SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NEXLAND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock, par value $0.0001 per share, of Nexland, Inc.
(2) Aggregate number of securities to which transaction applies: (i)
34,824,172 shares of Nexland common stock, (ii) vested in-the-money
options to purchase 6,178,846 shares of Nexland common stock and (iii)
warrants to purchase 100,000 shares of Nexland common stock.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): The filing
fee was determined based upon the estimated aggregate merger
consideration of $19,600,000 to be paid to the Nexland stockholders. The
actual merger consideration will be equal to $19,600,000, less payment
to the holders of outstanding and vested in-the-money options and
warrants. The amount to be paid to the holders of outstanding and vested
in-the-money options and warrants is estimated to be $1,746,198. In
accordance with Rule 0-11 under the Securities Exchange Act of 1934, as
amended, the filing fee was determined by multiplying $19,600,000 by
0.0000809000.
(4) Proposed maximum aggregate value of transaction: $19,600,000.
(5) Total fee paid: $1,585.64.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------
(3) Filing Party:
---------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------
[LOGO OF NEXLAND]
NEXLAND, INC.
1101 BRICKELL AVENUE
NORTH TOWER - 2ND FLOOR
MIAMI, FLORIDA 33131
Dear Stockholder:
We invite you to attend a special meeting of stockholders of Nexland,
Inc. to be held at 10 a.m., Eastern time, on July 14, 2003, at J.W. Marriott
Hotel, 1109 Brickell Avenue, 5th Floor, Miami, Florida 33131. Holders of record
of Nexland common stock at the close of business on June 13, 2003 will be
entitled to vote at the special meeting or any adjournment or postponement of
that meeting.
At the special meeting, we will ask you to approve and adopt the merger
agreement that we entered into on May 13, 2003 with Symantec Corporation, a
Delaware corporation, and Nebraska Acquisition Sub, Inc., a Delaware corporation
and a wholly owned subsidiary of Symantec. Under the merger agreement, Nebraska
Acquisition Sub will be merged with Nexland. As a result of the merger, Nexland
will become a wholly owned subsidiary of Symantec.
If we complete the merger, our stockholders will receive an aggregate
amount in cash equal to $19,600,000, less payment to the holders of outstanding
and vested in-the-money options and warrants, or approximately $0.5118 per share
of outstanding common stock, assuming no options or warrants are exercised or
cancelled prior to the merger and based on 34,824,172 shares of common stock
outstanding as of May 13, 2003.
We cannot complete the merger unless all of the conditions to closing
are satisfied, including the approval and adoption of the merger agreement by
holders of a majority of the outstanding shares of Nexland common stock.
Assuming the merger agreement is approved and adopted by the holders of a
majority of the outstanding shares of Nexland common stock and the other
conditions to closing are satisfied, the merger will be completed promptly
following the special meeting.
Nexland's Board of Directors carefully reviewed and considered the
terms and conditions of the proposed merger. Based on its review, the Board of
Directors has determined that the terms of the merger agreement and the merger
are advisable and are fair to and in the best interests of Nexland and its
stockholders. In making this determination, the Board of Directors considered,
among other things, oral opinions, subsequently confirmed in writing, on May 13,
2003, of Kendrick Pierce Securities, Inc., Nexland's financial advisor, to the
effect that, as of that date and on the basis of and subject to the matters
reviewed with the Board of Directors and contained in Kendrick Pierce's written
opinion, which is attached as an appendix to the attached proxy statement, the
aggregate consideration to be received by the holders of Nexland common stock in
the merger is fair from a financial point of view.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Several stockholders and all directors, who collectively hold
approximately 81.0% of our common stock, have expressed their support for the
merger and have entered into voting agreements and executed irrevocable proxies
obligating them to vote their shares in favor of the approval and adoption of
the merger agreement.
The attached notice of special meeting and proxy statement explain the
proposed merger and merger agreement and provide detailed information concerning
the special meeting. Please carefully read these materials, including the
appendices.
Your vote is important, so I urge you to vote your shares by proxy,
whether or not you plan to attend the meeting. After you read the attached proxy
statement, please indicate on the enclosed proxy card the manner in which you
want to have your shares voted. Then date, sign and mail the proxy card in the
postage-paid envelope that is provided. If you sign and return your proxy card
without indicating your choices, it will be understood that you wish to have
your shares voted in accordance with the recommendations of Nexland's Board of
Directors. Returning the proxy card does not deprive you of your right to attend
the special meeting and to vote your shares in person. If you do not vote, it
will have the same effect as voting against the merger.
We hope to see you at the meeting.
Sincerely,
---------------------------------------------
Gregory S. Levine
President, Chief Executive Officer and
Chairman of the Board
June 16, 2003
NEXLAND, INC.
1101 BRICKELL AVENUE
NORTH TOWER - 2ND FLOOR
MIAMI, FLORIDA 33131
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 14, 2003
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
Nexland, Inc. will be held on July 14, 2003, at J.W. Marriott Hotel, 1109
Brickell Avenue, 5th Floor, Miami, Florida 33131, at 10 a.m., Eastern time, for
the following purposes, as more fully described in the attached proxy statement:
(1) To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated May 13, 2003, by and among Symantec
Corporation, Nebraska Acquisition Sub, Inc. and Nexland, Inc.; and
(2) To consider such other business as may properly come before the
special meeting and any adjournment or postponement thereof.
Your Board of Directors has unanimously determined that the merger is
in the best interests of Nexland and its stockholders and unanimously recommends
that you vote to approve and adopt the merger agreement. This item of business
to be submitted to a vote of the stockholders at the special meeting is more
fully described in the attached proxy statement, which we urge you to read
carefully.
Stockholders of record at the close of business on June 13, 2003 are
entitled to notice of and to vote at the special meeting and any adjournment or
postponement of the meeting. All stockholders are cordially invited to attend
the special meeting in person. Approval and adoption of the merger agreement
will require the affirmative vote of the holders of a majority of outstanding
Nexland common stock.
Nexland common stockholders will have the right to dissent from the
merger and obtain payment in cash for the fair value of their shares of common
stock under applicable provisions of the Delaware General Corporation Law. To
perfect dissenter's rights, Nexland stockholders must give written demand for
appraisal of their shares before the taking of the vote on the merger at the
special meeting and must not vote in favor of the merger. The judicially
determined fair value of your shares may be more or less than the price per
share to be paid in the merger. In the absence of an equitable exception, a
stockholder in an appraisal proceeding will bear its own expenses, including
expert witness and attorneys' fees. A copy of the applicable Delaware statutory
provisions is included as Appendix D to the attached proxy statement and a
summary of these provisions can be found under "The Merger - Appraisal Rights of
Stockholders" in the attached proxy statement.
You should not send any certificates representing shares of Nexland
common stock with your proxy card. Upon approval of the merger, you will be sent
instructions regarding the procedure to exchange your stock certificates for the
cash merger consideration.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
MERGER PROPOSAL.
YOUR VOTE IS IMPORTANT
Your vote is very important. Whether or not you plan to attend the
special meeting, to ensure your representation, you are urged to mark, sign,
date and return the enclosed proxy as promptly as possible in the envelope
enclosed for that purpose. Any executed but unmarked proxy cards will be voted
for approval and adoption of the merger agreement. You may revoke your proxy in
the manner described in the attached proxy statement at any time before it has
been voted at the special meeting. Any stockholder attending the special meeting
may vote in person even if such stockholder has previously returned a proxy
card.
By Order of the Board of Directors,
-----------------------------------------
Gregory S. Levine
President, Chief Executive Officer and
Miami, Florida Chairman of the Board
June 16, 2003
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE TRANSACTION, PASSED UPON THE
MERITS OR FAIRNESS OF THE TRANSACTION, OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THE DISCLOSURE IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This proxy statement is dated and is first being mailed to our
stockholders on or about June 16, 2003.
TABLE OF CONTENTS
PAGE NO.
--------
SUMMARY TERM SHEET..............................................................................................iii
QUESTIONS AND ANSWERS ABOUT THE MERGER............................................................................1
When and where is the special meeting?...................................................................1
What is the purpose of the special meeting?..............................................................1
What effect will the merger have on Nexland?.............................................................1
What will I receive in the merger?.......................................................................1
Will I own any shares of Nexland common stock or Symantec common stock after completion of the merger?...1
What do I need to do now?................................................................................1
Should I send my stock certificates now?.................................................................2
When do you expect the merger to be completed?...........................................................2
When will I receive the cash consideration for my shares of Nexland common stock?........................2
What are the United States federal income tax consequences of the merger?................................2
What rights do I have to dissent from the merger?........................................................2
Do members of Nexland's management team have different interests in the merger?..........................2
What happens to options to purchase Nexland common stock in the merger?..................................3
What happens to warrants to purchase Nexland common stock in the merger?.................................3
Who is entitled to vote?.................................................................................3
Who can attend the special meeting?......................................................................3
If my shares are held in "street name" by my broker, will my broker vote my shares for me?...............3
What constitutes a quorum?...............................................................................3
How do I vote?...........................................................................................3
What if I do not specify how my shares are to be voted?..................................................4
Can I change my vote after I return my proxy card?.......................................................4
What is the Board of Directors' recommendation?..........................................................4
What vote is required to approve the merger agreement?...................................................4
Who should I contact if I have more questions about the merger?..........................................4
SUMMARY...........................................................................................................5
The Parties..............................................................................................5
The Special Meeting......................................................................................5
Vote Required............................................................................................6
Record Date For Voting...................................................................................6
The Merger...............................................................................................6
SUMMARY UNAUDITED CONDENSED FINANCIAL DATA.......................................................................12
INFORMATION CONCERNING THE SPECIAL MEETING.......................................................................13
THE MERGER.......................................................................................................15
Background of the Merger................................................................................15
Purpose of the Merger; Certain Effects of the Merger....................................................17
Recommendation of the Board of Directors................................................................17
Reasons for the Merger..................................................................................17
Opinion of Kendrick Pierce Securities, Inc..............................................................18
Interests of Certain Persons in the Merger..............................................................22
i
PAGE NO.
--------
Merger Financing; Source of Funds.......................................................................22
Material United States Federal Income Tax Consequences..................................................22
Exchange of Cash for Nexland Stock Certificates.........................................................24
Accounting Treatment....................................................................................24
Appraisal Rights of Stockholders........................................................................24
THE MERGER AGREEMENT.............................................................................................26
SECURITY OWNERSHIP OF NEXLAND COMMON STOCK.......................................................................36
PRICE RANGE OF COMMON STOCK AND DIVIDENDS........................................................................38
Holders Of Common Equity................................................................................38
Dividends...............................................................................................38
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS........................................................39
OTHER MATTERS....................................................................................................40
Proposals by Stockholders of Nexland....................................................................40
Incorporation by Reference..............................................................................40
Where You Can Find More Information.....................................................................40
APPENDIX A......................................................................................................A-1
APPENDIX B......................................................................................................B-1
APPENDIX C......................................................................................................C-1
APPENDIX D......................................................................................................D-1
APPENDIX E......................................................................................................E-1
ii
NEXLAND, INC.
1101 BRICKELL AVENUE
NORTH TOWER - 2ND FLOOR
MIAMI, FLORIDA 33131
-------------------------
PROXY STATEMENT
JUNE 3, 2003
-------------------------
This proxy statement is being furnished to stockholders of Nexland,
Inc., a Delaware corporation, in connection with the solicitation of proxies to
be used at the special meeting of stockholders of Nexland to be held on July 14,
2003, at J.W. Marriott Hotel, 1109 Brickell Avenue, 5th Floor, Miami, Florida
33131, at 10 a.m., local time, and at any postponements or adjournments thereof.
Nexland is making this proxy solicitation.
SUMMARY TERM SHEET
The following summary briefly describes the material terms of the
proposed merger whereby we will become a wholly-owned subsidiary of Symantec.
This summary does not contain all the information that may be important for you
to consider when evaluating the merger. We encourage you to read this proxy
statement in its entirety before voting. The sections below include references
to direct you to more complete descriptions of the matters discussed in this
summary.
If we complete the merger, our stockholders will receive an aggregate
amount in cash equal to $19,600,000, less payment to the holders of outstanding
and vested in-the-money options and warrants. Based on 34,824,172 shares of
common stock outstanding as of May 13, 2003 and assuming no options or warrants
are exercised or cancelled prior to the merger, you will receive approximately
$0.5118 per share of outstanding common stock.
The most relevant aspects and consequences of the merger are summarized
as follows:
o Our stockholders and holders of options and warrants to purchase our
common stock will no longer have any equity interest in us.
o All outstanding and vested in-the-money options to purchase shares
of Nexland common stock will be canceled and extinguished and will
be automatically exchanged for the right to receive a cash payment
equal to an aggregate of $1,746,197.57, subject to adjustment.
o All outstanding warrants to purchase shares of Nexland common stock
that are not validly exercised before the effective time of the
merger will be automatically terminated without consideration.
Holders of warrants will be given an opportunity to exercise the
warrants prior to the completion of the merger, in which case such
holders will receive a cash payment equal to the difference between
approximately $0.5118 per share and the per share exercise price for
such warrant.
o We will no longer be a public company, and our stock will no longer
be traded on the Over-the-Counter Bulletin Board maintained by the
National Association of Securities Dealers, Inc.
o All outstanding shares of our common stock will be owned by Symantec
other than those shares for which appraisal rights are exercised.
See "The Merger Agreement - Purpose of the Merger; Certain Effects
of the Merger" beginning on page 17.
o The merger is subject to several conditions, including obtaining the
affirmative vote of the holders of a majority of the outstanding
shares of our common stock and other customary closing conditions.
See "The Merger Agreement - Conditions to the Merger" beginning on
page 31.
o Our Board of Directors has unanimously determined that the merger is
advisable, fair to, and in the best interests of, us and our
stockholders and unanimously recommends that you approve and adopt
the merger agreement and the transactions contemplated by the merger
agreement, including the merger. See "The Merger - Recommendation of
the Board of Directors" beginning on page 17.
o Our Board of Directors has received an opinion from Kendrick Pierce
Securities, Inc., our financial advisor, to the effect that the cash
merger consideration to be received by our stockholders is fair,
from a financial point of view, to our stockholders. See "The Merger
- Opinion of Kendrick Pierce Securities, Inc." beginning on page 18.
o Executive officers and directors of Nexland have some interests in
the merger that may be different from, or in addition to, the
interests of stockholders generally. Nexland has provided our
officers and directors with liability insurance in respect of acts
or omissions of each person covered by our current policy occurring
prior to the completion of the merger. In addition, Gregory S.
iii
Levine and I. Daniel Sultan will be employed by Symantec following
the merger and Martin E. Dell'Oca will receive severance
compensation. See "The Merger - Interests of Certain Persons in the
Merger" beginning on page 22.
o The merger agreement must be approved by the affirmative vote of the
holders of a majority of the outstanding shares of our common stock.
Current directors and officers of Nexland holding an aggregate of
approximately [80.2%] of our outstanding common stock have agreed to
vote in favor of the merger. See "Information Concerning the Special
Meeting" beginning on page 13 and "The Merger Agreement - Voting
Agreements" beginning on page 35.
o Our common stockholders are entitled to appraisal rights under
Delaware law. See "The Merger - Appraisal Rights of Stockholders"
beginning on page 24.
o We expect the receipt of the cash merger consideration by our
stockholders to be treated as a taxable transaction. See "The Merger
- Material United States Federal Income Tax Consequences" beginning
on page 22.
o If the merger agreement is terminated, we may be required to pay
Symantec a termination fee of $800,000 and reimburse Symantec for
all merger-related expenses or reimburse Symantec up to $300,000 for
all merger related expenses, depending on the circumstances of the
termination. See "The Merger Agreement - Termination Fee" beginning
on page 34.
iv
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following are some questions, you, as our stockholder, may have
about the merger and answers to those questions. We urge you to read carefully
the remainder of this proxy statement because the information provided in these
questions and answers is not complete and additional important information is
contained in the remainder of this proxy statement.
WHEN AND WHERE IS THE SPECIAL MEETING?
We will hold a special meeting of our stockholders on Monday, July 14,
2003, at 10:00 a.m., Eastern time, at J.W. Marriott Hotel, 1109 Brickell Avenue,
5th Floor, Miami, Florida 33131.
WHAT IS THE PURPOSE OF THE SPECIAL MEETING?
At the special meeting, you will be asked to approve and adopt the
merger agreement dated May 13, 2003 among Symantec Corporation, Nebraska
Acquisition Sub, Inc. and Nexland, Inc. Only our stockholders as of the close of
business on June 13, 2003, the record date, will be entitled to vote at the
special meeting.
WHAT EFFECT WILL THE MERGER HAVE ON NEXLAND?
A special merger subsidiary formed by Symantec will be merged with and
into Nexland. Upon completion of the merger, Nexland will become a wholly owned
subsidiary of Symantec.
WHAT WILL I RECEIVE IN THE MERGER?
In the merger you will receive a cash payment for your shares of
Nexland common stock. Nexland stockholders will receive an aggregate amount in
cash equal to $19,600,000, less payment to the holders of outstanding and vested
in-the-money options and warrants. This is expected to result in a cash payment
of approximately $0.5118 for each share of Nexland common stock outstanding
immediately prior to the consummation of the merger based on 34,824,172 shares
of common stock outstanding as of May 13, 2003.
WILL I OWN ANY SHARES OF NEXLAND COMMON STOCK OR SYMANTEC COMMON STOCK AFTER
COMPLETION OF THE MERGER?
No. You will be paid cash for your shares of Nexland common stock.
WHAT DO I NEED TO DO NOW?
After reading this proxy statement carefully, you should complete, date
and sign your proxy card and mail it in the enclosed return envelope as soon as
possible so that your shares may be represented at the special meeting, even if
you plan to attend the meeting in person. Unless contrary instructions are
1
indicated on your proxy, all of your shares of Nexland common stock represented
by valid proxies will be voted "FOR" the approval and adoption of the merger
agreement and the merger.
SHOULD I SEND MY STOCK CERTIFICATES NOW?
No. If the merger is completed, each share of Nexland common stock
issued and outstanding immediately prior to the completion of the merger will be
canceled and extinguished and will be automatically converted into the right to
receive an amount of cash consideration as provided for in the merger agreement,
without interest. After the merger is completed, Symantec will send you written
instructions for exchanging your Nexland stock certificates for your cash
consideration.
WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
Assuming the merger agreement is approved and adopted by the holders of
a majority of the outstanding shares of Nexland common stock, the merger is
expected to be completed promptly following the special meeting. However, we
cannot assure you that all conditions to the merger will be satisfied or, if
satisfied, the date by which they will be satisfied.
When will I receive the cash consideration for my shares of Nexland common
stock?
After the merger is completed, you will receive written instructions,
including a letter of transmittal, that explain how to exchange your shares for
the cash consideration paid in the merger. When you properly return and complete
the required documentation with your shares, you will promptly receive from the
paying agent a payment of the cash consideration for your shares.
WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
We expect the merger to be treated as a taxable transaction to you for
United States federal income tax purposes. A brief summary of the United States
federal income tax consequences of the merger appears beginning on page 22 of
this proxy statement. You are urged to consult your tax advisor as to the tax
consequences to you of the merger in your particular circumstances.
WHAT RIGHTS DO I HAVE TO DISSENT FROM THE MERGER?
If you wish, you may dissent from the merger and seek an appraisal of
the fair value of your shares, but only if you comply with all requirements of
Delaware law which are summarized beginning on page 24 of this proxy statement.
The appraised fair value of your shares will be determined exclusive of any
value arising from the accomplishment or expectation of the merger and may be
more or less than the merger consideration.
Do members of Nexland's management team have different interests in the merger?
Yes. One member of management will receive severance benefits under an
existing employment agreement as a result of the merger and two members of
management will be employed by Symantec after the merger. Officers and directors
of Nexland have also been provided with liability insurance for acts and
omissions occurring prior to the completion of the merger. In addition, options
to purchase shares of Nexland common stock granted to our employees, including
officers and directors, will be cancelled and will be automatically exchanged
for the right to receive a cash payment equal to an aggregate of $1,746,197.57,
subject to adjustment. Of that total, officers and directors will receive
$931,884.95 in exchange for options they hold. As a condition of Symantec
entering into the merger agreement, certain members of our management have
entered into indemnification agreements pursuant to which they will indemnify
Symantec for a portion of the amount by which Nexland's total liabilities exceed
$4,700,000 as of the closing of the merger. See "The Merger - Interests of
Certain Persons in the Merger."
2
WHAT HAPPENS TO OPTIONS TO PURCHASE NEXLAND COMMON STOCK IN THE MERGER?
Under the merger agreement, all outstanding and vested in-the-money
options will be canceled and extinguished and will be automatically exchanged
for the right to receive a cash payment equal to an aggregate of $1,746,197.57,
subject to adjustment, of which officers and directors will receive $931,884.95
in exchange for options they hold. An in-the-money option is any option that has
an exercise price per share that is less than $0.5118 per share, the amount of
the cash consideration per share to be paid in the merger. All other options
will be canceled and extinguished upon completion of the merger without
consideration. No options will be assumed by Symantec as a result of the merger.
WHAT HAPPENS TO WARRANTS TO PURCHASE NEXLAND COMMON STOCK IN THE MERGER?
Outstanding warrants to purchase shares of Nexland common stock will
not be assumed by Symantec as a result of the merger. Holders of warrants will
be given an opportunity to exercise the warrants prior to the completion of the
merger, in which case such holders will receive a cash payment equal to the
difference between approximately $0.5118 and the per share exercise price for
such warrant. Any warrants not exercised prior to the completion of the merger
will be automatically canceled without consideration.
WHO IS ENTITLED TO VOTE?
Only stockholders of record on the close of business on the record
date, June 13, 2003, are entitled to receive notice of the special meeting and
to vote the shares of Nexland common stock that they held on that date at the
meeting, or any postponements or adjournments of the meeting. Each outstanding
share of Nexland common stock will be entitled to one vote on each matter to be
voted upon at the meeting. The holders of common stock vote together as a single
class.
WHO CAN ATTEND THE SPECIAL MEETING?
All Nexland stockholders as of the record date, or their duly appointed
proxies, may attend the special meeting, and each may be accompanied by one
guest. Seating, however, is limited. Admission to the meeting will be on a
first-come, first-serve basis. Registration will begin at 9:30 a.m., and seating
will begin at 9:45 a.m. Each stockholder may be asked to present valid picture
identification, such as a driver's license or passport. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
No. If you hold your shares in "street name" (that is, through a broker
or other nominee), your broker will not be able to vote your shares without
instructions from you. You should follow the directions provided by your broker
to vote your shares. If you plan to attend the special meeting, please note that
you will need to bring a copy of a brokerage statement reflecting your stock
ownership as of the record date and check in at the registration desk at the
meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Nexland common stock outstanding on the record date
will constitute a quorum, permitting the conduct of business at the meeting. As
of the record date, Nexland stockholders held a total of 34,824,172 votes. As
such, holders of at least 17,412,087 shares must be present at the meeting, in
person or by proxy, to obtain a quorum. Proxies received but marked as
abstentions and broker non-votes will be included in the calculation of the
number of shares considered to be present at the meeting.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and
return it to us, then it will be voted as you direct. If you intend to vote to
approve the merger agreement, you should mark the box on the proxy card to
3
indicate you vote "FOR" the merger agreement. If you are a registered
stockholder and attend the meeting, then you may deliver your completed proxy
card in person or vote by ballot at the meeting. "Street name" stockholders who
wish to vote at the meeting will need to obtain a proxy form from the
institution that holds their shares.
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?
If you submit a proxy but do not indicate any voting instructions, then
your shares of Nexland common stock will be voted in accordance with the Board
of Directors' recommendations.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with our Secretary
either a notice of revocation or a duly executed proxy bearing a later date. The
powers of the proxy holders will be suspended if you attend the meeting in
person and so request, although attendance at the meeting will not by itself
revoke a previously granted proxy.
WHAT IS THE BOARD OF DIRECTORS' RECOMMENDATION?
In summary, the Board of Directors recommends a vote "FOR."
Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote for the approval and adoption
of the merger agreement in accordance with the recommendation of the Board of
Directors. With respect to any other matter that properly comes before the
meeting, the proxy holders will vote as recommended by the Board of Directors
or, if no recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE THE MERGER AGREEMENT?
The affirmative vote of the holders of a majority of the outstanding
shares of Nexland common stock will be required for approval of the merger
agreement. A properly executed proxy marked "Abstain" with respect to such
matter will not be voted, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, an abstention will have the
effect of a negative vote.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to the matter to be acted upon. Thus, if you do not give
your broker or nominee specific instructions, your shares may not be voted and
will not be counted in determining the number of shares necessary for approval.
Shares represented by such "broker non-votes," however, will be counted in
determining whether there is a quorum. Accordingly, a broker non-vote will have
the same effect as a vote against the approval and adoption of the merger
agreement.
WHO SHOULD I CONTACT IF I HAVE MORE QUESTIONS ABOUT THE MERGER?
If you have questions about the merger or would like additional copies
of this proxy statement, you should contact Martin E. Dell'Oca, Chief Financial
Officer of Nexland, at (305) 358-7771.
4
SUMMARY
This summary, together with the Questions and Answers section,
highlights selected information discussed in greater detail elsewhere in this
proxy statement and may not contain all of the information that is important to
you. We urge you to read carefully this entire proxy statement and the other
documents to which this proxy statement refers, including the merger agreement,
which is attached to this proxy statement as Appendix A and the information
regarding appraisal rights, which is attached to this proxy statement as
Appendix D, to understand fully the merger. See the section titled "Where You
Can Find More Information" on page 40 for details of how you can obtain
additional information about Nexland and the merger. This summary is qualified
in its entirety by reference to the more detailed information appearing
elsewhere in this proxy statement.
THE PARTIES
NEXLAND, INC. Nexland is in the business of designing and selling the
Internet Sharing Box product line. These products consist of hardware routers
that allow users, connected to the Internet, to share Internet access at the
same time using only one modem, one telephone line or cable connection, and one
Internet access account. In addition, these products include a "firewall,"
providing network security. The products are compatible with personal computers.
All products allow simultaneous and independent Internet access for up to 253
users on a network, as well as firewall security protection to prevent unwanted
access to the local network. Nexland's common stock is quoted on the
Over-the-Counter Bulletin Board maintained by the National Association of
Securities Dealers, Inc. under the symbol "XLND."
Nexland is incorporated under the laws of the State of Delaware.
Nexland's executive offices are located at 1101 Brickell Avenue, Suite 200,
North Tower, Miami, Florida 33131. Nexland's telephone number is (305) 358-7771.
SYMANTEC CORPORATION. Symantec, a world leader in Internet security
technology, provides a broad range of content and network security software and
appliance solutions to enterprises, individuals and service providers. Symantec
is a leading provider of client, gateway and server security solutions for virus
protection, firewall and virtual private network, vulnerability management,
intrusion detection, Internet content and e-mail filtering, remote management
technologies and security services to enterprises and service providers around
the world. Founded in 1982, Symantec has offices in 38 countries worldwide.
Symantec's common stock is quoted on the Nasdaq National Market under the symbol
"SYMC."
Symantec is Nexland's largest customer, having accounted for
approximately 61% and 29% of our sales for the years ended December 31, 2002 and
2001, respectively.
Symantec is incorporated under the laws of the State of Delaware.
Symantec's executive offices are located at 20330 Stevens Creek Boulevard,
Cupertino, California 95014. Symantec's telephone number is (408) 253-9600.
NEBRASKA ACQUISITION SUB, INC. Symantec formed Nebraska Acquisition Sub
as a Delaware corporation for the sole purpose of entering into the merger
agreement. Nebraska Acquisition Sub is a wholly owned subsidiary of Symantec and
has not engaged in any business activity other than in connection with the
merger and the related transactions.
Nebraska Acquisition Sub's executive offices are located at 20330
Stevens Creek Boulevard, Cupertino, California 95014. Its telephone number is
(408) 253-9600.
THE SPECIAL MEETING
The special meeting will be held at 10 a.m., Eastern time, on July 14,
2003 at J.W. Marriott Hotel, 1109 Brickell Avenue, 5th Floor, Miami, Florida
33131. At the special meeting, you will be asked to consider and vote upon a
5
proposal to approve and adopt the merger agreement, a copy of which is attached
as Appendix A to this proxy statement, pursuant to which Nebraska Acquisition
Sub will be merged with and into us and we will become a wholly owned subsidiary
of Symantec. For a more complete description of the special meeting, please
refer to the section titled "Information Concerning the Special Meeting" on page
13 of this proxy statement.
VOTE REQUIRED
In order for the merger to be completed, the merger agreement must be
approved and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of our common stock. Holders of approximately 80.2% of our
common stock have expressed their intention to vote in favor of the merger
agreement and have signed voting agreements and executed irrevocable proxies
obligating them to vote their shares in favor of the merger. A copy of the form
of voting agreement is attached as Appendix B to this proxy statement.
RECORD DATE FOR VOTING
The close of business on June 13, 2003 is the record date for
determining holders of shares of our common stock entitled to vote at the
special meeting. Each share of common stock will be entitled to one vote. On the
record date, there were 34,824,172 shares of common stock entitled to vote at
the special meeting.
THE MERGER
For a more complete description of the merger, please refer to the
section titled "The Merger" beginning on page 15 of this proxy statement. A copy
of the merger agreement governing the merger is attached as Appendix A to this
proxy statement. You are encouraged to read the merger agreement in its entirety
because it is the legal document that governs the merger.
STRUCTURE OF THE MERGER. The merger transaction will be effected by the
merger of Nebraska Acquisition Sub with and into Nexland, resulting in Nexland
becoming a wholly owned subsidiary of Symantec.
WHAT YOU WILL RECEIVE IN THE MERGER. Pursuant to the merger agreement
and upon completion of the merger, each outstanding share of Nexland common
stock will be canceled and automatically converted into the right to receive an
amount of cash equal to the dollar amount equal to the fraction, the numerator
of which is $19,600,000 minus the amount of consideration paid to the holders of
outstanding and vested in-the-money options and validly exercised warrants, and
the denominator of which is the total number of shares of Nexland common stock
outstanding immediately prior to the completion of the merger. Assuming that no
options or warrants are exercised or canceled prior to the completion of the
merger and based on 34,824,172 shares of common stock outstanding as of May 13,
2003, each outstanding share of Nexland common stock will be converted into the
right to receive a cash amount of $0.5118 upon completion of the merger.
PURPOSE OF THE MERGER. The principal purpose of the merger is to bring
value to our stockholders by selling Nexland's business for cash. For a more
complete description of the purpose of the merger, please refer to the section
titled "The Merger - Purpose of the Merger; Certain Effects of the Merger" on
page 16 of this proxy statement.
DELISTING OF NEXLAND COMMON STOCK. Upon completion of the merger,
Nexland's common stock will be delisted from the Over-the-Counter Bulletin Board
and will no longer be publicly traded. For a more complete description of the
delisting of Nexland common stock, please refer to the section titled "The
Merger - Purpose of the Merger; Certain Effects of the Merger" on page 16 of
this proxy statement.
RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board of Directors,
taking into account, among other things, the opinion of Kendrick Pierce
Securities, Inc., has unanimously determined that the merger agreement and the
merger are advisable and are fair to you and in your and our best interests and
unanimously recommends that you vote "FOR" the approval and adoption of the
merger agreement. For a more complete discussion of the recommendation of the
Board, see the section titled "The Merger - Recommendation of the Board of
Directors" on page 16 of this proxy statement.
6
OPINION OF KENDRICK PIERCE SECURITIES, INC. On May 8, 2003, Kendrick
Pierce Securities, Inc. delivered an oral opinion, subsequently confirmed in
writing on May 13, 2003, to the Board of Directors that, as of that date and on
the basis of and subject to the matters reviewed with the Board, the aggregate
consideration to be received by the stockholders in the merger, was fair from a
financial point of view to Nexland's stockholders. We have attached a copy of
the opinion as Appendix C to this proxy statement. The opinion of Kendrick
Pierce is addressed to the Board, does not address any other aspect of the
merger, and does not constitute a recommendation as to how you should vote at
the special meeting. For a more complete description of the opinion of Kendrick
Pierce, please refer to the section titled "The Merger - Opinion of Kendrick
Pierce Securities, Inc." beginning on page 22 of this proxy statement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER. In considering the
recommendation of the Board of Directors with respect to the merger,
stockholders should be aware that the executive officers and directors of
Nexland have interests in the merger that may be different from, or in addition
to, the interests of Nexland stockholders generally. For example, several
officers of Nexland are expected to be employed by Symantec following the
merger, and one executive officer will receive severance compensation upon
completion of the merger pursuant to an existing employment agreement. All the
holders of outstanding and vested in-the-money options to purchase shares of
Nexland common stock, including officers and directors of Nexland, will receive
a cash payment equal to the difference between $0.5118 and the per share
exercise price for their option in connection with the merger. In addition, the
executive officers and directors of Nexland will be indemnified by Nexland, and
Nexland will cause directors and officers insurance to be provided on their
behalf. As a condition to Symantec entering into the merger agreement, certain
officers of Nexland have each entered into an indemnification agreement pursuant
to which he will indemnify Symantec for a portion of the amount that Nexland's
total liabilities exceed $4,700,000 as of the closing of the merger. The Board
of Directors was aware of these interests and considered them, among other
matters, in making its recommendation to approve and adopt the merger agreement
and the merger. For a more complete description of the interests of certain
persons in the merger, please refer to the section titled "The Merger-Interests
of Certain Persons in the Merger" beginning on page 22 of this proxy statement.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER. We
are not aware of any material governmental or regulatory approval required for
completion of the merger other than compliance with Delaware law.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The receipt of
cash for shares pursuant to the merger is a taxable event to our stockholders.
In general, a stockholder who receives cash in exchange for shares should
recognize gain or loss for United States federal income tax purposes equal to
the difference, if any, between the cash and the stockholder's adjusted tax
basis in the shares exchanged for cash pursuant to the merger. If the shares
exchanged constitute capital assets in the hands of the stockholder, such gain
or loss would be capital gain or loss. In general, capital gains recognized by
an individual are subject to preferential United States federal income tax rates
if the shares were held for more than one year, and if held for one year or less
at the time of the merger, they are subject to a tax at ordinary income tax
rates. Capital loss deductions are subject to limits. You are urged to consult
your tax advisor as to the consequences of the merger in your particular
circumstances immediately following the merger. For a more complete description
of United States federal income tax consequences of the merger, please refer to
the section titled "The Merger-Material United States Federal Tax Consequences"
beginning on page 22 of this proxy statement.
CONDITIONS TO THE MERGER. Each party's obligation to complete the
merger is subject to a number of conditions, including the approval and adoption
of the merger agreement by our stockholders and the absence of any prohibition
against the completion of the merger by any applicable law or regulation,
judgment, order or decree. The obligations of Symantec and Nebraska Acquisition
Sub are not subject to a financing condition.
Our obligation to complete the merger is subject to additional
conditions, any of which may be waived by us, including, generally, the accuracy
of the representations and warranties of Symantec and the performance in all
material respects of Symantec's obligations under the merger agreement.
The obligations of Symantec to complete the merger are subject to
additional conditions, any of which may be waived by Symantec, including, among
others:
7
o The accuracy of our representations and warranties;
o The performance in all material respects of our obligations under
the merger agreement;
o Gregory S. Levine, I. Daniel Sultan and David Lonardo being employed
by Symantec on substantially the same terms and with substantially
the same responsibilities and having entered into terms of
employment satisfactory to Symantec;
o The assignment to Nexland by Nexland, S.A. of certain trademarks to
"Nexland," "Internet Sharing Box," "Etherland," and "Plug N' Net";
o The amendment of the irrevocable option agreement terminating the
limited license granted to Nexland, S.A., granting Nexland, S.A. a
limited license to sell Nexland's products which Nexland, S.A. holds
in inventory in Europe and Africa for a period of 180 days and
granting Nexland, S.A. the limited right to use certain trademarks
in Europe and Africa for a period of 180 days;
o The delivery by Gregory S. Levine, I. Daniel Sultan and Martin E.
