at a price equal to the
average of the closing prices of the Parent Common Stock on the Nasdaq
Stock Market, regular session, for the ten consecutive trading days
immediately following the Effective Time and, in such case, all
references herein to the cash proceeds of the sale of the Excess Shares
and similar references shall be deemed to mean and refer to the payments
calculated as set forth in this paragraph(ii). In such event, Excess
Shares shall not be issued or otherwise transferred to the Exchange
Agent pursuant to Sections1.7(a) or (d).
(f) Required Withholding. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to
any holder or former holder of Company Common Stock such amounts as may be
required to be deducted or withheld therefrom under the Code or under any
provision of state, local or foreign tax law or under any other applicable
Legal Requirement (as defined in Section 2.2(a)). To the extent such amounts
are so deducted or withheld, such amounts shall be treated for all purposes
under this Agreement as having been paid to the person to whom such amounts
would otherwise have been paid.
(g) Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates,
upon the making of an affidavit of that fact by the holder thereof,
certificates representing the shares of Parent Common Stock into which the
shares of Company Common Stock represented by such
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Certificates were converted pursuant to Section 1.5, cash for fractional
shares, if any, as may be required pursuant to Section 1.7(d) and any
dividends or distributions payable pursuant to Section 1.7(c); provided,
however, that Parent may, in its discretion and as a condition precedent to
the issuance of such certificates representing shares of Parent Common
Stock, cash and other distributions, require the owner of such lost, stolen
or destroyed Certificates to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against Parent, the
Surviving Corporation or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
(h) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
(i) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Stock for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Company Common Stock who have not theretofore complied with the
provisions of this Section 1.7 shall thereafter look only to Parent for the
shares of Parent Common Stock, any cash in lieu of fractional shares of
Parent Common Stock to which they are entitled pursuant to Section 1.7(d)
and any dividends or other distributions with respect to Parent Common Stock
to which they are entitled pursuant to Section 1.7(c), in each case, without
any interest thereon.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section1.7(c) and (d)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If
after the Effective Time Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.9 Restricted Stock. If any shares of Company Common Stock that are
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition providing that
such shares ("Company Restricted Stock") may be forfeited or repurchased by
Company upon any termination of the stockholders' employment, directorship or
other relationship with Company (and/or any affiliate of Company) under the
terms of any restricted stock purchase agreement or other agreement with
Company that does not by its terms provide that such repurchase option, risk of
forfeiture or other condition lapses upon consummation of the Merger, then the
shares of Parent Common Stock issued upon the conversion of such shares of
Company Common Stock in the Merger will continue to be unvested and subject to
the same repurchase options, risks of forfeiture or other conditions following
the Effective Time, and the certificates representing such shares of Parent
Common Stock may accordingly be marked with appropriate legends noting such
repurchase options, risks of forfeiture or other conditions. Company shall take
all actions that may be necessary to ensure that, from and after the Effective
Time, Parent is entitled to exercise any such repurchase option or other right
set forth in any such restricted stock purchase agreement or other agreement. A
listing of the holders of Company Restricted Stock, together with the number of
shares and the vesting schedule of Company Restricted Stock held by each, is
set forth in Part 1.9 of the Company Disclosure Letter.
1.10 Tax Consequences. It is intended by the parties hereto that the Merger
shall constitute a "reorganization" within the meaning of Section 368 of the
Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
1.11 Alternative Transaction Structure. The parties agree that Parent may
change the method of effecting the business combination with Company, including
by merging Company with an affiliate of Parent, and Company shall cooperate in
such efforts, including by entering into an appropriate amendment to this
Agreement
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(to the extent such amendment does not substantively affect this Agreement or
adversely affect the rights and obligations of Company or its stockholders);
provided however that such affiliate shall become a party to, and agree to be
bound by, the terms of this Agreement and that any action taken pursuant to
this Section 1.11 shall not (i) alter or change the kind or amount of
consideration to be issued to the holders of Company Common Stock as provided
for in this Agreement, (ii) adversely affect the tax consequences of the
transaction to the holders of Company Common Stock, (iii) significantly delay
the receipt of any required regulatory approval or (iv) otherwise cause the
closing conditions in Article VI to not be capable of being fulfilled (unless
duly waived by the party entitled to the benefits thereof).
1.12 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub will take all such lawful and necessary action. Parent shall
cause Merger Sub to perform all of its obligations relating to this Agreement
and the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
As of the date of this Agreement and as of the Closing Date, except as
disclosed in (i) factual statements set forth in Company's (A) Annual Report on
Form 10-K for the year ending December 31, 2000 or (B) Quarterly Report on Form
10-Q or Current Report on Form 8-K filed subsequent to the filing of such Form
10-K but prior to the date of this Agreement (for the avoidance of doubt,
disclosure included in any section titled "risks and uncertainties", "forward
looking statements" or a similar type caption in any such filings shall not
qualify or modify any representation or warranty in this Agreement), or (ii)
the disclosure letter delivered by Company to Parent dated as of the date
hereof (the "Company Disclosure Letter") (each Part of which qualifies the
correspondingly numbered representation, warranty or covenant to the extent
specified therein and such other representations, warranties or covenants to
the extent a matter in such Part is disclosed in such a way as to make its
relevance to such other representation, warranty or covenant readily apparent),
Company represents and warrants to Parent and Merger Sub as follows:
2.1 Organization; Subsidiaries.
(a) Company and each of its 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, and
all requisite qualifications to do business as a foreign corporation, to
conduct its business in the manner in which its business is currently being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority or qualifications would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
in Section8.3) on Company.
(b) Neither Company nor any of its subsidiaries owns any capital stock
of, or any equity interest of any nature in, any corporation, partnership,
joint venture arrangement or other business entity, other than the entities
identified in Part 2.1(b) of the Company Disclosure Letter, except for
passive investments in equity interests of public companies as part of the
cash management program of Company. Neither Company nor any of its
subsidiaries has agreed or is obligated to make, or is bound by any Contract
(as defined in Section 8.3), in effect as of the date hereof or as may
hereinafter be in effect under which it may become obligated to make any
future investment in or capital contribution to any other entity. Neither
Company, nor any of its subsidiaries, has, at any time, been a general
partner of any general partnership, limited partnership or other entity.
Part 2.1(b) of the Company Disclosure Letter indicates the jurisdiction of
organization of each entity listed therein and Company's direct or indirect
equity interest therein.
(c) Company has delivered or made available to Parent a true and correct
copy of the Certificate of Incorporation and Bylaws of Company and similar
governing instruments of each of its subsidiaries, each as
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amended to date (collectively, the "Company Charter Documents"), and each
such instrument is in full force and effect. Neither Company nor any of its
subsidiaries is in violation of any of the provisions of the Company Charter
Documents. Company has delivered or made available to Parent all proposed or
considered amendments to the Company Charter Documents.
2.2 Company Capitalization.
(a) The authorized capital stock of Company consists solely of
150,000,000 shares of Company Common Stock, of which there were 32,661,554
shares issued and outstanding as of the close of business on September 20,
2001, 100,000 shares of preferred stock, par value $0.01 per share, of which
4,416 shares have been designated Series A Convertible Preferred, none of
which are issued or outstanding, and 7,000 shares have been designated
Series B Participating Cumulative Preference Stock, none of which are issued
or outstanding, and 7,000,000 shares of Class A common stock, par value
$0.01 per share, none of which are issued or outstanding. All outstanding
shares of Company Common Stock are duly authorized, validly issued, fully
paid and nonassessable and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of Company or any
Contract to which Company is a party or by which it is bound. As of the date
of this Agreement, there are 5,000 shares of Company Common Stock held in
treasury by Company. There are no shares of Company Restricted Stock issued
or outstanding.
(b) As of the close of business on September 20, 2001, (i) 2,872,494
shares of Company Common Stock are subject to issuance pursuant to
outstanding options to purchase Company Common Stock under the Company Stock
Option Plan for an aggregate exercise price of $45,271,670, (ii) 900,000
shares of Company Common Stock are subject to issuance pursuant to the
non-qualified option granted to Roger Moore (together with the options set
forth in clause (i) above, the "Company Options") for an aggregate exercise
price of $2,124,000, and (iii) 300,000 shares of Company Common Stock are
reserved for future issuance under the Company ESPP. Part 2.2(b) of the
Company Disclosure Letter sets forth the following information with respect
to each Company Option outstanding as of the date of this Agreement: (i) the
name of the optionee; (ii) the number of shares of Company Common Stock
subject to such Company Option; (iii) the exercise price of such Company
Option; (iv) the date on which such Company Option was granted or assumed;
(v) the vesting schedule of such Company Option, and the extent to which
such Company Option is vested as of the date of this Agreement; (vi) the
date on which such Company Option expires; and (vii) whether the
exercisability of such option will be accelerated in any way by the
transactions contemplated by this Agreement, and indicates the extent of any
such acceleration. Company has made available to Parent an accurate and
complete copy of the Company Stock Option Plan and the form of all stock
option agreements evidencing Company Options. There are no options
outstanding to purchase shares of Company Common Stock other than pursuant
to the Company Stock Option Plan and the Stock Option Agreement. All shares
of Company Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they
are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except in connection with the Company Options, there are no
Contracts of any character to which Company is bound obligating Company to
accelerate the vesting of any Company Option as a result of the Merger.
Except as set forth in Part 2.2(b) of the Company Disclosure Letter, all of
which terminate on or prior to the Closing, there are no outstanding or
authorized stock appreciation, profit participation, "phantom stock," or
other similar plans or Contracts with respect to Company or any of its
subsidiaries.
(c) All outstanding shares of Company Common Stock, all outstanding
Company Options, and all outstanding shares of capital stock of each
subsidiary of Company have been issued and granted in compliance with (i)
all applicable securities laws and other applicable Legal Requirements and
(ii) all requirements set forth in applicable agreements or instruments. For
the purposes of this Agreement, "Legal Requirements" means any federal,
state, local, municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
judgment, injunction, order, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by
or under the authority of any Governmental Entity (as defined in
Section2.3).
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2.3 Obligations With Respect to Capital Stock. There are no equity
securities, partnership interests or similar ownership interests of any class
of Company equity security, or any securities exchangeable or convertible into
or exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except for
securities Company owns free and clear of all claims and Encumbrances (as
defined in Section 8.3), directly or indirectly through one or more
subsidiaries, and except for shares of capital stock or other similar ownership
interests of certain subsidiaries of Company that are owned by certain nominee
equity holders as required by the applicable law of the jurisdiction of
organization of such subsidiaries, as of the date of this Agreement, there are
no equity securities, partnership interests or similar ownership interests of
any class of equity security of any subsidiary of Company, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. There are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights) or other Contracts of any character to which
Company or any of its subsidiaries is a party or by which it is bound
obligating Company or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock, partnership interests or similar ownership interests of Company
or any of its subsidiaries or obligating Company or any of its subsidiaries to
grant, extend, accelerate the vesting of, extend the exercise period of, or
enter into any such subscription, option, warrant, equity security, call, right
or other Contract. Neither Company nor any of its subsidiaries have any
authorized, issued, or outstanding bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which the stockholders
have the right to vote. Except for the Company Rights Agreement and the Voting
Agreement, there are no registration rights, and there is no voting trust,
proxy, rights agreement, "poison pill" anti-takeover plan or other agreement or
understanding to which Company is a party or by which it is bound with respect
to any equity security of any class of Company or with respect to any equity
security, partnership interest or similar ownership interest of any class of
any of its subsidiaries. Stockholders of Company will not be entitled to
dissenters' or appraisal rights under applicable state law in connection with
the Merger.
2.4 Authority; Non-Contravention.
(a) Company has all requisite corporate power and authority to enter into
this Agreement and the Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Company, subject only to the
approval and adoption of this Agreement and the approval of the Merger by
Company's stockholders (the "Company Stockholder Approvals") and the filing
of the Certificate of Merger pursuant to Delaware Law. The affirmative vote
of the holders of two-thirds of the outstanding shares of Company Common
Stock is sufficient for Company's stockholders to approve and adopt this
Agreement and approve the Merger, and no other approval of any holder of any
securities of Company is required in connection with the consummation of the
transactions contemplated hereby. Each of this Agreement and the Stock
Option Agreement has been duly executed and delivered by Company and,
assuming the due execution and delivery by Parent and Merger Sub,
constitutes the valid and binding obligation of Company, enforceable against
Company in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws affecting the rights of
creditors generally and general principles of equity.
(b) The execution and delivery of this Agreement and the Stock Option
Agreement by Company does not, and the performance of this Agreement and the
Stock Option Agreement by Company will not, (i) conflict with or violate the
Company Charter Documents, (ii) subject to obtaining the Company Stockholder
Approvals and compliance with the requirements set forth in Section 2.4(b),
conflict with or violate any Legal Requirement applicable to Company or any
of its subsidiaries or by which Company or any of its subsidiaries or any of
their respective properties is bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair Company's or any of
its subsidiaries' rights or alter the rights or obligations of any third
party under,
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or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of Company or any of its subsidiaries pursuant to, any
Contract to which Company or any of its subsidiaries is a party or by which
Company or any of its subsidiaries or its or any of their respective assets
are bound or affected. Part 2.4(b) of the Company Disclosure Letter list all
consents, waivers and approvals under any of Company's or any of its
subsidiaries' Contracts required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually
or in the aggregate not obtained, would result in a material loss of
benefits to or a Material Adverse Effect on, Company, Parent or the
Surviving Corporation as a result of the Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity") or other person, is required to be obtained or made
by Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement or the Stock Option Agreement or the consummation
of the Merger, except for (i) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which Company is qualified
to do business, (ii) the filing of the Proxy Statement/Prospectus (as
defined in Section 2.17) with the Securities and Exchange Commission ("SEC")
in accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the effectiveness of the Registration Statement (as
defined in Section 2.17), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable federal, foreign and state securities (or related) laws and
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the securities or antitrust laws of any foreign country,
(iv) the filing of applications with the Federal Communications Commission
for the authorization to transfer control of (x) the Section 214
authorization held by subsidiary National Telemanagement Corporation d/b/a
American Roaming Network ("NTC") and (y) radio station WPMS279 held by
Company, and (v) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not be material to, or
have a Material Adverse Effect on, Company, Parent or the Surviving
Corporation.
(d) Except with respect to Company's ownership of NTC and its ownership
of radio station WPMS279, neither Company nor any of its subsidiaries
engages in any business or offers any product or service that is subject to
regulation by the Federal Communications Commission, any state public
service or utility commission, or foreign regulatory authority
(collectively, "Communications Regulatory Agencies"), and no filing or other
notification (including any tariff or other rate schedule) is required to be
delivered to or filed with any Communications Regulatory Agency with respect
to (i) the business conducted or intended to be conducted by, or any product
or service offered or intended to be offered by, Company or any of its
subsidiaries or (ii) the execution, delivery or performance of this
Agreement, the Stock Option Agreement or the Voting Agreement or the
consummation of the Merger and the other transactions contemplated hereby
and thereby. Except as set forth in Part 2.4 of the Company Disclosure
Letter, (i) neither Company nor its subsidiaries are, directly or
indirectly, under the control of any regional or local exchange carrier,
inter-exchange carrier or other communications entity regulated by any
Communications Regulatory Agency (a "Telecommunications Entity") and no such
Telecommunications Entity has the ability to, directly or indirectly,
exercise any control, influence or direction with respect to the management
or business operations of Company or any of its subsidiaries; (ii) to the
personal knowledge of the Chief Financial Officer or Controller of Company,
no shares of any class of stock or other voting interests of Company or any
of its subsidiaries is owned, directly or indirectly, by any
Telecommunications Entity and no Telecommunications Entity has any financial
interest in the assets or operations of Company or its subsidiaries (other
than as a customer or supplier in the ordinary course of business); (iii)
none of the officers or directors of Company or any of its subsidiaries is a
director or officer of any Telecommunications Entity, and no officer or
director of any Telecommunications Entity is a director or officer of
Company or any of its subsidiaries; (iv) neither Company nor any of its
subsidiaries has been described as, or has represented itself to be, a
Telecommunications Entity in (1) any Contract or other arrangement entered
into by Company or any of its subsidiaries in connection with its business
or the
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procurement of equipment or other property for use in the construction or
operation of its network facilities, or (2) any filing with any
Communications Regulatory Agency; and (v) neither Company nor any of its
subsidiaries directly or indirectly own shares of any class of stock or
other voting interests of any Telecommunications Entity, and neither Company
nor any of its subsidiaries has any financial interest in the assets or
operations of any Telecommunications Entity or its subsidiaries (other than
as a customer or supplier in the ordinary course of business).
2.5 SEC Filings; Company Financial Statements.
(a) Company has filed all forms, reports and documents required to be
filed by Company with the SEC since the effective date of the registration
statement of Company's initial public offering and has made available to
Parent such forms, reports and documents in the form filed with the SEC. All
such required forms, reports and documents (including those that Company may
file subsequent to the date hereof) are referred to herein as the "Company
SEC Reports." As of their respective dates, the Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act of 1933, as amended (the "Securities Act")
The exchange offer will expire at 11:59 p.m., New York City time, on _________, 2013, unless extended with respect to either or the Exchange Act, as the case may be,both series.
PROSPECTUS , 2013
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and the rules and regulationsOfficers. Subsection (a) of Section 145 of the SEC thereunder applicableDGCL, empowers a corporation to such
Company SEC Reports and (ii) did not at the time they were filed (or if
amendedindemnify any person who was or superseded byis a filing prior to the date of this Agreement, then
on the date of such filing) contain any untrue statement of a material factparty or omit to state a material fact requiredis threatened to be stated thereinmade a party to any threatened, pending or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except to the extent corrected
prior to the date of this Agreementcompleted action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by a subsequently filed Company SEC
Report. None of Company's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports (the
"Company Financials"), including each Company SEC Report filed after the
date hereof until the Closing, (i) complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) was prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto or in the caseright of unaudited interim financial statements,the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as may be
permitteda director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the SEC on Form 10-Q, 8-Kperson in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any successor form undercriminal action or proceeding, had no reasonable cause to believe the Exchange Act) and (iii) fairly presented the consolidated financial positionperson’s conduct was unlawful. The termination of Company andany action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its subsidiaries as at the respective dates thereof and the
consolidated resultsequivalent, shall not, of Company's and its subsidiaries' operations and cash
flows for the periods indicated, exceptitself, create a presumption that the unaudited interim financial
statements mayperson did not contain footnotesact in good faith and werein a manner which the person reasonably believed to be in or are subjectnot opposed to normal and
recurring year-end adjustments. The balance sheet of Company contained in
Company SEC Reports as of June 30, 2001 is hereinafter referred to as the "Company Balance Sheet." Except as disclosed in the Company Financials,
since the datebest interests of the Company Balance Sheet, neither Company norcorporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful. Subsection (b) of its
subsidiaries hasSection 145 of the DGCL empowers a corporation to indemnify any liabilities required under GAAPperson who was or is a party or is threatened to be set forth onmade a balance sheet (absolute, accrued, contingentparty to any threatened, pending or otherwise) which are,
individuallycompleted action or suit by or in the aggregate, material to the business, results of
operations or financial condition of Company and its subsidiaries taken as a
whole, except for liabilities incurred since the dateright of the Company Balance
Sheetcorporation to procure a judgment in its favor by reason of the ordinary coursefact that such person acted in any of business consistent with past practicesthe capacities set forth above, against expenses (including attorneys’ fees) actually and liabilitiesreasonably incurred by the person in connection with this Agreement.
(c) Company has heretofore furnished to Parentthe defense or settlement of such action or suit if the person acted in good faith and in a complete and correct
copy of any amendments or modifications, which have not yet been filed withmanner the SEC but which are requiredperson reasonably believed to be filed, to agreements, documentsin or other instruments which previously had been filed by Company with the SEC
pursuantnot opposed to the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the datebest interests of the Company
Balance Sheet there has not been: (i) any Material Adverse Effect with respect
to Company, (ii) any declaration, setting aside or payment of any dividend on,
or other distribution (whether in cash, stock or property)corporation and except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Company'sChancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Subsection (d) of Section 145 of the DGCL provides that any indemnification under subsections (a) and (b) of its subsidiaries' capital stock,Section 145 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or any purchase,
redemptionformer director, officer, employee or other acquisitionagent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of Section 145. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (1) by Companya majority vote of the directors who are not parties to such action, suit or anyproceeding, even though less than a quorum, or (2) by a committee of its
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subsidiariessuch directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders. Section 145 of the DGCL further provides that to the extent a present or former director or officer of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of Company'sSection 145, or its subsidiaries' capital stock or any
other securities of Company or its subsidiaries or any options, warrants, calls
or rights to acquire any such shares or other securities except for repurchases
from employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any split, combination
or reclassificationin defense of any of Company'sclaim, issue or any of its subsidiaries' capital
stock, (iv) any grantingmatter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by Company or any of its subsidiaries of any increasesuch person in compensation or fringe benefits or payment of any bonus to any of their
directors or employees,connection therewith and that such expenses may be paid by the corporation in any case, in excess of 10% of any such amount prior
to such increase, (v) any making of any loan or providing any advance to their
directors or employees, or any granting by Company or any of its subsidiaries
of any increase in severance or termination pay or any entry by Company or any
of its subsidiaries into, or material modification or amendment of, any
currently effective employment, severance, termination or indemnification
Contract or any Contract the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving
Company of the nature contemplated hereby, (vi) any material changefinal disposition of such action, suit or alteration in the policyproceeding upon receipt of Company or its subsidiaries relating to the
granting of stock options or other equity compensation to their directors,
employees and consultants, (vii) entry by Company or any of its subsidiaries
into, or material modification, amendment or cancellation of, any licensing or
other agreement with regard to the use, acquisition or licensing of any
material Intellectual Property (as defined in Section 2.9) other than licenses,
assignment agreements, or other similar Contracts entered into in the ordinary
course of business consistent with past practice, (viii) entry by Company or
any of its subsidiaries into, or material modification, amendment or
cancellation of, any material Contract (including any Contract related to any
material network component, any material billing and collection or clearing
house services, or any Contract related to any material third party database or
data collection), (ix) any material change by Company in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, (x) any material revaluation by Company or any of its subsidiaries of any
of their material assets, including writing off notes or accounts receivable
other than in the ordinary course of business, or (xi) any material disruption
to network operations or any material network outage, or any material failure
to comply with the network standards and objectives established by Company or
its subsidiaries, in any such case under clause (xi) above, that have resulted
or could result in (1) a material breach of any Contract with a customer or
other third party, (2) the payment of any penalties, (3) the issuance of any
credits by Company or its subsidiaries outside of the ordinary course of
business, or (4) the issuance of any credits by Company or its subsidiaries in
the ordinary course of business which, in the aggregate, exceed $250,000
calculated on an annual basis.
