UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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-12
NETEGRITY, 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 $0.01 per share, of Netegrity, Inc.
("Netegrity common stock").
(2) Aggregate number of securities to which transaction applies:
41,308,027 shares, comprised of (i) 38,473,706 shares of
Netegrity common stock outstanding as of October 5, 2004, (ii)
options to purchase 2,740,321 shares of Netegrity common stock
exercisable on or before December 31, 2004 with an exercise
price of $10.75 or less and (iii) 94,000 shares of Netegrity
common stock estimated to be issued pursuant to the 2002
Employee Stock Purchase Plan on or before December 31, 2004.
(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 by multiplying 0.0001267 by the
product of $10.75 and 41,308,027 (38,473,706 outstanding
shares of Netegrity common stock plus 2,740,321 shares of
Netegrity common stock issuable upon the exercise of options
plus 94,000 shares of Netegrity common stock estimated to be
exercisable under the 2002 Employee Stock Purchase Plan).
(4) Proposed maximum aggregate value of transaction:
$444,061,290.25
(5) Total fee paid:
$56,263
[ ] 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:
-------------------------------
[NETEGRITY LOGO]
NETEGRITY, INC.
201 JONES ROAD
WALTHAM, MASSACHUSETTS 02451
__________, 2004
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of
Netegrity, Inc., which will be held at the offices of Wilmer Cutler Pickering
Hale and Dorr LLP located at 60 State Street, 26th Floor, Boston, Massachusetts
02109, on ________, at 9:00 a.m., local time.
At the meeting, you will be asked to consider and vote on a proposal to
adopt a merger agreement that Netegrity has entered into with Computer
Associates International, Inc. and a wholly-owned subsidiary of Computer
Associates. If our stockholders adopt the merger agreement and the merger is
subsequently completed, Netegrity will become a wholly-owned subsidiary of
Computer Associates, and you will be entitled to receive $10.75 in cash for each
share of Netegrity common stock that you own. A copy of the merger agreement is
attached as Annex A to the accompanying proxy statement, and you are encouraged
to read it in its entirety.
AFTER CAREFUL CONSIDERATION, OUR BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER AND THE MERGER
AGREEMENT ARE ADVISABLE AND IN THE BEST INTERESTS OF NETEGRITY AND ITS
STOCKHOLDERS. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION
OF THE MERGER AGREEMENT. IN REACHING ITS DETERMINATION, OUR BOARD OF DIRECTORS
CONSIDERED A NUMBER OF FACTORS, INCLUDING THE OPINION OF OUR FINANCIAL ADVISOR,
WHICH IS ATTACHED AS ANNEX B TO THE ACCOMPANYING PROXY STATEMENT, AND WHICH YOU
ARE URGED TO READ IN ITS ENTIRETY.
The accompanying document provides a detailed description of the proposed
merger, the merger agreement and related matters. I urge you to read these
materials carefully.
YOUR VOTE IS VERY IMPORTANT. Because adoption of the merger agreement
requires the affirmative vote of the holders of a majority of the outstanding
shares of Netegrity common stock entitled to vote, a failure to vote will have
the same effect as a vote against the adoption of the merger agreement.
WHETHER OR NOT YOU ARE ABLE TO ATTEND THE SPECIAL MEETING IN PERSON,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ENVELOPE PROVIDED AS SOON AS POSSIBLE OR SUBMIT A PROXY THROUGH THE INTERNET OR
BY TELEPHONE AS DESCRIBED IN THE ENCLOSED PROXY CARD. THIS ACTION WILL NOT LIMIT
YOUR RIGHT TO VOTE IN PERSON IF YOU WISH TO ATTEND THE SPECIAL MEETING AND VOTE
IN PERSON.
Thank you for your cooperation and your continued support of Netegrity.
Sincerely,
Barry N. Bycoff
Chairman of the Board, Chief Executive
Officer and President
This proxy statement is dated ______, 2004 and is first being mailed to
stockholders on or about _____, 2004.
NETEGRITY, INC.
201 JONES ROAD
WALTHAM, MASSACHUSETTS 02451
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF NETEGRITY
TO BE HELD ON ___________, 2004
To the Stockholders of Netegrity, Inc.:
Notice is hereby given that a special meeting of stockholders of
Netegrity, Inc. will be held at the offices of Wilmer Cutler Pickering Hale and
Dorr LLP located at 60 State Street, Boston, Massachusetts 02109, on ________,
at 9:00 a.m., local time, for the following purposes:
1. To consider and vote on a proposal to adopt the Agreement and Plan of
Merger, dated as of October 6, 2004, by and among Computer Associates
International, Inc., Netegrity, Inc. and Nova Acquisition Corp.; and
2. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof, including to consider any procedural
matters incident to the conduct of the special meeting, such as adjournment or
postponement of the special meeting to solicit additional proxies in favor of
the proposal to adopt the Agreement and Plan of Merger.
Only stockholders of record of our common stock as of the close of
business on ____________, 2004 are entitled to notice of, and to vote at, the
special meeting and any adjournment or postponement of the special meeting. The
affirmative vote of the holders of a majority of the outstanding shares of our
common stock entitled to vote is required to adopt the merger agreement.
If you fail to vote by proxy or in person, it will have the same effect as
a vote against the adoption of the merger agreement. If you return a properly
signed proxy card but do not indicate how you want to vote, your proxy will be
counted as a vote "FOR" adoption of the merger agreement. Holders of our common
stock are entitled to appraisal rights under the General Corporation Law of the
State of Delaware in connection with the merger. See "Appraisal Rights" on page
34.
By Order of the Board of Directors,
M. Colette Cooke
Vice President, General Counsel and
Secretary
Waltham, Massachusetts
_________, 2004
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED OR SUBMIT A
PROXY THROUGH THE INTERNET OR BY TELEPHONE AS DESCRIBED IN THE ENCLOSED PROXY
CARD. GIVING YOUR PROXY NOW WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU
ATTEND THE MEETING.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER.................. i
The Special Meeting.................................................... i
The Merger............................................................. ii
SUMMARY 1
The Companies.......................................................... 1
The Special Meeting.................................................... 1
The Merger............................................................. 3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS............................... 6
THE SPECIAL MEETING OF NETEGRITY STOCKHOLDERS................................... 8
Date, Time, Place and Purpose of the Special Meeting................... 8
Record Date; Stock Entitled to Vote; Quorum............................ 8
Vote Required.......................................................... 8
Share Ownership and Voting Power of Management......................... 8
Voting .............................................................. 9
Revocability of Proxies................................................ 9
Solicitation of Proxies................................................ 9
Other Business......................................................... 10
THE MERGER...................................................................... 10
Background of the Merger............................................... 10
Reasons for the Merger and Recommendation of the Board of Directors.... 11
Opinion of Financial Advisor to the Board of Directors of Netegrity.... 13
Delisting and Deregistration of Netegrity Common Stock................. 19
Interests of Certain Persons in the Merger............................. 19
The Stockholder Agreements............................................. 21
REGULATORY MATTERS.............................................................. 23
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES................................... 23
THE MERGER AGREEMENT............................................................ 24
Form of the Merger..................................................... 24
Structure and Effective Time........................................... 24
Certificate of Incorporation and Bylaws................................ 24
Board of Directors and Officers of the Surviving Corporation........... 24
Consideration to be Received in the Merger............................. 25
Payment Procedures..................................................... 25
Stock Options and the Employee Stock Purchase Plan..................... 25
Representations and Warranties......................................... 26
Covenants Relating to the Conduct of Our Business...................... 28
No Solicitation........................................................ 29
Stockholders Meeting................................................... 31
Indemnification and Insurance.......................................... 31
Benefit Arrangements................................................... 31
Conditions to the Merger............................................... 31
Termination............................................................ 32
Termination Fee........................................................ 33
Amendment.............................................................. 34
APPRAISAL RIGHTS................................................................ 34
MARKET PRICE AND DIVIDEND DATA.................................................. 37
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS.................. 37
DESCRIPTION OF NETEGRITY, INC................................................... 38
DESCRIPTION OF COMPUTER ASSOCIATES INTERNATIONAL, INC........................... 39
DESCRIPTION OF NOVA ACQUISITION CORP............................................ 39
FUTURE STOCKHOLDER PROPOSALS.................................................... 39
HOUSEHOLDING OF PROXY STATEMENT................................................. 39
WHERE YOU CAN FIND MORE INFORMATION............................................. 39
Annex A -- Agreement and Plan of Merger
Annex B -- Opinion of Broadview International
Annex C -- Section 262 of the General Corporation Law of the State of Delaware
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are provided for your convenience, and
briefly address some commonly asked questions about the proposed merger and the
Netegrity special meeting of stockholders. You should still carefully read this
entire proxy statement, including each of the annexes.
THE SPECIAL MEETING
Q. WHO IS SOLICITING MY PROXY?
A. This proxy is being solicited by our board of directors.
Q. WHAT MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A. You will be asked to vote on the adoption of the merger agreement that we
have entered into with Computer Associates International, Inc. (which is
referred to in this proxy statement as Computer Associates).
Q. WHAT VOTE IS REQUIRED FOR NETEGRITY'S STOCKHOLDERS TO ADOPT THE MERGER
AGREEMENT?
A. In order to adopt the merger agreement, holders of a majority of the
outstanding shares of our common stock entitled to vote must vote "FOR"
adoption of the merger agreement.
Q. WHO IS ENTITLED TO VOTE AT THE SPECIAL MEETING?
A. Holders of record of our common stock as of the close of business on
____________, 2004 are entitled to vote at the special meeting.
Q. WHAT SHOULD I DO NOW?
A. After carefully reading and considering the information contained in this
proxy statement, please vote your shares by returning the enclosed proxy
or submitting a proxy through the Internet or by telephone. You can also
attend the special meeting and vote in person. Do NOT enclose or return
your stock certificate(s) with your proxy.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A. Your broker will only be permitted to vote your shares if you instruct
your broker how to vote. You should follow the procedures provided by your
broker regarding the voting of your shares.
Q. WHAT IF I DO NOT VOTE?
A. If you fail to vote by proxy, either by mail, through the Internet or by
telephone, or in person, it will have the same effect as a vote against
adoption of the merger agreement. If you return a properly signed proxy
card but do not indicate how you want to vote, your proxy will be counted
as a vote "FOR" adoption of the merger agreement.
Q. WHEN SHOULD I SEND IN MY PROXY CARD?
A. You should send in your proxy card as soon as possible so that your shares
will be voted at the special meeting.
Q. MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A. Yes. You may change your vote at any time before your proxy card is voted
at the special meeting. You can do this in one of three ways. First, you
can send a written, dated notice to the Secretary of Netegrity stating
that you would like to revoke your proxy. Second, you can complete, date
and submit a new proxy card either by mail, through the Internet or by
telephone. Third, you can attend the meeting and vote in person. Your
attendance alone will not revoke
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your proxy. If you have instructed a broker to vote your shares, you must
follow directions received from your broker to change those instructions.
Q. MAY I VOTE IN PERSON?
A. Yes. You may attend the special meeting of stockholders and vote your
shares of common stock in person. If you hold shares in "street name" you
must provide a legal proxy executed by your bank or broker in order to
vote your shares at the meeting.
THE MERGER
Q. WHAT IS THE PROPOSED TRANSACTION?
A. Computer Associates will acquire us by merging a subsidiary of Computer
Associates into us, and we will cease to be a publicly-traded company
and will instead become a wholly-owned subsidiary of Computer Associates.
Q. IF THE MERGER IS COMPLETED, WHAT WILL I BE ENTITLED TO RECEIVE FOR MY
SHARES OF NETEGRITY COMMON STOCK AND WHEN WILL I RECEIVE IT?
A. You will be entitled to receive $10.75 in cash, without interest and less
any applicable withholding taxes, for each share of our common stock that
you own.
After the merger closes, Computer Associates will arrange for a letter of
transmittal to be sent to each stockholder. The merger consideration will
be paid to each stockholder once that stockholder submits the letter of
transmittal, properly endorsed stock certificates and any other required
documentation.
Q. AM I ENTITLED TO APPRAISAL RIGHTS?
A. Under the General Corporation Law of the State of Delaware, holders of
Netegrity common stock who do not vote in favor of adopting the merger
agreement will have the right to seek appraisal of the fair value of their
shares as determined by the Delaware Court of Chancery if the merger is
completed, but only if they submit a written demand for an appraisal prior
to the vote on the adoption of the merger agreement and they comply with
the Delaware law procedures explained in this proxy statement. For
additional information about appraisal rights, see "Appraisal Rights"
beginning on page 34.
Q. WHY IS THE NETEGRITY BOARD RECOMMENDING THE MERGER?
A. Our board believes that the merger and the merger agreement are advisable
and in the best interests of Netegrity and its stockholders and
unanimously recommends that you adopt the merger agreement. To review our
board's reasons for recommending the merger, see the section entitled
"Reasons for the Merger and Recommendation of the Board of Directors" on
pages 11 through 13 of this proxy statement.
Q. WILL THE MERGER BE A TAXABLE TRANSACTION TO ME?
A. Yes. The receipt of cash for shares of Netegrity common stock pursuant to
the merger will be a taxable transaction for U.S. federal income tax
purposes. In general, you will recognize gain or loss equal to the
difference between the amount of cash you receive and the adjusted tax
basis of your shares of our common stock. See the section entitled
"Material U.S. Federal Income Tax Consequences" on pages 23 through 24 of
this proxy statement for a more detailed explanation of the tax
consequences of the merger. You should consult your tax advisor on how
specific tax consequences of the merger apply to you.
Q. WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A. We are working towards completing the merger as quickly as possible. We
currently expect to complete the merger as quickly as possible after the
special meeting and after all the conditions to the merger are satisfied
or waived, including
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stockholder adoption of the merger agreement at the special meeting and
expiration or termination of the waiting period under U.S. antitrust law,
or other applicable antitrust law. We and Computer Associates intend to
file pre-merger notifications with the U.S. antitrust authorities pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 before October
22, 2004. We and Computer Associates are currently assessing whether any
foreign antitrust approvals are required to consummate the merger and, to
the extent any such approvals are required, we and Computer Associates
will seek to obtain such approvals as soon as reasonably practicable.
Q. SHOULD I SEND IN MY NETEGRITY STOCK CERTIFICATES NOW?
A. No. After the merger is completed, Computer Associates will send you
written instructions for exchanging your Netegrity stock certificates. You
must return your Netegrity stock certificates as described in the
instructions. You will receive your cash payment as soon as practicable
after Computer Associates receives your Netegrity stock certificates and
any completed documents required in the instructions.
PLEASE DO NOT SEND YOUR NETEGRITY STOCK CERTIFICATES NOW.
Q. WHAT SHOULD I DO IF I HAVE QUESTIONS?
A. If you have more questions about the special meeting, the merger or this
proxy statement, or would like additional copies of this proxy statement
or the proxy card, you should contact Georgeson Shareholder Communications
Inc., our proxy solicitor, toll-free at (888) 350-3512.
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SUMMARY
This summary highlights selected information from this proxy statement. It
does not contain all of the information that is important to you. Accordingly,
we urge you to read this entire proxy statement and the annexes to this proxy
statement.
THE COMPANIES
NETEGRITY, INC.
201 Jones Road
Waltham, Massachusetts 02451
(781) 890-1700
Netegrity, Inc., a corporation organized under the laws of the State of
Delaware, is a leading provider of security software solutions for managing user
identities and access. We provide an identity and access management product line
for evolving computing environments, including legacy, Web, and service-oriented
architectures. Our flexible, standards-based offerings are designed to increase
security, reduce administrative costs, and enable revenue enhancement. Supported
by a network of over 1,200 trained integration consultants and over 200
technology partners, our solutions are licensed to more than 350 million users
at over 850 organizations worldwide, including more than half of the Fortune
100(R) companies. Our common stock is quoted on The NASDAQ National Market under
the symbol "NETE."
COMPUTER ASSOCIATES INTERNATIONAL, INC.
One Computer Associates Plaza
Islandia, New York 11749
(631) 342-6000
Computer Associates International, Inc., a corporation organized under the
laws of the State of Delaware, is one of the world's largest providers of
management software. Founded in 1976, Computer Associates designs, markets and
licenses computer software products that allow businesses to efficiently run,
manage, and automate critical aspects of their IT operations. Computer
Associates operates in more than 100 countries, has a large and broad base of
customers and estimates that 95% of the Fortune 500(R) companies currently use
its products. Computer Associates' common stock is quoted on the New York Stock
Exchange under the symbol "CA."
NOVA ACQUISITION CORP.
c/o Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11749
(631) 342-6000
Nova Acquisition Corp., a corporation organized under the laws of the
State of Delaware (which we refer to as Merger Sub), is a direct wholly-owned
subsidiary of Computer Associates. Nova Acquisition Corp. was formed exclusively
for the purpose of effecting the merger. This is the only business of Nova
Acquisition Corp.
THE SPECIAL MEETING
DATE, TIME AND PLACE (PAGE 8)
The special meeting will be held on _________, 2004, at 9:00 a.m., local
time at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, located at 60
State Street, Boston, Massachusetts 02109.
MATTERS TO BE CONSIDERED (PAGE 8)
You will be asked to consider and vote upon a proposal to adopt the merger
agreement that we have entered into with Computer Associates and to consider any
other matters that may properly come before the meeting, including any
procedural matters in connection with the special meeting.
RECORD DATE (PAGE 8)
If you owned shares of our common stock at the close of business on
___________ __, 2004, the record date for the special meeting, you are entitled
to notice of and to vote at the special meeting. You have one vote for each
share of our common stock that you own on the record date. As of the close of
business on ___________ __, 2004, there were approximately __________ shares of
our common stock outstanding and entitled to be voted at the special meeting.
REQUIRED VOTE (PAGE 8)
Adoption of the merger agreement requires the affirmative vote of the
holders of a majority of our outstanding shares of common stock entitled to vote
at the special meeting. Failure to vote by proxy, either by mail, through the
Internet, by telephone or in person, will have the same effect as a vote
"AGAINST" adoption of the merger agreement.
VOTING BY PROXY (PAGE 9)
You may vote by proxy through the Internet, by telephone or by returning
the enclosed proxy. If you hold your shares through a broker or other nominee,
you should follow the procedures provided by your broker or nominee, which may
include submitting a proxy through the Internet or by telephone.
REVOCABILITY OF PROXY (PAGE 9)
You may revoke your proxy at any time before it is voted. If you have not
submitted a proxy through your broker or nominee, you may revoke your proxy by:
- submitting another properly completed proxy bearing a later date;
- giving written notice of revocation to any of the persons named as
proxies or to the Secretary of Netegrity;
- if you submitted a proxy through the Internet or by telephone, by
submitting a proxy again through the Internet or by telephone prior
to the close of the Internet voting facility or the telephone voting
facility; or
- voting in person at the special meeting.
Simply attending the special meeting will not constitute revocation of
your proxy. If your shares are held in street name, you should follow the
instructions of your broker or nominee regarding revocation of proxies. If your
broker or nominee allows you to submit a proxy by telephone or through the
Internet, you may be able to change your vote by submitting a proxy again by
telephone or through the Internet.
STOCKHOLDER AGREEMENTS AND SHARES OF OUR COMMON STOCK OWNED BY OUR DIRECTORS AND
EXECUTIVE OFFICERS (PAGES 31 AND 37)
At the request of Computer Associates, William C. Bartow, Barry N. Bycoff,
Stephanie A. Feraday, Eric R. Giler, Lawrence D. Lenihan, Jr., Ronald T. Maheu,
Pequot Private Equity Fund, L.P., Pequot Offshore Private Equity Fund, Inc.,
Regina O. Sommer and Ralph B. Wagner have entered into stockholder agreements
pursuant to which they have agreed to vote their shares of Netegrity common
stock "FOR" adoption of the merger agreement and against any other proposal or
offer to acquire Netegrity. The shares of Netegrity common stock covered by the
stockholder agreements, which include all of the shares owned by the persons and
entities listed above, represented, as of October 5, 2004, 8.25% of the
outstanding shares of Netegrity common stock and, giving effect to the issuance
of shares of Netegrity common stock beneficially owned by such stockholders
pursuant to stock options in respect of Netegrity common stock, 12.0% of the
outstanding shares of Netegrity common stock.
OUR BOARD'S RECOMMENDATION TO OUR STOCKHOLDERS REGARDING THE MERGER (PAGE 11)
- 2 -
Our board has approved the merger agreement, and determined that the
merger and the merger agreement are advisable, and in the best interests of
Netegrity and its stockholders. Our board unanimously recommends that our
stockholders vote "FOR" adoption of the merger agreement at the special meeting.
THE MERGER
STRUCTURE OF THE MERGER (PAGE 24)
Upon the terms and subject to the conditions of the merger agreement,
Merger Sub, a wholly-owned subsidiary of Computer Associates, will be merged
with and into us. As a result of the merger, we will cease to be a
publicly-traded company and will become a wholly-owned subsidiary of Computer
Associates. The merger agreement is attached as Annex A to this proxy statement.
Please read it carefully.
WHAT YOU WILL RECEIVE IN THE MERGER (PAGE 25)
Each holder of shares of our common stock will be entitled to receive
$10.75 in cash for each share of our common stock held immediately prior to the
merger.
RECOMMENDATION TO STOCKHOLDERS (PAGE 11)
Our board of directors has determined that the merger agreement and the
merger are advisable and in the best interests of Netegrity and its
stockholders. Accordingly, our board of directors has unanimously approved the
merger agreement and the merger and recommends that you vote for "FOR" the
adoption of the merger agreement.
OPINION OF FINANCIAL ADVISOR TO THE BOARD OF DIRECTORS OF NETEGRITY (PAGE 13)
Broadview International delivered its oral opinion to our board, which was
subsequently confirmed in writing, that, as of October 5, 2004 and based upon
and subject to the various qualifications, limitations, factors and assumptions
set forth therein, the $10.75 in cash per share of our common stock to be
received by the holders of shares of our common stock pursuant to the merger
agreement was fair to such holders from a financial point of view.
The full text of the written opinion of Broadview, dated October 5, 2004,
which sets forth, among other things, assumptions made, procedures followed,
matters considered and limitations on the review undertaken in connection with
the opinion, is attached as Annex B to this proxy statement. The opinion was
provided solely to our board in connection with and for the purposes of its
consideration of the transactions contemplated by the merger agreement. The
Broadview opinion does not constitute a recommendation as to how any holder of
shares of our common stock or any other person should vote or act with respect
to the transactions contemplated by the merger agreement or any other matter.
CONDITIONS TO THE MERGER (PAGE 31)
We and Computer Associates will not complete the merger unless a number of
conditions are satisfied or waived. These conditions include:
- the adoption of the merger agreement by our stockholders;
- the expiration or termination of the applicable waiting period under
the HSR Act and the receipt of all approvals and consents of
applicable governmental and regulatory agencies having been obtained
without any terms or conditions that would reasonably be likely to
(i) have a material adverse effect on Netegrity or on Computer
Associates (but with materiality measured at the Netegrity level) or
(ii) materially impair Computer Associates' ability to own and
operate any of the material businesses and assets of Netegrity from
and after the closing, other than those failures to obtain,
individually or in the aggregate, that would not be reasonably
likely to have any of the effects described in (i) or (ii) of this
bullet point;
- the absence of any legal ruling that would prohibit the consummation
of the merger or would be reasonably likely to impair Computer
Associates' ability to operate our business after the merger;
- 3 -
- the absence of any material adverse effect on us since October 6,
2004;
- the accuracy of the parties' representations and warranties set
forth in the merger agreement; and
- the performance by each party of its obligations under the merger
agreement.
TERMINATION OF THE MERGER AGREEMENT (PAGE 32)
We and Computer Associates may agree in writing to terminate the merger
agreement at any time prior to completing the merger, even after our
stockholders have adopted the merger agreement. The merger agreement may also be
terminated at any time prior to completion of the merger under certain
circumstances, including:
- by either party, if the merger is not completed by June 30, 2005
(other than because of the failure to fulfill an obligation under
the merger agreement by the party seeking termination);
- by either party, if any court or governmental agency issues a
nonappealable final order, decree or ruling or takes any other
nonappealable final action, in each case, having the effect of
permanently restraining, enjoining or otherwise prohibiting the
merger;
- by either party, if our stockholders fail to adopt the merger
agreement at the special meeting;
- by Computer Associates, if our board changes its recommendation to
our stockholders regarding adoption of the merger agreement in a
manner adverse to Computer Associates or approves or recommends an
alternative proposal or, after receipt of an acquisition proposal,
our board fails to timely reaffirm its approval or recommendation of
the merger agreement, after Computer Associates requests that we do
so;
- by Computer Associates, if a tender offer or exchange offer is made
for our common stock and our board either recommends to our
stockholders that they tender or exchange their shares or fails to
recommend against the offer within ten business days of the
commencement of the offer;
- by us, if our board approves a superior proposal or recommends a
superior proposal to our stockholders, provided, that prior to any
such termination:
o we inform Computer Associates of our intent to effect such
termination;
o we disclose the material terms and conditions (and provide
copies of the documentation) regarding the superior proposal
to Computer Associates;
o Computer Associates does not make within three business days
an offer that our board determines in good faith (after
consultation with our financial advisor) is at least as
favorable from a financial point of view to our stockholders
as the superior proposal; and
o we pay Computer Associates a termination fee and reimburse
Computer Associates for its expenses; and
- by either party, if the other party to the merger agreement breaches
or fails to perform any of its representations or agreements in the
merger agreement, which breach or failure to perform (i) would cause
the non-breaching party's conditions to closing not to be satisfied
and (ii) shall not have been cured within 20 days of written notice
of the breach or failure to perform.
TERMINATION FEE (PAGE 33)
We will be required to pay Computer Associates a termination fee of $13
million plus up to $2 million of Computer Associates' expenses relating to the
transactions contemplated by the merger agreement if any of the following occur:
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- we terminate the merger agreement because our stockholders fail to
adopt the merger agreement at the special meeting and prior to the
special meeting:
o our board changes its recommendation to stockholders regarding
adoption of the merger agreement in a manner adverse to
Computer Associates;
o our board approves or recommends an alternative proposal; or
o a tender offer or exchange offer is made for our common stock
and our board either recommends to our stockholders that they
tender or exchange their shares or fails to recommend against
the offer within ten business days of the commencement of the
offer;
- Computer Associates terminates the merger agreement because (i) our
board (A) changes its recommendation to stockholders regarding
adoption of the merger agreement in a manner adverse to Computer
Associates or (B) approves or recommends an alternative proposal or
(ii) a tender offer or exchange offer is made for our common stock
and our board either recommends to our stockholders that they tender
or exchange their shares or fails to recommend against the offer
within ten business days of the commencement of the offer;
- we terminate the merger agreement because our board approved a
superior proposal or recommended a superior proposal to our
stockholders;
- we or Computer Associates terminate the merger agreement because (i)
the merger is not completed by June 30, 2005, (ii) between the date
of the merger agreement and the date of termination of the merger
agreement an acquisition proposal was made or publicly disclosed and
not publicly withdrawn in good faith and without qualification prior
to June 30, 2005, and (iii) within 12 months after termination of
the merger agreement we enter into a definitive agreement for, or
complete, the acquisition proposal; or
- we or Computer Associates terminate the merger agreement because (i)
our stockholders did not adopt the merger agreement at the special
meeting, (ii) between the date of the merger agreement and the date
of termination of the merger agreement an acquisition proposal was
made or publicly disclosed and not publicly withdrawn in good faith
and without qualification prior to the fifth business day prior to
the date of the special meeting, and (iii) within 12 months after
termination of the merger agreement we enter into a definitive
agreement for, or complete, the acquisition proposal.
REGULATORY MATTERS (PAGE 23)
Under the provisions of the HSR Act, we and Computer Associates may not
complete the merger until we have made certain filings with the Federal Trade
Commission and the United States Department of Justice and the applicable
waiting period has expired or been terminated. We and Computer Associates intend
to file pre-merger notifications with the U.S. antitrust authorities pursuant to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 before October 22,
2004. We and Computer Associates are currently assessing whether any foreign
antitrust approvals are required to consummate the merger and, to the extent any
such approvals are required, we and Computer Associates will seek to obtain such
approvals as soon as reasonably practicable. We cannot assure you that a
challenge to the merger on antitrust grounds will not be made or, if a challenge
is made, of the result.
APPRAISAL RIGHTS (PAGE 34)
Under Delaware law, if you do not vote for adoption of the merger
agreement and prior to the special meeting you make a written demand and you
strictly comply with the other statutory requirements of the General Corporation
Law of the State of Delaware, you may elect to receive, in cash, the judicially
determined fair value of your shares of stock in lieu of the $10.75 per share
merger consideration. This value could be more or less than or the same as the
cash merger consideration.
NETEGRITY STOCK OPTIONS (PAGE 25)
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In general, at the completion of the merger, each option to purchase
shares of our common stock, including those options held by our executive
officers, will be assumed by Computer Associates and become an option to
purchase Computer Associates common stock with the number of shares of common
stock and the exercise price of the option being adjusted in accordance with a
conversion ratio equal to $10.75 divided by the average closing sales price of a
share of Computer Associates common stock for the five trading days prior to the
closing of the merger. The vesting of the options held by our non-employee
directors will accelerate in full at the effective time of the merger. Each of
these options will terminate at the effective time of the merger in exchange for
a payment equal to the number of shares of our common stock subject to such
option multiplied by the amount, if any, by which the cash consideration per
share to be paid in the merger exceeds the exercise price of the option.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 19)
Our directors and executive officers have interests in the merger that may
be in addition to, or different from, the interests of our stockholders. For
example, if the merger is completed, certain indemnification arrangements for
directors and officers of Netegrity will be continued and all of the options
held by our non-employee directors will be accelerated and become fully vested
at the effective time of the merger. In addition, our executive officers are
entitled to acceleration of the vesting of their options, severance payments and
continuation of benefits in the event that their employment is terminated under
certain circumstances in connection with the merger.
NO SOLICITATION (PAGE 29)
We have agreed that we will not solicit, initiate or knowingly encourage
any inquiries or any proposal or offer that is, or could reasonably be expected
to lead to, an acquisition proposal or to participate in discussions or furnish
non-public information for the purpose of encouraging or facilitating an
acquisition proposal. However, prior to the adoption of the merger agreement by
our stockholders, if we receive a superior proposal or determine that an
unsolicited written acquisition proposal is reasonably likely to result in a
superior proposal, we may respond to that proposal if required by our board's
fiduciary duties, provided that we keep Computer Associates reasonably informed
of the status and the material terms and conditions of such proposal.
Furthermore, our board may not withdraw its recommendation of the merger
or recommend an acquisition proposal (which we refer to as a change in
recommendation), unless prior to the stockholder vote: (i) our board determines
in good faith (after consultation with our outside counsel) that the failure to
make a change in recommendation would be inconsistent with its fiduciary
obligations, (ii) Computer Associates is given 72 hours' prior notice of our
board's intent to make such change, and (iii) to the extent the change in
recommendation is in response to a superior proposal, Computer Associates is
given the opportunity to propose an amendment to the terms of the merger, which
amendment must be considered by our board in determining whether the acquisition
proposal still constitutes a superior proposal. Notwithstanding any change in
recommendation, we are required to convene a special meeting of our stockholders
to vote on the merger agreement, unless we terminate the merger agreement.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains forward-looking statements about our plans,
objectives, expectations and intentions. You can identify these statements by
words such as "expect," "anticipate," "intend," "plan," "believe," "seek,"
"estimate," "may," "will" and "continue" or similar words. You should read
statements that contain these words carefully. They discuss our future
expectations or state other forward-looking information, and may involve known
and unknown risks over which we have no control, including, without limitation,
- the requirement that our stockholders adopt the merger agreement
with Computer Associates;
- receipt of necessary approvals under applicable antitrust laws and
other relevant regulatory authorities;
- failure by us to satisfy other conditions to the merger; and
- the effect of the announcement of the merger on our customer
relationships, operating results and business generally, including
the ability to retain key employees,
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and other risks detailed in our current filings with the Securities and Exchange
Commission (which we refer to as the SEC), including our most recent filings on
Forms 10-Q and 10-K. See "Where You Can Find More Information" on page 39. You
should not place undue reliance on forward-looking statements. We cannot
guarantee any future results, levels of activity, performance or achievements.