Dell'Oca to Symantec of an indemnification agreement; and
o The holders of 5% or less of our outstanding shares of common stock
having demanded and perfected appraisal rights at the effective time
of the merger.
The assignment to Nexland by Nexland S.A. of certain trademarks, the
amendment of the irrevocable option agreement and the delivery of
indemnification agreements has already been completed. For a more complete
description of the conditions to the merger, please refer to the section titled
"The Merger Agreement - Conditions to the Merger" beginning on page 31 of this
proxy statement.
TERMINATION OF THE MERGER AGREEMENT. The merger agreement may be
terminated, whether before or after receiving stockholder approval, without
completing the merger, under certain circumstances, including the following:
o By the mutual written consent of the parties;
o By us or Symantec:
o if the merger is not completed by August 31, 2003, or such other
date as we and Symantec may agree upon;
o if there is any law that makes completion of the transactions
contemplated by the merger agreement illegal or if there is an
order, decree, ruling or injunction having the effect of
permanently restraining, enjoining or otherwise prohibiting the
merger; or
o if our stockholders do not approve and adopt the merger agreement
at the special meeting or any adjournment or postponement
thereof.
o By Symantec:
o if Nexland fails to comply in any material respect with any of
the covenants or agreements contained in the merger agreement to
be complied with or performed by Nexland, or if there exists a
breach or breaches of any representation or warranty of Nexland
contained in the merger agreement;
8
o if our Board of Directors fails to recommend the adoption of the
merger agreement to our stockholders, or withdraws, amends or
modifies in a manner adverse to Symantec its recommendation to
the stockholders of Nexland for adoption of the merger agreement;
o if a tender offer for any of the outstanding shares of capital
stock of Nexland is commenced prior to the special meeting and
within the time required by Rule 14e-2(a) under the Securities
Exchange Act of 1934, and the Board of Directors fails to
recommend against acceptance of such tender offer, or takes no
position with respect to such tender offer, or states its
inability to take a position with respect to such tender offer;
o if Nexland or our Board of Directors takes any position with
respect to any acquisition proposal (other than the merger
agreement) other than a recommendation to reject such acquisition
proposal; or
o if our Board of Directors resolves to accept, accepts or
recommends to the stockholders of Nexland a superior proposal.
o By Nexland:
o if Symantec or Nebraska Acquisition Sub fails to comply in any
material respect with any of its covenants or agreements
contained in the merger agreement, or if there exists any breach
or breaches of any representation or warranty of Symantec or
Nebraska Acquisition Sub contained in the merger agreement; and
o if prior to the closing of merger, our Board of Directors
determines in good faith, after consultation with its financial
and legal advisors, that another acquisition proposal constitutes
a superior proposal and the Board of Directors believes in its
good faith judgment, after receiving advice of its outside legal
counsel, that its failure to terminate the merger agreement and
enter into the superior proposal would constitute a breach of its
fiduciary duties, provided that we:
o provide proper notice to Symantec of our intention;
o afford Symantec an opportunity to match the terms of the
superior proposal and to negotiate with us to make other
adjustments in the terms and conditions of the merger
agreement that would permit the Board of Directors to
recommend the merger agreement as revised;
o have not received from Symantec within three business days of
Symantec's receipt of proper notice an offer that our Board of
Directors determines in good faith matches or exceeds such
superior proposal or is otherwise sufficient to permit the
Board of Directors to continue to recommend the merger
agreement as amended by such offer from Symantec in lieu of
the superior proposal; or
o within three business days of Symantec's receipt of proper
notice, Nexland pays to Symantec the applicable termination
fee and expense reimbursement described below.
In the event of termination of the merger agreement by either party,
the merger agreement will become void and have no effect, provided that any
termination of the merger agreement will not relieve a breaching party from
liability for a breach of the merger agreement or for the payment of the
termination fee and expenses reimbursement described below. For a more complete
description of the termination provisions, please refer to the section titled
"The Merger Agreement - Termination of the Merger Agreement" beginning on page
32 of this proxy statement.
9
TERMINATION FEE.
o Nexland has agreed to pay Symantec a termination fee of $800,000,
plus all of the expenses incurred by Symantec in connection with the
merger agreement, if the merger agreement is terminated by Symantec
as a result of:
o our Board failing to recommend the adoption of the merger
agreement to the Nexland stockholders, or withdrawing, amending
or modifying in a manner adverse to Symantec its recommendation
to Nexland stockholders for adoption of the merger agreement;
o the commencement of a tender offer for any of the outstanding
shares of capital stock of Nexland prior to the special meeting
and within the time required by Rule 14e-2(a) under the
Securities Exchange Act of 1934, and our Board of Directors fails
to recommend against acceptance of such tender offer, takes no
position with respect to such tender offer or states its
inability to take a position with respect to such tender offer;
o our Board taking any position with respect to any acquisition
proposal (other than the merger agreement) other than a
recommendation to reject such acquisition proposal;
o our Board resolving to accept, accepting or recommending to
Nexland stockholders a superior proposal;
o Nexland failing to comply in any material respect with any of the
covenants or agreements contained in the merger agreement to be
complied with or performed by Nexland; or
o our Board determining in good faith, after consultation with its
financial and legal advisors, that another acquisition proposal
constitutes a superior proposal and our Board believes in its
good faith judgment, after receiving advice of its outside legal
counsel, that its failure to terminate the merger agreement and
enter into the superior proposal would constitute a breach of its
fiduciary duties.
o Nexland has agreed to reimburse Symantec up to $300,000 of the
expenses incurred by Symantec in connection with the merger
agreement, if the merger agreement is terminated by Nexland or
Symantec because of Nexland's failure to obtain stockholder approval
at the special meeting or any adjournment or postponement thereof,
provided that if Nexland is acquired within the 12 months following
the termination of the merger agreement for failure to obtain the
required stockholder vote, then Nexland will pay Symantec a
termination fee equal to $800,000 less any termination fee
previously paid.
For a more complete description of the termination provisions, please
refer to the section titled "The Merger Agreement - Termination of the Merger
Agreement" beginning on page 32 of this proxy statement.
APPRAISAL RIGHTS. You are entitled to exercise appraisal rights in
connection with the merger. If you elect to exercise appraisal rights, you must
comply with Section 262 of the Delaware General Corporation Law, which requires
you to deliver to us, before the stockholder vote to approve and adopt the
merger agreement is taken, written notice of your intent to demand appraisal of
your shares if the merger is completed, and requires you not to vote to adopt
the merger agreement. We have attached a copy of Section 262 as Appendix D to
this proxy statement. If you exercise appraisal rights, you will not receive the
cash consideration pursuant to the merger agreement. Instead, you will receive
the appraisal value of your shares which will be determined by a court exclusive
of any value arising from the accomplishment or the expectation of the merger
and may be more or less than the consideration provided in the merger agreement.
In addition, in the absence of an equitable exception, a stockholder in an
appraisal proceeding will bear its own expenses, including expert witness and
attorneys' fees. For a more complete description of the termination provisions,
please refer to the section titled "The Merger Agreement - Termination of the
Merger Agreement" beginning on page 32 of this proxy statement.
10
VOTING AGREEMENTS. As a condition to Symantec entering into the merger
agreement, Gregory S. Levine, Martin E. Dell'Oca, I. Daniel Sultan, Andre
Chouraqui, Laurent Solomon and Yves Many have entered into voting agreements
with Symantec, providing that they will vote all shares of Nexland's common
stock owned by them on, or acquired by them prior to, the record date for the
approval of the merger agreement and the merger, against any action or agreement
that would result in a breach in any material respect of Nexland and Symantec
under the merger agreement, and, except as otherwise agreed to in writing in
advance by Nexland, against any other acquisition proposal, any change in the
Board of Directors of Nexland other than in connection with the merger, any
amendment of Nexland's certificate of incorporation other than in connection
with the merger or any other action which is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, discourage or materially
and adversely affect the contemplated benefits to Nexland of the merger and the
other transactions contemplated by the merger agreement. In addition, the
parties to the voting agreements have agreed not to solicit, initiate or
encourage inquiries or proposals concerning any acquisition proposal or have
discussions or negotiations with any third party regarding any acquisition
proposal or induce or encourage any other stockholder to vote against, or fail
to vote in favor of, the merger agreement and the merger. The parties to the
voting agreements agreed not to transfer or dispose of their shares unless such
transferee agrees to be bound by the voting agreement. The parties to the voting
agreements delivered irrevocable proxies to Symantec pursuant to which Symantec
will vote for the merger and vote against any other acquisition proposal. The
stockholders who entered into the voting agreement beneficially owned an
aggregate of 28,221,338 outstanding shares of Nexland's common stock,
representing approximately 81.0% of the combined voting power of Nexland's
common stock outstanding as of May 13, 2003. Such vote is sufficient without any
other votes in favor to approve the merger agreement. A copy of the form of
voting agreement is attached as Appendix B to this proxy statement. For a more
complete description of the termination provisions, please refer to the section
titled "The Merger Agreement - Voting Agreements" beginning on page 35 of this
proxy statement.
INDEMNIFICATION AGREEMENTS. As a condition to Symantec entering into
the merger agreement, Gregory S. Levine, Martin E. Dell'Oca and I. Daniel Sultan
have each entered into an indemnification agreement with Symantec, providing
that he will indemnify Symantec for a portion of the amount by which total
liabilities of Nexland exceed $4,700,000 as of the closing of the merger. Under
the indemnification agreements, the amounts for which each of Gregory S. Levine,
Martin E. Dell'Oca and I. Daniel Sultan may be liable will not exceed $374,400,
$85,600 or $1,540,000, respectively. If the parties to the indemnification
agreements are not able to agree on the amount of liabilities of Nexland and the
amounts, if any, payable to Symantec, the indemnification agreements provide
that an independent certified public accountant will be appointed to resolve the
dispute.
11
SUMMARY FINANCIAL DATA
The following table sets forth a summary of statement of operations
data of Nexland, Inc. for the periods presented.
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 2003 DECEMBER 31, 2002
(UNAUDITED) (AUDITED)
------------------ ------------------
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales $ 751,742 $7,743,630
Cost of sales 316,037 4,038,944
---------- ----------
Gross profit 435,705 3,704,686
Operating expenses 843,001 3,004,931
Interest expense 15,670 282,699
Extraordinary loss -- 78,378
---------- ----------
Net income (loss) $ (422,966) $ 338,678
========== ==========
Net income (loss) per share $ (0.01) $ 0.01
========== ==========
The following table sets forth a summary of the balance sheet of
Nexland, Inc. for the periods presented.
AS OF MARCH 31, 2003 AS OF DECEMBER 31, 2002
(UNAUDITED) (AUDITED)
-------------------- -----------------------
CONDENSED CONSOLIDATED BALANCE SHEET DATA:
Cash $ 93,468 $ 222,095
Working capital (1,040,497) (503,032)
Total assets $ 1,414,405 $ 1,554,205
Total current liabilities 1,968,368 1,524,107
Total liabilities 2,438,368 2,155,202
Total capital deficit (1,023,963) (600,997)
----------- -----------
Total liabilities and capital deficit $ 1,414,405 $ 1,554,205
=========== ===========
Book value per share $ (0.029) $ (0.017)
12
INFORMATION CONCERNING THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING. This proxy statement is
furnished to you in connection with the solicitation of proxies by our Board of
Directors for the special meeting of stockholders to be held at 10 a.m., Eastern
time, on July 14, 2003, at J.W. Marriott Hotel, 1109 Brickell Avenue, 5th Floor,
Miami, Florida 33131, or any postponement or adjournment of the meeting. This
proxy statement, the notice of special meeting and the accompanying proxy card
are first being mailed to stockholders on or about June 16, 2003.
PURPOSE OF THE SPECIAL MEETING. At the special meeting, you will be
asked to consider and vote upon a proposal to approve and adopt the merger
agreement pursuant to which Nexland will become a wholly owned subsidiary of
Symantec. The merger agreement is attached as Appendix A to this proxy
statement. In the merger, each Nexland stockholder will receive approximately
$0.5118 per share based on 34,824,172 shares of Nexland common stock outstanding
as of May 13, 2003.
RECORD DATE; QUORUM; OUTSTANDING COMMON STOCK ENTITLED TO VOTE. All
stockholders of record at the close of business on June 13, 2003 are entitled to
notice of, and to vote at, the special meeting. The presence, in person or by
proxy, of holders of a majority of the outstanding shares of Nexland common
stock is required to constitute a quorum for the transaction of business. The
outstanding voting stock of Nexland as of June 13, 2003, consisted of 34,824,172
shares of common stock.
VOTING RIGHTS; VOTE REQUIRED. You are entitled to one vote for each
share of common stock that you held as of the close of business on the record
date. The affirmative vote of the holders of a majority of the outstanding
shares of our common stock is required to approve and adopt the merger
agreement. In determining whether the approval and adoption of the merger
agreement has received the requisite number of affirmative votes, abstentions
and broker non-votes will have the same effect as a vote against adoption of the
merger agreement. Holders of approximately 80.2% of our common stock, as of the
record date, have agreed to vote in favor of the merger and the merger
agreement.
VOTING AND REVOCATION OF PROXIES. You may vote in person at the special
meeting or by proxy. Nexland recommends that you vote by proxy even if you plan
to attend the special meeting. A form of proxy card for your use at the special
meeting accompanies this proxy statement. If a stockholder's shares are held of
record in "street name" by a broker, bank or other nominee and the stockholder
intends to vote the shares in person at the special meeting, the stockholder
must bring to the meeting a letter from the broker, bank or other nominee
confirming the stockholder's beneficial ownership of the shares to be voted.
Subject to the following sentence, all properly executed proxies that are
received prior to or at the special meeting and not revoked will be voted at the
special meeting in the manner specified. If you execute and return a proxy and
do not specify otherwise, the shares represented by your proxy will be voted
"for" the approval and adoption of the merger agreement in accordance with the
recommendation of the Board of Directors.
If you have given a proxy pursuant to this solicitation, you may
nonetheless revoke it by attending the special meeting and voting in person. In
addition, you may revoke any proxy you give at any time before the special
meeting by delivering to our Secretary at our executive offices at 1101 Brickell
Avenue, North Tower, 2nd Floor, Miami, Florida 33131, on or before the business
day prior to the special meeting, or at the special meeting itself, a written
statement revoking it or a duly executed proxy bearing a later date. If you have
executed and delivered a proxy to us, your attendance at the special meeting
will not in and of itself constitute a revocation of your proxy. If you have
instructed a broker to vote your shares, you must follow the directions provided
by your broker to change those instructions. If you do not send in your proxy or
do not instruct your broker to vote your shares or if you abstain from voting,
it will have the same effect as a vote against the approval and adoption of the
merger agreement.
Your vote is important. Please return your marked proxy card promptly
so your shares can be represented at the meeting, even if you plan to attend the
meeting in person. You should not send any share certificates with your proxy
card. If we complete the merger, you will be sent further information regarding
the procedure for the exchange of certificates representing your common stock.
13
SOLICITATION OF PROXIES. This solicitation of proxies is being made on
behalf of our Board of Directors. We will bear the cost of the solicitation of
proxies. We will solicit proxies initially by mail. Further solicitation may be
made by our directors, officers and employees personally, by telephone or
otherwise, but they will not be specifically compensated for these services.
Upon request, we will reimburse brokers, dealers, banks or similar entities
acting as nominees for their reasonable expenses incurred in forwarding copies
of the proxy materials to the beneficial owners of the shares of common stock
they hold of record.
OTHER MATTERS. Except for the vote on the merger agreement, no other
matter is expected to come before the special meeting.
14
THE MERGER
This section describes the proposed merger and the merger agreement.
While Nexland believes that the description covers the material terms of the
proposed merger, this summary may not contain all of the information that is
important to you. Stockholders should carefully read this entire document and
the other documents referred to in this proxy statement, such as the merger
agreement, for a more complete understanding of the merger.
BACKGROUND OF THE MERGER
Nexland's management and Board of Directors has believed for some time
that the value of Nexland's business was not, and would not be, adequately
reflected in the market price of our shares because of our lack of resources to
fund our business operations and the lack of liquidity in our common stock.
In order to explore opportunities that might provide value for Nexland
stockholders, our management engaged from time to time in the ordinary course of
business in discussions with representatives of other companies regarding
possible financing transactions, business partnerships, strategic relationships
and other transactions. However, none of these discussions resulted in any
attractive proposals for a business combination transaction of this nature. In
April 2002, Nexland engaged a financial advisor to advise and assist Nexland in
matters related to corporate reorganization and capitalization, intercompany and
affiliate agreements, and other corporate finance-related advisory services that
were believed to be necessary or desirable to enhance Nexland's stock price and
marketability. The financial advisor recommended that Nexland take certain
actions, including resolving outstanding issues with its foreign affiliates by
acquiring one affiliate and acquiring an option to acquire the other affiliate,
repurchasing outstanding convertible debentures and exploring the prospects for
a going private transaction.
In the third quarter of 2002, representatives of Symantec contacted
Nexland about the possibility of acquiring Nexland.
Nexland and Symantec already had a business relationship. Since June
2000, Nexland has been the original equipment manufacturer, or OEM, for
Symantec's Client VPN product. The Client VPN product was originally developed
by AXENT Technologies, Inc., a company acquired by Symantec in December 2000.
During 2001, Nexland and Symantec broadened their relationship and jointly
developed the Symantec Firewall/VPN Appliance, which was introduced in October
2001 and incorporates Nexland's entry-level appliance technology.
After significant merger discussions between Nexland and Symantec,
Symantec suggested that its best offer would be in the "mid-teens," which
Nexland interpreted to mean a price in the range of between $14 million and $16
million. Acting on the advice of our financial advisors, Nexland rejected the
proposal and Symantec withdrew its offer.
In November 2002, Nexland completed the transactions with its foreign
affiliates, consisting of the purchase of the assets of one affiliate and
acquiring an option to purchase the assets of another. In December 2002, Nexland
engaged a new financial advisor, Skyway Advisors, to explore strategic
alternatives relating to a merger or sale. While Nexland was preparing offering
materials, Symantec again indicated its interest in acquiring Nexland. In
January 2003, Nexland agreed to enter into exclusive negotiations with Symantec,
which resulted in Nexland signing a non-binding letter of intent in January 2003
pursuant to which Symantec would acquire Nexland for a purchase price of $21.7
million.
On February 28, 2003 counsel for Symantec delivered a draft merger
agreement to counsel for Nexland. Between February and May 2003, Nexland and
Symantec negotiated the terms of the merger agreement and reviewed alternative
structures for the possible sale of Nexland to Symantec. These structures
included a possible sale of the assets of the business and included the
structure of the proposed transaction. In each case, Nexland believed there
15
would be significant transaction costs, including taxes payable upon the sale.
We determined that, assuming we were to proceed with any sale of our business,
the ultimate structure of the proposed transaction would have to minimize those
costs.
Between February and May 2003, Nexland held a number of meetings and
conference calls with Symantec, our financial advisors, our counsel and
Symantec's counsel to discuss the terms of the proposed transaction and
exchanged various drafts and redrafts of the proposed merger agreement and
ancillary agreements. In addition, between February and May 2003, counsel to
Symantec conducted due diligence of Nexland. In May 2003, Nexland engaged
Kendrick Pierce Securities, Inc. as Nexland's financial advisors to render an
opinion as to whether the consideration to be received by the stockholders of
Nexland in connection with the merger is fair to such holders from a financial
point of view. At that time a team from Kendrick Pierce briefed senior
management on the valuation of Nexland, the competitive landscape and the
potential interest of other bidders. The negotiations during this period
highlighted significant issues for both parties. In particular, the following
issues were among those discussed and, in some cases, were unresolved until the
merger was signed:
o The structure of the transaction;
o The base aggregate consideration to be paid by Symantec;
o Restrictions on our ability to solicit or entertain competing
proposals and the fiduciary exceptions applicable to such
restrictions;
o The amount of the termination fee to be paid to Symantec in the
event the transaction is not consummated under specified
circumstances, and the circumstances in which the fee would be
payable;
o The date after which either party may terminate the merger agreement
if the merger is not completed;
o Provisions relating to the treatment of our employees during the
period prior to, and following, the merger; and
o The terms of the voting agreements.
These discussions culminated in the terms contained in the merger
agreement attached as Appendix A to this proxy statement. On May 13, 2003, a
meeting of our Board of Directors was held at our executive offices to review
the final terms of the proposed transaction. The Board received the oral
opinion, subsequently confirmed in writing, of Kendrick Pierce Securities, Inc.
that, as of that date and on the basis of and subject to the matters reviewed
with the Board, the aggregate consideration was fair from a financial point of
view to our stockholders. The Board, with the benefit of the presentation and
advice, having deliberated regarding the terms of the proposed transaction,
unanimously determined that the merger agreement and the merger are advisable
and are fair to and in the best interest of us and our stockholders and
unanimously approved the merger agreement and the merger.
The parties executed the merger agreement on May 13, 2003 after the
close of business. On May 14, 2003, Nexland issued a press release announcing
the signing of the merger agreement.
During the merger discussions, we also separately discussed the
production of new products for Symantec. These discussions extended to technical
matters, such as what new products can be produced and what their specifications
will be. Since we have executed a merger agreement with Symantec, these
discussions are now confined to technical matters. However, if the merger does
not proceed we may reopen discussions about the terms on which we can produce
new products for Symantec.
16
PURPOSE OF THE MERGER; CERTAIN EFFECTS OF THE MERGER
The principal purpose of the merger is to bring value to our
stockholders by selling Nexland for cash. The merger will be accomplished by a
merger of Nebraska Acquisition Sub, Inc., a corporation formed and wholly owned
by Symantec, into Nexland with Nexland as the surviving corporation and becoming
a subsidiary of Symantec. In the merger, all of the shares of Nexland common
stock held by our stockholders, other than dissenting stockholders who perfect
their appraisal rights, will be converted into the right to receive the cash
merger consideration. The cash merger consideration will be approximately
$0.5118 per share outstanding immediately prior to the completion of the merger
based on 34,824,172 shares of Nexland common stock outstanding as of May 13,
2003.
The merger will terminate all equity interests in Nexland held by
securityholders, and Symantec will be the sole beneficiary of any earnings and
growth of Nexland following the merger. Our common stock is currently registered
under the Securities Exchange Act of 1934 under the symbol "XLND." Upon the
completion of the merger, our common stock will be delisted from the
Over-the-Counter Bulletin Board and registration of our common stock under the
Exchange Act will be terminated.
RECOMMENDATION OF THE BOARD OF DIRECTORS
On May 13, 2003, our Board unanimously determined that the terms of the
merger agreement and the merger are advisable and are fair to and in the best
interests of us and our stockholders and unanimously approved the merger
agreement and the merger. Accordingly, our Board unanimously recommends that our
stockholders vote "for" the approval and adoption of the merger agreement.
REASONS FOR THE MERGER
In determining to approve and recommend the merger agreement and the
merger, and in reaching its determination that the merger agreement and the
merger are advisable and are fair to and in the best interests of us and our
stockholders, the Board consulted with our financial and legal advisors, and
considered, among other things, the following factors:
o Historical information concerning our business, our financial
performance and conditions, operations, technologies, management and
competitive positions;
o The fact that our auditors have noted in their audit opinions in
connection with our 2001 and 2002 financial statements that we are
dependent on outside financing and have had losses since inception
that raise substantial doubt about our ability to continue as a
going concern;
o The fact that we expect continued annual net losses for the
foreseeable future;
o The view of our Board that our financial performance is not expected
to improve significantly over the short term as an independent
entity;
o Current financial market conditions and historical market prices,
significant price volatility and limited trading volume with respect
to our common stock;
o The fact that access to further capital has been severely impacted
by continued market volatility;
o The financial condition, results of operations and prospects of our
business, before and after giving effect to the merger;
o The belief that the terms of the merger agreement, including the
parties' representations, warranties and covenants, the conditions
to their respective obligations, and the other terms described under
"The Merger Agreement" beginning on page 26, are reasonable;
17
o The fact that the merger agreement provides for a prompt cash
payment for all our shares thereby enabling our stockholders to
obtain the benefits of the merger at the earliest possible time;
o The terms of the voting agreements and of the merger agreement
relating to other potential bids, including the ability of Nexland
to terminate the merger agreement, which would have the effect of
terminating the voting agreements, and to pay a termination fee
believed to be reasonable under the circumstances, in order for us
to accept a superior proposal;
o The impact of the merger on our customers and employees;
o The support for the transactions expressed by our principal
stockholders, executive officers and directors as evidenced by the
voting agreements;
o The Kendrick Pierce Securities, Inc. opinion that the aggregate
consideration to be received by our stockholders in the merger is
fair from a financial point of view;
o The view of our Board that, based on the level of interest shown by
other potential acquirors, the merger agreement and the transactions
contemplated thereby, represent the most attractive alternative
available to maximize stockholder value; and
o The reasonable likelihood of the consummation of the transactions
contemplated by the merger agreement.
The above discussion concerning the information and factors considered
by our Board of Directors includes many of the factors considered by our Board
in making its determination. In view of the variety of factors considered in
connection with its evaluation of the merger agreement and the proposed merger,
our Board did not quantify or otherwise attempt to assign relative weights to
the specific factors it considered in reaching its determination. In addition,
individual members of our Board may have given different weight to different
factors. The interests of our directors and executive officers may be different
from, or in addition to, the interests of our stockholders generally as
described under "The Merger - Interests of Certain Persons in the Merger" on
page 21.
OPINION OF KENDRICK PIERCE SECURITIES, INC.
On May 8, 2003, Kendrick Pierce Securities, Inc. delivered its oral
opinion to the Nexland board of directors that, as of the date of such opinion,
and based upon the assumptions made, general procedures followed, matters
considered and limitations on the review undertaken, as set forth in such
opinion, the purchase price to be received by the holders of shares of common
stock was fair to such holders from a financial point of view. Kendrick Pierce
subsequently confirmed its earlier oral opinion by delivery of its written
opinion dated as of May 13, 2003.
Nexland's board of directors did not impose any limitations on Kendrick
Pierce with respect to the investigations made or procedures followed in
rendering its opinion. However, Kendrick Pierce was not instructed by Nexland to
solicit, nor did it solicit or assist Nexland in soliciting third parties that
might be interested in acquiring all or any part of Nexland.
THE FULL TEXT OF THE WRITTEN OPINION OF KENDRICK PIERCE, WHICH SETS
FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED
AS APPENDIX C TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE.
THE KENDRICK PIERCE OPINION IS ADDRESSED TO NEXLAND'S BOARD OF DIRECTORS AND IS
DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE
CONSIDERATION TO BE RECEIVED IN THE MERGER BY THE HOLDERS OF COMMON STOCK. THE
18
KENDRICK PIERCE OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY NEXLAND
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE. NEXLAND STOCKHOLDERS ARE
URGED TO READ THE OPINION IN ITS ENTIRETY. THE SUMMARY OF THE KENDRICK PIERCE
OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In connection with rendering the opinion described above and performing
its related financial analysis, Kendrick Pierce, among other things:
o reviewed Nexland's annual reports to shareholders on Form 10-K for
the fiscal years ended December 31, 1998 through 2002 and a draft
copy of the Form 10-Q prepared by Nexland for the period ended March
31, 2002, which Nexland's management represented as being the most
current financial statements available;
o reviewed the most recent (as of the date of the Kendrick Pierce
fairness opinion) draft of the Agreement and Plan of Merger between
Symantec Corporation, Nebraska Acquisition Sub, Inc., and Nexland;
o met with certain members of the senior management of Nexland to
discuss the operations, financial condition, future prospects, and
projected operations and performance of Nexland, and met with
representatives of Nexland's independent accounting firm and counsel
to discuss certain matters;
o visited the corporate offices of Nexland in Miami, Florida;
o reviewed forecasts and projections prepared by Nexland's management
with respect to Nexland for the years ended December 31, 2003
through 2007, which assume no sales of product to Symantec beyond
that which Symantec is contractually obligated to purchase under
contracts existing as of the date of Kendrick Pierce's fairness
opinion;
o reviewed the historical market prices and trading volume for
Nexland's publicly traded securities;
o reviewed certain other publicly available financial data for certain
companies Kendrick Pierce deemed comparable to Nexland, and publicly
available prices and premiums paid in other transactions that
Kendrick Pierce considered similar to the merger;
o reviewed drafts of certain documents to be delivered at the closing
of the merger; and
o conducted such other studies, analyses, and inquiries as Kendrick
Pierce deemed appropriate.
Kendrick Pierce assumed and relied upon, without independent
verification, the accuracy and completeness of all financial and other
information and data publicly available or furnished to or reviewed by or
discussed with it for the purposes of its opinion. Kendrick Pierce relied upon
and assumed, without independent verification, that the financial forecasts and
projections provided to Kendrick Pierce had been reasonably prepared and
reflected the best then currently available estimates of the future financial
results and condition of Nexland, and that there had been no material change in
the assets, financial condition, business, or prospects of Nexland since the
date of the most recent financial statements made available to Kendrick Pierce.
Kendrick Pierce expressed no view with respect to such forecasts and other
information and data or the assumptions on which they were based. Kendrick
Pierce expressed no opinion as to the underlying decision by Nexland to engage
in the transaction.
Kendrick Pierce did not independently verify the accuracy and
completeness of the information supplied to Kendrick Pierce with respect to
Nexland and did not assume any responsibility with respect to it. Kendrick
Pierce did not make any physical inspection or independent appraisal of any of
the properties or assets of Nexland. The Kendrick Pierce opinion is necessarily
based on business, economic, market, and other conditions as they existed and
were evaluated by Kendrick Pierce as of the date of the written opinion.
Kendrick Pierce has not assumed any obligation to update, revise, or reaffirm
its opinion.
FINANCIAL ANALYSIS. The following is a summary of the material
financial analyses performed by Kendrick Pierce in connection with its oral
opinion and the preparation of its written opinion described above. The
following summary, however, does not purport to be a complete description of the
analyses performed by Kendrick Pierce. Some of the summaries of the financial
analyses include information presented in tabular format. In order to understand
19
fully the financial analyses used by Kendrick Pierce, the tables must be read
together with the text of each summary. The tables alone do not constitute a
complete description of the financial analyses. Considering the data in the
tables without considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses,
could create a misleading or incomplete view of the financial analyses performed
by Kendrick Pierce.
MARKET TRADING ANALYSIS. Kendrick Pierce reviewed current and
historical market prices and trading data concerning Nexland's common stock for
specified periods before the announcement of the merger, which occurred after
the close of trading in Nexland's common stock on February 13, 2003. Kendrick
Pierce informed Nexland's Board of Directors that on February 13, 2003,
Nexland's common stock closed at $0.15 per share, which is less than the implied
transaction price per share of approximately $0.51. Kendrick Pierce also
informed Nexland's Board of Directors that the trading volume of Nexland's
common stock was low during the 360-days before announcement of the merger, and
therefore, may not accurately indicate Nexland's equity value. Kendrick Pierce
also noted, however, that the trading range of Nexland's common stock was
relatively consistent over such 360-day period. Kendrick Pierce informed the
Board that the implied transaction price per share exceeded the average of the
market prices of Nexland's common stock for the five-trading day,
thirty-calendar day, 90-calendar day, and 360 calendar-day periods ending
February 13, 2003 by more than 100%.
MARKET MULTIPLE APPROACH. Based on public and other available
information, Kendrick Pierce calculated the multiples of enterprise value to
last twelve months (LTM) (defined as the 12 months ended as of the date of the
companies' financial statements in its most recent quarterly or annual report
filed with the Securities and Exchange Commission as of May 13, 2003) revenues
for two groups of publicly traded companies that Kendrick Pierce deemed to be
reasonably similar to Nexland. Kendrick Pierce defined enterprise value as
equity value, plus debt less cash and cash equivalents. Kendrick Pierce believes
that the following four companies have operations similar to some of the
operations of Nexland in terms of product and industry group, but noted that
none of these companies have the same management composition, size, or
combination of businesses as Nexland: Intrusion, Inc., NetWolves Corporation,
SonicWALL, Inc., and V-ONE (collectively referred to as the "Close Group").
Although Kendrick Pierce deems the Close Group to be the more relevant
comparison, due to the lack of publicly traded companies in this group, Kendrick
Pierce also considered a broader group of companies, including Check Point
Software, Cisco Systems, Entrust Inc. Internet Security Systems, Intrusion Inc.
Netopia Inc., NetScreen Technologies NetWolves Corporation, Network Associates,
Secure Computing Corp., Sonic WALL Inc., Symantec Corp., V-ONE, and WatchGuard
Technologies (collectively referred to as the "Broad Group").
VALUATION SUMMARY - MARKET APPROACH
(LTM MEANS THE LATEST TWELVE MONTHS)
LOW HIGH MEDIAN MEAN
--- ---- ------ ----
Enterprise Value to LTM Revenue - Close Group .74x 1.36x 1.03x 1.04x
LOW HIGH MEDIAN MEAN
--- ---- ------ ----
Enterprise Value to LTM Revenue - Broad Group .49x 10.21x 1.73x 3.23x
Kendrick Pierce also calculated the implied enterprise value of Nexland
as a multiple of LTM Revenue, which was 2.53x and represents a premium of 144%
of the mean and 147% of the median calculated for the Close Group and a discount
of 22% of the mean and a premium of 47% of the median for the Broad Group,
respectively. Because of the historic operating losses of Nexland and many of
the comparable companies, Kendrick Pierce concluded that it was not appropriate
to use an "EBITDA" or other similar profitability analysis in evaluating the
fairness of the consideration to be received by Nexland's stockholders from a
financial point of view.
DISCOUNTED CASH FLOW APPROACH. Kendrick Pierce performed a discounted
cash flow analysis of Nexland based upon estimates of projected financial
performance prepared by Nexland for fiscal years 2003 through 2007, which assume
no sales of product to Symantec beyond that which Symantec is contractually
obligated to purchase under contracts existing as of the date of Kendrick
Pierce's fairness opinion. Using these projections, Kendrick Pierce calculated
an equity price per common share ranging from $0.27 to $0.35, which compares to
a transaction value per share of approximately $0.51.
20
COMPARABLE TRANSACTION APPROACH. The majority of comparable
transactions involve privately held target companies for which sufficient,
reliable information was not publicly available. As a result, Kendrick Pierce
considered only one transaction in the technology industry since January 2001 in
which reliable metrics were available, which was as follows:
DEAL VALUE
DATE ACQUIROR TARGET (IN $MILLIONS)
- ---- -------- ------ --------------
10/30/01 SonicWALL, Inc. Redcreek Communications $12.5
While Kendrick Pierce believes that a single data point is generally
unreliable, Kendrick Pierce calculated the multiple of enterprise value to LTM
revenues for the above transaction. The following table sets forth the multiple
indicated by this analysis and the implied transaction value resulting from such
analysis.
RELEVANT MULTIPLE IMPLIED TRANSACTION VALUE
----------------- -------------------------
Enterprise Value/LTM Revenue 1.9x 14.6 million
Kendrick Pierce noted that the value of the consideration to be
received by stockholders in connection with the merger, exceeds the implied
transaction value resulting from the above analysis.
QUALITATIVE ANALYSIS. Kendrick Pierce also considered certain
qualitative factors in its analyses in connection with its oral opinion and the
preparation of its written opinion described above, including significant
customer concentration during Nexland's 2002 fiscal year and the "going concern"
qualification in the report of Nexland's independent auditors for fiscal 2002
and the circumstances related thereto.