2.7 Taxes.
(a) Company and each of its subsidiaries have timely filed all material
federal, state, local and foreign returns, estimates, information statements
and reports ("Returns") relating to Taxes required to be filedundertaking by or on behalf of Company and each of its subsidiaries with any Tax authority, such Returns are true, correct and complete in all material respects, and Company
and each of its subsidiaries have paid all Taxes showndirector or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be due on such
Returns.
(b) Company and each of its subsidiaries have withheld all federal and
state income taxes, Taxes pursuant to the Federal Insurance Contribution Act
("FICA") and other Taxes required to be withheld, except such Taxes which
are not material to Company, and Company and its subsidiaries have paid such
Taxes to the appropriate Tax authoritiesindemnified by the applicable due date.
(c) Neither Company nor any of its subsidiaries has been delinquentcorporation as authorized in the payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against Company or any of its
subsidiaries, nor has Company or any of its subsidiaries executed any
unexpired waiver of any statute of limitations on or extending the period
for the assessment or collection of any Tax.
(d) No audit or other examination of any Return of Company or any of its
subsidiaries by any Tax authority is presently in progress, nor has Company
or any of its subsidiaries been notified of any request for such an audit or
other examination.
(e) No material adjustment relating to any Returns filed by Company or
any of its subsidiaries has been proposed formally or informally by any Tax
authority to Company or any of its subsidiaries or any representative
thereof.
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(f) Neither Company nor any of its subsidiaries has any liability for
unpaid Taxes which has not been accrued for or reserved on the Company
Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Company, other than any
liability for unpaid Taxes that may have accrued since the dateSection 145 of the Company Balance Sheet in connection with the operationDGCL; that any indemnification and advancement of the business of
Company and its subsidiaries in the ordinary course.
(g) There is no agreement, planexpenses provided by, or arrangement to which Company or any of
its subsidiaries is a party, including this Agreement and the agreements
entered into in connection with this Agreement, covering any employee or
former employee of Company or any of its subsidiaries that, individually or
collectively, would be reasonably likely to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m)
of the Code. There is no Contract to which Company or any of its
subsidiaries is a party or by which it is bound to compensate any individual
for excise taxes paidgranted pursuant to, Section 4999 of the Code.
(h) Neither Company nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by Company or its
subsidiaries.
(i) Neither Company nor any of its subsidiaries is party to or has any
obligation under any tax-sharing, tax indemnity or tax allocation agreement
or arrangement, other than among Company and its wholly owned subsidiaries.
(j) Except as may be required as a result of the Merger, Company and its
subsidiaries have not been and will not be required to include any
adjustment in Taxable income for any Tax period (or portion thereof) ending
after December 31, 1994 pursuant to Section 481 of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Closing.
(k) None of Company's or its subsidiaries' assets are tax exempt use
property within the meaning of Section 168(h) of the Code.
(l) Company has not been distributed in a transaction qualifying under
Section 355 of the Code within the last two years, nor has Company
distributed any corporation in a transaction qualifying under Section 355 of
the Code within the last two years.
(m) Company is not aware of any fact, circumstance, plan or intention on
the part of Company that would be reasonably likely to prevent the Merger
from qualifying as a "reorganization" pursuant to the provisions of Section
368 of the Code.
(n) Neither Company nor any of its subsidiaries has incurred, has any
liability, or has assumed any liability on behalf of a customer, for or in
respect of any fees, Taxes, assessments or forfeitures due to or imposed by
any Communications Regulatory Agency in connection with the provision of any
product or service by Company or any of its subsidiaries.
For the purposes of this Agreement, "Tax" or "Taxes" refers to (i) any and
all federal, state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities relating to taxes, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts, (ii)
any liability for payment of any amounts of the type described in clause (i) as
a result of being a member of an affiliated consolidated, combined or unitary
group, and (iii) any liability for amounts of the type described in clauses (i)
and (ii) as a result of any express or implied obligation to indemnify another
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
2.8 Title and Operation of Properties.
(a) Part 2.8 of the Company Disclosure Letter lists all real property
owned by Company or any of its subsidiaries and all real property leases to
which Company or any of its subsidiaries is a party and each
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amendment thereto that is in effect as of the date of this Agreement that
have a book value in excess of $500,000 or provide for annual payments in
excess of $500,000, respectively. All such current leases are in full force
and effect, are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing default or
event of default (or event which with notice or lapse of time, or both,
would constitute a default) that would give rise to a claim against Company
or any of its subsidiaries that is material to Company.
(b) Company or one of its subsidiaries (i) has good and marketable title
to all the property and assets reflected in the latest balance sheet
included in the Company Financials as being owned by Company or any of its
subsidiaries or acquired after the date thereof which are material to
Company (except properties sold or otherwise disposed of since the date
thereof in the ordinary course of business), free and clear of any
Encumbrances, except as reflected in the Company Financials and except for
Encumbrances for Taxes not yet due and payable and such Encumbrances which
are not material in character, amount or extent, and (ii) is lessee of all
leasehold estates reflected in the latest financial statements included in
such Company Financials or acquired after the date thereof which are
material to Company (except for leases that are not material and have
expired by their terms since the date thereof) and is in possession of the
properties purported to be leased thereunder, and each such lease is valid
without default thereunder by lessee or, to Company's knowledge, the lessor.
2.9 Intellectual Property. For the purposes of this Agreement, the following
terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights
registrations and applications therefor, and all other rights corresponding
thereto throughout the world; (iv) all industrial designs and any registrations
and applications therefor throughout the world; (v) all trade names, URLs,
logos, common law trademarks and service marks, trademark and service mark
registrations and applications therefor throughout the world; (vi) all
databases and data collections and all rights therein throughout the world;
(vii) all moral and economic rights of authors and inventors, however
denominated, throughout the world, (viii) all privacy, publicity and any
similar or equivalent rights throughout the world; and (ix) any similar or
equivalent rights to any of the foregoing anywhere in the world.
"Company Intellectual Property" shall mean any Intellectual Property that is
owned by, or exclusively licensed to, Company or one of its subsidiaries.
"Registered Intellectual Property" means all United States, international
and foreign: (i) patents and patent applications (including provisional
applications); (ii) registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or applications related to
trademarks; (iii) registered copyrights and applications for copyright
registration; and (iv) any other Intellectual Property that is the subject of
an application, certificate, filing, registration or other document issued,
filed with, or recorded by any Governmental Entity.
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Company or one of its
subsidiaries.
(a) No material Company Intellectual Property or product or service of
Company or any of its subsidiaries is subject to any proceeding or
outstanding decree, order, judgment, agreement, law, regulation or
stipulation restricting in any manner the use, transfer, or licensing
thereof by Company or any of its subsidiaries, or which may materially and
adversely affect the validity, use or enforceability of such Company
Intellectual Property.
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(b) Each material item of Company Registered Intellectual Property is
valid and subsisting, all necessary registration, maintenance and renewal
fees currently due in connection with such Registered Intellectual Property
have been made and all necessary documents, recordations and certificates in
connection with such Company Registered Intellectual Property have been
filed with the relevant patent, copyright, trademark or other authorities in
the United States or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Company Registered Intellectual Property,
except, in each case, as would not materially adversely affect such item of
Company Registered Intellectual Property.
(c) Company or one of its subsidiaries (i) owns or has license
(sufficient for the conduct of its business as currently conducted) to, each
material item of Intellectual Property used in the business of Company and
its subsidiaries, and (ii) owns and has good and exclusive title to or has
an exclusive license to each material item of Company Intellectual Property,
free and clear of any material Encumbrance.
(d) Neither Company nor any of its subsidiaries has transferred ownership
of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Company Intellectual Property, to any third
party.
(e) Part 2.9(e) of the Company Disclosure Letter lists all material
contracts, licenses and agreements to which Company or its subsidiaries is a
party (i) with respect to material Company Intellectual Property licensed or
transferred to any third party; or (ii) pursuant to which a third party has
licensed or transferred any material Intellectual Property to Company or any
of its subsidiaries, including any Contracts relating to access by Company
or its subsidiaries to material third party databases or data collections
owned by third parties.
(f) The operation of the business of Company and its subsidiaries as such
business currently is conducted, including Company's or its subsidiaries'
design, development, marketing and sale of the products or services of
Company or its subsidiaries (including with respect to products currently
under development) has not, does not and will not, to Company's knowledge,
infringe or misappropriate the Intellectual Property of any third party or
constitute unfair competition or trade practices under the laws of any
jurisdiction.
(g) Neither Company nor any of its subsidiaries has received notice from
any third party that the operation of the business of Company or any of its
subsidiaries or any act, product or service of Company or any of its
subsidiaries, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the
laws of any jurisdiction.
(h) To the knowledge of Company, no person has or is infringing or
misappropriating any Company Intellectual Property.
(i) Company and its subsidiaries have taken reasonable steps to protect
Company's and its subsidiaries' rights in Company's and such subsidiaries'
confidential information and trade secrets.
2.10 Compliance with Laws.
(a) Neither Company nor any of its subsidiaries is in material conflict
with, or in material default or in material violation of any material Legal
Requirement applicable to Company or any of its subsidiaries or by which
Company or any of its subsidiaries or any of their respective properties is
bound or affected. To Company's knowledge, no investigation or review by any
Governmental Entity is pending or has been threatened in a writing delivered
to Company or any of its subsidiaries against Company or any of its
subsidiaries, nor, to Company's knowledge, has any Governmental Entity
indicated an intention to conduct an investigation of Company or any of its
subsidiaries. There is no Legal Requirement binding upon Company or any of
its subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any material business practice
of Company or any of its subsidiaries, or any acquisition of material
property by Company or any of its subsidiaries.
(b) Company and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities that are
material to or required for the operation of the business of
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Company and its subsidiaries as currently conducted (collectively, the
"Company Permits"), and are in material compliance with the terms of the
Company Permits.
2.11 Litigation. There are no claims, suits, actions or proceedings pending
or, to the knowledge of Company, threatened against, relating to or affecting
Company or any of its subsidiaries, before any Governmental Entity or any
arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions
or proceedings, to have a Material Adverse Effect on Company, Parent or the
Surviving Corporation following the Merger. No Governmental Entity has at any
time challenged or questioned in a writing delivered to Company or any of its
subsidiaries or filed in any legal proceeding or otherwise the legal right of
Company or any of its subsidiaries to conduct its business as currently
conducted. As of the date hereof, to the knowledge of Company, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that would reasonably be expected to, cause or provide a bona fide
basis for a director or executive officer of Company or any of its subsidiaries
to seek indemnification from Company or such subsidiary.
2.12 Employee Benefit Plans.
(a) Definitions. With the exception of the definition of "Affiliate" set
forth in Section2.12(a)(i) below (which definition shall apply only to this
Section2.11 and Section 5.14), for purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with Company within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "Company Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including, each "employee benefit plan," within the
meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by Company or any
Affiliate for the benefit of any Employee (for the avoidance of doubt,
"Company Employee Plan" does not include "Employee Agreements");
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current, former, or retired employee,
officer, or director of Company or any Affiliate;
(vi) "Employee Agreement" shall mean each management, employment,
severance, consulting, relocation or similar agreement or contract
between Company or any Affiliate and (A) any Employee, requiring annual
or one time payments in excess of $25,000, or (B) any consultant,
requiring annual or one time payments in excess of $50,000;
(vii) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(ix) "International Employee Plan" shall mean each Company Employee
Plan that has been adopted or maintained by Company or any of its
Affiliates, whether informally or formally, for the benefit of Employees
outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
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(xii) "PBGC" shall mean the Pension Benefit Guaranty Corporation; and
(xiii) "Pension Plan" shall mean each Company Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Part 2.12 of the Company Disclosure Letter contains an
accurate and complete list of each Company Employee Plan and each Employee
Agreement. Neither Company nor any of its Affiliates have any plan or
commitment to establish any new Company Employee Plan, to modify any Company
Employee Plan or Employee Agreement (except to the extent required by law or
to conform any such Company Employee Plan or Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
Parent in writing, or as required by this Agreement), or to enter into any
Company Employee Plan or Employee Agreement, nor do they have any intention
or commitment to do any of the foregoing.
(c) Documents. Company has provided to Parent: (i) correct and complete
copies of all documents embodying each Company Employee Plan and each
Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations,
if any, prepared for each Company Employee Plan; (iii) the most recent
annual report (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection
with each Company Employee Plan or related trust; (iv) if the Company
Employee Plan is funded, the most recent annual and periodic accounting of
Company Employee Plan assets; (v) the most recent summary plan description
together with the summary of material modifications thereto, if any,
required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination, opinion, notification and advisory letters, and rulings
relating to Company Employee Plans and copies of all applications and
correspondence to or from the IRS or the DOL with respect to any Company
Employee Plan; (vii) all material written agreements and contracts relating
to each Company Employee Plan, including, but not limited to, administrative
service agreements, group annuity contracts and group insurance contracts;
(viii) all communications material to any Employee or Employees relating to
any Company Employee Plan and any proposed Company Employee Plans, in each
case, relating to any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting schedules or
other events which would result in any liability to Company or its
Affiliates that is material to Company; (ix) all COBRA forms and related
notices; and (x) all registration statements and prospectuses prepared in
connection with each Company Employee Plan.
(d) Employee Plan Compliance. (i) (A) Company or one of its Affiliates
has performed in all material respects all obligations required to be
performed by Company or its Affiliates under, and (B) none of Company of its
Affiliates is in default or violation of, or has knowledge of any default or
violation by any other party to, each Company Employee Plan, and each
Company Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) each Company Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code has either received a favorable determination letter from
the IRS with respect to each such Plan as to its qualified status under the
Code, ERISA and the Uruguay Round Agreements Act, the Uniformed Services
Employment and Reemployment Rights Act of 1994, the Small Business Job
Protection Act of 1996 and the Taxpayer Relief Act of 1997 (collectively
referred to as "GUST"), or has remaining a period of time under applicable
Treasury regulations or IRS pronouncements in which to apply for such a
determination letter and make any amendments necessary to obtain a favorable
determination and no event has occurred which would adversely affect the
status of such determination letter or the qualified status of such Plan;
(iii) no "prohibited transaction," within the meaning of Section 4975 of the
Code or Sections 406 and 407 of ERISA, and not otherwise exempt under
Section 408 of ERISA, has occurred with respect to any Company Employee
Plan; (iv) there are no actions, suits or claims pending, or, to the
knowledge of Company, threatened or reasonably anticipated (other than
routine claims for benefits) against any Company Employee Plan or against
the assets of any Company Employee Plan; (v) each Company Employee Plan can
be amended, terminated or otherwise discontinued after the
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Effective Time in accordance with its terms, without liability to Parent,
Company or any of its Affiliates (other than ordinary administration
expenses typically incurred in a termination event); (vi) there are no
audits, inquiries or proceedings pending or, to the knowledge of Company,
threatened by the IRS or DOL with respect to any Company Employee Plan;
(vii) neither Company nor any Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Section 402(i) of ERISA or
Sections 4975 through 4980 of the Code; and (viii) all contributions due
from Company or any Affiliate with respect to any of the Company Employee
Plans have been made as required under ERISA or have been accrued on the
Company Balance Sheet. All material filings and reports as to each Employee
Plan required to have been submitted to the IRS or the DOL have been duly
submitted.
(e) Pension Plans. Neither Company nor any Affiliate does now or has
ever, maintained, established, sponsored, participated in, or contributed
to, any Pension Plan that is subject to Title IV of ERISA or Section 412 of
the Code.
(f) Multiemployer Plans. At no time has Company or any of its Affiliates
contributed to or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan or
Employment Agreement provides, or has any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to any
person for any reason, except as may be required by COBRA, the Americans
with Disabilities Act of 1990, as amended, the Health Insurance Portability
and Accountability Act of 1996, as amended, the Women's Health and Cancer
Rights Act of 1998 and the FMLA, and the regulations thereunder or other
applicable statute, and Company has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) or any other person that such
Employee(s) or other person would be provided with retiree life insurance,
retiree health or other retiree employee welfare benefit, except to the
extent required by statute.
(h) COBRA; FMLA. The group health plans (as defined in Section4980B(g) of
the Code) that benefit employees of Company or its Affiliates are in
compliance, in all material respects, with the continuation coverage
requirements of Section4980B of the Code and Sections601 through 608 of
ERISA, the Americans with Disabilities Act of 1990, as amended, the Health
Insurance Portability and Accountability Act of 1996, as amended, the
Women's Health and Cancer Rights Act of 1998 and FMLA, and the regulations
thereunder, as such requirements affect Company, its Affiliates and its
Employees. As of the Closing Date, there will be no material outstanding,
uncorrected violations under COBRA, with respect to any of the Company's
Employee Plans, covered employees, or qualified beneficiaries.
(i) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Company Employee Plan, Employee Agreement, trust or loan
that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, extension of the
exercise period, vesting, distribution, increase in benefits or obligation
to fund benefits with respect to any Employee. No payment or benefit which
will or may be made by Company or its Affiliates with respect to any
Employee as a result of the transactions contemplated by this Agreement will
be characterized as an "excess parachute payment," within the meaning of
Section 280G(b)(1) of the Code or will be treated as a nondeductible expense
within the meaning of Section 162 of the Code.
(j) Employment Matters. Company and each of its subsidiaries: (i) is in
compliance in all material respects with all applicable foreign, federal,
state and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and
hours, in each case, with respect to Employees; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to Employees; (iii) has properly classified
independent contractors for purposes of federal and applicable state tax
laws, laws applicable to employee benefits and other applicable laws; (iv)
is not liable for any material arrears of wages or any taxes or any penalty
for failure to comply with any of the foregoing; and (v) is not liable for
any material payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment
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compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, or, to
Company's knowledge, threatened or reasonably anticipated claims or actions
against Company or any of its subsidiaries under any worker's compensation
policy or long-term disability policy. To Company's knowledge, no Employee
of Company or any of its subsidiaries has violated any employment contract,
nondisclosure agreement or noncompetition agreement by which such Employee
is bound due to such Employee being employed by Company or any of its
subsidiaries and disclosing to Company or any of its subsidiaries or using
trade secrets or proprietary information of any other person or entity.
(k) Labor. No work stoppage or labor strike against Company or any of its
subsidiaries is pending, threatened or reasonably anticipated. Company does
not know of any current, pending, threatened or reasonably anticipated
activities or proceedings of any labor union to organize any Employees.
There are no actions, suits, claims, labor disputes or grievances pending,
or, to the knowledge of Company, threatened or reasonably anticipated
relating to any labor, safety or discrimination matters involving any
Employee, including charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any liability to Company or its subsidiaries that is
material to Company. Neither Company nor any of its subsidiaries has engaged
in any unfair labor practices within the meaning of the National Labor
Relations Act. Neither Company nor any of its subsidiaries is presently, or
has been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by Company or any of its
subsidiaries.
(l) International Employee Plan. Each International Employee Plan has
been established, maintained and administered in material compliance with
its terms and conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such International
Employee Plan. Furthermore, no International Employee Plan has unfunded
liabilities that, as of the Effective Time, will not be offset by insurance
or are fully accrued on the Company Balance Sheet. Except as required by
law, no condition exists that would prevent Company or Parent from
terminating or amending any International Employee Plan at any time for any
reason.
2.13 Environmental Matters.
(a) Hazardous Material. Except as would not result in liability to
Company or any of its subsidiaries that is material to Company, no
underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state or
local law to be radioactive, toxic, hazardous or otherwise a danger to
health or the environment, including PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant
to the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, or defined as a hazardous waste pursuant to the United
States Resource Conservation and Recovery Act of 1976, as amended, and the
regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies (a "Hazardous Material") are present, as a result of the
actions of Company or any of its subsidiaries or any affiliate of Company,
or, to Company's knowledge, as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof that Company or any of
its subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not result in a
material liability to Company (in any individual case or in the aggregate)
(i) neither Company nor any of its subsidiaries has transported, stored,
used, manufactured, disposed of released or exposed its employees or others
to Hazardous Materials in violation of any law in effect on or before the
Closing Date, and (ii) neither Company nor any of its subsidiaries has
disposed of, transported, sold, used, released, exposed its employees or
others to or manufactured any product containing a Hazardous Material
(collectively "Hazardous Materials Activities") in violation of any rule,
regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
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(c) Permits. Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents
("Environmental Permits") material to and necessary for the conduct of
Company's and its subsidiaries' Hazardous Material Activities and other
businesses of Company and its subsidiaries as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No material action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to
Company's knowledge, no material action, proceeding, revocation proceeding,
amendment procedure, writ or injunction has been threatened by any
Governmental Entity against Company or any of its subsidiaries in a writing
delivered to Company or any of its subsidiaries concerning any Environmental
Permit of Company or any of its subsidiaries, Hazardous Material or any
Hazardous Materials Activity of Company or any of its subsidiaries. Company
is not aware of any fact or circumstance which could involve Company or any
of its subsidiaries in any material environmental litigation or impose upon
Company or any of its subsidiaries any environmental liability material to
Company.