The statements made in this proxy statement represent our views as of the date
of this proxy statement, and it should not be assumed that the statements made
herein remain accurate as of any future date. Moreover, we assume no obligation
to update forward-looking statements or update the reasons actual results could
differ materially from those anticipated in forward-looking statements, except
as required by law.
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THE SPECIAL MEETING OF NETEGRITY STOCKHOLDERS
We are furnishing this proxy statement to you, as a stockholder of
Netegrity, as part of the solicitation of proxies by our board for use at the
special meeting of stockholders.
DATE, TIME, PLACE AND PURPOSE OF THE SPECIAL MEETING
The special meeting will be held at the offices of Wilmer Cutler Pickering
Hale and Dorr LLP, located at 60 State Street, Boston, Massachusetts 02109, on
_________, 2004 at 9:00 a.m., local time. The purpose of the special meeting is:
- to consider and vote on the proposal to adopt the Agreement and Plan
of Merger, dated as of October 6, 2004, by and among Computer
Associates, Netegrity and Merger Sub; and
- to transact such other business as may properly come before the
meeting or any adjournment or postponement thereof, including to
consider any procedural matters incident to the conduct of the
special meeting, such as adjournment or postponement of the special
meeting to solicit additional proxies in favor of the proposal to
adopt the Agreement and Plan of Merger.
Our board has, by unanimous vote, determined that the merger agreement and
the merger are advisable and in the best interests of Netegrity and its
stockholders, and has approved the merger agreement and the merger. Our board
unanimously recommends that our stockholders vote "FOR" adoption of the merger
agreement.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
The holders of record of shares of our common stock as of the close of
business on ____________, 2004, which is the record date for the special
meeting, are entitled to receive notice of and to vote at the special meeting.
On the record date, there were approximately _________ shares of our
common stock outstanding held by approximately ___ stockholders of record.
Holders of a majority of the shares of our common stock issued and outstanding
as of the record date and entitled to vote at the special meeting must be
present in person or represented by proxy at the special meeting to constitute a
quorum to transact business at the special meeting. Both abstentions and broker
"non-votes" will be counted as present for purposes of determining the existence
of a quorum. In the event that a quorum is not present at the special meeting,
we currently expect that we will adjourn or postpone the meeting to solicit
additional proxies.
VOTE REQUIRED
Adoption of the merger agreement requires the affirmative vote of the
holders of a majority of the shares of our common stock outstanding on the
record date and entitled to vote.
Each holder of a share of our common stock is entitled to one vote per
share. Failure to vote your proxy (either through the Internet, by telephone or
by returning a properly executed proxy card) or to vote in person will have the
same effect as a vote "AGAINST" adoption of the merger agreement.
Brokers or other nominees who hold shares of our common stock in "street
name" for customers who are the beneficial owners of such shares may not give a
proxy to vote those customers' shares in the absence of specific instructions
from those customers. These non-voted shares of our common stock will not be
counted as votes cast or shares voting and will have the same effect as votes
"AGAINST" adoption of the merger agreement.
SHARE OWNERSHIP AND VOTING POWER OF MANAGEMENT
At Computer Associate's request, William C. Bartow, Barry N. Bycoff,
Stephanie A. Feraday, Eric R. Giler, Lawrence D. Lenihan, Jr., Ronald T. Maheu,
Pequot Private Equity Fund, L.P., Pequot Offshore Private Equity Fund, Inc.,
Regina O. Sommer and Ralph B. Wagner have each entered into a stockholder
agreement with Computer Associates and Merger Sub pursuant to which they have
agreed to vote their shares of Netegrity common stock "FOR" adoption of the
merger agreement and against any other proposal or offer to acquire Netegrity.
The shares of Netegrity common stock covered by the
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stockholder agreements, which include all of the shares owned by the persons and
entities listed above, represented, as of October 5, 2004, 8.25% of the
outstanding shares of Netegrity common stock and, giving effect to the issuance
of shares of Netegrity common stock beneficially owned by such stockholders
pursuant to stock options in respect of Netegrity common stock, 12.0% of the
outstanding shares of Netegrity common stock.
VOTING
Stockholders may vote their shares by attending the special meeting and
voting their shares of our common stock in person, or by completing the enclosed
proxy card, signing and dating it and mailing it in the enclosed postage-prepaid
envelope. All shares of our common stock represented by properly executed
proxies received in time for the special meeting will be voted at the special
meeting in the manner specified by the holder. If a written proxy card is signed
by a stockholder and returned without instructions, the shares of our common
stock represented by the proxy will be voted "FOR" adoption of the merger
agreement.
In addition, stockholders may submit a proxy through the Internet or by
telephone by following the instructions included with the enclosed proxy card.
If you submit a proxy through the Internet or by telephone, please do not return
the proxy card. You should be aware that in submitting a proxy through the
Internet, you may incur costs such as telephone and Internet access charges for
which you will be responsible. The Internet voting facility and the telephone
voting facility for stockholders of record will close at 11:59 p.m., Eastern
Standard Time, on _____, 2004.
Stockholders who have questions or requests for assistance in completing
and submitting proxy cards should contact Georgeson Shareholder Communications
Inc., our proxy solicitor, at (888) 350-3512.
Stockholders who hold their shares of Netegrity common stock in "street
name," meaning in the name of a bank, broker or other person who is the record
holder, must either direct the record holder of their shares of our common stock
how to vote their shares or obtain a proxy from the record holder to vote their
shares at the special meeting.
REVOCABILITY OF PROXIES
You can revoke your proxy at any time before it is voted at the special
meeting by:
- submitting another properly completed proxy bearing a later date;
- giving written notice of revocation to any of the persons named as
proxies or to the Secretary of Netegrity;
- if you submitted a proxy through the Internet or by telephone, by
submitting a proxy again through the Internet or telephone prior to
the close of the Internet voting facility or the telephone voting
facility; or
- voting in person at the special meeting.
If your shares of our common stock are held in the name of a bank, broker,
trustee or other holder of record, you must follow the instructions of your
broker or other holder of record to revoke a previously given proxy. If your
broker or nominee allows you to submit a proxy by telephone or through the
Internet, you may be able to change your vote by submitting a proxy again by
telephone or through the Internet.
SOLICITATION OF PROXIES
In addition to solicitation by mail, our directors, officers and employees
may solicit proxies by telephone, other electronic means or in person. These
people will not receive any additional compensation for their services, but we
will reimburse them for their out-of-pocket expenses. We will reimburse banks,
brokers, nominees, custodians and fiduciaries for their reasonable expenses in
forwarding copies of this proxy statement to the beneficial owners of shares of
our common stock and in obtaining voting instructions from those owners. We will
share equally with Computer Associates all expenses of filing, printing and
mailing this proxy statement.
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We have retained Georgeson Shareholder Communications Inc. to assist in
the solicitation of proxies by mail, telephone or other electronic means, or in
person, for a fee of approximately $17,500 plus expenses relating to the
solicitation.
OTHER BUSINESS
We are not currently aware of any business to be acted upon at the special
meeting other than the matters discussed in this proxy statement. Under our
bylaws, business transacted at the special meeting is limited to matters
relating to the purposes stated in the notice of special meeting, which is
provided at the beginning of this proxy statement. If other matters do properly
come before the special meeting, or at any adjournment or postponement of the
special meeting, we intend that shares of our common stock represented by
properly submitted proxies will be voted by and at the discretion of the persons
named as proxies on the proxy card. In addition, the grant of a proxy will
confer discretionary authority on the persons named as proxies on the proxy card
to vote in accordance with their best judgment on procedural matters incident to
the conduct of the special meeting, such as a motion to adjourn in the absence
of a quorum or a motion to adjourn for other reasons, including to solicit
additional votes in favor of adoption of the merger agreement.
THE MERGER
This discussion of the merger is qualified by reference to the merger
agreement, which is attached to this proxy statement as Annex A. You should read
the entire merger agreement carefully as it is the legal document that governs
the merger.
BACKGROUND OF THE MERGER
In March 2004, we were approached by a third party that expressed interest
in a possible acquisition of our company. To assist us in evaluating this
acquisition possibility as well as other strategic alternatives, our board of
directors engaged Broadview as our financial advisor. We entered into
confidentiality and standstill agreements with the third party. After
preliminary diligence and discussions, we were unable to agree on mutually
acceptable terms, and discussions were terminated in May 2004.
At a telephone meeting held on July 13, 2004, our board of directors
determined that it would be in the best interests of our stockholders for us to
explore the possible sale of our company. On July 16, 2004, at a meeting of our
board of directors, representatives of Broadview and the directors reviewed a
list of possible acquirors. After reviewing the list, the board of directors
determined that it would be appropriate for, and directed Broadview to, approach
these companies to determine their level of interest in acquiring our company.
In July and August 2004, our representatives and Broadview discussed with
approximately 13 companies their interest in acquiring our company. In the
course of this process, we received formal expressions of interest from six
parties, including Computer Associates and the third party that initially
approached us in March 2004. We entered into confidentiality and standstill
agreements with four of the five new parties. The other new party indicated that
it was not interested in discussing a possible acquisition of our company on the
terms we had instructed Broadview to discuss with it.
In August and September, 2004, these five parties undertook due diligence
reviews of our company, and Broadview and other representatives of Netegrity
engaged in discussions with each of them as to possible acquisition terms. On
September 5, 2004, one of the five remaining potential bidders indicated that it
was not interested in discussing a possible acquisition of our company on the
terms that we had instructed Broadview to discuss with it. Throughout August and
September 2004, several meetings of the board of directors were held to update
the directors on the status of the discussions.
Between September 2004 and October 6, 2004, Computer Associates conducted
financial, technical and legal due diligence of Netegrity.
On September 15, 2004, Wilmer Cutler Pickering Hale and Dorr LLP, who we
refer to as Wilmer Hale, our legal counsel, delivered a draft merger agreement
to Computer Associates and the other three interested parties.
On September 22, 2004, one of the four potential bidders indicated that it
was no longer interested in discussing a possible acquisition of our company.
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On October 1 and 2, 2004, our representatives informed the bidders of our
estimated financial results for the quarter ending September 30, 2004, which
were estimated to be lower than our initial expectations for the quarter.
On October 3, 2004, at a telephone meeting of our board of directors, the
directors and Broadview reviewed the status of the discussions with the three
bidders. Our board determined that it would be in the best interests of our
stockholders to pursue discussions with Computer Associates.
From October 3 through October 5, 2004, our representatives and
representatives of Computer Associates, and their respective legal counsel,
negotiated the merger agreement and related stockholder agreements.
On October 4, 2004, at a special telephonic meeting of our board of
directors, Broadview and other representatives of Netegrity reviewed the status
of the negotiations with Computer Associates and representatives of Wilmer Hale
reviewed the principal terms of the merger agreement.
On October 5, 2004, at a special telephonic meeting of our board of
directors, representatives of Wilmer Hale summarized the terms of the definitive
merger agreement and the related stockholder agreements, each of which had been
previously circulated to our board. Representatives of Wilmer Hale also reviewed
for our directors their fiduciary duties in considering the acquisition.
Representatives of Broadview presented a financial analysis pertaining to the
transaction and delivered their oral opinion (later confirmed by delivery of a
written opinion) to the effect that as of October 5, 2004, and based upon and
subject to the various qualifications, limitations, factors and assumptions set
forth in the opinion, the merger consideration of $10.75 in cash per share was
fair, from a financial point of view, to the holders of our common stock.
Following these presentations, our board discussed the potential acquisition.
Thereafter, our board unanimously determined that the merger agreement was
advisable and in the best interests of our stockholders, approved and declared
the advisability of the merger agreement and related matters and unanimously
recommended that our stockholders adopt the merger agreement.
During the early morning of October 6, 2004, we and Computer Associates
executed the merger agreement and the stockholder agreements were executed.
Prior to the opening of trading on October 6, 2004, we issued a press
release announcing the merger.
REASONS FOR THE MERGER AND RECOMMENDATION OF THE BOARD OF DIRECTORS
In the course of reaching its decision to approve the merger agreement and
the merger, our board consulted with senior management and our financial and
legal advisors, and reviewed a significant amount of information and considered
a number of factors, including the following:
- the value of the consideration to be received by our stockholders
pursuant to the merger agreement, as well as the fact that
stockholders will receive the consideration in cash, which provides
certainty of value to our stockholders compared to a transaction in
which they would receive stock or other non-cash consideration;
- the $10.75 per share to be paid as the consideration in the merger
represents a 39% premium over the closing price of our common stock
on October 5, 2004 (the trading day prior to announcement of the
transaction) and a 87% premium over the closing price of our common
stock on September 8, 2004 (the twentieth trading day prior to the
announcement);
- the board received offers to acquire our company from other bidders,
and the offer of $10.75 per share from Computer Associates was the
highest offer;
- the financial presentation of Broadview (including the assumptions
and methodologies underlying the analyses in connection therewith)
and the opinion of Broadview which is attached to this proxy
statement as Annex B and which you should read carefully in its
entirety, that as of October 5, 2004, the merger consideration of
$10.75 in cash per share to be received by our stockholders pursuant
to the merger was fair to our stockholders from a financial point of
view;
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- the then current financial market conditions, and historical market
prices, volatility and trading information with respect to our
common stock, including the possibility that if we remained as a
publicly owned corporation, in the event of a decline in the market
price of our common stock or the stock market in general, the price
that might be received by holders of our common stock in the open
market or in a future transaction might be less than the $10.75 per
share cash price to be paid in the merger;
- historical and current information concerning our business,
financial performance and condition, operations, technology,
management and competitive position, and current industry, economic
and market conditions, including our prospects if we were to remain
an independent company;
- the terms and conditions of the merger agreement, including:
o the ability of the board, under certain circumstances, to
furnish information to and conduct negotiations with a third
party and, upon the payment to Computer Associates of a
termination fee of $13 million and up to $2 million in expense
reimbursement, to terminate the merger agreement to accept a
superior proposal; and
o the board's belief that the $15 million maximum aggregate fees
and expenses payable to Computer Associates was reasonable in
the context of termination fees that were payable in other
comparable transactions and would not be likely to preclude
another party from making a competing proposal; and
- the likelihood that the merger will be consummated, in light of the
limited conditions to Computer Associates' obligation to complete
the merger, Computer Associates' financial capability, and the
absence of any financing condition to Computer Associates'
obligation to complete the merger;
In the course of its deliberations, our board also considered a variety of risks
and other countervailing factors, including:
- the risks and costs to us if the merger does not close, including
the diversion of management and employee attention, employee
attrition and the effect on business relationships;
- the restrictions that the merger agreement imposes on actively
soliciting competing bids, and the fact that we would be obligated
to pay the $13 million termination fee (and up to an additional $2
million in expense reimbursement) to Computer Associates under
certain circumstances;
- the fact that Netegrity will no longer exist as an independent,
stand-alone company and our stockholders will no longer participate
in the growth of Netegrity or in any synergies resulting from the
merger;
- the fact that gains from an all-cash transaction would be taxable to
our stockholders for U.S. federal income tax purposes; and
- the interests of our officers and directors in the merger described
under " -- Interests of Certain Persons in the Merger."
The foregoing discussion of the factors considered by our board is not
intended to be exhaustive, but does set forth the principal factors considered
by the board. Our board collectively reached the unanimous conclusion to approve
the merger agreement and the merger in light of the various factors described
above and other factors that each member of our board felt were appropriate. In
view of the wide variety of factors considered by our board in connection with
its evaluation of the merger and the complexity of these matters, our board did
not consider it practical, and did not attempt, to quantify, rank or otherwise
assign relative weights to the specific factors it considered in reaching its
decision and did not undertake to make any specific determination as to whether
any particular factor, or any aspect of any particular factor, was favorable or
unfavorable to the ultimate determination of the board. Rather, our board made
its recommendation based on the totality of information presented to and the
investigation conducted by it. In considering the factors discussed above,
individual directors may have given different weights to different factors.
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After evaluating these factors and consulting with its legal counsel and
its financial advisors, our board determined that the merger agreement was
advisable and in the best interests of our stockholders. Accordingly, our board
has unanimously approved the merger agreement and the merger. OUR BOARD
RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO THE BOARD OF DIRECTORS OF NETEGRITY
Pursuant to a letter agreement dated as of May 20, 2004, Broadview was
engaged to act as financial advisor to our board of directors. The board
selected Broadview based on Broadview's reputation and experience in the
information technology (which we refer to as IT), communications, healthcare
technology and media industry in particular. Broadview focuses on providing
merger and acquisition advisory services to IT, communications, healthcare
technology and media companies. In this capacity, Broadview is continually
engaged in valuing these businesses and maintains an extensive database of IT,
communications, healthcare technology and media mergers and acquisitions for
comparative purposes. At the meeting of our board of directors on October 5,
2004, Broadview rendered its opinion that as of such date, and based upon and
subject to the various qualifications, limitations, factors and assumptions
described in the Broadview opinion, the $10.75 in cash per share to be received
by holders of our common stock pursuant to the merger agreement was fair, from a
financial point of view, to such holders.
BROADVIEW'S OPINION, WHICH DESCRIBES THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY BROADVIEW, IS ATTACHED AS
ANNEX B TO THIS PROXY STATEMENT. HOLDERS OF OUR COMMON STOCK ARE URGED TO, AND
SHOULD, READ THE BROADVIEW OPINION CAREFULLY AND IN ITS ENTIRETY. THE BROADVIEW
OPINION WAS PROVIDED SOLELY TO OUR BOARD OF DIRECTORS AND ADDRESSES ONLY THE
FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW TO HOLDERS
OF OUR COMMON STOCK AS OF THE DATE OF THE OPINION. THE BROADVIEW OPINION DOES
NOT ADDRESS ANY OTHER ASPECT OF THE MERGER CONSIDERATION. THE SUMMARY OF THE
BROADVIEW OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
Broadview's opinion does not address the underlying business decision to
enter into the merger agreement or the merger, nor does it evaluate alternative
transaction structures or other financial or strategic alternatives or business
strategies.
In reading the discussion of the fairness opinion set forth below, you
should be aware that Broadview's opinion does not constitute a recommendation to
any Netegrity stockholder or any other person as to how they should vote or act
with respect to the proposed merger or any other matter.
In reading the discussion of the fairness opinion set forth below, you
should be aware that Broadview:
- reviewed the terms of the merger agreement in the form of the draft
furnished to Broadview by our legal counsel on October 5, 2004;
- reviewed certain SEC filings, including the financial statements
included in such filings, and other information with respect to
Netegrity;
- reviewed certain internal financial and operating information
concerning Netegrity, including certain projections for Netegrity
prepared and furnished to Broadview by our management;
- participated in discussions with our management concerning the
operations, business strategy, current financial performance and
prospects for Netegrity;
- discussed with our management its view of the strategic rationale
for the merger;
- reviewed the recent reported closing prices and trading activity for
our common stock;
- compared certain aspects of our financial performance with certain
public companies;
- analyzed available information, both public and private, concerning
certain precedent transactions;
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- reviewed recent equity research analyst reports covering Netegrity;
- participated in negotiations and discussions related to the merger;
and
- conducted other financial studies, analyses and investigations as
Broadview deemed appropriate for purposes of its opinion.
In rendering its opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all the financial and other
information (including without limitation the representations and warranties
contained in the Agreement) that was publicly available or furnished to
Broadview by us or our advisors. With respect to the financial projections
examined by Broadview, Broadview assumed that they were reasonably prepared and
reflected the best available estimates and good faith judgments of our
management as to the future performance of Netegrity. Broadview also assumed,
that in the course of obtaining the necessary regulatory and third party
approvals, consents and releases for the merger, no modification, delay,
limitation, restriction or condition would be imposed that would have a material
adverse effect on the merger and that the merger would be consummated in
accordance with applicable laws and regulations and the terms of the merger
agreement as set forth in the October 5, 2004 draft thereof, without waiver,
amendment or modification of any material term, condition or agreement.
Broadview has not made or taken into account any independent appraisal or
valuation of any of Netegrity's assets or liabilities. Broadview expresses no
view as to the federal, state or local tax consequences of the merger.
Broadview did not make or assume any responsibility for making an
independent valuation or appraisal of Netegrity's assets, nor was Broadview
furnished with any such appraisals, nor did Broadview evaluate the solvency or
fair value of Netegrity under any state or federal securities laws relating to
bankruptcy, insolvency or similar matters.
For purposes of its opinion, Broadview assumed that Netegrity was not
currently involved in any material transaction other than the merger, other
publicly announced transactions and those activities undertaken in the ordinary
course of conducting its business. Broadview's opinion was necessarily based
upon market, economic, financial and other conditions as they existed and could
be evaluated as of the date of the opinion. It should be understood that,
although subsequent developments may affect its opinion, Broadview has no
obligation to update, revise or reaffirm its opinion.
The following is a summary explanation of various sources of information
and valuation methodologies employed by Broadview in rendering its opinion.
Broadview did not explicitly assign any relative weights to the various factors
of analyses considered. This summary of financial analyses includes information
presented in tabular format. In order to fully understand the financial analyses
used by Broadview, the tables must be read together with the text of each
summary. Considering the tables alone could create a misleading or incomplete
view of Broadview's financial analyses.
Netegrity Stock Performance Analysis
Broadview compared our recent stock performance with that of the NASDAQ
Composite and an index comprised of public companies that Broadview deemed
comparable to Netegrity. Broadview selected companies competing in the
information security industry with Trailing Twelve Month (which we refer to as
TTM) revenue greater than $75 million, positive TTM revenue growth and positive
TTM Earnings Before Interest and Taxes (which we refer to as EBIT) margin.
Broadview selected the following companies: Check Point Software Technologies
Ltd.; Internet Security Systems, Inc; RSA Security Inc.; SafeNet, Inc.; Secure
Computing Corporation; Symantec Corporation; Macrovision Corporation; Trend
Micro Incorporated; and Websense, Inc. (which we refer to as the Netegrity
Comparable Index).
Public Company Comparables Analysis
Broadview considered ratios of share price and market capitalization,
adjusted for cash and debt when necessary, to selected historical operating and
balance sheet results in order to derive multiples placed on a company in a
particular market segment. Such ratios indicate the value public equity markets
place on companies. In order to perform this analysis, Broadview compared
financial information of Netegrity with publicly available information for the
companies listed above. For this analysis, as well as other analyses, Broadview
examined publicly available information.
The following table presents, as of October 5, 2004, the median multiples
and the range of multiples for the Netegrity Comparable Index of total market
capitalization (which is defined as equity market capitalization plus total debt
minus cash
- 14 -
and cash equivalents and which we refer to as TMC) or Netegrity share price,
divided by selected operating metrics as appropriate:
Median Multiple Range of Multiples
--------------- ------------------
TTM TMC/R 6.98x 2.61x - 11.50x
TTM TMC/EBIT 22.6x 12.2x - 32.7x
TTM P/E 37.6x 18.6x - 54.9x
Projected 12/31/04 TMC/Revenue 5.78x 2.41x - 10.18x
Projected 12/31/04 TMC/EBIT 21.4x 11.5x - 25.6x
Projected 12/31/04 P/E 29.2x 17.9x - 49.0x
Projected 12/31/05 TMC/Revenue 5.02x 2.06x - 9.03x
Projected 12/31/05 TMC/EBIT 14.6x 8.9x - 22.0x
Projected 12/31/05 P/E 25.5x 15.3x - 42.9x
These comparables imply the following medians and ranges for per share value
(for analyses employing Netegrity TTM financials, Broadview utilized figures for
the TTM ended June 30, 2004, and Netegrity projected figures were not revised to
reflect any potential adjustment resulting from Netegrity's performance during
the quarter ended September 30, 2004):
Median
Implied
Value Range of Implied Values
----- -----------------------
TTM TMC/R $17.65 $7.99 - $27.67
TTM TMC/EBIT $ 5.38 $3.92 - $6.78
TTM P/E $ 6.64 $3.29 - $9.70
Projected 12/31/04 TMC/Revenue $16.52 $8.18 - $27.41
Projected 12/31/04 TMC/EBIT $ 7.69 $5.17 - $8.78
Projected 12/31/04 P/E $ 7.61 $4.67 - $12.79
Projected 12/31/05 TMC/Revenue $19.98 $9.50 - $34.16
Projected 12/31/05 TMC/EBIT $ 6.38 $4.74 - $8.47
Projected 12/31/05 P/E $ 8.03 $4.82 - $13.49
No company included in the Netegrity Comparable Index is identical to
Netegrity. In evaluating such comparables, Broadview made numerous assumptions
with respect to the information security industry performance and general
economic conditions, many of which are beyond the control of Netegrity.
Mathematical analysis, such as determining the median, average or range, is not
in itself a meaningful method of using comparable company data.
Transaction Comparables Analysis
Broadview considered ratios of equity purchase price, adjusted for the
seller's cash and debt when appropriate, to selected historical and balance
sheet operating results in order to indicate multiples strategic and financial
acquirers have been willing to pay for companies in a particular market segment.
In order to perform this analysis, Broadview reviewed a number of transactions
that it considered similar to the merger. Broadview selected these transactions
since January 1, 2003 involving sellers in the information security industry
with revenue greater than $10 million in the last reported 12 months before the
acquisition. For this analysis, as well as other analyses, Broadview examined
publicly available information, as well as information from Broadview's
proprietary database of published and confidential merger and acquisition
transactions in the IT, communications, healthcare technology and media
industries. These transactions consisted of the acquisition of:
- Netscreen Technologies, Inc. by Juniper Networks, Inc.;
- 15 -
- Brightmail, Inc. by Symantec Corporation;
- Neoteris, Inc. by Netscreen Technologies, Inc.;
- Zone Labs, Inc. by Check Point Software Technologies Ltd;
- SSP Solutions, Inc. by SAFLINK Corporation; and
- Rainbow Technologies, Inc. by SafeNet, Inc.
The following table presents, as of October 5, 2004, the median multiple
and the range of multiples of adjusted price (defined as equity price plus total
debt minus cash and cash equivalents) divided by the seller's revenue (which we
refer to as P/R) and the range of multiples of adjusted price divided by the
seller's EBIT (which we refer to as P/EBIT) in the last reported twelve months
prior to acquisition for the transactions listed above:
Median Multiple Range of Multiples
--------------- ------------------
P/R 9.76x 2.71x - 13.82x
P/EBIT 54.5x 24.9x - 226.9x
These comparables imply the following median and range for per share value (for
the P/R analysis, Broadview used Netegrity revenue for the TTM ended September
30, 2004, and for the P/EBIT analysis, Broadview used Netegrity EBIT for the TTM
ended June 30, 2004 as a proxy for the TTM ended September 30, 2004 due to lack
of available data):
Median Implied Value Range of Implied Values
-------------------- -----------------------
P/R $23.79 $8.19 - $32.76
P/EBIT $ 9.84 $5.70 - $33.93
No transaction utilized as a comparable in the transaction comparables
analysis is identical to the merger. In evaluating the comparables, Broadview
made numerous assumptions with respect to the information security industry's
performance and general economic conditions, many of which are beyond the
control of Netegrity. Mathematical analysis, such as determining the average,
median or range, is not in itself a meaningful method of using comparable
transaction data.
Transaction Premiums Paid Analysis
Broadview considered the premiums paid above a seller's share price in
order to determine the additional value that strategic and financial acquirers,
when compared to public stockholders, are willing to pay for companies in a
particular market segment. In order to perform this analysis, Broadview reviewed
a number of transactions involving publicly-held software companies. Broadview
selected these transactions from its proprietary database by choosing
transactions since January 1, 2003 with an equity purchase price between $50
million and $1 billion. These transactions consisted of the acquisition of:
- Caminus Corporation by SunGard Data Systems Inc.;
- Numerical Technologies, Inc. by Synopsys, Inc.;
- Mercator Software, Inc. by Ascential Software Corporation;
- Speechworks International, Inc. by ScanSoft, Inc.;
- Lightspan, Inc. by PLATO Learning, Inc.;
- Freemarkets, Inc. by Ariba, Inc.;
- Sanchez Computer Associates, Inc. by Fidelity National Financial,
Inc.;
- Group 1 Software, Inc. by Pitney Bowes Inc.;
- ON Technology Corporation by Symantec Corp.;
- Brio Software, Inc. by Hyperion Solutions Corporation;
- 16 -
- Novadigm, Inc. by Hewlett Packard Company;
- H.T.E., Inc. by SunGard Data Systems, Inc.;
- Rogue Wave Software, Inc. by Quovadx, Inc.;
- Elite Information Group, Inc. by The Thomson Corporation;
- Marimba, Inc. by BMC Software, Inc.;
- Latitude Communications, Inc. by Cisco Systems, Inc.;
- Inet Technologies, Inc. by Tektronix, Inc.;
- Timberline Software Corporation by Sage Group plc (Best Software);
- Comshare, Incorporated by Geac Computer Corp Ltd.;
- iManage, Inc. by Interwoven, Inc.;
- Concerto Software, Inc. by Melita International, Ltd.;
- Barra, Inc. by Morgan Stanley (Morgan Stanley Capital International
Inc.);
- Ross Systems, Inc. by chinadotcom corporation (CDC Software Holdings
Inc.);
- Practiceworks, Inc. by Eastman Kodak Company;
- Systems & Computer Technology Corporation by SunGard Data Systems
Inc.;
- Triple G Systems Group, Inc. by General Electric Company (General
Electric Medical Systems Information Technologies);
- Landacorp, Inc. by SHPS Holdings, Inc.; and
- Optika, Inc. by Stellent, Inc.
The following table presents, as of October 5, 2004, the median premium
and the range of premiums for these transactions calculated by dividing:
- the offer price per share minus the closing share price of the
seller's common stock twenty trading days or one trading day prior
to the public announcement of the transaction, by
- the closing share price of the seller's common stock twenty trading
days or one trading day prior to the public announcement of the
transaction:
Median Premium Range of Premiums
-------------- -----------------
Premium Paid to Seller's Stock 25.2% 3.0% - 260.0%
Price 1 Trading Day Prior to
Announcement
Premium Paid to Seller's Stock 40.4% (8.6%) - 214.7%
Price 20 Trading Days Prior to
Announcement
The following table presents the median implied value and the range of
implied values of Netegrity's stock, calculated by using the premiums shown
above and Netegrity's share price twenty trading days and one trading day prior
to delivery:
- 17 -
Median Implied Value Range of Implied Values
-------------------- -----------------------
Premium Paid to Seller's Stock $9.38 $7.71 - $26.96
Price 1 Trading Day Prior to
Announcement
Premium Paid to Seller's Stock $8.77 $5.71 - $19.67
Price 20 Trading Days Prior to
Announcement
No transaction utilized as a comparable in the transaction premiums paid
analysis is identical to the merger. In evaluating the comparables, Broadview
made numerous assumptions with respect to the software industry's performance
and general economic conditions, many of which are beyond the control of
Netegrity. Mathematical analysis, such as determining the average, median or
range is not in itself a meaningful method of using comparable transaction data.
Present Value of Projected Share Price Analysis
Broadview calculated the present value of the projected future share price
of shares of Netegrity common stock on a standalone basis using our management's
net income estimates for the twelve months ending December 31, 2005 and December
31, 2006. For this analysis, Broadview calculated Netegrity EPS for the twelve
months ending December 31, 2005 and December 31, 2006 using net income provided
by our management and projected diluted shares outstanding from a selected
analyst report. The implied share price calculated using the median TTM P/E for
the public company comparables, Netegrity EPS for the twelve months ended
December 31, 2005 and discounted based on the Capital Asset Pricing Model (which
we refer to as CAPM) using the median capital-structure adjusted beta for the
public company comparables was $9.16. The implied share price calculated using
the median TTM P/E for the public company comparables, Netegrity EPS for the
twelve months ended December 31, 2006 and discounted based on the CAPM using the
median capital-structure adjusted beta for the public company comparables was
$21.37.
Consideration of the Discounted Cash Flow Methodology
While discounted cash flow is a commonly used valuation methodology,
Broadview did not employ such an analysis for the purposes of its opinion.