The foregoing description is only a summary of the analyses and
examinations that Kendrick Pierce considered in connection with its opinion. It
is not a comprehensive description of all analyses and examinations actually
conducted by Kendrick Pierce. The preparation of a fairness opinion necessarily
is not susceptible to partial analysis or summary description. Kendrick Pierce
believes that its analyses and the summary set forth above must be considered as
a whole and that selecting portions of its analyses and of the factors
considered, without considering all analyses and factors, would create an
incomplete view of the process underlying the analyses set forth in its
presentation to our board. In addition, Kendrick Pierce may have given various
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions. The fact that any
specific analysis has been referred to in the summary above is not meant to
indicate that this analysis was given greater weight than any other analysis.
Accordingly, the ranges of valuations resulting from any particular analysis
described above should not be taken to be the view of Kendrick Pierce with
respect to the actual value of Nexland.
Kendrick Pierce is an investment-banking firm with special expertise
in, among other things, valuing businesses and securities and rendering fairness
opinions. Kendrick Pierce is continually engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, leveraged buyouts,
private placements of debt and equity, corporate, and other purposes. Kendrick
Pierce does not beneficially own any interest in the securities of Nexland.
Pursuant to a letter agreement, dated May 2, 2002, Nexland retained
Kendrick Pierce to render a fairness opinion in connection with the merger.
Nexland selected Kendrick Pierce based on its qualifications, expertise,
reputation, and knowledge in the valuation of assets and businesses, including
businesses in the technology industry.
Nexland has agreed to pay Kendrick Pierce a fee of $50,000 for the
delivery of its fairness opinion, $5,000 of which was due upon execution of its
engagement letter and $45,000 of which is contingent upon the consummation of
the merger. Nexland has also agreed to reimburse Kendrick Pierce for its
expenses in performing its services. Further, Nexland has agreed to indemnify
Kendrick Pierce, its affiliates, and their respective directors, officers,
agents, consultants, employees, and controlling persons against specific
liabilities, including liabilities under the federal securities laws.
21
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of our Board of Directors with
respect to the merger, stockholders should be aware that the executive officers
and directors of Nexland have some interests in the merger that may be different
from, or in addition to, the interests of stockholders generally. Our Board was
aware of these interests and considered them, among other matters, in making its
recommendation.
DIRECTOR AND OFFICER INDEMNIFICATION. Nexland has provided our officers
and directors with liability insurance in respect of acts or omissions of each
person covered by our current policy occurring prior to the completion of the
merger.
OFFICER AND DIRECTOR OPTIONS TO PURCHASE SHARES OF NEXLAND COMMON
STOCK. Under the merger agreement, all outstanding and vested in-the-money
options to purchase shares of Nexland common stock granted to our employees,
including officers and directors, will be canceled and extinguished and will be
automatically exchanged for the right to receive a cash payment equal to an
aggregate of $1,746,197.57, subject to adjustment, of which officers and
directors will receive $931,884.95 in exchange for options they hold. A vested
in-the-money option is any option that has an exercise price per share that is
less than $0.5118 per share, the amount of the consideration per share to be
paid in the merger. All other options will be canceled and extinguished upon
completion of the merger without consideration.
OFFICERS OF NEXLAND. Gregory S. Levine and I. Daniel Sultan will be
employed by Symantec following the merger. Mr. Levine will serve as Senior
Director of Global Appliances and Mr. Sultan will serve as Chief Architect.
Martin E. Dell'Oca will receive severance compensation equal to two years' of
his base salary and a portion of his employee benefits.
INDEMNIFICATION AGREEMENTS REGARDING NEXLAND LIABILITIES. Gregory S.
Levine, Martin E. Dell'Oca and I. Daniel Sultan have each entered into an
indemnification agreement with Symantec providing that he will indemnify
Symantec for a portion of the amount that total liabilities of Nexland exceed
$4,700,000 as of the closing of the merger.
MERGER FINANCING; SOURCE OF FUNDS
Symantec has informed us that the aggregate merger consideration of
approximately $19,600,000 to be paid to our stockholders will be financed
through existing cash on hand.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER
We are not aware of any material governmental or regulatory approval
required for completion of the merger other than compliance with Delaware law.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal
income tax consequences of exchange of shares of Nexland common stock for cash
in the merger. This discussion is based on current provisions of the Internal
Revenue Code of 1986, as amended, referred to in this proxy statement as the
Code, Treasury regulations under the Code and administrative rulings and court
decisions, all of which are subject to change. Any such change, which may or may
not be retroactive, could alter the tax consequences to Nexland or the Nexland
stockholders as described herein.
Nexland stockholders should be aware that this discussion does not
address all federal income tax considerations that may be relevant to particular
stockholders of Nexland in light of their particular circumstances, such as
stockholders who are banks, insurance companies, tax-exempt organizations,
dealers in securities, or foreign persons, stockholders who acquired their
shares in connection with stock options or in other compensatory transactions,
stockholders who hold Nexland common stock as part of an integrated investment
22
(including a "STRADDLE") comprising shares of Nexland common stock and one or
more other positions, or stockholders who have previously entered into a
constructive sale of Nexland common stock. In addition, the following discussion
does not address the tax consequences of the transaction under foreign, state or
local tax laws, or the tax consequences of transactions effectuated prior or
subsequent to or concurrently with the transaction (whether or not such
transactions are in connection with the transaction), including, without
limitation, transactions in which Nexland common stock is acquired.
ACCORDINGLY, NEXLAND STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE TRANSACTIONS, INCLUDING
THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
TRANSACTIONS IN THEIR PARTICULAR CIRCUMSTANCES.
Assuming that the shares of Nexland common stock surrendered in the
transaction were held as capital assets, then, subject to the assumptions,
limitations and qualifications referred to in this document, the transaction
would result in the following federal income tax consequences:
o Except as described below, generally, each holder of Nexland common
stock will recognize gain, if any, only to the extent of the excess
of the sum of the amount of cash received in the merger over the
holder's adjusted basis in the Nexland common stock immediately
prior to the transaction. Such gain generally should be capital
gain, and generally should be long-term capital gain if the Nexland
common stock exchanged in the transactions has been held for more
than one year. In the event that a holder's adjusted basis in the
Nexland common stock exceeds the amount of cash received by the
holder in the transaction, the holder will recognize a loss. Such
loss generally should be capital loss, and generally should be
long-term capital loss if the Nexland common stock exchanged in the
transactions has been held for more than one year.
o Each individual who acquired shares of Nexland common stock through
the exercise of incentive stock options will incur a disqualifying
disposition of those shares upon receipt of the cash in the merger
if the shares have not been held for more than two years from the
grant date of the incentive stock option and more than one year
after the exercise date of the incentive stock option for those
shares. Upon the disqualifying disposition, each individual will
recognize ordinary income equal to the excess, if any, of the fair
market value of the shares of Nexland common stock at the time the
incentive stock option was exercised over the aggregate exercise
price paid for those shares. Any additional gain or any loss
recognized upon the exchange of Nexland common stock for the cash in
the merger will be capital gain or loss, which will be long term if
the shares of Nexland common stock were held more than one year from
the date of exercise. However, if the aggregate value of the cash
received per share of Nexland common stock is less than the exercise
price paid per share of Nexland common stock upon the exercise of
the incentive stock option, then the individual will not recognize
any ordinary income upon the disqualifying disposition of those
shares and will recognize a capital loss per share equal to the
excess of such exercise price per share over the cash paid per share
of Nexland common stock. The capital loss will be short term unless
the shares of Nexland common stock involved in the disqualifying
disposition have been held for more than one year.
o Each individual who holds an option to purchase Nexland common stock
and does not exercise such option prior to the merger will recognize
ordinary income in the amount of the cash consideration received, if
any, upon the automatic cash-out of such option. Such income will
constitute wages subject to applicable federal and state income and
employment withholding taxes.
No ruling has been or will be sought from the Internal Revenue Service
in connection with the transaction.
You may be subject to "backup withholding" at a rate of 28% on payments
received in connection with the merger unless you (i) provide a correct taxpayer
identification number (which, if you are an individual, is your social security
number) and any other required information to the paying agent, or (ii) are a
corporation or come within certain exempt categories and, when required,
demonstrate this fact, all in accordance with the requirements of the backup
withholding rules. If you do not provide a correct taxpayer identification
number, you may be subject to penalties imposed by the Internal Revenue Service.
23
Any amount paid as backup withholding does not constitute an additional tax and
will be creditable against your United States federal income tax liability. You
should consult with your own tax advisor as to your qualification for exemption
from backup withholding and the procedure for obtaining such exemption. You may
prevent backup withholding by completing a W-9 or substitute W-9 and submitting
it to the paying agent for the merger when you submit your stock certificate(s)
following the effective time of the merger.
The preceding discussion is intended only as a summary of certain
United States federal income tax consequences of the merger and does not purport
to be a complete analysis or discussion of all potential tax effects relevant to
the merger. Thus, Nexland's stockholders are urged to consult their own tax
advisors concerning the specific tax consequences to them of the merger,
including tax return reporting requirements, the applicability and effect of
foreign, federal, state, local and other applicable tax laws, and the effect of
any proposed changes in the tax laws.
EXCHANGE OF CASH FOR NEXLAND STOCK CERTIFICATES
When the merger is completed, Symantec's paying agent will mail to
Nexland stockholders a letter of transmittal and instructions for use in
surrendering Nexland stock certificates in exchange for the appropriate amount
of cash. When a Nexland stockholder delivers Nexland stock certificates to the
paying agent along with a properly executed letter of transmittal and any other
required documents, the Nexland stock certificates will be canceled and the
Nexland stockholder will receive the amount of cash to which the stockholder is
entitled under the merger agreement.
ACCOUNTING TREATMENT
The merger will be accounted for using the purchase method of
accounting under generally accepted accounting principles. After the merger, the
results of operations of Nexland will be included in the consolidated financial
statements of Symantec. The purchase price will be allocated to the fair value
of the net assets acquired. The excess purchase price over the fair value of the
assets will be allocated to goodwill. A final determination of the allocation of
the purchase price to the assets acquired and liabilities assumed based on their
respective fair values has not yet been made.
APPRAISAL RIGHTS OF STOCKHOLDERS
You have the right to dissent from the merger and to demand and obtain
a cash payment for the appraised value of your shares of common stock under the
circumstances described below. The appraised value may be less than, equal to or
greater than the per share cash merger consideration provided for in the merger
agreement, and will be determined exclusive of any value arising from the
accomplishment or expectation of the merger. If you fail to comply with the
procedural requirements of Section 262 of the Delaware General Corporation Law,
you will lose your right to dissent and seek payment of the appraised value of
your shares.
Symantec's obligations to close the merger are conditioned upon holders
of 5% or less of the outstanding Nexland common stock exercising these appraisal
rights.
The following is a summary of Section 262, which specifies the
procedures applicable to dissenting stockholders. This summary is not a complete
statement of the law regarding your right to dissent under Delaware law, and if
you are considering dissenting, we urge you to review the provisions of Section
262 carefully. The text of Section 262 is attached to this document as Appendix
D, and we incorporate that text into this document by reference.
Among other matters, you should be aware of the following:
o to be entitled to dissent and seek appraisal, you must hold shares
of our common stock on the date you make the demand required under
Delaware law, you must continuously hold those shares until the
24
merger has been completed, you must not vote in favor of the merger
and you must otherwise comply with the requirements of Section 262;
o before the special meeting, you must deliver a written notice that
states your identity and your intent to demand appraisal to Nexland,
Inc., 1101 Brickell Avenue, North Tower, Second Floor, Miami Florida
33131, Attention: Secretary; simply voting against the merger is not
a demand for appraisal rights;
o the surviving corporation will notify all of the dissenting
stockholders who have complied with Section 262 and who have not
voted in favor of the merger that the merger has been completed;
o within 120 days after the effective time of the merger, the
surviving corporation or any stockholder who has complied with the
requirements of Section 262 may file a petition in the Delaware
Court of Chancery demanding a determination of the value of the
stock of the dissenting stockholders;
o if a petition is made, the Delaware Court of Chancery will determine
which dissenting stockholders complied with the requirements of
Section 262 and are entitled to appraisal rights;
o the Delaware Court of Chancery may require the stockholders who have
demanded an appraisal for their shares and who hold stock
represented by certificates to submit their stock certificates to
the Register in Chancery for notation; and the Delaware Court of
Chancery may dismiss the proceedings as to any stockholder that
fails to comply with this requirement;
o the Delaware Court of Chancery will then appraise the shares,
determining their fair value exclusive of any element of value
arising from the accomplishment or expectation of the merger,
together with a fair rate of interest, if any, to be paid on the
appraised fair value; the Delaware Court of Chancery will consider
all relevant factors in determining the fair value and the fair
interest rate, if any;
o the Delaware Court of Chancery will then direct the surviving
corporation to pay the fair value of the dissenting shares, together
with any interest, to the stockholders entitled to payment; payment
will be made when the stockholder surrenders the certificates to the
surviving corporation;
o the costs of the proceeding for appraising the fair value may be
determined by the court and the court may require the parties to
bear the costs in any manner that the court believes to be
equitable;
o if you dissent from the merger, you will not be entitled to vote
your shares of common stock for any purpose or to receive dividends
or other distributions following the merger, other than dividends or
other distributions payable to stockholders of record at a date
prior to the effective time of the merger;
o you may withdraw your demand for appraisal and accept the per share
cash merger consideration provided for in the merger agreement at
any time within 60 days after the effective date of the merger; and
o the exchange of shares for cash pursuant to the exercise of
appraisal rights will be a taxable transaction for United States
federal income tax purposes and possibly state, local and foreign
income tax purposes as well.
25
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger
agreement. You are urged to read the full text of the merger agreement attached
as Appendix A to this proxy statement. In addition, important information about
the merger is provided in the section titled "The Merger" beginning on page 15.
STRUCTURE OF THE MERGER. The merger agreement provides that following
the approval and adoption of the merger agreement by our stockholders and the
satisfaction or waiver of the other conditions to the merger, Nebraska
Acquisition Sub, a wholly owned subsidiary of Symantec, will be merged with and
into us, and Nexland will continue as the surviving corporation and become a
wholly owned subsidiary of Symantec. The merger will become effective upon the
filing of a certificate of merger with the Secretary of State of the State of
Delaware or at such later time as is agreed to in writing by the parties and as
specified in the certificate of merger. The filing of the certificate of merger
and the closing of the merger will occur promptly following the special meeting.
When the merger becomes effective, the certificate of incorporation of
Nexland will be amended in its entirety as set forth in the certificate of
merger, and as so amended will be the certificate of incorporation of Nexland as
the surviving corporation, until thereafter amended as provided by applicable
law or in the certificate of incorporation. The bylaws of Nebraska Acquisition
Sub in effect immediately prior to the effective time of the merger will be the
bylaws of Nexland as the surviving corporation until thereafter changed or
amended as provided by applicable law, the certificate of incorporation or the
bylaws of that entity.
CONVERSION OF CAPITAL STOCK. At the effective time of the merger,
pursuant to the merger agreement and the Delaware General Corporation Law, each
issued and outstanding share of Nexland common stock, other than any shares held
by a dissenting stockholder that has exercised and perfected appraisal rights,
will be canceled and extinguished and will be automatically converted into the
right to receive cash merger consideration, without interest, as described
below.
The cash merger consideration that Symantec will pay for each issued
and outstanding share of Nexland common stock will be equal to the fraction, the
numerator of which is $19,600,000 minus the amount of consideration paid to the
holders of outstanding and vested in-the-money options and validly exercised
warrants, and the denominator of which is the total number of shares of Nexland
common stock outstanding immediately prior to the completion of the merger.
Assuming that no options or warrants are exercised or canceled prior to the
completion of the merger, each outstanding share of Nexland common stock will be
converted in the right to receive a cash amount of $0.5118 upon completion of
the merger based on 34,824,172 shares of common stock outstanding as of May 13,
2003.
EXCHANGE OF COMMON STOCK CERTIFICATES. At the effective time, each
certificate representing shares of Nexland common stock then outstanding, other
than any shares held by a dissenting stockholder exercising appraisal rights,
will represent the right to receive the cash into which such issued and
outstanding shares may be converted. At the effective time, all such shares of
our common stock will be canceled and extinguished and will cease to exist. As a
result, each holder of a certificate representing any such shares will cease to
have an equity interest in Nexland and will cease to have any voting or other
rights with respect to such shares, except the right to receive upon the
surrender of such certificate the cash consideration payable under the merger
agreement, without interest.
Symantec will designate a bank or trust company to act as paying agent
and will deposit with the paying agent sufficient funds to pay the cash merger
consideration payable to the holders of vested in-the-money options and our
stockholders who surrender their stock certificates. Symantec will direct the
paying agent to mail a letter of transmittal to you as soon as possible after
the effective time of the merger. The letter of transmittal will provide you
instructions regarding how to surrender your Nexland stock certificates in
exchange for the cash merger consideration payable for your shares. YOU SHOULD
NOT SEND IN YOUR STOCK CERTIFICATES UNTIL YOU RECEIVE A LETTER OF TRANSMITTAL
AND YOU SHOULD ONLY SEND YOUR CERTIFICATES AS INSTRUCTED IN SUCH LETTER OF
TRANSMITTAL. In all cases, the merger consideration will only be paid in
accordance with the procedures set forth in the merger agreement and the letter
of transmittal mailed to you by Symantec's paying agent.
26
We strongly recommend that stock certificates and letters of
transmittal be transmitted only by registered United States mail, return receipt
requested and appropriately insured. Holders of common stock whose stock
certificates are lost will be required to make an affidavit identifying such
certificate or certificates as lost, stolen or destroyed and, if required by
Symantec, to post a bond in such amount as we may reasonably require to
indemnify against any claim that may be made against us with respect to such
certificate or certificates.
Any merger consideration payable in respect of stock certificates that
have not been surrendered prior to six months after the effective time of the
merger will, to the extent permitted by applicable law, become the property of
Symantec, free and clear of all claims or interest of any person previously
entitled to such merger consideration. Thereafter, such holders will be entitled
to look to the surviving corporation only as a general creditor with respect to
the merger consideration payable upon surrender of their certificates, without
any interest. Neither the surviving corporation nor the paying agent will be
liable to any holder of a certificate for merger consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
TREATMENT OF STOCK OPTIONS TO PURCHASE SHARES OF NEXLAND COMMON STOCK.
All options to purchase Nexland common stock outstanding as of the effective
time of the merger shall by virtue of the merger, and without any action on the
part of the holders of such options, be terminated and cancelled as of the
effective time of the merger and each vested in-the-money option shall be
automatically converted into, and represent only, the right to receive an amount
in cash equal to the excess if any, of (i) the aggregate merger consideration
for that number of shares of common stock subject to outstanding options to
purchase our common stock immediately prior to the effective time of the merger
over (ii) the aggregate exercise price of all those shares of our common stock
subject to outstanding options to purchase our common stock. This excess amount
is also referred to in this proxy statement as the "option cash-out amount." An
in-the-money option is any option that has an exercise price per share that is
less than $0.5118 per share, the amount of cash consideration per share to be
paid in the merger.
EXCHANGE PROCEDURES FOR OPTIONS TO PURCHASE SHARES OF NEXLAND COMMON
STOCK. Promptly following the effective time of the merger, Symantec will cause
the paying agent to mail to each holder (as of the effective time of the merger)
of an option that was converted into the right to receive the option cash-out
amount, a letter of transmittal and instructions for use in receiving the cash
amount payable in respect of the options held by such holder. Upon the delivery
to the paying agent of a properly completed letter of transmittal in accordance
with the instructions specified in such letter of transmittal, a holder of
options will be entitled to receive that portion of the option cash-out amount
payable in respect of such options.
TREATMENT OF WARRANTS TO PURCHASE SHARES OF NEXLAND COMMON STOCK. All
outstanding warrants to purchase shares of Nexland common stock that are not
validly exercised before the effective time of the merger will be automatically
terminated without consideration. Holders of warrants will be given an
opportunity to exercise the warrants prior to the completion of the merger, in
which case such holders will receive a cash payment equal to the difference
between approximately $0.5118 per share and the per share exercise price for
such warrant.
REQUIRED WITHHOLDING. The paying agent may deduct and withhold from the
per share merger consideration or other consideration or amount deliverable or
otherwise payable upon completion of the merger to any holder or former holder
of our common stock or option to purchase our common stock any amounts as may be
required to be deducted or withheld under the Code or under any applicable
provision of state, local or foreign tax law or under any other applicable legal
requirement. To the extent any amounts are so deducted or withheld by the paying
agent, these amounts will be treated for all purposes under the merger agreement
as having been delivered or otherwise paid to the person to whom those amounts
would otherwise have been delivered or otherwise paid upon completion of the
merger.
REPRESENTATIONS AND WARRANTIES. The merger agreement contains customary
representations and warranties made by each of Nexland, Symantec and Nebraska
Acquisition Sub relating to, among other things, the following:
o corporate organization and corporate matters of Nexland, Symantec
and Nebraska Acquisition Sub;
o corporate authorization of the merger agreement and authorization to
enter into and complete the transactions contemplated by the merger
agreement;
27
o the binding effect of the merger agreement;
o conflicts or violations under its certificate of incorporation or
bylaws as a result of the completion of the transactions
contemplated by the merger agreement; and
o governmental approvals and consents.
In addition, the merger agreement contains representations and
warranties by us, relating to, among other things:
o capital structure;
o liens on outstanding shares of our stock;
o issuance of outstanding shares of our stock;
o options, warrants, calls, subscriptions and other rights relating to
our stock;
o authorization, performance and enforceability of the merger
agreement;
o our subsidiaries;
o property, equipment and leasehold matters;
o ownership and condition of our tangible assets;
o environmental matters;
o material contracts and the absence of defaults under such contracts;
o reports, registration statements and documents filed by us with the
Securities and Exchange Commission;
o financial statements;
o absence of specified material changes or events relating to us or
our business since December 31, 2002;
o absence of undisclosed liabilities;
o pending or threatened litigation;
o labor matters;
o employee benefit plans;
o compliance with laws;
o intellectual property;
o tax matters and compliance with relevant tax laws;
o insurance matters;
o finder's fees, brokerage commissions and legal, accounting or
similar fees;
28
o approval of the merger agreement by our Board of Directors;
o receipt of a fairness opinion from our financial advisor; and
o accuracy of the information provided by us to Symantec in connection
with the merger agreement and this proxy statement.
CERTAIN COVENANTS. Under the merger agreement, we have agreed that from
May 13, 2003 until the effective time of the merger, we will conduct our
businesses in the ordinary course consistent with past practice and not take any
action inconsistent with the merger agreement or the consummation of the merger.
In addition, except as expressly contemplated or allowed by the terms of the
merger agreement and except as we have previously expressly disclosed to
Symantec, during the period from May 13, 2003 and continuing until the effective
time of the merger, we have agreed not to take any of the following actions,
among others, unless Symantec agrees in writing:
o incur any indebtedness for borrowed money, or assume, guarantee,
endorse, or otherwise become responsible for obligations of any
other person;
o issue (except pursuant to the exercise of options or warrants
outstanding on May 13, 2003) or commit to issue any shares of its
capital stock or any other securities or any securities convertible
into shares of its capital stock or any other securities, including,
without limitation, any options to acquire capital stock, accelerate
the vesting of any options, or reserve for issuance of additional
shares;
o declare, pay or incur any obligation to pay any dividend or
distribution in respect of our capital stock or declare, make or
incur any libation to make any distribution or redemption with
respect to our capital stock;
o make any change to our certificate of incorporation or bylaws;
o mortgage, pledge or otherwise encumber any assets or sell, transfer,
license or otherwise dispose of any assets except for the sale or
disposition of inventory to customers in the ordinary course of
business and consistent with past practice;
o cancel, release or assign any indebtedness owed to it or any claims
or rights held by us;
o make any investment or commitment of a capital nature either by
purchase of stock or securities, contributions to capital, property
transfer or otherwise, or by the purchase of any property or assets
of any other person;
o terminate certain material contracts or make any change in any such
contracts;
o enter into or modify any employment contract or pay any compensation
to or for any employee, officer or director other than in the
ordinary course of business and pursuant to employment arrangements
existing as of May 13, 2003;
o pay or agree to pay any bonus, incentive compensation, service
award, severance, "stay bonus" or other like benefit or enter into
or modify any other material employee plan;
o enter into or modify any contract or other arrangement with a
related party;
o make any change in any method of accounting or accounting practice;
o fail to comply with all material laws applicable to the assets of
Nexland and our business in a manner consistent with past practices;
29
o fail to use our commercially reasonable efforts to maintain our
business and existing business relationships and to preserve the
goodwill of our business so that such relationships and goodwill
will be preserved on and after the effective time of the merger;
o take certain actions or make certain agreements with respect to
taxes;
o commence any litigation or similar proceeding;
o take any action that would cause any representation or warranty made
by us in the merger agreement to be or become untrue in any material
respect;
o knowingly take any action that would prevent us from performing our
agreements and covenants under the merger agreement; or
o directly or indirectly take, agree to take or otherwise permit to
occur any of the actions described above.
The merger agreement also contains covenants by us relating to the
following:
o obtaining stockholder approval of the merger agreement;
o filing of this proxy statement;
o providing Symantec with access to information about us;
o providing Symantec with notice regarding the commencement by us of
any litigation regarding our proprietary technology;
o certain tax-related matters; and
o our filings with the Securities and Exchange Commission.
The covenants contained in the merger agreement that relate to the
conduct of our business are complicated and are not easily summarized. You are
urged to read carefully the sections of the merger agreement titled "Conduct
Prior to the Effective Time" and "Covenants."
NO SOLICITATION OF TRANSACTIONS. Prior to the effective time of the
merger, we have agreed to certain limitations on our ability to initiate,
solicit or encourage any inquiries or the making of any proposal that, among
other things, constitutes or is reasonably likely to lead to, in a single or
series of related transactions, a bona fide proposal by a third party:
o to acquire a beneficial ownership of all or a portion of our capital
stock or our business pursuant to a merger, sale of shares or other
business combination; or
o to acquire, lease, license or otherwise dispose of a material
portion of our proprietary rights and technology.
We have also agreed not to engage in negotiations or discussions with
or furnish any information to, any third party relating to an acquisition
proposal, as described above, or to enter into any agreement in respect of any
such acquisition proposal or approve any such acquisition proposal. However, we
may participate in discussions or negotiations with and furnish information to
any third party making an unsolicited acquisition proposal, and we may approve
an unsolicited acquisition proposal if, among other things, the Board of
Directors determines in good faith, after receiving advice from our financial
advisor that such acquisition proposal is reasonably likely to lead to a
acquisition proposal superior to the transactions contemplated by the merger
agreement. In the event that Nexland determines to furnish any information as
described above, or receives any acquisition proposal, we have agreed to inform
30
Symantec in writing promptly and furnish to Symantec the identity of the
recipient of such information to be provided and/or the potential acquiror and
the terms of such acquisition proposal.
We have also agreed that our Board of Directors will not withdraw or
modify or propose to withdraw or modify, in any manner adverse to Symantec, the
Board of Directors' approval or recommendation of the merger agreement and the
merger, or approve or recommend, or propose to approve or recommend, any other
acquisition proposal unless the Board of Directors has determined in good faith
that it must take such action, pursuant to its fiduciary duties under applicable
law, and gives notice of such determination to Symantec.
In the event that Nexland receives a superior acquisition proposal, we
may terminate the merger agreement and pay the applicable termination fee. For a
more complete discussion of the termination provisions and termination fee, see
the sections titled "The Merger - Termination of the Merger Agreement" and "The
Merger - Termination Fee" on pages 32 and 34 of this proxy statement. If the
merger agreement is terminated and Nexland pays Symantec the required
termination fee prior to the special meeting, there will no longer be an
obligation to hold a special meeting to approve the merger with Symantec and all
voting agreements will terminate.
CONDITIONS TO THE MERGER. The obligations of Nexland and Symantec to
complete the merger are subject to the fulfillment or waiver, prior to the
effective time of the merger of a number of conditions, including the following:
o receipt of approvals from any governmental regulatory authority, if
necessary;
o no court or governmental authority has issued a temporary
restraining order, preliminary or permanent injunction or other
order which remains pending and which would enjoin or prohibit
completion of the merger;
o no governmental authority has notified either party of its intent to
commence or the commencement of any proceedings that would restrain
or prohibit completion of the merger;
o the representations and warranties made by each of Nexland and
Symantec in the merger agreement are accurate in all respects at the
effective time; and
o each of Nexland and Symantec has performed and complied in all
material respects with each agreement, covenant and obligation
required by the merger agreement to be so performed or complied with
by it on or before the effective time.
The obligation of Symantec to complete the merger is subject to the
fulfillment or waiver, prior to the effective time of the merger of a number of
conditions, including the following:
o approval of the merger agreement by Nexland stockholders;
o all consents, approvals, notifications, disclosures, filings and
registrations listed or required to be listed under the merger
agreement have been obtained or made;
o no litigation may be pending or threatened relating to the merger
agreement or the transactions contemplated by the merger agreement;
o not more than 5% of the issued and outstanding shares of common
stock have exercised their appraisal rights;
o certain key employees having remained continuously employed by us on
substantially the same terms with substantially the same
responsibilities as on the date of the merger agreement and our not
having any knowledge that any of our key employees has an intention
to termination his employment with us;
31
o certain key employees have executed and delivered employment
agreements to Symantec;
o all agreements evidencing Nexland options have been amended, in a
manner satisfactory to Symantec, to allow for the treatment of such
options in the merger as contemplated by the merger agreement;
o none of our employees having any right to a payment or acceleration
of any right to benefits that constitutes a parachute payment under
the Code upon the closing of the merger;
o we have not exercised our option to purchase the assets of Nexland,
S.A.;
o all outstanding warrants to purchase shares of our stock have been
exercised or terminated;
o agreements with each of E.S. Bankest, LLC and ExpoCredit Corporation
have been terminated;
o certain employees have executed a noncompetition agreement with
Symantec;
o Nexland, S.A., certain stockholders of Nexland, S.A. and us have
executed a noncompetition agreement with Symantec;
o the trademarks "Nexland, " Internet Sharing Box," "Etherland," and
"Plug N' Net" have been assigned to Nexland;
o our irrevocable option agreement with Nexland, S.A. has been amended
as contemplated by the merger agreement;
o our agreement with ADP TotalSource Services, Inc. has been
terminated; and
o each of our officers has executed and delivered to Symantec an
indemnification agreement.
The execution of noncompetition agreements by certain employees of
Nexland with Symantec, the assignment of certain trademarks by Nexland, S.A. to
us, the amendment of the irrevocable option agreement with Nexland, S.A. and the
delivery of indemnification agreements by officers of Nexland to Symantec have
been completed.
Our obligation to complete the merger is subject to additional
conditions, including, generally, the accuracy of the representations and
warranties of Symantec and Nebraska Acquisition Sub, and the performance in all
material respects of their obligations under the merger agreement.
TERMINATION OF THE MERGER AGREEMENT. The merger agreement may be
terminated, at any time prior to the effective time of the merger, whether
before or after receiving stockholder approval, under certain circumstances,
including the following:
o By the mutual written consent of the parties;
o By us or Symantec:
o if the merger is not completed by August 31, 2003, or such other
date as we and Symantec may agree Upon, except this right to
terminate the merger agreement is not available to any party
responsible for the delay;
o if any law has been enacted or promulgated prohibiting the
completion of the merger;
32
o if a court of competent jurisdiction or other governmental entity
has issued an order, decree, rulINg or injunction restraining,
enjoining or otherwise prohibiting the merger on substantially
the terms contemplated by the merger agreement; or
o if our stockholders do not approve and adopt the merger agreement
at the special meeting or any adjournment or postponement
thereof.
o By Symantec:
o if we have materially breached or failed to comply in any
material respect with any covENant, representation, warranty or
agreement contained in the merger agreement and the breach is not
cured within 30 days following written notice of such breach;
o if our Board fails to recommend the adoption of the merger
agreement to our stockholders, or withDRaws, amends or modifies
in a manner adverse to Symantec its recommendation to the
stockholders of Nexland for adoption of the merger agreement;
o if a tender offer for any of the outstanding shares of capital
stock of Nexland is commenced prIOr to the special meeting and
within the time required by Rule 14e-2(a) under the Securities
Exchange Act of 1934 and the Board of Directors fails to
recommend against acceptance of such tender offer, or takes no
position with respect to such tender offer, or states its
inability to take a position with respect to such tender offer;
o if we or our Board of Directors takes any position with respect
to any acquisition proposal (otheR than the merger agreement)
other than a recommendation to reject such acquisition proposal;
or
o if the Board of Directors resolves to accept, accepts or
recommends to the stockholders of Nexland a superior proposal.
o By Nexland:
o if Symantec or Nebraska Acquisition Sub materially breaches or
fails to comply in any material rESpect with any covenant,
representation, warranty or agreement contained in the merger
agreement and the breach is not cured within 30 days following
written notice of such breach; or
o if prior to the closing of the merger, our Board of Directors
determines in good faith, After consultation with its financial
and legal advisors, that another acquisition proposal constitutes
a superior proposal and the Board of Directors believes in its
good faith judgment, after receiving advice of its outside legal
counsel, that its failure to terminate the merger agreement and
enter into the superior proposal would constitute a breach of its
fiduciary duties, provided that we:
o provide proper notice to Symantec of our intention;
o afford Symantec an opportunity to match the terms of the
superior proposal and to negotiate with us to make other
adjustments in the terms and conditions of the merger
agreement that would permit the Board of Directors to
recommend the merger agreement as revised;
o have not received from Symantec within three business days of
Symantec's receipt of proper notice an offer that the Board of
Directors determines in good faith matches or exceeds such
33
superior proposal or is otherwise sufficient to permit the
Board of Directors to continue to recommend the merger
agreement as amended by such offer from Symantec in lieu of
the superior proposal; or
o within three business days of Symantec's receipt of proper
notice, Nexland pays to Symantec the applicable termination
fee and expense reimbursement described below.
In the event of termination of the merger agreement by either Symantec
or us, the merger agreement will become void and have no effect, provided that
the termination of the merger agreement will not relieve a breaching party from
liability for a breach of the merger agreement or for the payment of the
termination fee and expenses reimbursement described below.
TERMINATION FEE.
o Nexland has agreed to pay Symantec a termination fee of $800,000,
plus all of the expenses incurred by Symantec in connection with the
merger agreement, if the merger agreement is terminated by Symantec
as a result of:
o our Board of Directors failing to recommend the adoption of the
merger agreement to the stockholderS, or withdrawing, amending or
modifying in a manner adverse to Symantec its recommendation to
the stockholders of Nexland for adoption of the merger agreement;
o our Board of Directors failing to recommend against acceptance of
a tender offer for any OF the outstanding shares of capital stock
of Nexland commenced prior to the special meeting and within the
time required by Rule 14e-2(a) under the Securities Exchange Act
of 1934, taking no position with respect to such tender offer, or
stating its inability to take a position with respect to such
tender offer;
o our Board of Directors taking any position with respect to any
acquisition proposal (other thAN the merger agreement) other than
a recommendation to reject such acquisition proposal;
o our Board of Directors resolving to accept, accepting or
recommending to the stockholders of Nexland a superior proposal;
o Nexland failing to comply in any material respect with any of the
covenants or agreements contaiNEd in the merger agreement to be
complied with or performed by Nexland; or
o our Board of Directors determining in good faith, after
consultation with its financial and Legal advisors, that another
acquisition proposal constitutes a superior proposal and our
Board of Directors believes in its good faith judgment, after
receiving advice of its outside legal counsel, that its failure
to terminate the merger agreement and enter into the superior
proposal would constitute a breach of its fiduciary duties.