(e) Radio Frequency Radiation Compliance. Company and its subsidiaries
provide no service to the public that would be subject to the rules,
regulations, standards and guidelines prescribed or established by (i) the
Federal Communications Commission pursuant to Section 704(b) of the
Telecommunications Act of 1996, as amended, and (ii) any other
Communications Regulatory Agency, in each case relating to the environmental
effects of radio frequency radiation.
2.14 Certain Agreements. Neither Company nor any of its subsidiaries is a
party to or is bound by:
(a) any employment or consulting Contract with any employee or member of
Company's Board of Directors, other than those that are terminable by
Company or any of its subsidiaries on no more than thirty days notice
without liability or financial obligation, except to the extent general
principles of wrongful termination law or good faith and fair dealing may
limit Company's or any of its subsidiaries' ability to terminate employees
at will, or any consulting Contract;
(b) any Contract, including any stock option plan, stock appreciation
right plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement;
(c) any Contract of indemnification, any guaranty or any instrument
evidencing indebtedness for borrowed money by way of direct loan, sale of
debt securities, purchase money obligation, conditional sale, or otherwise;
(d) any Contract containing covenants purporting to limit or which
effectively limit Company's or any of its subsidiaries' freedom to compete
in any line of business or in any geographic area or which would so limit
Company or Surviving Corporation or any of its subsidiaries after the
Effective Time or granting any exclusive distribution or other exclusive
rights;
(e) any Contract currently in force relating to the disposition or
acquisition by Company or any of its subsidiaries after the date of this
Agreement of a material amount of assets not in the ordinary course of
business, or pursuant to which Company has any material ownership or
participation interest in any corporation, partnership, joint venture,
strategic alliance or other business enterprise other than Company's
subsidiaries;
(f) any Contract with regard to the acquisition or licensing of any
material Intellectual Property other than licenses, assignment, or other
similar Contracts entered into in the ordinary course of business consistent
with past practice;
(g) any Contract with any (i) officer, (ii) director, (iii) holder of 5%
or more of the capital stock of Company or (iv) subsidiary, in any case of
(i), (ii) and (iv), of Company or any subsidiary of Company;
(h) any executed but not fully performed Contract providing for capital
expenditures by Company or its subsidiaries in excess of $500,000;
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(i) any Contract material to the performance of Company's and its
subsidiaries' network operations (such Contracts listed on Part 2.14(i) of
the Company Disclosure Letter being a "Material Network Contract");
(j) any Contract related to access to any material third party database
or data collection;
(k) any material billing and collection or clearing house Contract; or
(l) any other Contract currently in effect, the cancellation of which
would have a Material Adverse Effect on Company.
The Contracts required to be disclosed in the Company Disclosure Letter
pursuant to clauses (a) through (l) above or pursuant to Section 2.9 or are
required to be filed with any Company SEC Report ("Company Contracts") are
valid and in full force and effect, except to the extent that such invalidity
would not be material to Company. Neither Company nor any of its subsidiaries,
nor to Company's knowledge, any other party thereto, is in material breach,
violation or default under, and neither Company nor any of its subsidiaries has
received written notice that it has materially breached, violated or defaulted,
any of the terms or conditions of any Company Contract in such a manner as
would be material to Company.
2.15 Customer Contracts and Network Operations.
(a) Part 2.15(a) of the Disclosure Letter lists the ten customers of
Company and its subsidiaries that have contributed the most revenue, in the
aggregate, to Company and its subsidiaries in the current fiscal year ("Key
Customers"). Part 2.15 of the Disclosure Letter also lists each material
Contract between a Key Customer and Company or its subsidiaries ("Key
Customer Contract"). Each Key Customer Contract is in full force and effect.
Neither Company nor any of its subsidiaries, nor to Company's knowledge, any
other party thereto, is in breach, violation or default under, and neither
Company nor any of its subsidiaries has received written notice that it has
breached, violated or defaulted, any of the terms or conditions of any Key
Customer Contract. Neither Company nor any of its subsidiaries has received
any written or oral indication or assertion from any Key Customer that there
has been any material problem with the service Company or its subsidiaries
provide to such Key Customers or that a Key Customer desires to amend,
decrease services pursuant to, terminate, relinquish or not renew any Key
Customer Contract. No Contract with a Key Customer materially differs from
Company's or subsidiaries' standard form contract for the applicable service
in the form previously provided to Parent.
(b) There has not occurred with respect to Company or its subsidiaries
(i) any material disruption to network operations or any network outage,
(ii) any material delay in implementing any planned network build out or
scheduled upgrading or maintenance activities, (iii) any material failure to
comply with any network performance standards or objectives set forth in any
material customer Contract or promulgated by Telcordia or the American
National Standards Institute, or (iv) any failure to correct any material
network deficiency or condition of which Company or its subsidiaries have
knowledge that could cause or result in any of the foregoing (collectively,
a "Network Failure"), which have resulted, or could result, in (1) a
material breach of any material Contract with a customer or other third
party, (2) the payment of any penalties or (3) the issuance of any credits
by Company or its subsidiaries which, in the aggregate, exceed $150,000.
Company or its subsidiaries have implemented remedial measures reasonably
designed to prevent the reoccurrence of any Network Failure.
(c) Neither Company nor any of its subsidiaries has provided to its
customers or any third parties, other than in the ordinary course of
business and consistent with the terms of the standard form customer
contract for such product or service in the form previously provided to
Parent, (i) any warranties, representations, covenants or guarantees
regarding products or services provided by Company or its subsidiaries,
including any warranties, representations, covenants or guarantees regarding
network or service availability, service levels, operability or
non-interruption; (ii) any rights to obtain refunds or credits with respect
to any product or service provided by Company or its subsidiaries; and (iii)
any indemnities with respect to intellectual property infringement or the
performance or availability of any product or service of Company or any of
its subsidiaries.
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2.16 Brokers' and Finders' Fees. Except for fees payable to Robertson
Stephens, Inc. pursuant to an engagement letter dated May 4, 2001, a copy of
which has been provided to Parent, neither Company nor any of its subsidiaries
has incurred, nor will they incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.17 Insurance. Part 2.17 of the Company Disclosure Letter sets forth a list
of all insurance policies and fidelity bonds carried by Company or any of its
subsidiaries. Such policies and bonds are written by insurers of recognized
financial responsibility against such risks and losses and in such amounts as
is reasonably sufficient for the conduct of the business of Company and its
subsidiaries, including to cover the replacement cost of the fixed assets used
in Company's and its subsidiaries' businesses. There is no material claim
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies have been paid and Company
and its subsidiaries are otherwise in compliance in all material respects with
the terms of such policies and bonds. To the knowledge of Company, there has
been no threatened termination of, or material premium increase with respect
to, any of such policies.
2.18 Disclosure. The information supplied by Company for inclusion in the
Form S-4 (or any similar successor form thereto) Registration Statement to be
filed by Parent with the SEC in connection with the issuance of Parent Common
Stock in the Merger (the "Registration Statement") shall not at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The information
supplied by Company for inclusion or incorporation by reference in the proxy
statement/prospectus to be filed with the SEC as part of the Registration
Statement (the "Proxy Statement/Prospectus") shall not, on the date the Proxy
Statement/Prospectus is mailed to Company's stockholders, at the time of the
meeting of Company's stockholders (the "Company Stockholders' Meeting") to
consider the Company Stockholder Approvals, or as of the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders' Meeting which has become false or
misleading. The proxy statement included in the Proxy Statement/Prospectus will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder. If at any time prior to the
Effective Time any event relating to Company or any of its affiliates, officers
or directors should be discovered by Company which is required to be set forth
in an amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, Company shall promptly inform Parent. Notwithstanding the
foregoing, Company makes no representation or warranty with respect to any
information supplied by Parent or Merger Sub that is contained in any of the
foregoing documents.
2.19 Board Approval. The Board of Directors of Company has, as of the date
of this Agreement, (i) determined that the Merger is fair to, and in the best
interests of Company and its stockholders, and has approved this Agreement and
the Stock Option Agreement and (ii) declared the advisability of the Merger and
recommends that the stockholders of Company approve and adopt this Agreement
and approve the Merger.
2.20 Fairness Opinion. Company's Board of Directors has received a written
opinion from Robertson Stephens, Inc., dated as of the date hereof, to the
effect that, as of the date hereof, the consideration to be received by
Company's stockholders in the Merger is fair to Company's stockholders from a
financial point of view, and has delivered to Parent a copy of such opinion.
2.21 DGCL Section 203 and Rights Agreement. The restrictions contained in
Section 203 of the Delaware Law applicable to a "business combination" (as
defined in such Section 203) are not applicable to the execution,
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delivery or performance of this Agreement or the Stock Option Agreement or to
the consummation of the Merger. To Company's knowledge, no other anti-takeover,
control share acquisition, fair price, moratorium or other similar statute or
regulation (each, a "Takeover Statute") applies or purports to apply to this
Agreement, the Merger or the other transactions contemplated hereby. Company
has (i) duly authorized and executed an appropriate amendment to the Company
Rights Agreement which amendment has been provided to Parent and (ii) taken all
other action necessary or appropriate so that the entering into of this
Agreement, the Stock Option Agreement or the Voting Agreement, and the
consummation of the transactions contemplated hereby and thereby (including the
Merger) do not and will not result in Parent or Merger Sub being or becoming an
"Acquiring Person" thereunder or the ability of any person to exercise a
"Right" (as defined in the Company Rights Agreement) or enabling or requiring
Rights to separate from the shares of Company Common Stock to which they are
attached or to be triggered or become exercisable and the Company Rights
Agreement will expire immediately prior to the Effective Time, and the Company
Rights Agreement, as so amended, has not been further amended or modified
except in accordance herewith. No "Distribution Date" or "Shares Acquisition
Date" (as such terms are defined in the Company Rights Plan) has occurred prior
to the date of this Agreement, nor will occur as a result of the entry by
Company into this Agreement, the Stock Option Agreement or the Voting Agreement
or the consummation of any of the transactions contemplated hereby and thereby.
2.22 Affiliates. Part 2.22 of the Company Disclosure Letter is a complete
list of those persons who may be deemed to be, in Company's reasonable
judgment, affiliates of Company within the meaning of Rule 145 promulgated
under the Securities Act. Except as set forth in the Company SEC Reports, since
the date of Company's last proxy statement filed with the SEC, no event has
occurred as of the date of this Agreement that would be required to be reported
by Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date of this Agreement and as of the Closing Date, except as
disclosed in (i) factual statements set forth in Parent's (A) Annual Report on
Form 10-K for the year ending December 31, 2000 or (B) Quarterly Report on Form
10-Q or Current Report on Form 8-K filed subsequent to the filing of such Form
10-K but prior to the date of this Agreement (for the avoidance of doubt,
disclosure included in any section titled "risk factors", "forward looking
statements" or a similar type caption in any such filings shall not qualify or
modify any representation or warranty in this Agreement), or (ii) the
disclosure letter delivered by Parent to Company dated as of the date hereof
(the "Parent Disclosure Letter") (each Part of which qualifies the
correspondingly numbered representation, warranty or covenant to the extent
specified therein and such other representations, warranties or covenants to
the extent a matter in such Part is disclosed in such a way as to make its
relevance to such other representation, warranty or covenant readily apparent,
Parent and Merger Sub represent and warrant as follows:
3.1 Organization of Parent and Merger Sub.
(a) Each of Parent and Merger Sub 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, and
all requisite qualifications to do business as a foreign corporation, to
conduct its business in the manner in which its business is currently being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority or qualifications would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
(b) Parent has delivered or made available to Company a true and correct
copy of the Certificate of Incorporation and Bylaws of Parent and Merger
Sub, each as amended to date (collectively, the "Parent Charter Documents"),
and each such instrument is in full force and effect. Neither Parent nor
Merger Sub is in violation of any of the provisions of the Parent Charter
Documents. Parent has delivered or made available to Company all proposed or
considered amendments to the Parent Charter Documents.
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3.2 Parent and Merger Sub Capitalization.
(a) The authorized capital stock of Parent consists solely of
1,000,000,000 shares of Parent Common Stock, of which there were 204,114,323
shares issued and outstanding as of the close of business on September 20,
2001, and 5,000,000 shares of Preferred Stock, par value $0.001 per share,
none of which are issued or outstanding. All outstanding shares of Parent
Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute,
the Certificate of Incorporation or Bylaws of Parent or any Contract to
which Parent is a party or by which it is bound.
(b) As of the close of business on September 20, 2001, (i) 21,308,338
shares of Parent Common Stock are subject to issuance pursuant to
outstanding options to purchase Parent Common Stock, and (ii) 1,471,370
shares of Parent Common Stock are reserved for future issuance under
Parent's 1998 Equity Employee Stock Purchase Plan. All shares of Parent
Common Stock subject to issuance as aforesaid, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are
issuable, would be duly authorized, validly issued, fully paid and
nonassessable.
(c) The authorized capital stock of Merger Sub consists of 100 shares of
common stock, $0.00001 par value, all of which, as of the date hereof, are
issued and outstanding and are held directly by Parent. All of the
outstanding shares of Merger Sub's common stock have been duly authorized
and validly issued, and are fully paid and nonassessable. Merger Sub has no
subsidiaries.
(d) Merger Sub was formed for the purpose of consummating the Merger and
has no material assets or liabilities except as necessary for such purpose.
(e) The Parent Common Stock to be issued in the Merger, when issued in
accordance with the provisions of this Agreement, will be validly issued,
fully paid and nonassessable.
3.3 Obligations With Respect to Capital Stock. Except as set forth in Part
3.3 of the Parent Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of Parent
equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except for
securities Parent owns free and clear of all claims and Encumbrances, directly
or indirectly through one or more subsidiaries, and except for shares of
capital stock or other similar ownership interests of certain subsidiaries of
Parent that are owned by certain nominee equity holders as required by the
applicable law of the jurisdiction of organization of such subsidiaries, as of
the date of this Agreement, there are no equity securities, partnership
interests or similar ownership interests of any class of equity security of any
subsidiary of Parent, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as
set forth in Part 3.2 or Part 3.3 of the Parent Disclosure Letter, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights) or
other Contracts of any character to which Parent or any of its subsidiaries is
a party or by which it is bound obligating Parent or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock, partnership interests or similar
ownership interests of Parent or any of its subsidiaries or obligating Parent
or any of its subsidiaries to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right or
other Contract.
3.4 Authority; Non-Contravention.
(a) Each of Parent and Merger Sub has all requisite corporate power and
authority to enter into this Agreement and, with respect to Parent, the
Stock Option Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement, and the
Stock Option Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Parent and Merger Sub, subject only to the filing of the Certificate
of Merger pursuant to Delaware Law. No vote of Parent's stockholders is
necessary to approve and adopt
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this Agreement or approve the Merger, and no approval of any holder of any
securities of Parent is required in connection with the consummation of the
other transactions contemplated hereby. This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and, assuming the
due authorization, execution and delivery by Company, constitutes the valid
and binding obligations of Parent and Merger Sub, respectively, enforceable
against Parent and Merger Sub in accordance with their terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting
the rights of creditors generally and general principles of equity. The
Stock Option Agreement has been duly executed and delivered by Parent and,
assuming the due authorization, execution and delivery by Company,
constitutes the valid and binding obligations of Parent, respectively,
enforceable against Parent in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting
the rights of creditors generally and general principles of equity.
(b) The execution and delivery of this Agreement by each of Parent and
Merger Sub, and the Stock Option Agreement by Parent, does not, and the
performance of this Agreement by Parent and Merger Sub, and the Stock Option
Agreement by Parent, will not, (i) conflict with or violate the Certificate
of Incorporation or Bylaws of Parent or Merger Sub, (ii) subject to
compliance with the requirements set forth in Section 3.4(c), conflict with
or violate any Legal Requirement applicable to Parent or Merger Sub or by
which any of their respective properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair
Parent's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of Parent or Merger Sub pursuant to, Contract or
obligation to which Parent or Merger Sub is a party or by which Parent or
Merger Sub or any of their respective properties are bound or affected.
(c) No consent, approval, order or authorization of, or registration with
any Governmental Entity is required to be obtained or made by Parent or
Merger Sub in connection with the execution and delivery of this Agreement
or the Stock Option Agreement or the consummation of the Merger, except for
(i) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware, (ii) the filing of the Proxy Statement/Prospectus and
the Registration Statement with the SEC and a Schedule 13D with regard to
the Voting Agreement in accordance with the Securities Act and the Exchange
Act, and the effectiveness of the Registration Statement, (iii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal, foreign and state
securities (or related) laws and the HSR Act and the securities or antitrust
laws of any foreign country, and (iv) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would not
be material to Parent or the Surviving Corporation or have a material
adverse effect on the ability of the parties hereto to consummate the Merger
within the time frame in which the Merger would otherwise be consummated in
the absence of such requirement.
3.5 SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required to be
filed by Parent with the SEC since the effective date of the registration
statement of Parent's initial public offering, and has made available to
Company such forms, reports and documents in the form filed with the SEC.
All such required forms, reports and documents (including those that Parent
may file subsequent to the date hereof) are referred to herein as the
"Parent SEC Reports." As of their respective dates, the Parent SEC Reports
(i) were prepared in accordance with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such Parent SEC Reports, and (ii) did not
at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except to the extent corrected prior to the date of this
Agreement by a subsequently filed Parent SEC Report. None of Parent's
subsidiaries is required to file any forms, reports or other documents with
the SEC.
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(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports (the
"Parent Financials"), including any Parent SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto,
(ii) was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited interim financial statements, as may be
permitted by the SEC on Form 10-Q, 8-K or any successor form under the
Exchange Act) and (iii) fairly presented the consolidated financial position
of Parent and its subsidiaries as at the respective dates thereof and the
consolidated results of Parent's operations and cash flows for the periods
indicated, except that the unaudited interim financial statements may not
contain footnotes and were or are subject to normal and recurring year-end
adjustments. The balance sheet of Parent contained in Parent SEC Reports as
of June 30, 2001 is hereinafter referred to as the "Parent Balance Sheet."
(c) Except as disclosed in the Parent Financials, since the date of the
Parent Balance Sheet, neither Parent nor any of its subsidiaries has any
liabilities required under GAAP to be set forth on a balance sheet
(absolute, accrued, contingent or otherwise) which would reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on Parent, except for liabilities incurred since the date of the
Parent Balance Sheet in the ordinary course of business consistent with past
practices and liabilities incurred in connection with this Agreement.
(d) Parent has heretofore furnished to Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with
the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Parent with the SEC
pursuant to the Securities Act or the Exchange Act.
3.6 Absence of Certain Changes or Events. Since the date of the Parent
Balance Sheet there has not been (i) any Material Adverse Effect with respect
to Parent, (ii) any declaration, setting aside or payment of any dividend on,
or other distribution (whether in cash, stock or property) in respect of, any
of Parent's or any of its subsidiaries' capital stock, (iii) any split,
combination or reclassification of any of Parent's or any of its subsidiaries'
capital stock, (iv) any material change by Parent in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP, or
(v) any material revaluation by Parent of any of its material assets, including
writing off notes or accounts receivable other than in the ordinary course of
business.
3.7 Taxes. Parent is not aware of any fact, circumstance, plan or intention
on the part of Parent that would be reasonably likely to prevent the Merger
from qualifying as a "reorganization" pursuant to the provisions of Section 368
of the Code.
3.8 Intellectual Property. For the purposes of this Agreement, "Parent
Intellectual Property" shall mean any Intellectual Property that is owned by,
or exclusively licensed to, Parent or one of its subsidiaries.
(a) No material Parent Intellectual Property is subject to any proceeding
or outstanding decree, order, judgment, agreement, or stipulation
restricting in any manner the use, transfer, or licensing thereof by Parent,
or which may materially and adversely affect the validity, use or
enforceability of such Parent Intellectual Property, which proceeding,
decree, order, judgment, agreement or stipulation would reasonably be
expected to have a Material Adverse Effect on Parent.
(b) To Parent's knowledge, the operation of the business of Parent as
such business currently is conducted, including Parent's design,
development, marketing and sale of the products or services of Parent
(including with respect to products currently under development) has not,
does not and will not infringe or misappropriate the Intellectual Property
of any third party or, to its knowledge, constitute unfair competition or
trade practices under the laws of any jurisdiction, except for such matters
as would not reasonably be expected to have a Material Adverse Effect on
Parent.
(c) Parent has not received notice from any third party that the
operation of the business of Parent or any act, product or service of
Parent, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or trade practices under the laws of
any jurisdiction, which allegations if true, would reasonably be expected to
have a Material Adverse Effect on Parent.
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3.9 Litigation. There are no claims, suits, actions or proceedings pending
or, to the knowledge of Parent, threatened against, relating to or affecting
Parent or any of its subsidiaries, before any Governmental Entity or any
arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions
or proceedings, to have a Material Adverse Effect on Parent or have a material
adverse effect on the ability of the parties hereto to consummate the Merger.
3.10 Disclosure. The information supplied by Parent for inclusion in the
Registration Statement shall not at the time the Registration Statement is
filed with the SEC and at the time it becomes effective under the Securities
Act contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The information supplied by Parent for inclusion in the Proxy
Statement/Prospectus shall not, on the date the Proxy Statement/Prospectus is
mailed to Company's stockholders, at the time of the Company Stockholders'
Meeting or as of the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Stockholders' Meeting which has become false or misleading. The Registration
Statement and prospectus included in the Proxy Statement/Prospectus will comply
as to form in all material respects with the provisions of the Securities Act
and the rules and regulations thereunder. If at any time prior to the Effective
Time, any event relating to Parent or any of its affiliates, officers or
directors should be discovered by Parent which is required to be set forth in
an amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, Parent shall promptly inform Company. Notwithstanding the
foregoing, Parent makes no representation or warranty with respect to any
information supplied by Company which is contained in any of the foregoing
documents.