Discounted cash flow analysis is most appropriate for companies that exhibit
relatively steady or somewhat predictable streams of future cash flow. Given the
uncertainty in estimating both the future cash flows and a sustainable long-term
growth rate for the company, Broadview considered a discounted cash flow
analysis inappropriate for valuing Netegrity.
---------------------------------
The merger and acquisition transaction environment varies over time
because of macroeconomic factors such as interest rate and equity market
fluctuations and microeconomic factors such as industry results and growth
expectations. No company or transaction reviewed was identical to the proposed
transactions and, accordingly, the foregoing analyses involve complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that would affect the acquisition values in
the comparable transactions, including the size and demographic and economic
characteristics of the markets of each company and the competitive environment
in which it operates.
The preparation of a fairness opinion is a complex process involving
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analysis or the summary set forth above,
without considering the analysis as a whole, could create an incomplete view of
the processes underlying the opinion of Broadview. In arriving at its fairness
determination, Broadview considered the results of all these constituent
analyses and did not attribute any particular weight to any particular factor or
analysis considered by it; rather, Broadview made its determination as to
fairness on the basis of its experience and professional judgment after
considering the results of all such analyses. Certain Broadview analyses are
based upon forecasts of future results and are not necessarily indicative of
actual future results, which may be significantly more or less favorable than
suggested by such analyses. The foregoing summary does not purport to be a
complete description of the analyses performed by Broadview. Additionally,
analyses relating to the
- 18 -
value of businesses or securities are not appraisals. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty.
As described above, Broadview's opinion to our board was among many
factors taken into consideration by our board in making its determination to
approve the merger agreement and recommend the merger. Such decisions were
solely those of our board. The opinion of Broadview was provided solely to our
board and does not constitute a recommendation to any person, including the
holders of our common stock, as to how such person should vote or act on any
matter related to the merger.
Based upon and subject to the foregoing qualifications, limitations,
factors and assumptions and those set forth in the opinion, Broadview was of the
opinion that, as of October 5, 2004, the $10.75 in cash per share of our common
stock to be received by the holders of our common stock was fair, from a
financial point of view, to such holders.
Pursuant to the terms of the Broadview engagement letter, Netegrity has
paid Broadview an engagement fee of $50,000 and a fee of $750,000 upon delivery
of Broadview's opinion and has agreed to pay Broadview a transaction fee equal
to 0.75% of the aggregate consideration paid in the transaction, which equates
to approximately $3.3 million, less the amount of the engagement fee and the
opinion fee already paid, which is only payable upon consummation of the
transaction. Broadview will also be reimbursed for its reasonable and customary
expenses, and it and related parties will be indemnified against certain
liabilities, including liabilities under the federal securities laws, in
connection therewith. No limitations were imposed on Broadview by Netegrity with
respect to the investigations made or procedures followed by it in rendering its
opinion.
Broadview and its affiliates in the past have provided, currently are
providing, or in the future may provide investment banking, financial and
advisory services to Netegrity, Computer Associates or certain of their
affiliates unrelated to the proposed merger, for which services they have
received, or expect to receive, compensation. Paul Deninger, Chairman of
Broadview, served as a a director of Netegrity from February 2000 to May 2003.
In the ordinary course of business Broadview and its affiliates, including
Jefferies Group, Inc., Broadview's parent company, may actively trade or hold
the securities of Netegrity, Computer Associates or certain of their respective
affiliates for their own accounts and for the accounts of customers and,
accordingly, may at any time hold long or short positions in those securities.
DELISTING AND DEREGISTRATION OF NETEGRITY COMMON STOCK
If the merger is completed, Netegrity common stock will be delisted from
The Nasdaq National Market and deregistered under the Securities Exchange Act of
1934, as amended, which we refer to as the Exchange Act, and Netegrity will no
longer file periodic reports with the SEC.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of our board with respect to the merger
agreement, holders of shares of our common stock should be aware that our
executive officers and directors have interests in the merger that may be
different from, or in addition to, those of our stockholders generally. These
interests may create potential conflicts of interest. Our board was aware of
these potential conflicts of interest and considered them, among other matters,
in reaching its decision to approve the merger agreement and to recommend that
our stockholders vote in favor of adopting the merger agreement.
STOCK OPTIONS AND OTHER EQUITY-BASED AWARDS
The merger agreement provides that, in general, at the effective time of
the merger, each option to purchase shares of our common stock, including those
options held by our executive officers, will be assumed by Computer Associates
and become an option to purchase Computer Associates common stock with the
number of shares of common stock and the exercise price of the option being
adjusted in accordance with a conversion ratio equal to $10.75 divided by the
average closing sales price of a share of Computer Associates common stock for
the five trading days prior to the closing of the merger. The vesting of the
options held by our non-employee directors will accelerate in full at the
effective time of the merger. Each of these options will terminate at the
effective time of the merger in exchange for a payment equal to the number of
shares of our
- 19 -
common stock subject to such option multiplied by the amount, if any, by which
the cash consideration per share to be paid in the merger exceeds the exercise
price of the option.
In addition, certain agreements between us and our executive officers
provide for acceleration of the vesting of options as a result of the merger or
in connection with a termination of employment or change of position following
consummation of the merger:
- Our executive employment agreement with Barry N. Bycoff provides
that 50% of Mr. Bycoff's unvested stock options will automatically
vest in the event Mr. Bycoff's employment is terminated in
connection with the merger. As of October 5, 2004, Mr. Bycoff held
unvested options to purchase 659,455 shares of our common stock.
- Our executive retention agreements with each of Regina O. Sommer,
William Bartow, and Stephanie Feraday provide that, if within twelve
months following the merger, we terminate the employee's employment
other than for cause (as defined in the agreement), disability or
death, or if the employee terminates his or her employment for good
reason (as defined in the agreement), the employee's outstanding
stock options will accelerate so that the number of shares that
would have vested within the two-year period following the date of
such termination will become immediately exercisable. In addition,
each such option will continue to be exercisable (to the extent such
option was exercisable on the date of termination) for a period of
six months following the date of termination (or the remainder of
the option term if less than six months). As of October 5, 2004, Ms.
Sommer, Mr. Bartow and Ms. Feraday held unvested options to purchase
147,606 138,126 and 147,605 shares, respectively, of our common
stock.
EMPLOYMENT AGREEMENTS
Pursuant to our executive employment agreement with Mr. Bycoff, in the
event Mr. Bycoff's employment is terminated by Netegrity or his roles and
responsibilities significantly change for any reason within six months prior to
or within one year following the merger, or if Computer Associates does not
assume his executive employment agreement, in addition to the vesting of options
described above, Mr. Bycoff will be entitled to 36 months base salary and bonus
and 24 months continuation of life and disability insurance benefits. If Mr.
Bycoff does not receive 90 days notice of the termination of his employment, he
will be entitled to an additional payment equal to 90 days salary. Mr. Bycoff's
current annual base salary is $375,000 and his bonus for 2003 was $102,000.
Pursuant to the executive retention agreements with each of Ms. Sommer,
Mr. Bartow, and Ms. Feraday, if within twelve months following the merger, we
terminate the employee's employment other than for cause (as defined in the
agreement), disability or death, or the employee terminates his or her
employment for good reason (as defined in the agreement), in addition to the
vesting of options described above, the employee will be entitled to six months
base salary, 50% of the employee's annual bonus opportunity for the most
recently completed fiscal year and 12 months continuation of benefits. The
current annual base salary of Ms. Sommer, Mr. Bartow and Ms. Feraday is
$200,000, $200,000 and $180,000, respectively and their bonuses for 2003 were
$27,000, $44,795 and $18,000, respectively.
On October 5, 2004, Mr. Bartow signed a letter confirming that he is
interested in remaining employed by Netegrity following consummation of the
merger and representing his good faith agreement that he will sign an employment
contract with Computer Associates on mutually acceptable terms within one month
following the closing of the merger.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Computer Associates has agreed that, for a period of six years following
the effective time of the merger, it and the surviving corporation will
indemnify, to the fullest extent permitted under the General Corporation Law of
the State of Delaware, our current and former directors and officers, and the
current and former directors and officers of any of our subsidiaries, against
all claims, losses, liabilities, damages, judgments, fines and reasonable fees,
costs and expenses, including attorneys' fees and disbursements incurred in
connection with any claim, action, suit, proceeding or investigation, arising
out of or pertaining to the fact that those persons were directors or officers
of us or any of our subsidiaries. Each indemnified party will be entitled to
advancement of expenses incurred in the defense of any such claim, action, suit,
proceeding or investigation from Computer Associates and the surviving
corporation within ten business days of receipt of a request for an advancement.
- 20 -
However, to the extent required by the General Corporation Law of the State of
Delaware, any person to whom expenses are advanced must provide an undertaking
to repay the advances if it is ultimately determined that such person is not
entitled to indemnification.
Computer Associates has agreed that the provisions of the certificate of
incorporation and bylaws of the surviving corporation will contain provisions no
less favorable with respect to indemnification, advancement of expenses and
exculpation of our and our subsidiaries' current and former directors and
officers than the current provisions of our certificate of incorporation and
bylaws.
Computer Associates has also agreed to cause the surviving corporation to
maintain in effect, at no expense to the beneficiaries, for six years after the
merger, a directors' and officers' liability insurance policy covering the
current and former officers and directors of us and our subsidiaries with
respect to matters existing or occurring at or prior to the effective time of
the merger. Computer Associates is not required to pay an annual premium for the
insurance in excess of 250% of the last annual premium we paid. If our existing
insurance expires, is terminated or is canceled during the six-year period or if
it exceeds 250% of the last annual premium we paid, Computer Associates has
agreed to cause the surviving corporation to obtain as much directors' and
officers' liability insurance as can be obtained for the remainder of the period
for an annualized premium not in excess of 250% of the last annual premium we
paid, on terms and conditions no less advantageous to the indemnified parties
than our existing directors' and officers' liability insurance.
BENEFIT ARRANGEMENTS WITH COMPUTER ASSOCIATES
Computer Associates has agreed that, for a period of 12 months following
the merger, it will use all commercially reasonable efforts to provide
continuing employees with base salary and pension and welfare benefits which are
substantially similar in the aggregate to the base salary and benefits currently
provided to those persons as employees of Netegrity. Continuing employees are
those of our employees who continue as employees of the surviving corporation
following the merger. Computer Associates has agreed to give continuing
employees full credit for prior service with us for purposes of eligibility and
vesting under Computer Associates' employee benefits plans and the determination
of benefits levels under Computer Associates' employee benefits plans relating
to vacation or severance. Provided that prior to the effective time of the
merger we have not previously paid bonuses under our 2004 bonus plan in the
ordinary course of business and in accordance with the terms previously approved
by our board, Computer Associates agreed to create a $2.5 million bonus pool for
the period from January 1, 2004 to March 31, 2005 to persons who are continuing
employees at the time of distribution in amounts to be determined by Computer
Associates in its discretion. In addition, Computer Associates has reserved the
right to pay less than 100% of the bonus pool.
THE STOCKHOLDER AGREEMENTS
In connection with the execution of the merger agreement, at the request
of Computer Associates, each of the following directors, executive officers and
stockholders of Netegrity entered into a stockholder agreement with Computer
Associates:
- William C. Bartow
- Barry N. Bycoff
- Stephanie A. Feraday
- Eric R. Giler
- Lawrence D. Lenihan, Jr.
- Ronald T. Maheu
- Pequot Private Equity Fund, L.P.
- Pequot Offshore Private Equity Fund, Inc.
- 21 -
- Regina O. Sommer and
- Ralph B. Wagner.
Under the stockholder agreements, each of these parties has agreed to vote
all of his, her or its shares of Netegrity common stock:
- in favor of adoption of the merger agreement;
- against any proposal or offer for a merger, consolidation,
dissolution, tender offer, recapitalization, reorganization, share
exchange, business combination or similar transaction involving us,
other than the transactions contemplated by the merger agreement;
- against any proposal or offer to acquire in any manner, directly or
indirectly, over 15% of our equity securities or consolidated total
assets (including equity securities of our subsidiaries), other than
the transactions contemplated by the merger agreement; and
- against any action the consummation of which would frustrate the
purposes, or prevent or delay the consummation, of the transactions
contemplated by the merger agreement.
In addition, under the stockholder agreements, each of these parties has:
- granted to Computer Associates an irrevocable a proxy to vote or
express consent on the matters above;
- agreed that he, she or it will not, and will not permit his, her or
its affiliates to, directly or indirectly, transfer or otherwise
dispose of shares of our common stock, or to enter into any
agreement, arrangement or understanding with respect to any such
transaction, other than pursuant to the merger or to an affiliate or
family member who executes a stockholder agreement with Computer
Associates;
- agreed not to take any action that is prohibited to be taken by any
of our officers or directors under the no solicitation provisions of
the merger agreement, and to use his, her or its reasonable best
efforts to cause his, her or its employees, attorneys and other
representatives not to take any such action;
- agreed to notify Computer Associates within 24 hours of receiving
any proposal or offer for a business combination or similar
transaction involving us or to acquire in any manner, over 15% of
our equity securities or consolidated total assets, other than the
transactions contemplated by the merger agreement, any request for
information relating to us or any of our subsidiaries in connection
with such an offer or proposal, or any inquiry with respect to such
an offer or proposal; and
- agreed not to exercise any rights to demand appraisal of any of his,
her or its shares of our common stock.
The stockholder agreements will terminate upon the earlier to occur of the
effective time of the merger or the termination of the merger agreement.
The stockholder agreements apply only to the exercise of voting rights
attaching to Netegrity shares and do not limit the discretion of any stockholder
who is a director of Netegrity with respect to his or her duties as a director.
The shares of Netegrity common stock covered by the stockholder
agreements, which include all of the shares owned by the persons and entities
listed above, represented, as of October 5, 2004, 8.25% of the outstanding
shares of Netegrity common stock and, giving effect to the issuance of shares of
Netegrity common stock beneficially owned by such stockholders pursuant to stock
options in respect of Netegrity common stock, 12.0% of the outstanding shares of
Netegrity common stock. None of the Netegrity stockholders who are parties to
the stockholder agreements were paid additional consideration in connection with
the stockholder agreements.
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REGULATORY MATTERS
Mergers and acquisitions that may have an impact in the United States are
subject to review by the Department of Justice and the Federal Trade Commission
to determine whether they comply with applicable antitrust laws. Under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder, which we refer to as the HSR Act,
mergers and acquisitions that meet certain jurisdictional thresholds, such as
the present transaction, may not be completed until the expiration of a waiting
period that follows the filing of notification forms by both parties to the
transaction with the Department of Justice and the Federal Trade Commission. The
initial waiting period is 30 days, but this period may be shortened if the
reviewing agency grants "early termination" of the waiting period, or it may be
lengthened if the reviewing agency determines that an in-depth investigation is
required and issues a formal request for additional information and documentary
material. We and Computer Associates intend to file pre-merger notifications
with the U.S. antitrust authorities pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 before October 22, 2004. We and Computer Associates are
currently assessing whether any foreign antitrust approvals are required to
consummate the merger and, to the extent any such approvals are required, we and
Computer Associates will seek to obtain such approvals as soon as reasonably
practicable.
It is possible that any of the government entities with which filings are
made may seek various regulatory concessions as conditions for granting approval
of the merger. There can be no assurance that we will obtain the regulatory
approvals necessary to complete the merger or that the granting of these
approvals will not involve the imposition of conditions on completion of the
merger or require changes to the terms of the merger. These conditions or
changes could result in conditions to the merger not being satisfied. See "The
Merger Agreement -- Conditions to the Merger."
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain material United States
federal income tax consequences to our stockholders of the receipt of cash in
exchange for shares of our common stock pursuant to the merger or upon the
exercise of appraisal rights. This summary is based upon the provisions of the
Internal Revenue Code of 1986, as amended, applicable current and proposed
United States Treasury Regulations, judicial authority, and administrative
rulings and practice, all of which are subject to change, possibly on a
retroactive basis. This discussion assumes that the shares of our common stock
are held as capital assets by a United States person (i.e., a citizen or
resident of the United States or a domestic corporation). This discussion does
not address all aspects of United States federal income taxation that may be
relevant to a particular stockholder of ours in light of the stockholder's
personal investment circumstances, or those stockholders of ours subject to
special treatment under the United States federal income tax laws (for example,
life insurance companies, dealers or brokers in securities or currencies,
tax-exempt organizations, financial institutions, United States expatriates,
foreign corporations and nonresident alien individuals), our stockholders who
hold shares of our common stock as part of a hedging, "straddle," conversion or
other integrated transaction, or stockholders of ours who acquired their shares
of our common stock through the exercise of employee stock options or other
compensation arrangements or our employee stock purchase plan. In addition, this
discussion does not address any aspect of foreign, state or local or estate and
gift taxation that may be applicable to a stockholder of ours. WE URGE YOU TO
CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO YOU
(INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND
OTHER TAX LAWS) OF THE RECEIPT OF CASH IN EXCHANGE FOR SHARES OF OUR COMMON
STOCK PURSUANT TO THE MERGER OR UPON THE EXERCISE OF APPRAISAL RIGHTS.
The receipt of cash in the merger or upon the exercise of appraisal rights
will be a taxable transaction for United States federal income tax purposes. In
general, for United States federal income tax purposes, a holder of shares of
our common stock will recognize gain or loss equal to the difference between his
or her adjusted tax basis in shares of our common stock converted to cash in the
merger and the amount of cash received. Gain or loss will be calculated
separately for each block of shares of our common stock (i.e., shares of our
common stock acquired at the same cost in a single transaction) converted to
cash in the merger. If the shares of our common stock have been held for more
than one year at the effective time of the merger, the gain or loss will be
long-term capital gain or loss subject (in the case of stockholders who are
individuals) to tax at a maximum United States federal income tax rate of 15%,
and will be short-term capital gain or loss if, at the effective time of the
merger, the shares of our common stock so converted to cash have been held for
one year or less. The deductibility of a capital loss recognized on the exchange
is subject to limitation.
Under the United States federal income tax backup withholding rules,
unless an exemption applies, Computer Associates generally is required to and
will withhold 28% of all payments to which a stockholder or other payee is
entitled in the merger, unless the stockholder or other payee (1) is a
corporation or comes within other exempt categories and
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demonstrates this fact or (2) provides its correct tax identification number
(social security number, in the case of an individual, or employer
identification number in the case of other stockholders), certifies under
penalties of perjury that the number is correct (or properly certifies that it
is awaiting a taxpayer identification number), certifies as to no loss of
exemption from backup withholding and otherwise complies with the applicable
requirements of the backup withholding rules. Each stockholder of ours and, if
applicable, each other payee, should complete, sign and return to the paying
agent for the merger the substitute Form W-9 that each stockholder of ours will
receive with the letter of transmittal following completion of the merger in
order to provide the information and certification necessary to avoid backup
withholding, unless an applicable exception exists and is proved in a manner
satisfactory to the paying agent. The exceptions provide that certain
stockholders of ours (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, however, he or she must submit a signed Form W-8BEN, "Certificate of
Foreign Status of Beneficial Owner for United States Tax Withholding." Backup
withholding is not an additional tax. Generally, any amounts withheld under the
backup withholding rules described above can be refunded or credited against a
holder's United States federal income tax liability, if any, provided that the
required information is furnished to the United States Internal Revenue Service
in a timely manner.
THE FOREGOING DISCUSSION OF CERTAIN MATERIAL UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES IS INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT
INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS, LEGAL OR TAX ADVICE TO ANY
HOLDER OF SHARES OF OUR COMMON STOCK. WE URGE YOU TO CONSULT YOUR OWN TAX
ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO YOU (INCLUDING THE
APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS)
OF THE RECEIPT OF CASH IN EXCHANGE FOR SHARES OF OUR COMMON STOCK PURSUANT TO
THE MERGER OR UPON THE EXERCISE OF APPRAISAL RIGHTS.
THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement.
However, because the merger agreement is the primary legal document that governs
the merger, you should carefully read the complete text of the merger agreement
for its precise legal terms and other information that may be important to you.
The merger agreement is included as Annex A to this proxy statement.
FORM OF THE MERGER
If all of the conditions to the merger are satisfied or waived in
accordance with the merger agreement, Merger Sub, a wholly-owned subsidiary of
Computer Associates created solely for the purpose of engaging in the
transactions contemplated by the merger agreement, will merge with and into
Netegrity. The separate corporate existence of Merger Sub will cease, and
Netegrity will survive the merger and will become a wholly-owned subsidiary of
Computer Associates. We sometimes refer to Netegrity after the merger as the
surviving corporation.
STRUCTURE AND EFFECTIVE TIME
The merger agreement provides that we will complete the merger no later
than the second business day after satisfaction or waiver of the conditions to
the completion of the merger described in the merger agreement. We intend to
complete the merger as promptly as practicable, subject to receipt of
stockholder approval and all requisite regulatory approvals. We refer to the
time at which the merger is completed as the effective time. Although we expect
to complete the merger by the end of the fourth quarter of 2004, we cannot
specify when, or assure you that, we and Computer Associates will satisfy or
waive all conditions to the merger.
CERTIFICATE OF INCORPORATION AND BYLAWS
Our certificate of incorporation, as in effect on the date of the merger
agreement, will be the certificate of incorporation of the surviving corporation
(subject to an amendment as of the effective time to reduce our authorized share
capital to 1,000 shares), and the bylaws of Merger Sub, as in effect immediately
prior to the effective time of the merger, will be the bylaws of the surviving
corporation.
BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
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The directors of Merger Sub immediately prior to the merger will become
the directors of the surviving corporation following the merger. Our officers
will continue to be the officers of the surviving corporation following the
merger.
CONSIDERATION TO BE RECEIVED IN THE MERGER
Upon completion of the merger, each share of our common stock issued and
outstanding immediately prior to the effective time of the merger will be
cancelled and converted into the right to receive $10.75 in cash, without
interest and less applicable withholding taxes, other than shares held by
stockholders who properly exercise and perfect their appraisal rights and any
shares owned by us, Computer Associates or Merger Sub. Our stockholders are
entitled to assert appraisal rights instead of receiving the merger
consideration. For a description of these appraisal rights, please see
"Appraisal Rights."
PAYMENT PROCEDURES
Prior to the effective time of the merger, Computer Associates will
appoint a paying agent that will make payment of the merger consideration in
exchange for certificates representing shares of our common stock. Computer
Associates will deposit sufficient cash with the paying agent at or before the
effective time of the merger in order to permit the payment of the merger
consideration. Promptly after the effective time of the merger, the paying agent
will mail to each holder of record of a certificate representing shares of our
common stock a letter of transmittal and instructions explaining how to send
his, her or its stock certificates to the paying agent. The paying agent will
pay the merger consideration, less any withholding taxes required by law, to our
stockholders promptly following the paying agent's receipt of the stock
certificates and properly completed letter of transmittal. No interest will be
paid or accrued on the cash payable upon the surrender or any such stock
certificate. Computer Associates is entitled to cause the paying agent to
deliver to it any funds that have not been distributed within 180 days after the
effective time of the merger. After that date, holders of certificates who have
not complied with the instructions to exchange their certificates will be
entitled to look only to Computer Associates for payment of the applicable
merger consideration, without interest.
You should not send your Netegrity stock certificates to the paying agent
until you have received transmittal materials from the paying agent. Do not
return your Netegrity stock certificates with the enclosed proxy.
If any of your certificates representing common stock have been lost,
stolen or destroyed, you will be entitled to obtain the merger consideration
after you make an affidavit of that fact and, if required by Computer
Associates, post a bond as Computer Associates may direct as indemnity against
any claim that may be made against Computer Associates with respect to your
lost, stolen or destroyed stock certificates.
STOCK OPTIONS AND THE EMPLOYEE STOCK PURCHASE PLAN
The merger agreement provides that, at the completion of the merger, each
option to purchase shares of our common stock will be assumed by Computer
Associates and will become an option to acquire shares of Computer Associates
common stock, on the same terms and conditions (other than the number of
underlying shares and the exercise price) as were applicable under such option
immediately prior to the effective time of the merger. The number of shares of
Computer Associates common stock underlying each option will be determined by
multiplying the number of shares of our common stock that were subject to the
option immediately prior to the effective time by the conversion ratio described
below, and rounding the resulting number down to the nearest whole number of
shares of Computer Associates common stock. The per share exercise price for the
Computer Associates common stock issuable upon exercise of each option will be
determined by dividing the per share exercise price of our common stock subject
to such option, as in effect immediately prior to the effective time, by the
conversion ratio and rounding the resulting exercise price up to the nearest
whole cent. Options that are "incentive stock options" may be further adjusted
to comply with the applicable regulations.
The conversion ratio will be equal to the fraction having a numerator
equal to $10.75 and a denominator equal to the average of the closing sales
prices of a share of Computer Associates common stock as reported on the New
York Stock Exchange for each of the five consecutive trading days immediately
preceding the closing date.
The vesting of the options held by our non-employee directors will
accelerate in full at the effective time of the merger. The non-employee
directors have separately agreed that each of these options will terminate at
the effective time of the merger in exchange for a payment equal to the number
of shares of our common stock subject to such option multiplied by
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the amount, if any, by which the cash consideration per share to be paid in the
merger exceeds the exercise price of the option. See "The Merger - Interests of
Certain Persons in the Merger - Stock Options and Other Equity-Based Awards."
We have agreed to terminate our 2002 Employee Stock Purchase Plan as of or
prior to the effective time of the merger.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties
that we made to Computer Associates regarding, among other things:
- corporate matters, including due organization, power and
qualification;
- our capitalization;
- our subsidiaries;
- authorization, execution, delivery and performance and the
enforceability of the merger agreement and related matters;
- absence of conflicts with, or violations of, organizational
documents or other obligations as a result of the merger;
- identification of required governmental filings and consents;
- accuracy of information contained in registration statements,
reports and other documents that we file with the SEC and the
compliance of our filings with the SEC with applicable federal
securities law requirements and, with respect to financial
statements therein, generally accepted accounting principles;
- accuracy of information contained in this proxy statement;
- maintenance and effectiveness of disclosure controls and procedures
required under applicable federal securities law;
- compliance in all material respects with the applicable provisions
of the Sarbanes-Oxley Act of 2002;
- absence of undisclosed liabilities;
- absence of certain changes or events affecting our business since
June 30, 2004;
- filing of tax returns and absence of unpaid taxes;
- owned and leased property;
- intellectual property;
- our material contracts and key customer relationships;
- litigation;
- environmental matters;
- employee benefits plans;
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- compliance with laws;
- permits;
- labor matters;
- insurance;
- receipt of a fairness opinion from our financial advisor;
- inapplicability of state anti-takeover statutes; and
- absence of undisclosed brokers' fees.
In addition, Computer Associates made representations and warranties
regarding, among other things:
- corporate matters, including due organization, power and
qualification;
- authorization, execution, delivery and performance and the
enforceability of the merger agreement and related matters
- absence of conflicts with, or violations of, organizational
documents or other obligations as a result of the merger;
- identification of required governmental filings and consents;
- accuracy of information supplied for inclusion in this proxy
statement;
- operations of Merger Sub; and
- availability of funds necessary for the merger, including the merger
consideration.
Many of our representations and warranties are qualified by a material
adverse effect standard. A "material adverse effect" means, with respect to
Netegrity, any change, event, circumstance of development that is materially
adverse to the business, assets, financial condition or results of operation of
Netegrity, except that the following will not be considered to constitute a
material adverse effect:
- any change resulting from (A) general economic or business
conditions in the U.S., Europe or Israel, or acts of war or
terrorism, (B) factors generally affecting the industries or markets
in which Netegrity operates or (C) any changes in applicable law or
generally accepted accounting principles (except, in each case, to
the extent such change primarily relates only to Netegrity or
disproportionately adversely affects Netegrity as compared to other
companies of similar size in our industry);
- any adverse change proximately caused by the pendency or
announcement of the merger;
- any out of pocket expenses (including legal fees arising from the
transactions contemplated by the merger agreement) directly incurred
in connection with the merger agreement;
- any failure by Netegrity to meet any revenue or earnings estimates
for any period ending on or after October 6, 2004 and prior to the
closing (provided that this will not prevent an event underlying a
missed revenue or earnings estimate from constituting a material
adverse effect to the extent the underlying event rises to the level
of a material adverse effect); or
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- a decline in the price of our common stock on Nasdaq (provided that
this will not prevent an event underlying a decline in stock price
from constituting a material adverse effect to the extent the
underlying event rises to the level of a material adverse effect).
COVENANTS RELATING TO THE CONDUCT OF OUR BUSINESS
From the date of the merger agreement through the effective time of the
merger, we have agreed, and have agreed to cause our subsidiaries, to conduct
our business in the ordinary course of business and use our reasonable best
efforts to preserve our business organization, assets, properties and
relationships with third parties and to keep available the services of our
present officers and key employees.
During the same period, we have also agreed that, subject to certain
exceptions, we will not do any of the following without the prior written
consent of Computer Associates:
- declare, make or pay any dividends on shares of our capital stock,
or split, combine or reclassify any of our capital stock, or
purchase or redeem any shares of our capital stock or any of our
other securities, except for the acquisition of shares of our common
stock in connection with the exercise of options;
- issue or otherwise dispose of or encumber any shares of our capital
stock or other securities, or grant any right or option to acquire
any shares of our capital stock or other securities, other than the
issuance of shares of common stock pursuant to the exercise of
outstanding options under our existing option plans or pursuant to
our employee stock purchase plan;
- amend our certificate of incorporation or bylaws or comparable
organizational documents;
- acquire any business or any business organization or division, or
any assets, other than inventory and other items in the ordinary
course of business;
- sell, lease or otherwise dispose of or encumber any material
property or assets, other than in the ordinary course of business;
- adopt a stockholder rights plan or similar plan or arrangement that
is applicable to Computer Associates or its affiliates;
- incur or guarantee indebtedness, other than obligations pursuant to
existing credit facilities in the ordinary course of business;
- issue, sell, amend or guarantee any debt securities;
- make any loans or advances, except routine employee advances in the
ordinary course of business, or capital contributions to, or
investment in, any other person;
- enter into any hedging agreements or other similar financial
agreements, other than in the ordinary course of business;
- make any capital expenditures in excess of $250,000 in the
aggregate, other than as set forth in our budget;
- make any material changes in accounting methods, except as may be
required under generally accepted accounting principles;
- enter into, amend or terminate or waive any material rights under,
any material contract, other than in the ordinary course of
business;
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- grant any exclusivity rights, "most favored nation" rights or
agreements restricting our ability to compete, to the extent any
such rights or agreements would survive the effective time of the
merger;
- except as required by applicable law or agreements in effect as of
October 6, 2004:
o adopt, amend or terminate any employment agreement or any
employee benefit plan or arrangement;
o increase the compensation or fringe benefits of any director,
officer or employee, other than annual increases in salaries
of persons who are not officers in the ordinary course of
business and that do not exceed 2%;
o amend or accelerate the payment, right to payment or vesting
of any compensation or benefits;
o pay any benefit not provided for on the date of the merger
agreement under our employee benefit plans;
o grant any awards under any bonus, compensation or equity
compensation plan, except for grants of options to purchase
common stock to new hires in the ordinary course of business;
- make or rescind any material tax election, settle or compromise any
material tax liability or amend any material tax return;
- initiate, compromise or settle any material litigation or
arbitration proceeding;
- take any action that may result in any condition to the merger not
being satisfied; or
- authorize, or commit or agree to take, any of the foregoing actions.
NO SOLICITATION
The merger agreement provides that, until the effective time of the merger
or the earlier termination of the merger agreement, neither Netegrity nor any of
our officers and directors will, and we will use reasonable best efforts to
cause our employees, investment bankers, attorneys, accountants and other
advisors or representatives not to, directly or indirectly:
- solicit, initiate or knowingly encourage any inquiries or the making
of any proposal or offer that constitutes, or could reasonably be
expect to lead to, any acquisition proposal; or
- enter into, continue or otherwise participate in any discussions or
negotiations regarding, or furnish to any person any non-public
information for the purpose of encouraging or facilitating, any
acquisition proposal.