We have agreed to reimburse Symantec up to $300,000 of the expenses
incurred by Symantec in connection with the merger agreement, if the merger
agreement is terminated by us or Symantec because of our failure to obtain
stockholder approval at the special meeting or any adjournment or postponement
thereof, provided that if Nexland is acquired within the 12 months following the
termination of the merger agreement for our failure to obtain the required
stockholder vote, then we will pay Symantec a termination fee equal to $800,000
less any termination fee previously paid.
34
EXPENSES. Except as set forth above, all fees and expenses incurred in
connection with the merger, including all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties incurred by us or
Symantec are the obligation of the respective party incurring such fees and
expenses.
VOTING AGREEMENTS. As an inducement and a condition to Symantec's
entering into the merger agreement and incurring the obligations set forth
therein, each of Gregory S. Levine, Martin E. Dell'Oca, I. Daniel Sultan, Andre
Chouraqui, Laurent Solomon and Yves Many entered into a voting agreement with
Symantec and Nexland. Under the terms of the voting agreement, the stockholders
agreed to vote, and granted an irrevocable proxy to Symantec to vote, all shares
of Nexland capital stock owned by such stockholders as of the record date for
the special meeting:
o in favor of the adoption of the merger agreement and the completion
of the merger;
o against any action or agreement that would result in a breach in any
material respect of Nexland under the merger agreement; and
o except as otherwise agreed to in writing in advance by Nexland,
against: (i) any proposal made by a third-party to acquire a
beneficial ownership of all or a material portion of Nexland
pursuant to a merger, consolidation or similar transaction or the
sale, disposal or lease of material assets of Nexland or any similar
transaction, each whether in any single or multi-step transaction;
(ii) any change in the Board of Directors other than in connection
with the merger; (iii) any amendment of our certificate of
incorporation other than in connection with the merger; or (iv) any
other action which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, discourage or materially
and adversely affect the contemplated benefits to us in the merger.
The stockholders who entered into the voting agreement held an
aggregate of 28,221,338 outstanding shares of Nexland common stock (representing
approximately 81.0% of the combined voting power of Nexland common stock) as of
the record date.
In addition, these stockholders have agreed not to dispose of any
shares of Nexland common stock without Symantec's prior written consent on or
prior to the record date of the special meeting, or grant any proxy or power of
attorney with respect to their shares of Nexland common stock. After the record
date of the special meeting, those stockholders are permitted to transfer their
shares as long as the transferee agrees in writing to be bound by the voting
agreement. The voting agreement will terminate on the earlier of the effective
time of the merger or the termination of the merger agreement. The form of
voting agreement entered into by the stockholders is attached to this proxy
statement as Appendix B.
INDEMNIFICATION AGREEMENTS. As a condition to Symantec entering into
the merger agreement, Gregory S. Levine, Martin E. Dell'Oca and I. Daniel Sultan
have each entered into an indemnification agreement with Symantec, providing
that he will indemnify Symantec for a portion of the amount by which Nexland's
total liabilities exceed $4,700,000 as of the closing of the merger. Under the
indemnification agreements, the amounts for which each of Gregory S. Levine,
Martin E. Dell'Oca and I. Daniel Sultan may be liable will not exceed $374,400,
$85,600 or $1,540,000, respectively. If the parties to the indemnification
agreements are not able to agree on the amount of liabilities and the amounts,
if any, payable to Symantec, the indemnification agreements provide that an
independent certified public accountant will be appointed to resolve the
dispute.
35
SECURITY OWNERSHIP OF NEXLAND COMMON STOCK
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of May 13, 2003, as to (i) each
person (or group of affiliated persons) known by us to own beneficially more
than 5% of our outstanding common stock, (ii) each of our directors, (iii) each
of our executive officers, and (iv) all directors and executive officers of
Nexland as a group.
For the purpose of this table, beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. The number
of shares beneficially owned by a person includes shares of common stock subject
to options held by that person that are currently exercisable or exercisable
within 60 days of May 13, 2003. Shares issuable pursuant to such options are
deemed outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for the purposes of computing the
percentage ownership of each other person.
Gregory S. Levine, Martin E. Dell'Oca, I. Daniel Sultan, Andre
Chouraqui, Laurent Solomon and Yves Many have entered into voting agreements
with Symantec, providing that they will vote all shares of our common stock
owned by them on, or acquired by them prior to, the record date for, among other
things, the approval of the merger agreement and the merger. As a result of its
entering into voting agreements with these stockholders, Symantec may be deemed
to be the beneficial owner of 32,121,338 shares of Nexland common stock, which
includes 3,900,000 shares of Nexland common stock subject to options covered
under the voting agreements that are exercisable at the discretion of the
appropriate stockholder within 60 days of May 13, 2003. For a more complete
description of the voting agreements, please refer to the section titled "The
Merger Agreement -- Voting Agreements" beginning on page 35 of this proxy
statement.
COMMON STOCK
BENEFICIALLY OWNED
NAME AND ADDRESS ------------------------------
OF BENEFICIAL OWNER NUMBER PERCENTAGE(1)
------------------- ------ ----------------
I. Daniel Sultan 14,207,588(2)(3) 39.0%
P.O. Box 3783
Hallandale, Florida 33008
Andre Chouraqui
Barker Road #2, House #9
The Peak, Hong Kong 5,044,500 14.5%
Laurent Solomon
P.O. Box 9096
Daytona Beach, Florida 32120 4,044,500(4) 11.0%
Gregory S. Levine
P.O. Box 693267
Miami, Florida 33169 4,002,500(5)(6) 11.0%
Yves Many(7)
P.O. Box 693267
Miami, Florida 33169 2,522,250 7.2%
Martin E. Dell'Oca
385 Hampton Lane
Key Biscayne, Florida 33149 1,300,000(8) 3.6%
All directors and executive officers
as a group (3 persons) 19,510,088 50.1%
- --------------
(1) Applicable percentage of ownership is based on 34,824,172 shares of common
stock outstanding as of May 13, 2003, together with applicable options for
each stockholder.
36
(2) Includes 12,611,251 shares that are held of record by BH Investor Group,
LLC. This entity is controlled by I. Daniel Sultan.
(3) Includes options owned by Mr. Sultan to acquire 1,400,000 shares of our
common stock and 196,337 shares of common stock for conversion of debt to
common stock.
(4) These shares are held of record by Fast-Access Group, LLC. This entity is
controlled by Laurent Solomon.
(5) Includes 2,602,500 shares that are held of record by Broadband Investor
Group, LLC. This entity is controlled by Gregory S. Levine, our President
and Chief Executive Officer.
(6) Includes options owned by Mr. Levine to acquire 1,400,000 shares of our
common stock.
(7) These shares are held of record by High-Speed Venture, LLC. This entity is
controlled by Mr. Many.
(8) Includes 200,000 shares of our common stock that were granted to Mr.
Dell'Oca pursuant to his employment agreement. Also includes options to
acquire 1,100,000 shares of our common stock.
37
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Nexland's common stock is traded on the Over-the-Counter Bulletin Board
under the symbol "XLND." The following table sets forth, for the periods
indicated, the high and low bid prices of a share of common stock for the last
two years, as well as the first quarter of 2003.
HIGH BID LOW BID
-------- -------
2001
Quarter Ended March 31, 2001 $ 1.78 $ 0.19
Quarter Ended June 30, 2001 0.85 0.27
Quarter Ended September 30, 2001 0.55 0.20
Quarter Ended December 31, 2001 0.55 0.22
2002
Quarter Ended March 31, 2002 $ 0.39 $ 0.22
Quarter Ended June 30, 2002 0.29 0.07
Quarter Ended September 30, 2002 0.25 0.10
Quarter Ended December 31, 2002 0.24 0.05
2003
Quarter Ended March 31, 2003 $ 0.47 $ 0.15
Quarter Ended June 30, 2003
(through May 14, 2003) $ 0.50 $ 0.23
On May 13, 2003, the last full trading day prior to the public
announcement of the signing of the merger agreement, the closing sale price of
our common stock reported on the Over-the-Counter Bulletin Board was $0.15 per
share. On May 28, 2003, the most recent practicable date prior to the printing
of this proxy statement, the closing price of our common stock reported on the
Over-the-Counter Bulletin Board was $0.50. You are urged to obtain current
market quotations for our common stock prior to making any decision with respect
to the proposed merger.
HOLDERS OF COMMON EQUITY
As of May 28, 2003, there were 405 registered holders of record for our
common stock.
DIVIDENDS
We have never declared or paid dividends on our common stock.
38
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain information contained herein should be considered
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 which is subject to a number of risks and
uncertainties. The preparation of forward-looking statements requires the use of
estimates of future revenues, expenses, activity levels and economic and market
conditions, many of which are outside our control. Specific factors that could
cause actual results to differ materially from those set forth in the
forward-looking statements include: economic conditions, labor costs, cost of
supplies, competitive pressures on pricing, particularly from lower-cost
competitors, government legislation, customer perceptions of our products,
demand for our products, and other operational matters and risks and
uncertainties listed from time to time in our reports to the Securities and
Exchange Commission. Other factors and assumptions not identified above are also
involved in the preparation of forward-looking statements, and the failure of
such other factors and assumptions to be realized may also cause actual results
to differ materially from those discussed. We do not assume responsibility for
the accuracy and completeness of the forward-looking statements. We assume no
obligation to update such estimates to reflect actual results, changes in
assumptions or changes in other factors affecting such estimates.
39
OTHER MATTERS
As of the date of this proxy statement, we know of no business that
will be presented for consideration at the meeting other than the items referred
to above. If any other matter is properly brought before the meeting for action
by stockholders, proxies in the enclosed form returned to us will be voted in
accordance with the recommendation of our Board of Directors or, in the absence
of such a recommendation, in accordance with the judgment of the proxy holder.
PROPOSALS BY STOCKHOLDERS OF NEXLAND
If we complete the merger, we will no longer have public stockholders
or any public participation in our stockholder meetings. If we do not complete
the merger, we intend to hold our next annual stockholder meeting in 2004. In
that case, if you are still a stockholder as of the record date of that meeting,
you would continue to be entitled to attend and participate in our stockholder
meetings. Proposals by our stockholders that are intended to be presented at our
2004 annual meeting must be received by us within a reasonable time before we
begin to print and mail our proxy materials in order that they may be considered
for inclusion in the proxy statement and form of proxy relating to that meeting.
Proposals received within 90 days of our 2004 annual meeting will be considered
to be received within a reasonable time.
WHERE YOU CAN FIND MORE INFORMATION
As required by law, we file reports, proxy statements and other
information with the Securities and Exchange Commission. Copies of our reports,
proxy statements and other information may be inspected and copied at the public
reference facilities maintained by the Securities and Exchange Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
Reports, proxy statements and other information concerning Nexland may
be inspected at The National Association of Securities Dealers, 1735 K Street,
N.W., Washington, D.C. 20006.
Copies of our reports, proxy statements and other information can also
be obtained by mail at prescribed rates from the Public Reference Section of the
Securities and Exchange Commission, 450 Fifth Street, N.W. Washington, D.C.
20549 or by calling the Securities and Exchange Commission at 1-800-SEC-0330.
The Securities and Exchange Commission maintains a website on the Internet that
contains reports, proxy statements and other information regarding Nexland. The
address of the website maintained on the Internet by the Securities and Exchange
Commission is http://www.sec.gov.
Neither Symantec nor we have authorized anyone to give any information
or make any representation about the merger or about the respective companies
that differs from or adds to the information in this proxy statement or in the
documents that Symantec or we file publicly with the Securities and Exchange
Commission. Therefore, you should not rely upon any information that differs
from or is in addition to the information contained in this proxy statement or
in the documents that Symantec or we file publicly with the Securities and
Exchange Commission.
40
The information contained in this proxy statement speaks only as of the
date on the cover, unless the information specifically indicates that another
date applies.
With respect to the information contained in this document, Symantec
has supplied the information concerning Symantec and Nebraska Merger Sub, and we
have supplied the information concerning us.
41
APPENDIX A
AGREEMENT AND PLAN OF MERGER
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
SYMANTEC CORPORATION,
NEBRASKA ACQUISITION SUB, INC.,
and
NEXLAND, INC.
Dated as of May 13, 2003
================================================================================
TABLE OF CONTENTS
PAGE
----
ARTICLE 1. DEFINITIONS..........................................................................1
1.1 Defined Terms.......................................................................1
1.2 Interpretation Provisions..........................................................12
ARTICLE 2. THE MERGER..........................................................................12
2.1 The Merger.........................................................................12
2.2 Effective Time.....................................................................12
2.3 Effect of the Merger...............................................................13
2.4 Certificate of Incorporation; Bylaws...............................................13
2.5 Directors and Officers.............................................................13
2.6 The Merger Consideration; Effect on Outstanding Securities of the Company..........13
2.7 Dissenting Shares..................................................................14
2.8 Exchange Procedures................................................................15
2.9 No Further Ownership Rights in Company Securities..................................15
2.10 Lost, Stolen or Destroyed Certificates.............................................16
2.11 Taking of Necessary Action; Further Action.........................................16
2.12 Tax Treatment......................................................................16
2.13 Withholding........................................................................16
2.14 Cancellation, Termination or Exercise of In-the-Money Company Options..............16
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MAJOR STOCKHOLDERS................17
3.1 Organization of the Company........................................................17
3.2 Capitalization of the Company......................................................17
3.3 Stockholders' Agreements, etc......................................................18
3.4 Authorization......................................................................18
3.5 Officers and Directors.............................................................19
3.6 Bank Accounts......................................................................19
3.7 Subsidiaries.......................................................................19
3.8 Real Property......................................................................19
3.9 Personal Property..................................................................20
3.10 Environmental Matters..............................................................21
3.11 Contracts..........................................................................22
3.12 No Conflict or Violation; Consents.................................................24
3.13 Permits............................................................................24
3.14 SEC Reports; Financial Statements; Books and Records...............................25
3.15 Absence of Certain Changes or Events...............................................26
3.16 Liabilities........................................................................28
3.17 Litigation.........................................................................28
3.18 Labor Matters......................................................................29
3.19 Employee Benefit Plans.............................................................30
3.20 Transactions with Related Parties..................................................32
3.21 Compliance with Law................................................................32
3.22 Intellectual Property..............................................................32
3.23 Tax Matters........................................................................36
3.24 Insurance..........................................................................38
3.25 Brokers; Transaction Costs.........................................................39
3.26 No Other Agreements to Sell the Company or the Assets..............................39
3.27 Accounts Receivable................................................................39
3.28 Inventory..........................................................................40
3.29 Product Warranty...................................................................40
3.30 Board Recommendation...............................................................40
3.31 Fairness Opinion...................................................................40
3.32 Material Misstatements or Omissions................................................40
i
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB..............................41
4.1 Organization.......................................................................41
4.2 Authorization......................................................................41
4.3 No Conflicts.......................................................................41
4.4 Approvals..........................................................................41
4.5 Merger Consideration...............................................................42
4.6 Brokers' and Finders' Fees.........................................................42
4.7 Board Approval; No Stockholder Approval Required...................................42
4.8 Material Misstatements or Omissions................................................42
ARTICLE 5. CONDUCT PRIOR TO THE EFFECTIVE TIME.................................................42
5.1 Conduct of Business of the Company.................................................42
5.2 No Solicitation....................................................................44
ARTICLE 6. ADDITIONAL COVENANTS................................................................46
6.1 Special Meeting; Board Recommendation..............................................46
6.2 Voting Agreements..................................................................47
6.3 Access to Information..............................................................47
6.4 Confidentiality....................................................................47
6.5 Expenses...........................................................................48
6.6 Public Disclosure..................................................................48
6.7 Commercially Reasonable Efforts....................................................48
6.8 Notification of Certain Matters....................................................48
6.9 Company Repurchases................................................................49
6.10 Proprietary Rights.................................................................49
6.11 Tax Matters........................................................................49
6.12 SEC Filings........................................................................50
6.13 Stockholder Litigation.............................................................50
6.14 Indemnification....................................................................51
ARTICLE 7. CONDITIONS TO THE MERGER............................................................51
7.1 Conditions to Obligations of Each Party to Effect the Merger.......................51
7.2 Additional Conditions to Obligations of the Company................................51
7.3 Additional Conditions to the Obligations of Buyer..................................52
ARTICLE 8. TERMINATION.........................................................................54
8.1 Termination........................................................................54
8.2 Termination by Buyer...............................................................55
8.3 Termination by the Company.........................................................56
8.4 Procedure for Termination..........................................................56
8.5 Effect of Termination..............................................................56
8.6 Extension; Waiver..................................................................57
ii
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE 9. MISCELLANEOUS PROVISIONS............................................................57
9.1 Notices............................................................................57
9.2 Entire Agreement...................................................................58
9.3 Further Assurances; Post-Closing Cooperation.......................................58
9.4 Amendment; Waiver..................................................................58
9.5 Third Party Beneficiaries..........................................................59
9.6 No Assignment; Binding Effect......................................................59
9.7 Headings...........................................................................59
9.8 Invalid Provisions.................................................................59
9.9 Governing Law......................................................................59
9.10 Arbitration........................................................................59
9.11 Remedies Cumulative................................................................59
9.12 Construction.......................................................................60
9.13 Counterparts.......................................................................60
iii
EXHIBITS TO THE AGREEMENT AND PLAN OF MERGER
Exhibit A Form of Voting Agreement
Exhibit B Form of Certificate of Merger
Exhibit C Form of Buyer Compliance Certificate
Exhibit D Form of Employment Agreement
Exhibit E Form of Company Compliance Certificate
Exhibit F Form of Noncompetition Agreement with Key Employees
Exhibit G Form of Noncompetition Agreement with Nexland, S.A.
Exhibit H Form of Indemnification Agreement
iv
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 13, 2003 (the
"AGREEMENT"), is by and among Symantec Corporation, a Delaware corporation
("BUYER"), Nebraska Acquisition Sub, Inc., a Delaware corporation and
wholly-owned subsidiary of Buyer ("MERGER SUB"), and Nexland, Inc., a Delaware
corporation (the "COMPANY").
RECITALS:
A. The respective Boards of Directors of Buyer, Merger Sub and the
Company have determined that it is advisable and in the best interests of their
respective stockholders to effect the acquisition of the Company pursuant to the
terms and subject to the conditions set forth herein.
B. In furtherance of such acquisition, the Boards of Directors of
Buyer, Merger Sub and the Company have each approved the merger of Merger Sub
with and into the Company (the "MERGER"), upon the terms and subject to the
conditions set forth herein, in accordance with the applicable provisions of the
Delaware General Corporation Law (the "DGCL" or "DELAWARE LAW").
C. In connection with the execution of this Agreement and as an
inducement to Buyer to enter into this Agreement, Gregory S. Levine, Martin E.
Dell'Oca, I. Daniel Sultan, Andre Chouraqui, Laurent Solomon and Yves Many
(collectively, the "MAJOR STOCKHOLDERS") shall have executed and delivered to
Buyer, concurrently with the execution and delivery of this Agreement by the
parties hereto, a Voting Agreement in the form attached hereto as EXHIBIT A.
E. Pursuant to the Merger, each outstanding share of Company Common
Stock will be converted solely into the right to receive cash payment, as
provided in Section 2.6 herein, upon the terms and subject to the conditions set
forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Buyer, Merger Sub and the Company hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the terms below shall
have the following meanings:
"ACQUISITION AGREEMENT" has the meaning set forth in Section
5.2(f).
"ACQUISITION PROPOSAL" has the meaning set forth in Section
5.2(c).
"ACTIONS" means, collectively, any action, order writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, investigation or dispute.
"AFFILIATE" of a Person means any other Person which, directly
or indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" has the meaning set forth in the preamble.
"AGGREGATE COMPANY OPTION CONSIDERATION" means $1,777,376.45,
subject to adjustment as set forth in Section 2.14(c).
"APPROVAL" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"ASSETS" means the right, title and interest of any Person in
its properties, assets and rights of any kind, whether tangible or intangible,
real or personal, including without limitation the right, title and interest in
the following: all Contracts and Contract Rights; all machinery, equipment and
computer hardware; all inventory; all Books and Records; all Proprietary Rights;
all Permits; all return and other rights under or pursuant to all warranties,
representations and guarantees made by suppliers and other third parties in
connection with the Assets or services furnished to such Person; all cash,
accounts receivable, deposits and prepaid expenses; and all goodwill.
"BALANCE SHEET DATE" means December 31, 2002.
"BENEFIT ARRANGEMENT" means any employment, consulting,
severance or other similar contract, arrangement or policy (written or oral) and
each plan, arrangement, program, agreement or commitment (written or oral)
providing for insurance coverage (including, without limitation, any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health or accident benefits (including, without limitation, any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of the Code
providing for the same or other benefits) or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement insurance,
compensation or benefits which (a) is not a Welfare Plan, Pension Plan or
Multiemployer Plan, (b) is entered into, maintained, contributed to or required
to be contributed to, as the case may be, by the Company or any Subsidiary or
under which the Company or any Subsidiary may incur any liability, and (c)
covers any Employee or former Employee.
"BOOKS AND RECORDS" means (a) all product, business and
marketing plans, sales and promotional literature and artwork relating to the
Assets of the Company or any Company Subsidiary or the Business, (b) all books,
records, lists, ledgers, financial data, files, reports, Tax Returns and related
work papers and letters from accountants, budgets, pricing guidelines, journals,
2
deeds, title policies, minute books, stock certificates and books, stock
transfer ledgers, Contracts, product and design manuals, plans, drawings,
technical manuals and operating records of every kind relating to the Assets of
the Company or the Company Subsidiaries or the Business (including records and
lists of customers, distributors, suppliers and personnel), computer files and
programs (including data processing files and records), retrieval programs,
operating data and plans and environmental studies and plans, and (c) all
telephone and fax numbers used in the Business, and in each case whether
maintained as hard copy or stored in computer memory and whether owned by the
Company or its Affiliates.
"BUSINESS" means the business and operations of the Company.
"BUSINESS COMBINATION" means, with respect to any Person, (i)
any merger, consolidation or other business combination to which such Person is
a party, (ii) any sale, dividend, split or other disposition of any capital
stock or other equity interests of such Person (except for issuances of common
stock upon conversion of preferred stock outstanding on the date hereof or the
exercise of options or warrants outstanding on the date hereof or issued in
accordance with the covenants of this Agreement), (iii) any tender offer
(including a self tender), exchange offer, recapitalization, restructuring,
liquidation, dissolution or similar or extraordinary transaction, (iv) any sale,
dividend or other disposition of all or a material portion of the Assets of such
Person (including by way of exclusive license or joint venture formation) or (v)
the entering into of any agreement or understanding, the granting of any rights
or options, or the acquiescence of such Person, with respect to any of the
foregoing.
"BUSINESS DAY" means a day other than Saturday, Sunday or any
day on which banks located in the State of California are authorized or
obligated to close.
"BUYER" has the meaning set forth in the preamble.
"BUYER EXPENSE NOTICE" has the meaning set forth in Section
8.5(b).
"BUYER TRANSACTION EXPENSES" has the meaning set forth in
Section 8.5(b).
"CERTIFICATE OF MERGER" has the meaning set forth in Section
2.2.
"CERTIFICATES" has the meaning set forth in Section 2.8(b).
"CLOSING" has the meaning set forth in Section 2.1(b).
"CLOSING DATE" means the date of the Closing.
"COBRA" has the meaning set forth in Section 3.19(f).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON MERGER CONSIDERATION" means the dollar amount equal to
the fraction, the numerator of which is the Merger Consideration minus the
Aggregate Company Option Consideration and the denominator of which is the
3
aggregate number of shares of Company Common Stock outstanding immediately prior
to the Effective Time.
"COMPANY" has the meaning set forth in the preamble.
"COMPANY BALANCE SHEET" has the meaning set forth in Section
3.14(b).
"COMPANY COMMON STOCK" means the Common Stock, par value
$0.0001 per share, of the Company.
"COMPANY FINANCIAL STATEMENTS" has the meaning set forth in
Section 3.14(b).
"COMPANY MATERIAL ADVERSE EFFECT" or "COMPANY MATERIAL ADVERSE
CHANGE" or a similar phrase means (a) any change, circumstance or effect that
individually or in the aggregate with all other changes, circumstances and
effects, is or would be reasonably likely to be materially adverse to (i) the
business, operations, assets, properties (whether tangible or intangible),
liabilities (taken as a whole), condition (financial or otherwise), results of
operations or prospects, of the Company and the Company Subsidiaries, taken as a
whole, or (ii) the right or ability of the Company to consummate any of the
transactions contemplated hereby or (b) any event or condition which, with the
passage of time, the giving or receipt of notice, would reasonably be expected
to constitute a "Material Adverse Effect" on or "Material Adverse Change" with
respect to the Company and the Company Subsidiaries, taken as a whole.
"COMPANY NEGATIVE VOTE" has the meaning set forth in Section
8.1(d).
"COMPANY OPTION PAYMENT SCHEDULE" means SCHEDULE 2.4(C) to the
Disclosure Schedules, which sets forth, each as of the date hereof, the name of
each holder of In-the-Money Company Options, as well as the number of
In-the-Money Company Options held by each such holder, the number of shares of
Company Common Stock for which such In-the-Money Company Options are
exercisable, the price per share of Company Common Stock for which such
In-the-Money Company Options are exercisable and the amount payable to the
holder of such In-the-Money Company Options pursuant to this Agreement.
"COMPANY OPTIONS" means options to purchase shares of Company
Common Stock issued by the Company (including, but not limited to, options
issued to Employees).
"COMPANY PROPRIETARY RIGHT" shall mean any Proprietary Right
that is (i) owned by, (ii) licensed to, or (iii) was developed or created by or
for the Company or the Company Subsidiaries.
"COMPANY REGISTERED PROPRIETARY RIGHTS" means all Registered
Proprietary Rights owned by, filed in the name of, assigned to or applied by or
for, the Company or the Company Subsidiaries.
"COMPANY RESTRICTED STOCK" means shares of Company Common
Stock which are subject to a repurchase option by the Company.
"COMPANY SEC REPORTS" has the meaning set forth in Section
3.14(a).
4
"COMPANY SHARES" means (i) all shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time, (ii) all vested
and unvested Company Options issued and outstanding immediately prior to the
Effective Time, and (iii) any other securities convertible into or otherwise
exercisable or exchangeable for Company Common Stock issued and outstanding
immediately prior to the Effective Time.
"COMPANY SPECIAL MEETING" has the meaning set forth in Section
6.1(a).
"COMPANY STOCKHOLDER" means each holder of Company Common
Stock immediately prior to the Effective Time.
"COMPANY STOCK PLANS" means the Company's 1999 Nonqualifying
Stock Option Plan and the Company's 2000 Stock Option Plan.
"COMPANY SUBSIDIARY" means any corporation or other
organization, whether incorporated or unincorporated, of which (A) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by the Company (through ownership of
securities, by contract or otherwise) or (B) the Company or any subsidiary of
the Company is a general partner of any general partnership or a manager of any
limited liability company.
"COMPANY THIRD PARTY EXPENSES" has the meaning set forth in
Section 6.5.
"COMPANY WARRANTS" has the meaning set forth in Section
3.2(b).
"CONFIDENTIALITY AGREEMENT" means that certain Mutual
Non-Disclosure Agreement, dated as of January 20, 2003, between Buyer and the
Company.
"CONSENTS" means any and all Permits and any and all consents,
approvals or waivers from third parties that are required for the consummation
of the transactions contemplated by this Agreement.
"CONTRACT RIGHTS" means all rights and obligations under the
Contracts.
"CONTRACTS" means all agreements, contracts, leases (whether
for real or personal property), purchase orders, undertakings, covenants not to
compete, employment agreements, confidentiality agreements, licenses,
instruments, obligations and commitments to which a Person is a party or by
which a Person or any of its Assets are bound or affected, whether written or
oral.
"DEFAULT" means (a) a breach of or default under any Contract,
(b) the occurrence of an event that with the passage of time or the giving of
notice or both would constitute a breach of or default under any Contract or (c)
the occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract.
"DGCL" or "DELAWARE LAW" has the meaning set forth in the
recitals.
5
"DISCLOSURE SCHEDULES" has the meaning set forth in Article 3.
"DISSENTING SHARES" has the meaning set forth in Section
2.7(a).
"EFFECTIVE TIME" has the meaning set forth in Section 2.2.
"EMPLOYEE PLANS" means all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"EMPLOYEES" means all officers and directors of the Company or
the Company Subsidiaries and all other Persons employed by the Company on a full
or part-time basis, together with all Persons retained as "independent
contractors" as of the relevant date.
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section
7.3(d).
"ENCUMBRANCE" means any claim, lien, pledge, option, charge,
easement, tax assessment, security interest, deed of trust, mortgage,
right-of-way, encroachment, building or use restriction, conditional sales
agreement, encumbrance or other right of third parties, whether voluntarily
incurred or arising by operation of law, and includes any agreement to give any
of the foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.
"ENVIRONMENTAL CLAIMS" means all notices of violation, liens,
claims, demands and Action or Proceedings arising directly or indirectly out of
Environmental Conditions or Environmental Laws.
"ENVIRONMENTAL CONDITIONS" means the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata or
ambient air, relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, pouring, emptying, discharging, injecting, escaping, leaching,
disposal, dumping or threatened release of Hazardous Substances by the Company
or any of its predecessors or successors in interest, or by its respective
agents, representatives, Employees or independent contractors when acting in
such capacity on behalf of the Company. With respect to Environmental Claims by
third parties, Environmental Conditions also include the exposure of persons to
Hazardous Substances at the work place or the exposure of persons or property to
Hazardous Substances migrating from or otherwise emanating from or located on
property owned or occupied by the Company.
"ENVIRONMENTAL LAWS" means all applicable U.S. federal, state,
district and local laws, all rules or regulations promulgated thereunder, and
all orders, consent orders, judgments, notices, permits or demand letters
issued, promulgated or entered pursuant thereto, relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface water, ground water, land surface, or subsurface strata), including,
without limitation, (a) laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, industrial
materials, wastes or other substances into the environment and (b) laws relating
to the identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport or other handling of
pollutants, contaminants, chemicals, industrial materials, wastes or other
6
substances. Environmental Laws shall include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Toxic Substances Control Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe Drinking
Water Act, as amended, the Clean Air Act, as amended, and all analogous laws
promulgated or issued by any state or other Governmental or Regulatory
Authority.
"ENVIRONMENTAL REPORTS" means any and all written analyses,
summaries or explanations, in the possession or control of the Company or the
Company Subsidiaries, prepared for the purpose of analyzing or assessing (a) any
Environmental Conditions in, on or about the properties of the Company or the
Company Subsidiaries or (b) the Company's or the Company Subsidiaries'
compliance with Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" means any entity which is (or at any
relevant time was) a member of a "controlled group of corporations" with, under
"common control" with, or a member of an "affiliated service group" with, or
otherwise required to be aggregated with, the Company as set forth in Section
414(b), (c), (m) or (o) of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FACILITIES" means all plants, offices, manufacturing
facilities, stores, warehouses, administration buildings and all real property
and related facilities leased by the Company or the Company Subsidiaries, all as
identified or listed on DISCLOSURE SCHEDULE 3.8(B).
"GAAP" means generally accepted accounting principles as
applied in the United States.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court,
tribunal, arbitrator, authority, agency, bureau, board, commission, department,
ministry or a branch thereof, official or other instrumentality of the United
States, any foreign country or any domestic or foreign state, province, county,
city or other political subdivision.
"HAZARDOUS SUBSTANCES" means all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials (whether solids, liquids or
gases) subject to regulation, control or remediation under Environmental Laws.
"INDEMNIFICATION AGREEMENT" has the meaning set forth in
Section 7.3(v).
"IRREVOCABLE OPTION AGREEMENT" has the meaning set forth in
Section 7.3(m).
"IN-THE-MONEY COMPANY OPTIONS" means all Company Options
identified on the Company Option Payment Schedule.
7
"KEY EMPLOYEES" means each of Gregory S. Levine, I. Daniel
Sultan and David Lonardo.
"LAW" or "LAWS" means any law, statute, order, decree, consent
decree, judgment, rule, regulation, ordinance or other pronouncement having the
effect of law whether in the United States, any foreign country, or any domestic
or foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"LEASE" means a real property lease or a personal property
lease, as applicable.
"LEASED PROPERTY" has the meaning set forth in Section 3.8(b).
"LETTER OF INTENT" means that certain non-binding Letter of
Intent between Buyer and the Company dated as of February 13, 2003.
"LIABILITY" means any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any Person of any type, whether accrued, absolute,
contingent, matured, unmatured, liquidated, unliquidated, known or unknown.
"LICENSE" means any Contract that grants a Person the right to
use or otherwise enjoy the benefits of any Proprietary Right (including without
limitation any covenants not to sue with respect to any Proprietary Right).
"MAJOR STOCKHOLDERS" has the meaning set forth in the
preamble.
"MERGER" has the meaning set forth in the preamble.
"MERGER CONSIDERATION" means a cash amount equal to
$19,600,000.00.
"MERGER SUB" has the meaning set forth in the preamble.
"MULTIEMPLOYER PLAN" means any "multiemployer plan," as
defined in Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company or any
ERISA Affiliate contributes to or is required to contribute to, or, after
September 25, 1980, contributed to or was required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability and (b) covers
any Employee or former Employee or any ERISA Affiliate.
"NEXLAND CANADA" means Nexland Canada Distributors Inc., a
corporation organized under the laws of British Columbia.
"NEXLAND, S.A." means Nexland, S.A., a corporation organized
under the laws of France.
"NEXLAND, S.A. INVENTORY" has the meaning set forth in Section
7.3(t).
"OFFICER'S CERTIFICATE" has the meaning set forth in Section
6.5.
8
"OPTION" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract (other
than such Person's preferred stock) that gives the right to (a) purchase or
otherwise receive or be issued any shares of capital stock or other equity
interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person or (b) receive any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock or other
equity interests of such Person.
"ORDER" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"OUTSIDE DATE" has the meaning set forth in Section 9.1(b).
"PAYING AGENT" means American Stock Transfer and Trust
Company.
"PENSION PLAN" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the
Company or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the five (5) years prior to the Closing
Date, maintained, administered, contributed to or was required to contribute to,
or under which the Company or any ERISA Affiliate may incur any liability
(including, without limitation, any contingent liability) and (b) covers any
Employee or former Employee or any ERISA Affiliate.
"PERMITS" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, national, state or local, necessary for the
past, present or anticipated conduct or operation of the Business or ownership
of the Assets of any Person.
"PERMITTED ENCUMBRANCES" means (a) statutory liens of
landlords, liens of carriers, warehousepersons, mechanics and material persons,
and purchase money liens incurred in the ordinary course of business for sums
(i) not yet due and payable, or (ii) being contested in good faith, if, in
either such case, an adequate reserve shall have been made therefor in such
Person's financial statements, (b) liens incurred or deposits made in connection
with workers' compensation, unemployment insurance and other similar types of
social security programs or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return of money bonds and similar obligations, in each case in
the ordinary course of business, consistent with past practice, (c) easements,
rights-of-way, restrictions and other similar charges or encumbrances, in each
case, which do not interfere with the ordinary conduct of business of the
Company and the Company Subsidiaries and do not materially detract from the
value of the property upon which such encumbrance exists, and (d) liens securing
taxes, assessments and governmental charges not yet due and payable.
"PERSON" means any person or entity, whether an individual,
trustee, corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
"POTENTIAL ACQUIROR" has the meaning set forth in Section
5.2(a).