3.11 Parent Contracts. Neither Parent nor any of its subsidiaries is in
breach or default under, and neither Parent nor any of its subsidiaries has
received written notice that it has materially breached or defaulted, any of
the terms or conditions of any Contract set forth on Part 3.11 of the Parent
Disclosure Letter, in such a manner as would reasonably be expect to have a
Material Adverse Effect on Parent.
3.12 Brokers' and Finders' Fees. Except for fees payable to Credit Suisse
First Boston Corporation, Parent has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.13 Board Approval. The Board of Directors of Parent has, (i) as of the
date of this Agreement, determined that the Merger is fair to, and in the best
interests of Parent and its stockholders, and has approved this Agreement and
the Stock Option Agreement and (ii) reserved for issuance sufficient shares of
Parent Common Stock to consummate the transactions contemplated hereby.
3.14 DGCL Section 203. Neither Parent nor any affiliate is, or has been
during the past three years, an "interested stockholder" (as defined in Section
203 of the Delaware Law) of Company, other than as contemplated by this
Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its
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business in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted and in compliance in all material respects with
all applicable Legal Requirements, pay its debts (other than unsecured trade
debt which it will pay consistent with past practice) and Taxes when due
subject to good faith disputes over such debts or Taxes, pay or perform other
material obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to (i) preserve intact its present
business organization, (ii) keep available the services of its present officers
and employees and (iii) preserve its relationships with customers, suppliers,
licensors, licensees, and others with which it has business dealings. In
addition, Company will promptly notify Parent of any material event involving
its business, operations or financial condition.
In addition, without limiting the generality of the foregoing, except as
expressly contemplated by this Agreement, or except as set forth in Part 4.1 of
the Disclosure Letter without the prior written consent of Parent, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time,
Company shall not do any of the following and shall not permit its subsidiaries
to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of
such plans;
(b) Grant any severance or termination pay to any employee except
pursuant to written agreements in effect, or policies existing, on the date
hereof and as previously disclosed in writing to Parent, or adopt any new
severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company
Intellectual Property, other than non-exclusive licenses in the ordinary
course of business and consistent with past practice;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares
of capital stock or any securities convertible into shares of capital stock,
or enter into other agreements or commitments of any character obligating it
to issue any such shares or convertible securities, other than the issuance
delivery and/or sale of (i) shares of Company Common Stock pursuant to the
exercise of Company Options, (ii) shares of Company Common Stock issuable to
participants in the Company ESPP consistent with the terms thereof and (iii)
shares of Company Common Stock issuable to Parent (or a designee of Parent)
pursuant to the Stock Option Agreement;
(g) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof; or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of Company and its subsidiaries or enter into any
material joint ventures, strategic relationships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any properties
or assets which are material, individually or in the aggregate, to the
business of Company and its subsidiaries;
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(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Company or any of its subsidiaries, enter into any "keep well" or other
Contract to maintain any financial statement condition or enter into any
arrangement having the economic effect of any of the foregoing other than
(i) in connection with the financing of ordinary course trade payables
consistent with past practice or (ii) pursuant to existing credit facilities
in the ordinary course of business;
(k) Adopt or amend (other than any amendment required by law or
regulation) any employee benefit plan or employee stock purchase or employee
stock option plan, or enter into any employment contract or collective
bargaining agreement (other than offer letters and letter agreements entered
into in the ordinary course of business consistent with past practice with
employees who are terminable "at will"), pay any special bonus or special
remuneration to any director or employee, make any loan or provide any
advance to any director or employee, or increase the salaries or wage rates
or fringe benefits (including rights to severance or indemnification) of its
directors, employees or consultants other than in the ordinary course of
business, consistent with past practice, or change in any material respect
any management policies or procedures;
(l) Make any material capital expenditures outside of the ordinary course
of business or outside of the budget previously provided to Parent;
(m) Materially modify, amend or terminate any Company Contract or other
material Contract to which Company or any subsidiary thereof is a party
(including any Key Customer Contracts, any Material Network Contract, any
material billing, collection or clearing house Contract, or any Contract
related to access to any material third party databases or data collections)
or waive, release or assign any material rights or claims thereunder;
(n) Enter into any Contract with regard to the acquisition or licensing
of any material Intellectual Property (as defined in Section 2.9) other than
licenses, distribution Contracts, or other similar Contracts entered into in
the ordinary course of business consistent with past practice;
(o) Enter into (A) any Contract that would be a Material Network
Contract, (B) any Contract related to any material billing and collection or
clearing house services, or (C) any Contract related to access to any
material third party database or data collection, except in any such case in
the ordinary course of business consistent with past practice;
(p) Materially revalue any of its assets or, except as required by GAAP,
make any change in accounting methods, principles or practices;
(q) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement,
including with respect to the Company Rights Agreement or any Takeover
Statute;
(r) Take any action that would cause any representation or warranty of
Company to become untrue or inaccurate; or
(s) Agree in writing or otherwise commit or negotiate to take any of the
actions described in Section 4.1(a) through (r) above.
4.2 No Parent Dividend. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, Parent shall not declare, set aside or pay
any dividends on or make any other distributions (whether in cash, stock,
equity securities or property) in respect of any capital stock of Parent or
split, combine or reclassify any capital stock of Parent or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock of Parent, except to the extent that Company
shall otherwise consent in writing.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Antitrust and Other
Filings.
(a) As promptly as practicable after the execution of this Agreement,
Company will prepare and file with the SEC, the Proxy Statement/Prospectus
and Parent will prepare and file with the SEC the Registration Statement in
which the Proxy Statement/Prospectus will be included as a prospectus. Each
of Company and Parent will respond to any comments of the SEC, will use its
respective commercially reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing and Company will cause the Proxy
Statement/Prospectus to be mailed to its stockholders at the earliest
practicable time after the Registration Statement is declared effective by
the SEC. Promptly after the date of this Agreement, each of Company and
Parent will prepare and file (i) with the United States Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice Notification and Report Forms relating to the transactions
contemplated herein as required by the HSR Act, as well as comparable
pre-merger notification forms required by the merger notification or control
laws and regulations of any applicable jurisdiction, as agreed to by the
parties (the "Antitrust Filings") and (ii) any other filings required to be
filed by it under the Exchange Act, the Securities Act or any other federal,
state or foreign laws relating to the Merger and the transactions
contemplated by this Agreement (the "Other Filings"). Company and Parent
each shall promptly supply the other with any information which may be
required in order to effectuate any filings pursuant to this Section 5.1.
(b) Each of Company and Parent will notify the other promptly (i) upon
the occurrence of any event which is required to be set forth in an
amendment or supplement to the Proxy Statement/Prospectus, the Registration
Statement or any Antitrust Filing or Other Filing or (ii) upon the receipt
of any comments from the SEC or its staff or any other government officials
in connection with any filing made pursuant hereto and of any request by the
SEC or its staff or any other government officials for amendments or
supplements to the Registration Statement, the Proxy Statement/Prospectus or
any Antitrust Filings or Other Filings or for additional information and
will supply the other with copies of all correspondence between such party
or any of its representatives, on the one hand, and the SEC, or its staff or
any other government officials, on the other hand, with respect to the
Registration Statement, the Proxy Statement/Prospectus, the Merger or any
Antitrust Filing or Other Filing. Except where prohibited by applicable
Legal Requirements, and subject to the mutual confidentiality agreement,
dated as of September 10, 2001 (the "Confidentiality Agreement"), each of
Company and Parent shall consult with the other prior to taking a position
with respect to any such filing, shall permit the other to review and
discuss in advance, and consider in good faith the views of the other in
connection with any analyses, appearances, presentations, memoranda, briefs,
white papers, arguments, opinions and proposals before making or submitting
any of the foregoing to any Governmental Entity by or on behalf of any party
hereto in connection with any investigations or proceedings in connection
with this Agreement or the transactions contemplated hereby (including under
any antitrust or fair trade Legal Requirement), coordinate with the other in
preparing and exchanging such information and promptly provide the other
(and its counsel) with copies of all filings, presentations or submissions
(and a summary of any oral presentations) made by such party with any
Governmental Entity in connection with this Agreement or the transactions
contemplated hereby; provided that with respect to any such filing,
presentation or submission, each of Parent and Company need not supply the
other (or its counsel) with copies (or in case of oral presentations, a
summary) to the extent that any law, treaty, rule or regulation of any
Governmental Entity applicable to such party requires such party or its
Subsidiaries to restrict or prohibit access to any such properties or
information or where such properties or information is subject to the
attorney-client privilege (it being understood that the participation and
cooperation contemplated herein is not intended to constitute, nor shall be
deemed to constitute, any form of direct or indirect waiver of the
attorney-client privilege maintained by any party hereto). Each of Company
and Parent will cause all documents that it is responsible for filing with
the SEC or other regulatory authorities under this Section 5.1 to comply in
all material respects with all applicable requirements of law and the rules
and regulations promulgated thereunder.
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5.2 Meeting of Company Stockholders.
(a) Promptly after the date hereof, Company will take all action
necessary in accordance with the Delaware Law and its Certificate of
Incorporation and Bylaws to convene and hold the Company Stockholders'
Meeting to be held as promptly as practicable, and in any event (to the
extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement, for the purpose
of voting upon approval and adoption of this Agreement and approval of the
Merger. Subject to Section 5.2(c), Company will use its commercially
reasonable efforts to solicit from its stockholders proxies in favor of the
adoption and approval of this Agreement and the approval of the Merger and
will take all other action necessary or advisable to obtain such approvals
and to secure the vote or consent of its stockholders required by the rules
of the Nasdaq Stock Market, Delaware Law and its Certificate of
Incorporation and Bylaws. Notwithstanding anything to the contrary contained
in this Agreement, Company may adjourn or postpone the Company Stockholders'
Meeting to the extent necessary to ensure that any necessary supplement or
amendment to the Proxy Statement/Prospectus is provided to Company's
stockholders in advance of a vote on the Merger and this Agreement or, if as
of the time for which Company Stockholders' Meeting is originally scheduled
(as set forth in the Proxy Statement/Prospectus) there are insufficient
shares of Company Common Stock represented (either in person or by proxy) to
constitute a quorum necessary to conduct the business of the Company
Stockholders' Meeting. Company shall ensure that the Company Stockholders'
Meeting is called, noticed, convened, held and conducted, and that all
proxies solicited by Company in connection with the Company Stockholders'
Meeting are solicited, in compliance with the Delaware Law, its Certificate
of Incorporation and Bylaws, the rules of the Nasdaq Stock Market and all
other applicable legal requirements. Company's obligation to call, give
notice of, convene and hold the Company Stockholders' Meeting in accordance
with this Section 5.2(a) shall not be limited to or otherwise affected by
the commencement, disclosure, announcement or submission to Company of any
Acquisition Proposal (as defined in Section 5.3), or Superior Offer, or by
any withdrawal, amendment or modification of the recommendation of the Board
of Directors of Company with respect to this Agreement or the Merger.
(b) Subject to Section 5.2(c): (i) the Board of Directors of Company
shall recommend that Company's stockholders vote in favor of and adopt and
approve this Agreement and approve the Merger at the Company Stockholders'
Meeting; (ii) the Proxy Statement/Prospectus shall include a statement to
the effect that the Board of Directors of Company has recommended that
Company's stockholders vote in favor of and adopt and approve this Agreement
and the Merger at the Company Stockholders' Meeting; and (iii) neither the
Board of Directors of Company nor any committee thereof shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or modify in a
manner adverse to Parent, the recommendation of the Board of Directors of
Company that Company's stockholders vote in favor of and adopt and approve
this Agreement and the Merger.
(c) Nothing in this Agreement shall prevent the Board of Directors of
Company from withholding, withdrawing, amending or modifying its
recommendation in favor of the Merger if (i) a Superior Offer (as defined
below) is made to Company and is not withdrawn, (ii) Company shall have
provided written notice to Parent (a "Notice of Superior Offer") advising
Parent that Company has received a Superior Offer, specifying all of the
material terms and conditions of such Superior Offer and identifying the
person or entity making such Superior Offer, (iii) Parent shall not have,
within five business days of Parent's receipt of the Notice of Superior
Offer, made an offer that Company's Board of Directors by a majority vote
determines in its good faith judgment (after consultation with a financial
advisor of national standing) to be at least as favorable to Company's
stockholders as such Superior Offer (it being agreed that the Board of
Directors of Company shall convene a meeting to consider any such offer by
Parent promptly following the receipt thereof), (iv) the Board of Directors
of Company concludes in good faith, after consultation with its outside
counsel, that, in light of such Superior Offer, the withholding, withdrawal,
amendment or modification of such recommendation is required in order for
the Board of Directors of Company to comply with its fiduciary obligations
to Company's stockholders under applicable law and (v) Company shall not
have violated any of the restrictions set forth in Section 5.3 or this
Section 5.2. Company shall provide
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Parent with at least three business days prior notice (or such lesser prior
notice as provided to the members of Company's Board of Directors but in no
event less than twenty-four hours) of any meeting of Company's Board of
Directors at which Company's Board of Directors is reasonably expected to
consider any Acquisition Proposal to determine whether such Acquisition
Proposal is a Superior Offer. Nothing contained in this Section 5.2(c) shall
limit Company's obligation to hold and convene the Company Stockholders'
Meeting (regardless of whether the recommendation of the Board of Directors
of Company shall have been withdrawn, amended or modified). For purposes of
this Agreement, "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to consummate any of the following
transactions: (i) a merger or consolidation involving Company pursuant to
which the stockholders of Company immediately preceding such transaction
hold less than 50% of the equity interest in the surviving or resulting
entity of such transaction or (ii) the acquisition by any person or group
(including by way of a tender offer or an exchange offer or a two step
transaction involving a tender offer followed with reasonable promptness by
a merger involving Company), directly or indirectly, of ownership of 100% of
the then outstanding shares of capital stock of Company, on terms that the
Board of Directors of Company determines, in its reasonable judgment (after
consultation with a financial advisor of national standing) to be more
favorable to Company stockholders from a financial point of view than the
terms of the Merger; provided, however, that any such offer shall not be deemed to be a "Superior Offer" if any financing required to consummate the
transaction contemplated by such offer is not committed or is not likely in
the reasonable judgment of Company's Board of Directors (after consultation
with its financial advisor) to be obtained by such third party on a timely
basis.
(d) Nothing contained in this Agreement shall prohibit Company or its
Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules14d-9 and 14e-2(a) promulgated under the Exchange Act;
provided, however, that the Board of Directors of Company shall not
recommend that the stockholders of Company tender their shares in connection
with a tender offer except to the extent that the Board of Directors
determines in its good faith judgment, after consultation with outside
counsel and a financial advisor of national standing, that the tender offer
constitutes a Superior Offer and that such recommendation is required in
order for the Board of Directors of Company to comply with its fiduciary
duties to Company's stockholders under applicable law.
5.3 No Solicitation.
(a) From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Article VII, Company and its
subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them
to, directly or indirectly, (i) solicit, initiate, seek, entertain,
encourage, facilitate, support or induce the making, submission or
announcement of any Acquisition Proposal (as hereinafter defined), (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes,
or may reasonably be expected to lead to, any Acquisition Proposal, (iii)
engage in discussions with any person with respect to any Acquisition
Proposal, except as to the existence of these provisions, (iv) approve,
endorse or recommend any Acquisition Proposal or (v) enter into any letter
of intent or any other Contract contemplating or otherwise relating to any
Acquisition Proposal; provided, however, that prior to the approval of this
Agreement and the Merger at the Company Stockholders' Meeting, this Section
5.3(a) shall not prohibit Company from furnishing nonpublic information
regarding Company and its subsidiaries to, or entering into discussions
with, any person or group who has submitted (and not withdrawn) to Company
an unsolicited, written, bona fide Acquisition Proposal that the Board of
Directors of Company reasonably concludes (after consultation with a
financial advisor of national standing) may constitute a Superior Offer if
(1) neither Company nor any representative of Company and its subsidiaries
shall have violated any of the restrictions set forth in this Section 5.3,
(2) the Board of Directors of Company concludes in good faith, after
consultation with its outside legal counsel, that such action is required in
order for the Board of Directors of Company to comply with its
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fiduciary obligations to Company's stockholders under applicable law, (3)
prior to furnishing any such nonpublic information to, or entering into any
such discussions with, such person or group, Company gives Parent written
notice of the identity of such person or group and all of the material terms
and conditions of such Acquisition Proposal and of Company's intention to
furnish nonpublic information to, or enter into discussions with, such
person or group, and Company receives from such person or group an executed
confidentiality agreement containing terms at least as restrictive with
regard to Company's confidential information as the Confidentiality
Agreement (as defined in Section 5.1), (4) Company gives Parent at least
three business days advance notice of its intent to furnish such nonpublic
information or enter into such discussions, and (5) contemporaneously with
furnishing any such nonpublic information to such person or group, Company
furnishes such nonpublic information to Parent (to the extent such nonpublic
information has not been previously furnished by Company to Parent). Company
and its subsidiaries will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
two sentences by any officer, director or employee of Company or any of its
subsidiaries or any investment banker, attorney or other advisor or
representative of Company or any of its subsidiaries shall be deemed to be a
breach of this Section 5.3 by Company.
For purposes of this Agreement, "Acquisition Proposal" shall mean any offer
or proposal (other than an offer or proposal by Parent) relating to, or
involving: (A) any acquisition or purchase from Company by any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 20% interest in the total outstanding
voting securities of Company or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 20% or more of the total outstanding voting
securities of Company or any of its subsidiaries or any merger, consolidation,
business combination or similar transaction involving Company pursuant to which
the stockholders of Company immediately preceding such transaction hold less
than 80% of the equity interests in the surviving or resulting entity of such
transaction, other than as set forth on Part 5.3(a) of the Company Disclosure
Letter; (B) any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of business),
acquisition, or disposition of any material portion of the assets of Company
and its subsidiaries; or (C) any liquidation or dissolution of Company.
(b) In addition to the obligations of Company set forth in paragraph (a)
of this Section 5.3, Company as promptly as practicable shall advise Parent
orally and in writing of any request for non-public information which
Company reasonably believes would lead to an Acquisition Proposal or of any
Acquisition Proposal, or any inquiry with respect to or which Company
reasonably should believe would lead to any Acquisition Proposal, the
material terms and conditions of such request, Acquisition Proposal or
inquiry, and the identity of the person or group making any such request,
Acquisition Proposal or inquiry. Company will (i) keep Parent informed as
promptly as practicable in all material respects of the status and details
(including material amendments or proposed amendments) of any such request,
Acquisition Proposal or inquiry and (ii) provide to Parent as promptly as
practicable a copy of all written materials provided to Company in
connection with any such request, Acquisition Proposal or inquiry.
5.4 Confidentiality; Access to Information.
(a) Confidentiality Agreement. The parties acknowledge that Company and
Parent have previously executed the Confidentiality Agreement, which will
continue in full force and effect in accordance with its terms.
(b) Access to Information. Company will afford Parent and its
accountants, counsel and other representatives reasonable access during
normal business hours to the properties, books, records and personnel of
Company during the period prior to the Effective Time to obtain all
information concerning the business, properties, results of operations and
personnel of Company, as Parent may reasonably request. Parent will afford
Company and its accountants, counsel and other representatives reasonable
access during
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normal business hours to the properties, books, records and personnel of
Parent during the period prior to the Effective Time to obtain all
information concerning the business, properties, results of operations and
personnel of Parent, as Company may reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section 5.4 will
affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties to consummate the
Merger.
5.5 Public Disclosure. Parent and Company will consult with each other, and
to the extent reasonably practicable, agree, before issuing any press release
or otherwise making any public statement with respect to the Merger, this
Agreement or an Acquisition Proposal and will not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law or any listing agreement with a national securities exchange.
The parties have agreed to the text of the joint press release announcing the
signing of this Agreement.
5.6 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including using reasonable
efforts to accomplish the following: (i) the taking of all reasonable acts
necessary to cause the conditions precedent set forth in Article VI to be
satisfied, (ii) the obtaining of all necessary actions or nonactions,
waivers, consents, approvals, orders and authorizations from Governmental
Entities and the making of all necessary registrations, declarations and
filings (including registrations, declarations and filings with Governmental
Entities, if any) and the taking of all commercially reasonable steps as may
be necessary to avoid any suit, claim, action, investigation or proceeding
by any Governmental Entity, (iii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iv) the defending of any suits,
claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental
Entity vacated or reversed and (v) the execution or delivery of any
additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement. Notwithstanding
anything in this Agreement to the contrary, neither Parent nor any of its
affiliates shall be under any obligation (i) to make proposals, execute or
carry out agreements or submit to orders providing for the sale or other
disposition or holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets of Parent, any of its
affiliates or Company or the holding separate of the shares of Company
Common Stock (or shares of stock of the Surviving Corporation), or (ii)
imposing or seeking to impose or confirm any limitation or regulation on the
ability of Parent or any of its subsidiaries or affiliates to freely conduct
their business or own such assets or to acquire, hold or exercise full
rights of ownership of the shares of Company Common Stock (or shares of
stock of the Surviving Corporation).