However, until such time as our stockholders adopt the merger agreement, we may
provide information to and participate in discussions or negotiations with a
third party if we receive a superior proposal or a bona fide, unsolicited
written acquisition proposal (other than as a result of a breach by us of the no
solicitation provision). Our board may take these actions only if:
- our board determines in good faith after consultation with outside
counsel that the failure to so act would be inconsistent with its
fiduciary obligations under applicable law;
- the third party has entered into a customary confidentiality
agreement with us containing terms not less restrictive of the third
party than those terms contained in our confidentiality agreement
with Computer Associates;
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- in the case of an acquisition proposal, our board determines in good
faith, after consultation with outside counsel and our financial
advisors, that it is reasonably likely that the acquisition proposal
will result in a superior proposal; and
- also in the case of an acquisition proposal, for this purpose the
reference in the definition of acquisition proposal below to 15%
will be replaced by 50%, except in the case the acquisition proposal
is an asset sale, in which case "all substantially all" will be
substituted for 15%.
In response to such a proposal, we may also amend, or grant a waiver or release
under, any standstill or similar agreement with respect to any shares of our
common stock.
We have further agreed that, until the effective time of the merger or the
earlier termination of the merger agreement, our board will not:
- withhold, withdraw or modify (or publicly propose to take any such
action), in a manner adverse to Computer Associates, its approval of
the merger agreement or its recommendation that stockholders vote to
adopt the merger agreement or publicly take a neutral position or no
position with respect to an acquisition proposal (except during the
ten-business day period after the first public announcement of such
acquisition proposal);
- permit us to enter into any letter of intent, merger agreement or
similar agreement regarding any acquisition proposal; or
- approve, recommend or adopt any acquisition proposal (or propose
(publicly or otherwise) to take any such action).
However, until such time as our stockholders adopt the merger agreement, our
board may withhold, withdraw or modify its recommendation with respect to the
merger agreement or approve or recommend any superior proposal if our board
determines in good faith, after consultation with outside counsel, that failure
to do so would be inconsistent with its fiduciary obligations under applicable
law. The superior proposal must have been made or received after the date of the
merger agreement and must not have been solicited, initiated or knowingly
encouraged in breach of the merger agreement. We must notify Computer Associates
if our board intends to take any of these actions, our board may not take such
actions until 72 hours after Computer Associates has been so notified and our
board must take into account any changes to the terms of the merger agreement
proposed by Computer Associates in determining whether the acquisition proposal
still constitutes a superior proposal.
We have agreed to promptly notify Computer Associates of our receipt of
any acquisition proposal or request for information or inquiry with respect to
any acquisition proposal, the material terms of any such acquisition proposal or
inquiry and the identity of the person making any such acquisition proposal or
inquiry. We are also required to keep Computer Associates informed of the status
of any such acquisition proposal or inquiry. We also agreed to cease all
discussions and negotiations regarding any acquisition proposal that existed as
of the date of the merger agreement and to request the return or destruction of
all confidential information provided to the other bidders.
Nothing in the merger agreement prohibits us or our representatives from
taking and disclosing a position to our stockholders with respect to a tender
offer contemplated by Rules 14d-9 and 14e-2 of the Exchange Act or from making
any required disclosure to our stockholders, if our board determines in good
faith, and after consultation with outside counsel, that failure to do so would
be inconsistent with its obligations under applicable law.
An acquisition proposal means any proposal or offer for a merger,
consolidation, dissolution, tender offer, recapitalization, reorganization,
share exchange, business combination or similar transaction involving us or any
proposal or offer to acquire in any manner, directly or indirectly, over 15% of
our equity securities or consolidated total assets.
A superior proposal means any unsolicited, bona fide written proposal made
by a third party to acquire over 50% of our equity securities or all or
substantially all of our assets pursuant to a tender or exchange offer, a
merger, a consolidation or a sale of our assets, that our board determines in
its good faith judgment, after consultation with our outside counsel and
financial advisor, to be more favorable from a financial point of view to our
stockholders than the merger, taking into account
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all the terms and conditions of the proposal and the merger agreement, and is
reasonably capable of being completed on the terms proposed, taking into account
all financial, regulatory, legal and other aspects of the proposal.
STOCKHOLDERS MEETING
We have agreed that unless the merger agreement has been terminated in
accordance with its terms, we will be obligated to hold a meeting of our
stockholders to vote on the proposal to adopt the merger agreement. We are
required to hold the meeting regardless of whether our board determines to
withhold, withdraw or modify its recommendation that stockholders adopt the
merger agreement or our board determines to approve or recommend a superior
proposal.
INDEMNIFICATION AND INSURANCE
Computer Associates has agreed that, for a period of six years following
the effective time of the merger, it and the surviving corporation will
indemnify our current and former directors and officers against losses arising
out of or pertaining to the fact that those persons were directors or officers
of Netegrity. Computer Associates has also agreed to cause the surviving
corporation to maintain in effect for six years after the merger a directors'
and officers' liability insurance policy covering the current and former
officers and directors with respect to matters existing or occurring at or prior
to the effective time of the merger. Computer Associates is not required to pay
an annual premium for the insurance in excess of 250% of the last annual premium
we paid. For more information, please refer to "The Merger -- Interests of
Certain Persons in the Merger -- Indemnification of Officers and Directors."
BENEFIT ARRANGEMENTS
Computer Associates has agreed that, for a period of 12 months following
the merger, it will use all commercially reasonable efforts to provide
continuing employees with base salary and pension and welfare benefits which are
substantially similar in the aggregate to the base salary and benefits currently
provided to those persons as employees of Netegrity. Continuing employees are
those of our employees who continue as employees of the surviving corporation
following the merger. Computer Associates has agreed to give continuing
employees full credit for prior service with us for purposes of eligibility and
vesting under Computer Associates' employee benefits plans and the determination
of benefits levels under Computer Associates' employee benefits plans relating
to vacation or severance. Provided that prior to the effective time of the
merger we have not previously paid bonuses under our 2004 bonus plan in the
ordinary course of business and in accordance with the terms previously approved
by our board, Computer Associates has also agreed to create a $2.5 million bonus
pool that may be distributed after March 31, 2005 to persons who are continuing
employees at the time of distribution in amounts to be determined by Computer
Associates in its discretion. In addition, Computer Associates has reserved the
right to pay less than 100% of the bonus pool.
Prior to the effective time of the merger, Computer Associates' board of
directors, or an appropriate board committee of non-employee directors, will
adopt a resolution consistent with the interpretative guidance of the SEC so
that the assumption of the options to purchase our common stock held by company
insiders will be an exempt transaction for purposes of Section 16 of the
Exchange Act. Company insiders means our officers and directors who will become
subject to the reporting requirements of Section 16 of the Exchange Act with
respect to Computer Associates' equity securities immediately following the
merger.
CONDITIONS TO THE MERGER
Our and Computer Associates' obligations to effect the merger are subject
to the satisfaction or waiver of the following conditions:
- our stockholders must have adopted the merger agreement;
- the applicable waiting period under the HSR Act must have expired or
been terminated;
- we and Computer Associates must have obtained all authorizations,
consents, orders and approvals and made all filings required to be
obtained from or filed with any governmental entity without any
terms or conditions that would reasonably be likely to (i) have a
material adverse effect on us or on Computer Associates (but
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with materiality measured at the Netegrity level) or (ii) materially
impair Computer Associates' ability to own and operate any of our
material businesses and assets from and after the closing, other
than those failures to obtain, individually or in the aggregate,
that would not be reasonably likely to any of the effects described
in (i) or (ii) of this bullet point; and
- no court or governmental agency shall have enacted, issued,
promulgated, enforced or entered any order, stay, decree, judgment
or injunction or statute, rule or regulation that is in effect and
that has the effect of making the merger illegal or otherwise
prohibiting the merger or that would be reasonably likely to
materially impair Computer Associates' ability to own and operate
any of our material businesses or assets after the merger.
In addition, our obligation to effect the merger is subject to the
satisfaction or waiver of the following conditions:
- the representations and warranties of Computer Associates in the
merger agreement that are qualified by reference to a material
adverse effect on Computer Associates must be true and correct, and
the representations and warranties of Computer Associates in the
merger agreement that are not so qualified must be true and correct
except where the failure to be true and correct would not
individually or in the aggregate have or be reasonably like to have
a material adverse effect on Computer Associates; and
- Computer Associates must have performed, in all material respects,
all obligations required to be performed by it under the merger
agreement.
In addition, the obligation of Computer Associates to effect the merger is
subject to the satisfaction or waiver of the following conditions:
- our representations and warranties in the merger agreement that are
qualified by reference to a material adverse effect on us must be
true and correct, and our representations and warranties in the
merger agreement that are not so qualified must be true and correct
except where the failure to be true and correct would not
individually or in the aggregate have or be reasonably like to have
a material adverse effect on us;
- we must have performed, in all material respects, all obligations
required to be performed by us under the merger agreement;
- there must not be instituted or pending any suit, action or
proceeding in which a governmental entity is challenging or seeking
to restrain or prohibit the consummation of the merger, or seeking
to prohibit or materially impair Computer Associates' ability to own
or operate any of our material businesses and assets, or seeking to
prohibit or limit in any material respect Computer Associates'
ability to vote, transfer, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the
surviving corporation; and
- there must not have occurred any change, event, circumstance or
development since October 6, 2004 that has had, or is reasonably
likely to have, a material adverse effect on us.
TERMINATION
The merger agreement may be terminated and the merger may be abandoned at
any time prior to the effective time of the merger (notwithstanding any approval
by our stockholders):
- by the mutual written consent of us and Computer Associates;
- by either us or Computer Associates, if:
o the merger has not consummated by June 30, 2005, provided that
this right to terminate is not available to any party whose
failure to fulfill any obligation under the merger agreement
has been a principal cause of or resulted in the failure of
the merger to occur by June 30, 2005;
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o any governmental order, decree, ruling or action permanently
restraining, enjoining or otherwise prohibiting the merger
shall become final and nonappealable; or
o the meeting of our stockholders has been held and completed,
and the required vote to adopt the merger agreement was not
obtained;
- by Computer Associates, if:
o our board fails to recommend, or withdraws, qualifies or
modifies its recommendation that our stockholders adopt the
merger agreement in a manner adverse to Computer Associates,
or fails to reconfirm its recommendation within five business
days after Computer Associates requests it to do so, or our
board approves or recommends an acquisition proposal (or
publicly announces an intention to do so), or recommends that
our stockholders accept a tender offer or exchange offer for
our common stock or, within ten business days after
commencement of a tender offer or exchange offer, fails to
recommend against acceptance of the offer; or
o we breach or fail to perform any representation, warranty,
covenant or agreement that would result in the failure of a
condition to our obligation to effect the merger being
satisfied and which is not cured within 20 days after written
notice of the breach or failure to perform is given to us; or
- by us, if:
o our board approves or recommends to our stockholders a
superior proposal, provided that prior to any such
termination, (A) we inform Computer Associates of our intent
to effect such termination, (B) we disclose the material terms
and conditions (and provide copies of the documentation)
regarding the superior proposal, (C) Computer Associates does
not make within three business days an offer that our board
determines in good faith (after consultation with our
financial advisor) is at least as favorable from a financial
point of view to our stockholders as the superior proposal and
(D) we pay Computer Associates a termination fee and reimburse
Computer Associates for its expenses; or
o Computer Associates breaches or fails to perform any
representation, warranty, covenant or agreement that would
result in the failure of a condition to its obligation to
effect the merger being satisfied and which is not cured
within 20 days after written notice of the breach or failure
to perform is given to Computer Associates.
TERMINATION FEE
The merger agreement obligates us to pay a termination fee to Computer
Associates of $13 million, plus reimburse up to $2 million of Computer
Associates' expenses relating to the transactions contemplated by the merger
agreement, if:
- the merger agreement is terminated by us or Computer Associates
because:
o the merger has not been completed by June 30, 2005, and (A)
between the date of the merger agreement and the date of
termination of the merger agreement an acquisition proposal
was made or publicly disclosed and not publicly withdrawn in
good faith and without qualification prior to June 30, 2005,
and (B) within 12 months after termination of the merger
agreement we enter into a definitive agreement to consummate,
or consummate, the acquisition proposal; or
o our stockholders did not adopt the merger agreement at the
special meeting, and (A) between the date of the merger
agreement and the date of termination of the merger agreement
an acquisition proposal was made or publicly disclosed and not
publicly withdrawn in good faith and without qualification
prior to the fifth business day prior to the date of the
special meeting, and (B) within 12
- 33 -
months after termination of the merger agreement we enter into
a definitive agreement to consummate, or consummate, the
acquisition proposal;
- the merger agreement is terminated by Computer Associates because:
o our board fails to recommend, or withdraws, qualifies or
modifies its recommendation that our stockholders adopt the
merger agreement in a manner adverse to Computer Associates
(or publicly announces its intention to do so), or fails to
reconfirm its recommendation within five business days after
Computer Associates requests it to do so; or
o our board approves or recommends an acquisition proposal, or
recommends that our stockholders accept a tender offer or
exchange offer for our common stock or, within ten business
days after commencement of a tender offer or exchange offer,
fails to recommend against acceptance of the offer; or
- the merger agreement is terminated by us because:
o the meeting of our stockholders has been duly convened and our
stockholders have not adopted the merger agreement, and, prior
to the date of the meeting, our board shall have failed to
recommend, or shall have withdrawn, qualified or modified its
recommendation that our stockholders adopt the merger
agreement in a manner adverse to Computer Associates (or
publicly announced its intention to do so), or shall have
failed to reconfirm its recommendation within five business
days after Computer Associates requests it to do so, or our
board shall have approved or recommended an acquisition
proposal, or recommended that our stockholders accept a tender
offer or exchange offer for our common stock or, within ten
business days after commencement of a tender offer or exchange
offer, failed to recommend against acceptance of the offer; or
o our board has approved or recommended to our stockholders a
superior proposal, and such action was done in compliance with
the no solicitation, notification and other provisions of the
merger agreement.
AMENDMENT
The parties may amend the merger agreement at any time before or after
adoption of the merger agreement by our stockholders. However, after stockholder
approval has been obtained, the parties may not amend the merger agreement in a
manner that by law requires further approval by our stockholders without
obtaining such further approval.
APPRAISAL RIGHTS
Delaware law entitles the holders of shares of our common stock, who
follow the procedures specified in Section 262 of the General Corporation Law of
the State of Delaware, to have their shares appraised by the Delaware Court of
Chancery and to receive "fair value" of these shares as of completion of the
merger in place of the merger consideration, as determined by the court.
IN ORDER TO EXERCISE APPRAISAL RIGHTS, A HOLDER MUST DEMAND AND PERFECT
THE RIGHTS IN ACCORDANCE WITH SECTION 262.
The following description is intended as a brief summary of the material
provisions of the Delaware statutory procedures required to be followed in order
to perfect appraisal rights. This summary, however, is not a complete statement
of all applicable requirements and is qualified in its entirety by reference to
Section 262 of the General Corporation Law of the State of Delaware, the full
text of which appears in Annex C to this proxy statement.
Section 262 requires that stockholders on the record date for the special
meeting be notified not less than 20 days before the special meeting that
appraisal rights will be available. A copy of Section 262 must be included with
the notice. This proxy statement constitutes our notice to the holders of shares
of our common stock of the availability of appraisal rights in
- 34 -
connection with the merger in compliance with the requirements of Section 262.
If you wish to consider exercising your appraisal rights, you should carefully
review the text of Section 262 contained in Annex C to this proxy statement
since failure to timely and properly comply with the requirements of Section 262
will result in the loss of your appraisal rights under Delaware law.
If you elect to demand appraisal of your shares, you must:
- be a holder of record of shares of our common stock;
- deliver to us a written demand for appraisal of your shares of
Netegrity common stock before the vote of stockholders with respect
to the merger is taken;
- not vote in favor of the merger; and
- continuously hold your shares of our common stock through the
completion of the merger.
Neither voting (in person or by proxy) against, abstaining from voting on
nor failing to vote on the proposal to adopt the merger agreement will
constitute a written demand for appraisal within the meaning of Section 262 of
the General Corporate Law of the State of Delaware. The written demand for
appraisal must be in addition to and separate from any proxy or vote. If the
written demand for appraisal is made in accordance with the requirements of
Delaware law, failure to vote against the merger (i.e., abstaining) will not
operate as a waiver of the stockholder's appraisal rights.
Only a holder of record of shares of our common stock are entitled to
assert appraisal rights for the shares of common stock registered in that
holder's name. A demand for appraisal should be executed by or on behalf of the
holder of record, fully and correctly, as his, hers or its name appears on his,
hers or its stock certificates, and must state that such person intends thereby
to demand appraisal of his, hers or its shares of our common stock in connection
with the merger. If the shares of our common stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares of common stock
are owned of record by more than one person, as in a joint tenancy and tenancy
in common, the demand should be executed by or on behalf of all joint owners. An
authorized agent, including two or more joint owners, may execute a demand for
appraisal on behalf of a holder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, the agent is agent for such owner or owners. A record holder, such as a
broker who holds shares of our common stock as nominee for several beneficial
owners, may exercise appraisal rights with respect to the shares of our common
stock held for one or more beneficial owners while not exercising such rights
with respect to the shares of our common stock held for other beneficial owners;
in such case, however, the written demand should set forth the number of shares
of our common stock as to which appraisal is sought and where no number of
shares of our common stock is expressly mentioned the demand will be presumed to
cover all shares of our common stock which are held in the name of the record
owner. Stockholders who hold their shares of our common stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such a nominee.
All demands for appraisal should be made in writing and addressed to the
Secretary of Netegrity at 201 Jones Road, Waltham, Massachusetts 02451 before
the stockholder vote on the merger is taken at the special meeting. The demand
must reasonably inform us of the identity of the holder and the intention of the
holder to demand appraisal of his, her or its shares of common stock. If your
shares of our common stock are held through a broker, bank, nominee or other
third party, and you wish to demand appraisal rights you must act promptly to
instruct the applicable broker, bank nominee or other third party to follow the
steps summarized in this section.
Within 10 days after the effective date of the merger, the surviving
corporation must give written notice of the date the merger became effective to
each holder who has properly filed a written demand for appraisal and has not
voted in favor of the merger. At any time within 60 days after the effective
date, any holder who has demanded an appraisal has the right to withdraw the
demand and to accept the cash payment specified by the merger agreement for his
or her shares of our common stock. Within 120 days after the effective date,
either the surviving corporation or any holder who has complied with the
requirements of Section 262 and who is otherwise entitled to appraisal rights,
may file a petition in the Delaware Court of Chancery (which we refer to as the
Chancery Court) demanding a determination of the fair value of the shares of our
common stock held by all holders entitled to appraisal. Neither Netegrity nor
Computer Associates has any intention or obligation to
- 35 -
file such a petition. Accordingly, the failure of a holder to file a petition in
the Chancery Court demanding a determination of the fair value of the shares
within 120 days after the effective time could nullify the holder's previously
written demand for appraisal. Within 120 days after the effective time of the
merger, any holder of our common stock who has complied with the requirements
for exercise of appraisal rights will be entitled, upon written request, to
receive from the surviving corporation a statement setting forth the aggregate
number of shares not voted in favor of the merger and with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. The statement must be mailed to such holder within 10 days after a
written request for the statement has been received by the surviving corporation
or within 10 days after the expiration of the period for delivery of demands for
appraisal, whichever is later.
If a petition for appraisal is duly filed by a holder and a copy of the
petition is delivered to the surviving corporation, the surviving corporation
will then be obligated, within 20 days after receiving service of a copy of the
petition, to provide the Chancery Court with a duly verified list containing the
names and addresses of all holders who have demanded an appraisal of their
shares of our common stock and with whom agreements as to the value of their
shares of our common stock have not been reached by the surviving corporation.
After notice to dissenting holders of the time and place of the hearing of the
petition, the Chancery Court is empowered to conduct such a hearing. At the
hearing, the Chancery Court will determine those holders who have complied with
Section 262 and who have become entitled to appraisal rights. The Chancery Court
may require the holders who have demanded an appraisal for their shares of our
common stock to submit their stock certificates to the Register in Chancery for
notation of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with that direction, the Chancery Court may dismiss the
proceedings as to that holder.
After determination of the holders entitled to appraisal of their shares
of our common stock, the Chancery Court will 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. When the fair value is determined, the Chancery Court will
direct the payment of the value, with interest, if any, to the holders entitled
to receive payment, upon surrender by such holders of the certificates
representing the applicable shares of our common stock.
In determining fair value and the fair rate of interest, if any, the
Chancery Court is required to take into account all relevant factors. You should
be aware that the fair value of your shares of Netegrity common stock as
determined under Section 262 could be more, the same, or less than the value
that you are entitled to receive under the terms of the merger agreement.
Costs of the appraisal proceeding may be imposed upon the parties
participating in the appraisal proceeding by the Chancery Court as the Chancery
Court deems equitable in the circumstances. Upon the application of a holder,
the Chancery Court may order all or a portion of the expenses incurred by any
holder in connection with the appraisal proceeding, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts, to
be charged pro rata against the value of all shares of our common stock entitled
to appraisal.
Any holder who has demanded appraisal rights will not, from and after the
effective date of the merger, be entitled to vote shares of Netegrity common
stock subject to that demand for any purpose or to receive payments of dividends
or any other distribution with respect to those shares, other than dividends or
other distribution payable to our stockholders of record at a date prior to the
effective date; however, if no petition for appraisal is filed within 120 days
after the effective date of the merger, or if the holder delivers a written
withdrawal of his or her demand for appraisal and an acceptance of the merger
within 60 days after the effective date of the merger, then the right of that
holder to appraisal will cease and that holder will be entitled to receive the
cash payment for his, her or its shares of our common stock pursuant to the
merger agreement. Any withdrawal of a demand for appraisal made more than 60
days after the effective date of the merger may only be made with the written
approval of the surviving corporation and must, to be effective, be made within
120 days after the effective date. Notwithstanding the foregoing, no appraisal
proceeding in the Chancery Court will be dismissed without the approval of the
Chancery Court and may be subject to conditions the Chancery Court deems just.
IN VIEW OF THE COMPLEXITY OF SECTION 262, HOLDERS OF SHARES OF OUR COMMON
STOCK WHO MAY WISH TO PURSUE APPRAISAL RIGHTS SHOULD PROMPTLY CONSULT THEIR
LEGAL ADVISORS.
- 36 -
MARKET PRICE AND DIVIDEND DATA
Our common stock is traded on The NASDAQ National Market under the symbol
"NETE." The table below shows, for the periods indicated, the high and low sales
prices for shares of our common stock as reported by The NASDAQ National Market.
Netegrity Common Stock
----------------------
Low High
--- ----
Year Ended December 31, 2002
First quarter $11.50 $19.60
Second quarter 5.05 14.77
Third quarter 1.97 4.72
Fourth quarter 1.40 4.14
Year Ended December 31, 2003
First quarter 2.87 4.87
Second quarter 3.30 7.30
Third quarter 5.82 11.97
Fourth quarter 9.27 13.85
Year Ended December 31, 2004
First quarter 7.22 14.18
Second quarter 7.75 9.95
Third quarter 5.46 8.43
Fourth quarter through ______, 2004
The following table sets forth the closing sales prices per share of
Netegrity common stock, as reported on The NASDAQ National Market on October 5,
2004, the last full trading day before the public announcement of the proposed
merger, and on ______, 2004, the latest practicable date before the printing of
this proxy statement:
October 5, 2004 $7.75
________, 2004 $____
If the merger is consummated, our common stock will be delisted from The
NASDAQ National Market, there will be no further public market for shares of our
common stock and each share of our common stock will be converted into the right
to receive $10.75 in cash, without interest.
We have never paid dividends on shares of our common stock and do not
anticipate paying dividends on shares of our common stock in the future.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of shares of our
common stock as of October 5, 2004 by (1) each person or entity known by us to
beneficially own more than five percent of the shares of our common stock, (2)
each director and named executive officer individually and (3) all our current
directors and executive officers as a group. Unless otherwise indicated and
except pursuant to the stockholder agreements (as discussed on page 21), all
shares of our common stock are owned directly and the indicated owner has sole
voting and dispositive power with respect to such shares.
SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------------------------ ------------------ -----
T. Rowe Price Associates, Inc. (1)............................... 4,499,060 11.69%
100 East Pratt Street
Baltimore, MD 21202
Lawrence D. Lenihan, Jr. (2)..................................... 2,711,055 7.05%
Pequot Capital Management, Inc. (3).............................. 2,656,430 6.90%
500 Nyala Farm Road
Westport, CT 06880
- 37 -
SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------------------------ ------------------ -----
Barry N. Bycoff (4).............................................. 1,491,181 3.85%
Regina O. Sommer (5)............................................. 169,062 *
Deepak Taneja.................................................... 144,679 *
Ralph B. Wagner (6).............................................. 92,966 *
Thomas L. Thimot (7)............................................. 4,500 *
William C. Bartow (7)............................................ 219,375 *
Sandra E. Bergeron............................................... -- *
Eric R. Giler (7)................................................ 44,563 *
Ronald T. Maheu (7).............................................. 9,000 *
All current executive officers and directors as a
group (9 persons) (8)............................................ 4,825,302 12.03%
---------------
*less than 1%
(1) Consists of securities owned by various individual and institutional
investors which T. Rowe Price Associates, Inc. serves as investment advisor with
power to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Exchange Act, T. Rowe Price
Associates, Inc. is deemed to be a beneficial owner of such securities; however,
T. Rowe Price Associates, Inc. expressly disclaims beneficial ownership of such
securities. Based on information provided to us by T. Rowe Price Associates,
Inc. in February 2004.
(2) Includes 15,000 shares held by Mr. Lenihan's minor children. Mr.
Lenihan is a Managing General Partner of Pequot Capital Management, Inc., and
may be deemed to beneficially own the 2,656,430 shares held by Pequot Private
Equity Fund, L.P. and Pequot Offshore Private Equity Fund, Inc. Mr. Lenihan
disclaims beneficial ownership of these shares, except to the extent of his
pecuniary interest therein. The 2,711,055 shares include 5,250 shares issuable
upon exercise of options exercisable within 60 days of October 5, 2004.
(3) Consists of 2,353,235 shares held of record by Pequot Equity Fund,
L.P., 297,945 shares held of record by Pequot Offshore Private Equity Fund,
Inc., and 5,250 shares issuable upon exercise of options exercisable within 60
days of October 5, 2004. Both funds are managed by Pequot Capital Management,
Inc., which has voting and dispositive power of the shares of common stock held
by Pequot Equity Fund, L.P. and Pequot Offshore Private Equity Fund, Inc.
(4) Includes 15,000 shares held in trust for the benefit of Mr. Bycoff's
children and 1,105,931 shares issuable upon exercise of options exercisable
within 60 days of October 5, 2004.
(5) Includes 134,062 shares issuable upon exercise of options exercisable
within 60 days of October 5, 2004.
(6) Includes 33,598 shares issuable upon exercise of options exercisable
within 60 days of October 5, 2004.
(7) Consists of shares issuable upon exercise of options exercisable
within 60 days of October 5, 2004.
(8) Includes 1,639,879 shares issuable upon exercise of options
exercisable within 60 days of October 5, 2004.
DESCRIPTION OF NETEGRITY, INC.
Netegrity, Inc., a corporation organized under the laws of the State of
Delaware, is a leading provider of security software solutions for managing user
identities and access. We provide an identity and access management product line
for evolving computing environments, including legacy, Web, and service-oriented
architectures. Our flexible, standards-based offerings are designed to increase
security, reduce administrative costs, and enable revenue enhancement. Supported
by a network of over 1,200 trained integration consultants and over 200
technology partners, our solutions are licensed to more than
- 37 -
350 million users at over 850 organizations worldwide, including more than half
of the Fortune 100(R) companies. Our common stock is quoted on The Nasdaq
National Market under the symbol "NETE."
DESCRIPTION OF COMPUTER ASSOCIATES INTERNATIONAL, INC.
Computer Associates International, Inc., a corporation organized under the
laws of the State of Delaware, is one of the world's largest providers of
management software. Founded in 1976, Computer Associates designs, markets and
licenses computer software products that allow businesses to efficiently run,
manage, and automate critical aspects of their IT operations. Computer
Associates operates in more than 100 countries, has a large and broad base of
customers and estimates that 95% of the Fortune 500(R) companies currently use
its products. Computer Associates' common stock is listed on the New York Stock
Exchange under the symbol "CA."
DESCRIPTION OF NOVA ACQUISITION CORP.
Nova Acquisition Corp., a corporation organized under the laws of the
State of Delaware, is a direct wholly-owned subsidiary of Computer Associates.
Nova Acquisition Corp. was formed exclusively for the purpose of effecting the
merger. This is the only business of Nova Acquisition Corp.
FUTURE STOCKHOLDER PROPOSALS
If the merger is consummated, we will not have public stockholders and
there will be no public participation in any future meetings of stockholders.
However, if the merger is not completed, we will hold our 2005 Annual Meeting of
Stockholders. If such meeting is held, stockholder proposals submitted pursuant
to Rule 14a-8 under the Exchange Act for inclusion in our 2005 annual proxy
statement should be sent to us at 201 Jones Road, Waltham, Massachusetts 02451,
Attention: Corporate Secretary, and we must receive such proposals by December
1, 2004. All stockholder proposals must also meet the requirements set forth in
the rules and regulations of the SEC in order to be eligible for inclusion in
our proxy statement for our 2005 Annual Meeting of Stockholders.
Stockholder proposals submitted outside the process of Rule 14a-8 under
the Exchange Act should be sent to us at 201 Jones Road, Waltham, Massachusetts
02451 and must be received between January 26 and February 25, 2005 to be
considered timely under the Exchange Act.
HOUSEHOLDING OF PROXY STATEMENT
Some banks, brokers and other nominee record holders may be participating
in the practice of "householding" proxy statements. This means that only one
copy of our proxy statement may have been sent to multiple stockholders in your
household. We will promptly deliver a copy of the proxy statement to you if you
write or call us at the following address or phone number: Netegrity, Inc., 201
Jones Road, Waltham, Massachusetts 02451, Attention: Corporate Secretary, (781)
890-1700.
WHERE YOU CAN FIND MORE INFORMATION
Each of Netegrity and Computer Associates files annual, quarterly and
current reports, proxy statements and other information with the SEC under the
Exchange Act. You may read and copy this information at, or obtain copies of
this information by mail from, the SEC's Public Reference Room, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Please call the SEC
at 1-800-SEC-0330 for further information about the public reference room.
The filings of Netegrity and Computer Associates with the SEC are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http://www.sec.gov."
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED OR VOTE THROUGH THE INTERNET OR BY TELEPHONE AS DESCRIBED
IN THE ENCLOSED PROXY CARD. GIVING YOUR PROXY NOW WILL NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IF YOU ATTEND THE MEETING.
- 39 -
If you have any questions about this proxy statement, the special meeting
or the merger or need assistance with the voting procedures, you should contact
Georgeson Shareholder Communications Inc., our proxy solicitor, toll-free at
(888) 350-3512.
- 40 -
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
COMPUTER ASSOCIATES INTERNATIONAL, INC.
NOVA ACQUISITION CORP.
AND
NETEGRITY, INC.