9
"PROPRIETARY RIGHTS" means all (a) U.S. and foreign patents,
patent applications, patent disclosures and improvements thereto, including
petty patents and utility models and applications therefor, (b) U.S. and foreign
trademarks, service marks, trade dress, logos, trade names and corporate names
and the goodwill associated therewith and registrations and applications for
registration thereof, (c) U.S. and foreign copyrights and registrations and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations and applications for registration thereof, (e) rights in Trade
Secrets, (f) domain name registrations, (g) other proprietary rights, and (h)
licenses granting any rights with respect to any of the foregoing.
"PROXY STATEMENT" has the meaning set forth in Section 6.1(b).
"PTO" shall mean the United States Patent and Trademark
Office.
"REGISTERED PROPRIETARY RIGHTS" shall mean all United States,
international and foreign: (a) issued patents and patent applications (including
provisional applications), (b) registered trademarks and servicemarks,
applications to register trademarks and servicemarks, intent-to-use
applications, other registrations or applications to trademarks or servicemarks,
(c) registered copyrights and applications for copyright registration, (d) any
mask work registrations and applications to register mask works, and (e) any
other Proprietary Right that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.
"RELATED PARTY" means (a) any of the Company's officers,
directors, stockholders and any officers, directors, partners, associates or
relatives of such officers, directors and stockholders, (b) any Person in which
the Company or any stockholder or any Affiliate, associate or relative of any
such Person has any direct or indirect interest, including without limitation
Nexland, S.A., Nexland Asia Limited, Smerwick Ltd. and Longfield Ltd. and (c)
any direct or indirect trustee or beneficiary of any stockholder.
"REPRESENTATIVE" of any Person means any officer, director,
Employee, stockholder, attorney, principal, investment advisors, accountant,
agent, Affiliate, or other representative of such Person.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SUBSIDIARY" means any Person in which the Company or Buyer,
as the context requires, directly or indirectly through Subsidiaries or
otherwise, beneficially owns at least 50% of either the equity interest in, or
the voting control of, such Person, whether or not existing on the date hereof.
"SUPERIOR PROPOSAL" has the meaning set forth in Section
5.2(d).
"SUPERIOR TRANSACTION" has the meaning set forth in Section
5.2(f).
10
"SURVIVING CORPORATION" has the meaning set forth in Section
2.1(a).
"TAX" or "TAXES" means any (i) federal, state, local or
foreign net income, gross income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, and (ii) any liability of the Company
or the Company Subsidiaries imposed by law for the payment of amounts described
in clause (i) on another Person, including as a result of being a transferee,
successor or a member of an affiliated, consolidated, combined or unitary group.
"TAX LIABILITY" means a Liability for any Tax.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof, and
including any elections, rulings and requests for rulings and other
correspondence to or from any Governmental Authority dealing with Taxes.
"THIRD PARTY EXPENSES" has the meaning set forth in Section
6.5.
"TO THE KNOWLEDGE" or "KNOWLEDGE" of a party (or similar
phrases) means to the extent of matters which are actually known by such party
and when used in respect of the Company or the Company Subsidiaries, the term
"to the knowledge" or "knowledge" shall mean the matters which are known or
reasonably should be known by Gregory S. Levine, Martin E. Dell'Oca, I. Daniel
Sultan or David Lonardo after due inquiry.
"TRADE SECRETS" means all trade secrets and confidential
business information (including ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, research and development information, software, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans, mailing and e-mail lists, and customer and supplier mailing
and e-mail lists and information), in each case which are not generally known to
the public.
"VOTING AGREEMENT" means a Voting Agreement in the form
attached hereto as EXHIBIT A, dated the date hereof, executed and delivered to
Buyer by each Major Stockholder.
"WELFARE PLAN" means any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, which (a) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability and (b) covers
any Employee or former Employee or any ERISA Affiliate.
"WSRI" has the meaning set forth in Section 3.10(f).
11
1.2 INTERPRETATION PROVISIONS.
(a) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement, and article, section,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The terms "include" and
"including" are not limiting and mean "including without limitation."
(b) References to agreements and other documents are also to
all subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations
promulgated thereunder and references to statutes or regulations shall be
construed as including all statutory and regulatory provisions consolidating,
amending or replacing the statute or regulation.
(d) The schedules and exhibits to this Agreement are a
material part hereof and shall be treated as part of this Agreement.
ARTICLE 2.
THE MERGER
2.1 THE MERGER.
(a) THE MERGER. At the Effective Time, and on the terms and
subject to the conditions of this Agreement and the DGCL, Merger Sub shall be
merged with and into the Company, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving corporation. The
Company, as the surviving corporation after the Merger, is hereinafter sometimes
referred to as the "SURVIVING CORPORATION."
(b) CLOSING. Unless this Agreement shall have been terminated
pursuant to Section 8.1, and subject to the satisfaction (or to the extent
permitted, the waiver) of the conditions set forth in Articles 6 and 7, the
closing of the transactions contemplated by this Agreement (the "CLOSING") will
take place (i) at the offices of Heller Ehrman White & McAuliffe LLP, 275
Middlefield Road, Menlo Park, California, as promptly as practicable (and in any
event within three (3) Business Days) after satisfaction (or to the extent
permitted, the waiver) of the conditions set forth in Articles 6 and 7 or (ii)
at such other time, date or place as Buyer and the Company may mutually agree.
2.2 EFFECTIVE TIME. As promptly as practicable after the satisfaction
(or to the extent permitted, the waiver) of the conditions set forth in Articles
6 and 7, and provided that this Agreement has not been terminated pursuant to
Section 9.1, the parties hereto shall cause the Merger to be consummated by
executing and filing a certificate of merger, in substantially the form attached
hereto as EXHIBIT B, with the Secretary of State of the State of Delaware as
required by, and executed in accordance with the relevant provisions of, the
DGCL (the "CERTIFICATE OF MERGER"), the time of acceptance by the Secretary of
State of Delaware of such filing or such later time as may be agreed to by the
parties and set forth in the Certificate of Merger being referred to herein as
the "EFFECTIVE TIME".
12
2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights
privileges, powers, franchises of the Company and the Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and the Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
2.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of
the Company in effect immediately prior to the Effective Time shall be amended
in its entirety as set forth in Exhibit A to the Certificate of Merger, and as
so amended shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with applicable law.
(b) At the Effective Time, the Bylaws of the Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter duly amended in accordance with
applicable law, the Certificate of Incorporation of the Surviving Corporation
and such Bylaws.
2.5 DIRECTORS AND OFFICERS. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation and in
accordance with applicable law. The Company shall cause each or any director and
officer of the Company to tender his or her resignation prior to the Effective
Time, with each such resignation to be effective as of the Effective Time.
2.6 THE MERGER CONSIDERATION; EFFECT ON OUTSTANDING SECURITIES OF THE
COMPANY. On the terms and subject to the conditions of this Agreement, at the
Effective Time, by virtue of the Merger and without any action on the part of
Buyer, the Company or the holder of any Company Shares, the following shall
occur:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time will
be canceled and extinguished, and each share of Company Common Stock which is
issued and outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock to be canceled pursuant to Section 2.6(b), and
any Dissenting Shares (as provided in Section 2.7)) shall be automatically
converted into solely the right to receive in cash, without interest, the Common
Merger Consideration.
(b) CANCELLATION OF COMPANY-OWNED STOCK. Each share of Company
Common Stock owned by the Company or the Company Subsidiaries immediately prior
to the Effective Time shall be automatically canceled and extinguished without
any exchange thereof and without any further action on the part of Buyer, Merger
Sub or the Company.
13
(c) COMPANY OPTIONS.
(i) Each In-the-Money Company Option outstanding
immediately prior to the Effective Time shall be cancelled and extinguished and
shall be automatically exchanged for the right to receive a cash payment in the
amount set forth on the Company Option Payment Schedule.
(ii) All other Company Options shall be cancelled and
extinguished as of the Effective Time without consideration.
(iii) The Company shall take all action necessary to
cause the Company Options to be treated as contemplated by this Section 2.6(c).
(d) COMPANY WARRANTS. The Company shall take all action
necessary to cause the Company Warrants to be exercised prior to the Effective
Time and to cause the Company Warrants to be automatically terminated if not
exercised prior to the Effective Time.
(e) COMMON STOCK OF MERGER SUB. Each share of common stock of
the Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any shares shall continue to
evidence ownership of such shares of capital stock of the Surviving Corporation.
2.7 DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger and
who has demanded appraisal for such shares in accordance with Delaware Law
("DISSENTING SHARES") shall not be converted into a right to receive the Common
Merger Consideration unless and until such holder fails to perfect or withdraws
or otherwise loses such holder's right to appraisal. A holder of Dissenting
Shares shall be entitled to receive payment of the appraisal value of such
shares of Company Common Stock held by such holder in accordance with the
provisions of Section 262 of the DGCL unless, after the Effective Time, such
holder fails to perfect or withdraws or loses such holder's right to appraisal,
in which case such shares shall be treated as if they had been converted as of
the Effective Time into the right to receive the Common Merger Consideration,
without interest thereon.
(b) The Company shall give Buyer (i) prompt notice of its
receipt of any written demands for appraisal of any shares of Company Common
Stock, withdrawals of such demands, and any other instruments relating to the
Merger served pursuant to Delaware Law and received by the Company and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under Delaware Law. The Company shall not, except with the
prior written consent of Buyer or as may be required under applicable law,
voluntarily make any payment with respect to any demands for appraisal of
Company Common Stock or offer to settle or settle any such demands.
14
2.8 EXCHANGE PROCEDURES.
(a) MERGER CONSIDERATION. On the Closing Date, Buyer shall
deposit with the Paying Agent, for exchange in accordance with this Article 2,
the Merger Consideration payable in exchange for the Company Common Stock and
the In-the-Money Company Options.
(b) EXCHANGE PROCEDURES. As soon as practicable after the
Effective Time, Buyer shall cause to be mailed to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented Company Common Stock or an option agreement representing
In-the-Money Company Options (the "CERTIFICATES") and which shares of Company
Common Stock or In-the-Money Company Options are exchanged for and represent the
right to receive a portion of the Merger Consideration pursuant to Section 2.6,
(i) a letter of transmittal in customary form (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent and shall be in such
form and have such other provisions as Buyer may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the appropriate portion of the Merger Consideration pursuant to Section 2.6.
Upon surrender of a Certificate for cancellation to Paying Agent or to such
other agent or agents as may be appointed by Buyer, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor an amount to which such holder is entitled pursuant
to Section 2.6, and the Certificate so surrendered shall be canceled. Until
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented Company Shares or In-the-Money Company Options will be deemed from
and after the Effective Time to evidence the ownership of the portion of the
Merger Consideration as provided in Section 2.6 without any interest thereon.
(c) REMAINING FUNDS. At any time following six (6) months
after the Effective Time, the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any funds (including any interest received
with respect thereto) which had been made available to the Paying Agent and
which have not been disbursed to holders of Certificates. Thereafter such
holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as a general creditor
thereof with respect to the Common Merger Consideration payable upon surrender
of their Certificates, without any interest thereon. Neither the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a Certificate
for Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
2.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY SECURITIES. The portion of
the Merger Consideration paid upon the surrender for exchange of shares of
Company Common Stock or In-the-Money Company Options in accordance with the
terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to such shares of Company Common Stock or In-the-Money Company
Options, and there shall be no further registration of transfers on the records
of the Company of shares of Company Common Stock or Company Options which 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 2.
15
2.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates evidencing shares of Company Common Stock or In-the-Money Company
Options shall have been lost, stolen or destroyed, Buyer shall cause the Paying
Agent to pay the portion of the Merger Consideration applicable to such shares
or options in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof; PROVIDED, HOWEVER,
that Buyer or Paying Agent may, in their discretion and as a condition precedent
to the payment thereof, require the owner of such lost, stolen or destroyed
Certificates to provide an indemnity with respect to the Certificates alleged to
have been lost, stolen or destroyed.
2.11 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 or to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company, the officers and directors of the
Surviving Corporation and the Buyer are fully authorized to take, and will use
their reasonable efforts to take, all lawful and reasonable action.
2.12 TAX TREATMENT. The Merger shall constitute a taxable transaction
under the Code.
2.13 WITHHOLDING. Buyer shall be entitled to deduct and withhold, from
the Merger Consideration otherwise payable to the Company Stockholders or
holders of In-the-Money Company Options, such amounts as may be required to be
deducted and withheld under the Code and any other applicable Tax laws. If any
withholding obligation may be avoided by any Company Stockholder or holder of
In-the-Money Company Options providing information or documentation to Buyer,
Buyer shall request that information before withholding. To the extent amounts
are so withheld and paid to any appropriate taxing authority, Buyer shall be
treated as though it had paid, from the Merger Consideration from which
withholding was required, an appropriate amount otherwise payable directly to
such Company Stockholders or holders of In-the-Money Company Options.
2.14 CANCELLATION, TERMINATION OR EXERCISE OF IN-THE-MONEY COMPANY
OPTIONS.
(a) If at any time after the date of this Agreement but
immediately prior to the Effective Time any In-the-Money Company Options are
cancelled or terminated without consideration in connection with the termination
of employment of the holder thereof or for any other reason other than the
exercise of such In-the-Money Company Options for cash, the amount of Aggregate
Company Option Consideration shall be reduced by an amount equal to the amount
payable in respect of each such In-the-Money Company Option, as such amount is
reflected on the Company Option Payment Schedule.
(b) If at any time after the date of this Agreement but
immediately prior to the Effective Time any In-the-Money Company Options are
exercised for cash, the Merger Consideration shall be increased by an amount
equal to the exercise price for each such In-the-Money Company Option.
16
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MAJOR STOCKHOLDERS
As an inducement of Buyer to enter into this Agreement, the Company
hereby makes the following representations and warranties to Buyer which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct, except as otherwise set forth in written
disclosure schedules of the Company (the "DISCLOSURE SCHEDULES") delivered to
Buyer prior to the date hereof, a copy of which is attached hereto. The
Disclosure Schedules are numbered to correspond to the various sections of this
Article 3 setting forth certain exceptions to the representations and warranties
contained in this Article 3 and certain other information called for by this
Agreement.
3.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with all requisite corporate power and authority to conduct the
Business as it is presently being conducted and to own or lease, as applicable,
the Assets owned or leased by it. Each of the Company Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company and each of the Company
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction the failure to be so qualified would
constitute a Company Material Adverse Effect. Each jurisdiction in which the
Company and the Company Subsidiaries are qualified to do business as a foreign
corporation is set forth in DISCLOSURE SCHEDULE 3.1.
3.2 CAPITALIZATION OF THE COMPANY.
(a) AUTHORIZED CAPITALIZATION. As of the date of this
Agreement, the authorized capitalization of the Company consists of (i)
50,000,000 shares of common stock, par value $0.0001 per share, of which
34,824,172 shares are issued and outstanding and (ii) 10,000,000 shares of
undesignated preferred stock, par value $0.0001 per share, none of which are
issued and outstanding. The Company has no other capital stock authorized,
issued or outstanding. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Company. With respect to any Company Common Stock that has been
issued subject to a right of repurchase on the part of the Company, DISCLOSURE
SCHEDULE 3.2(A) sets forth the holder thereof, the number and type of securities
covered thereby, and the vesting schedule thereof (including a description of
the circumstances under which such vesting schedule can or will be accelerated).
(b) COMPANY OPTIONS AND COMPANY WARRANTS. As of the date of
this Agreement, 6,592,346 shares of Company Common Stock are reserved for
issuance upon the exercise of outstanding Company Options and 100,000 shares of
Company Common Stock reserved for issuance upon exercise of warrants to purchase
Company Common Stock (the "COMPANY WARRANTS"). Except as set forth on Schedule
3.2(b), all of the Company Options have been validly granted under the Company
Common Stock Plan. DISCLOSURE SCHEDULE 3.2(B) sets forth the name of each holder
of Company Options and Company Warrants, as well as the number of Company
Options or Company Warrants held by each such holder, the number of shares of
17
Company Common Stock for which each such Company Option or Company Warrant is
exercisable (both vested and unvested in the case of Company Options), and the
price per share of Company Common Stock for which each such Company Option or
Company Warrant is exercisable (without taking into account whether or not such
Company Option or Company Warrant is in fact exercisable on the date hereof).
The Company has previously provided to Buyer true and correct copies of all
option agreements governing Company Options and all Company Warrants.
(c) NO OTHER CAPITAL STOCK, OPTIONS, WARRANTS. Except for the
Company Options referred to above and the Company Warrants, there are no
outstanding Options, warrants, convertible securities or rights of any kind to
purchase or otherwise acquire any shares of capital stock or other securities of
the Company or any Company Subsidiary. No debt securities of the Company or any
Company Subsidiary are issued and outstanding.
(d) The Company is directly or indirectly the record and
beneficial owner of all of the outstanding shares of capital stock or other
equity interests of each Company Subsidiary. All of such shares have been duly
authorized and are validly issued, fully paid, nonassessable and free of
preemptive rights with respect thereto and are owned by the Company free and
clear of any claim, lien or encumbrance of any kind with respect thereto. There
are no proxies or voting agreements with respect to such shares, and there are
not any existing options, warrants, calls, subscriptions, or other rights or
other agreements or commitments obligating the Company or any Company Subsidiary
to issue, transfer or sell any shares of capital stock or any other securities
convertible into, exercisable for, or evidencing the right to subscribe for any
shares of any Company Subsidiary. The Company does not directly or indirectly
own any interest in any Person except the Company Subsidiaries.
(e) VALID ISSUANCES. All outstanding shares of Company Common
Stock are, and any shares of Company Common Stock issued upon exercise of any
Company Option or Company Warrant will be, validly issued, fully paid and
non-assessable and not subject to any preemptive or similar rights created by
statute, the Company's Certificate of Incorporation or Bylaws, or any Contract.
The Company Options have been, and the shares of Company Common Stock have been
or will be, issued in compliance with all federal, state and foreign corporate
and securities laws.
3.3 STOCKHOLDERS' AGREEMENTS, ETC. Neither the Company nor any Company
Subsidiary is a party or subject to any agreement or understanding, and, to the
Company's knowledge, there is no Contract, arrangement or understanding between
or among any Persons, which affects, restricts or relates to voting, giving of
written consents, dividend rights or transferability of shares with respect to
the Company Common Stock, including without limitation any voting trust
agreement or proxy.
3.4 AUTHORIZATION. The Company has all necessary corporate power and
authority to enter into this Agreement and to perform its obligations hereunder
and, assuming the approval of the adoption of the Merger by a majority of the
outstanding shares of Company Common Stock at the Company Special Meeting or any
adjournment or postponement thereof, has taken all corporate action necessary to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company, and this Agreement is a valid and binding
18
obligation of the Company, enforceable against the Company in accordance with
its terms, except that enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors or (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
3.5 OFFICERS AND DIRECTORS. DISCLOSURE SCHEDULE 3.5 contains a true,
correct and complete list of all the officers and directors of the Company and
each Company Subsidiary.
3.6 BANK ACCOUNTS. DISCLOSURE SCHEDULE 3.6 contains a list of all of
the Company's and the Company Subsidiaries' bank accounts, safe deposit boxes
and persons authorized to draw thereon or have access thereto.
3.7 SUBSIDIARIES. The Company has no Subsidiaries, other than Nexland
Canada, and Nexland, Inc., a Florida corporation. Neither the Company nor any
Company Subsidiary owns any or has any obligations, whether conditional or
otherwise, to purchase any equity interests in any other entity.
3.8 REAL PROPERTY.
(a) COMPANY-OWNED REAL PROPERTY. Neither the Company nor any
Company Subsidiary owns any real property.
(b) LEASED REAL PROPERTY. DISCLOSURE SCHEDULE 3.8(B) sets
forth and describes briefly all Leases pursuant to which Facilities are leased,
occupied or used by the Company or any Company Subsidiary (as lessee), true and
correct copies of which have been delivered to Buyer. The Company or a Company
Subsidiary has good and valid leasehold title to, and enjoys peaceful and
undisturbed possession of, all leased property described in such Leases (the
"LEASED PROPERTY"), free and clear of any and all Encumbrances other than any
Permitted Encumbrances which would not permit the termination of the Lease
therefor by the lessor. With respect to each Leased Property (i) there are no
pending or, to the knowledge of the Company, threatened condemnation or
administrative proceedings relating to, or any pending or threatened Actions
relating to, the Company's or the Company Subsidiaries' leasehold interests in
such Leased Property or any portion thereof, (ii) to the knowledge of the
Company, no third party has entered into any sublease, license, option, right,
concession or other agreement or arrangement, written or oral, granting to any
person the right to use or occupy such Leased Property or any portion thereof or
interest therein, except in connection with a Permitted Encumbrance, and (iii)
neither the Company nor any Company Subsidiary has received notice of any
pending or threatened special assessment relating to such Leased Property or
otherwise has any knowledge of any pending or threatened special assessment
relating thereto.
With respect to each Lease listed on DISCLOSURE SCHEDULE 3.8(B), (i)
there has been no breach or default under any such Lease by the Company, any
Company Subsidiary or, to the knowledge of the Company, by any other party, (ii)
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby will not cause a material default under
any such Lease, (iii) such Lease is a valid and binding obligation of the
lessor, is in full force and effect with respect to and is enforceable against
the lessor in accordance with its terms, and will continue to be legal, binding,
19
enforceable, valid, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby, (iv) no party is in
breach or default and no action has been taken by the Company or any Company
Subsidiary, and no event has occurred which, with notice or lapse of time or
both, would permit termination, modification or acceleration by a party thereto
other than the Company or a Company Subsidiary without the consent of the
Company or a Company Subsidiary, as the case may be, under any such Lease that
is material to the Company or any Company Subsidiary, (v) no party has
repudiated any term thereof or threatened to terminate, cancel or not renew any
such Lease, (vi) neither the Company nor any Company Subsidiary has assigned,
transferred, conveyed, mortgaged or encumbered any interest therein or in any
leased property subject thereto (or any portion thereof), (vii) there are no
disputes, oral agreements, or forbearance programs in effect as to the lease or
sublease, (viii) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (vii) above are true and correct
with respect to the underlying Lease, (ix) neither the Company nor any Company
Subsidiary has assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold, and (x) all Facilities
leased or subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations.
3.9 PERSONAL PROPERTY.
(a) GENERAL. The Company or a Company Subsidiary owns or
leases all personal property Assets necessary for the conduct of the Business as
presently conducted, and such personal property Assets (taken as a whole) (i)
are free from material defects (patent and latent), (ii) have been maintained in
accordance with normal industry practice, and (iii) are in such operating
condition and repair as is appropriate for the conduct of the Business as
presently conducted.
(b) OWNED PERSONAL PROPERTY. The Company or a Company
Subsidiary has good and marketable title to all such personal property used by
it, free and clear of any and all Encumbrances other than Permitted
Encumbrances. With respect to each such item of personal property (i) there are
no Leases, subleases, licenses, options, rights, concessions or other
agreements, written or oral, granting to any party or parties the right of use
of any portion of such item of personal property, (ii) there are no outstanding
options or rights of first refusal in favor of any other party to purchase any
such item of personal property or any portion thereof or interest therein and
(iii) there are no parties (other than the Company or the Company Subsidiaries)
who are in possession of or who are using any such item of personal property.
(c) LEASED PERSONAL PROPERTY. Other than Personal Property
owned by the Company or the Company Subsidiaries, the Company or a Company
Subsidiary has good and valid leasehold title to all of the tangible personal
property Assets used by the Company or any Company Subsidiary, free and clear of
any and all Encumbrances other than Permitted Encumbrances which would not
permit the termination of the lease therefor by the lessor. DISCLOSURE SCHEDULE
3.9(C) sets forth all Leases for personal property.
With respect to each Lease listed on DISCLOSURE SCHEDULE 3.9(C), (i)
there has been no breach or default under such Lease by the Company, any Company
Subsidiary or by any other party, (ii) the execution, delivery and performance
20
of this Agreement and the consummation of the transactions contemplated hereby
will not cause (with or without notice and with or without the passage of time)
a default under any such Lease, (iii) such Lease is a valid and binding
obligation of the applicable lessor, is in full force and effect and is
enforceable by the Company or a Company Subsidiary in accordance with its terms,
(iv) no action has been taken by the Company or any Company Subsidiary and no
event has occurred which, with notice or lapse of time or both, would permit
termination, modification or acceleration by a party thereto other than by the
Company or a Company Subsidiary without the consent of the Company or a Company
Subsidiary, (v) no party has repudiated any term thereof or threatened to
terminate, cancel or not renew any such Lease, and (vi) neither the Company nor
any Company Subsidiary has assigned, transferred, conveyed, mortgaged or
encumbered any interest therein or in any leased property subject thereto (or
any portion thereof).
3.10 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. The Company and the Company Subsidiaries are
in compliance with all Environmental Laws, including, without limitation, all
Permits required thereunder to conduct the Business as currently being conducted
or proposed to be conducted. All such Permits are listed on DISCLOSURE SCHEDULE
3.10(A). Neither the Company nor any Company Subsidiary has received any notice
to the effect that (i) it is not in compliance with, or is in violation of, any
such Environmental Laws or Permits required thereunder or (ii) any circumstances
are reasonably likely to result in a failure of the Company to comply with, or a
violation by the Company or any Company Subsidiary of, any such Environmental
Laws or Permits required thereunder.
(b) ENVIRONMENTAL CLAIMS. There are no existing or, to the
knowledge of the Company, threatened Environmental Claims against the Company or
any Company Subsidiary. Neither the Company nor any Company Subsidiary has
received any notification of any allegation of any actual, or potential
responsibility for, or any inquiry or investigation regarding, any disposal,
release or threatened release at any location of any Hazardous Substance which
could result in liability to the Company or any Company Subsidiary under
Environmental Laws.
(c) HAZARDOUS SUBSTANCES. To the knowledge of the Company, (i)
no underground tank or other underground storage receptacle for Hazardous
Substances is currently located on the Facilities, and (ii) there have been no
releases of any Hazardous Substances from any such underground tank or related
piping. There have been no releases (i.e., any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping) of Hazardous Substances in quantities
that could result in liability to the Company or any Company Subsidiary under
Environmental Laws, other than those authorized by Environmental Laws including,
without limitation, the Permits required thereunder. In addition, to the
knowledge of the Company, (i) there have been no such releases by predecessors
of the Company or any Company Subsidiary and (ii) no releases in quantities
exceeding the reportable quantities as defined under federal or state law on,
upon, or into any real property in the immediate vicinity of any of the real
properties of the Company or any Company Subsidiary other than those authorized
by Environmental Laws which, through soil or ground water contamination, may
have come to be located on the properties of the Company.
21
(d) ENVIRONMENTAL INDEMNITIES. Neither the Company nor any
Company Subsidiary is a party, whether as a direct signatory or as successor,
assign or third-party beneficiary, or otherwise bound, to any Lease or other
Contract (excluding insurance policies disclosed on the Disclosure Schedules)
under which the Company or any Company Subsidiary is obligated by or entitled to
the benefits of, directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions. Neither the Company nor any Company Subsidiary has
released any other person from any claim under any Environmental Law or waived
any rights concerning any Environmental Condition.
(e) ENVIRONMENTAL REPORTS. Complete and accurate copies of the
Environmental Reports, as well as all other written environmental reports,
audits or assessments which have been conducted, either by the Company, any
Company Subsidiary or any person engaged by the Company or any Company
Subsidiary for such purpose, at any facility owned or formerly owned by the
Company or any Company Subsidiary have been made available to Buyer.
(f) ENVIRONMENTAL MATTERS. The precious metal mining claims
("properties") formerly held by Windstar Resources, Inc. ("WSRI") were
properties owned by the Department of Interior (federal land) and staked
(boundaries established) by WSRI, which granted WSRI the right to mine for
minerals contained therein only if a mining permit was issued by the Department
of Interior. There were no mining nor exploration permits ever issued, therefore
no mining took place on the properties. Since the annual minimum payment payable
to the Department of Interior was not made by WSRI on August 31, 1999, the right
to hold the claims was lost and the properties reverted by to the Department of
Interior.
3.11 CONTRACTS.
(a) DISCLOSURE. DISCLOSURE SCHEDULE 3.11(A) sets forth a
complete and accurate list of all of the Contracts to which the Company or any
Company Subsidiary is a party of the following categories:
(i) Contracts not made in the ordinary course of
business;
(ii) License agreements or royalty agreements,
whether the Company or any Company Subsidiary is the licensor or licensee
thereunder (excluding licenses that are commonly available on standard
commercial terms, such as software "shrink-wrap" licenses);
(iii) Non-disclosure agreements (whether the Company
or any Company Subsidiary is the beneficiary or the obligated party thereunder);
(iv) Contracts or commitments (including groups of
related Contracts or commitments) involving future expenditures or Liabilities,
actual or potential, in excess of $50,000.00 after the date hereof or otherwise
material to the Business or the Assets of the Company or any Company Subsidiary;
(v) Contracts or commitments relating to commission
arrangements with others that are material to the Business;
22
(vi) Employment contracts, consulting contracts,
severance agreements, "stay-bonus" agreements and similar arrangements,
including Contracts (A) to employ or terminate executive officers or other
personnel and other contracts with present or former officers or directors of
the Company or any Company Subsidiary or (B) that will result in the payment by,
or the creation of any Liability of the Company, any Company Subsidiary or Buyer
to pay any severance, termination, "golden parachute," or other similar payments
to any present or former personnel following termination of employment or
otherwise as a result of the consummation of the transactions contemplated by
this Agreement;
(vii) Indemnification agreements;
(viii) Promissory notes, loans, agreements,
indentures, evidences of indebtedness, letters of credit, guarantees, or other
instruments relating to an obligation to pay money, whether the Company or any
Company Subsidiary shall be the borrower, lender or guarantor thereunder
(excluding credit provided by the Company or any Company Subsidiary in the
ordinary course of business to purchasers of its products and obligations to pay
vendors in the ordinary course of business and consistent with past practice);
(ix) Contracts containing covenants limiting the
freedom of the Company, any Company Subsidiary, or any officer, director,
Employee or Affiliate of the Company or any Company Subsidiary to engage in any
line of business or compete with any Person that relates directly or indirectly
to the Business;
(x) Any Contract with the federal, state or local
government or any agency or department thereof;
(xi) Any Contract or other arrangement with a Related
Party;
(xii) Leases of real or personal property (including
groups of related Leases) involving annual payments of more than $50,000.00;
(xiii) Contracts or commitments (including groups of
related Contracts or commitments) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will extend over a
period of more than six (6) months, result in a loss to the Company or any
Company Subsidiary, or involve consideration in excess of $50,000.00;
(xiv) Contracts or commitments concerning a
partnership or joint venture; and
(xv) Any other Contract under which the consequences
of a default by any party or termination would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
Complete and accurate copies of all of the Contracts listed on
DISCLOSURE SCHEDULE 3.11, including all amendments and supplements thereto, have
been provided to Buyer. There are no oral Contracts.
23
(b) TERMINATION OF EMPLOYMENT CONTRACTS. That certain
Executive Compensation Agreement dated November 17, 1999 between the Company and
Gregory S. Levine and that certain Executive Employment Agreement dated January
1, 2003 between the Company and I. Daniel Sultan each has been irrevocably
terminated, effective as of immediately prior to the Effective Time and pursuant
to a Termination Agreement in the form attached as DISCLOSURE SCHEDULE 3.11(B),
such that the Company shall have no liability thereunder following the
termination thereof.
(c) ABSENCE OF DEFAULTS. All of the Contracts are valid,
binding and enforceable in accordance with their terms, with no material
existing (or threatened in writing) Default or dispute. The Company or a Company
Subsidiary has fulfilled, or is in a position to take all action necessary to
enable it to fulfill when due, all of its material obligations under each of
such Contracts. All parties to such Contracts have complied in all material
respects with the provisions thereof, no party is in Default thereunder and no
notice of any claim of Default has been given to the Company or any Company
Subsidiary.
3.12 NO CONFLICT OR VIOLATION; CONSENTS. None of the execution,
delivery or performance of this Agreement, the consummation of the transactions
contemplated hereby, nor compliance by the Company with any of the provisions
hereof, will (a) violate or conflict with any provision of the governing
documents of the Company or any Company Subsidiary, (b) violate, conflict with,
or result in a breach of or constitute a default (with or without notice or the
passage of time) under, or result in the termination of, or accelerate the
performance required by, or result in a right to terminate, accelerate, modify
or cancel under, or require a notice or consent under, or result in the creation
of any Encumbrance upon any of its respective Assets under, any Contract, Lease,
License, franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest or other arrangement to which the
Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary is bound or to which any of its respective Assets are
subject, (c) violate any applicable Regulation or Order or (d) impose any
Encumbrance on any of the Assets of the Company or any Company Subsidiary or the
Business.
(b) No notices to, declaration, filing or registration with,
approvals or Consents of, or assignments by, any Persons (including any federal,
national, state or local governmental or administrative authorities) are
necessary to be made or obtained by the Company in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.13 PERMITS. DISCLOSURE SCHEDULE 3.13 sets forth a complete list of
all material Permits held by the Company and the Company Subsidiaries, all of
which are as of the date hereof in full force and effect. The Company and the
Company Subsidiaries have, and at all times have had, all material Permits
required under any applicable Regulation in the operation of the Business or in
the ownership of the Assets of the Company or any Company Subsidiary, and own or
possess such Permits free and clear of all Encumbrances. Neither the Company nor
any Company Subsidiary is in default, and neither the Company nor any Company
Subsidiary has received any notice of any claim of default with respect to any
24
such Permit. Except as otherwise governed by law, all such Permits are renewable
by their terms or in the ordinary course of business without the need to comply
with any special qualification procedures or to pay any amounts other than
routine filing fees and will not be adversely affected by the completion of the
transactions contemplated by this Agreement.
3.14 SEC REPORTS; FINANCIAL STATEMENTS; BOOKS AND RECORDS.
(a) SEC REPORTS. The Company has filed with the SEC all
required forms, reports, registration statements and documents required to be
filed by it with the SEC (collectively, all such forms, reports, registration
statements and documents filed since January 1, 1998 are referred to herein as
the "COMPANY SEC REPORTS"). All of the Company SEC Reports complied as to form,
when filed, in all material respects with the applicable provisions of the
Securities Act and the Exchange Act. Accurate and complete copies of the Company
SEC Reports have been made available to Buyer. As of their respective dates or,
in the case of registration statements, their effective dates (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), the Company SEC Reports (including all exhibits and schedules
thereto and documents incorporated by reference therein) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has been
advised by each of its current officers and directors that each such person and
such persons' Affiliates have complied with all filing requirements under
Section 13 and Section 16(a) of the Exchange Act. Each certification included in
the Company SEC Reports pursuant to Section 302 or Section 906 of the
Sarbanes-Oxley Act of 2002 was accurate when made.
(b) FINANCIAL STATEMENTS. Each of the financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports (the "COMPANY FINANCIAL STATEMENTS"), (x) was prepared in accordance
with GAAP and (y) fairly presented the financial position of Company as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, consistent with the books and records of the
Company, except that the unaudited interim financial statements were or are
subject to normal year-end adjustments. The balance sheet of the Company
contained in the Company's Form 10-K for the year ended December 31, 2002 is
hereinafter referred to as the "COMPANY BALANCE SHEET."
(c) INTERNAL CONTROLS; DISCLOSURE CONTROLS. The Company
maintains a system of internal accounting controls and disclosure controls and
procedures sufficient to provide reasonable assurance that (i) transactions are
executed with management's authorization, (ii) transactions are recorded as
necessary to permit preparation of financial statements in accordance with GAAP
and to maintain accountability for assets, (iii) access to assets is permitted
only in accordance with management's authorization, (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences and
(v) material information concerning the Company is publicly disseminated in a
timely manner.