(b) Each of Company and Parent will give prompt notice to the other of (i)
any notice or other communication from any person alleging that the consent of
such person is or may be required in connection with the Merger, (ii) any
notice or other communication from any Governmental Entity in connection with
the Merger, (iii) any litigation relating to, involving or otherwise affecting
Company, Parent or their respective subsidiaries that relates to or may
reasonably be expected to affect, the consummation of the Merger. Company shall
give prompt notice to Parent of any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate, or any failure of
Company to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, such that the conditions set forth in Section 6.3
would not be satisfied, provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
Parent shall give prompt notice to Company of any representation or warranty
made by it or Merger Sub contained in this Agreement becoming untrue or
inaccurate,
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or any failure of Parent or Merger Sub to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions
set forth in Section 6.2 would not be satisfied, provided, however, that no
such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
5.7 Third Party Consents. As soon as practicable following the date hereof,
Parent and Company will each use its commercially reasonable efforts to obtain
any material consents, waivers and approvals under any of its or its
subsidiaries' respective Contracts required to be obtained in connection with
the consummation of the transactions contemplated hereby.
5.8 Stock Options and ESPP.
(a) At the Effective Time, each outstanding Company Option, whether or
not then exercisable, will be converted into an option to purchase Parent
Common Stock. Each Company Option so converted will continue to have, and be
subject to, substantially the same terms and conditions set forth in the
Company Stock Option Plan immediately prior to the Effective Time (including
any repurchase rights or vesting provisions), except that (i) each Company
Stock Option will be exercisable (or will become exercisable in accordance
with its terms) for that number of whole shares of Parent Common Stock equal
to the product of the number of shares of Company Common Stock that were
issuable upon exercise of such Company Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock and (ii) the per share
exercise price for the shares of Parent Common Stock issuable upon exercise
of such converted Company Option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Company Option was exercisable immediately prior to the Effective Time by
the Exchange Ratio, rounded up to the nearest whole cent. Continuous
employment with Company or its subsidiaries shall be credited to the
optionee for purposes of determining the vesting of all converted Company
Options after the Effective Time.
(b) Company shall take all actions necessary pursuant to the terms of the
Company ESPP in order to shorten the Option Period(s) under such plan which
includes the Effective Time (the "Current Offerings") such that a new
purchase date for each such Option Period shall occur prior to the Effective
Time and shares shall be purchased by Company ESPP participants prior to the
Effective Time. The Current Offerings shall expire immediately following
such new purchase date, and the Company ESPP shall terminate immediately
prior to the earlier of (i) the Effective Time or (ii) the date upon which
the Company ESPP terminates by its terms. Subsequent to such new purchase
date, Company shall take no action, pursuant to the terms of the Company
ESPP, to commence any new offering period.
5.9 Form S-8. Parent agrees to file a registration statement on Form S-8 for
the shares of Parent Common Stock issuable with respect to converted Company
Options as soon as is reasonably practicable after the Effective Time and shall
maintain the effectiveness of such registration statement on a basis comparable
to registration statements applicable to other outstanding stock options of the
Parent.
5.10 Indemnification.
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification Contracts between Company and its directors
and officers as of the Effective Time (the "Indemnified Parties") and any
indemnification provisions under Company's Certificate of Incorporation or
Bylaws as in effect on the date hereof, in each case, subject to applicable
law. The Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the Indemnified Parties as
those contained in the Certificate of Incorporation and Bylaws of Company as
in effect on the date hereof, which provisions will not be amended, repealed
or otherwise modified for a period
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of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the
Effective Time, were directors, officers, employees or agents of Company,
unless such modification is required by law.
(b) For a period of six years after the Effective Time, Parent will cause
the Surviving Corporation to maintain in effect, if available, directors'
and officers' liability insurance covering those persons who are currently
covered by Company's directors' and officers' liability insurance policy on
terms comparable to those applicable to the current directors and officers
of Company; provided, however, that in no event will Parent or the Surviving
Corporation be required to expend in excess of 200% of the annual premium
currently paid by Company for such coverage (or such coverage as is
available for such 200% of such annual premium).
(c) This Section 5.9 shall survive the consummation of the Merger, is
intended to benefit Company, the Surviving Corporation and each Indemnified
Party, shall be binding on all successors and assigns of the Surviving
Corporation and Parent, and shall be enforceable by the Indemnified Parties.
5.11 Nasdaq Listing. Parent agrees to authorize for listing on the Nasdaq
Stock Market the shares of Parent Common Stock issuable, and those required to
be reserved for issuance, in connection with the Merger, effective upon
official notice of issuance.
5.12 Letter of Company's Accountants. Company shall use all reasonable
efforts to cause to be delivered to Parent a letter of Company's independent
accountants, dated no more than two business days before the date on which the
Registration Statement becomes effective (and satisfactory in form and
substance to Parent), that is customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
5.13 Takeover Statutes; Company Rights Agreement.
(a) No party hereto shall take any action that would cause the
transactions contemplated by this Agreement or the Stock Option Agreement to
be subject to any Takeover Statute. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Parent and Company and their respective Boards of
Directors shall grant such approvals and take such lawful actions as are
necessary to ensure that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise act to
eliminate or minimize the effects of such statute and any regulations
promulgated thereunder on such transactions.
(b) Company shall promptly take all actions necessary in order to ensure
that the entering into of this Agreement, the Stock Option Agreement and the
Voting Agreement and the consummation of the transactions contemplated
hereby and thereby and any other action, or combination of actions in
furtherance hereof and thereof, do not and will not result in the ability of
any person to exercise a Company Right under the Company Rights Agreement or
enable or require the Company Right to separate from the shares of Company
Common Stock to which they are attached or to be triggered or become
exercisable.
5.14 Certain Employee Benefits.
(a) As soon as practicable after the execution of this Agreement, Parent
and Company shall confer and work together in good faith to agree upon
mutually acceptable employee benefit and compensation arrangements for
Company and its Affiliates employees following the Merger. The Company and
its Affiliates shall take such actions as are necessary to terminate any
Company Employee Plans and any leased employee arrangement immediately prior
to the Closing Date, unless otherwise agreed to by Parent and Company;
provided that those employees of Company or any of its Affiliates who are
eligible to participate in each such Company Employee Plans shall be
provided the opportunity to participate in a employee benefit plan
maintained by Parent. The Company and its Affiliates agree that they shall
terminate any and all group severance, separation, retention and salary
continuation plans, programs or arrangements (other than agreements
disclosed in Part 5.14 of the Company Disclosure Letter) prior to the
Closing Date.
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(b) Employees of Company and its subsidiaries will be granted credit for
all service with Company, its subsidiaries or its Affiliates under each
Company employee benefit plan, program or arrangement of Parent or its
Affiliates in which such Employees are eligible to participate for all
purposes, except for purposes of benefit accrual under a defined benefit
pension plan. To the extent that Employees become eligible to participate in
a medical, dental or health plan of Parent or its Affiliates in lieu of the
Company's Employee Plan, Parent will cause such plan to (i) waive any
preexisting condition exclusions and waiting period limitations for
conditions covered under the applicable medical, dental or health plans
maintained or contributed to by Company (but only to the extent
corresponding exclusions and limitations were satisfied by such Employees
under the applicable medical, dental or health plans maintained or
contributed to by Company); and (ii) credit any deductible or out of pocket
expenses incurred by the Employees and their beneficiaries under such plans
during the portion of the calendar year prior to such participation.
(c) With respect to matters described in this Section 5.14, Company will
use all reasonable efforts to consult with Parent (and consider in good
faith the advice of Parent) prior to sending any notices or other
communication materials to its Employees.
5.15 Section 16 Matters. Provided that Company delivers to Parent the
Section 16 Information (as defined below) in a timely fashion, Parent and
Company shall take all such steps as may be required (to the extent permitted
under applicable law) to cause any disposition of Company Common Stock
(including derivative securities with respect to Company Common Stock) or
acquisitions of Parent Common Stock (including derivative securities with
respect to Parent Common Stock) resulting from the transactions contemplated by
Article I of this Agreement by each Company Insider to be exempt under Rule
16b-3 promulgated under the Exchange Act. "Section 16 Information" shall mean
information regarding the Company Insiders, the number of shares of Company
capital stock held by each such Company Insider and expected to be exchanged
for Parent Common Stock in connection with the Merger, and the number and
description of the Company Options held by each such Company Insider and
expected to be converted into options for Parent Common Stock in connection
with the Merger. "Company Insiders" shall mean those officers and directors of
Company who will be subject to the reporting requirement of Section 16(b) of
the Exchange Act with respect to Parent.
5.16 Company Affiliates; Restrictive Legend. Parent will give stop transfer
instructions to its transfer agent with respect to any Parent Common Stock
received pursuant to the Merger by any Company Affiliate, and there will be
placed on the certificates representing such Parent Common Stock, or any
substitutions therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES AND MAY BE TRANSFERRED ONLY (A) IN CONFORMITY WITH RULE 145(D) UNDER
SUCH ACT OR (B) IN ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY
ACCEPTABLE TO THE ISSUER, IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE
ISSUER, THAT THE TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval. This Agreement shall have been approved
and adopted, and the Merger shall have been approved, by the requisite vote
of the stockholders of Company under applicable law and the Company Charter
Documents.
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(b) Registration Statement Effective; Proxy Statement. The SEC shall have
declared the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding in
respect of the Proxy Statement/Prospectus, shall have been initiated or
threatened in writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger. All waiting
periods, if any, under the HSR Act relating to the transactions contemplated
hereby will have expired or been terminated. Any other material foreign
antitrust approvals required to be obtained prior to the consummation of the
Merger shall have been obtained.
(d) Nasdaq Listing. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing on the Nasdaq Stock Market,
subject to official notice of issuance.
6.2 Additional Conditions to Obligations of Company. The obligation of
Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. Each representation and warranty of
Parent and Merger Sub contained in this Agreement shall be true and correct
in all material respects (except for any statements in a representation or
warranty that expressly include a standard of materiality, which statements
shall be true and correct in all respects giving effect to such standard) as
of the date of this Agreement and as of the Closing Date with the same force
and effect as if made on the Closing Date, except that those representations
and warranties which address matters only as of a particular date (other
than the date of this Agreement) shall remain true and correct in all
material respects (except for any statements in a representation or warranty
that expressly include a standard of materiality, which statements shall be
true and correct in all respects giving effect to such standard) as of such
date (it being understood that, for purposes of determining the accuracy of
such representations and warranties,any update of or modification to the
Parent Disclosure Letter made or purported to have been made after the
execution of this Agreement shall be disregarded). Company shall have
received a certificate with respect to the foregoing signed on behalf of
Parent by the Chief Executive Officer or Chief Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Closing Date, and Company shall have received a certificate to
such effect signed on behalf of Parent by the Chief Executive Officer or
Chief Financial Officer of Parent.
(c) Material Adverse Effect. No Material Adverse Effect with respect to
Parent shall have occurred since the date of this Agreement and be
continuing.
(d) Tax Opinion. Company shall have received an opinion of Blackwell
Sanders Peper Martin LLP, dated as of the Closing Date, in form and
substance reasonably satisfactory to it, on the basis of the facts,
representations and assumptions set forth or referred to in such opinion,
that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and that each of Parent and Company will be a
party to the reorganization within the meaning of Section 368(a) of the
Code. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering
such opinions.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. Each representation and warranty of
Company contained in this Agreement shall be true and correct in all
material respects (except for any statements in a representation or
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warranty that expressly include a standard of materiality, which statements
shall be true and correct in all respects giving effect to such standard) as
of the date of this Agreement and as of the Closing Date with the same force
and effect as if made on the Closing Date, except that those representations
and warranties which address matters only as of a particular date (other
than the date of this Agreement) shall remain true and correct in all
material respects (except for any statements in a representation or warranty
that expressly include a standard of materiality, which statements shall be
true and correct in all respects giving effect to such standard) as of such
date (it being understood that, for purposes of determining the accuracy of
such representations and warranties,any update of or modification to the
Company Disclosure Letter made or purported to have been made after the
execution of this Agreement shall be disregarded). Parent shall have
received a certificate with respect to the foregoing signed on behalf of
Company by the Chief Executive Officer or Chief Financial Officer of
Company.
(b) Agreements and Covenants. Company shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer or Chief Financial Officer
of Company.
(c) Material Adverse Effect. No Material Adverse Effect with respect to
Company shall have occurred since the date of this Agreement and be
continuing.
(d) Legal Opinion. Parent shall have received the written legal opinion
of Kraskin, Lesse & Cosson, LLP, telecommunications legal counsel to
Company, dated as of the Closing Date, in form and substance reasonably
satisfactory to Parent, covering the matters set forth on Exhibit C.
(e) No Restraints. There shall not be instituted, pending or threatened
any action, proceeding or hearing by any Governmental Entity (i) seeking to
restrain, prohibit, regulate or otherwise interfere with the ownership or
operation by Parent or any of its subsidiaries of all or any portion of the
business of Company or any of its subsidiaries or of Parent or any of its
subsidiaries or to compel Parent or any of its subsidiaries to dispose of or
hold separate all or any portion of the business or assets of Company or any
of its subsidiaries or of Parent or any of its subsidiaries, (ii) seeking to
impose or confirm limitations or regulations on the ability of Parent or any
of its subsidiaries effectively to exercise full rights of ownership of the
shares of Company Common Stock (or shares of stock of the Surviving
Corporation) including the right to vote any such shares on any matters
properly presented to stockholders or freely conduct Company's business or
(iii) seeking to require divestiture by Parent or any of its subsidiaries of
any such assets or shares.
(f) Consents. (i) All material required approvals or consents of any
Governmental Entity or other person in connection with the Merger and the
consummation of the other transactions contemplated hereby shall have been
obtained and become final and non-appealable (and all relevant statutory,
regulatory or other governmental waiting periods, shall have expired), and
(ii) all such approvals and consents which have been obtained shall have
been so obtained on terms that are not reasonably likely to materially
affect the ownership or operations of business by Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approvals of the
stockholders of Company or Parent:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by September 30, 2002 (the "Outside Date") for any reason;
provided, however, that the right to terminate this Agreement under this
Section7.1(b) shall not be available to any party whose action or failure to
act has been a principal cause of or resulted in the failure of the Merger
to occur on or before such date and such action or failure to act
constitutes a breach of this Agreement;
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(c) by either Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action is final
and nonappealable;
(d) by either Company or Parent, if the approval and adoption of this
Agreement and the approval of the Merger by the stockholders of Company
shall not have been obtained by reason of the failure to obtain the required
vote at a meeting of Company stockholders duly convened therefore or at any
adjournment thereof; provided, however, that the right to terminate this
Agreement under this Section7.1(d) shall not be available to Company where
the failure to obtain Company stockholder approval shall have been caused by
(i) the action or failure to act of Company and such action or failure to
act constitutes a material breach by Company of this Agreement or (ii) a
breach of the Voting Agreement by any party thereto other than Parent;
(e) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of
Company) if a Triggering Event (as defined below) shall have occurred;
(f) by Company, either (i) upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or
if any representation or warranty of Parent shall have become untrue, in
either case such that the conditions set forth in Section6.2(a) or
Section6.2(a) would not be satisfied as of the time of such breach or as of
the time such representation or warranty shall have become untrue, or (ii)
if a Material Adverse Effect on Parent shall have occurred; provided that if
such inaccuracy in Parent's representations and warranties or breach by
Parent, or Material Adverse Effect on Parent, is curable prior to the
Outside Date by Parent through the exercise of its commercially reasonable
efforts, then Company may not terminate this Agreement under this
Section7.1(g) for 30 days after delivery of written notice from Company to
Parent of such breach, provided Parent continues to exercise commercially
reasonable efforts to cure such breach or Material Adverse Effect on Parent
(it being understood that Company may not terminate this Agreement pursuant
to this paragraph(iii) if such breach by Parent or Material Adverse Effect
on Parent is cured during such 30-day period, or if Company shall have
materially breached this Agreement); or
(g) by Parent, either (i) upon a breach of any representation, warranty,
covenant or agreement on the part of Company set forth in this Agreement, or
if any representation or warranty of Company shall have become untrue, in
either case such that the conditions set forth in Section6.3(a) or Section
6.3(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, or (ii) if a
Material Adverse Effect on Company shall have occurred; provided that if
such inaccuracy in Company's representations and warranties or breach by
Company, or Material Adverse Effect on Company, is curable prior to the
Outside Date by Company through the exercise of its commercially reasonable
efforts, then Parent may not terminate this Agreement under this
Section7.1(g) for 30 days after delivery of written notice from Parent to
Company of such breach, provided Company continues to exercise commercially
reasonable efforts to cure such breach or Material Adverse Effect on Company
(it being understood that Parent may not terminate this Agreement pursuant
to this paragraph (g) if such breach by Company or Material Adverse Effect
on Company is cured during such 30-day period, or if Parent shall have
materially breached this Agreement).
For the purposes of this Agreement, a "Triggering Event" shall be deemed to
have occurred if: (i) the Board of Directors of Company or any committee
thereof shall for any reason have withdrawn or shall have amended or modified
in a manner adverse to Parent its recommendation in favor of the adoption and
approval of the Agreement or the approval of the Merger; (ii) Company shall
have failed to include in the Proxy Statement/Prospectus the recommendation of
the Board of Directors of Company in favor of the adoption and approval of the
Agreement and the approval of the Merger; (iii) the Board of Directors of
Company fails to reaffirm its recommendation in favor of the adoption and
approval of the Agreement and the approval of the Merger within 10 business
days after Parent requests in writing that such recommendation be reaffirmed;
(iv) the Board of Directors of Company or any committee thereof shall have
approved or publicly recommended any Acquisition Proposal; (v) Company shall
have entered into any letter of intent or other Contract accepting any
Acquisition Proposal; (vi) Company shall have materially breached any of the
provisions of Sections 5.2 or 5.3; or (vii) a
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tender or exchange offer relating to securities of Company shall have been
commenced by a person unaffiliated with Parent, and Company shall not have sent
to its security holders pursuant to Rule 14e-2 promulgated under the Securities
Act, within 10 business days after such tender or exchange offer is first
published sent or given, a statement disclosing that Company recommends
rejection of such tender or exchange offer.
7.2 Notice of Termination; Effect of Termination. Any proper termination of
this Agreement under Section7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in
Section 7.1, this Agreement shall be of no further force or effect, except (i)
as set forth in this Section 7.2, Section 7.2 and Article VIII, each of which
shall survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section7.2, 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 Parent and
Company shall share equally all fees and expenses, other than attorneys' and
accountants fees and expenses,incurred in relation to the printing and
filing with the SEC of the Proxy Statement/Prospectus (including any
preliminary materials related thereto) and the Registration Statement
(including financial statements and exhibits) and any amendments or
supplements thereto.
(b) Company Payments. In the event that this Agreement is terminated by
Parent or Company, as applicable, pursuant to Sections7.1(b), 7.1(d), 7.1(e)
or 7.1(g), Company shall promptly, but in no event later than two days after
the date of such termination, pay Parent a fee equal to $45.5 million in
immediately available funds (the "Termination Fee"); provided, that in the
case of a termination under Sections7.1(b), 7.1(d) or 7.1(g) prior to which
no Triggering Event has occurred, (i)such payment shall be made only if
(A)following the date of this Agreement and prior to the termination of this
Agreement, a person has publicly announced an Acquisition Proposal and (B)
within 18 months following the termination of this Agreement, either a
Company Acquisition (as defined below) is consummated, or Company enters
into a Contract providing for a Company Acquisition and (ii) such payment
shall be made promptly, but in no event later than two days after the
consummation of any such Company Acquisition or the entry by Company into
any such Contract. Company acknowledges that the agreements contained in
this Section7.3(b) are an integral part of the transactions contemplated by
this Agreement, the amount of, and the basis for payment of, the Termination
Fee are reasonable and appropriate in all respects, and that, without these
agreements, Parent would not enter into this Agreement. Accordingly, if
Company fails to pay in a timely manner the Termination Fee due pursuant to
this Section7.3(b), and, in order to obtain such payment, Parent makes a
claim that results in a judgment against Company for the amounts set forth
in this Section7.3(b), Company shall pay to Parent its reasonable costs and
expenses (including reasonable attorneys' fees and expenses) in connection
with such suit, together with interest on the amounts set forth in this
Section7.3(b) at the prime rate of Bank of America, N.A. in effect on the
date such payment was required to be made. Payment of the fees described in
this Section7.3(b) shall not be in lieu of damages incurred in the event of
breach of this Agreement.
For the purposes of this Agreement, "Company Acquisition" shall mean any of
the following transactions (other than the transactions contemplated by this
Agreement); (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Company pursuant to which the stockholders of Company immediately preceding
such transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (ii) a sale or other
disposition by Company or its subsidiaries of assets (in a transaction or
series of transactions) representing in excess of 50% of the aggregate
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fair market value of Company's business immediately prior to such sale, or
(iii) the acquisition by any person or group (including by way of a tender
offer or an exchange offer or issuance by Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 50% of the voting power of the then outstanding
shares of capital stock of Company.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of Parent and Company; provided,
after any such approval, no amendment shall be made which by law or in
accordance with the rules of any relevant stock exchange or the Nasdaq Stock
Market requires further approval by such stockholders without such further
stockholder approval. This Agreement may not be amended except by execution of
an instrument in writing signed on behalf of each of Parent, Merger Sub and
Company. The agreement of Parent to any amendment shall be deemed to be the
agreement of Merger Sub to such amendment.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, except that Parent may not extend for the benefit of Merger Sub and
vice versa, (ii) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant
hereto and (iii) waive compliance with any of the agreements or conditions for
the benefit of such party contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The agreement of
Parent to any extension or waiver shall be deemed to be the agreement of Merger
Sub to such extension or waiver. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations and
warranties of Company, Parent and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if delivered
personally, (ii) on the date of confirmation of receipt (or, the first business
day following such receipt if the date is not a business day) of transmission
by facsimile, or (iii) on the date of confirmation of receipt (or, the first
business day following such receipt if the date is not a business day) if
delivered by a nationally recognized courier service. Subject to the foregoing,
all notices hereunder shall be delivered as set forth below, or pursuant to
such other instructions as may be designated in writing by the party to receive
such notice:
(a) if to Parent or Merger Sub, to:
VeriSign, Inc.