DATED AS OF
OCTOBER 6, 2004
A-1
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGER.................................................. A-7
1.1 Effective Time of the Merger................................ A-7
1.2 Closing..................................................... A-7
1.3 The Merger; Effects of the Merger........................... A-7
1.4 Certificate of Incorporation and By-laws.................... A-8
1.5 Directors and Officers of the Surviving Corporation......... A-8
ARTICLE II CONVERSION OF SECURITIES.................................... A-8
2.1 Conversion of Capital Stock................................. A-8
2.2 Exchange of Certificates.................................... A-9
2.3 Company Stock Plans and Warrants............................ A-10
2.4 Dissenting Shares........................................... A-11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-12
3.1 Organization, Standing and Power............................ A-12
3.2 Capitalization.............................................. A-13
3.3 Subsidiaries................................................ A-14
3.4 Authority; No Conflict; Required Filings and Consents....... A-15
3.5 SEC Filings; Financial Statements; Information Provided..... A-16
3.6 No Undisclosed Liabilities.................................. A-18
3.7 Absence of Certain Changes or Events........................ A-18
3.8 Taxes....................................................... A-18
3.9 Owned and Leased Properties................................. A-19
3.10 Intellectual Property....................................... A-20
3.11 Contracts................................................... A-22
3.12 Litigation.................................................. A-24
3.13 Environmental Matters....................................... A-24
3.14 Employee Benefit Plans...................................... A-25
3.15 Compliance With Laws........................................ A-26
3.16 Permits..................................................... A-26
3.17 Labor Matters............................................... A-27
3.18 Insurance................................................... A-27
3.19 Opinion of Financial Advisor................................ A-27
3.20 Takeover Statutes........................................... A-27
3.21 Brokers..................................................... A-27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
TRANSITORY SUBSIDIARY....................................... A-28
4.1 Organization, Standing and Power............................ A-28
4.2 Authority; No Conflict; Required Filings and Consents....... A-28
4.3 Information Provided........................................ A-29
4.4 Operations of the Transitory Subsidiary..................... A-29
4.5 Financing................................................... A-29
ARTICLE V CONDUCT OF BUSINESS......................................... A-29
5.1 Covenants of the Company.................................... A-29
5.2 Confidentiality............................................. A-31
A-2
PAGE
----
ARTICLE VI ADDITIONAL AGREEMENTS....................................... A-32
6.1 No Solicitation............................................. A-32
6.2 Proxy Statement............................................. A-34
6.3 Nasdaq Quotation............................................ A-34
6.4 Access to Information....................................... A-34
6.5 Stockholders Meeting........................................ A-35
6.6 Legal Conditions to the Merger.............................. A-35
6.7 Public Disclosure........................................... A-36
6.8 Indemnification............................................. A-36
6.9 Notification of Certain Matters............................. A-37
6.10 Exemption from Liability Under Section 16(b)................ A-38
6.11 Employee Benefits........................................... A-38
6.12 Service Credit.............................................. A-38
6.13 Company 401(k) Plans........................................ A-39
6.14 Loans to Company Employees, Officers and Directors.......... A-39
6.15 Takeover Statutes and Laws.................................. A-39
6.16 Termination of Non-Employee Director Options................ A-39
ARTICLE VII CONDITIONS TO MERGER........................................ A-39
7.1 Conditions to Each Party's Obligation To Effect the
Merger...................................................... A-39
7.2 Additional Conditions to Obligations of the Buyer and the
Transitory Subsidiary....................................... A-40
7.3 Additional Conditions to Obligations of the Company......... A-41
ARTICLE VIII TERMINATION AND AMENDMENT................................... A-41
8.1 Termination................................................. A-41
8.2 Effect of Termination....................................... A-43
8.3 Fees and Expenses........................................... A-43
8.4 Amendment................................................... A-44
8.5 Extension; Waiver........................................... A-44
ARTICLE IX MISCELLANEOUS............................................... A-44
9.1 Nonsurvival of Representations, Warranties and Agreements... A-44
9.2 Notices..................................................... A-44
9.3 Entire Agreement............................................ A-45
9.4 No Third Party Beneficiaries................................ A-45
9.5 Assignment.................................................. A-46
9.6 Severability................................................ A-46
9.7 Counterparts and Signature.................................. A-46
9.8 Interpretation.............................................. A-46
9.9 Governing Law............................................... A-46
9.10 Remedies.................................................... A-46
9.11 Submission to Jurisdiction.................................. A-46
9.12 WAIVER OF JURY TRIAL........................................ A-47
Exhibit A Form of Company Stockholder Agreement.......................
Schedule A Parties to Company Stockholder Agreements...................
A-3
TABLE OF DEFINED TERMS
REFERENCE IN
TERMS AGREEMENT
----- ------------
Acquisition Proposal........................................ Section 6.1(f)
Acquisition Proposal Assessment Period...................... Section 6.1(b)(i)
Adverse Recommendation Notice............................... Section 6.1(b)
Affiliate................................................... Section 3.2(c)
Agreement................................................... Preamble
Alternative Acquisition Agreement........................... Section 6.1(b)(ii)
Antitrust Laws.............................................. Section 6.6(b)
Antitrust Order............................................. Section 6.6(b)
Bankruptcy and Equity Exception............................. Section 3.4(a)
Bonus Pool.................................................. Section 6.11
Bonus Pool Period........................................... Section 6.11
Business Day................................................ Section 1.2
Buyer....................................................... Preamble
Buyer Common Stock.......................................... Section 2.3(a)
Buyer Disclosure Schedule................................... Article IV
Buyer Employee Plan......................................... Section 6.12
Buyer Material Adverse Effect............................... Section 4.1
Buyer Stock Options......................................... Section 2.3(a)
Certificate................................................. Section 2.2(b)
Certificate of Merger....................................... Section 1.1
Change of Recommendation.................................... Section 6.1(b)
Closing..................................................... Section 1.2
Closing Date................................................ Section 1.2
Code........................................................ Section 2.2(f)
Company..................................................... Preamble
Company Balance Sheet....................................... Section 3.5(b)
Company Board............................................... Section 3.4(a)
Company Common Stock........................................ Section 2.1(b)
Company Disclosure Schedule................................. Article III
Company Employee Plans...................................... Section 3.14(a)
Company ESPP................................................ Section 2.3(e)
Company Insiders............................................ Section 6.10(c)
Company Intellectual Property............................... Section 3.10(b)
Company Leases.............................................. Section 3.9(b)
Company Material Adverse Effect............................. Section 3.1
Company Material Contract................................... Section 3.11(a)
Company Meeting............................................. Section 3.4(d)
Company Obligations......................................... Section 3.6
Company Permits............................................. Section 3.16
Company Preferred Stock..................................... Section 3.2(a)
Company Registered Intellectual Property.................... Section 3.10(b)
Company SEC Reports......................................... Section 3.5(a)
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REFERENCE IN
TERMS AGREEMENT
----- ------------
Company Stock Options....................................... Section 2.3(a)
Company Stock Plans......................................... Section 2.3(c)
Company Stockholder Agreements.............................. Preamble
Company Stockholder Approval................................ Section 3.4(a)
Company Voting Proposal..................................... Section 3.4(a)
Confidentiality Agreement................................... Section 5.2
Continuing Employees........................................ Section 6.11
Contract.................................................... Section 3.4(b)
Conversion Ratio............................................ Section 2.3(a)
Costs....................................................... Section 6.8(a)
DGCL........................................................ Preamble
Dissenting Shares........................................... Section 2.4(a)
Effective Time.............................................. Section 1.1
Employee Benefit Plan....................................... Section 3.14(a)
Environmental Law........................................... Section 3.13(b)
ERISA....................................................... Section 3.14(a)
ERISA Affiliate............................................. Section 3.14(a)
Exchange Act................................................ Section 3.4(c)
Exchange Agent.............................................. Section 2.2(a)
Exchange Fund............................................... Section 2.2(a)
GAAP........................................................ Section 3.5(b)
Governmental Entity......................................... Section 3.4(c)
Hazardous Substance......................................... Section 3.13(c)
HSR Act..................................................... Section 3.4(c)
Indemnified Parties......................................... Section 6.8(a)
Insurance Policies.......................................... Section 3.18
Intellectual Property....................................... Section 3.10(a)
IRS......................................................... Section 3.14(b)
Liens....................................................... Section 3.4(b)
Maximum Premium............................................. Section 6.8(c)
Merger...................................................... Preamble
Merger Consideration........................................ Section 2.1(c)
Outside Date................................................ Section 8.1(b)
Person...................................................... Section 2.2(b)
Potential Superior Proposal................................. Section 6.1(a)
Pre-Closing Period.......................................... Section 5.1
Proxy Statement............................................. Section 3.5(c)
Required Company Stockholder Vote........................... Section 3.4(d)
Representatives............................................. Section 6.1(a)
SEC......................................................... Section 3.4(c)
Section 16 Information...................................... Section 6.10(b)
Securities Act.............................................. Section 3.2(c)
Specified Time.............................................. Section 6.1(a)
Subsidiary.................................................. Section 3.3(a)
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REFERENCE IN
TERMS AGREEMENT
----- ------------
Superior Proposal........................................... Section 6.1(f)
Surviving Corporation....................................... Section 1.3
Tax Returns................................................. Section 3.8(a)
Taxes....................................................... Section 3.8(a)
Termination Fee............................................. Section 8.3(b)
Third Party Intellectual Property........................... Section 3.10(b)
Transaction Documents....................................... Section 9.3
Transitory Subsidiary....................................... Preamble
Voting Debt................................................. Section 3.2(d)
Waiting Period.............................................. Section 8.1(f)
Warrants.................................................... Section 2.3(e)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
October 6, 2004, by and among Computer Associates International, Inc., a
Delaware corporation (the "Buyer"), Nova Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of the Buyer (the "Transitory
Subsidiary"), and Netegrity, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Buyer and the Company
deem it advisable and in the best interests of each corporation and their
respective stockholders to consummate the Merger (as defined below) on the terms
and conditions set forth herein;
WHEREAS, the acquisition of the Company shall be effected through a merger
(the "Merger") of the Transitory Subsidiary with and into the Company in
accordance with the terms of this Agreement and the Delaware General Corporation
Law (the "DGCL"), as a result of which the Company shall continue its existence
and become a wholly owned subsidiary of the Buyer; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the Buyer's willingness to enter into this
Agreement, the stockholders of the Company listed on Schedule A have entered
into Stockholder Agreements, dated as of the date of this Agreement, in the form
attached hereto as Exhibit A (the "Company Stockholder Agreements"), pursuant to
which such stockholders have, among other things, agreed to give the Buyer a
proxy to vote shares of capital stock of the Company that such stockholders own
in favor of the Company Voting Proposal (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Buyer, the Transitory Subsidiary and the Company agree
as follows:
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, prior to the Closing, the Buyer and the Company shall jointly
prepare, and immediately following the Closing the Surviving Corporation shall
cause to be filed with the Secretary of State of Delaware, a certificate of
merger (the "Certificate of Merger") in such form as is required by, and
executed by the Company in accordance with, the relevant provisions of the DGCL
and shall make all other filings or recordings required under the DGCL. The
Merger shall become effective upon the filing of the Certificate of Merger with
the Secretary of State of Delaware or at such later time as is established by
the Buyer and the Company and set forth in the Certificate of Merger (the date
and time at which the Merger becomes effective, the "Effective Time").
1.2 Closing. The closing of the Merger (the "Closing") shall take place at
9:00 a.m., Eastern time, on a date to be specified by the Buyer and the Company
(the "Closing Date"), which shall be no later than the second (2nd) Business Day
after satisfaction or waiver of the conditions set forth in Article VII (other
than delivery of items to be delivered at the Closing and other than
satisfaction of those conditions that by their nature are to be satisfied at the
Closing, it being understood that the occurrence of the Closing shall remain
subject to the delivery of such items and the satisfaction or waiver of such
conditions at the Closing), at the offices of Wilmer Cutler Pickering Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts, unless another date, place or
time is agreed to in writing by the Buyer and the Company. For purposes of this
Agreement, the term "Business Day" means any day ending on 11:59 p.m. (eastern
time) other than a day on which banks in the State of New York are authorized or
obligated to be closed.
1.3 The Merger; Effects of the Merger. Subject to the provisions of this
Agreement, at the Effective Time, the Transitory Subsidiary shall be merged with
and into the Company, whereupon the separate corporate existence of the
Transitory Subsidiary shall cease and the Company shall continue as the
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surviving corporation (the Company following the Merger is sometimes referred to
herein as the "Surviving Corporation"). The Merger shall have the effects set
forth in Section 259 of the DGCL.
1.4 Certificate of Incorporation and By-laws. The Certificate of
Incorporation of the Company, as in effect on the date of this Agreement, shall
remain in effect, as amended at the Effective Time as provided in the next
sentence and, as so amended, such Certificate of Incorporation shall be the
Certificate of Incorporation of the Surviving Corporation until hereafter
changed or amended as provided therein or by applicable law. ARTICLE FOURTH
shall be deleted in its entirety and replaced with the following: "FOURTH. The
total number of shares which the Corporation shall have authority to issue is
1,000 shares of Common Stock (the "Common Stock"), and the par value of each of
such share is $0.01." The By-laws of the Transitory Subsidiary as in effect
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
1.5 Directors and Officers of the Surviving Corporation.
(a) The directors of the Transitory Subsidiary 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 By-laws
of the Surviving Corporation.
(b) The officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the Transitory Subsidiary, the
Company or any holder of shares of the capital stock of the Company or capital
stock of the Transitory Subsidiary:
(a) Capital Stock of the Transitory Subsidiary. Each share of the
common stock of the Transitory Subsidiary issued and outstanding
immediately prior to the Effective Time shall be converted into and become
one fully paid and nonassessable share of common stock, $0.01 par value per
share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Buyer-Owned Stock. All shares
of common stock, $0.01 par value per share, of the Company ("Company Common
Stock") that are owned by the Company as treasury stock and any shares of
Company Common Stock owned by the Buyer or the Transitory Subsidiary
immediately prior to the Effective Time shall be cancelled and shall cease
to exist and no payment shall be made with respect thereto.
(c) Merger Consideration for Company Common Stock. Subject to Section
2.2, each share of Company Common Stock (other than shares to be cancelled
in accordance with Section 2.1(b) and Dissenting Shares (as defined in
Section 2.4 below)) issued and outstanding immediately prior to the
Effective Time shall be automatically converted into the right to receive
$10.75 in cash per share, without interest (the "Merger Consideration"). As
of the Effective Time, all such shares of Company Common Stock shall no
longer be outstanding and shall automatically be cancelled and shall cease
to exist, and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto,
except the right (other than in respect of Dissenting Shares) to receive
the Merger Consideration pursuant to this Section 2.1(c) upon the surrender
of such certificate in accordance with Section 2.2, without interest.
(d) Adjustments to Merger Consideration. The Merger Consideration
shall be adjusted to reflect fully the effect of any reclassification,
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Company Common Stock),
reorganization, recapitalization
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or other like change with respect to Company Common Stock occurring (or for
which a record date is established) after the date hereof and prior to the
Effective Time.
2.2 Exchange of Certificates. The procedures for exchanging outstanding
shares of Company Common Stock for the Merger Consideration pursuant to the
Merger are as follows:
(a) Exchange Agent. At or prior to the Effective Time, the Buyer shall
deposit, or cause to be deposited, with a bank or trust company or paying
agent mutually acceptable to the Buyer and the Company (the "Exchange
Agent"), for the benefit of the holders of shares of Company Common Stock,
for payment through the Exchange Agent in accordance with this Section 2.2,
cash in an amount equal to the product of the Merger Consideration and the
number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time (exclusive of any shares to be cancelled
pursuant to Section 2.1(b)) (the "Exchange Fund"). The Exchange Agent shall
invest the Exchange Fund as directed by the Buyer, provided that such
investments shall be in obligations of or guaranteed by the United States
of America, in commercial paper obligations rated A-1 or P-1 or better by
Moody's Investors Service, Inc. or Standard & Poor's Corporation,
respectively, or in certificates of deposit, bank repurchase agreements or
banker's acceptances of commercial banks with capital exceeding $1 billion.
Any interest and other income resulting from such investment shall become a
part of the Exchange Fund, and any amounts in excess of the amounts payable
under Section 2.1(c) shall be promptly returned to Buyer.
(b) Exchange Procedures. Promptly (and in any event within five (5)
Business Days) after the Effective Time, the Buyer shall cause the Exchange
Agent to mail to each holder of record of a certificate which immediately
prior to the Effective Time represented outstanding shares of Company
Common Stock (each, a "Certificate") (i) a letter of transmittal in
customary form and (ii) instructions for effecting the surrender of the
Certificates in exchange for the Merger Consideration payable with respect
thereto. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration that such holder has the right to receive pursuant to
the provisions of this Article II, after giving effect to any required
withholding taxes, and the Certificate so surrendered shall immediately be
cancelled. No interest will be paid or accrued on the cash payable upon the
surrender of such certificate or certificates. In the event of a transfer
of ownership of Company Common Stock which is not registered in the
transfer records of the Company, it will be a condition of payment of the
Merger Consideration that the surrendered Certificate be properly endorsed,
with signatures guaranteed, or otherwise in proper form for transfer and
that the Person requesting such payment will pay any transfer or other
taxes required by reasons of the payment to a Person other than the
registered holder of the surrendered Certificate or such Person will
establish to the satisfaction of the Buyer that such taxes have been paid
or are not applicable. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the Merger
Consideration as contemplated by this Section 2.2. For purposes of this
Agreement, the term "Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(c) No Further Ownership Rights in Company Common Stock. All Merger
Consideration paid upon the surrender for exchange of Certificates
evidencing shares of Company Common Stock in accordance with the terms
hereof shall be deemed to have been paid in satisfaction of all rights
pertaining to such shares of Company Common Stock, and from and after the
Effective Time there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
cancelled and exchanged as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Common Stock one
hundred eighty (180) days after the
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Effective Time shall be delivered to the Buyer, upon demand, and any former
holder of Company Common Stock who has not previously complied with this
Section 2.2 shall be entitled to receive only from the Buyer payment of its
claim for Merger Consideration, without interest.
(e) No Liability. To the extent permitted by applicable law, none of
the Buyer, the Transitory Subsidiary, the Company, the Surviving
Corporation or the Exchange Agent shall be liable to any holder of shares
of Company Common Stock delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) Withholding Rights. Each of the Buyer and the Surviving
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of
Company Common Stock such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code
of 1986, as amended (the "Code"), or any other applicable state, local or
foreign Tax law. To the extent that amounts are so withheld by the
Surviving Corporation or the Buyer, as the case may be, such withheld
amounts (i) shall be remitted by the Buyer or the Surviving Corporation, as
the case may be, to the applicable Governmental Entity, and (ii) shall be
treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or the
Buyer, as the case may be.
(g) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, and, if required
by the Buyer, the posting by such Person of a bond in such reasonable
amount as the Buyer may direct as indemnity against any claim that may be
made against it with respect to such certificate, the Exchange Agent shall
pay, in exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration to be paid in respect of the shares of Company Common Stock
formerly represented thereby pursuant to this Agreement.
2.3 Company Stock Plans and Warrants.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of any holder of outstanding options to purchase Company Common
Stock ("Company Stock Options"), each Company Stock Option, whether vested or
unvested, and all stock option plans or other equity-related plans of the
Company (the "Company Stock Plans") themselves, insofar as they relate to
outstanding Company Stock Options, shall be assumed by the Buyer and shall
become an option to acquire, on the same terms and conditions as were applicable
under the Company Stock Option immediately prior to the Effective Time, the
number of shares of common stock, $0.10 par value per share, of the Buyer
("Buyer Common Stock;" such options, "Buyer Stock Options") determined as
follows: (i) the number of shares of Buyer Common Stock subject to each Company
Stock Option assumed by the Buyer shall be determined by multiplying the number
of shares of Company Common Stock that were subject to such Company Stock Option
immediately prior to the Effective Time by the Conversion Ratio (as defined
below), and rounding the resulting number down to the nearest whole number of
shares of Buyer Common Stock; and (ii) the per share exercise price for the
Buyer Common Stock issuable upon exercise of each Company Stock Option assumed
by the Buyer shall be determined by dividing the per share exercise price of
Company Common Stock subject to such Company Stock Option, as in effect
immediately prior to the Effective Time, by the Conversion Ratio, and rounding
the resulting exercise price up to the nearest whole cent. Any restrictions on
the exercise of any Company Stock Option assumed by the Buyer shall continue in
full force and effect and the term, exercisability, vesting schedule and other
provisions of such Company Stock Option shall otherwise remain unchanged as a
result of the assumption of such Company Stock Option (other than as set forth
in any agreement in effect as of the date of this Agreement and listed in
Section 2.3(a) of the Company Disclosure Schedule). The "Conversion Ratio" shall
be equal to the fraction having a numerator equal to $10.75 and having
denominator equal to the average of the closing sale prices of a share of Buyer
Common Stock as reported on The New York Stock Exchange for each of the five (5)
consecutive trading days immediately preceding the Closing Date; provided,
however, that if, between the date of this Agreement and the Effective Time, the
outstanding shares of Company Common Stock or Buyer Common
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Stock are changed into a different number or class of shares by reason of any
stock split, division or subdivision of shares, stock dividend, reverse stock
split, consolidation of shares, reclassification, recapitalization or other
similar transaction, then the Conversion Ratio shall be adjusted to the extent
appropriate; provided, however, that with respect to any Company Stock Option
which is an "incentive stock option", within the meaning of Section 422 of the
Code, the adjustments provided in this Section shall, if applicable, be modified
in a manner so that the adjustments are consistent with requirements of Section
424(a) of the Code.
(b) Prior to the Effective Time, the Company shall take any actions that
are necessary to accomplish the provisions of Section 2.3(a).
(c) Within five (5) Business Days following the Effective Time, the Buyer
shall deliver to the participants in the Company Stock Plans an appropriate
notice setting forth such participants' rights pursuant to the Company Stock
Options, as provided in this Section 2.3.
(d) The Buyer shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Buyer Common Stock for delivery upon
exercise of the Company Stock Options assumed in accordance with this Section.
Within five (5) Business Days following the Effective Time, the Buyer shall have
filed a registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of Buyer Common Stock subject to
such options and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
(e) At the Effective Time, by virtue of the Merger and without any action
on the part of the holder of the warrants to purchase Company Common Stock
("Warrants") issued pursuant to the Warrant Agreement dated August 2, 1999
between the Company and General Electric Company, the holder of the Warrants
shall have the right, upon exercise of the Warrants and in accordance with
Section 8.2 of such warrant agreement, only to receive in cash the amount of
Merger Consideration receivable at the Effective Time by a holder of the number
of shares of Company Common Stock for which the Warrants may have been exercised
immediately prior to the Effective Time. The Surviving Corporation expressly
assumes the obligation to deliver, upon exercise, such cash.
(f) The Company shall terminate its 2002 Employee Stock Purchase Plan (the
"Company ESPP") in accordance with its terms as of or prior to the Effective
Time.
2.4 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this Agreement,
shares of Company Common Stock held by a holder who has not voted in favor of
the Merger or consented thereto in writing and who has demanded appraisal rights
in respect of such shares of Company Common Stock in accordance with the DGCL
(any such shares being referred to as "Dissenting Shares" until such time as
such holder fails to perfect or otherwise loses such holder's appraisal rights
under the DGCL with respect to such shares) shall not be converted into or
represent the right to receive Merger Consideration in accordance with Section
2.1, but shall be entitled only to such rights as are granted by the DGCL to a
holder of Dissenting Shares.
(b) If any Dissenting Shares shall lose their status as such (through
failure to perfect or otherwise), then, as of the later of the Effective Time or
the date of loss of such status, such shares shall automatically be converted
into and shall represent only the right to receive Merger Consideration in
accordance with Section 2.1, without interest thereon, upon surrender of the
Certificate formerly representing such shares.
(c) The Company shall give the Buyer: (i) prompt notice of any written
demand for appraisal received by the Company prior to the Effective Time
pursuant to the DGCL, any withdrawal of any such demand and any other demand,
notice or instrument delivered to the Company prior to the Effective Time
pursuant to the DGCL that relate to such demand; and (ii) the opportunity to
direct and participate in all
A-11
negotiations and proceedings with respect to any such demand, notice or
instrument. The Company shall not make any payment or settlement offer prior to
the Effective Time with respect to any such demand, notice or instrument, unless
the Buyer shall have given its prior written consent to such payment or
settlement offer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Transitory
Subsidiary that the statements contained in this Article III are true and
correct, except as set forth in the disclosure schedule delivered by the Company
to the Buyer and the Transitory Subsidiary prior to the execution of this
Agreement (the "Company Disclosure Schedule"). The Company Disclosure Schedule
shall be arranged in sections and paragraphs corresponding to the numbered and
lettered sections and paragraphs contained in this Article III, and the
disclosure in any Section or paragraph shall qualify (a) the corresponding
Section or paragraph in this Article III and (b) the other sections and
paragraphs in this Article III to the extent that it is reasonably apparent from
a reading of such disclosure that it also qualifies or applies to such other
sections and paragraphs.
3.1 Organization, Standing and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted and is duly qualified to do business and,
where applicable as a legal concept, is in good standing as a foreign
corporation in each jurisdiction in which the character of the properties it
owns, operates or leases or the nature of its activities makes such
qualification necessary, except for such failures to be so organized, qualified
or in good standing, individually or in the aggregate, that have not had, and
are not reasonably likely to have, a Company Material Adverse Effect. The
Company has made available to the Buyer a complete and correct copy of the
Company's certificate of incorporation and by-laws, each as amended to the date
hereof. The Company's certificates of incorporation and by-laws so delivered are
in full force and effect. The Company has made available to the Buyer correct
and complete copies of the minutes of all meetings of the stockholders, the
Company Board and each committee of the Board of Directors of the Company and
each of its Subsidiaries held between January 1, 2002 and September 30, 2004
(excluding all names and information required to be redacted in compliance with
applicable laws governing the sharing of information and information relating to
the Company's consideration and exploration of strategic alternatives). For
purposes of this Agreement, the term "Company Material Adverse Effect" means any
material adverse change, event, circumstance or development with respect to, or
material adverse effect on, the business, assets, financial condition or results
of operations of the Company and its Subsidiaries, taken as a whole; provided,
however, that none of the following, in and of itself or themselves, shall
constitute a Company Material Adverse Effect:
(a) changes that are the result of general economic or business
conditions in the United States, Europe or Israel or acts of war or
terrorism;
(b) changes that are the result of factors generally affecting the
industries or markets in which the Company operates;
(c) any adverse change, effect or circumstance proximately caused by
the pendency or the announcement of the transactions contemplated by this
Agreement (provided that the exclusion set forth in this clause (c) shall
not apply to the use of the term "Company Material Adverse Effect" in
Section 3.4(b), 3.4(c), 3.11(c) or 3.12 or in Section 7.2(a) in connection
with a breach of any such representations and warranties);
(d) changes in applicable law, rule or regulations or generally
accepted accounting principles or the interpretation thereof after the date
hereof;
A-12
(e) any out of pocket expenses (including filing fees and legal
expenses specifically with respect to any litigation arising from the
transactions contemplated by this Agreement) directly incurred in
connection with the transaction contemplated by this Agreement and in
accordance with its terms;
(f) any failure by the Company to meet any estimates of revenues or
earnings for any period ending on or after the date of this Agreement and
prior to the Closing; provided, that, the exception in this clause shall
not prevent or otherwise affect a determination that any change, effect,
circumstance or development underlying such failure has resulted in, or
contributed to, a Company Material Adverse Effect; and
(g) a decline in the price of the Company Common Stock on The Nasdaq
National Market; provided, that, the exception in this clause shall not
prevent or otherwise affect a determination that any change, effect,
circumstance or development underlying such decline has resulted in, or
contributed to, a Company Material Adverse Effect;
provided, further, that, with respect to clauses (a), (b) and (d), such change,
event, circumstance or development does not (i) primarily relate only to (or
have the effect of primarily relating only to) the Company and its Subsidiaries
or (ii) disproportionately adversely affect the Company and its Subsidiaries
compared to other companies of similar size operating in the industry in which
the Company and its Subsidiaries operate.
3.2 Capitalization.
(a) The authorized capital stock of the Company as of the date of this
Agreement consists of 135,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, $0.01 par value per share ("Company Preferred
Stock"). As of October 1, 2004, (i) 38,473,706 shares of Company Common Stock
were issued and outstanding, and (ii) no shares of Company Preferred Stock were
issued or outstanding and (iii) Company Stock Options to purchase an aggregate
of 6,397,234 shares of Company Common Stock were outstanding. Since October 1,
2004, no shares of Company Common Stock or Company Preferred Stock have been
issued by the Company, except Company Common Stock issued upon exercise of
outstanding Company Stock Options.
(b) Section 3.2(b) of the Company Disclosure Schedule sets forth a complete
and accurate list, as of the date specified therein, of: (i) all Company Stock
Plans, indicating for each Company Stock Plan, as of such date, the number of
shares of Company Common Stock issued under such Plan, the number of shares of
Company Common Stock subject to outstanding options under such Plan and the
number of shares of Company Common Stock reserved for future issuance under such
Plan; and (ii) all outstanding Company Stock Options, indicating with respect to
each such Company Stock Option the name of the holder thereof, the Company Stock
Plan under which it was granted, the number of shares of Company Common Stock
subject to such Company Stock Option, the exercise price, the date of grant, and
the vesting schedule, including whether (and to what extent) the vesting will be
accelerated in any way by the Merger or by termination of employment or change
in position following consummation of the Merger. The Company has made available
to the Buyer complete and accurate copies of all Company Stock Plans and the
forms of all stock option agreements evidencing Company Stock Options.
(c) Except (i) as set forth in this Section 3.2 and (ii) as reserved for
future grants under Company Stock Plans, as of the date of this Agreement, (A)
there are no equity securities of any class of the Company, or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding and (B) there are no options, warrants, equity
securities, calls, rights, commitments or agreements of any character to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound obligating the Company or any of its Subsidiaries
to issue, exchange, transfer, deliver or sell, or cause to be issued, exchanged,
transferred, delivered or sold, additional shares of capital stock or other
equity interests of the Company or any security or rights convertible into or
exchangeable or exercisable for any such shares or other equity interests, or
obligating the Company or any of its Subsidiaries to grant, extend, accelerate
the vesting of, otherwise modify or amend or enter into any such option,
warrant, equity security, call, right, commitment
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or agreement. The Company does not have any outstanding stock appreciation
rights, phantom stock, performance based rights or similar rights or
obligations. Other than the Company Stockholder Agreements, neither the Company
nor any of its Affiliates is a party to or is bound by any agreements or
understandings with respect to the voting (including voting trusts and proxies)
or sale or transfer (including agreements imposing transfer restrictions) of any
shares of capital stock or other equity interests of the Company. For purposes
of this Agreement, the term "Affiliate" when used with respect to any party
shall mean any Person who is an "affiliate" of that party within the meaning of
Rule 405 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). There are no registration rights, and, as of the date of this
Agreement, there is no rights agreement, "poison pill" anti-takeover plan or
other similar plan, device or arrangement to which the Company or any of its
Subsidiaries is a party or by which it or they are bound with respect to any
equity security of any class of the Company.
(d) All outstanding shares of Company Common Stock are, and all shares of
Company Common Stock subject to issuance as specified in Section 3.2(b) above,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any other right of any kind under any provision of the DGCL, the
Company's Certificate of Incorporation or By-laws, any agreement to which the
Company is a party or is otherwise bound or otherwise that obligate the Company
to issue or sell any shares of capital stock or other securities of the Company
or any securities or obligations convertible or exchangeable into or exercisable
for, or giving any Person a right to subscribe for or acquire, any securities of
the Company, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. The Company does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter ("Voting
Debt"). The Company does not own, directly or indirectly, any voting interest in
any Person that requires an additional filing by the Buyer under the HSR Act.
(e) There are no obligations, contingent or otherwise, of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Company Common Stock or the capital stock of the Company or any of its
Subsidiaries.
3.3 Subsidiaries.
(a) Section 3.3 of the Company Disclosure Schedule sets forth, as of the
date of this Agreement, for each Subsidiary of the Company: (i) its name; (ii)
the number and type of outstanding equity securities and a list of the holders
thereof; and (iii) the jurisdiction of organization. For purposes of this
Agreement, the term "Subsidiary" means, with respect to any Person, any other
Person of which at least a majority of the securities or ownership interests
having by their terms voting power to elect a majority of the board of directors
or other persons performing similar functions is directly or indirectly owned or
controlled by such Person or by one or more of its respective Subsidiaries.