(d) BOOKS AND RECORDS. The Books and Records, in reasonable
detail, accurately and fairly reflect in all material respects the activities of
the Company, the Company Subsidiaries and the Business and have been provided to
Buyer or made available for its inspection.
25
(e) ALL ACCOUNTS RECORDED. Neither the Company nor any Company
Subsidiary has engaged in any transaction, maintained any bank account or used
any corporate funds except for transactions, bank accounts or funds which have
been and are reflected in the Books and Records.
(f) CORPORATE RECORDS. The stock records and minute books of
the Company and the Company Subsidiaries that have been made available to Buyer
fully reflect all minutes of meetings, resolutions and other material actions
and proceedings of the stockholders and board of directors and all committees
thereof, all issuances, transfers and redemptions of capital stock of the
Company and the Company Subsidiaries and contain true, correct and complete
copies of their respective Certificate of Incorporation and Bylaws and all
amendments thereto through the date hereof.
3.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet
Date, the Company and the Company Subsidiaries have conducted the Business only
in the ordinary course consistent with past practice and there has not been any:
(a) Company Material Adverse Change;
(b) failure to operate the Business in the ordinary course so
as to use all commercially reasonable efforts to preserve the Business intact
and to preserve the continued services of the Employees and the goodwill of
suppliers, customers and others having business relations with the Company or
any Company Subsidiary;
(c) resignation or termination of any officer, director or
manager, or any increase in the rate of compensation payable or to become
payable by the Company or any Company Subsidiary to any officer, director or
Representative of the Company or any Company Subsidiary (other than standard
increases in connection with general, regularly-scheduled reviews consistent
with past practice), including the making of any loan to, or the payment, grant
or accrual of any bonus, incentive compensation, service award or other similar
benefit to, any such Person;
(d) any payment, loan or advance of any amount to or in
respect of, or the sale, transfer or lease of any properties or the Assets to,
or entering into of any Contract with, any Related Party except regular
compensation to Employees;
(e) sale, assignment, license, transfer or Encumbrance of any
of the Assets of the Company or any Company Subsidiary, tangible or intangible,
singly or in the aggregate, other than sales of products and services involving
less than $50,000.00 in the ordinary course of business and consistent with past
practice;
(f) new Contracts (or series of related new Contracts), or
extensions, modifications, terminations, accelerations or renewals thereof,
except for Contracts involving less than $50,000.00 entered into, modified or
terminated in the ordinary course of business and consistent with past practice;
(g) actual or threatened (i) termination of any material
customer account or group of accounts or actual or (ii) material reduction in
26
purchases or royalties payable by any such customer or occurrence of any event
that is likely to result in any such termination or reduction;
(h) disposition or lapsing of any Proprietary Rights of the
Company or any Company Subsidiary, in whole or in part, or any disclosure of any
trade secret, process or know-how to any Person not an Employee;
(i) change in accounting methods or practices by the Company
or any Company Subsidiary;
(j) revaluation by the Company or any Company Subsidiary of
any of their respective Assets, including writing off or establishing reserves
with respect to inventory, notes or accounts receivable (other than for which
adequate reserves have been previously established);
(k) damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Assets, the Business or the prospects of the
Company or any Company Subsidiary;
(l) declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any Company
Subsidiary or any redemption, purchase or other acquisition of any equity
securities of the Company or any Company Subsidiary;
(m) issuance or reservation for issuance by the Company or any
Company Subsidiary of, or commitment of it to issue or reserve for issuance, any
shares of capital stock or other equity securities or obligations or securities
convertible into or exchangeable for shares of capital stock or other equity
securities;
(n) increase, decrease or reclassification of the capital
stock of the Company or any Company Subsidiary;
(o) amendment of the Certificate of Incorporation, Bylaws or
charter documents of the Company or any Company Subsidiary;
(p) capital expenditure or execution of any lease or any
incurring of liability therefor by the Company in one or more related
transactions, involving payments or obligations in excess of $50,000.00 in the
aggregate;
(q) failure to pay any obligation of the Company or any
Company Subsidiary when due;
(r) cancellation of any indebtedness or waiver of any rights
of substantial value to the Company or any Company Subsidiary, except in the
ordinary course of business and consistent with past practice;
(s) indebtedness incurred or guaranteed by the Company or any
Company Subsidiary for borrowed money or any commitment to borrow money entered
27
into by the Company or any Company Subsidiary, or any loans made or agreed to be
made by the Company or any Company Subsidiary;
(t) liability incurred by the Company or any Company
Subsidiary except in the ordinary course of business and consistent with past
practice, or any increase or change in any assumptions underlying or methods of
calculating any bad debt, contingency or other reserves;
(u) payment, discharge or satisfaction of any Liabilities of
the Company or any Company Subsidiary other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of Liabilities as reflected or reserved against in the Financial
Statements or incurred in the ordinary course of business and consistent with
past practice since the Balance Sheet Date;
(v) acquisition of any equity interest in any other Person by
the Company or any Company Subsidiary; or
(w) agreement by the Company or any Company Subsidiary
directly or indirectly to do any of the foregoing.
3.16 LIABILITIES. Neither the Company nor any Company Subsidiary has
any Liabilities (absolute, accrued, contingent or otherwise) except (i)
Liabilities which are reflected and properly reserved against in the Financial
Statements, (ii) Liabilities incurred after the Balance Sheet Date in the
ordinary course of business and consistent with past practice (iii) Liabilities
arising under the Contracts (other than obligations which are required to be
reflected on a balance sheet prepared in accordance with GAAP) set forth on
DISCLOSURE SCHEDULE 3.11 and (iv) Liabilities set forth on DISCLOSURE SCHEDULE
3.16. None of the Liabilities described in this Section 3.16 relates to any
breach of Contract, breach of warranty, tort, infringement or violation of law
or arose out of any Action.
3.17 LITIGATION. There is no Action pending or threatened or, to the
knowledge of the Company, anticipated (i) against, relating to or affecting the
Company or any Company Subsidiary, or any of the Assets of the Company or any
Company Subsidiary or any of the officers and directors of the Company or any
Company Subsidiary, (ii) which seeks to enjoin or obtain damages in respect of
the transactions contemplated hereby or (iii) which seeks to prevent the Company
from consummating the transactions contemplated hereby. None of such Actions, if
adversely determined against the Company, any Company Subsidiary, their
respective directors or officers, or any other Person could reasonably be
expected to result in a loss to the Company and any Company Subsidiary,
individually or in the aggregate, in excess of $25,000.00. There is no basis for
any Action, which if adversely determined against the Company, any Company
Subsidiary, their respective directors or officers, or any other Person could
reasonably be expected to result in a loss to the Company, individually or in
the aggregate, in excess of $25,000.00. There are presently no outstanding
judgments, decrees or orders of any court or any governmental or administrative
agency against or affecting the Company, any Company Subsidiary, the Business or
28
any of the Assets of the Company or any Company Subsidiary. DISCLOSURE SCHEDULE
3.17 contains a complete and accurate description of all Actions to which the
Company or any Company Subsidiary has been a party since January 1, 1998 or
which relate to any of the Assets of the Company or any Company Subsidiary or
the Company's or any Company Subsidiary's officers or directors as such, or any
such Actions which were settled prior to the institution of formal proceedings,
other than Actions brought by the Company or any Company Subsidiary for
collection of monies owed in the ordinary course of business.
3.18 LABOR MATTERS.
(a) GENERAL. Neither the Company nor any Company Subsidiary is
a party to any labor agreement with respect to its Employees with any labor
organization, group or association. No petition for certification as the
exclusive bargaining representative for any of the Employees is pending before
the National Labor Relations Board. To the Company's knowledge, no union
organizing activity has occurred with respect to the Employees in the past two
(2) years. There is no unfair labor practice charge or complaint against the
Company pending before the National Labor Relations Board or any other domestic
or foreign governmental agency arising out of the Company's or any Company
Subsidiary's activities, and the Company has no knowledge of any facts or
information which would give rise thereto; there is no labor strike or labor
disturbance pending or threatened against the Company or any Company Subsidiary,
nor is any grievance currently being asserted against it; and neither the
Company nor any Company Subsidiary has experienced a work stoppage or other
labor difficulty. There are no material controversies pending or to the
knowledge of the Company, threatened between the Company or any Company
Subsidiary and the Employees, and the Company has no knowledge of any facts
which could reasonably result in any such controversy. To the knowledge of the
Company, no executive, Key Employee, or group of Employees has any plans to
terminate employment with the Company or any Company Subsidiary.
(b) COMPLIANCE. The Company and each Company Subsidiary is in
material compliance with all applicable Laws respecting employment practices,
terms and conditions of employment, wages and hours, equal employment
opportunity, and the payment of social security and similar taxes and is not
engaged in any unfair labor practice. The Company has no knowledge of any claims
for past due wages or any penalties for failure to comply with any of the
foregoing.
(c) SEVERANCE OBLIGATIONS. Except as set forth on Schedule
3.18(c), neither the Company nor any Company Subsidiary has entered into any
severance, "stay-bonus" or similar arrangement in respect of any present or
former Employee that will result in any obligation (absolute or contingent) of
Buyer or the Company or any Company Subsidiary to make any payment to any
present or former Employee following termination of employment or upon
consummation of the transactions contemplated by this Agreement (whether or not
employment is continued for any specified period after the Effective Time).
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the acceleration or vesting of
any other rights of any Person to benefits under any Employee Plans.
(d) HIGHLY COMPENSATED EMPLOYEES. Attached hereto as
DISCLOSURE SCHEDULE 3.18(D) is a list of the names of all present Employees with
total compensation exceeding $100,000.00 in 2002 and their current compensation
payable by the Company or any Company Subsidiary. Notwithstanding any provision
of this Agreement or any Disclosure Schedule to the contrary, the Company
29
represents that from and after the Effective Time no benefit or other
compensation is payable to any Person identified on DISCLOSURE SCHEDULE 3.18(D)
upon the voluntary resignation of such Person from employment with Buyer or the
Company or any Company Subsidiary as a result of the Merger.
3.19 EMPLOYEE BENEFIT PLANS.
(a) There are no, and since the formation of the Company and
each Company Subsidiary, there have been no, Employee Plans which cover or have
covered Employees or under which the Company has contributed or has any
obligation to contribute or with respect to which the Company may have any
liability. With respect to each Employee Plan, the Company has delivered or made
available to Buyer a true, complete and correct copy of (i) such Employee Plan
(or, if not written, a written summary of its material terms) and the most
recent summary plan description, if any, related to such Employee Plan, (ii)
each trust agreement or other funding arrangement relating to such Employee
Plan, (iii) the two (2) most recent annual reports (Form 5500) filed with the
IRS with respect to such Employee Plan, (iv) the most recent actuarial report or
financial statement relating to such Employee Plan and (v) the most recent
determination letter, if any, issued by the IRS with respect to such Employee
Plan and any pending request for such a determination letter. The Company and
the Company Subsidiaries have no, and to the knowledge of Company, no other
person or entity has, any express or implied obligation, whether legally
enforceable or not, to modify, change or terminate any Employee Plan, other than
with respect to a modification, change or termination required by ERISA or the
Code.
(b) COMPLIANCE. Each Employee Plan has been administered in
all material respects in accordance with its terms and all applicable laws,
including ERISA and the Code, and contributions required to be made under the
terms of any of such Employee Plans as of the date of this Agreement have been
timely made or, if not yet due, have been properly reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Company
Financial Statements prior to the date of this Agreement. With respect to such
Employee Plans, no event has occurred and there exists no condition or set of
circumstances in connection with which Company or any Company Subsidiary could
be subject to any material liability (other than for routine benefit
liabilities) under the terms of, or with respect to, such Employee Plans, ERISA,
the Code or any other applicable Law.
(c) QUALIFICATION. The Company on behalf of itself and each
ERISA Affiliate hereby represents that: (i) each Employee Plan which is intended
to qualify under Section 401(a), Section 401(k), Section 401(m) or Section
4975(e)(7) of the Code has received a favorable determination letter from the
IRS as to its qualified status, and each trust established in connection with
any such Employee Plan which is intended to be exempt from federal income
taxation under Section 501(a) of the Code is so exempt, and no fact or event has
occurred that could adversely affect the qualified status of any such Employee
Plan or the exempt status of any such trust and (ii) each Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability (other than (A) liability for
30
ordinary administrative expenses typically incurred in a termination event or
(B) if the Employee Plan is a Pension Plan subject to Part 2 of Title I of
ERISA, liability for the accrued benefits of the Pension Plan as of the date of
such termination to the extent that either there are sufficient assets set aside
in the Pension Plan's trust or insurance contract to satisfy such liability or
such liability is reflected on the most recent balance sheet included in the
Company Financial Statements prior to the date of this Agreement). No suit,
administrative proceeding, action or other litigation has been brought, or is
threatened, against or with respect to any such Employee Plan, including any
audit or inquiry by the IRS or United States Department of Labor (other than
routine benefits claims by Employee Plan participants or beneficiaries).
(d) TITLE IV PENSION PLANS. No Employee Plan is a
Multiemployer Plan or other Pension Plan subject to Title IV of ERISA, and
neither the Company nor any ERISA Affiliate has sponsored or contributed to or
been required to contribute to a Multiemployer Plan or other Pension Plan
subject to Title IV of ERISA. No material liability under Title IV of ERISA has
been incurred by Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to Company or any
ERISA Affiliate of incurring or being subject (whether primarily, jointly or
secondarily) to a material liability thereunder. None of the assets of Company
or any ERISA Affiliate is, or may reasonably be expected to become, the subject
of any lien arising under ERISA or Section 412(n) of the Code. Neither the
Company nor any ERISA Affiliate has any liability for unpaid contributions to a
Multiemployer Plan under Section 515 of ERISA.
(e) FUNDING DEFICIENCY. With respect to each Pension Plan set
forth on DISCLOSURE SCHEDULE 3.19 that is subject to Title IV or Part 3 of Title
I of ERISA or Section 412 of the Code, (i) no reportable event (within the
meaning of Section 4043 of ERISA, other than an event that is not required to be
reported before or within 30 days of such event) has occurred or is expected to
occur, (ii) there was not an accumulated funding deficiency (within the meaning
of Section 302 of ERISA or Section 412 of the Code), whether or not waived, as
of the most recently ended plan year of such Pension Plan; and (iii) there is no
"unfunded benefit liability" (within the meaning of Section 4001(a)(18) of
ERISA).
(f) RETIREE WELFARE BENEFITS; COBRA AND HIPAA. Except as
required by Law, no Employee Plan provides any of the following retiree or
post-employment benefits to any person: medical, disability or life insurance
benefits. The Company is in compliance with (i) the requirements of the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and the
regulations (including proposed regulations, if any) thereunder and (ii) the
applicable requirements of the Health Insurance Portability and Accountability
Act of 1996, as amended, and the regulations (including proposed regulations)
thereunder.
(g) DEDUCTIBILITY OF PAYMENTS. There is no contract,
agreement, plan or arrangement covering any Employee or former Employee that,
individually or collectively, requires the payment by the Company or any Company
Subsidiary of any amount (i) that is not deductible under Section 162(a)(1),
162(m) or 404 of the Code or (ii) that is an "excess parachute payment" pursuant
to Section 280G of the Code.
(h) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS. No
prohibited transaction (as defined in Section 4975 of the Code or Section 406 of
ERISA) has occurred that involves the assets of any Employee Plan for which no
exemption exists under Section 408 of ERISA and Section 4975(c)(2) or (d) of the
Code and is reasonably likely to subject the Company, any Company Subsidiary or
any of their employees, directors or officers to the tax or penalty on
prohibited transactions imposed by Section 4975 of the Code or the sanctions
31
imposed on prohibited transactions under Title I of ERISA. Neither the Company
nor any Company Subsidiary has violated or has participated with a fiduciary (as
defined in Section 3(21) of ERISA) of a Welfare Plan or Pension Plan in a
violation of Part 4 of Title I, Subtitle B of ERISA with respect to any such
plan, and the Company has not been assessed any civil penalty under Section
502(l) of ERISA.
(i) NO ADOPTION. Neither the Company nor any ERISA Affiliate
has announced to their employees, former employees, consultants or directors an
intention to create, or otherwise created, a legally binding commitment to
adopt, change or terminate any Employee Plan which is intended to cover
Employees or former Employees.
3.20 TRANSACTIONS WITH RELATED PARTIES. No Related Party has (a)
borrowed from or loaned to the Company money or other property which has not
been repaid or returned, (b) any contractual relationship or other claims,
express, or implied, of any kind whatsoever against the Company or any Company
Subsidiary or (c) any interest in any property used by the Company or any
Company Subsidiary.
3.21 COMPLIANCE WITH LAW. The Company and the Company Subsidiaries have
conducted the Business in compliance with all applicable Laws and Orders.
Neither the Company nor any Company Subsidiary has received any notice to the
effect that, or has otherwise been advised that, the Company or any Company
Subsidiary is not in compliance with any such Laws or Orders, and the Company
has no reason to anticipate that any existing circumstances are likely to result
in any material violation of any of the foregoing.
3.22 INTELLECTUAL PROPERTY.
(a) DISCLOSURE SCHEDULE 3.22(A) lists all Company Registered
Proprietary Rights (including all Company Registered Proprietary Rights and all
trademarks and service marks that the Company or any Company Subsidiary has used
with the intent of creating or benefiting from any common law rights relating to
such marks) and lists any proceedings or actions pending as of the date hereof
before any court or tribunal (including the PTO or equivalent authority anywhere
in the world) related to any of the Company Registered Proprietary Rights.
(b) The Company or a Company Subsidiary has all requisite
right, title and interest in or valid and enforceable rights under Contracts or
Licenses to use all Company Proprietary Rights used by the Company or any
Company Subsidiary or necessary to the conduct of the Business as presently
conducted. Each item of Company Proprietary Rights, including all Company
Registered Proprietary Rights listed on DISCLOSURE SCHEDULE 3.22(B), is owned
exclusively by the Company (excluding Proprietary Rights licensed to the Company
under any License) and is free and clear of any Encumbrances). The Company (i)
owns exclusively all trademarks, service marks and trade names used by the
Company or any Company Subsidiary in connection with the operation or conduct of
32
the Business, including the sale of any products or technology or the provision
of any services by the Company or any Company Subsidiary, PROVIDED, HOWEVER,
that the Company or a Company Subsidiary may use trademarks, service marks and
trade names of third parties which are licensed to the Company or any Company
Subsidiary, and (ii) owns exclusively, and have good title to, all copyrighted
works that are the Company's products or other works of authorship that the
Company otherwise purports to own; PROVIDED, HOWEVER, that such works may
incorporate copyrighted works or works of authorship, trademarks or trade names
of third parties which are licensed to the Company or are in the public domain.
(c) To the extent that any Company Proprietary Rights have
been developed or created by any Person other than the Company, the Company has
a written agreement with such Person with respect thereto and the Company has
either (i) obtained ownership of, and is the exclusive owner of, all such
Proprietary Rights by operation of law or by valid assignment of any such rights
or (ii) has obtained a License under or to such Proprietary Rights.
(d) Neither the Company nor any Company Subsidiary has
transferred ownership of or granted any License of or other right to use or
authorized the retention of any rights to use, any Proprietary Rights that are
or were Company Proprietary Rights, to any other Person.
(e) The Company Proprietary Rights constitute all the
Proprietary Rights necessary or desirable to the conduct of the Business as it
currently is conducted or as reasonably contemplated to be conducted, including,
without limitation, the design, development, distribution, marketing,
manufacture, use, import, license, and sale of the products, technology and
services of the Company (including products, technology, or services currently
under development). Each of the Company Proprietary Rights owned or used by the
Company or any Company Subsidiary immediately prior to the Closing will be owned
or available for use by the Company or a Company Subsidiary on identical terms
and conditions immediately subsequent to the Closing. The Company has taken all
necessary and desirable action to maintain and protect each item of the Company
Proprietary Rights that it or any Company Subsidiary owns or uses.
(f) DISCLOSURE SCHEDULE 3.22(F) lists all Contracts and
Licenses (including all inbound Licenses) to which the Company or any Company
Subsidiary is a party with respect to any Proprietary Rights. No Person other
than the Company or a Company Subsidiary has ownership rights to improvements
made by the Company or any Company Subsidiary in Proprietary Rights which has
been licensed to the Company or any Company Subsidiary.
(g) DISCLOSURE SCHEDULE 3.22(G) lists all Contracts, Licenses
and agreements between the Company or any Company Subsidiary and any other
Person wherein or whereby the Company or any Company Subsidiary has agreed to,
or assumed, any obligation or duty to warrant, indemnify, reimburse, hold
harmless, guaranty or otherwise assume or incur any obligation or Liability or
provide a right of rescission with respect to the infringement or
misappropriation by the Company, any Company Subsidiary or such other Person of
the Proprietary Rights of any Person other than the Company or the Company
Subsidiaries.
(h) To the knowledge of the Company, the operation of the
Business as currently conducted or as presently proposed to be conducted,
including the Company's design, development, use, import, manufacture and sale
of the products, technology or services (including products, technology or
services currently under development) of the Company or any Company Subsidiary
33
does not infringe or misappropriate the Proprietary Rights of any Person,
violate the rights of any Person (including rights to privacy or publicity), or
constitute unfair competition or an unfair trade practice under any applicable
Law, and neither the Company nor any Company Subsidiary has received notice from
any Person claiming that such operation or any act, product, technology or
service (including products, technology or services currently under development)
of the Company infringes or misappropriates the Proprietary Rights of any Person
or constitutes unfair competition or trade practices under any applicable Law.
To the extent that the Company has received any notice related to the above or
is aware of any pending, anticipated, or threatened Action against the Company
or any Company Subsidiary relating to infringement or misappropriation of the
Proprietary Rights of any Person, the Company has conducted, prior to the
Closing Date, a complete and accurate investigation of any alleged infringement
or misappropriation. Based on the complete and accurate investigation, there is
no basis for any Action against the Company or any Company Subsidiary and any
judgment, order, or determination from such Action will have no material impact
on the operation of the Business as currently conducted or as presently proposed
to be conducted, including the Company's design, development, use, import,
manufacture and sale of the products, technology or services (including
products, technology or services currently under development) of the Company.
These representations are in addition to those of Section 3.17 of this Agreement
or any other provision hereof.
(i) Each item of Company Registered Proprietary Rights is
valid and subsisting, and all necessary registration, maintenance, renewal fees,
annuity fees and taxes due through the date of this Agreement in connection with
such Registered Proprietary Rights have been paid and all necessary documents
and certificates in connection with such Company Registered Proprietary Rights
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 Registered Proprietary Rights. DISCLOSURE
SCHEDULE 3.22(I) lists all actions that must be taken by the Company or any
Company Subsidiary within 180 days from the date hereof, including the payment
of any registration, maintenance, renewal fees, annuity fees and taxes or the
filing of any documents, applications or certificates for the purposes of
maintaining, perfecting or preserving or renewing any Company Registered
Proprietary Rights. The Company has not registered the copyright with the U.S.
Copyright Office for the latest version of each product or technology of the
Company or any Company Subsidiary that constitutes or includes a copyrightable
work. In each case in which the Company or any Company Subsidiary has acquired
ownership of any Proprietary Rights from any Person, the Company or a Company
Subsidiary has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Proprietary Rights (including the right
to seek damages with respect to such Proprietary Rights) to the Company or a
Company Subsidiary, to the maximum extent required to protect the Company's or
the Company Subsidiaries' ownership interests in and to such Proprietary Rights
in accordance with applicable Laws, the Company has recorded each such
assignment of Registered Proprietary Rights with the relevant Governmental or
Regulatory Authority, including the PTO, the U.S. Copyright Office, or their
respective equivalents in any relevant foreign jurisdiction, as the case may be.
(j) There are no Contracts or Licenses between the Company or
any Company Subsidiary and any other Person with respect to Company Proprietary
Rights under which there is any claim (or facts that may reasonably lead to a
34
claim) known to the Company regarding the scope of such Contract or License, or
performance under such Contract or License, including with respect to any
payments to be made or received by the Company thereunder.
(k) To the knowledge of the Company, no Person is infringing
or misappropriating any Company Proprietary Rights.
(l) The Company has taken all commercially reasonable steps to
protect its rights in confidential information and trade secrets of the Company
and the Company Subsidiaries or provided by any other Person to the Company or
any Company Subsidiary subject to a duty of confidentiality. Without limiting
the generality of the foregoing, the Company has, and enforces, a policy
requiring each Employee, consultant and independent contractor to execute
proprietary information, confidentiality and invention and copyright assignment
agreements, and all current and former Employees, consultants and independent
contractors of the Company and any Company Subsidiary have executed such
agreements, as applicable. Forms of all such agreements have been provided to
Buyer or made available to Buyer for review.
(m) No Company Proprietary Rights or product, technology or
service of the Company is subject to any Order or Action or Proceeding that
restricts, or that is reasonably expected to restrict in any manner, the use,
transfer or licensing of any Company Proprietary Rights by the Company or that
may affect the validity, use or enforceability of such Company Proprietary
Rights.
(n) Neither this Agreement nor any transactions contemplated
by this Agreement will result in Buyer granting any rights or licenses with
respect to the Proprietary Rights of Buyer to any Person pursuant to any
Contract to which the Company or any Company Subsidiary is a party or by which
any of their respective Assets are bound.
(o) DISCLOSURE SCHEDULE 3.22(O) sets forth a list of (x) all
software which is material to the Business and which the Company or any Company
Subsidiary has licensed from any third party which is used by the Company or any
Company Subsidiary in the Company products or otherwise in their businesses and
(y) a list of all "freeware" and "shareware" incorporated into any product now
shipped by the Company or any Company Subsidiary. The Company and the Company
Subsidiaries have all rights necessary to the use of such software, "freeware"
and "shareware."
(p) The Company has taken all necessary and appropriate steps
to protect and preserve ownership of Company Proprietary Rights. The Company has
secured valid written assignments from all consultants and Employees who
contributed to the creation or development of the Company Proprietary Rights. In
the event that the consultant is concurrently employed by the Company or any
Company Subsidiary and a third party, the Company has taken additional steps to
ensure that any Company Proprietary Rights developed by such a consultant does
not belong to the third party or conflict with the third party's employment
agreement such steps include, but are not limited to, ensuring that all research
and development work performed by such a consultant are performed only on the
Company's or the Company Subsidiaries' facilities and only using the Company's
or the Company Subsidiaries' resources.
35
3.23 TAX MATTERS.
(a) FILING OF TAX RETURNS. The Company and each Company
Subsidiary has timely filed with the appropriate taxing authorities and in the
proper form all Tax Returns required to be filed. The Tax Returns filed are
complete and accurate. All Taxes due and payable by the Company or any Company
Subsidiary (whether or not shown on any Tax Return) have been paid. Neither the
Company nor any Company Subsidiary has applied for or received any extension of
time within which to file any Tax Return, other than for Tax Returns that have
already been filed. No claim has ever been made by an authority in a
jurisdiction where the Company or any Company Subsidiary does not file Tax
Returns that the Company or any Company Subsidiary is or may be subject to
taxation by that jurisdiction.
(b) PAYMENT OF TAXES. The unpaid Taxes of the Company and the
Company Subsidiaries (i) did not, as of the Balance Sheet Date, exceed the
reserve for Tax Liability (excluding any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) set forth on the face
of the balance sheets contained in the Financial Statements (rather than in any
notes thereto), and (ii) will not exceed that reserve as adjusted for operations
and transactions through the Closing Date in accordance with the past custom and
practice of the Company and the Company Subsidiaries in filing their respective
Tax Returns.
(c) AUDITS, INVESTIGATIONS OR CLAIMS. To the knowledge of the
Company, no deficiencies for Taxes of the Company or any Company Subsidiary have
been claimed, proposed or assessed by any taxing or other governmental
authority. There are no pending or, to the knowledge of the Company, threatened
audits, assessments or other Actions for or relating to any Liability in respect
of Taxes of the Company or any Company Subsidiary, and there are no matters
under discussion with any governmental authorities, or known to the Company,
with respect to Taxes that are likely to result in an additional Liability for
Taxes with respect to the Company or any Company Subsidiary. Audits of federal,
state, local and foreign Tax Returns by the relevant taxing authorities have
been completed for the periods set forth on DISCLOSURE SCHEDULE 3.23(C) and,
except as set forth in such Disclosure Schedule, none of the Company, any
Company Subsidiary and their predecessors have been notified that any taxing
authority intends to audit a Tax Return for any other period.
(d) COPIES OF TAX RETURNS, WAIVERS AND EXTENSIONS. The Company
has delivered to Buyer complete and accurate copies of federal, state, local and
foreign Tax Returns of the Company, the Company Subsidiaries and their
predecessors for the years ended December 31, 1998, 1999, 2000 and 2001, and
complete and accurate copies of all examination reports and statements of
deficiencies assessed against or agreed to by the Company or any predecessor
since December 31, 1996. None of the Company, any Company Subsidiary or any
predecessor has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency.
(e) LIENS. There are no Encumbrances for Taxes other than
Permitted Encumbrances on any of the Assets of the Company or any Company
Subsidiary.
(f) TAX ELECTIONS. All elections with respect to Taxes
affecting the Company, the Company Subsidiaries or their Assets, as of the date
hereof are set forth on DISCLOSURE SCHEDULE 3.23(F). Neither the Company nor any
36
Company Subsidiary has (i) consented at any time under Section 341(f)(1) of the
Code to have the provisions of Section 341(f)(2) of the Code apply to any
disposition of any Assets; (ii) agreed, or is required, to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise; (iii) made an election, or is required, to treat any Asset as owned
by another Person pursuant to the provisions of Section 168(f) of the Code or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code; (iv) acquired and does not own any assets that
directly or indirectly secure any debt the interest on which is tax exempt under
Section 103(a) of the Code; (v) made and will not make a consent dividend
election under Section 565 of the Code; (vi) elected at any time to be treated
as an S corporation within the meaning of Sections 1361 or 1362 of the Code; or
(vii) made any of the foregoing elections or is required to apply any of the
foregoing rules under any comparable state or local Tax provision.
(g) PRIOR AFFILIATED GROUPS. Neither the Company nor any
Company Subsidiary is or has ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code or of any group that
has filed a combined consolidated or unitary state or local return, except for
the group of which the Company is the parent and Company Subsidiaries are
members.
(h) TAX SHARING AGREEMENTS. None of the Company, any Company
Subsidiary, their respective Assets or the Business are, or will be after the
Effective Time, bound by any Tax-sharing agreement (including indemnity
arrangements) or similar arrangements. Neither the Company nor any Company
Subsidiary has assumed the liability of any other Person for Taxes by contract
or course of dealing.
(i) PARTNERSHIPS, SINGLE MEMBER LLCS, CFCS AND PHCS. Neither
the Company nor any Company Subsidiary (i) is a partner for Tax purposes with
respect to any joint venture, partnership, or other arrangement or contract
which is treated as a partnership for Tax purposes, (ii) owns a single member
limited liability company which is treated as a disregarded entity, (iii) is a
stockholder of a "controlled foreign corporation" as defined in Section 957 of
the Code (or any similar provision of state, local or foreign law) and (iv) is a
"personal holding company" as defined in Section 542 of the Code (or any similar
provision of state, local or foreign law).
(j) NO WITHHOLDING. The Company and the Company Subsidiaries
have withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any Employee, independent contractor,
creditor, stockholder or other third party.
(k) FIRPTA. Neither the Company nor any Company Subsidiary is
or has ever been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in section 897(c)(1)(A)(ii) of the Code.
(l) INTERNATIONAL BOYCOTT. Neither the Company nor any Company
Subsidiary has ever participated in or is participating in an international
boycott within the meaning of Section 999 of the Code.
37
(m) PERMANENT ESTABLISHMENT. Neither the Company nor any
Company Subsidiary has or has had a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States of America and such foreign country.
(n) OTHER AGREEMENTS. Except as set forth on DISCLOSURE
SCHEDULE 3.23(N), (i) there are no Tax rulings, requests for rulings, or
"closing agreements" (as described in Section 7121 of the Code or any
corresponding provision of state, local or foreign Tax law) relating to the
Company or any Company Subsidiary which could affect the Company's or the
Company Subsidiaries' liability for Tax for any period after the Closing Date,
(ii) as a result of any closing agreement, neither the Company nor any Company
Subsidiary will be required to include any item of income in, or exclude any
item of deduction from, any taxable period ending after the Closing Date, and
(iii) as a result of a change in accounting method for a Tax period beginning on
or before the Closing Date, neither the Company nor any Company Subsidiary will
be required to include any adjustment under Section 481(c) of the Code (or any
corresponding provision of state, local or foreign Tax law) in taxable income
for any Tax period ending after the Closing Date.
(o) OTHER TAXES. No transaction contemplated by this Agreement
will be subject to any stock transfer Tax, sales Tax, use Tax, real estate
transfer or gains Tax, or other similar Tax.
(p) SECTIONS 280G AND 162(M). No payment or other benefit, and
no acceleration of the vesting of any options, payments or other benefits, will
be, as a direct or indirect result of the transactions contemplated by this
Agreement, an "excess parachute payment" to a "disqualified individual" as those
terms are defined in Section 280G of the Code and the regulations thereunder.
All compensation payable to any Employee is deductible under Section 162(m) of
the Code.
3.24 INSURANCE. DISCLOSURE SCHEDULE 3.24 sets forth the following
information with respect to each insurance policy or binders of insurance
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the Company or
any Company Subsidiary has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past two (2) years:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage
was on a claims made, occurrence or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(e) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
38
With respect to each such insurance policy or binder: (i) the policy is
legal, valid, binding, enforceable, and in full force and effect; (ii) the
policy will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the transactions
contemplated hereby; (iii) none of the Company, any Company Subsidiary or any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy, and (iv) no
party to the policy has repudiated any provision thereof. Since November 17,
1999, the Company and each Company Subsidiary has been covered by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. DISCLOSURE SCHEDULE 3.24 describes any
self-insurance arrangements affecting the Company or any Company Subsidiary.
There are no facts known to the Company upon which an insurer might reasonably
be justified in reducing or denying coverage or increasing premiums on existing
policies or binders. There are no outstanding unpaid claims under any such
policies or binders. Such policies and binders are in full force and effect on
the date hereof and shall be kept in full force and effect by the Company
through the Closing Date.
3.25 BROKERS; TRANSACTION COSTS. Neither the Company nor any Company
Subsidiary has entered into and will not enter into any contract, agreement,
arrangement or understanding with any Person which will result in the obligation
of Buyer, the Company or any Company Subsidiary to pay any finder's fee,
brokerage commission, legal, accounting, or similar payment in connection with
the transactions contemplated hereby.
3.26 NO OTHER AGREEMENTS TO SELL THE COMPANY OR THE ASSETS. Neither the
Company nor any Company Subsidiary has any legal obligation, absolute or
contingent, to any other Person to sell the Assets of the Company or any Company
Subsidiary (other than inventory in the ordinary course of business) or to sell
any capital stock of the Company or any Company Subsidiary or to effect any
merger, consolidation or other reorganization of the Company or any Company
Subsidiary or to enter into any agreement with respect thereto, except pursuant
to the Company Options and this Agreement.