487 East Middlefield Road
Mountain View, California 94043
Attention: James M. Ulam, General Counsel
Facsimile No.: 650-426-5113
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with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attention: Gordon K. Davidson
Douglas N. Cogen
Jeffrey R. Vetter
Facsimile No.: 650-494-1417
(b) if to Company, to:
Illuminet Holdings, Inc.
4501 Intelco Loop
Lacey, Washington 98503
Attention: Chief Executive Officer
Facsimile No.: 360-923-3440
with a copy to:
Blackwell Sanders Peper Martin LLP
Two Pershing Square
2300 Main Street
Suite 1000
Kansas City, Missouri 14108
Attention: James M. Ash
Shari L. Wright
Facsimile No.: 816-983-8080
8.3 Interpretation; Certain Defined Terms.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Articles or
Sections, such reference shall be to an Article or a Section of this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by
the words "without limitation." The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed
to include the business of all direct and indirect subsidiaries of such
entity. Reference to the subsidiaries of an entity shall be deemed to
include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, other than Section 2.12, the term
"affiliates" shall mean a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, the first-mentioned person;
(c) For purposes of this Agreement, the term "Contract" shall mean any
written, oral or other agreement, contract, subcontract, lease,
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan or legally binding commitment,
obligation or undertaking of any nature.
(d) For purposes of this Agreement, "Encumbrances" means any lien,
pledge, hypothecation, charge, mortgage, security interest, encumbrance,
claim, infringement, interference, option, right of first refusal,
preemptive right, community property interest or restriction of any nature
(including any restriction on the voting of any security, any restriction on
the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any
asset and any restriction on the possession, exercise or transfer of any
other attribute of ownership of any asset).
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(e) For purposes of this Agreement, the term "knowledge" means with
respect to a party hereto, with respect to any matter in question, that any
of the officers (with respect to Company, only those officers set forth on
Part 8.3 of the Company Disclosure Letter (the "Disclosure Officers")) or
directors of such party has actual knowledge of such matter, after
reasonable inquiry of such matter. Any such person will be deemed to have
actual knowledge of a matter if (i)such matter is reflected in one or more
documents (whether written or electronic, including e-mails sent to or by
such individual) in, or that have been in, such individual's possession
within the past year, including personal files of such individual, (ii)such
matter is reflected in one or more documents (whether written or electronic)
contained in books and records of such party that would reasonably be
expected to be reviewed by an individual who has the duties and
responsibilities of such individual in the customary performance of such
duties and responsibilities, or (iii)such knowledge could be obtained from
reasonable inquiry of the individuals who directly report to the Disclosure
Officers or any individuals employed by such party charged with senior
administrative or operational responsibility for such matters for such
party.
(f) For purposes of this Agreement, the term "Material Adverse Effect"
when used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect that is or is reasonably likely to be
materially adverse to (1) the business, assets (including intangible
assets), capitalization, regulatory environment, financial condition,
operations or results of operations of such entity taken as a whole with its
subsidiaries or (2) the ability of the parties hereto to consummate the
Merger within the time frame the Merger would otherwise be consummated in
the absence of such change, event, violation, inaccuracy, circumstance or
effect, except to the extent that any such change, event, violation,
inaccuracy, circumstance or effect set forth in (1) or (2) above, directly
and primarily results from (i) changes in general economic conditions or
changes affecting the industry generally in which such entity operates
(provided that such changes do not affect such entity in a disproportionate
manner) or (ii) changes in the trading prices for such entity's capital
stock.
(g) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental Entity.
(h) For purposes of this Agreement, "subsidiary" of a specified entity
will be any corporation, partnership, limited liability company, joint
venture or other legal entity of which the specified entity (either alone or
through or together with any other subsidiary) owns, directly or indirectly,
50% or more of the stock or other equity or partnership interests the
holders of which are generally entitled to vote for the election of the
Board of Directors or other governing body of such corporation or other
legal entity.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement, its
Exhibits and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Stock
Option Agreement, the Voting Agreement, the Company Disclosure Letter and the
Parent Disclosure Letter and any non-competition agreement between Parent and
employees of Company or its subsidiaries (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 5.9.
8.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
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Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon suchrights to which the indemnified party and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the eventmay be entitled; that any indemnification and advancement of the
provisions of this Agreement were not performed in accordance with their
specific termsexpenses provided by, or weregranted pursuant to, Section 145 shall, unless otherwise breached. It is accordingly agreed that the
parties shallprovided when authorized or ratified, continue as to a person who has ceased to be entitled to seek an injunctiona director, officer, employee or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written consent
of the other parties hereto. Subject to the preceding sentence, this Agreement
shall be binding uponagent and shall inure to the benefit of such person’s heirs, executors and administrators; and empowers the parties heretocorporation to purchase and their respective successors and permitted assigns. Any purported assignment in
violation of this Section shall be void.
8.11 Waiver Of Jury Trial. EACH OF PARENT, COMPANY AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be executed by their duly authorized respective officers as of the
date first written above.
VERISIGN, INC.
/s/ STRATTON D. SCLAVOS
By: _________________________________
Name: Stratton D. Sclavos
Title: President and Chief Executive
Officer
ILLINOIS ACQUISITION CORPORATION
/s/ STRATTON D. SCLAVOS
By: _________________________________
Name: Stratton D. Sclavos
Title: Chief Executive Officer
ILLUMINET HOLDINGS, INC.
/s/ ROGER H. MOORE
By: _________________________________
Name: Roger H. Moore
Title: President and Chief Executive
Officer
A-45
ANNEX B
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (the "Agreement") is made and entered into as of
September 23, 2001, between Illuminet Holdings, Inc., a Delaware corporation
("Company"), and VeriSign, Inc., a Delaware corporation ("Parent").
RECITALS
A. Concurrently with the execution and delivery of this Agreement, Company,
Parent and Illinois Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), are entering into an
Agreement and Plan of Merger (the "Merger Agreement"), that provides, among
other things, that upon the terms and subject to the conditions thereof, for
the merger of Merger Sub and Company (the "Merger"). Capitalized terms used in
this Agreement but not defined herein shall have the meanings ascribed to such
terms in the Merger Agreement.
B. As a condition to Parent's willingness to enter into the Merger
Agreement, Parent has required that Company agree, and Company has agreed, to
grant to Parent an option to acquire shares of Company Common Stock ("Company
Shares"), upon the terms and subject to the conditions set forth herein.
In consideration of the foregoing and of the mutual covenants and agreements
set forth herein and in the Merger Agreement and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
1. Grant of Option. Company hereby grants to Parent an irrevocable option
(the "Option"), exercisable following the occurrence of an Exercise Event (as
defined in Section 2(a)), to acquire up to a number of Company Shares equal to
19.9% of the Company Shares issued and outstanding as of the date upon which an
Exercise Notice (as defined in Section 2(b) below) shall have been delivered
(the "Option Shares"), in the manner set forth below by paying cash at a price
of $35.62 per share (the "Exercise Price"). All references in this Agreement to
Company Shares issued to Parent hereunder shall be deemed to include any
associated Company Rights.
2. Exercise of Option; Profit Cap.
(a) For all purposes of this Agreement, an "Exercise Event" shall mean
the occurrence of any of (i) a Triggering Event (as such term is defined in
the Merger Agreement), (ii) the amendment by Company of the Company Rights
Agreement or the taking by Company of any corporate action that removes any
applicable restrictions under Section 203 of the Delaware Law or under any
other Takeover Statute, in each case, in connection with any Acquisition
Proposal; (iii) Company's failure to take all action necessary to convene
the Company's Stockholders' Meeting as promptly as practicable, and in any
event within 45 days after the declaration of effectiveness of the
Registration Statement, (iv) (A) the public announcement of an acquisition
or purchase by any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a 20%
beneficial ownership interest in the total outstanding voting securities of
Company or any of its subsidiaries; (B) the public announcement or
commencement of any tender offer or exchange offer that if consummated would
result in any person or "group" beneficially owning 20% or more of the total
outstanding voting securities of Company or any of its subsidiaries; (C) the
public announcement of a bona fide proposal or offer by a person or entity
reasonably able to consummate any of the following: a merger, consolidation,
business combination or similar transaction involving Company pursuant to
which the stockholders of Company immediately preceding such transaction
hold less than 80% of the equity interests in the surviving or resulting
entity of such transaction; or (D) a sale, lease, exchange, transfer,
license (other than in the ordinary course of business),
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acquisition, or disposition of any material portion of the assets of
Company; or (v) the commencement of a solicitation within the meaning of
Rule 14a-1(l) by any person or entity other than Company or its Board of
Directors (or any person or entity actingmaintain insurance on behalf of Companyany person who is or its Board
of Directors) seeking to alter the composition of Company's Board of
Directors. Company shall notify Parent promptly in writingwas a director, officer, employee or agent of the occurrence
of any Exercise Event of which it has knowledge.
(b) At any time following the occurrence of an Exercise Event, Holder may
deliver to Company a written notice (an "Exercise Notice") specifying that
it wishes to exercise its rights to acquire Company Shares under the Option
and close a purchase of Option Shares and specifying the total number of
Option Shares it wishes to acquire. Unless such Exercise Noticecorporation or is withdrawn
by Holder, the closing of a purchase of such Option Shares (a "Closing")
shall take placeor was serving at the principal offices of Company upon such date (which
shall be no earlier than three business days following the deliveryrequest of the Exercise Notice)corporation as may be designated by Holder in the Exercise Notice. For
purposesa director, officer, employee or agent of this Agreement Parent and each person holding an interest in the
Option or the Option Shares as Parent's transferee are referred to
collectively as the "Holder."
(c) The Option shall terminate upon the earlier to occur of (i) the
Effective Time (as such term is defined in the Merger Agreement) or (ii) 12
months following the termination of the Merger Agreement in accordance with
its terms under any circumstances; provided, however, that if the Option is
exercisable but cannot be exercised by reason of any applicable government
order or because the waiting period related to the issuance of the Option
Shares under the HSR Act shall not have expired or been terminated, or
because any other condition to closing under Section 3 hereof has not been
satisfied, then the Option shall not terminate until the tenth business day
after all such impediments to exercise shall have been removed or shall have
become final and not subject to appeal.
(d) Company shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 2.
(e) This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of Holder, upon presentation and surrender of
this Agreement at the principal office of Company, for other Agreements
providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as
are set forth herein, in the aggregate the same number of Company Shares
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, Company will
execute and deliver a new Agreement of like tenor and date.
(f) If the sum of (i) any Termination Fee received by Parent under
Section 7.3(b) of the Merger Agreement plus (ii) the proceeds received by
Holder for any salesanother corporation, partnership, joint venture, trust or other dispositions of Option Shares in excess of
Holder's purchase price forenterprise against any liability asserted against such Option Shares plus (iii) the proceeds
receivedperson and incurred by Holder for any sales or other dispositions of the Option
(including pursuant to Parent's exercise of its rights to surrender the
Option pursuant to Section 9 hereof), plus (iv) any dividends or
distributions received by Parent declared on Option Shares is, in the
aggregate, greater than $65.0 million (such cumulative amount, the "Profit
Cap"), then all such proceeds received by Parent in excess of the Profit Cap
shall be promptly remitted in cash by Parent to Company.
3. Conditions to Closing. The obligation of Company to issue Option Shares
to Holder hereunder is subject to the conditions that (a) any waiting period
under the HSR Act applicable to the issuance of the Option Shares hereunder
shall have expired or been terminated; (b) all material consents, approvals,
orders or authorizations of, or registrations, declarations or filings with,
any Governmental Entity, if any, required in connection with the issuance of
the Option Shares hereunder shall have been obtained or made, as the case may
be; and (c) no preliminary or permanent injunction or other order by any court
of competent jurisdiction
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prohibiting or otherwise restraining such issuance shall be in effect. It is
understood and agreed that at any time during which Holder shall be entitled to
deliver to Company an Exercise Notice, the parties will use their respective
reasonable efforts to satisfy all conditions to Closing, so that a Closing may
take place as promptly as practicable.
4. Closing. At any Closing, (a) Company shall deliver to Holder a
certificate in definitive form representing the number of Company Shares
designated by Holder in its Exercise Notice consistent with this Agreement,
such certificate to be registered in the name of Holder and to bear the legend
set forth in Section 11 hereof, against delivery of (b) payment by Holder to
Company of the aggregate Exercise Price for the Company Shares so designated
and being purchased by delivery of a certified check, bank check or wire
transfer of immediately available funds.
5. Representations and Warranties of Company. Company represents and
warrants to Parent that (a) Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Company and consummation by Company of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Company and no other corporate proceedings on the part of Company are necessary
to authorize this Agreement or any of the transactions contemplated hereby; (c)
this Agreement has been duly executed and delivered by Company and constitutes
the legal, valid and binding obligation of Company and, assuming this Agreement
has been duly executed and delivered by Parent, is enforceable against Company
in accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws affecting the rights of creditors generally
and general principles of equity; (d) except for any filings, authorizations,
approvals or orders required under the HSR Act and the applicable blue sky laws
of any state, and the rules and regulations promulgated thereunder, or by the
Nasdaq Stock Market, Company has taken all necessary corporate and other action
to authorize and reserve for issuance and to permit it to issue upon exercise
of the Option, and at all times from the date hereof until the termination of
the Option will have reserved for issuance, a sufficient number of unissued
Company Shares for Parent to exercise the Option in full and will take all
necessary corporate or other action to authorize and reserve for issuance all
additional Company Shares or other securities which may be issuable pursuant to
Section 8(a) upon exercise of the Option, all of which, upon their issuance and
delivery in accordance with the terms of this Agreement and payment therefor by
Parent, will be validly issued, fully paid and nonassessable; (e) upon delivery
of the Company Shares and any other securities to Parent upon exercise of the
Option, Parent will acquire such Company Shares or other securities free and
clear of all Encumbrances, excluding those imposed by Parent; (f) the execution
and delivery of this Agreement by Company do not, and the performance of this
Agreement by Company will not, (i) violate the Certificate of Incorporation or
Bylaws of Company, (ii)conflict with or violate any order applicable to Company
or any of its subsidiaries or by which they or any of their material property
is bound or affected or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a material Encumbrance on any
material property or assets of Company or any of its subsidiaries pursuant to,
any material contract or agreement to which Company or any of its subsidiaries
is a party or by which Company or any of its subsidiaries or any of their
material property is bound or affected; and (g) the execution and delivery of
this Agreement by Company does not, and the performance of this Agreement by
Company will not, require any consent, approval, authorization or permit of, or
filing with, or notification to, any Governmental Entity, except pursuant to
the HSR Act and except for any filings required under the blue sky laws of any
state and the rules and regulations promulgated thereunder or by the Nasdaq
Stock Market.
6. Representations and Warranties of Parent. Parent represents and warrants
to Company that (i) the execution and delivery of this Agreement by Parent and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and this
Agreement has been duly executed and delivered by a duly authorized officer of
Parent and will constitute a legal, valid and binding obligation of Parent and,
assuming this Agreement has been duly executed and delivered by Parent, is
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enforceable against Company in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting
the rights of creditors generally and general principles of equity; and (ii)
Parent is acquiring the Option, and, if and when the Parent exercises the
Option, it will be acquiring the Option Shares issuable upon the exercise
thereof for its own account and not with a view to distribution or resale in
any manner which would be in violation of the Securities Act of 1933, as
amended (the "Securities Act").
7. Registration Rights.
(a) Following the termination of the Merger Agreement, Holder may by
written notice (a "Registration Notice") to Company (sometimes referred to
herein as the "Registrant") request the Registrant to promptly prepare, file
and keep current a shelf registration statement under the Securities Act
covering this Option and any shares issued and issuable pursuant to this
Option and Company shall use reasonable best efforts to cause such
registration statement to become effective, as promptly as practicable, and
keep such registration statement current in order to permit the sale or
other disposition of this Option and any Option Shares (such Option Shares,
together with any other shares of Company's capital stock issuable in lieu
of or with respect to such Option Shares, the "Registrable Securities") in
accordance with any plan of disposition requested by Holder. Company shall
use its reasonable best efforts to cause such registration statement to
become effective and remain effective for such period not in excess of 180
days from the date such registration statement first becomes effective or
such shorter time as may be necessary to effect such sales or other
dispositions.
(b) (i) Holder shall not be entitled to more than two effective
registrations hereunder; provided that no registration of Registrable
Securities shall be deemed to be a registration for purposes of this clause
(i) unless such registration shall have become and remained effective
pursuant to Section 7(a) hereof; (ii) the Registrant will not be required to
file any such registration statement or maintain its effectiveness during
any period of time (not to exceed 60 days in the aggregate) when (A) the
Registrant is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and
such information would have to be disclosed if a registration statement were
filed or effective at that time; (B) the Registrant is required under the
Securities Act to include audited financial statements for any period in
such registration statement and such financial statements are not yet
available for inclusion in such registration statement; or (C) the
Registrant determines, in its good faith, reasonable judgment, that such
registration would materially interfere with any financing, acquisition or
other material transaction involving the Registrant; and (iii) the
Registrant will not be required to maintain the effectiveness of any such
registration statement for a period greater than 180 days. The Registrant
shall use all reasonable best efforts to cause any Registrable Securities
registered pursuant to this Section 7 to be qualified for sale under the
securities or blue sky laws of such jurisdictions as Holder may reasonably
request and shall continue such registration or qualification in effect in
such jurisdictions until Holder has sold or otherwise disposed of all of the
securities subject to the registration statement; provided, however, that
the Registrant shall not be required to qualify to do business in, or
consent to general service of process in, any jurisdiction by reason of this
provision.
(c) The registration rights set forth in this Section 7 are subject to
the condition that Holder shall provide the Registrant with such information
with respect to Holder's Registrable Securities, the plan for distribution
thereof, and such other information with respect to Holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to enable
the Registrant to include in a registration statement all material facts
required to be disclosed with respect to a registration thereunder,
including the identity of Holder and Holder's plan of distribution.
(d) A registration effected under this Section 7 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and
the fees and expenses of counsel to Holder, and the Registrant shall use all
reasonable best efforts to: (i) provide such documentation (including
certificates, opinions of counsel and "comfort" letters from auditors) as
are customary in connection with underwritten public offerings and as an
underwriter may reasonably require, (ii) prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration
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statements as may be necessary to comply with the provisions of the
Securities Act and (iii) furnish to Holder and to any underwriter of such
securities such number of copies of the final prospectus and such other
documents as Holder or underwriters may reasonably request. In connection
with any registration which Holder requests be underwritten, Holder and the
Registrant agree to enter into an underwriting agreement reasonably
acceptable to each such party, in form and substance customary for
transactions of this type with the underwriters participating in such
offering.
(e) Indemnification
(i) The Registrant will indemnify Holder, each of Holder's directors
and officers and each person who controls Holder within the meaning of
Section 15 of the Securities Act, and each underwriter of the
Registrant's securities, with respect to any registration, qualification
or compliance which has been effected pursuant to this Agreement,
against all expenses, claims, losses, damages or liabilities (or actions
in respect thereof), including any of the foregoing incurred in
settlement of any action or litigation, commenced or threatened (each, a
"Damage Claim"), arising out of or based on (A) any untrue statement (or
alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document,
or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, (B) any omission (or alleged
omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or (C) any
violation by the Registrant of any rule or regulation promulgated under
the Securities Act, the Securities Exchange Act of 1934, as amended, any
federal or state securities law or any rule or regulation promulgated
under any of them applicable to the Registrant (each matter in clause
(A), (B) or (C), a "Violation"), in each case in connection with any
such registration, qualification or compliance, and the Registrant will
reimburse Holder and, each of its directors and officers and each person
who controls Holder within the meaning of Section 15 of the Securities
Act, and each underwriter for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or
defending any such Damage Claim, provided that the Registrant will not
be liable in any such case to the extent that any such Damage Claim
arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity
with written information furnished to the Registrant by Holder or
director or officer or controlling person or underwriter, and provided,
further, that the indemnity agreement contained in this Section 7(e)(i)
shall not apply to amounts paid in settlement of any such Damage Claim
(including defense costs) if such settlement is effected without the
consent of the Registrant, which consent shall not be unreasonably
withheld.
(ii) The Holder will indemnify the Registrant, each of the
Registrant's directors and officers and each underwriter of the
Registrant's securities covered by such registration statement and each
person who controls the Registrant within the meaning of Section 15 of
the Securities Act, against all Damage Claims arising out of or based on
any Violation in connection with any such registration, qualification or
compliance, and will reimburse the Registrant, such directors, officers
or control persons or underwriters for any legal or any other expenses
reasonably incurred in connection with investigating, preparing or
defending any such Damage Claim, in each case to the extent, but only to
the extent, that such Violation occurs in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Registrant by
Holder expressly for use therein, provided that in no event shall any
indemnity under this Section 7(e)(ii) exceed the gross proceeds of the
offering received by Holder and provided,further that the indemnity
agreement contained in this Section 7(e)(ii) shall not apply to amounts
paid in settlement of any such Damage Claim (including defense costs) if
such settlement is effected without the consent of Holder, which consent
shall not be unreasonably withheld.
(iii) Each party entitled to indemnification under this Section 7(e)
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
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therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at
such party's expense; provided, however, that the Indemnifying Party
shall pay such expense if representation of the Indemnified Party by
counsel retained by the Indemnifying Party would be inappropriate due to
actual or potential differing interests between the Indemnified Party
and any other party represented by such counsel in such proceeding, and
provided, further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 7(e) unless the failure to give such
notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. No Indemnifying
Party shall be required to indemnify any Indemnified Party with respect
to any settlement entered into without such Indemnifying Party's prior
consent (which shall not be unreasonably withheld).