(b) Each Subsidiary of the Company is a corporation or other entity duly
organized, validly existing and in good standing (to the extent such concepts
are applicable) under the laws of the jurisdiction of its incorporation or
organization, has all requisite corporate or organization power and authority to
own, lease and operate its properties and assets and to carry on its business as
now being conducted and as proposed to be conducted, and is duly qualified to do
business and is in good standing as a foreign corporation (to the extent such
concepts are applicable) in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failures to be so organized, qualified
or in good standing, individually or in the aggregate, that have not had, and
are not reasonably likely to have, a Company Material Adverse Effect. All of the
outstanding shares of capital stock and other equity securities or interests of
each Subsidiary of the Company are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and all such shares or securities
other than directors' qualifying shares in the case of non-U.S. Subsidiaries,
all of which the Company has the power to cause to be transferred for no or
nominal consideration to the Company or the
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Company's designee are owned, of record and beneficially, by the Company or
another of its Subsidiaries free and clear of all security interests, liens,
claims, pledges, agreements, limitations in the Company's voting rights, charges
or other encumbrances. There are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Company or any of its
Subsidiaries is a party or which are binding on any of them providing for the
issuance, disposition or acquisition of any capital stock of any Subsidiary of
the Company. There are no outstanding stock appreciation, phantom stock or
similar rights with respect to any Subsidiary of the Company. There are no
voting trusts, proxies or other agreements or understandings with respect to the
voting of any capital stock of any Subsidiary of the Company.
(c) The Company has made available to the Buyer complete and accurate
copies of the charter, by-laws or other organizational documents of each
Subsidiary of the Company, and all such documents are in full force and effect.
(d) The Company does not control directly or indirectly or have any direct
or indirect equity participation or similar interest in any corporation,
partnership, limited liability company, joint venture, trust or other business
association or entity which is not a Subsidiary of the Company, other than
securities in a publicly traded company held for investment by the Company or
any of its Subsidiaries and consisting of less than 1% of the outstanding
capital stock of such company. Each such investment is listed on Section 3.3(d)
of the Company Disclosure Schedule.
3.4 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and, subject to the adoption of this Agreement (the "Company
Voting Proposal") by the Company's stockholders under the DGCL (the "Company
Stockholder Approval"), to consummate the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, the Board of
Directors of the Company (the "Company Board"), at a meeting duly called and
held, by the unanimous vote of all directors (i) determined that the Merger is
fair and in the best interests of the Company and its stockholders, (ii)
approved this Agreement and declared its advisability in accordance with the
provisions of the DGCL, (iii) directed that this Agreement be submitted to the
stockholders of the Company for their adoption and resolved to recommend that
the stockholders of the Company vote in favor of the adoption of this Agreement,
and (iv) to the extent necessary, adopted a resolution having the effect of
causing the Company not to be subject to any state takeover law or similar law
that might otherwise apply to the Merger and any other transactions contemplated
by this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement by the Company
have been duly authorized by all necessary corporate action on the part of the
Company, subject only to the required receipt of the Company Stockholder
Approval. This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles (the "Bankruptcy and Equity Exception").
(b) The execution and delivery of this Agreement by the Company do not, and
the consummation by the Company of the transactions contemplated by this
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or By-laws of the Company or
of the charter, by-laws, or other organizational document of any Subsidiary of
the Company, (ii) conflict with, or result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under, require a consent or waiver under,
constitute a change in control under, require the payment of a penalty under or
result in the imposition of any mortgage, security interest, pledge, lien,
charge or encumbrance ("Liens") on the Company's or any of its Subsidiary's
assets under, any of the terms, conditions or provisions of any lease, license,
contract or other agreement, instrument or obligation, written or oral, to which
the Company or any of its Subsidiaries is a party or by which any of them or any
of their properties or assets may be bound (a "Contract"), or (iii) subject to
obtaining the Company Stockholder Approval and compliance with the requirements
specified in clauses (i) through (v) of
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Section 3.4(c), conflict with or violate any permit, concession, franchise,
license, judgment, injunction, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or any of its or
their respective properties or assets, except in the case of clauses (ii) and
(iii) of this Section 3.4(b) for any such conflicts, violations, breaches,
defaults, terminations, cancellations, accelerations, losses, penalties or
Liens, and for any consents or waivers not obtained, that, individually or in
the aggregate, have not had, and are not reasonably likely to have, a Company
Material Adverse Effect or prevent or materially delay consummation of the
Merger. Section 3.4(b)(ii) of the Company Disclosure Schedule sets forth a list
of all consents or waivers required to be obtained under the Company Material
Contracts in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby.
(c) No consent, approval, license, permit, order or authorization of, or
registration, declaration, notice or filing with, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority, agency or instrumentality (a "Governmental Entity"), or
any stock market or stock exchange on which shares of Company Common Stock are
listed for trading is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
by this Agreement, except for (i) the premerger notification requirements under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of the Certificate of Merger with the Delaware Secretary
of State and appropriate corresponding documents with the appropriate
authorities of other U.S. states in which the Company is qualified as a foreign
corporation to transact business, (iii) the filing of the Proxy Statement with
the Securities and Exchange Commission (the "SEC") in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iv) the
filing of such reports, schedules or materials under Section 13 of or Rule
14a-12 under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (v) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable U.S. state securities laws and (vi) such other
consents, approvals, licenses, permits, orders, authorizations, registrations,
declarations, notices and filings as may be required under applicable U.S. state
or local laws which, if not obtained or made, would not be reasonably likely to
have a Company Material Adverse Effect or prevent or materially delay
consummation of the Merger.
(d) The affirmative vote for adoption of the Company Voting Proposal by the
holders of at least a majority of the outstanding shares of Company Common Stock
on the record date for the meeting of the Company's stockholders (the "Company
Meeting") to consider the Company Voting Proposal (the "Required Company
Stockholder Vote") is the only vote of the holders of any class or series of the
Company's capital stock or other securities necessary for the adoption of this
Agreement and for the consummation by the Company of the other transactions
contemplated by this Agreement.
3.5 SEC Filings; Financial Statements; Information Provided.
(a) The Company has filed all registration statements, forms, reports and
other documents required to be filed by the Company with the SEC since January
1, 2002. All such registration statements, forms, reports and other documents
(including those that the Company may file after the date hereof until the
Closing) are referred to herein as the "Company SEC Reports." The Company SEC
Reports (i) were or will be filed on a timely basis, (ii) at the time filed,
complied, or will comply when filed, as to form in all material respects with
the applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Reports, and (iii) did not or will not at the time they were or
are filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Company SEC Reports or necessary in
order to make the statements in such Company SEC Reports, in the light of the
circumstances under which they were made, not misleading. No Subsidiary of the
Company is subject to the reporting requirements of Section 13(a) or Section
15(d) of the Exchange Act. There are no off-balance sheet structures or
transactions with respect to the Company or any of its Subsidiaries that would
be required to be reported or set forth in the Company SEC Reports.
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(b) Each of the consolidated financial statements (including, in each case,
any related notes and schedules) contained or to be contained in or incorporated
by reference in the Company SEC Reports at the time filed (i) complied or will
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto and (ii) were or will be prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited interim financial statements,
as permitted by the SEC on Form 10-Q under the Exchange Act). Each of the
consolidated balance sheets (including, in each case, any related notes and
schedules) contained or to be contained or incorporated by reference in the
Company SEC Reports at the time filed fairly presented or will fairly present in
all material respects the consolidated financial position of the Company and its
Subsidiaries as of the dates indicated and each of the consolidated statements
of income and of changes in financial position contained or to be contained or
incorporated by reference in the Company SEC Reports (including, in each case,
any related notes and schedules) fairly presented or will fairly present in all
material respects the consolidated results of operations, retained earnings and
changes in financial position, as the case may be, of the Company and its
Subsidiaries for the periods set forth therein, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments. The consolidated, unaudited balance sheet of the Company
as of June 30, 2004 is referred to herein as the "Company Balance Sheet."
(c) The information to be supplied by or on behalf of the Company for
inclusion in the proxy statement to be sent to the stockholders of the Company
(the "Proxy Statement") in connection with the Company Meeting shall not, on the
date the Proxy Statement is first mailed to stockholders of the Company or at
the time of the Company Meeting, contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Proxy Statement not false
or misleading in light of the circumstances under which they were or shall be
made; or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of proxies for the
Company Meeting which has become false or misleading. If at any time prior to
the Company Meeting any fact or event relating to the Company or any of its
Affiliates which should be set forth in a supplement to the Proxy Statement
should be discovered by the Company or should occur, the Company shall, promptly
after becoming aware thereof, inform the Buyer of such fact or event.
(d) The Company maintains disclosure controls and procedures required by
Rule 13a-15 or 15d-15 under the Exchange Act. Such disclosure controls and
procedures are effective to ensure that all material information concerning the
Company is made known on a timely basis to the individuals responsible for the
preparation of the Company's filings with the SEC and other public disclosure
documents. The Company has disclosed, based on its most recent evaluation prior
to the date hereof, to the Company's auditors and the audit committee of the
Company Board (A) any significant deficiencies in the design or operation of
internal controls which could adversely affect in any material respect the
Company's ability to record, process, summarize and report financial data and
has identified for the Company's auditors any material weaknesses in internal
controls and (B) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal controls.
The Company has made available to Buyer a summary of any such disclosure made by
management to the Company's auditors and audit committee since January 1, 2003.
Since January 1, 2003, no former or current employee of the Company or any of
its Subsidiaries has alleged to any of the senior officers of the Company that
the Company or any of its Subsidiaries has engaged in questionable accounting or
auditing practices. No attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of its Subsidiaries,
has reported evidence of a violation of securities laws, breach of fiduciary
duty or similar violation by the Company or any of its officers, directors,
employees or agents to the Company Board or any committee thereof or to any
director or officer of the Company.
(e) The Company is in compliance with the applicable listing and other
rules and regulations of The Nasdaq National Market and has not since January 1,
2002 received any notice from The Nasdaq National Market asserting any
non-compliance with such rules and regulations.
A-17
(f) The Company is in compliance in all material respects with the
applicable provisions of the Sarbanes-Oxley Act of 2002.
3.6 No Undisclosed Liabilities. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement and except for obligations or
liabilities incurred in the ordinary course of business after the date of the
Company Balance Sheet, the Company and its Subsidiaries do not have any
obligations or liabilities of any nature, whether or not accrued, contingent or
otherwise and whether or not required to be disclosed in the Company SEC
Reports, including those relating to matters involving any Environmental Law
(any such obligations or liabilities, "Company Obligations"), that are material,
individually or in the aggregate, and that are required by GAAP to be shown as a
liability on a consolidated balance sheet of the Company. To the knowledge of
the Company, the Company and its Subsidiaries do not have any other Company
Obligations, except (a) as disclosed in the Company SEC Reports filed prior to
the date of this Agreement and (b) for such Company Obligations that,
individually or in the aggregate, have not had, and are not reasonably likely to
have, a Company Material Adverse Effect.
3.7 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, since the date of
the Company Balance Sheet, each of the Company and its Subsidiaries has
conducted their respective businesses only in the ordinary course of business
and, since such date, there has not been (i) any change, event, circumstance or
development that, individually or in the aggregate, has had, or is reasonably
likely to have, a Company Material Adverse Effect, or (ii) any other action or
event that would have required the consent of the Buyer under Section 5.1 of
this Agreement had such action or event occurred after the date of this
Agreement.
3.8 Taxes.
(a) The Company and each of its Subsidiaries has filed all Tax Returns that
it was required to file, and all such Tax Returns were correct and complete,
except for any failure to file or errors or omissions that, individually or in
the aggregate, has not had, and is not reasonably likely to have, a Company
Material Adverse Effect. The Company and each of its Subsidiaries has paid on a
timely basis all Taxes that are shown to be due on any such Tax Returns. The
unpaid Taxes of the Company and its Subsidiaries for Tax periods through the
date of the Company Balance Sheet do not exceed the accruals and reserves for
Taxes set forth on the Company Balance Sheet exclusive of any accruals and
reserves for "deferred taxes" or similar items that reflect timing differences
between Tax and financial accounting principles. All liabilities for Taxes that
arose since the date of the Company Balance Sheet arose in the ordinary course
of business. All Taxes that the Company or any of its Subsidiaries is or was
required by law to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the proper Governmental Entity. For
purposes of this Agreement, (i) "Taxes" means all taxes, charges, fees, levies
or other similar assessments or liabilities, including income, gross receipts,
ad valorem, windfall profits, premium, value-added, excise, real property,
personal property, sales, use, services, transfer, withholding, employment,
severance, payroll and franchise taxes imposed by the United States of America
or any state, local or foreign government, or any agency thereof, or other
political subdivision of the United States or any such government, and any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or dispute
thereof and (ii) "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied to a taxing authority in
connection with Taxes.
(b) The Company has made available to the Buyer correct and complete copies
of (i) all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since January 1, 2002
and (ii) any "closing agreement" as described in Section 7121 of the Code (or
any similar provision of state, local or foreign Tax law) applicable to the
Company or any of its Subsidiaries. The federal income Tax Returns of the
Company and each of its Subsidiaries have been audited by the Internal Revenue
Service or are closed by the applicable statute of limitations for all taxable
years through the taxable year specified in Section 3.8(b) of the Company
Disclosure Schedule. The Company has made available to the Buyer correct and
complete copies of all other Tax Returns of
A-18
the Company and its Subsidiaries together with all related examination reports
and statements of deficiency for all periods from and after January 1, 2002. No
examination or audit of any Tax Return of the Company or any of its Subsidiaries
by any Governmental Entity is currently in progress or, to the knowledge of the
Company, threatened or contemplated. Neither the Company nor any of its
Subsidiaries has been informed by any Governmental Entity that the Governmental
Entity believes that the Company or any of its Subsidiaries was required to file
any Tax Return that was not filed. Neither the Company nor any of its
Subsidiaries has waived any statute of limitations with respect to Taxes or
agreed to an extension of time with respect to a Tax assessment or deficiency.
Neither the Company nor any of its Subsidiaries has undergone, nor will the
Company or any of its Subsidiaries undergo as a result of the transactions
contemplated by this Agreement, a change in its method of accounting resulting
in an adjustment to its taxable income pursuant to Section 481 of the Code.
(c) Neither the Company nor any of its Subsidiaries: (i) has made any
payments, is obligated to make any payments, or is a party to any agreement that
could obligate it to make any payments that will be treated as an "excess
parachute payment" under Section 280G of the Code; or (ii) has any actual or
potential liability for any Taxes of any Person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of law in any jurisdiction), or as a transferee or successor, by
contract or otherwise.
(d) Neither the Company nor any of its Subsidiaries (i) is or has ever been
a member of a group of corporations with which it has filed (or been required to
file) consolidated, combined or unitary Tax Returns, other than a group of which
only the Company and its Subsidiaries are or were members or (ii) is a party to
or bound by any Tax indemnity, Tax sharing or Tax allocation agreement.
3.9 Owned and Leased Properties.
(a) The Company owns no real property.
(b) Section 3.9(b) of the Company Disclosure Schedule sets forth a complete
and accurate list as of the date of this Agreement of all real property leased,
subleased or licensed by the Company or any of its Subsidiaries as lessor,
lessee, sublessor, sublessee, licensor or licensee (collectively "Company
Leases") and the location of the premises. Each of the Company Leases is in full
force and effect. Neither the Company nor any of its Subsidiaries nor, to the
Company's knowledge, any other party to any Company Lease is in default under
any of the Company Leases, except where the existence of such defaults,
individually or in the aggregate, has not had, and is not reasonably likely to
have, a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries leases, subleases or licenses any real property to any Person other
than the Company and its Subsidiaries. The Company has made available to the
Buyer complete and accurate copies of all Company Leases.
(c) The Company and each of its Subsidiaries has good and marketable title
to, or valid leasehold interests in, all of its material tangible assets and
properties, except for such tangible assets and properties as are disposed in
the ordinary course of business and except for defects in title, easements,
restrictive covenants, Taxes that are not yet delinquent and similar
encumbrances that, individually or in the aggregate, are not reasonably likely
to have a Company Material Adverse Effect. All such material tangible assets and
properties, other than assets and properties in which the Company or any of its
Subsidiaries has a leasehold interest, are free and clear of all Liens, except
for (i) Liens for Taxes not yet due and payable, that are payable without
penalty or that are being contested in good faith and for which adequate
reserves have been recorded, (ii) Liens for assessments and other governmental
charges or liens of landlords, carriers, warehousemen, mechanics and repairmen
incurred in the ordinary course of business, in each case for sums not yet due
and payable or due but not delinquent or being contested in good faith by
appropriate proceedings, (iii) Liens incurred in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security 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, and (iv) Liens
that do not materially interfere with the conduct of the Company's business and
do not materially affect the use or value of the Company's assets.
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3.10 Intellectual Property.
(a) The Company and its Subsidiaries own, license, sublicense or otherwise
possess legally enforceable rights to use all Intellectual Property used in or
necessary to conduct the business of the Company and its Subsidiaries as
currently conducted, other than those rights the absence of which, individually
or in the aggregate, has not had, and is reasonably likely not to have, a
Company Material Adverse Effect. For purposes of this Agreement, the term
"Intellectual Property" means (i) patents, trademarks, service marks, trade
names, domain names, copyrights, designs and trade secrets, (ii) inventions,
discoveries, ideas, processes, formulae, methods, schematics, technology,
know-how, computer software programs (including, without limitation, source
code, operating systems, applications, documentation, specifications, files, and
other materials related thereto), published and unpublished works of authorship,
data and databases, (iii) other tangible or intangible proprietary or
confidential information and materials, and (iv) all applications for or
registrations of any of the foregoing and all rights in or to any of the
foregoing.
(b) The execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations under this Agreement, and the
consummation by the Company of the Merger will not result in the breach,
termination or modification of the terms of, or create on behalf of any third
party the right to terminate or modify, (i) any license, sublicense or other
agreement relating to any Company Intellectual Property ("Company Intellectual
Property" means any Intellectual Property that is owned or purported to be owned
by the Company or any of its Subsidiaries) that is material to the business of
the Company and its Subsidiaries, taken as a whole, or that is material to any
Company Product (as defined below) or (ii) any license, sublicense and other
agreement as to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is authorized to use
any third party Intellectual Property ("Third Party Intellectual Property") that
is material to the business of the Company and its Subsidiaries, taken as a
whole, or that is material to any Company Product. Section 3.10(b)(i) of the
Company Disclosure Schedule sets forth a complete and accurate list of all
products of the Company or any of its Subsidiaries currently distributed or
supported (the "Company Products"). To the knowledge of the Company, except as
set forth in Section 3.10(b)(ii) of the Company Disclosure Schedule, there are
no royalties, honoraria, fees or other payments payable by Company or any of its
Subsidiaries to any third party after the Closing (other than salaries payable
to employees, consultants and independent contractors not contingent on or
related to use of their work product) as a result of the ownership, use,
possession, license, sale, marketing, advertising or disposition of any item of
Company Intellectual Property or Third Party Intellectual Property (other than
generally commercially available, off-the-shelf software programs with a
purchase price of less than $10,000 and that are not embedded in a Company
Product) or any Company Product other than payments made to third parties in
connection with the distribution, reselling or licensing of products of such
third party on a standalone or bundled basis (but not as incorporated in Company
Products). Section 3.10(b)(iii) of the Company Disclosure Schedule sets forth a
complete and accurate list of all distribution, reseller and licensing
agreements or other arrangements pursuant to which the Company distributes,
resells or licenses any products of any third party on a standalone or bundled
basis. Section 3.10(b)(iv) of the Company Disclosure Schedule sets forth a
complete and accurate list of: (i) all patents and patent applications
(including provisional applications) that are Company Intellectual Property;
(ii) registered trademarks and applications to register trademarks that are
Company Intellectual Property; (iii) registered copyrights and applications for
copyright registration that are Company Intellectual Property; (iv) registered
Internet domain names that are Company Intellectual Property that are used or
intended to be used in the business of the Company or any of its Subsidiaries;
and (v) any other Intellectual Property that is the subject of an application,
certificate, filing, registration or other document issued, filed with, or
recorded by any governmental authority that is Company Intellectual Property
((i) through (iv) collectively, "Company Registered Intellectual Property"),
including the jurisdictions in which each such item has been issued or
registered or in which any application for such issuance and registration has
been filed, or in which any other filing or recordation has been made. Section
3.10(b)(v) of the Company Disclosure Schedule sets forth a complete and accurate
list of all Third Party Intellectual Property.
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(c) Each item of Company Registered Intellectual Property is subsisting
and, to the Company's knowledge, valid and enforceable, and has not expired or
been cancelled or abandoned, and all necessary registration, maintenance and
renewal fees due on or before the Closing in connection with such Company
Registered Intellectual Property have been paid and all documents, recordations
and certificates in connection with such Company Registered Intellectual
Property required to be filed on or before the Closing 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 prosecuting,
maintaining and perfecting such Company Registered Intellectual Property and
recording the Company's and its Subsidiaries' ownership interests therein. To
the knowledge of the Company, no third party is infringing, violating or
misappropriating any of the Company Intellectual Property rights of the Company
or any of its Subsidiaries. Except as set forth on Section 3.10(c) of the
Company Disclosure Schedule, no claim has been asserted or threatened, or has
been or is planned to be asserted, by the Company or any of its Subsidiaries
that (A) any third party has infringed, misappropriated or otherwise violated
any Intellectual Property rights of the Company or its Subsidiaries; or (B) a
third party's owned or claimed Intellectual Property interferes with, infringes,
dilutes or otherwise harms any Intellectual Property rights of the Company or
any of its Subsidiaries.
(d) The Company and its Subsidiaries have taken reasonable measures to
protect the proprietary nature of the Company Intellectual Property. Without
limiting the generality of the foregoing, except as set forth in Section 3.10(d)
of the Company Disclosure Schedule, each employee, consultant and contractor of
the Company or any of its Subsidiaries has executed proprietary information,
confidentiality and assignment agreements substantially similar to the form of
the Company's standard forms, as provided to Buyer, pursuant to which such
employee, consultant or contractor has assigned and agreed to assign to the
Company or the relevant Subsidiary, as applicable, all rights to any
Intellectual Property relating to the Company's or its Subsidiary's business
that is developed by such employee, consultant or contractor during the
employment of such employee with the Company or the relevant Subsidiary, as
applicable, or in the course of engagement of such consultant or contractor with
the Company or the relevant Subsidiary, as applicable, and, except under
nondisclosure or confidentiality agreements, or as necessary for the release or
distribution of products, to the knowledge of the Company there has been no
disclosure by the Company or any of its Subsidiaries of any of their material
confidential information or trade secrets at such time as the Company and its
Subsidiaries generally treated such information as confidential or proprietary.
(e) To the knowledge of the Company, the conduct of the business of the
Company and its Subsidiaries as currently conducted does not infringe, violate
or constitute a misappropriation of any Intellectual Property of any third
party. Neither the Company nor any of its Subsidiaries, nor, to the knowledge of
the Company, any of their respective Indemnitees, has received any written claim
or notice alleging any such infringement, violation or misappropriation or
offering to license or grant any other rights or immunities under any
Intellectual Property of any third party, or otherwise concerning the ownership,
validity, registerability, enforceability, infringement, use or licensed right
to use any Intellectual Property.
(f) Except as set forth on Section 3.10(f) of the Company Disclosure
Schedule, none of the Company Products are, in whole or in part, subject to the
provision of any open source or other license agreement that: (i) requires the
distribution or making available of the source code for the Company Product in
connection with the distribution of any Company Product; (ii) prohibits or
limits the Company or its Subsidiaries from charging a fee or receiving
consideration in connection with sublicensing or distributing any Company
Product (whether in source or object code form), or (iii) allows a customer,
other than as permitted by law, or requires that a customer have the right to,
decompile, disassemble or otherwise reverse-engineer any Company Product by its
terms and not by operation of law (any such open source or other license
agreement described in clause (i), (ii) or (iii) above, a "Limited License").
The proprietary source code of the Company or any of its Subsidiaries does not
incorporate, constitute a derivative work of, dynamically link with or otherwise
interact with and is not distributed with any software that is subject to a
Limited License.
(g) Except as set forth in Section 3.10(g) of the Company Disclosure
Schedule, all Company Intellectual Property and all Company Products were, in
their entirety: (i) developed by employees of the
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Company or its Subsidiaries within the scope of their employment; or (ii)
developed by independent contractors or other third parties who have assigned
their Intellectual Property rights to the Company or a Subsidiary of the Company
pursuant to written agreements.
(h) Neither the Company nor any of its Subsidiaries has received, since
January 1, 2002, any written demand for the release of any proprietary source
code of the Company or any of its Subsidiaries nor, to the knowledge of the
Company, has any event occurred or does any circumstance or condition exist that
(with or without notice or lapse of time, or both) will, or would reasonably be
expected to, result in the occurrence of any release conditions in a source code
escrow agreement that would result in such release.
(i) Section 3.10(i) of the Company Disclosure Schedule contains a list of
all industry standards bodies or similar organizations that the Company or any
of its Subsidiaries is now or ever was a member or promoter of, or a contributor
to, or otherwise participated in, provided that the mere act of implementing a
standard shall not be deemed to cause Company to be considered a member,
promoter, contributor or participant in a standards body or similar
organization. The Company has provided to the Buyer complete and accurate copies
of all Contracts, policies and rules to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound relating to Intellectual Property of each standards body or similar
organization identified in the Company Disclosure Schedule.
3.11 Contracts.
(a) For purposes of this Agreement, "Company Material Contract" shall mean:
(i) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) with respect to the Company and
its Subsidiaries;
(ii) any employment, service or consulting Contract or arrangement
with any current or former executive officer or other employee of the
Company or member of the Company's Board of Directors contemplating payment
in excess of $75,000 in any year, other than those that are terminable by
the Company or any of its Subsidiaries on no more than thirty (30) days'
notice without liability or financial obligation to the Company or any of
its Subsidiaries;
(iii) any Contract containing any covenant (A) limiting in any respect
the right of the Company or any of its Affiliates to engage in any line of
business or compete with any Person in any line of business or to compete
with any party or the manner or locations in which any of them engage, (B)
granting any exclusivity rights or "most favored nation" status that,
following the Merger, would in any way apply to the Buyer or any of its
Subsidiaries, including the Company and its Subsidiaries, or (C) otherwise
prohibiting or limiting the right of the Company or any of its Affiliates
to make, sell or distribute any products or services or use, transfer,
license, distribute or enforce any Intellectual Property rights of the
Company or any of its Subsidiaries;
(iv) any Contract relating to the disposition or acquisition by the
Company or any of its Subsidiaries after the date of this Agreement of a
material amount of assets not in the ordinary course of business or
pursuant to which the Company or any of its Subsidiaries has any material
ownership interest in any other Person or other business enterprise other
than the Company's Subsidiaries (including, without limitation, joint
venture, partnership or other similar agreements);
(v) any Contract to provide source code to any third party for all or
any portion of any Company Product or Company Intellectual Property;
(vi) any Contract to license any third party to manufacture,
reproduce, develop or modify any portion of the Company's products,
services or technology or any Contract to sell or distribute any of the
Company's products, services or technology, except (A) agreements with
distributors, sales representatives or other resellers in the ordinary
course of business, or (B) agreements allowing internal backup copies to be
made by end-user customers in the ordinary course of business;
A-22
(vii) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other contracts relating to the
borrowing of money or extension of credit, other than accounts receivables
and payables in the ordinary course of business;
(viii) any settlement agreement entered into within three (3) years
prior to the date of this Agreement, other than (A) releases immaterial in
nature or amount entered into with former employees or independent
contractors of the Company in the ordinary course of business in connection
with the routine cessation of such employee's or independent contractor's
employment with the Company, or (B) settlement agreements for cash only
(which has been paid) and does not exceed $125,000 as to such settlement;
(ix) any Contract not described in clause (iii) above under which the
Company or any Subsidiaries has licensed or otherwise made available any
Company Intellectual Property or Third Party Intellectual Property to a
third party, other than to customers, distributors and other resellers in
the ordinary course of business;
(x) any Contract under which the Company or any Subsidiaries has
received a license to any Third Party Intellectual Property that is
material to the business of the Company and its Subsidiaries, taken as a
whole, but excluding generally commercially available, off-the-shelf
software programs with a purchase price of less than $10,000;
(xi) any Contract between the Company or any of its Subsidiaries and
any of the top 50 current customers of the Company and its Subsidiaries
(determined on the basis of cumulative license revenues received by the
Company and its Subsidiaries during the twelve-month period ended September
30, 2004) (the "Major Customers," and each such Contract, a "Major Customer
Contract");
(xii) any Contract which has aggregate future sums due from the
Company or any of its Subsidiaries in excess of $250,000 and is not
terminable by the Company or any such Subsidiary (without penalty or
payment) on ninety (90) (or fewer) days' notice; or
(xiii) any other Contract (A) with any Affiliate of the Company (other
than its Subsidiaries), (B) with a Governmental Authority (other than
ordinary course Contracts with Governmental Authorities as a customer)
which imposes any material obligation or restriction on the Company or any
of its Affiliates, (C) with investment bankers, financial advisors,
attorneys, accountants or other advisors retained by the Company or any of
its Subsidiaries involving payments by or to the Company or any of its
Subsidiaries of more than $250,000 on an annual basis, (D) providing for
indemnification by the Company or any of its Subsidiaries of any Person,
except for any such Contract that is (x) not material to the Company or any
of its Subsidiaries and (y) entered into in the ordinary course of
business, (E) containing a standstill or similar agreement pursuant to
which the Company or any of its Subsidiaries have agreed not to acquire
assets or securities of another Person, or (F) relating to currency hedging
or similar transactions.
(b) Section 3.11(b) of the Company Disclosure Schedule sets forth a list
(arranged in clauses corresponding to clauses set forth in Section 3.11(a)) of
all Company Material Contracts to which the Company or any of its Subsidiaries
is a party or bound by as of the date hereof. A correct and complete copy of
each Company Material Contract has been made available to Buyer (including all
amendments, modifications, extensions, renewals, guarantees or other Contracts
with respect thereto, but excluding all names, terms and conditions that have
been redacted in compliance with applicable laws governing the sharing of
information).
(c) All Company Material Contracts are valid and binding and in full force
and effect, except to the extent they have previously expired in accordance with
their terms or for such failures to be valid and binding or in full force and
effect that, individually or in the aggregate, are not reasonably likely to have
a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has violated, and, to the knowledge of the Company, no other party
to any of the Company Material Contracts has violated, any provision of, or
committed or failed to perform any act which, with or without notice, lapse of
time or
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both, would constitute a default under the provisions of any Company Material
Contract, except in each case for those violations and defaults which,
individually or in the aggregate, are not reasonably likely to have a Company
Material Adverse Effect.
(d) During the last twelve (12) months, to the knowledge of the senior
officers of the Company, none of the Major Customers has terminated or failed to
renew any of its Major Customer Contracts and neither the Company nor any of its
Subsidiaries has received any written notice of termination from any of the
Major Customers.
(e) The Company has made available to Buyer a copy of each of its standard
form Contracts currently in use by the Company or any of its Subsidiaries in
connection with their respective businesses (each, a "Company Standard Form
Contract").
(f) Section 3.11(f) of the Company Disclosure Schedule sets forth a list of
all active vendors, resellers and distributors or similar Persons through which
the products of the Company and its Subsidiaries are marketed, sold or otherwise
distributed (determined on the basis of product revenues received by the Company
and its Subsidiaries during the twelve months preceding the date of this
Agreement).
3.12 Litigation. Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement, there is no civil, criminal or
administrative action, suit, proceeding, claim, arbitration, hearing or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries that, individually or in the aggregate,
has had since June 30, 2004, or is reasonably likely to have, a Company Material
Adverse Effect or prevent or materially delay the consummation of the Merger.
There are no material judgments, orders or decrees outstanding against the
Company or any of its Subsidiaries.
3.13 Environmental Matters.
(a) Except as disclosed in the Company SEC Reports filed prior to the date
of this Agreement and except for matters that, individually or in the aggregate,
are not reasonably likely to have a Company Material Adverse Effect:
(i) the Company and its Subsidiaries have complied with applicable
Environmental Laws, and, to the knowledge of the Company, there are no
facts existing which would give rise to such non-compliance;
(ii) neither the Company nor any of its Subsidiaries has received a
written notice that it is subject to liability for any Hazardous Substance
disposal or contamination pursuant to any Environmental Law on the property
of any third party;
(iii) neither the Company nor any of its Subsidiaries has received any
written notice, demand, claim or request for information alleging that the
Company or any of its Subsidiaries may be in violation of, liable under or
have obligations under any Environmental Law;
(iv) to the knowledge of the Company, there is no contamination by
Hazardous Substances at, under or in the vicinity of any site of which the
Company, any of its Subsidiaries or any predecessor of either is or was
owner or operator, as such terms are used in Environmental Laws; and
(v) neither the Company nor any of its Subsidiaries is subject to any
orders, decrees or injunctions by any Governmental Entity or is subject to
any indemnity agreement with any third party addressing liability under any
Environmental Law.