3.27 ACCOUNTS RECEIVABLE. All Accounts Receivable of the Company and
the Company Subsidiaries that are reflected on the Company Balance Sheet or on
the accounting records of the Company or any Company Subsidiary as of the
Closing Date represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business
of the Company. Unless paid prior to the Closing Date, such Accounts Receivable
are or will be as of the Closing Date collectible net of an appropriate reserve
shown on the Company Balance Sheet or on the accounting records of the Company
as of the Closing Date (which reserves are adequate and calculated consistent
with past practice). Each of such Accounts Receivable either has been or will be
collected in full, without any set-off, within one hundred twenty (120) days
after the day on which it first becomes due and payable. There is no contest,
claim, or right of set-off under any Contract with any obligor of any Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
DISCLOSURE SCHEDULE 3.27 contains a complete and accurate list of all Accounts
Receivable as of the date of the hereof, which list sets forth the aging of such
Accounts Receivable.
39
3.28 INVENTORY. All inventory of the Company and the Company
Subsidiaries, whether or not reflected in the Company Balance Sheet or on the
accounting records of the Company or any Company Subsidiary as of the Closing
Date (accounted for consistent with past practice), consists of a quality and
quantity usable and salable in the ordinary course of business of the Company,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Company Balance
Sheet or on the accounting records of the Company as of the Closing Date, as the
case may be. The quantities of each item of inventory are not excessive, but are
reasonable in the present circumstances of the Company. The Company has good and
marketable title to the inventories free and clear of all Encumbrances. The
inventories do not include any material amount of inventory that is slow-moving,
obsolete, excess, damaged or otherwise not merchantable or returnable by vendors
for full credit.
3.29 PRODUCT WARRANTY. Each product manufactured, sold, leased, or
delivered by the Company or any Company Subsidiary has been in conformity with
all applicable contractual commitments and all express and implied warranties,
and neither the Company nor any Company Subsidiary has any Liability (and there
is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damage in
connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Company Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company. No product
manufactured, sold, leased, or delivered by the Company or any Company
Subsidiary is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. The Company has
previously provided to Buyer complete and accurate copies of the standard terms
and conditions of sale or lease for the Company and any Company Subsidiary
(containing applicable guaranty, warranty, and indemnity provisions).
3.30 BOARD RECOMMENDATION. The board of directors of the Company has,
at a meeting of such board duly held on May 13, 2003, unanimously (i) approved,
adopted and declared advisable this Agreement, the Voting Agreements and the
transactions contemplated hereby and thereby, (ii) determined that this
Agreement is fair to and in the best interests of the stockholders of the
Company and (iii) resolved to recommend approval of the adoption of this
Agreement to the stockholders of the Company. The Company has taken any and all
action necessary to exempt the execution, delivery and performance of this
Agreement, the Voting Agreements and the transactions contemplated hereby and
thereby from the restrictions on "business combinations" set forth in Section
203 of the Delaware Law.
3.31 FAIRNESS OPINION. The Company has received the opinion of
Kendrick, Pierce & Company, Inc. dated the date of the approval of this
Agreement by the board of directors of the Company to the effect that the
aggregate consideration in the Merger is fair, from a financial point of view,
to the stockholders of the Company.
3.32 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or
warranties by the Company in this Agreement (including all schedules,
certificates and exhibits hereto) contains or will contain at the Effective Time
any untrue statement of a material fact, or omits or will omit to state any
material fact necessary to make the statements or facts contained therein not
40
misleading. In addition, the other document, written information, statement,
certificate or schedule heretofore or hereinafter furnished by the Company or
any of its Representatives to Buyer or Merger Sub in connection with the
transactions contemplated by this Agreement, or mailed or delivered to
stockholders of the Company in connection with soliciting the approval of the
adoption of this Agreement by the stockholders of the Company, taken as a whole
do not contain or will not contain any untrue statement of a material fact, or
do not omit or will not at the Effective Time omit to state any material fact
necessary to make the statements or facts contained therein not misleading.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
As an inducement of the Company to enter into this Agreement, Buyer and
the Merger Sub represent and warrant to the Company as follows, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the state of Delaware. Merger Sub has not engaged in any business
(other than in connection with this Agreement and the transactions contemplated
hereby) since the date of its incorporation. Merger sub is a wholly-owned
subsidiary of Buyer.
4.2 AUTHORIZATION. Each of Buyer and Merger Sub has all necessary
corporate power and authority to enter into this Agreement and, assuming the
approval of the adoption of this Agreement by the sole stockholder of Merger
Sub, has taken all action necessary to consummate the transactions contemplated
hereby and to perform its respective obligations hereunder. This Agreement has
been duly executed and delivered by each of Buyer and Merger Sub, and this
Agreement is a valid and binding obligation of each of Buyer and Merger Sub
enforceable against each of Buyer and Merger Sub in accordance with its terms,
except that enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors or (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
4.3 NO CONFLICTS. The execution and delivery by each of Buyer and
Merger Sub of this Agreement does not, and the performance by each Buyer and
Merger Sub of its obligations under this Agreement and the consummation of the
transactions contemplated hereby do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the Certificate of Incorporation or
Bylaws of Buyer or Merger Sub; or
(b) conflict with or result in a violation or breach of any
Law or Order applicable to Buyer or Merger Sub.
4.4 APPROVALS. Other than the filing of the Certificate of Merger,
together with the required officers' certificates, and such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
41
required under state or federal securities laws, if any, there are no material
Approvals of Governmental or Regulatory Authorities relating to the business
conducted by Buyer or Merger Sub required to be given to or obtained by Buyer
from any Governmental or Regulatory Authorities in connection with the
consummation of the transactions contemplated by this Agreement.
4.5 MERGER CONSIDERATION. Buyer currently has available, and at the
Effective Time of the Merger will continue to have available, sufficient cash
and cash equivalents to enable it to perform its obligations under this
Agreement.
4.6 BROKERS' AND FINDERS' FEES. Neither Buyer nor Merger Sub 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 transactions contemplated hereby.
4.7 BOARD APPROVAL; NO STOCKHOLDER APPROVAL REQUIRED. The boards of
directors of Buyer and Merger Sub have approved this Agreement and the Merger.
The stockholders of Buyer are not required to adopt this Agreement. Buyer, as
the sole stockholder of Merger Sub, shall adopt this Agreement immediately after
the execution and delivery of this Agreement by the parties hereto.
4.8 MATERIAL MISSTATEMENTS OR OMISSIONS. No representation or
warranties by Buyer and/or Merger Sub in this Agreement (including all
schedules, certificates and exhibits hereto) contains or will contain at the
Effective Time any untrue statement of a material fact, or omits or will omit to
state any material fact necessary to make the statements or facts contained
therein not misleading. In addition, the other document, written information,
statement, certificate or schedule heretofore or hereinafter furnished by Buyer
and/or Merger Sub or any their respective Representatives to the Company in
connection with the transactions contemplated by this Agreement, or provided to
the Company by Buyer and/or Merger Sub or any of their Representatives in
connection with soliciting the approval of the adoption of this Agreement by the
stockholders of the Company, taken as a whole do not contain or will not contain
any untrue statement of a material fact, or do not omit or will not at the
Effective Time omit to state any material fact necessary to make the statements
or facts contained therein not misleading.
ARTICLE 5.
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as otherwise expressly
contemplated by this Agreement or as consented to by Buyer in writing, from the
date hereof through the Closing, the Company shall, and shall cause each Company
Subsidiary to, (a) operate the Business solely in the ordinary course of
business and in accordance with past practice and (b) not take any action
inconsistent with this Agreement or the consummation of the Merger. Without
limiting the generality of the foregoing, except as specifically contemplated by
this Agreement or as consented to by Buyer in writing, the Company shall not,
and shall cause each Company Subsidiary not to:
42
(a) incur any indebtedness for borrowed money, or assume,
guarantee, endorse, or otherwise become responsible for obligations of any other
Person;
(b) issue (except pursuant to the exercise of the Company
Options or Company Warrants outstanding on the date of this Agreement) or commit
to issue any shares of its capital stock or any other securities or any
securities convertible into shares of its capital stock or any other securities,
including, without limitation, any options to acquire capital stock, accelerate
the vesting of any Company Options, or reserve for issuance additional shares
under the Company Stock Plans;
(c) declare, pay or incur any obligation to pay any dividend
or distribution on its capital stock or declare, make or incur any obligation to
make any distribution or redemption with respect to capital stock;
(d) make any change to the Company's Certificate of
Incorporation or Bylaws or the charter documents of any Company Subsidiary;
(e) mortgage, pledge or otherwise encumber any Assets or sell,
transfer, license or otherwise dispose of any Assets except for the sale or
disposition of inventory to customers in the ordinary course of business and
consistent with past practice;
(f) cancel, release or assign any indebtedness owed to it or
any claims or rights held by it;
(g) make any investment or commitment of a capital nature
either by purchase of stock or securities, contributions to capital, property
transfer or otherwise, or by the purchase of any property or assets of any other
Person;
(h) terminate any Contract listed on DISCLOSURE SCHEDULE 3.11
or make any change in any such Contract;
(i) without the written consent of Buyer, which consent shall
not be unreasonably withheld, (i) enter into or modify any employment Contract,
(ii) pay any compensation to or for any Employee, officer or director other than
in the ordinary course of business and pursuant to employment arrangements
existing as of the date of this Agreement, (iii) pay or agree to pay any bonus,
incentive compensation, service award, severance, "stay bonus" or other like
benefit or (iv) enter into or modify any other material Employee Plan;
(j) enter into or modify any Contract or other arrangement
with a Related Party;
(k) make any change in any method of accounting or accounting
practice;
(l) fail to comply with all material Laws applicable to the
Assets of the Company or any Company Subsidiary and the Business consistent with
past practices;
(m) fail to use its commercially reasonable efforts to (i)
maintain the Business, (ii) maintain existing relationships with material
suppliers and customers of the Company and others having business dealings with
43
the Company, and (iii) otherwise preserve the goodwill of the Business so that
such relationships and goodwill will be preserved on and after the Closing Date;
(n) make or change any election in respect of Taxes, adopt or
change any material accounting method in respect of Taxes, enter into any Tax
allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing
agreement, settle or compromise any claim, notice, audit report or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(o) commence any Action or Proceeding;
(p) take any action that would cause any representation or
warranty of the Company in this Agreement to be or become untrue in any material
respect;
(q) knowingly take any other actions that would prevent the
Company from performing or cause the Company not to perform its agreements and
covenants hereunder; or
(r) directly or indirectly take, agree to take or otherwise
permit to occur any of the actions described in Sections 5.1(a) through 5.1(q).
5.2 NO SOLICITATION.
(a) The Company shall not, and shall cause each Company
Subsidiary and its Representatives not to: (i) initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal that
constitutes or is reasonably likely to lead to any Acquisition Proposal (as
defined in Section 5.2(c) hereof), (ii) engage in negotiations or discussions
(other than to advise as to the existence of the restrictions set forth in this
Section 5.2) with, or furnish any information or data to, any third party
relating to an Acquisition Proposal, or (iii) enter into any agreement with
respect to any Acquisition Proposal or approve any Acquisition Proposal.
Notwithstanding anything to the contrary contained in this Section 5.2 or in any
other provision of this Agreement, the Company and its Representatives (i) may
participate in discussions or negotiations with or furnish information to any
third party making an unsolicited Acquisition Proposal (a "POTENTIAL ACQUIROR")
or approve an unsolicited Acquisition Proposal if (A) neither the Company nor
any of its Representatives has violated the provisions of this Section 5.2 and
(B) the board determines in good faith after receiving advice from its financial
advisor that such Acquisition Proposal is reasonably likely to lead to a
Superior Proposal (as defined in Section 5.2(d) hereof). Prior to furnishing any
non-public information to a Potential Acquiror, the Company shall enter into an
agreement with such Potential Acquiror containing confidentiality, standstill
and nonsolicitation provisions at least as favorable to the Company as the
confidentiality, standstill and nonsolicitation provisions of the
Confidentiality Agreement and the Letter of Intent. In the event that the
Company shall determine to provide any information as described above, or shall
receive any Acquisition Proposal (or any material amendment to an Acquisition
Proposal previously received), it shall promptly, and in any event within 24
hours, inform Buyer in writing as to that fact and shall furnish to Buyer the
identity of the recipient of such information to be provided and/or the
Potential Acquiror and the terms of such Acquisition Proposal (or material
amendment).
44
(b) Except as provided in this Section 5.2(b), the board of
directors of the Company shall recommend to the stockholders of the Company the
adoption of this Agreement. The board of directors of the Company shall not (i)
withdraw or modify or propose to withdraw or modify, in any manner adverse to
Buyer, its approval and recommendation of the adoption of this Agreement or (ii)
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal unless, in each case, the board has (x) determined in good faith that
the failure to take such action would be inconsistent with the board's fiduciary
duties under applicable law and (y) gives at least five (5) Business Days' prior
written notice to Buyer of its determination under clause (x) of this Section
5.2(b).
(c) For purposes of this Agreement, "ACQUISITION PROPOSAL"
shall mean any bona fide proposal, whether in writing or otherwise, made by a
third party to:
(i) acquire beneficial ownership (as defined under
Rule 13d-3 of the Exchange Act) of all or a material portion of the business of,
or any material equity interest in, the Company or any Company Subsidiary
pursuant to a merger, consolidation or other business combination, sale of
shares of capital stock, sale of assets, tender offer or exchange offer or
similar transaction involving the Company or any Company Subsidiary; or
(ii) acquire, lease, exchange, transfer, license or
dispose of (other than in the ordinary course of business), a material portion
of the Company's Proprietary Rights.
Each of (i) or (ii) above shall include any single or multi-step transaction or
series of related transactions which is structured to permit any transaction
described therein.
(d) The term "SUPERIOR PROPOSAL" means a bona fide Acquisition
Proposal for all of the Company Common Stock (or all or substantially all of the
assets of the Company), made in writing and not initiated, solicited or
encouraged in violation of Section 5.2(a) of this Agreement, on terms which the
board of directors of the Company (A) determines in its good faith judgment, if
accepted, is reasonably likely to be consummated on a timely basis, taking into
account all legal, financial and regulatory aspects of such Acquisition Proposal
and (B) determines in its good faith judgment to be more favorable to Company
and the stockholders of the Company than the Merger (based on the advice of the
Company's financial advisor that the value of the consideration provided for in
such proposal is superior to the value of the consideration provided for in the
Merger).
(e) The Company shall not terminate, amend, modify or waive
any provision of any confidentiality or standstill agreement relating to an
Acquisition Proposal to which it or any Company Subsidiary is a party.
(f) If prior to the Effective Time the board of directors of
the Company determines in good faith, after consultation with its financial and
legal advisors, that any Acquisition Proposal constitutes a Superior Proposal
and the board of directors of the Company believes in its good faith judgment,
after receiving advice of its outside legal counsel that failing to terminate
this Agreement and enter into a transaction (the "SUPERIOR TRANSACTION") with
45
respect to the Superior Proposal would constitute a breach of its fiduciary
duties under applicable law, the Company may terminate this Agreement and enter
into a binding acquisition agreement (an "ACQUISITION AGREEMENT") with respect
to such Superior Transaction, provided, that, prior to any such termination, (i)
the Company has provided Buyer written notice that it intends to terminate this
Agreement pursuant to this Section 5.2(f), identifying the Superior Transaction
then determined to be more favorable and the parties thereto and delivering to
Buyer a copy of the Acquisition Agreement for such Superior Transaction in the
form to be entered into, (ii) the Company causes its legal counsel and its
financial advisor to afford Buyer the opportunity to match the terms of the
Superior Transaction and to negotiate with Buyer to make other adjustments in
the terms and conditions of this Agreement that would permit the Company's board
of directors to recommend this Agreement as revised, (iii) the Company has not
received from Buyer, within three (3) Business Days of Buyer's receipt of the
notice referred to in clause (i), an offer that the Company's board of directors
determines in good faith, after consultation with and taking into account the
advice of its outside legal counsel and its outside financial advisors of
nationally recognized reputation, matches or exceeds such Superior Transaction
or is otherwise sufficient to permit the Company's board of directors to
continue to recommend this Agreement, as amended by such offer from Buyer, and
the Merger, rather than the Superior Transaction (for purposes of such
determination, if the consideration offered in a Superior Transaction is other
than cash, Buyer shall be deemed to have "matched" such Superior Transaction if
the aggregate consideration offered by Buyer has a value that is not less than
the value of the consideration offered in the Superior Transaction, as
determined in good faith by Company's board of directors, after consultation
with and taking into account the advice of its outside legal and outside
financial advisor of nationally recognized reputation); (iv) Buyer's right to
match any Superior Transaction shall apply equally with respect to any
subsequent increase or other revision of the terms of any Superior Transaction,
and (v) within three (3) full Business Days after the Company has provided the
notice referred to in clause (i) above (provided that the Company board of
directors' determinations and beliefs shall continue in effect without material
revision or modification), the Company delivers (or causes the other party to
the Superior Transaction to deliver) to Buyer the termination fee provided for
in Section 8.5.
ARTICLE 6.
ADDITIONAL COVENANTS
6.1 SPECIAL MEETING; BOARD RECOMMENDATION.
(a) In order to obtain stockholder approval of this Agreement,
the Company, acting through its board of directors, shall duly call, give notice
of, convene and hold a special meeting of the stockholders of the Company for
the purpose of considering and voting on the adoption of this Agreement (the
"COMPANY SPECIAL MEETING"). The Company Special Meeting shall be held as soon as
practicable after the execution of this Agreement.
(b) As promptly as practicable, but in no event later than 15
Business Days after the execution of this Agreement, the Company shall prepare
and file with the SEC a preliminary form of the proxy statement for the Company
Special Meeting (the "PROXY STATEMENT"). As promptly as practicable following
receipt of SEC comments on such preliminary Proxy Statement, the Company shall
prepare a response to such comments. The Company shall provide drafts of the
Proxy Statement and any response letter to Buyer, and Buyer shall be entitled to
46
review and comment on all such drafts. Neither the Proxy Statement nor any such
response letter shall be filed with the SEC without the consent of Buyer, which
consent shall not be unreasonably withheld. Upon resolution of all comments or
expiration of any waiting period, the Company shall, as promptly as practicable
following such resolution, mail the definitive Proxy Statement to the
stockholders of the Company as of the record date for the Company Special
Meeting. The Company shall use all commercially reasonable efforts to have the
preliminary Proxy Statement cleared by the SEC as promptly as practicable. Buyer
and the Company shall promptly furnish to each other all information, and take
such other actions (including, without limitation, using all commercially
reasonable efforts to provide any required consents of their respective
independent auditors), as may reasonably be requested in connection with any
action by any of them in connection with the preceding sentences of this Section
6.1(b).
(c) Subject to Section 5.2(b), the Proxy Statement shall
contain the recommendation of the board of directors of the Company in favor of
the adoption of this Agreement.
6.2 VOTING AGREEMENTS. Contemporaneously with the execution of this
Agreement, each of the Major Stockholders have entered into Voting Agreements
with Buyer (in the form of EXHIBIT A attached hereto) with respect to the voting
of their Company Common Stock and which Voting Agreements prohibit the Major
Stockholders from selling or transferring their Company Common Stock prior to
the Effective Time.
6.3 ACCESS TO INFORMATION. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice the Company shall (i) give Buyer and its officers, employees,
accountants, counsel, financing sources and other agents and representatives
reasonable access to all buildings, offices, and other facilities and to all
Books and Records of the Company and the Company Subsidiaries, whether located
on the premises of the Company or at another location; (ii) permit Buyer to make
such inspections as it may reasonably require; (iii) cause its officers to
furnish Buyer such financial, operating, technical and product data and other
information with respect to the Business and Assets of the Company or any
Company Subsidiary as Buyer from time to time may request, including without
limitation, financial statements and schedules; (iv) allow Buyer the opportunity
to interview such Employees and other personnel and Affiliates of the Company
and the Company Subsidiaries as Buyer may reasonably request; and (v) assist and
cooperate with Buyer in the development of integration plans for implementation
by Buyer and the Surviving Corporation following the Effective Time; PROVIDED,
HOWEVER, that no investigation pursuant to this Section 6.3 shall affect or be
deemed to modify any representation or warranty made by the Company herein.
6.4 CONFIDENTIALITY. Each of the parties hereto hereby agrees to keep
the information or knowledge obtained in any investigation pursuant to Section
6.3, or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; PROVIDED,
HOWEVER, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of Law, or a confidentiality
agreement or other contractual, legal or fiduciary obligation of confidentiality
47
of the disclosing party or any other party with respect to such information, (c)
became known to the public through no fault of such party, (d) is later lawfully
acquired by such party without confidentiality restrictions from other sources
not bound by applicable confidentiality restrictions, (e) is required to be
disclosed by order of court or Governmental or Regulatory Authority with
subpoena powers (provided that such party shall have provided the other party
with prior notice of such order and an opportunity to object or seek a
protective order and take any other available action) or (f) which is disclosed
without obligation of confidentiality in the course of any Action or Proceeding
between any of the parties hereto.
6.5 EXPENSES(a) All fees and expenses incurred in connection with the
proposed Merger, including all legal, accounting, financial advisory, consulting
and all other fees and expenses of third parties ("THIRD PARTY EXPENSES")
incurred by a party in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby,
shall be the obligation of the respective party incurring such fees and
expenses. The Company shall deliver to Buyer itemized invoices for all Third
Party Expenses of the Company ("COMPANY THIRD PARTY EXPENSES") to be incurred by
the Company prior to or after the Effective Time and an officer's certificate
(the "OFFICER'S CERTIFICATE") setting forth the aggregate amount of all such
Company Third Party Expenses, each to be delivered to Buyer at least five (5)
Business Days before the Closing Date.
6.6 PUBLIC DISCLOSURE. Except as required by law (including federal and
state securities laws), or as may be reasonably necessary to complete the
Merger, no party hereto shall disclose the existence of, or any subject matter
of, or the terms and conditions of, this Agreement to any third party (other
than a party's financial and legal advisors) without the prior written consent
of the other (which shall not be unreasonably withheld or delayed), and each
party is responsible for preventing disclosure by such party's financial and
legal advisors. The parties will mutually reasonably agree to the timing and
content of any announcements, press releases or public statements concerning the
proposed Merger.
6.7 COMMERCIALLY REASONABLE EFFORTS. The Company and Buyer shall use
commercially reasonable efforts to take, or cause to be taken, all actions and
do, or cause to be done, all things necessary, proper and appropriate under this
Agreement, applicable laws, and applicable regulations to complete the
transactions contemplated by this Agreement, including without limitation, (a)
obtain all Approvals and Consents under any of the Contracts and under other
agreements as may be required in connection with the Merger (including those set
forth in DISCLOSURE SCHEDULE 3.12), (b) to obtain all Approvals from
Governmental or Regulatory Authorities including, without limitation, using
commercially reasonable efforts to obtain all necessary governmental and private
party consents, approvals or waivers, PROVIDED, HOWEVER, that no party shall be
obligated to make a material payment of money as a condition to obtaining any
such Approval or Consent other than filing fees and other reasonably anticipated
costs and expenses. Buyer and the Company shall provide each other with such
assistance and information as is reasonably required to obtain such Approvals as
set forth in DISCLOSURE SCHEDULE 3.12.
6.8 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Buyer, and Buyer shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company or Buyer,
respectively, contained in this Agreement to be untrue or inaccurate at or prior
to the Closing Date and (b) any failure of the Company or Buyer, as the case may
48
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery
of any notice pursuant to this Section 6.8 shall not limit or otherwise affect
any remedies available to the party receiving such notice.
6.9 COMPANY REPURCHASES. The Company will exercise any rights that
mature between the date hereof and the Effective Time to repurchase any
outstanding shares of Company Common Stock at the price at which such shares
were issued.
6.10 PROPRIETARY RIGHTS. The Company shall give Buyer prompt notice of
that any Person shall have (i) commenced, or shall have notified the Company or
any Company Subsidiary that it intends to commence, an Action or Proceeding or
(ii) provided the Company or any Company Subsidiary with notice, in either case
which allege(s) that any of the Proprietary Rights, including the Company
Proprietary Rights, presently embodied, or proposed to be embodied, in the
Company's or the Company Subsidiaries' products or utilized in Company-designed
or modified development tools (including standard cells) or design environments
infringes or otherwise violates the intellectual property rights of such Person,
is available for licensing from a potential licensor providing the notice or
otherwise alleges that the Company or any Company Subsidiary does not otherwise
own or have the right to exploit such Proprietary Rights, including the Company
Proprietary Rights. The Company shall take commercially reasonable actions to
maintain, perfect, preserve or renew the Company Registered Proprietary Rights,
including, without limitation, the payment of any registration, maintenance,
renewal fees, annuity fees and taxes or the filing of any documents,
applications or certificates related thereto, and to promptly respond and
prepare to respond to all requests, related to the Company Registered
Proprietary Rights, received from Governmental or Regulatory Authorities. At the
Closing, the Company will notify Buyer of all material actions which must be
taken within the 180 days following the Closing and which are necessary to
maintain, perfect, preserve or renew the Company Registered Proprietary Rights,
including the payment of any registration, maintenance, renewal fees, annuity
fees and taxes or the filing of any documents, applications or certificates
related thereto.
6.11 TAX MATTERS
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Buyer
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for the Company and the Company Subsidiaries for all periods ending on
or prior to the Closing Date which are required to be filed (taking into account
all extensions properly obtained) after the Closing Date.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING
DATE. Buyer shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the Company for Tax periods which begin before the Closing
Date and end after the Closing Date.
(c) REFUNDS. Any Tax refunds of the Company or any Company
Subsidiary that are received by Buyer, the Company or any Company Subsidiaries
and any amounts credited against Tax of the Company or any Company Subsidiary to
which Buyer, the Company or any Company Subsidiary become entitled, that relate
to Tax periods or portions thereof ending on, before or after the Closing Date
shall be for the account of the Buyer.
49
(d) TAX ELECTIONS. Neither the Company nor any Company
Subsidiary shall make or change any election or method of accounting with
respect to Taxes or settle or compromise any material Tax Liability or refund
after the date hereof without Buyer's prior written consent (which consent shall
not be unreasonably withheld).
(e) FIRPTA CERTIFICATE. The Company shall have delivered to
Buyer, not more than 20 days before the Closing Date, a statement in accordance
with Treasury Regulations Section 1.1445-2(c)(3) and 1.897-2(h) certifying that
the Company is not, and has not been, a "United States real property holding
corporation" for purposes of Sections 897 and 1445 of the Code. In addition, the
Company shall have delivered to Buyer on the Closing Date a copy of the
notification to the IRS, prepared in accordance with Treasury Regulations
Section 1.897-2(h)(2), of delivery of the statement referred to in the preceding
sentence, signed by a responsible corporate officer of the Company. The Company
acknowledges that Buyer may cause the Company to file such notification with the
IRS on or after the Closing Date.
(f) CARRYBACKS. Any net operating losses or similar Tax
attribute of the Company or any Company Subsidiary is an asset of the Company
that (subject to any applicable limitations imposed by law) is being acquired by
Buyer pursuant to the Merger, and neither the Company nor any Company Subsidiary
shall elect to carry back any such Tax attributes to prior years of the Company
or any Company Subsidiary or otherwise act so as to limit the ability of Buyer
to use such attributes subsequent to the Merger.
6.12 SEC FILINGS. The Company will deliver promptly to Buyer true and
complete copies of each report, registration statement or statement mailed by it
to its stockholder generally or filed by it with the SEC, in each case
subsequent to the date hereof and prior to the Effective Time. As of their
respective dates, such reports, including the consolidated financial statements
included therein, and statements (excluding any information therein provided by
Buyer or the Merger Sub, as to which the Company makes no representation) will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. Each of
the consolidated financial statements (including, in each case, any related
notes thereto) contained in such reports, (a) shall comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, (b) shall be 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 under the Exchange Act) and (c) shall fairly present the consolidated
financial position of the Company and the Company Subsidiaries as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal year-end adjustments.
6.13 STOCKHOLDER LITIGATION. The Company and Buyer agree that in
connection with any third party or derivative litigation which may be brought
against the Company, any Company Subsidiary or their respective directors
relating to the transactions contemplated hereby, the Company will keep Buyer,
and any counsel which Buyer may retain, informed of the course of such
50
litigation, to the extent Buyer is not otherwise a party thereto, and the
Company agrees that it will consult with Buyer prior to entering into settlement
or compromise of any such stockholder litigation; PROVIDED that no such
settlement or compromise will be entered into without Buyer's prior written
consent (which consent or denial of consent shall not be unreasonably withheld
or delayed).
6.14 INDEMNIFICATION. The certificate of incorporation and bylaws of
the Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the certificate of incorporation and bylaws of the
Company as of the date hereof, which provisions shall not be amended, repealed
or otherwise modified for a period of six (6) 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 and officers of the
Company, unless such modification is required by law. The Surviving Corporation
will honor and fulfill the obligations of the Company pursuant to
indemnification agreements with the Company's officers and directors existing as
of the date hereof.
ARTICLE 7.
CONDITIONS TO THE MERGER
7.1 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 or mutual waiver at or prior to the Closing
of the following conditions:
(a) GOVERNMENTAL AND REGULATORY APPROVALS. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated hereby shall have been timely obtained.
(b) NO INJUNCTIONS OR REGULATORY RESTRAINTS; ILLEGALITY. No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any action
taken, or any Law or Order enacted, entered, enforced or deemed applicable to
the Merger or the other transactions contemplated by the terms of this Agreement
that would prohibit the consummation of the Merger or which would permit
consummation of the Merger only if certain divestitures were made or if Buyer
were to agree to limitations on its business activities or operations.
(c) LEGAL PROCEEDINGS. No Governmental or Regulatory Authority
shall have notified either party to this Agreement that such Governmental or
Regulatory Authority intends to commence proceedings to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
or Regulatory Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate the Merger and the other transactions contemplated
by this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by the Company:
51
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in this Agreement shall have been accurate in all
respects as of the date of this Agreement and shall be accurate in all respects
as of the Closing Date as if made on and as of the Closing Date.
(b) PERFORMANCE. Buyer shall have performed and complied with
in all material respects each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by the Buyer at or before the
Closing Date.
(c) BUYER CERTIFICATE. Buyer shall have delivered to the
Company a certificate, dated the Closing Date and executed by an authorized
officer of the Buyer, substantially in the form set forth in EXHIBIT C hereto.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligation
of Buyer to consummate the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by Buyer:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall have been accurate
in all respects as of the date of this Agreement and shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date.
(b) PERFORMANCE. The Company shall have performed and complied
with in all material respects each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Company on or
before the Closing Date.
(c) COMPANY CERTIFICATE. The Company shall have delivered to
Buyer a certificate, dated the Closing Date and executed by the President and
Chief Executive Officer of the Company, substantially in the form set forth in
EXHIBIT D.
(d) STOCKHOLDER APPROVAL. The adoption of this Agreement by a
majority of the outstanding shares of Company Common Stock shall have been
obtained at the Company Special Meeting or any adjournment or postponement
thereof.
(e) CONSENTS AND APPROVALS. All consents, approvals,
notifications, disclosures, filings and registrations listed or required to be
listed in DISCLOSURE SCHEDULE 3.12 of the Disclosure Schedule shall have been
obtained or made.
(f) ACTIONS. No Action shall be pending or threatened relating
in any way to this Agreement or the transactions contemplated herein.
(g) DISSENTING SHARES. Not more than 5% of the issued and
outstanding shares of Company Common Stock shall be Dissenting Shares.
(h) KEY EMPLOYEES. Each of the Key Employees shall remain
continuously employed by the Company on substantially the same terms and with
substantially the same responsibilities as on the date hereof and the Company
52
shall have no knowledge that any of the Key Employees has any intention to
terminate their employment with the Surviving Corporation.
(i) EMPLOYMENT AGREEMENTS. Each Key Employee shall have
executed and delivered to Buyer an Employment Agreement in substantially the
form attached hereto as EXHIBIT E.
(j) COMPANY OPTIONS. All agreements evidencing Company Options
shall have been amended, in a manner reasonably satisfactory to Buyer, to the
extent necessary to provide for the treatment of such Company Options in the
Merger as contemplated by this Agreement.
(k) SECTION 280G. The Company and any person who is a
"disqualified individual" (as defined in Section 280G(c) of the Code and the
proposed Treasury Regulations promulgated thereunder) with respect to the
Company shall have taken any and all actions necessary such that no payment or
acceleration of any right to benefits or payment pursuant to this Agreement, any
Employee Plan, Contract or any other plan or arrangement shall constitute an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the Code.
(l) FIRPTA CERTIFICATE. Buyer shall have no actual knowledge
and shall not have received a notice pursuant to Treasury Regulations Section
1.445-4 that the statement delivered by the Company pursuant to Section 6.11(e)
is false.
(m) PURCHASE OF ASSETS OF NEXLAND, S.A. The Company shall not
have exercised, in any manner, its option to acquire the assets of Nexland, S.A.
pursuant to the Irrevocable Option Agreement, dated as of November 6, 2002,
between the Company, Nexland, S.A. and the stockholders of Nexland, S.A. (the
"IRREVOCABLE OPTION AGREEMENT").
(n) COMPANY WARRANTS. All Company Warrants shall have been
exercised or amended in a manner reasonably satisfactory to Buyer to provide for
their termination at the Effective Time.
(o) TERMINATION OF E.S. BANKEST, LLC AGREEMENT. That certain
Factoring Agreement, dated as of January 31, 2001, between the Company and
Bankest LLC shall have been terminated, the Company shall have no liability
thereunder and any UCC-1 financing statement related thereto shall have been
terminated.
(p) TERMINATION OF EXPOCREDIT CORPORATION AGREEMENT. That
certain Assignment of Receivables Agreement, dated as of April 2, 2003, between
the Company and ExpoCredit Corporation shall have been terminated, the Company
shall have no liability thereunder and any UCC-1 financing statement related
thereto shall have been terminated.
(q) NONCOMPETITION AGREEMENTS. Each of I. Daniel Sultan,
Gregory S Levine and David Lonardo shall have executed a Noncompetition
Agreement in the form attached hereto as EXHIBIT F.
53
(r) NONCOMPETITION AGREEMENT WITH NEXLAND, S.A. The Company,
Nexland, S.A., Yves Many, Andre Chouraqui and I. Daniel Sultan shall have
executed a Noncompetition Agreement in the form attached hereto as EXHIBIT G.
(s) ASSIGNMENT OF TRADEMARKS BY I. DANIEL SULTAN AND NEXLAND,
S.A. The trademark "Nexland" owned by I. Daniel Sultan shall have been assigned
to the Company and the trademarks "Internet Sharing Box", "Etherland" and "Plug
N' Net" owned by Nexland, S.A. shall have been assigned to the Company, pursuant
to a trademark assignment agreement reasonably satisfactory to Buyer.
(t) AMENDMENT OF IRREVOCABLE OPTION AGREEMENT. The Company
shall have caused the Irrevocable Option Agreement to be amended, in a manner
satisfactory to Buyer, so as to (i) terminate the limited licensed granted to
Nexland, S.A. by the Company under Section 2.6 of the Irrevocable Option
Agreement, (ii) grant Nexland, S.A. a limited license to sell the Company's
products which Nexland, S.A. holds in its inventory as of the date hereof (the
"NEXLAND, S.A. INVENTORY") in Europe and Africa for a period of 180 days from
the Closing Date and (iii) grant Nexland, S.A. the limited right to use the
trademarks assigned by I. Daniel Sultan and Nexland, S.A. to Buyer under Section
7.3(s) of this Agreement in Europe and Africa for a period of 180 days from the
Closing Date and to the extent necessary to facilitate the disposition of the
Nexland, S.A. Inventory in accordance with the terms of the amendment to the
Irrevocable Option Agreement.
(u) TERMINATION OF AGREEMENTS WITH ADP TOTALSOURCE SERVICES,
INC. All agreements between the Company and ADP TotalSource Services, Inc.
including that certain Client Services Agreement dated as of December 4, 2002,
shall have been terminated, effective as of the Closing Date.