(iv) If the indemnification provided for in this Section 7(e) is held
by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any Damage Claim, then the Indemnifying Party, in
lieu of indemnifying the Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party with respect to such
Damage Claim in the proportion that is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in
connection with the statements or omissions that resulted in such Damage
Claim, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and the Indemnified Party shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party
or by the Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. In any such case, (A) Holder will not be
required to contribute any amount in excess of the aggregate public
offering price of all such Registrable Securities offered and sold by
Holder pursuant to such registration statement, and (B) no person or
entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
8. Adjustment Upon Changes in Capitalization; Rights Plans
(a) In the event of any change in the Company Shares by reason of stock
dividends, stock splits, reverse stock splits, mergers (other than the
Merger), recapitalizations, combinations, exchanges of shares and the like,
the type and number of shares or securities subject to the Option and the
Exercise Price shall be adjusted appropriately, and proper provision shall
be made in the agreements governing such transaction so that Holder shall
receive, upon exercise of the Option, the number and class of shares or
other securities or property that Holder would have received in respect of
the Company Shares if the Option had been exercised immediately prior to
such event or the record date therefor, as applicable. Company shall use all
reasonable best efforts to promptly take all action necessary to protect the
rights of Holder against dilution.
(b) Prior to such time as the Option is terminated, and at any time after
the Option is exercised (in whole or in part, if at all), Company shall not
(i) amend (nor permit the amendment of) its Company Rights Agreement nor
adopt (nor permit the adoption of) a new stockholders rights plan that
contains provisions for the distribution or exercise of rights thereunder as
a result of Holder or any affiliate or transferee being the beneficial owner
of shares of Company by virtue of the Option being exercisable or having
been exercised (or as a result of beneficially owning shares issuable in
respect of any Option Shares), or (ii) take any other action which would
prevent or disable Holder from exercising its rights under this Agreement or
enjoying the full rights and privileges possessed by other holders of
Company Shares generally with respect to the Option Shares obtained by
Holder upon exercise of the Option.
B-6
9. Surrender of Option. At any time following the occurrence of an Exercise
Event, Holder may, at its sole option and upon Holder's written request to
Company, surrender the Option, to the extent not previously exercised, to
Company in exchange for the payment by Company to Holder in immediately
available funds of an amount equal to the product of: (x) the excess, if any,
of (i) the greater of (A) the highest price per share paid or agreed to be paid
by an acquiring person for any Company Shares in the transaction that causes an
Exercise Event (or, in the event of a sale of all or a substantially portion of
Company's assets, the sum of the price paid for such assets and the current
market value of the remaining assets of Company, divided by the number of
Company Shares then outstanding (the value of any consideration other than cash
to be determined, in the case of consideration with a readily ascertainable
market value, by reference to such market value and, in any case where the
market value of the consideration is not so ascertainable, by agreement in good
faith between Holder and Company)) or (B) the highest closing sale price of
Company Shares on the Nasdaq Stock Market during the 30 day period ending with
the trading day immediately preceding the date of such request over (ii) the
Exercise Price, multiplied by (y) the total number of Option Shares as to which
the Option has not theretofore been exercised. Upon the delivery by Holder to
Company of a surrender request, each party shall take all actions necessary to
consummate such surrender transaction as expeditiously as possible. Upon
exercise of its right to surrender the Option or any portion thereof and full
payment therefor to Holder pursuant to this Section 9, any and all rights of
Holder with respect to the portion of the Option so surrendered shall be
terminated.
10. Substitute Option. Company shall not enter into any Company Acquisition
unless the acquiring person or any person that controls such acquiring person,
as designated by Holder, assumes in writing all obligations of Company
hereunder.
11. Restrictive Legends. Each certificate representing Option Shares issued
to Holder hereunder (other than certificates representing shares sold in a
registered public offering pursuant to Section 7) shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
12. Listing and HSR Filing. The Company, upon the request of Holder, shall
promptly file an application to list the Company Shares to be acquired upon
exercise of the Option for quotation on the Nasdaq Stock Market and shall use
its reasonable efforts to obtain approval of such listing as soon as
practicable. Promptly after the date hereof, upon request by Holder, each of
the parties hereto shall file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice all required
premerger notification and report forms and other documents and exhibits
required to be filed under the HSR Act ("HSR Filings") to permit the
acquisition of the Company Shares subject to the Option at the earliest
possible date. In the event that Holder does not exercise its rights to acquire
Company Shares hereunder before the expiration of the period for which
permission has initially been granted pursuant to the HSR Act, Company shall,
upon request of Holder in connection with Holder's election to exercise this
option, promptly prepare and file all additional HSR Filings to permit
acquisition of the Company Shares subject to the Option as soon as possible
after delivery of the Exercise Notice and demand by Holder for preparation and
filing by Company of such additional HSR Filings. All such fees and expense
(other than fees and expenses for counsel to Holder) in connection with such
listing application or HSR Filings will be paid for by Company.
13. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Except as set forth in Sections 2(b) and 7, nothing contained in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective successors and permitted assigns any
rights or remedies of any nature whatsoever by reason of this Agreement.
B-7
14. Specific Performance; Fees.
(a) The parties hereto recognize and agree that if for any reason any of
the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, immediate and irreparable harm or
injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies
the other party shall be entitled to an injunction restraining any violation
or threatened violation of the provisions of this Agreement or the right to
enforce any of the covenants or agreements set forth herein by specific
performance. In the event that any action shall be brought in equity to
enforce the provisions of the Agreement, neither party will allege, and each
party hereby waives the defense, that there is an adequate remedy at law.
(b) If any action, suit or other proceeding (whether at law, in equity or
otherwise) is instituted concerningcapacity, or arising out of this Agreement or any
transaction contemplated hereunder, the prevailing party shall recover, in
addition to any other remedy granted to such party therein, allperson’s status as such, party's
costs and attorneys fees incurred in connection with the prosecution or
defense of such action, suit or other proceeding.
15. Entire Agreement. This Agreement and the Merger Agreement (including the
appendices and exhibits thereto) constitute the entire agreement between the
parties with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
16. Further Assurances. Each party will execute and deliver all such further
documents and instruments and take all such further action as may be necessary
in order to consummate the transactions contemplated hereby.
17. Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
18. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if delivered
personally, (ii) on the date of confirmation of receipt (or, the first business
day following such receipt if the date is not a business day) of transmission
by facsimile, or (iii) on the date of confirmation of receipt (or, the first
business day following such receipt if the date is not a business day) if
delivered by a nationally recognized courier service. Subject to the foregoing,
all notices hereunder shall be delivered as set forth below, or pursuant to
such other instructions as may be designated in writing by the party to receive
such notice:
(a) if to Parent, to:
VeriSign, Inc.
487 East Middlefield Road
Mountain View, California 94043
Attention: James M. Ulam, General Counsel
Facsimile No.: 650-426-5113
B-8
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Gordon K. Davidson
Douglas N. Cogen
Jeffrey R. Vetter
Facsimile No.: 650-494-1417
(b) if to Company, to:
Illuminet Holdings, Inc.
4501 Intelco Loop
Lacey, Washington 98503
Attention: Chief Executive Officer
Facsimile No.: 360-923-3440
with a copy to:
Blackwell Sanders Peper Martin LLP
Two Pershing Square
2300 Main Street
Suite 1000
Kansas City, MO 14108
Attention: James M. Ash
Shari L. Wright
Facsimile No.: 816-983-8080
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
20. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
21. Expenses. Except as otherwise expressly provided herein or in the Merger
Agreement, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
22. Amendments; Waiver. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
23. Assignment. Company may not sell, transfer, assign or otherwise dispose
of any of its rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written consent of Parent.
The rights and obligations hereunder shall inure to the benefit of and be
binding upon any successor or permitted assign of a party hereto. No consent
shall be required in connection with a merger, consolidation, reorganization,
sale of substantially all assets or similar transaction with respect to a party
hereto. Any purported assignment in violation of this Section shall be void.
24. Public Announcement. Company shall consult with Parent and Parent shall
consult with Company before issuing any press release with respect to the
initial announcement of this Agreement or the transactions
B-9
contemplated hereby and neither party shall issue any such press release prior
to such consultation except as may be required by law.
25. Waiver Of Jury Trial. EACH OF PARENT AND COMPANY HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT OR COMPANY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Stock Option
Agreement to be executed by their duly authorized respective officers as of the
date first written above.
VERISIGN, INC.
/s/ STRATTON D. SCLAVOS
By: _________________________________
Name: Stratton D. Sclavos
Title: President and Chief Executive
Officer
ILLUMINET HOLDINGS, INC.
/s/ ROGER H. MOORE
By: _________________________________
Name: Roger H. Moore
Title: President and Chief Executive
Officer
B-10
ANNEX C
FORM OF VOTING AGREEMENT
This VOTING AGREEMENT (the "Agreement") is made and entered into as of
September 23, 2001, between VeriSign, Inc., a Delaware corporation ("Parent"),
and the undersigned stockholder ("Stockholder") of Illuminet Holdings, Inc., a
Delaware corporation ("Company").
RECITALS
A. Concurrently with the execution of this Agreement, Parent, Company and
Illinois Acquisition Corporation, a Delaware corporation and a wholly-owned
first-tier subsidiary of Parent ("Merger Sub"), are entering into an Agreement
and Plan of Merger (the "Merger Agreement") which provides for the merger of
Merger Sub with and into Company (the "Merger"). Pursuant to the Merger, shares
of common stock of Company, par value $0.01 per share ("Company Common Stock")
will be converted into shares of Parent Common Stock on the basis described in
the Merger Agreement. Capitalized terms used but not defined herein shall have
the meanings set forth in the Merger Agreement.
B. Stockholder is the record holder or beneficial owner of, or exercises
voting power over, such number of outstanding shares of Company Common Stock as
is indicated on the final page of this Agreement.
C. As a material inducement to enter into the Merger Agreement, Parent
desires Stockholder to agree, and Stockholder is willing to agree, to vote the
Shares (as defined below), and such other shares of capital stock of Company
over which Stockholder has voting power, so as to facilitate consummation of
the Merger.
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties agree as
follows:
1. AGREEMENT TO VOTE SHARES
1.1 Definitions. For purposes of this Agreement:
(a) Shares. The term "Shares" shall mean all issued and outstanding
shares of Company Common Stock owned of record or beneficially by
Stockholder or over which Stockholder exercises voting power, in each case,
as of the record date for persons entitled (i) to receive notice of, and to
vote at the meeting of the stockholders of Company called for the purpose of
voting on the matters referred to in Section 1.2, or (ii) to take action by
written consent of the stockholders of Company with respect to the matters
referred to in Section 1.2. Stockholder agrees that any shares of capital
stock of Company that Stockholder purchases or with respect to which
Stockholder otherwise acquires beneficial ownership or over which
Stockholder exercises voting power after the execution of this Agreement and
prior to the date of termination of this Agreement pursuant to Section 3
below shall be subject to the terms and conditions of this Agreement to the
same extent as if they constituted Shares on the date hereof.
(b) Subject Securities. The term "Subject Securities" shall mean: (i) all
securities of Company (including all shares of Company Common Stock and all
options, warrants and other rights to acquire shares of Company Common Stock
beneficially owned by Stockholder as of the date of this Agreement; and (ii)
all additional securities of Company (including all additional shares of
Company Common Stock and all additional options, warrants and other rights
to acquire shares of Company Common Stock) of which Stockholder acquires
ownership during the period from the date of this Agreement through the
earlier of termination of this Agreement pursuant to Section 3 below or the
record date for the meeting at which stockholders of Company are asked to
vote upon approval of the Merger Agreement and the Merger.
C-1
(c) Transfer. Stockholder shall be deemed to have effected a "Transfer"
of a security if Stockholder directly or indirectly: (i) sells, pledges,
hypothecates, encumbers, transfers or disposes of, or grants an option with
respect to, such security or any interest in such security; or (ii) enters
into an agreement or commitment providing for the sale, pledge,
hypothecation encumbrance, transfer or disposition of, or grant of an option
with respect to, such security or any interest therein.
1.2 Agreement to Vote Shares. Stockholder hereby covenants and agrees
that, during the period commencing on the date hereof and continuing until
the first to occur of (i) such date and time as the Merger shall become
effective in accordance with the terms and provisions of the Merger
Agreement (the "Effective Time") and (ii) termination of this Agreement in
accordance with its terms, at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of the stockholders of
Company, however called, or in connection with any written consent of the
stockholders of Company, Stockholder will appear at the meeting or otherwise
cause the Shares to be counted as present thereat for purposes of
establishing a quorum and vote or consent (or cause to be voted or
consented) the Shares:
(1) in favor of the approval and adoption of the Merger Agreement and
the approval of the Merger and the other actions contemplated by the
Merger Agreement and any actions required in furtherance thereof;
(2) against approval of any proposal made in opposition to or in
competition with the consummation of the Merger, including, without
limitation, any Acquisition Proposal or Superior Offer (each as defined
in the Merger Agreement) or any action or agreement thatcorporation would result in
a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement of Company under the Merger Agreement
or of the Stockholder under this Agreement.
Stockholder further agrees not to enter into any agreement or understanding
with any person the effect of which would be inconsistent with or violative of
any provision contained in this Section 1.2.
1.3. Transfer and Other Restrictions. (a) Prior to the termination of
this Agreement, Stockholder agrees not to, directly or indirectly:
(i) except pursuant to the terms of the Merger Agreement, offer for
sale, Transfer or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to or consent
to the offer for sale Transfer or other disposition of any or all of the
Subject Securities or any interest therein except as provided in Section
1.2 hereof;
(ii) grant any proxy, power of attorney, deposit any of the Subject
Securities into a voting trust or enter into a voting agreement or
arrangement with respect to the Subject Securities except as provided in
this Agreement; or
(iii) take any other action that would make any representation or
warranty of Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling Stockholder from performing its
obligations under this Agreement.
(b) To the extent Stockholder is, as of the date hereof, party to a
contract or agreement that requires Stockholder to Transfer Shares to
another person or entity (excluding a contract or agreement pledging Shares
to Company), Stockholder will not effect any such Transfer unless and until
the transferee agrees to be bound by and executes an agreement in the form
of this Agreement with respect to the Shares to be Transferred. Nothing
herein shall prohibit Stockholder from exercising (in accordance with the
terms of the option or warrant, as applicable) any option or warrant
Stockholder may hold; provided that the securities acquired upon such
exercise shall be deemed Shares.
C-2
1.4 Irrevocable Proxy. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Parent a proxy in the form attached hereto
as Exhibit I (the "Proxy"), which shall be irrevocable, with respect to the
Shares, subject to the other terms of this Agreement.
1.5 Appraisal Rights. Stockholder agrees not to exercise any rights of
appraisal and any dissenters' rights that Stockholder may have (whether
under applicable law or otherwise) or could potentially have or acquire in
connection with the Merger.
1.6 No Limitation on Discretion as Director. This Agreement is intended
solely to apply to the exercise by Stockholder of rights attaching to
ownership of the Shares, and nothing herein shall be deemed to apply to, or
to limit in any manner the discretion of Stockholder who is a director of
the Company with respect to, any action which may be taken or omitted by
Stockholder acting in Stockholder's fiduciary capacity as a director of the
Company.
2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
(a) Stockholder is the record and beneficial owner of, or Stockholder
exercises voting power over, the shares of Company Common Stock indicated on
the final page of this Agreement, which, on and as of the date hereof, are
free and clear of any Encumbrances that would adversely affect the ability
of Stockholder to carry out the terms of this Agreement. The number of
Shares set forth on the signature pages hereto are the only Shares
beneficially owned by such Stockholder and, except as set forth on such
signature pages, the Stockholder holds no options to purchase or rights to
subscribe for or otherwise acquire any securities of the Company and has no
other interest in or voting rights with respect to any securities of the
Company.
(b) Stockholder has the requisite capacity, power and authority to enter
into this Agreement and to consummate the transaction contemplated by this
Agreement. The execution and delivery of this Agreement by such Stockholder
and the consummation by such Stockholder of the transactions contemplated by
this Agreement have been duly authorized by all necessary action. This
Agreement has been duly executed and delivered by such Stockholder and
constitutes a valid and binding obligation of such Stockholder, enforceable
against such Stockholder in accordance with its terms, except (i) as the
same may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws of general application relating to or affecting creditors'
rights, and (ii) for the limitations imposed by general principles of
equity. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation
or acceleration of any obligation which would result in the creation of any
Encumbrance upon any of the Shares owned by such Stockholder under, any
provision of applicable law or regulation or of any agreement, judgment,
injunction, order, decree, or other instrument binding on such Stockholder
or any Shares owned by such Stockholder. No consent, approval, order or
authorization of, or registration, declaration or filing with or exemption
by any Governmental Entity is required by or with respect to such
Stockholder in connection with the execution and delivery of this Agreement
by such Stockholder or the consummation by such Stockholder of the
transactions contemplated by this Agreement, except for applicable
requirements, if any, of Sections 13 and 16 of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder. If this
Agreement is being executed in a representative or fiduciary capacity, the
person signing this Agreement has full power and authority to enter into and
perform such Agreement. Prior to the approval of Company's Board of
Directors of this Agreement, Stockholder and Parent had no agreement,
arrangement or understanding with respect to the voting of any of
Stockholder's securities of the Company.
3. TERMINATION
This Agreement shall terminate and shall have no further force or effect as
of the first to occur of (i) the Effective Time and (ii) such date and time as
the Merger Agreement shall have been validly terminated pursuant to Article VII
thereof.
C-3
4. MISCELLANEOUS
4.1 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
4.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor
any of the rights, interests or obligations of the parties hereto may be
assigned by either of the parties without prior written consent of the
other. Any purported assignment in violation of this Section shall be void.
4.3 Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
4.4 Specific Performance; Injunctive Relief; Attorneys Fees. The parties
hereto acknowledge that Parent will be irreparably harmed and that there
will be no adequate remedy at law for a violation of any of the covenants or
agreements of Stockholder set forth herein. Therefore, it is agreed that, in
addition to any other remedies that may be available to Parent upon any such
violation, Parent shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to Parent at law or in equity. If any action, suit or other
proceeding (whether at law, in equity or otherwise) is instituted concerning
or arising out of this Agreement or any transaction contemplated hereunder,
the prevailing party shall recover, in addition to any other remedy granted
to such party therein, all such party's costs and attorneys fees incurred in
connection with the prosecution or defense of such action, suit or other
proceeding.
4.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if
delivered personally, (ii) on the date of confirmation of receipt (or, the
first business day following such receipt if the date is not a business day)
of transmission by facsimile, or (iii) on the date of confirmation of
receipt (or, the first business day following such receipt if the date is
not a business day) if delivered by a nationally recognized courier service.
Subject to the foregoing, all notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
If to Parent:
VeriSign, Inc.
487 East Middlefield Road
Mountain View, California 94043
Attention: James M. Ulam,
General Counsel
Facsimile No.: 650-426-5113
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attention: Gordon K. Davidson
Douglas N. Cogen
Jeffrey R. Vetter
Facsimile: 650-494-1417
C-4
If to Stockholder, to the address for notice set forth on the last
page hereof.
with a copy to:
Blackwell Sanders Peper Martin LLP
Two Pershing Square
2300 Main Street
Suite 1000
Kansas City, Missouri 14108
Attention: James M. Ash
Shari L. Wright
Facsimile: 816-983-8080
Any party hereto may by notice so given provide and change its address for
future notices hereunder. Notice shall conclusively be deemed to have been
given when personally delivered or when deposited in the mail in the manner set
forth above.
4.6 Governing Law. This Agreement shall be governed by and construed
exclusively in accordance with the laws of the State of Delaware, excluding
that body of law relating to conflict of laws.
4.7 Entire Agreement. This Agreement, the Merger Agreement and the Proxy
granted hereunder constitute and contain the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersede any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties respecting the
subject matter hereof.
4.8 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
4.9 Captions. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.
* * * * *
C-5
IN WITNESS WHEREOF, the parties hereto have caused this Voting Agreement to
be executed by their duly authorized respective officers as of the date first
above written.
VERISIGN, INC.
By:__________________________________
Name:
Title:
STOCKHOLDER:
[STOCKHOLDER]
By: _________________________________
Name:
Title:
Stockholder's Address for Notice:
[Address]
Outstanding shares of Company
Common Stock held of record or
beneficially owned by Stockholder
or over which Stockholder
exercises voting power:
__________________________________
C-6
EXHIBIT I
IRREVOCABLE PROXY
The undersigned stockholder (the "Stockholder") of Illuminet Holdings, Inc.,
a Delaware corporation (the "Company"), hereby irrevocably appoints and
constitutes the members of the Board of Directors of VeriSign, Inc., a Delaware
corporation ("Parent"), and each such Board member (collectively, the
"Proxyholders"), the agents, attorneys and proxies of the undersigned, with
full power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to the shares of capital stock of Company
which are listed below (the "Shares"), and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof
and prior to the date this proxy terminates, to vote the Shares as follows: the
Proxyholders named above are empowered at any time prior to termination of this
proxy to exercise all voting and other rights (including, without limitation, the power to execute and deliver written consents with respect to the Shares)indemnify such person against such liabilities under Section 145. Section 102(b)(7) of the undersigned at every annual, special or adjourned meeting of Company
stockholders, and in every written consent in lieu of such a meeting, or
otherwise, (i) in favor of adoption of the Agreement and Plan of Merger (the
"Merger Agreement") among Parent, Illinois Acquisition Corporation and Company,
and the approval of the merger of Illinois Acquisition Corporation with and
into Company (the "Merger"), and (ii) against approval of any proposal made in
opposition to or in competition with consummation of the Merger, including,
without limitation, any Acquisition Proposal or Superior Offer (each as defined
in the Merger Agreement) or any action or agreement that would result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of Company under the Merger Agreement or of the
Stockholder under the voting agreement between Parent and Stockholder (the
"VotingAgreement").