(b) For purposes of this Agreement, the term "Environmental Law" means any
law (including common law), regulation, order, decree or permit requirement of
any governmental jurisdiction relating to: (i) the protection, investigation or
restoration of the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), human health and safety, or natural
resources, (ii) the handling, use, storage, treatment, transport, disposal,
release or threatened release of any Hazardous Substance, or (iii) noise, odor
or wetlands protection.
A-24
(c) For purposes of this Agreement, the term "Hazardous Substance" means:
(i) any substance that is regulated or which falls within the definition of a
"hazardous substance," "hazardous waste" or "hazardous material" pursuant to any
Environmental Law; or (ii) any petroleum product or by-product,
asbestos-containing material, polychlorinated biphenyls, radioactive materials
or radon.
3.14 Employee Benefit Plans.
(a) Section 3.14(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all Employee Benefit Plans maintained, or
contributed to or with respect to which there is any liability, by the Company,
any of the Company's Subsidiaries or any of their ERISA Affiliates (together,
the "Company Employee Plans"). For purposes of this Agreement, the following
terms shall have the following meanings: (i) "Employee Benefit Plan" means any
"employee pension benefit plan" (as defined in Section 3(2) of ERISA), any
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA), and any
other written or oral plan, agreement or arrangement (whether or not subject to
ERISA) involving direct or indirect compensation to more than one person or
monetary benefits in excess of $75,000, including insurance coverage, vacation,
loans, fringe benefits, severance benefits, disability benefits, retention or
change in control benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation or benefits and all unexpired
severance agreements, for the benefit of, or relating to, any current or former
employee, consultant or director of the Company or any of its Subsidiaries or an
ERISA Affiliate; (ii) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended; and (iii) "ERISA Affiliate" means any entity which is a
member of (A) a controlled group of corporations (as defined in Section 414(b)
of the Code), (B) a group of trades or businesses under common control (as
defined in Section 414(c) of the Code), or (C) an affiliated service group (as
defined under Section 414(m) of the Code or the regulations under Section 414(o)
of the Code), any of which includes or included the Company or a Subsidiary of
the Buyer.
(b) With respect to each Company Employee Plan, the Company has made
available to the Buyer a complete and accurate copy of (i) such Company Employee
Plan, (ii) the most recent annual report (Form 5500) filed with the Internal
Revenue Service (the "IRS"), and (iii) each trust agreement, group annuity
contract and summary plan description, if any, relating to such Company Employee
Plan.
(c) Each Company Employee Plan is in compliance in all material respects
with ERISA, the Code and all other applicable laws and the regulations
thereunder and is being administered in all material respects in accordance with
its terms.
(d) With respect to the Company Employee Plans, there are no benefit
obligations for which any required contributions, premiums or expenses have not
been timely made and all obligations have been properly accrued to the extent
required by GAAP. The assets of each Company Employee Plan which is funded are
reported at their fair market value on the books and records of such Company
Employee Plan.
(e) All the Company Employee Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the Internal
Revenue Service to the effect that such Company Employee Plans are qualified and
the plans and trusts related thereto are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, no such determination
letter has been revoked and revocation has not been threatened, and no such
Company Employee Plan has been amended or operated since the date of its most
recent determination letter or application therefor in any respect, and no act
or omission has occurred, that would adversely affect its qualification or
materially increase its cost. Neither the Company nor any of its Subsidiaries
has engaged in a transaction with respect to any Company Employee Plan that
could subject the Company or any Subsidiary to material liability under Title I
of ERISA or the penalty, excise tax or joint and several liability provisions of
the Code or applicable law.
(f) Neither the Company, any of the Company's Subsidiaries nor any of their
ERISA Affiliates has (i) ever maintained a Company Employee Plan which was ever
subject to Section 412 of the Code or
A-25
Title IV of ERISA or (ii) ever been obligated to contribute to a "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA).
(g) As of the date hereof, there is no material pending or, to the
knowledge of the Company, threatened claim (other than routine claims for
benefits), litigation, audit or investigation by any federal or state or foreign
agency relating to the Company Employee Plans. Neither the Company nor any of
its Subsidiaries has any obligations for retiree health and life benefits under
any Company Employee Plan or collective bargaining agreement, except for
continuation of medical benefits to the extent required by applicable law. The
Company or its Subsidiaries may amend or terminate any such retiree health or
life benefit plan at any time without incurring any liability thereunder other
than in respect of claims incurred prior to such amendment or termination,
subject only to such constraints as may be imposed by applicable law.
(h) There has been no amendment to, announcement by the Company or any of
its Subsidiaries relating to, or change in employee participation or coverage
under, any Company Employee Plan which would increase materially the expense of
maintaining such plan above the level of the expense incurred therefor for the
most recent fiscal year. Neither the Company nor any of its Subsidiaries is a
party to any oral or written (i) agreement with any stockholders, director,
executive officer or other key employee of the Company or any of its
Subsidiaries (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
or any of its Subsidiaries of the nature of any of the transactions contemplated
by this Agreement (either alone or in combination with another event), (B)
providing any term of employment or compensation guarantee, or (C) providing
severance benefits or other benefits after the termination of employment of such
director, executive officer or key employee; or (ii) agreement or plan binding
the Company or any of its Subsidiaries, including any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan,
compensation, bonus or severance benefit plan, (x) any of the benefits of which
(including any amount of compensation) shall be increased, or the vesting or
funding of the benefits of which shall be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which shall be calculated on the basis of any of the transactions
contemplated by this Agreement, (y) which limits or restricts the right of Buyer
to merge, amend or terminate any such agreement or plan or (z) which would
result in any payments under any Company Employee Plan which would not be
deductible under Section 162(m) of the Code.
(i) Set forth on Section 3.14(i) of the Company Disclosure Schedule is a
list of all loans by the Company or any of its Subsidiaries to any of their
employees, officers or directors outstanding as of the date hereof, together
with the name of each borrower and the aggregate principal amount of
indebtedness owed by each borrower to the Company and its Subsidiaries as of
September 30, 2004.
(j) Each current U.S. employee of the Company has executed a
confidentiality agreement, substantially similar to the form of one of the
Company's standard forms, as provided to Buyer, which include a noncompetition
provision.
3.15 Compliance With Laws. The Company and each of its Subsidiaries is in
compliance with, is not in violation of, and, since January 1, 2002, has not
received any written notice alleging any violation with respect to, any
applicable federal, state, local or foreign statute, law ordinance, rule,
regulation, judgment, order, injunction, decree, arbitration award, agency
requirement, license or permit of any Governmental Entity, except such events of
non-compliance or notices that, individually or in the aggregate, (i) have not
had, and are not reasonably likely to have, a Company Material Adverse Effect,
or (ii) have not resulted, and are not reasonably likely to result, in the
imposition of a criminal fine, penalty or sanction against the Company, any of
its Subsidiaries or any of their respective officers of directors. To the
knowledge of the Company, (x) no investigation or review by any Governmental
Entity with respect to the Company or any of its Subsidiaries is pending or
threatened, and (y) no Governmental Entity has indicated an intention to conduct
the same.
3.16 Permits. The Company and each of its Subsidiaries have all permits,
licenses, franchises and other authorizations from Governmental Entities
required to conduct their businesses as now being
A-26
conducted, except for such permits, licenses and franchises the absence of
which, individually or in the aggregate, have not had, and is not reasonably
likely to have, a Company Material Adverse Effect (the "Company Permits"). The
Company and each of its Subsidiaries are in compliance with the terms of the
Company Permits, except for such failures to comply that, individually or in the
aggregate, have not had, and are not reasonably likely to have, a Company
Material Adverse Effect. No Company Permit shall cease to be effective as a
result of the consummation of the transactions contemplated by this Agreement.
3.17 Labor Matters. Section 3.17 of the Company Disclosure Schedule
contains a list as of the date of this Agreement of all employees of the Company
and each of its Subsidiaries, along with the position and the annual rate of
base compensation of each such person. Neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is the subject of any proceeding asserting that the
Company or any of its Subsidiaries has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization, and
there is not pending or, to the knowledge of the Company, threatened, nor has
there been during the past five (5) years any labor strike, dispute, walkout,
work stoppage, slow-down or lockout involving the Company or any of its
Subsidiaries. There are no complaints, charges or claims against the Company or
any of its Subsidiaries or, to the knowledge of the Company, threatened to be
brought or filed with any Governmental Entity in connection with the employment
by the Company or any of its Subsidiaries of any individual, including any claim
relating to employment discrimination, equal pay, sexual harassment, employee
safety, and health, wages and hours or workers' compensation.
3.18 Insurance. Each of the Company and its Subsidiaries maintains
insurance policies, including without limitation fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies (the "Insurance Policies"), with reputable insurance
carriers against all risks of a character and in such amounts as are usually
insured against by similarly situated companies in the same or similar
businesses. Since January 1, 2002, no insurer of the Company or any if its
Subsidiaries has (a) cancelled or invalidated any Insurance Policy or (b)
refused any coverage or rejected any material claim under any Insurance Policy.
Each Insurance Policy is in full force and effect and all premiums due with
respect to all Insurance Policies have been paid.
3.19 Opinion of Financial Advisor. The financial advisor of the Company,
Broadview International, a division of Jefferies & Company, has delivered to the
Company an opinion dated the date of this Agreement to the effect, as of such
date, that the Merger Consideration is fair to the holders of Company Common
Stock from a financial point of view, a copy of which opinion has been made
available to the Buyer (it being understood that the Buyer will not be a third
party beneficiary of such opinion).
3.20 Takeover Statutes. The Company Board has taken all actions necessary
so that the restrictions contained in Section 203 of the DGCL applicable to a
"business combination" (as defined in Section 203) shall not apply to the
execution, delivery or performance of this Agreement, the Company Stockholder
Agreements or the consummation of the Merger or the other transactions
contemplated by this Agreement or the Company Stockholder Agreements. No other
"fair price," "moratorium," "control share acquisition" or similar anti-takeover
statute or regulation or any anti-takeover provision in the Company's
certificate of incorporation and by-laws is, or at the Effective Time will be,
applicable to the Merger, the Company Stockholder Agreements or the other
transactions contemplated hereby or thereby.
3.21 Brokers. No agent, broker, investment banker, financial advisor or
other firm or Person is or shall be entitled, as a result of any action,
agreement or commitment of the Company or any of its Affiliates, to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with any of the transactions contemplated by this Agreement, except
Broadview International, whose fees and expenses shall be paid by the Company.
The Company has made available to the Buyer a complete and accurate copy of all
agreements pursuant to which Broadview International is entitled to any fees and
expenses in connection with any of the transactions contemplated by this
Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary represent and warrant to the
Company that the statements contained in this Article IV are true and correct,
except as set forth in the disclosure schedule delivered by the Buyer and the
Transitory Subsidiary to the Company prior to the execution of this Agreement
(the "Buyer Disclosure Schedule"). The Buyer Disclosure Schedule shall be
arranged in sections and paragraphs corresponding to the numbered and lettered
sections and paragraphs contained in this Article IV and the disclosure in any
Section or paragraph shall qualify (a) the corresponding Section or paragraph in
this Article IV and (b) the other sections and paragraphs in this Article IV to
the extent that it is reasonably apparent from a reading of such disclosure that
it also qualifies or applies to such other sections and paragraphs.
4.1 Organization, Standing and Power. Each of the Buyer and the Transitory
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted, and is duly
qualified to do business and, where applicable as a legal concept, is in good
standing as a foreign corporation in each jurisdiction in which the character of
the properties it owns, operates or leases or the nature of its activities makes
such qualification necessary, except for such failures to be so organized,
qualified or in good standing, individually or in the aggregate, that are not
reasonably likely to have a Buyer Material Adverse Effect. For purposes of this
Agreement, the term "Buyer Material Adverse Effect" means any material adverse
change, event, circumstance or development with respect to, or any material
adverse effect on, (a) the business, financial condition or results of
operations of the Buyer and its Subsidiaries, taken as a whole, or (b) the
ability of the Buyer or the Transitory Subsidiary to consummate the transactions
contemplated by this Agreement.
4.2 Authority; No Conflict; Required Filings and Consents.
(a) Each of the Buyer and the Transitory Subsidiary has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement by the Buyer and the Transitory Subsidiary have been duly authorized
by all necessary corporate action on the part of each of the Buyer and the
Transitory Subsidiary. This Agreement has been duly executed and delivered by
each of the Buyer and the Transitory Subsidiary and constitutes the valid and
binding obligation of each of the Buyer and the Transitory Subsidiary,
enforceable against each of them in accordance with its terms, subject to the
Bankruptcy and Equity Exception.
(b) The execution and delivery of this Agreement by each of the Buyer and
the Transitory Subsidiary do not, and the consummation by the Buyer and the
Transitory Subsidiary of the transactions contemplated by this Agreement will
not, (i) conflict with, or result in any violation or breach of, any provision
of the Certificate of Incorporation or By-laws of the Buyer or the Transitory
Subsidiary, (ii) conflict with, or result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under, require a consent or waiver under,
constitute a change in control under, require the payment of a penalty under or
result in the imposition of any Lien on the Buyer's or the Transitory
Subsidiary's assets under, any of the terms, conditions or provisions of any
lease, license, contract or other agreement, instrument or obligation to which
the Buyer or the Transitory Subsidiary is a party or by which any of them or any
of their properties or assets may be bound, or (iii) subject to compliance with
the requirements specified in clauses (i) and (ii) of Section 4.2(c), conflict
with or violate any permit, concession, franchise, license, judgment,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to the Buyer or the Transitory Subsidiary or any of its or their
respective properties or assets, except in the case of clauses (ii) and (iii) of
this Section 4.2(b) for any such conflicts, violations, breaches, defaults,
terminations, cancellations, accelerations, losses, penalties or Liens, and for
any consents or waivers not obtained, that, individually or in the aggregate,
are
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not reasonably likely to have a Buyer Material Adverse Effect or prevent or
materially delay the consummation of the Merger.
(c) No consent, approval, license, permit, order or authorization of, or
registration, declaration, notice or filing with, any Governmental Entity or any
stock market or stock exchange on which shares of Buyer Common Stock are listed
for trading is required by or with respect to the Buyer or the Transitory
Subsidiary in connection with the execution and delivery of this Agreement by
the Buyer or the Transitory Subsidiary or the consummation by the Buyer or the
Transitory Subsidiary of the transactions contemplated by this Agreement, except
for (i) the premerger notification requirements under the HSR Act, (ii) the
filing of the Certificate of Merger with the Delaware Secretary of State and
appropriate corresponding documents with the appropriate authorities of other
U.S. states in which the Company is qualified as a foreign corporation to
transact business, (iii) the filing of such reports, schedules or materials
under Section 13 of or Rule 14a-12 under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby, (iv)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable U.S. state securities laws and
(v) such other consents, approvals, licenses, permits, orders, authorizations,
registrations, declarations, notices and filings as may be required under
applicable U.S. state or local laws which, if not obtained or made, would not be
reasonably likely to have a Buyer Material Adverse Effect or prevent or
materially delay consummation of the Merger.
(d) No vote of the holders of any class or series of the Buyer's capital
stock or other securities is necessary for the consummation by the Buyer of the
transactions contemplated by this Agreement.
4.3 Information Provided. The information to be supplied by or on behalf
of the Buyer for inclusion in the Proxy Statement to be sent to the stockholders
of the Company in connection with the Company Meeting shall not, on the date the
Proxy Statement is first mailed to stockholders of the Company or at the time of
the Company Meeting, contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made in the Proxy Statement not false or misleading
in light of the circumstances under which they were or shall be made; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Meeting which has become false or misleading. If at any time prior to the
Company Meeting any fact or event relating to the Buyer or any of its Affiliates
which should be set forth in a supplement to the Proxy Statement should be
discovered by the Buyer or should occur, the Buyer shall, promptly after
becoming aware thereof, inform the Company of such fact or event.
4.4 Operations of the Transitory Subsidiary. The Transitory Subsidiary was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement.
4.5 Financing. The Buyer and the Transitory Subsidiary have sufficient
funds to perform all of their respective obligations under this Agreement and to
consummate the Merger.
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of the Company. Except as expressly provided or permitted
herein, set forth in Section 5.1 of the Company Disclosure Schedule or as
consented to in writing by the Buyer (which consent shall not be unreasonably
withheld, conditioned or delayed), during the period commencing on the date of
this Agreement and ending at the Effective Time or such earlier date as this
Agreement may be terminated in accordance with its terms (the "Pre-Closing
Period"), the Company shall, and shall cause each of its Subsidiaries to, act
and carry on its business in the ordinary course of business and use reasonable
best efforts to maintain and preserve its and each of its Subsidiary's business
organization, assets and properties, keep available the services of its present
officers and key employees and preserve its business relationships with
customers, strategic partners, suppliers, distributors and others having
business
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dealings with it. Without limiting the generality of the foregoing, except as
expressly provided or permitted herein or as set forth in Section 5.1 of the
Company Disclosure Schedule, during the Pre Closing Period the Company shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly, do
any of the following without the prior written consent of the Buyer (which
consent shall not be unreasonably withheld, conditioned or delayed):
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect
of, any of its capital stock (other than dividends and distributions by a
direct or indirect wholly owned Subsidiary of the Company to its parent);
(ii) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock or any of its other
securities or engage in a recapitalization or reorganization or similar
change effecting Company Common Stock; or (iii) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
Subsidiaries or any other securities of the Company or any of its
Subsidiaries or any rights, warrants or options to acquire any such shares
or other securities, except, in the case of this clause (iii), for the
acquisition of shares of Company Common Stock (A) from holders of Company
Stock Options in full or partial payment of the exercise price payable by
such holder upon exercise of Company Stock Options to the extent required
or permitted under the terms of such Company Stock Options; or (B) from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares at their original issuance price in
connection with any termination of services to the Company or any of its
Subsidiaries;
(b) except as permitted by Section 5.1(k), issue, deliver, sell,
grant, pledge or otherwise dispose of or encumber any shares of its capital
stock or the capital stock of any of its Subsidiaries, any other voting
securities or any securities convertible into or exchangeable for, or any
rights, warrants or options to acquire, any such shares, voting securities
or convertible or exchangeable securities (other than the issuance of
shares of Company Common Stock upon the exercise of Company Stock Options
outstanding on the date of this Agreement or pursuant to the Company ESPP)
or Voting Debt;
(c) amend its Certificate of Incorporation, by-laws or other
comparable charter or organizational documents;
(d) acquire (i) by merging or consolidating with, or by purchasing all
or a substantial portion of the assets or any stock of, or by any other
manner, any business or any corporation, partnership, joint venture,
limited liability company, association or other business organization or
division thereof, or (ii) any assets that are material, individually or in
the aggregate, to the Company and any of its Subsidiaries, taken as a
whole, except purchases of inventory and raw materials in the ordinary
course of business;
(e) sell, lease, license, pledge, abandon, cancel, surrender, or allow
to lapse or expire, or otherwise dispose of or encumber any material
properties or material assets of the Company (including capital stock of
any of its Subsidiaries) or of any of its Subsidiaries other than in the
ordinary course of business;
(f) adopt or implement any stockholder rights plan, "poison pill"
anti-takeover plan or other similar plan, device or arrangement that, in
each case, is applicable to the Buyer or any of its Affiliates, the
transactions contemplated by this Agreement or pursuant to the Voting
Agreements;
(g) (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person (other than pursuant to existing credit
facilities in the ordinary course of business), (ii) issue, sell or amend
any debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another Person, enter into any "keep well" or other agreement
to maintain any financial statement condition of another Person or enter
into any arrangement having the economic effect of any of the foregoing,
(iii) make any loans, advances (other than routine advances to employees of
the Company and its Subsidiaries in the ordinary course of business) or
capital contributions to, or investment in, any other Person, other than
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the Company or any of its direct or indirect wholly owned Subsidiaries, or
(iv) other than in the ordinary course of business, enter into any hedging
agreement or other financial agreement or arrangement designed to protect
the Company or its Subsidiaries against fluctuations in commodities prices
or exchange rates;
(h) make any capital expenditures or other expenditures with respect
to property, plant or equipment in excess of $250,000 in the aggregate for
the Company and its Subsidiaries, taken as a whole, other than as set forth
in the Company's budget for capital expenditures previously made available
to the Buyer or the specific capital expenditures disclosed in Section 3.7
of the Company Disclosure Schedule;
(i) make any material changes in accounting methods, principles or
practices, except insofar as may have been required by a change in GAAP or,
except as so required, change any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve;
(j) except in the ordinary course of business, enter into, renew,
modify, amend, terminate, waive, delay the exercise of, release or assign
any material rights or claims under, any Company Material Contract;
provided, that, nothing herein shall permit the Company or any of its
Subsidiaries to enter into any Contract of the type specified in Section
3.11(a)(iii) or 3.11(a)(xiii)(E) to the extent such Contract would survive
after the Effective Time;
(k) except as required to comply with applicable law or agreements,
plans or arrangements existing on the date hereof, (i) take any action with
respect to, adopt, enter into, terminate or amend any employment,
severance, retirement, retention, welfare, incentive or similar agreement,
arrangement or benefit plan for the benefit or welfare of any current or
former director, officer, employee or consultant or any collective
bargaining agreement, (ii) increase in any respect the compensation or
fringe benefits of, or pay any bonus to, any director, officer, employee or
consultant (except for annual increases of salaries of persons who are not
officers in the ordinary course of business and that do not exceed 2%),
(iii) amend or accelerate the payment, right to payment or vesting of any
compensation or benefits, including any outstanding options or restricted
stock awards, (iv) pay any benefit not provided for as of the date of this
Agreement under any Company Employee Plan, (v) grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement or
benefit plan, including the grant of stock options, stock appreciation
rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any benefit
plans or agreements or awards made thereunder, except for grants of options
to purchase Company Common Stock to new hires in the ordinary course of
business, which options shall have an exercise price equal to the fair
market value of the Company Common Stock on the date of grant (determined
in a manner consistent with the Company's existing practice for
establishing fair market value for option grants) and which options shall
otherwise be upon the Company's customary terms, or (vi) take any action to
fund or in any other way secure the payment of compensation or benefits
under any Company Employee Plan;
(l) make or rescind any material Tax election, settle or compromise
any material Tax liability or amend any material Tax Return;
(m) initiate, compromise or settle any material litigation or
arbitration proceeding (other than in connection with the enforcement of
the Company's rights under this Agreement);
(n) take any action that is intended or would reasonably be expected
to result in any of the conditions to the Merger set forth in Article VII
not being satisfied; or
(o) authorize any of, or commit, resolve or agree, in writing or
otherwise, to take any of, the foregoing actions.
5.2 Confidentiality. The parties acknowledge that the Buyer and the
Company have previously executed a confidentiality agreement, dated as of July
28, 2004, as amended on October 3, 2004 (the
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"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms, except as expressly modified
herein.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
(a) No Solicitation or Negotiation. The Company hereby covenants that,
except as expressly permitted by this Section 6.1, during the Pre-Closing Period
neither the Company nor any of its Subsidiaries nor any of its or their officers
or directors shall, and the Company shall use reasonable best efforts to
instruct and cause its employees, investment bankers, attorneys, accountants and
other advisors or representatives (such employees, investment bankers,
attorneys, accountants and other advisors or representatives, collectively,
"Representatives") not to, directly or indirectly:
(i) solicit, initiate or knowingly encourage any inquiries or the
making of any proposal or offer that constitutes, or could reasonably be
expected to lead to, any Acquisition Proposal; or
(ii) enter into, continue or otherwise participate in, any discussions
or negotiations regarding, or furnish to any Person any non-public
information for the purpose of encouraging or facilitating, any Acquisition
Proposal.
Notwithstanding anything to the contrary set forth in this Agreement, prior
to the adoption of this Agreement at the Company Meeting (the "Specified
Time"), the Company may, to the extent failure to do so would be
inconsistent with the fiduciary obligations of the Company Board under
applicable law, as determined in good faith by the Company Board after
consultation with outside counsel, (A) in response to (1) a Superior
Proposal or (2) a bona fide, unsolicited written Acquisition Proposal (as
defined herein, but substituting 50% for 15%, except in the case of an
asset sale, in which case "all or substantially all" shall be substituted
for 15%), that the Company Board determines in good faith after
consultation with outside counsel and its financial advisor is reasonably
likely to lead to a Superior Proposal (any such Acquisition Proposal, a
"Potential Superior Proposal"), in each case, that did not result from a
breach by the Company of this Section 6.1, and subject to compliance with
Section 6.1(c), (x) furnish information with respect to the Company to the
Person making such Superior Proposal or Potential Superior Proposal and its
Representatives pursuant to a customary confidentiality agreement not less
restrictive of the other party than the Confidentiality Agreement (and
promptly disclose (and if applicable, provide copies of) any such
information to the Buyer to the extent not previously provided to the Buyer
by the Company) and (y) participate in discussions or negotiations
(including solicitation of such a revised Superior Proposal or Potential
Superior Proposal) with such Person and its Representatives regarding any
such Superior Proposal or Potential Superior Proposal, and (B) in response
to a Superior Proposal or a Potential Superior Proposal, in each case, that
did not result from a breach by the Company of this Section 6.1, and
subject to compliance with Section 6.1(c), amend, or grant a waiver or
release under, any standstill or similar agreement with respect to any
Company Common Stock.
(b) No Change in Recommendation or Alternative Acquisition Agreement.
During the Pre-Closing Period, the Company Board and each committee thereof
shall not:
(i) except as expressly permitted by this Section 6.1, withhold,
withdraw or modify (or publicly propose or resolve to withhold, withdraw or
modify), in a manner adverse to the Buyer, the approval, recommendation or
declaration of advisability by the Company Board or any committee thereof
with respect to the Company Voting Proposal (it being understood that
publicly taking a neutral position or no position with respect to an
Acquisition Proposal shall be considered an adverse modification, except
that publicly taking a neutral position or no position with respect to an
Acquisition Proposal for a period of time not in excess of ten (10)
Business Days after the first public announcement of such Acquisition
Proposal shall not be considered an adverse modification (such time period,
an
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"Acquisition Proposal Assessment Period") unless such position continues
beyond the expiration of the Acquisition Proposal Assessment Period);
(ii) cause or permit the Company to enter into any letter of intent,
memorandum of understanding, agreement in principle, acquisition agreement,
merger agreement or similar agreement (an "Alternative Acquisition
Agreement") providing for the consummation of a transaction contemplated by
any Acquisition Proposal (other than a confidentiality agreement referred
to in Section 6.1(a) entered into in the circumstances referred to in
Section 6.1(a)); or
(iii) except as expressly permitted by this Section 6.1, approve,
recommend or adopt or propose (publicly or otherwise) to approve, recommend
or adopt, any Acquisition Proposal.
Notwithstanding anything to the contrary set forth in this Agreement, prior to
the Specified Time, the Company Board may withhold, withdraw or modify its
recommendation with respect to the Company Voting Proposal or approve or
recommend any Superior Proposal made or received after the date hereof and not
solicited, initiated or knowingly encouraged in breach of this Agreement, and
subject to compliance with Section 6.1(c), if the Company Board determines in
good faith, after consultation with outside counsel, that failure to do so would
be inconsistent with its fiduciary obligations under applicable law (a "Change
of Recommendation"); provided, however, that no Change of Recommendation may be
made until after 72 hours following the Buyer's receipt of written notice from
the Company (an "Adverse Recommendation Notice") advising the Buyer that the
Company Board intends to make such Change in Recommendation, which Adverse
Recommendation Notice shall contain all information concerning any Superior
Proposal required by Section 6.1(c) (it being understood and agreed that, in
accordance with Section 6.1(c), the Company shall keep the Buyer reasonably
informed during such 72-hour period of the status and material terms and
conditions (including any amendment thereto) of any such Superior Proposal). In
determining whether to make a Change of Recommendation in response to a Superior
Proposal, the Company Board shall take into account any changes to the terms of
this Agreement proposed by the Buyer (in response to an Adverse Recommendation
Notice or otherwise) in determining whether such third party Acquisition
Proposal still constitutes a Company Superior Proposal.
(c) Notices to the Buyer. The Company shall promptly (within 24 hours)
advise the Buyer, orally and in writing, of receipt by the Company of any
Acquisition Proposal or any request for information in connection with any
Acquisition Proposal, or of any inquiry with respect to any Acquisition Proposal
and provide copies of any such written request, Acquisition Proposal or inquiry,
together with the material terms and conditions thereof (including any amendment
thereto) and the identity of the Person making any such request, Acquisition
Proposal or inquiry. The Company shall keep the Buyer reasonably informed of the
status and the material terms and conditions (including any amendment thereto)
of any such request, Acquisition Proposal or inquiry.
(d) Certain Permitted Disclosure. Nothing contained in this Section 6.1 or
in Section 6.5 (or elsewhere in this Agreement) shall be deemed to prohibit the
Company from taking and disclosing to its stockholders a position with respect
to a tender offer contemplated by Rule 14d-9 or Rule 14e-2 promulgated under the
Exchange Act or from making any required disclosure to the Company's
stockholders if, in the good faith judgment of the Company Board, after
consultation with outside counsel, failure to so disclose would be inconsistent
with its obligations under applicable law.
(e) Cessation of Ongoing Discussions. The Company shall, and shall direct
its Representatives to, cease immediately all discussions and negotiations that
commenced prior to the date of this Agreement regarding any proposal that
constitutes, or could reasonably be expected to lead to, an Acquisition
Proposal. The Company also agrees, if it has not done so already, to promptly
request of each Person, if any, that has heretofore executed a confidentiality
agreement within the twelve (12) months prior to the date hereof in connection
with any Acquisition Proposal to return or destroy all confidential information
heretofore furnished to such Person by or on behalf of it or its Subsidiaries.
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(f) Definitions. For purposes of this Agreement:
"Acquisition Proposal" means (i) any proposal or offer for a merger,
consolidation, dissolution, tender offer, recapitalization, reorganization,
share exchange, business combination or similar transaction involving the
Company or (ii) any proposal or offer to acquire in any manner, directly or
indirectly, over 15% of the equity securities or consolidated total assets
(including, without limitation, equity securities of its Subsidiaries) of
the Company, in each case other than the transactions contemplated by this
Agreement.
"Superior Proposal" means any unsolicited, bona fide written proposal
made by a third party to acquire over 50% of the equity securities or all
or substantially all of the assets of the Company and its Subsidiaries,
taken as a whole, pursuant to a tender or exchange offer, a merger, a
consolidation or a sale of its assets, which the Company Board determines
in its good faith judgment (after consultation with its outside counsel and
financial advisor) (i) to be more favorable from a financial point of view
to the holders of Company Common Stock than the Merger, taking into account
all the terms and conditions of such proposal and this Agreement
(including, after complying with Sections 6.1(b) and (c), any proposal by
the Buyer to amend the terms of this Agreement) and (ii) is reasonably
capable of being completed on the terms proposed, taking into account all
financial, regulatory, legal and other aspects of such proposal.
6.2 Proxy Statement. As promptly as practicable after the execution of
this Agreement, the Company, in cooperation with the Buyer, shall prepare and
file with the SEC the Proxy Statement. The Company shall respond to any comments
of the SEC or its staff and shall cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable time after the resolution of any such
comments. The Company shall notify the Buyer promptly upon the receipt of any
comments from the SEC or its staff or any other government officials and of any
request by the SEC or its staff or any other government officials for amendments
or supplements to the Proxy Statement and shall supply the Buyer with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Proxy Statement. The Company shall use commercially
reasonable efforts to cause all documents that it is responsible for filing with
the SEC or other regulatory authorities under this Section 6.2 to comply in all
material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs which is required
to be set forth in an amendment or supplement to the Proxy Statement, the Buyer
or the Company, as the case may be, shall promptly inform the other of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of the Company, such
amendment or supplement.