(v) INDEMNIFICATION AGREEMENT. I. Daniel Sultan, Gregory S.
Levine and Martin E. Dell'Oca shall have executed and delivered to Buyer an
Indemnification Agreement, dated as of the Closing Date, in the form attached
hereto as EXHIBIT H (the "INDEMNIFICATION AGREEMENT").
ARTICLE 8.
TERMINATION
8.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned any time prior to the Effective Time, whether before or after the
adoption of this Agreement by the stockholders of the Company:
(a) by mutual written consent of the parties duly authorized
by the boards of directors of the Company and Merger Sub;
(b) by either Buyer or the Company if the Merger shall not
have been consummated on or before August 31, 2003 (the "OUTSIDE DATE"), which
date may be extended by mutual consent of the parties hereto; PROVIDED, HOWEVER,
that the party seeking to terminate this Agreement pursuant to this clause
8.1(b) shall not have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
failure to consummate the Merger on or before such date;
54
(c) by either Buyer or the Company if (i) any law shall have
been enacted, entered or promulgated prohibiting the consummation of the Merger
substantially on the terms contemplated hereby or (ii) a court of competent
jurisdiction or other Government Entity shall have issued an order, decree,
ruling or injunction, or taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger
substantially on the terms contemplated hereby, and such order, decree, ruling,
injunction or other action shall have become final; PROVIDED, that the party
seeking to terminate this Agreement pursuant to this Section 8.1(c) shall have
used its reasonable commercial efforts to remove such order, decree, ruling or
injunction; or
(d) by either Buyer or the Company if the adoption of this
Agreement by a majority of the outstanding shares of Company Common Stock is not
obtained at the Company Special Meeting or any adjournment or postponement
thereof (a "COMPANY NEGATIVE VOTE").
8.2 TERMINATION BY BUYER. This Agreement may be terminated and the
Merger may be abandoned any time prior to the Effective Time, whether before or
after adoption of this Agreement by the stockholders of the Company, by Buyer,
if:
(a) The Company shall have failed to comply in any material
respect with any of the covenants or agreements contained in any Section of this
Agreement to be complied with or performed by the Company at or prior to such
date of termination; PROVIDED, HOWEVER, that if such failure or failures are
capable of being cured prior to the Effective Time, such failure or failures
shall not have been cured within thirty (30) days of delivery to the Company of
written notice of such failure or failures;
(b) there exists a breach or breaches of any representation or
warranty of the Company contained in this Agreement such that the closing
condition set forth in Section 7.3(a) would not be satisfied; PROVIDED, HOWEVER,
that if such breach or breaches are capable of being cured prior to the
Effective Time, such breach or breaches shall not have been cured within thirty
(30) days of delivery to the Company of written notice of such breach or
breaches; or
(c) (i) the board of directors of the Company fails to
recommend the adoption of this Agreement to the stockholders of the Company, or
withdraws, amends or modifies in a manner adverse to Buyer its recommendation to
the stockholders of the Company for adoption of this Agreement, (ii) a tender
offer (to which Rule 14e-2(a) applies) for any of the outstanding shares of
capital stock of the Company is commenced prior to the Company Special Meeting,
and within the time required by Rule 14e-2(a) under the Exchange Act the board
of directors of the Company fails to recommend against acceptance of such tender
offer, or takes no position with respect to such tender offer, or states its
inability to take a position with respect to such tender offer, (iii) the
Company or its board of directors takes any position (including making no
recommendation or stating an inability to make a recommendation) with respect to
any Acquisition Proposal other than a recommendation to reject such Acquisition
Proposal, (iv) the board of directors of the Company resolves (which resolution
shall not modify, limit or impair the Company's obligations under this
Agreement) to accept, accepts or recommends to the stockholders of the Company a
Superior Proposal, or (v) the board of directors of the Company resolves to take
any of the foregoing actions.
55
8.3 TERMINATION BY THE COMPANY. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after adoption of this Agreement by the stockholders of the Company, by action
of the board of directors of the Company:
(a) if Buyer or Merger Sub shall have failed to comply in any
material respect with any of the covenants or agreements contained in any
Section of this Agreement to be complied with or performed by Buyer or Merger
Sub at or prior to such date of termination; PROVIDED, HOWEVER, that if such
failure or failures are capable of being cured prior to the Effective Time, such
failure or failures shall not have been cured within thirty (30) days of
delivery to Buyer of written notice of such failure or failures; or
(b) if there exists a breach or breaches of any representation
or warranty of Buyer or Merger Sub contained in this Agreement such that the
Closing condition set forth in Section 7.2(a) would not be satisfied; PROVIDED,
HOWEVER, that if such breach or breaches are capable of being cured prior to the
Effective Time, such breach or breaches shall not be cured within thirty (30)
days of delivery to Buyer of written notice of such breach or breaches.
(c) pursuant to and in compliance with Section 5.2(f).
8.4 PROCEDURE FOR TERMINATION. In order to terminate this Agreement
pursuant to this Article VIII, a Party shall provide written notice thereof to
the other Parties.
8.5 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to
this Article VIII, no Party (or any of its directors or officers) shall have any
liability or further obligation under this Agreement to any other Party, except
as provided in this Section 8.5 and except that nothing herein shall relieve any
Party from liability for breach of this Agreement.
(b) If this Agreement is terminated by Buyer (i) pursuant to
Section 8.2(c), or (ii) pursuant to Section 8.2(a) as a result of a breach by
the Company of a covenant contained in Section 5.2 or by the Company pursuant to
Section 8.3(c), then within two (2) Business Days of delivery by Buyer of the
Buyer Expense Notice (as defined below) the Company shall pay Buyer a
termination fee equal to $800,000.00 PLUS all of the expenses incurred by Buyer
in connection with this Agreement and the transactions contemplated hereby
(collectively, the "BUYER TRANSACTION EXPENSES") as set forth in a written
notice to the Company (the "BUYER EXPENSE NOTICE"). If this Agreement is
terminated by Buyer or the Company pursuant to Section 8.1(d) as a result of a
Company Negative Vote, then within two (2) Business Days of delivery by Buyer of
the Buyer Expense Notice the Company shall pay Buyer its Buyer Transaction
Expenses as set forth in a Buyer Expense Notice which shall not exceed
$300,000.00; provided that if, within twelve months of the date of termination
of this Agreement pursuant to Section 8.1(d) as a result of a Company Negative
Vote, any Person acquires a majority of the voting stock of the Company or all
or substantially all of the assets of the Company, then the Company shall pay to
Buyer a termination fee equal to $800,000.00 less any termination fee previously
paid upon closing of such transaction.
56
(c) Any fee payable under this Section 8.5 will be payable by
wire transfer of immediately available funds to an account specified by the
receiving party.
8.6 EXTENSION; WAIVER. At any time prior to the Effective Time, Buyer
or the Company may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations of the other party hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements, covenants 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.
ARTICLE 9.
MISCELLANEOUS PROVISIONS
9.1 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by internationally recognized overnight courier
prepaid, to the parties at the following addresses or facsimile numbers:
If prior to the Closing, to the Company:
Nexland, Inc.
1101 Brickell Avenue
North Tower - 2nd Floor
Miami, Florida 33131
Attention: Gregory S. Levine, President & Chief Executive Officer
Facsimile No.: (305) 358-7771
Telephone No.: (305) 358-3151
With a copy to:
Kirkpatrick & Lockhart LLP
Miami Center
20th Floor
201 South Biscayne Boulevard
Miami, Florida 33131-2399
Attention: Clayton Parker, Esq.
Facsimile No.: (305) 358-7095
Telephone No.: (305) 539-3306
If to Buyer or Merger Sub or, if after the Closing, to the Surviving
Corporation:
Symantec Corporation
20330 Stevens Creek Blvd.
Cupertino, California 95014
Attention: Arthur F. Courville
Facsimile No.: (408) 517-8121
Telephone No.: (408) 517-8000
57
With a copy to:
Heller Ehrman White & McAuliffe LLP
333 Bush Street
San Francisco, California 94104
Attention: Timothy G. Hoxie, Esq.
Facsimile No.: (415) 772-6268
Telephone No.: (415) 772-6000
All such notices, requests and other communications will (a) if
delivered personally to the address as provided in this Section 9.1, be deemed
given upon delivery, (b) if delivered by facsimile transmission to the facsimile
number as provided for in this Section 9.1, be deemed given upon receipt of
facsimile confirmation, (c) if delivered by mail in the manner described above
to the address as provided for in this Section 9.1, be deemed given on the
earlier of the third Business Day following mailing or upon receipt and (d) if
delivered by overnight courier to the address as provided in this Section 9.1,
be deemed given on the earlier of the first Business Day following the date sent
by such overnight courier or upon receipt (in each case regardless of whether
such notice, request or other communication is received by any other Person to
whom a copy of such notice is to be delivered pursuant to this Section 9.1). Any
party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
9.2 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules
hereto, including the Company Disclosure Schedule, 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, except for the
Confidentiality Agreement, which shall continue in full force and effect and
shall survive any termination of this Agreement or the Closing in accordance
with its terms.
9.3 FURTHER ASSURANCES; POST-CLOSING COOPERATION. At any time or from
time to time after the Closing, the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied.
9.4 AMENDMENT; WAIVER. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Buyer, Merger Sub and the Company. Any term
or condition of this Agreement may be waived at any time by the party that is
entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party
58
waiving such term or condition. No waiver by any party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.
9.5 THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person, other than any Person entitled to
indemnity under Section 6.14, and each such person shall be a third-party
beneficiary of the provisions set forth in Section 6.14.
9.6 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
9.7 HEADINGS. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
9.8 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.9 GOVERNING LAW. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
Delaware.
9.10 ARBITRATION. Any and all disputes or controversies arising out of
this Agreement shall be finally settled by arbitration conducted in California
in accordance with the then existing rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof; provided, that nothing in this
Section 9.10 shall prevent a party from applying to a court of competent
jurisdiction to obtain temporary relief pending resolution of the dispute
through arbitration. The parties hereby agree that service of any notices in the
course of such arbitration at their respective addresses as provided for in
Section 9.10 shall be valid and sufficient.
9.11 REMEDIES CUMULATIVE. 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 such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
59
9.12 CONSTRUCTION. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
preferentum.
9.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
* * * * * *
60
IN WITNESS WHEREOF, Buyer, Merger Sub and the Company have
caused this Agreement to be signed by their duly authorized representatives, all
as of the date first written above.
SYMANTEC CORPORATION
By: /s/ John W. Thompson
--------------------------------------------
Name: John W. Thompson
Title: Chairman and Chief Executive Officer
NEBRASKA ACQUISITION SUB, INC.
By: /s/
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
NEXLAND, INC.
By: /s/
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
[SIGNATURE PAGE TO MERGER AGREEMENT]
61
APPENDIX B
FORM OF VOTING AGREEMENT
B-1
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "AGREEMENT") is made and entered into as of
________, 2003 by and among the undersigned stockholder ("STOCKHOLDER") of
Nexland, Inc., a Delaware corporation (the "COMPANY"), and Symantec Corporation,
a Delaware corporation ("SYMANTEC").
RECITALS
A. Stockholder is the registered and/or beneficial owner of such number
of shares of the Company's common stock (the "COMMON STOCK") and options to
purchase shares of the Common Stock as is indicated on EXHIBIT A to this
Agreement.
B. Nebraska Acquisition Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of Symantec ("MERGER SUB"), and the Company are entering
into the Agreement and Plan of Merger (the "MERGER AGREEMENT"), dated as of the
date hereof, pursuant to which Merger Sub will merge with and into the Company
upon the terms and conditions set forth in the Merger Agreement (the "MERGER").
Capitalized terms not defined in this Agreement have the meanings ascribed to
them in the Merger Agreement.
C. The execution of this Agreement by Stockholder is a condition to
Symantec's obligation to execute the Merger Agreement.
D. The parties wish to provide for the voting arrangements set forth in
this Agreement.
In consideration of the mutual covenants and agreements set forth
herein, the Company's and Symantec's willingness to enter into the Merger
Agreement, and such other valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. VOTING AGREEMENT. Subject to Section 3 below, Stockholder hereby
irrevocably agrees to vote (or cause to be voted) all of its shares of capital
stock of the Company as is indicated on EXHIBIT A and all other shares of
capital stock of the Company now owned or hereafter acquired, or which
Stockholder may be empowered to vote (the "SHARES"), from time to time and at
all times, whether at an annual or special meeting of the Company's
stockholders, or upon an action by written consent, (a) in favor of the adoption
of the Merger Agreement and the consummation of the transactions contemplated
therein, including the Merger, (b) against any action or agreement that would
result in a breach in any material respect of the Company and Symantec under the
Merger Agreement, and (c) except as otherwise agreed to in writing in advance by
the Company (other than the Merger and the other transactions contemplated by
the Merger Agreement), against: (i) any Acquisition Proposal, (ii) any change in
the board of directors of the Company other than in connection with the Merger,
(iii) any amendment of the Company's certificate of incorporation other than in
connection with the Merger or (iv) any other action which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, discourage
or materially and adversely affect the contemplated benefits to the Company of
the Merger and the other transactions contemplated by the Merger Agreement.
B-2
Stockholder shall not enter into any agreement or understanding, whether oral or
written, with any person or entity prior to the termination of this Agreement to
vote thereafter in a manner inconsistent with this Section 1.
2. IRREVOCABLE PROXY. Contemporaneously with the execution of this
Agreement, Stockholder has executed and delivered to Symantec a duly executed
proxy in the form attached hereto as EXHIBIT B (the "PROXY") with respect to
each meeting of stockholders of Company, such Proxy to cover the total number of
Shares for which Stockholder is entitled to vote at any such meeting. Upon the
execution of this Agreement by Stockholder, Stockholder hereby revokes any and
all prior proxies given by Stockholder with respect to the Shares and agrees not
to grant any subsequent proxies with respect to the Shares until on or after the
Expiration Date (as defined below). Symantec shall (i) vote for each proposal or
give its consent, as applicable, with respect to any matter described in Section
1(a) and (ii) vote against or withhold its consent, as applicable, with respect
to (A) any matter described in Section 1(b) and (B) unless agreed to in writing
in advance by the Company and Symantec, any matter described in Section 1(c).
3. TERM. This Agreement shall be effective as of the date hereof and
shall continue in effect until the earlier to occur of (i) the Effective Time of
the Merger or (ii) termination of the Merger Agreement in accordance with its
terms (the "EXPIRATION DATE").
4. SOLICITATION. Prior to the Expiration Date, Stockholder shall not,
directly or indirectly: (i) solicit, initiate or encourage (including by way of
furnishing nonpublic information) inquiries or proposals concerning any
Acquisition Proposal or, except as set for in the Merger Agreement, have
discussions or negotiations with any third party (other than Symantec or Merger
Sub) regarding any Acquisition Proposal (other than the Merger); or (ii) induce
or encourage any other stockholder of the Company to vote against, or fail to
vote in favor of, the Merger Agreement and the Merger. Stockholder shall notify
Symantec of any written inquiries or proposals it receives relating to any
Acquisition Proposal.
5. SPECIFIC ENFORCEMENT. The parties acknowledge and agree that the
parties hereto would be irreparably damaged in the event any of the provisions
of this Agreement were not performed by the parties in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that
Symantec and the Company shall be entitled to an injunction to prevent breaches
of this Agreement and to specifically enforce this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction, in addition to any other
remedy to which the parties may be entitled at law or in equity. Each party
consents to personal jurisdiction in any such action brought in the United
States District Court for the Northern District of California or in any court of
the State of California having subject matter jurisdiction.
6. AGREEMENT TO RETAIN SHARES. Stockholder agrees not to transfer
(except as may be specifically required by court order or by operation of law),
sell, exchange, pledge or otherwise dispose of or encumber the Shares, or to
make any offer or agreement relating thereto, at any time prior to the
Expiration Date, unless each person or entity to which any of such Shares are or
may be transferred shall have: (a) executed a counterpart of this Agreement and
a Proxy (with such modifications as Symantec may reasonably request); and (b)
agreed in writing to hold such Shares subject to all of the terms and provisions
of this Agreement.
B-3
7. WAIVER OF APPRAISAL RIGHTS. Stockholder hereby irrevocably and
unconditionally waives, and agrees to cause to be waived and to prevent the
exercise of, any rights of appraisal, any dissenters' rights (including under
Section 262 of the General Corporation Law of the State of Delaware) and any
similar rights relating to the Merger or any related transaction that
Stockholder or any other person may have by virtue of the ownership of any
outstanding shares of Common Stock.
8. LEGEND REQUIREMENT. All certificates evidencing the Shares shall,
during the term of this Agreement, bear such restrictive legends as Symantec and
its counsel deem necessary or advisable under applicable law or pursuant to this
Agreement, and the Company agrees to so legend such Shares. Such legend may
include, without limitation, the following:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN
VOTING RESTRICTIONS PURSUANT TO A VOTING AGREEMENT RELATING TO
SUCH SECURITIES, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT IN COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT."
9. REPRESENTATIONS AND WARRANTIES.
9.1 OWNERSHIP OF SHARES. Stockholder represents and warrants
that (a) it has good title to and is the sole record owner of the Shares and it
does not own beneficially or of record any other capital stock of the Company,
(b) the Shares are validly issued, fully paid and nonassessable and (c) except
for the encumbrances and restrictions arising hereunder, it has no knowledge of
the Shares that are owned by Stockholder being subject to any pledges, liens,
security interests, adverse claims, assessments, proxies, participations,
options, equities, charges or encumbrances of any nature whatsoever with respect
to the ownership of or right to vote or dispose of such Shares, except for
applicable securities laws and the transactions documents under which they were
issued.
9.2 AUTHORITY; DUE EXECUTION; ENFORCEABILITY. Stockholder
hereby represents and warrants that he has the full right, power, capacity and
authority to enter into this Agreement and Stockholder has sole voting power and
sole power of disposition with respect to the Shares with no restrictions on
Stockholder's voting rights or rights of disposition pertaining thereto. Each
party hereto represents and warrants that this Agreement has been duly and
validly executed and delivered by such party and constitutes a legal, valid and
binding obligation of such party enforceable against such party in accordance
with its terms, except as enforcement thereof may be limited against such party
by (a) bankruptcy, insolvency, reorganization, moratorium and similar laws, both
state and federal, affecting the enforcement of creditors' rights or remedies in
general as from time to time in effect or (b) the exercise by courts of equity
powers (the "ENFORCEABILITY EXCEPTIONS"). The Proxy, when duly executed and
delivered by Stockholder, will constitute the legal, valid and binding
obligation of Stockholder, enforceable against Stockholder in accordance with
its terms, except as enforcement thereof may be limited against Stockholder by
the Enforceability Exceptions. If Stockholder is married and the Shares
constitute community property, this Agreement has been duly executed and
delivered by, and constitutes the legal, valid and binding obligation of,
B-4
Stockholder's spouse, enforceable against Stockholder's spouse in accordance
with its terms, subject to laws of general application relating to bankruptcy,
fraudulent conveyance, insolvency and the relief of debtors, and rules of law
governing specific performance, injunctive relief and other equitable remedies.
9.3 NO CONFLICTS OR CONSENTS. Each party hereto represents and
warrants that the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, with or without
giving of notice or the passage of time, (a) violate any judgment, award,
decree, injunction or order of any court, arbitrator or governmental agency
applicable to such party or its property or assets or any federal or state law,
statute or regulation, (b) conflict with, result in the breach of any provision
of or constitute a violation of or default under any agreement or instrument to
which such party is a party or by which such party or such party's property or
assets may be bound, or (c) require any consent or approval of any person.
9.4 TITLE TO SECURITIES. As of the date of this Agreement: (a)
Stockholder either (i) holds of record or (ii) beneficially owns with the right
to vote (in the case of clause (i) and (ii), free and clear of any liens,
claims, options, rights of first refusal, co-sale rights, charges or other
encumbrances (collectively, "LIENS")), other than a right of repurchase in favor
of the Company, the number of outstanding shares of Common Stock set forth on
EXHIBIT A hereof; and (b) Stockholder holds (free and clear of any Liens) the
options and other rights to acquire shares of Company Common Stock set forth
under the caption "Options and Other Rights to Purchase Common Stock" on EXHIBIT
A hereof; and (c) Stockholder does not directly or indirectly own any shares of
capital stock or other securities of the Company, or any option, warrant or
other right to acquire (by purchase, conversion or otherwise) any shares of
capital stock or other securities of the Company, other than the shares and
options and other rights specified on EXHIBIT A hereof.
9.5 RELIANCE BY SYMANTEC AND MERGER SUB. Stockholder
understands and acknowledges that Symantec and Merger Sub are entering into the
Merger Agreement in reliance, in part, upon Stockholder's execution and delivery
of this Agreement. Stockholder has sole voting power with respect to the Shares.
9.6 DUTY OF CANDOR. Stockholder represents and warrants that
for each patent application filed by Nexland with the U.S. Patent and Trademark
Office (the "USPTO"), Stockholder is not aware of any relevant references or
publications that either should have been disclosed or need to be disclosed to
the USPTO.
10. COVENANTS OF STOCKHOLDER. Except as set forth in the Merger
Agreement, Stockholder hereby covenants and agrees that during the term hereof
it shall not enter into any transaction, take any action or by inaction permit
any event to occur, that would result in any of the representations or
warranties of Stockholder herein contained not being true and correct.
Stockholder hereby waives any rights of appraisal or rights to dissent from the
Merger that Stockholder may have under Section 262 of the General Corporation
Law of the State of Delaware or otherwise.
11. CONFIDENTIALITY. Stockholder agrees, except as otherwise required
by legal process, (i) to hold any information regarding this Agreement and the
Merger in strict confidence, and (ii) not to divulge any such information to any
third person, until such time as Symantec or the Company has disclosed publicly
the Merger or the Expiration Date occurs or such information becomes public not
through disclosure by Stockholder.
B-5
12. MISCELLANEOUS.
12.1 ASSIGNMENT; TRANSFER OF RIGHTS. This Agreement shall
inure to the benefit of and be binding upon the respective executors,
administrators, heirs, successors, and assigns of the parties. The Shares may be
transferred or assigned by Stockholder; provided, however, that (i) Symantec and
the Company must receive written notice prior to the time of said transfer or
assignment, stating the name and address of said transferee or assignee, and
(ii) such transferee or assignee must agree in writing (which writing shall be
in a form acceptable to the Company) to be bound by the terms and conditions of
this Agreement.
12.2 FURTHER ASSURANCES. Stockholder shall cooperate with the
Company and execute and deliver any additional documents necessary or desirable,
in the opinion of the Company or its counsel, to evidence the irrevocable proxy
granted herein with respect to the Shares and to carry into effect the intent
and purposes of each provision of this Agreement.
12.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, excluding those
laws that direct the application of the laws of another jurisdiction.
12.4 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.5 NOTICES. Any notice required or permitted hereunder shall
be given in writing and shall be conclusively deemed effectively given upon
personal delivery or delivery by courier, or on the first business day after
transmission if sent by confirmed facsimile transmission, or five days after
deposit in the United States mail, by registered or certified mail, postage
prepaid, addressed to the party at the address set forth below such party's name
on the signature page of this Agreement, or at a new address as such party may
designate by 10 days' advance written notice to the other parties hereto.
12.6 SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
12.7 SURVIVAL. The representations, warranties and agreements
of the parties contained in this Agreement shall survive the termination of this
Agreement and shall continue in full force and effect following termination of
the Agreement.
12.8 COSTS OF ENFORCEMENT. If any party to this Agreement
seeks to enforce its rights under this Agreement by legal proceedings, the
non-prevailing party shall pay all costs and expenses incurred by the prevailing
party, including, without limitation, all reasonable attorneys' fees.
12.9 ENTIRE AGREEMENT; AMENDMENT. This Agreement may be
amended or modified only by a written instrument executed by each of the parties
hereto. This Agreement, the Proxy and the Merger Agreement constitute and
contain the entire agreement of the parties with regard to the subject matter
hereof and thereof and supersede any and all prior negotiations, correspondence,
understandings and agreements between the parties regarding the subject matter
hereof or thereof.
[SIGNATURE PAGE FOLLOWS]
B-6
IN WITNESS WHEREOF, the parties have executed this Voting Agreement as
of the date first above written.
STOCKHOLDER: By:
-------------------------------------------
Name:
-------------------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
Telephone:
------------------------------
Facsimile:
------------------------------
SYMANTEC:
By:
---------------------------------------------
Name: John W. Thompson
Title: Chairman and Chief Executive Officer
Address: Symantec Corporation
20330 Stevens Creek Blvd.
Cupertino, California 95014
Telephone: (408) 517-8000
Facsimile: (408) 517-8121
[SIGNATURE PAGE TO VOTING AGREEMENT]
B-7
EXHIBIT A
TO VOTING AGREEMENT
___________ is the registered and/or beneficial owner of such number of shares
of the Company's common stock and options to purchase shares of the Common Stock
as indicated below:
Shares of common stock:_____________________
Company options:___________________________
B-8
EXHIBIT B
TO VOTING AGREEMENT
IRREVOCABLE PROXY
The undersigned stockholder of Nexland, Inc., a Delaware corporation
("NEXLAND"), hereby irrevocably (to the full extent permitted by Section 212 of
the General Corporation Law of the State of Delaware) appoints Gregory E. Myers
and Arthur F. Courville, and each of them, or any other designee of Symantec
Corporation, a Delaware corporation ("SYMANTEC"), as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution and
resubstitution, to vote and exercise all voting and related rights (to the full
extent that the undersigned is entitled to do so) with respect to all of the
shares of capital stock of Nexland that now are or hereafter may be beneficially
owned by the undersigned, and any and all other shares or securities of Nexland
issued or issuable in respect thereof on or after the date hereof (collectively,
the "SHARES") in accordance with the terms of this Proxy. The Shares
beneficially owned by the undersigned stockholder of Nexland as of the date of
this Proxy are listed on the final page of this Proxy.
Upon the undersigned's execution of this Proxy, any and all prior
proxies given by the undersigned with respect to any Shares are hereby revoked
and the undersigned agrees not to grant any subsequent proxies with respect to
the Shares until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the extent provided in Section 212 of the
General Corporation Law of the State of Delaware) and is granted in
consideration of Symantec entering into that certain Agreement and Plan of
Merger among Nexland, Nebraska Acquisition Sub, Inc., a Delaware corporation and
a wholly-owned subsidiary of Symantec ("MERGER SUB"), and Symantec (such
agreement as it may be amended or restated is hereinafter referred to as the
"MERGER AGREEMENT"). The Merger Agreement provides for the merger of Merger Sub
with and into Nexland (the "MERGER"). As used herein, the term "EXPIRATION DATE"
shall mean the earlier 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 or (ii) the date of termination of the Merger Agreement in accordance
with its terms.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to Section 228 of the General Corporation Law of the State of
Delaware), at every annual, special or adjourned meeting of the stockholders of
Nexland and in every written consent in lieu of such meeting as follows:
(a) in favor of the adoption of the Merger Agreement and the
consummation of the transactions contemplated therein, including the Merger,
(b) against any action or agreement that would result in a
breach in any material respect of Nexland and Symantec under the Merger
Agreement; and
B-9
(c) except as otherwise agreed to in writing in advance by
Nexland (other than the Merger and the other transactions contemplated by the
Merger Agreement), against:
(i) any Acquisition Proposal (as defined in the
Merger Agreement);
(ii) any change in the board of directors of Nexland
other than in connection with the Merger;
(iii) any amendment of Nexland's certificate of
incorporation other than in connection with the Merger; or
(iv) any other action which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, discourage
or materially and adversely affect the contemplated benefits to Nexland of the
Merger and the other transactions contemplated by the Merger Agreement.
The attorneys and proxies named above may not exercise this Proxy on
any other matter except as provided above. The undersigned stockholder may vote
the Shares on all other matters.
All authority herein conferred shall survive the death or incapacity of
the undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
This Proxy is coupled with an interest and is irrevocable.
Dated: , 2003
----------
- --------------------------------------
(Signature of Stockholder)
- -------------------------------------
(Print Name of Stockholder)
Shares beneficially owned:
shares of Nexland, Inc. Common Stock
- ---------
B-10
APPENDIX C
OPINION OF KENDRICK PIERCE SECURITIES, INC.
May 13, 2003
The Board of Directors
Nexland, Inc.
1101 Brickell Avenue
North Tower, 2nd Floor
Miami, FL 33131
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a
financial point of view, to the stockholders of Nexland, Inc. ("Nexland") of the
aggregate consideration in the proposed merger (the "Merger") of Nexland into
Nebraska Acquisition Sub, Inc., a Delaware Corporation ("Merger Sub") and
subsidiary of Symantec Corporation ("Symantec"), pursuant to the Agreement and
Plan of Merger, dated as of May 13, 2003, between Buyer, Merger Sub and Nexland
and other such documents related thereto (the "Agreement"). Pursuant to the
terms of the Agreement, Buyer will pay gross aggregate consideration of
$19,600,000 in cash for all of the outstanding equity interest in Nexland. It is
our understanding that the aggregate consideration will result in an estimated
net consideration of $.5118 per outstanding share, after payment of $1,777,376
to the holders of outstanding options and warrants. It is further our
understanding that no transaction expenses will be deducted from the aggregate
consideration that is distributed to the shareholders of Nexland; however, I.
Daniel Sultan, Gregory S. Levine and Martin E. Dell'Oca (the "Directors") shall
have executed an Indemnification Agreement (the " Indemnification Agreement")
with Symantec and Merger Sub pursuant to which the Directors have agreed to
indemnify Symantec for certain liabilities of Nexland.
Kendrick, Pierce Securities, Inc., as part of its investment banking business,
is continually engaged in the valuation of securities in connection with
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for various other
purposes. We have acted exclusively for the Board of Directors of Nexland in
rendering this fairness opinion and will receive a fee from Nexland for our
services that is principally contingent upon the consummation of the Merger.
Nexland has agreed to indemnify us against certain liabilities arising out of
our engagement including the rendering of this opinion and other matters.
In connection with this opinion, we have, among other things,
C-1
1. reviewed, analyzed and relied upon the draft Agreement dated as of
May 12, 2003;
2. reviewed Nexland's Form 10-KSB for the fiscal years ended December
31, 2002 and December 31, 2001 filed with the Securities and
Exchange Commission;
3. reviewed certain financial statements, including the unaudited
financial statements dated March 31, 2003, and other operating data,
including financial forecasts and other forward looking information
prepared and/or furnished to us by the management of the Nexland;
4. held discussions with senior management of Nexland and their counsel
regarding the past and current business operations, financial
condition and future prospects and such other matters as we have
deemed relevant to our inquiry;
5. compared certain financial and stock market information for Nexland
and for certain other companies deemed relevant to our analysis, the
securities of which are publicly traded,
6. reviewed prices and premiums paid in other transactions that we
considered relevant to our analysis of the Transaction;
7. and performed such other studies and analyses as we considered
appropriate.
In conducting our review and arriving at our opinion, we have relied upon the
accuracy and completeness of all of the financial and other information provided
to us by Nexland's management or its representatives or publicly available and
we have not assumed any responsibility for independently verifying the accuracy
or completeness of any such information. We have relied upon the management of
Nexland as to the reasonableness and achievability of the financial and
operating forecasts and projections (and the assumptions and bases therefor)
provided to us, and we have assumed that such forecasts and projections reflect
the best currently available estimates and judgments of such management made in
good faith and that such forecasts and projections will be realized in the
amounts and in the time periods currently estimated by management. We have not
assumed any responsibility for the independent verification of any such
information or projections provided to us and we have relied further on the
assurances of the senior management team of Nexland that all such information is
complete and accurate in all material respects and that they are unaware of any
facts or circumstances that would make such information incomplete or misleading
in any material respect.
We have further assumed that the draft Agreement furnished to us is identical in
all respects material to our analysis to the definitive agreements to be
executed in connection with the Merger and that the Merger will be consummated
in accordance with the terms
C-2
thereof including that, in all respects material to our analysis, the
representations and warranties made by the parties thereto are true and accurate
in all materials respects.
We have not made an independent evaluation or appraisal of the assets or
liabilities of Nexland, including its intellectual property, and we have not
been furnished with any such current evaluation or appraisal.
We have not opined as to the fairness of the consideration paid to the Directors
because such consideration may be reduced by any potential liabilities pursuant
to the Indemnification Agreement
We understand that the Merger will not qualify as a tax-free reorganization
under the United States Internal Revenue Code and that the consideration will be
taxable to the stockholders of Nexland.
Our opinion is necessarily based on market, economic, financial and other
circumstances and conditions as they exist and can be evaluated as of the date
of this letter. By rendering this opinion, we assume no responsibility to update
or revise our opinion based upon circumstances or events occurring after the
date hereof.
This opinion does not address Nexland's underlying business decision to effect
the Merger or the availability or advisability of any alternatives to the
Merger. This opinion is not a recommendation to Nexland's directors or
shareholders as to whether to approve or vote for the Merger.
It is understood that this letter is intended for the information of Nexland's
Board of Directors in evaluating the Merger and does not confer rights or
remedies upon any other party. This opinion is not to be quoted or referred to,
in whole or in part, without our prior written consent, which shall not be
unreasonably withheld; provided, however, that this letter may be included in
its entirety in any proxy statement to be distributed by Nexland to its
stockholders in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the aggregate consideration in the Merger is fair, from a financial
point of view, to the stockholders of Nexland.
Very truly yours,
Kendrick Pierce Securities, Inc.
C-3
APPENDIX D
SECTION 262. APPRAISAL RIGHTS
D-1
ANNEX D
DELAWARE GENERAL CORPORATION LAW
SECTION 262. Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
D-1
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, then either a constituent corporation
before the effective date of the merger or consolidation or the surviving
or resulting corporation within 10 days thereafter shall notify each of the
holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall,
also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall
D-2
be such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or
D-3
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
D-4
APPENDIX E
PROXY CARD
E-1
NEXLAND, INC.
1101 BRICKELL AVENUE
NORTH TOWER - 2ND FLOOR
MIAMI, FLORIDA 33131
2003 SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NEXLAND, INC.
Gregory S. Levine and Martin E. Dell'Oca, or either one or more of them with
power of substitution in each, are hereby authorized to represent the
undersigned as proxies at the 2003 Special Meeting of Stockholders of Nexland,
Inc. to be held at J.W. Marriott Hotel, 1109 Brickell Avenue, 5th Floor, Miami,
Florida 33131 on July 14, 2003, at 10:00 a.m., and at any adjournment thereof,
and to vote the same number of shares as the undersigned would be entitled to
vote if then personally present and voting thereat.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL AND
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER DATED MAY 13, 2003 ENTERED INTO
AMONG NEXLAND, INC., SYMANTEC CORPORATION, AND NEBRASKA ACQUISITION SUB, INC.
(IMPORTANT TO BE SIGNED AND DATED BELOW. THANK YOU FOR VOTING.)
Please mark votes as in this example [X].
APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF MERGER DATED MAY 13, 2003
ENTERED INTO AMONG NEXLAND, INC., SYMANTEC CORPORATION, AND NEBRASKA ACQUISITION
SUB, INC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF MERGER. IN THEIR
DISCRETION, THE PROXIES LISTED ABOVE ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY POSTPONEMENT OR
ADJOURNMENT THEREOF. THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS
EXERCISE.
DATED: , 2003
-----------------------------
- ---------------------------- -------------------------------------------
Print Name Signature
- ---------------------------- -------------------------------------------
Print Name, if held jointly Signature, if held jointly
Please date, print and sign your name above.
When shares are held by joint tenants, both
should sign. When signing as attorney, as
executor, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
E-2