The Proxyholders may not exercise this proxy on any other matter. The
Stockholder may vote the Shares on all such other matters. The proxy granted by
the Stockholder to the Proxyholders hereby is granted as of the date of this
Irrevocable Proxy in order to secure the obligations of the Stockholder set
forth in Section 1 of the Voting Agreement, and is irrevocable and coupled with
an interest in such obligations and in the interests in Company to be purchased
and sold pursuant the Merger Agreement.
This proxy will terminate upon the termination of the Voting Agreement in
accordance with its terms. Upon the execution hereof, all prior proxies given
by the undersigned with respect to the Shares and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof
are hereby revoked and no subsequent proxies will be given until such time as
this proxy shall be terminated in accordance with its terms. Any obligation of
the undersigned hereunder shall be binding upon the successors and assigns of
the undersigned. The undersigned stockholder authorizes the Proxyholders to
file this proxy and any substitution or revocation of substitution with the
Secretary of the Company and with any Inspector of Elections at any meeting of
the stockholders of the Company.
This proxy is irrevocable and shall survive the insolvency, incapacity,
death or liquidation of the undersigned. Dated: September 23, 2001.
_____________________________________
Signature
_____________________________________
Name (and Title)
Shares of Company Common Stock held
of record by or beneficially owned by
the Stockholder or over which the
Stockholder exercises voting power:
_____________________________________
C-7
ANNEX D
September 23, 2001
Board of Directors
Illuminet Holdings, Inc.
4501 Intelco Loop, S.E.
Olympia, WA 98503
Members of the Board:
We understand that Illuminet Holdings, Inc. (the "Company"), Verisign, Inc.
("Acquiror") and Illinois Acquisition Corporation (a wholly owned subsidiary of
Acquiror, "Merger Sub") are proposing to enter into an Agreement and Plan of
Merger (the "Agreement") which will provide, among other things, for the merger
(the "Merger") of Merger Sub with and into the Company. Upon consummation of
the Merger, the Company will become a wholly owned subsidiary of Acquiror.
Under the terms, and subject to the conditions, set forth in the Agreement
dated September 23, 2001 (the "Merger Agreement"), at the effective time of the
Merger, the outstanding shares of common stock of the Company, par value $0.01
per share ("Company Common Stock"), other than certain shares to be canceled
pursuant to the Agreement will be converted into the right to receive 0.93 of a
share (the "Exchange Ratio") of the common stock of Acquiror, par value $0.001
per share ("Acquiror Common Stock"). The Merger Agreement alsoDGCL provides that Acquiror will receive an option to purchase up to 19.9%a certificate of the Company Common
Stock and that the Company will pay a termination fee in the event the Merger
is not consummated under certain circumstances (principally circumstances
involving a competing acquisition of the Company). Our understanding is that
under no circumstances will the aggregate of the termination fee and the
proceeds from the option agreement (less the exercise price) exceed $65
million. The terms and conditions of the Merger are set out more fully in the
Merger Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view, as of the date hereof, to the "Holders of Company
Common Stock". The "Holders of Company Common Stock" shall be defined as all
holders of Company Common Stock other than Acquiror, Merger Sub, any affiliates
of Acquiror or Merger Sub. We understand that the Holders of Company Common
Stock are not entitled to appraisal rights under applicable law.
For purposes of this opinion we have, among other things:
(i) reviewed certain publicly available financial statements and other
business and financial information of the Company and Acquiror,
respectively;
(ii) reviewed with the Company and Acquiror certain publicly available
estimates of research analysts relating to the Company and Acquiror;
(iii) held discussions with the respective managements of the Company and
Acquiror concerning the businesses, past and current operations,
financial conditions and future prospects of both the Company and
Acquiror, independently and combined, including discussions with the
managements of the Company and Acquiror concerning their views
regarding the strategic rationale for the Merger;
(iv) reviewed the financial terms and conditions set forth in the Merger
Agreement;
(v) reviewed the stock price and trading history of Company Common Stock
and Acquiror Common Stock;
(vi) compared the financial performance of the Company and Acquiror and the
prices and trading activity of Company Common Stock and Acquiror
Common Stock with that of certain other publicly traded companies
comparable with the Company and Acquiror, respectively;
D-1
(vii) compared the financial terms of the Merger with the financial terms,
to the extent publicly available, of other transactions that we deemed
relevant;
(viii) reviewed the pro forma impact of the Merger on Acquiror's revenue per
share and revenue growth rates, and earnings per share and earnings
growth rates, respectively;
(ix) prepared an analysis of the relative contributions of the Company and
Acquiror to the combined company;
(x) prepared a discounted cash flow analysis of each of the Company and
Acquiror;
(xi) participated in discussions and negotiations among representatives of
the Company and Acquiror and their financial and legal advisors; and
(xii) made such other studies and inquiries, and reviewed such other data,
as we deemed relevant.
In our review and analysis, and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us (including information furnished to us orally or
otherwise discussed with us by the managements of the Company and Acquiror) or
publicly available and have neither attempted to verify, nor assumed
responsibility for verifying, any of such information. We have relied upon the
assurances of the managements of the Company and Acquiror that they are not
aware of any facts that would make such information, in light of the
circumstances under which it was provided, inaccurate or misleading.
Furthermore, we did not obtain or make, or assume any responsibility for
obtaining or making, any independent evaluation or appraisal of the properties,
assets or liabilities (contingent or otherwise) of the Company or Acquiror, nor
were we furnished with any such evaluation or appraisal. With respect to the
discussions which we have had with the respective management teams relating to
estimates of future performance (and the assumptions and bases therefor) for
Acquiror and the Company, we have assumed that such forecasts have been
reasonably prepared in good faith on the basis of reasonable assumptions and
reflect the best currently available estimates and judgments of the managements
of Acquiror and the Company, respectively, as to the future financial condition
and performance of the Company and Acquiror, respectively, and we have further
assumed that such forecasts will be realized in the amounts and in the time
periods currently estimated. We have assumed that the Merger will be
consummated upon the terms set forth in the Merger Agreement without material
alteration thereof, including, among other things, that the Merger will be
accounted for as a "purchase method" business combination in accordance with
U.S. generally accepted accounting principles ("GAAP") and that the Merger will
be treated as a tax-free reorganization pursuant to the Internal Revenue Code
of 1986, as amended. In addition, we have assumed that the historical financial
statements of each of the Company and Acquiror reviewed by us have been
prepared and fairly presented in accordance with GAAP consistently applied.
This opinion is necessarily based upon market, economic and other conditions
as in effect on, and information made available to us as of, the date hereof.
It should be understood that subsequent developmentsincorporation may affect the conclusion
expressed in this opinion and that we disclaim any undertaking or obligation to
advise any person of any change in any matter affecting this opinion which may
come or be brought to our attention after the date of this opinion. Our opinion
is limited to the fairness, from a financial point of view as to the date
hereof, to the Holders of Company Common Stock of the Exchange Ratio. We do not
express any opinion as to (i) the value of any employee agreement or other
arrangement entered into in connection with the Merger, (ii) any tax or other
consequences that might result from the Merger or (iii) what the value of
Acquiror Common Stock will be when issued to the Company's stockholders
pursuant to the Merger or the price at which the shares of Acquiror Common
Stock that are issued pursuant to the Merger may be traded in the future. Our
opinion does not address the relative merits of the Merger and the other
business strategies that the Company's Board of Directors has considered or may
be considering, nor does it address the decision of the Company's Board of
Directors to proceed with the Merger. Neither does our opinion address any
legal or accounting matters, as to which we understand that the Company has
obtained such advice as it deemed necessary from qualified professionals.
D-2
In connection with the preparation of our opinion, we were not authorized to
solicit, and did not solicit, third-parties regarding alternatives to the
Merger.
We are acting as financial advisor to the Company in connection with the
Merger and will receive (i) a fee contingent upon the delivery of this opinion
and (ii) an additional fee contingent upon the consummation of the Merger. In
addition, the Company has agreed to indemnify us for certain liabilities that
may arise out of our engagement. We have provided financial advisory services
in the past to the Company with respect to mergers and acquisitions and public
financings. We maintain a market in the shares of Company Common Stock and
Acquiror Common Stock. In the ordinary course of business, we may trade in the
Company's securities and Acquiror's securities for our own account and the
account of our customers and, accordingly, may at any time hold a long or short
position in the Company's securities or Acquiror's securities.
Our opinion expressed herein is provided for the information of the Board of
Directors of the Company in connection with its evaluation of the Merger. Our
opinion is not intended to be and does not constitute a recommendation to any
stockholder of the Company as to how such stockholder should vote, or take any
other action, with respect to the Merger. This opinion may not be summarized,
described or referred to or furnished to any party except with our express
prior written consent.
Based upon and subject to the foregoing considerations, it is our opinion
that, as of the date hereof, the Exchange Ratio is fair to the Holders of
Company Common Stock from a financial point of view.
Very truly yours,
Robertson Stephens, Inc.
/s/ Robertson Stephens, Inc.
--------------------------------------
D-3
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933.
As permitted by the Delaware General Corporation Law, the Registrant's Third
Amended and Restated Certificate of Incorporation includescontain a provision that
eliminateseliminating or limiting the personal liability of a director to the corporation or its directorsstockholders for monetary damages for breach of fiduciary
duty as a director, except for liability:provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director'sdirector’s duty of loyalty to the Registrantcorporation or its stockholders;stockholders, (ii) for acts or omissions not in good faith or thatwhich involve intentional misconduct or a knowing violation of law;law, (iii) under sectionSection 174 of the Delaware General Corporation Law (regarding unlawful dividends and stock
purchases);DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.
As Article Eight of our Certificate of Incorporation gives us the authority to indemnify, to the extent permitted by applicable law, any agent and any other person to whom Delaware law permits us to indemnify. Article V, Section 2 of our Bylaws provides that we will indemnify and hold harmless each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the Delaware General Corporation Law,fact that he or she is or was a director or an officer of the Registrant's
Amended and Restated Bylaws provide that: (i)Company or is or was serving at the Registrantrequest of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of such proceeding is required to
indemnify its directors and officersalleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director or officer, to the fullest extent permittedauthorized by law, as the Delaware General Corporation Law, subject to certain very limited exceptions;
(ii)same exists or may hereafter be amended (but, in the Registrant may indemnify its other employees and agentscase of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith. Notwithstanding the preceding sentence, except for proceedings to enforce rights set forth in Article V, Section 2 of our Bylaws, we will be required under our Bylaws to indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors; provided, however, that as to any matter disposed of by a compromise payment by such person, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless such compromise and indemnification therefore shall be appropriated in accordance with Article V, Section 2(a) of our Bylaws. Expenses (including attorneys’ fees) incurred by a current officer or director of the Company in defending any proceeding for which such officer or director may be entitled to indemnification under the our Bylaws shall be paid or reimbursed in advance of the final disposition of such matter upon receipt of an undertaking by such director or officer to repay such amount unless it indemnifiesis determined that such person is entitled to be indemnified by the Company. Under Delaware law, directors of the Company will remain liable for the following: any breach of the director’s duty of loyalty to the Company or its stockholders; acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law; the payment of dividends, stock repurchases or redemptions that are unlawful under Delaware law; and any transaction in which the director receives an improper personal benefit. We have entered into indemnification agreements with our directors and certain officers. Under certain circumstances, the indemnification agreements provide these directors and officers with indemnification against liability arising out of third party actions and derivative actions based on the fact that these directors unless otherwise requiredand officers are or were agents of the Company or based on actions or omissions by law, its Certificatethese directors and officers while acting as an agent of Incorporation, its Amendedthe Company, in good faith and Restated Bylaws, or
agreement; (iii)in a manner reasonably believed to be in the Registrant is required to advance expenses, as incurred,
tobest interests of the Company. The form of indemnity agreement between VeriSign, Inc. and its directors and executive officers in connection with a legal proceedingis filed as Exhibit 10.01 to our Quarterly Report on Form 10-Q for the fullest extent permittedquarter ended March 31, 2010. As required by the Delaware General Corporation Law,
subjectindemnification agreements described above, we have purchased directors’ and officers’ insurance which is intended to cover our directors and officers against losses arising from certain very limited exceptions;kinds of claims which might be made against them based on their acts, errors or omissions while acting in their capacity as such. Item 21. Exhibits and (iv) the rights conferredFinancial Statement Schedules. The exhibits to this registration statement are listed in the Amended“Exhibit Index” following the signature pages hereto and Restated Bylaws are not exclusive.
The Registrant has entered into Indemnification Agreements with each of its
current directors and certain of its executive officers and intends to enter
into such Indemnification Agreements with each of its other executive officers
to give such directors and executive officers additional contractual assurances
regarding the scope of the indemnification set forth in the Registrant's
Certificate of Incorporation and to provide additional procedural protections.
At present, there is no pending litigation or proceeding involving a director,
officer or employee of the Registrant regarding which indemnification is
sought, nor is the Registrant aware of any threatened litigation that may
result in claims for indemnification.
The Registrant has obtained directors' and officers' liability insurance
with an annual aggregate coverage limit of $200 million.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) Exhibits
Incorporated by Reference
Exhibit ------------------------- Filed
Number Exhibit Description Form Date Number Herewith
------ ----------------------------------------------------------------- ---- ------- ------ --------
2.01 Agreement and Plan of Merger between VeriSign and Illuminet
dated September 23, 2001 (contained in Annex A to the
prospectus/proxy statement that is part of this registration
statement) X
3.03 Amended and Restated Bylaws of the Registrant S-1 1/29/98 3.04
4.01 Voting Agreement dated as of March 6, 2000 among the
Registrant and the parties indicated therein 8-K 3/8/00 9.1
4.02 Registration Rights Agreement dated as of March 6, 2000 among
the Registrant and the parties indicated therein 8-K 3/8/00 99.1
4.03 Stock Option Agreement between VeriSign and Illuminet dated
September 23, 2001 (contained in Annex B to the prospectus/
proxy statement that is part of this registration statement) X
4.04 Form of Voting Agreement dated as of September 23, 2001
among the Registrant and the parties indicated therein (contained
in Annex C to the prospectus/proxy statement that is part of this
registration statement) X
5.01 Opinion of Fenwick & West LLP*
8.01 Tax Opinion of Blackwell Sanders Peper Martin, LLP*
23.01 Consent of Deloitte & Touche LLP, independent auditors X
23.02 Consent of Ernst & Young LLP, independent auditors X
23.03 Consent of KPMG LLP X
23.04 Consent of PricewaterhouseCoopers LLP, independent
accountants X
23.05 Consent of Robertson Stephens, Inc. X
23.06 Consent of Fenwick & West LLP (included in exhibit 5.01)*
99.01 Form of Proxy of Illuminet Holdings, Inc. X
--------
* To be filed by amendment.
(B) Financial Statement Schedules
The information required to be set forth herein is incorporated by reference to VeriSign's Annual Report on Form 10-K for the year ended December 31, 2000
filed with the Securities Exchange Commission on March 28, 2001.
herein.
Item 22. UNDERTAKINGSUndertakings. (a) The undersigned Registrantregistrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
registration statement: (i) To include any prospectus required by Sectionsection 10(a)(3) of the Securities Act;
Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statementregistration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement.registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation“Calculation of Registration Fee"Fee” table in the effective Registration Statementregistration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statementregistration statement or any material change to such information in the Registration
Statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) above do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDEbona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§ 230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. (c) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned Registrantregistrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter); (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; (iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. (d) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant'sregistrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act)Act of 1934) that is incorporated by reference in the Registration Statementregistration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA
FIDEbona fide offering thereof. (g) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrantregistrant pursuant to the foregoing provisions, discussed in Item 6 hereof, or otherwise, the Registrantregistrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrantregistrant of expenses incurred or paid by a director, officer or controlling person of the Registrantregistrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, hereby, the Registrantregistrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-3
That prior (h) The undersigned registrant hereby undertakes to any public reofferingrespond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the securities registered hereunderregistration statement through usethe date of responding to the request. (i) The undersigned registrant hereby undertakes to supply by means of a prospectus which ispost-effective amendment all information concerning a parttransaction, and the company being acquired involved therein, that was not the subject of thisand included in the registration statement by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Mountain
View,Reston, State of California,Virginia on the 8/th/20th day of October 2001.
VERISIGN, INC.
By: /s/ STRATTON D. SCLAVOS
__________________________________
Stratton D. Sclavos,
President and Chief Executive Officer
August, 2013. | | | | | VERISIGN, INC. | | By: | /S/ GEORGE E. KILGUSS, III | | | GEORGE E. KILGUSS, III | | | Senior Vice President and | | | Chief Financial Officer |
POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each individualperson whose signature appears below hereby constitutes and appoints Stratton D. Sclavos, Dana L. EvanGeorge E. Kilguss, III and James M. Ulam,Richard H. Goshorn, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, with full power of each to act alone, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign the Registration Statement filed herewith and any and all amendments to thissaid Registration Statement, on Form S-4 and to file the same, with all exhibits thereto, and allother documents in connection therewith, with the Securities and Exchange Commission, grantedgranting unto said attorneys-in-fact and agents, andwith full power of each of them,to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises,connection therewith, as fully tofor all intendsintents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or his, her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with Pursuant to the requirements of the Securities Exchange Act of 1933, this registration statement has been signed by the following persons on behalf
of the registrant and in the capacities indicated on the 8/th/20th day of October
2001.
Signature Title
--------- -----
/S/ STRATTON D. SCLAVOS President, Chief Executive Officer
----------------------- and Director
Stratton D. Sclavos
/s/ DANA L. EVAN Executive Vice President of Finance
----------------------- and Administration and Chief
Dana L. Evan Financial Officer
/s/ D. JAMES BIDZOS Chairman of the Board
-----------------------
D. James Bidzos
/s/ WILLIAM CHENEVICH Director
-----------------------
William Chenevich
/s/ KEVIN R. COMPTON Director
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Kevin R. Compton
/s/ DAVID J. COWAN Director
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David J. Cowan
/s/ SCOTT G. KRIENS Director
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Scott G. Kriens
August, 2013. | | | | | Signature | | Title | | | | /S/ D. JAMES BIDZOS | | President, Chief Executive Officer, Executive Chairman and Director | D. JAMES BIDZOS | | | | | /S/ GEORGE E. KILGUSS, III | | Chief Financial Officer (Principal Accounting Officer) | GEORGE E. KILGUSS, III | | | | | | | Director | WILLIAM L. CHENEVICH | | | | | | /S/ KATHLEEN A. COTE | | Director | KATHLEEN A. COTE | | | | | | /S/ ROGER H. MOORE | | Director | ROGER H. MOORE | | | | | | /S/ JOHN D. ROACH | | Director | JOHN D. ROACH | | | | | | /S/ LOUIS A. SIMPSON | | Director | LOUIS A. SIMPSON | | | | | | /S/ TIMOTHY TOMLINSON | | Director | TIMOTHY TOMLINSON | | |
II-5
Signature Title
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/s/ GREG REYES Director
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Greg Reyes
/s/ TIMOTHY TOMLINSON Director
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Timothy Tomlinson
II-6
EXHIBIT INDEX | | | | | Exhibit Number | | Description | | 3.1 | | Fourth Amended and Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit Description
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2.01 Agreement and Plan of Merger between VeriSign and Illuminet dated September 23, 2001
(contained in Annex A3.01 to the prospectus/proxy statement that is partRegistrant’s Registration Statement on Form S-1 filed on November 5, 2007). | | 3.2 | | Sixth Amended and Restated Bylaws of this registration
statement)
4.03 Stock Option Agreement between VeriSign and IlluminetRegistrant (incorporated by reference to Exhibit 3.01 to Registrant’s Current Report on Form 8-K dated September 23, 2001 (contained
in Annex B to the prospectus/proxy statement that is partJuly 25, 2012). | | 4.1 | | Indenture (including form of this registration statement)
4.04 Form of Voting Agreementnotes), dated as of September 23, 2001 amongApril 16, 2013, between VeriSign, Inc., each of the Registrantsubsidiary guarantors party thereto and the parties
indicated therein (contained in Annex CU.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the prospectus/proxy statement that is partRegistrant’s Current Report on Form 8-K dated April 16, 2013). | | 4.2 | | Form of this
registration statement)
23.01 Consentnotes (included in Exhibit 4.1). | | 5.1* | | Opinion of DeloitteCleary Gottlieb Steen & Touche LLP, independent auditors
23.02 ConsentHamilton LLP. | | 10.1 | | Registration Rights Agreement, dated April 16, 2013, by and among VeriSign, Inc., VeriSign Information Services, Inc. and J.P. Morgan Securities LLC, for itself and on behalf of Ernst & Young LLP, independent auditors
23.03 the initial purchasers (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated April 16, 2013). | | 12.1* | | Computation in support of ratios of earnings to fixed charges with respect to the years ended December 31, 2008 through 2012 and for the six months ended June 30, 2013. | | 21.1* | | Subsidiaries of the Registrant. | | 23.1* | | Consent of KPMG LLP
23.04 LLP. | | 23.2* | | Consent of PricewaterhouseCoopersCleary Gottlieb Steen & Hamilton LLP independent accountants
23.05 Consent(included in Exhibit 5.1). | | 24.1* | | Powers of Robertson Stephens, Inc.
99.01 Attorney (included on signature page hereof). | | 25.1* | | Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of U.S. Bank National Association, as Trustee under the Indenture. | | 99.1* | | Form of ProxyLetter of Illuminet Holdings, Inc.
Transmittal. |
_________________ * Filed herewith.
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