6.3 Nasdaq Quotation. The Company agrees to use commercially reasonable
efforts to continue the quotation of the Company Common Stock on The Nasdaq
Stock Market during the term of this Agreement.
6.4 Access to Information. During the Pre-Closing Period, subject to
applicable law regarding the sharing of information, the Company shall (and
shall cause each of its Subsidiaries to) afford to the Buyer's officers,
employees, accountants, counsel and other representatives, reasonable access,
upon reasonable notice, during normal business hours and in a manner that does
not unreasonably disrupt or interfere with business operations, to all its
properties, books, contracts, commitments, personnel and records as Buyer shall
reasonably request, and, during such period, the Company shall (and shall cause
each of its Subsidiaries to) furnish promptly to the Buyer (a) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of federal or state
securities laws and (b) all other information concerning its business,
properties, assets and personnel as the Buyer may reasonably request; provided,
that no investigation pursuant to this Section 6.4 shall affect or be deemed to
modify any representation or warranty made by the Company in this Agreement. The
Buyer will hold any such information which is nonpublic in confidence in
accordance with the Confidentiality Agreement.
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6.5 Stockholders Meeting. The Company, acting through the Company Board,
shall take all actions in accordance with applicable law, its Certificate of
Incorporation and By-laws and the rules of The Nasdaq Stock Market to promptly
and duly call, give notice of, convene and hold as promptly as practicable the
Company Meeting for the purpose of considering and voting upon the Company
Voting Proposal. Unless this Agreement is terminated in accordance with Article
VIII, the obligation of the Company to convene and hold the Company Meeting will
not be limited or otherwise affected by a Change in Recommendation. Subject to
Section 6.1, (i) the Company Board will recommend to the stockholders of the
Company the adoption of the Company Voting Proposal include such recommendation
in the Proxy Statement and (ii) the Company Board shall not withhold, withdraw
or modify, or publicly propose or resolve to withhold, withdraw or modify in a
manner adverse to the Buyer, the recommendation of the Company Board that the
Company's stockholders vote in favor of the Company Voting Proposal. Subject to
Section 6.1 (but without affecting in any manner the Company's obligations
pursuant to Section 6.2), the Company shall take all action that is both
reasonable and lawful to solicit from its stockholders proxies in favor of the
Company Voting Proposal and shall take all other action necessary or advisable
to secure the vote or consent of the stockholders of the Company required by the
rules of The Nasdaq Stock Market or the DGCL to obtain such approvals.
Notwithstanding anything to the contrary contained in this Agreement, the
Company, after consultation with the Buyer, may adjourn the Company Meeting, but
only to the extent necessary to ensure that any required supplement or amendment
to the Proxy Statement is provided to the Company's stockholders or, if as of
the time for which the Company Meeting is originally scheduled (as set forth in
the Proxy Statement) there are insufficient shares of Company Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Company Meeting.
6.6 Legal Conditions to the Merger.
(a) Subject to the terms hereof, including Section 6.1 and Section 6.6(b),
the Company and the Buyer shall each use commercially reasonable efforts to (i)
take, or cause to be taken, all actions, and do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated hereby as promptly as practicable, (ii) as promptly as practicable,
obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by the Company or the Buyer or any of their Subsidiaries, or
otherwise reasonably requested by the Buyer, in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, (iii) as promptly as practicable, make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the Exchange Act,
and any other applicable federal or state securities laws, (B) the HSR Act and
any related governmental request thereunder, and (C) any other applicable law,
and (iv) execute or deliver any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement. The Company and the Buyer shall consult and cooperate with each
other, and consider in good faith the views of one another, in connection with
the obtaining of all such consents, licenses, permits, waivers, approvals,
authorizations, or orders, including, without limitation, (i) keeping the other
apprised of the status of matters relating to the completion of the transactions
contemplated hereby, (ii) providing copies of written notices or other
communications received by such party or any of its respective Subsidiaries with
respect to the transactions contemplated hereby, (iii) subject to applicable
laws relating to the sharing of information, providing copies of any proposed
filings to be made with, or written materials submitted to, any third party
and/or any Governmental Entity in connection with the transactions contemplated
hereby (including, without limitation, any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any party hereto) and (iv) if requested, accepting reasonable
additions, deletions or changes suggested in connection therewith. The Company
and the Buyer shall each use its reasonable best efforts to furnish to each
other all information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable law (including all
information required to be included in the Proxy Statement) in connection with
the transactions contemplated by this Agreement. For the avoidance of doubt, the
Buyer and the Company
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agree that nothing contained in this Section 6.6(a) shall modify or affect their
respective rights and responsibilities under Section 6.6(b). The Company shall
not permit any of its officers or any other representatives or agents to
participate in any meeting or proceeding with any Governmental Entity in respect
of any filings, investigation or other inquiry in connection with the
transactions contemplated by this Agreement unless it consults with the Buyer in
advance and, to the extent permitted by such Governmental Entity, gives the
Buyer and its outside counsel the opportunity to attend and participate at such
meeting or proceeding.
(b) Subject to the terms hereof, each of the Buyer and the Company agree,
and shall cause each of their respective Subsidiaries, to cooperate and to use
commercially reasonable efforts to obtain any government clearances or approvals
required for Closing under the HSR Act, the Sherman Act, as amended, the Clayton
Act, as amended, the Federal Trade Commission Act, as amended, and any other
federal, state or foreign law, regulation or decree designed to prohibit,
restrict or regulate actions for the purpose or effect of monopolization or
restraint of trade (collectively "Antitrust Laws"), to respond to any government
requests for information under any Antitrust Law, and to contest and resist any
action, including any legislative, administrative or judicial action, and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Antitrust Order")
that restricts, prevents or prohibits the consummation of the Merger or any
other transactions contemplated by this Agreement under any Antitrust Law.
Notwithstanding the foregoing or any other provision in this Agreement, (i)
nothing in this Agreement shall require, or be construed to require, the Buyer
or any of its Affiliates to proffer to, or agree to, sell or hold separate and
agree to sell, before or after the Effective Time, any assets, businesses, or
interest in any assets or businesses of Buyer, the Company or any of their
respective Affiliates (or to consent to any sale, or agreement to sell, by the
Company of any of its assets or businesses) or to agree to any material changes
(including, without limitation, through a licensing arrangement) or restriction
in the operations of any such assets or businesses and (ii) nothing in this
Agreement shall require, or be construed to require, the Buyer or any of its
Affiliates to take any other action under this Section 6.6 if the United States
Department of Justice or the United States Federal Trade Commission authorizes
its staff to seek a preliminary injunction or restraining order to enjoin
consummation of the Merger. The Company and the Buyer will each request early
termination of the waiting period with respect to the Merger under the HSR Act.
(c) Each of the Company and the Buyer shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, commercially reasonable efforts to
obtain any third party consents required in connection with the Merger that are
(i) necessary to consummate the transactions contemplated hereby or otherwise
reasonably requested by the Buyer, (ii) disclosed or required to be disclosed in
the Company Disclosure Schedule or the Buyer Disclosure Schedule, as the case
may be, or (iii) required to prevent the occurrence of an event that has had, or
is reasonably likely to have, a Company Material Adverse Effect or a Buyer
Material Adverse Effect prior to or after the Effective Time, it being
understood that neither the Company nor the Buyer shall be required to make
materially burdensome payments in connection with the fulfillment of its
obligations under this Section 6.6.
6.7 Public Disclosure. Except as may be required by law or stock market
regulations, (a) the press release announcing the execution of this Agreement
shall be issued only in such form as shall be mutually agreed upon by the
Company and the Buyer and (b) the Buyer and the Company shall consult with the
other party before issuing any other press release or otherwise making any
public statement with respect to the Merger or this Agreement.
6.8 Indemnification.
(a) From the Effective Time through the sixth anniversary of the date on
which the Effective Time occurs, each of Buyer and the Surviving Corporation
shall, jointly and severally, indemnify and hold harmless each person who is
now, or has been at any time prior to the date hereof, or who becomes prior to
the Effective Time, a director or officer of the Company or any of its
Subsidiaries (the "Indemnified Parties"), against all claims, losses,
liabilities, damages, judgments, fines and reasonable fees, costs and
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expenses, including attorneys' fees and disbursements (collectively, "Costs"),
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to the fact that the Indemnified Party is or was an officer
or director of the Company or any of its Subsidiaries, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent
permitted under the DGCL for officers and directors of Delaware corporations.
Each Indemnified Party will be entitled to advancement of expenses incurred in
the defense of any such claim, action, suit, proceeding or investigation from
each of Buyer and the Surviving Corporation within ten (10) Business Days of
receipt by Buyer or the Surviving Corporation from the Indemnified Party of a
request therefor; provided that any Person to whom expenses are advanced
provides an undertaking, to the extent required by the DGCL, to repay such
advances if it is ultimately determined that such Person is not entitled to
indemnification.
(b) The Certificate of Incorporation and By-laws of the Surviving
Corporation shall contain, and Buyer shall cause the Certificate of
Incorporation and By-laws of the Surviving Corporation to so contain, provisions
no less favorable with respect to indemnification, advancement of expenses and
exculpation of present and former directors and officers of the Company and its
Subsidiaries than are presently set forth in the Certificate of Incorporation
and By-laws of the Company.
(c) Subject to the next sentence, the Surviving Corporation shall maintain,
and Buyer shall cause the Surviving Corporation to maintain, at no expense to
the beneficiaries, in effect for six (6) years from the Effective Time the
current policies of the directors' and officers' liability insurance maintained
by the Company with respect to matters existing or occurring at or prior to the
Effective Time (including the transactions contemplated by this Agreement), so
long as the annual premium therefor would not be in excess of 250% of the annual
premium paid by the Company in its most recent fiscal year, which premium is set
forth in Section 6.8(c) of the Company Disclosure Schedule (250% of such annual
premium, the "Maximum Premium"). If the Company's existing insurance expires, is
terminated or canceled during such six-year period or exceeds the Maximum
Premium, the Surviving Corporation shall obtain, and Buyer shall cause the
Surviving Corporation to obtain, as much directors' and officers' liability
insurance as can be obtained for the remainder of such period for an annualized
premium not in excess of the Maximum Premium, on terms and conditions no less
advantageous to the Indemnified Parties than the Company's existing directors'
and officers' liability insurance. The provisions of this Section 6.8(c) shall
be deemed to have been satisfied if the Buyer, with the cooperation of the
Company, obtains prepaid policies prior to the Closing for purposes of this
Section 6.8, which policies provide such directors and officers with coverage no
less advantageous to the insured for an aggregate period of six (6) years with
respect to claims arising from facts or events that occurred on or before the
Effective Time (including those related to this Agreement and the transactions
contemplated hereby).
(d) If the Buyer fails to comply with its obligations under this Section
6.8, and, in order to enforce an Indemnified Party's rights under this Section
6.8, an Indemnified Party commences a suit that results in a judgment against
the Buyer that the Buyer breached its obligations under this Section 6.8, the
Buyer shall pay to the Indemnified Party its reasonable costs and expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
such suit after delivery to the Buyer of reasonable documentation evidencing
such costs and expenses.
(e) The provisions of this Section 6.8 are intended to be in addition to
the rights otherwise available to the current officers and directors of the
Company by law, charter, statute, by-law or agreement, and shall operate for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives in accordance with Section 9.4 hereof.
6.9 Notification of Certain Matters. During the Pre-Closing Period, the
Buyer shall give prompt notice to the Company, and the Company shall give prompt
notice to the Buyer, of (a) the occurrence, or failure to occur, of any event,
which occurrence or failure to occur is reasonably likely to cause any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect, in each case at any time from and
after the date of this Agreement until the Effective Time, (b) any material
failure of the Buyer and the Transitory Subsidiary or the Company, as the case
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may be, or of any officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, or (c) any actions, suits, claims, investigations or
proceedings commenced or threatened in writing against, relating to or involving
or otherwise affecting such party or any of its Subsidiaries that relate to the
consummation of the Merger. Notwithstanding the above, the delivery of any
notice pursuant to this Section will not limit or otherwise affect the remedies
available hereunder to the party receiving such notice or the conditions to such
party's obligation to consummate the Merger.
6.10 Exemption from Liability Under Section 16(b).
(a) The Board of Directors of the Buyer, or a committee thereof consisting
of non-employee directors (as such term is defined for purposes of Rule 16b-3(d)
under the Exchange Act), shall adopt a resolution in advance of the Effective
Time providing that the receipt by the Company Insiders of Buyer Stock Options
upon substitution of Company Stock Options, in each case pursuant to the
transactions contemplated hereby and to the extent such securities are listed in
the Section 16 Information, is intended to be exempt pursuant to Rule 16b-3
under the Exchange Act.
(b) The Company shall provide the Section 16 Information to the Buyer at
least ten (10) Business Days prior to the Closing. For purposes of this
Agreement, "Section 16 Information" means information regarding the Company
Insiders and the number of shares of Company Common Stock or other Company
equity securities deemed to be beneficially owned by each such Company Insider
and expected to be exchanged for options to purchase Buyer Common Stock in
connection with the Merger.
(c) For purposes of this Agreement, "Company Insiders" means those officers
and directors of the Company who immediately after the Closing become subject to
the reporting requirements of Section 16(a) of the Exchange Act with respect to
equity securities of the Buyer.
6.11 Employee Benefits. For a twelve (12) month period following the
Effective Time, the Buyer will use all commercially reasonable efforts to
provide generally to those of its employees and employees of the Surviving
Corporation or their respective Subsidiaries who shall have been employees of
the Company or any of its Subsidiaries immediately prior to the Effective Time
("Continuing Employees"), the same base salary and pension and welfare benefits
under employee benefit plans (but excluding bonus and equity compensation) which
are substantially similar in the aggregate to those benefits provided to those
Continuing Employees immediately prior to the execution of this Agreement under
the Company Employee Plans. The Buyer shall create a bonus pool of $2.5 million
(the "Bonus Pool") for the Continuing Employees for the period from January 1,
2004 through March 31, 2005 (the "Bonus Pool Period"); provided however that if
the Company has paid bonuses under its bonus plan for 2004 in the ordinary
course of business (provided such payment may be made at any time after January
2, 2005 and in accordance with the terms of the formula approved by the Company
Board prior to the date hereof (but under no circumstances to exceed $2.4
million in the aggregate) prior to the Effective Time, then the Buyer shall not
be obligated to create such Bonus Pool. In the event the Company has not made
the bonus payments referred to above and subject to the provisions of Section
6.11 of the Company Disclosure Schedule, at the time that the Buyer pays annual
bonuses to its other employees after March 31, 2005, the Buyer shall distribute
bonuses from the Bonus Pool to the Continuing Employees who are actively
employed as of the end of the Bonus Pool Period in amounts determined by the
Buyer in its discretion, provided that the Buyer reserves the right to pay less
than 100% of the Bonus Pool.
6.12 Service Credit. Following the Effective Time, the Buyer will give
each Continuing Employee full credit for prior service with the Company or its
Subsidiaries for purposes of (a) eligibility and vesting under any Buyer
Employee Plans (as defined below), (b) determination of benefits levels under
any Buyer Employee Plan or policy relating to vacation or severance and (c)
determination of "retiree" status under the Computer Associates International,
Inc. Savings Harvest Plan, in each case for which the Continuing Employee is
otherwise eligible and in which the Continuing Employee is offered
participation, but except where such crediting would result in a duplication of
benefits. In addition, the Buyer shall waive, or cause to be waived, any
limitations on benefits relating to pre-existing conditions to the same extent
such limitations are waived under any comparable plan of the Buyer and recognize
for purposes of annual
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deductible and out-of-pocket limits under its medical and dental plans,
deductible and out-of-pocket expenses paid by Continuing Employees in the
calendar year in which the Effective Time occurs. For purposes of this
Agreement, the term "Buyer Employee Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement, including insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation and all unexpired severance
agreements, for the benefit of, or relating to, any current or former employee
of the Buyer or any of its Subsidiaries or any entity which is a member of (A) a
controlled group of corporations (as defined in Section 414(b) of the Code), (B)
a group of trades or businesses under common control (as defined in Section
414(c) of the Code) or (C) an affiliated service group (as defined in Section
414(m) of the Code or the regulations under Section 414(o) of the Code), any of
which includes or included the Buyer or a Subsidiary of the Buyer.
6.13 Company 401(k) Plans. Prior to the Effective Time, the Company shall
take all actions necessary to terminate the Netegrity, Inc. Retirement Savings
Plan.
6.14 Loans to Company Employees, Officers and Directors. Prior to the
Effective Time, all loans (other than travel advances, payroll advances and
other advances made in the ordinary course of business, which in each case do
not exceed $1,000, and the relocation loans set forth in Section 6.14 of the
Company Disclosure Schedule) by the Company or any of its Subsidiaries to any of
their employees, officers or directors shall be no longer outstanding.
6.15 Takeover Statutes and Laws. If any anti-takeover statute, law or
regulation (including, without limitation, a "fair price," "moratorium," or
"control share acquisition" statute) becomes applicable to the Merger, the
Stockholder Agreements or any of the other transactions contemplated by hereby
or thereby, the Company and its Board of Directors shall grant such approvals
and take such actions as are necessary so that such transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and the Stockholder Agreements or by the Merger and otherwise act to
eliminate or minimize the effects of such statute, law or regulation on such
transactions.
6.16 Termination of Non-Employee Director Options. Prior to the Effective
Time, the non-employee members of the Company Board shall have agreed to
terminate, effective as of the Effective Time, all of the Company Options issued
to them under the 1997 Non-Employee Director Stock Option Plan that shall have
not been exercised as of the Effective Time.
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Company Voting Proposal shall have been
duly adopted at the Company Meeting, at which a quorum is present, by the
Required Company Stockholder Vote.
(b) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) Governmental Approvals. Other than the filing of the Certificate
of Merger, all authorizations, consents, orders or approvals of, or
declarations, notices or filings with, or expirations of waiting periods
imposed by, any Governmental Entity in connection with the Merger and the
consummation of the other transactions contemplated by this Agreement, the
failure to file, obtain or occur, individually or in the aggregate, would
be reasonably likely (i) to have a Company Material Adverse Effect or a
Buyer Material Adverse Effect (measuring "materiality," solely for purposes
of determining whether such failure would be reasonably likely to have a
"Buyer Material Adverse
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Effect" pursuant to this clause (i), in terms of the level of adverse
effect that would constitute "material" if such effect were to occur to the
Company and its Subsidiaries) or (ii) to materially impair the Buyer's
ability to own and operate any of the material businesses and assets of the
Company or its Subsidiaries from and after the Effective Time, shall have
been filed, been obtained or occurred on terms and conditions which,
individually or in the aggregate, would not be reasonably likely to have
any of the effects set forth in clause (i) or (ii) above.
(d) No Injunctions. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction (preliminary or
permanent) or statute, rule or regulation which is in effect and which (i)
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger or the other transactions contemplated by this
Agreement or (ii) would be reasonably likely to materially impair the
Buyer's ability to own and operate any of the material businesses or assets
of the Company or its Subsidiaries from and after the Effective Time.
7.2 Additional Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligations of the Buyer and the Transitory Subsidiary to
effect the Merger shall be subject to the satisfaction on or prior to the
Closing Date of each of the following additional conditions, any of which may be
waived, in writing, exclusively by the Buyer and the Transitory Subsidiary:
(a) Representations and Warranties. (i) The representations and
warranties of the Company set forth in this Agreement that are qualified by
reference to Company Material Adverse Effect shall be true and correct as
of the date of this Agreement and as of the Closing Date as though made on
and as of such date and time (except to the extent such representations and
warranties are specifically made as of a particular date, in which case
such representations and warranties shall be true and correct as of such
date); (ii) the representations and warranties of the Company set forth in
this Agreement that are not qualified by Company Material Adverse Effect
shall be true and correct as of the date of this Agreement and as of the
Closing Date as though made on and as of such date and time (except to the
extent such representations and warranties are specifically made as of a
particular date, in which case such representations and warranties shall be
true and correct as of such date); provided, that, notwithstanding anything
herein to the contrary, the condition set forth in this Section 7.2(a)(ii)
shall be deemed to have been satisfied even if any representations and
warranties of the Company (other than Section 3.2 hereof, which must be
true and correct in all material respects) are not so true and correct
unless the failure of such representations and warranties of the Company to
be so true and correct, individually or in the aggregate, has had, or is
reasonably likely to have, a Company Material Adverse Effect; and the Buyer
shall have received a certificate signed on behalf of the Company by the
chief executive officer or the chief financial officer of the Company to
such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement on or prior to the Closing Date; and the Buyer
shall have received a certificate signed on behalf of the Company by the
chief executive officer or the chief financial officer of the Company to
such effect.
(c) No Restraints. There shall not be instituted or pending any suit,
action or proceeding in which a Governmental Entity is (i) challenging or
seeking to restrain or prohibit the consummation of the Merger or any of
the other transactions contemplated by this Agreement or (ii) seeking to
(A) prohibit or materially impair the Buyer's ability to own or operate any
of the material businesses and assets of the Company or its Subsidiaries
from and after the Effective Time or any of the businesses or assets of the
Buyer or its Subsidiaries (including, without limitation, through any
divestiture, licensing or hold separate arrangement) or (B) prohibit or
limit in any material respect the Buyer's ability to vote, transfer,
receive dividends with respect to or otherwise exercise ownership rights
with respect to the stock of the Surviving Corporation.
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(d) No Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any change, event, circumstance or
development that has had, or is reasonably likely to have, a Company
Material Adverse Effect.
(e) Consents. The consents, authorizations, orders, permits and
approvals listed in Section 7.2(e) of the Company Disclosure Schedule shall
have been obtained and shall be in full force and effect.
7.3 Additional Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger shall be subject to the satisfaction on or
prior to the Closing Date of each of the following additional conditions, any of
which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. (i) The representations and
warranties of the Buyer set forth in this Agreement that are qualified by
reference to Buyer Material Adverse Effect shall be true and correct as of
the date of this Agreement and as of the Closing Date as though made on and
as of such date and time (except to the extent such representations and
warranties are specifically made as of a particular date, in which case
such representations and warranties shall be true and correct as of such
date); (ii) the representations and warranties of the Buyer set forth in
this Agreement that are not qualified by Buyer Material Adverse Effect
shall be true and correct as of the date of this Agreement and as of the
Closing Date as though made on and as of such date and time (except to the
extent such representations and warranties are specifically made as of a
particular date, in which case such representations and warranties shall be
true and correct as of such date); provided, that, notwithstanding anything
herein to the contrary, the condition set forth in this Section 7.3(a)(ii)
shall be deemed to have been satisfied even if any representations and
warranties of the Buyer are not so true and correct unless the failure of
such representations and warranties of the Buyer to be so true and correct,
individually or in the aggregate, has had or is reasonably likely to have,
a Buyer Material Adverse Effect; and the Company shall have received a
certificate signed on behalf of the Buyer by the chief executive officer or
the chief financial officer of the Buyer to such effect.
(b) Performance of Obligations of the Buyer and the Transitory
Subsidiary. The Buyer and the Transitory Subsidiary shall have performed
in all material respects all obligations required to be performed by them
under this Agreement on or prior to the Closing Date; and the Company shall
have received a certificate signed on behalf of the Buyer by the chief
executive officer or the chief financial officer of the Buyer to such
effect.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time (with respect to Sections 8.1(b) through 8.1(h), by written
notice by the terminating party to the other party), whether before or after
stockholder approval hereof:
(a) by mutual written consent of the Buyer, the Transitory Subsidiary
and the Company; or
(b) by either the Buyer or the Company if the Merger shall not have
been consummated by June 30, 2005 (the "Outside Date") (provided, that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been a principal cause of or resulted in the failure of the
Merger to occur on or before the Outside Date); or
(c) by either the Buyer or the Company if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger; or
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(d) by either the Buyer or the Company if at the Company Meeting at
which a vote on the Company Voting Proposal is taken, the Required Company
Stockholder Vote in favor of the Company Voting Proposal shall not have
been obtained; provided, that, prior to or upon any termination by the
Company pursuant to this Section 8.1(d), the Company shall have paid to
Buyer any Termination Fee and Expenses then due and payable under Section
8.3(b) under the terms specified therein; or
(e) by the Buyer, if: (i) the Company Board shall have failed to
recommend approval of the Company Voting Proposal in the Proxy Statement or
shall have withheld, withdrawn, qualified or modified its recommendation of
the Company Voting Proposal in a manner adverse to the Buyer (it being
understood that the taking of a neutral position or no position with
respect to an Acquisition Proposal beyond the Acquisition Proposal
Assessment Period shall be considered an adverse modification), (ii) the
Company Board shall have approved, recommended or adopted (or publicly
announced its intention to take any such action) any Acquisition Proposal,
(iii) after the end of an Acquisition Proposal Assessment Period, the
Company Board shall have failed to reaffirm its approval or recommendation
of this Agreement and the Merger as promptly as practicable (but in any
event within five (5) Business Days) after receipt of any written request
to do so from the Buyer, or (iv) a tender offer or exchange offer for
outstanding shares of Company Common Stock shall have been commenced (other
than by the Buyer or an Affiliate of the Buyer) and the Company Board
recommends that the stockholders of the Company tender their shares in such
tender or exchange offer or, within ten (10) Business Days after the
commencement of such tender or exchange offer, the Company Board fails to
recommend against acceptance of such offer; or
(f) by the Company, if (i) the Company Board, pursuant to and in
compliance with Section 6.1, shall have approved or recommended to the
stockholders of the Company any Superior Proposal and (ii) prior to or upon
termination pursuant to this Section 8.1(f), the Company shall have paid to
the Buyer the Termination Fee then due and payable under Section 8.3;
provided, that, (A) the Company notifies the Buyer in writing, prior to
such termination, promptly of its intention to terminate this Agreement and
to enter into a binding written agreement concerning a Superior Proposal
promptly following the Waiting Period (as hereinafter defined), attaching
the most current version of such agreement (or, to the extent no such
agreement is contemplated to be entered into by the Company in connection
with such Superior Proposal, a description of all material terms and
conditions of such Superior Proposal), and (B) the Buyer does not make,
within three (3) Business Days after its receipt of such written
notification (the "Waiting Period"), an offer that the Company Board
determines, in good faith after consultation with its financial advisor, is
at least as favorable from a financial point of view to the stockholders of
the Company as such Superior Proposal (it being understood that (1) the
Company shall not enter into any such binding agreement during the Waiting
Period, (2) the Company shall keep the Buyer reasonably informed at all
times during the Waiting Period of the status and material terms and
conditions (including any amendment thereto) of such Superior Proposal and
provide copies of all draft Alternative Acquisition Agreements related
thereto (and any executed confidentiality agreement entered into in the
circumstances referred to in Section 6.1(a)), and (3) the Company shall
notify the Buyer promptly if the Company's intention to enter into such
binding written agreement shall change at any time after giving
notification of such Superior Proposal); or
(g) by the Buyer, if there has been a breach of or failure to perform
any representation, warranty, covenant or agreement on the part of the
Company set forth in this Agreement, which breach or failure to perform (i)
would cause the conditions set forth in Section 7.2(a) or 7.2(b) not to be
satisfied, and (ii) shall not have been cured within twenty (20) days
following receipt by the Company of written notice of such breach or
failure to perform from the Buyer; or
(h) by the Company, if there has been a breach of or failure to
perform any representation, warranty, covenant or agreement on the part of
the Buyer or the Transitory Subsidiary set forth in this Agreement, which
breach or failure to perform (i) would cause the conditions set forth in
Section 7.3(a) or 7.3(b) not to be satisfied, and (ii) shall not have been
cured within twenty
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(20) days following receipt by the Buyer of written notice of such breach
or failure to perform from the Company.
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall immediately become void and
there shall be no liability or obligation on the part of the Buyer, the Company,
the Transitory Subsidiary or their respective officers, directors, stockholders
or Affiliates; provided, that (a) any such termination shall not relieve any
party from liability for any willful breach of this Agreement and (b) the
provisions of Sections 5.2 (Confidentiality) and 8.3 (Fees and Expenses), this
Section 8.2 (Effect of Termination) and Article IX (Miscellaneous) of this
Agreement (other than Section 9.1, which shall survive the Effective Time but
not the termination of this Agreement) and the Confidentiality Agreement shall
remain in full force and effect and survive any termination of this Agreement.
8.3 Fees and Expenses.
(a) Except as set forth in this Section 8.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such fees and expenses, whether or not the Merger
is consummated; provided, however, that the Company and the Buyer shall share
equally all fees and expenses, other than accountants' and attorneys' fees,
incurred with respect to the printing, filing and mailing of the Proxy Statement
(including any related preliminary materials) and any amendments or supplements
thereto.
(b) The Company shall pay the Buyer a termination fee of $13.0 million (the
"Termination Fee") and shall pay all of the charges and expenses of the Buyer
actually incurred relating to the transactions contemplated by this Agreement
prior to termination (including, but not limited to, reasonable fees and
expenses of the Buyer's counsel, accountants and financial advisors, but
excluding any discretionary fees paid to such financial advisors) up to a
maximum amount of $2.0 million ("Expenses"), in each case payable by wire
transfer of same day funds in the event:
(i) (A) the Buyer or the Company terminates this Agreement pursuant to
Section 8.1(b) or (d), (B) after the date hereof and prior to such
termination, an Acquisition Proposal was made or publicly disclosed and not
publicly withdrawn in good faith and without qualification prior to, with
respect to any termination pursuant to Section 8.1(b), the date of such
termination and, with respect to any termination pursuant to Section
8.1(d), the fifth (5th) Business Day prior to the date of the Company
Meeting, and (C) within twelve (12) months after such termination, the
Company shall have reached a definitive agreement to consummate, or shall
have consummated, such Acquisition Proposal;
(ii) the Buyer terminates this Agreement pursuant to Section 8.1(e);
or
(iii) the Company terminates this Agreement (A) pursuant to Section
8.1(d) and, prior to the date of the Company Meeting, any event giving rise
to the Buyer's right of termination under Section 8.1(e) shall have
occurred or (B) pursuant to Section 8.1(f).
The Termination Fee due under this Section 8.3(b) shall be paid to the Buyer (x)
in the case of clause (i) above, upon the earlier of the date of the execution
of such definitive agreement and such consummation of an Acquisition Proposal,
(y) in the case of clause (ii) above, within two (2) Business Days after the
date of termination of this Agreement and (z) in the case of clause (iii) above,
upon or prior to termination of this Agreement. The Expenses payable pursuant to
this Section 8.3(b) shall be paid to the Buyer within two (2) Business Days
after demand therefor and delivery to the Company of reasonable documentation
therefor following the execution of a definitive agreement to consummate the
Acquisition Proposal, consummation of the Acquisition Proposal or the occurrence
of the termination event, as the case may be, giving rise to the Termination Fee
payment obligation described in this Section 8.3(b).
(c) The parties acknowledge that the agreements contained in this Section
8.3 are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, the parties would
A-43
not enter into this Agreement. Payment of the Termination Fee and Expenses shall
not be in lieu of damages incurred in the event of a breach of this Agreement
described in clause (a) of Section 8.2, but is otherwise the sole and exclusive
remedy of the parties in connection with any termination of this Agreement. If
the Company fails to pay both the Termination Fee and Expenses in accordance
with Section 8.3(b), and, in order to obtain such payment, the Buyer commences a
suit that results in a judgment against the Company for the Termination Fee
and/or Expenses, the Company shall pay to the Buyer its reasonable costs and
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with such suit, together with interest on the amount of the
Termination Fee and/or Expenses, as the case may be, from the date such payment
was required to be made until the date of payment at the prime rate of Citibank
in effect on the date such payment was required to be made, after delivery to
the Company of reasonable documentation evidencing such costs and expenses.
8.4 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of any party, but, after any such approval, no amendment
shall be made which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended or supplemented
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed but shall not be obligated to, (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements or conditions 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 a written instrument signed on behalf
of such party. Such extension or waiver shall not be deemed to apply to any time
for performance, inaccuracy in any representation or warranty, or noncompliance
with any agreement or condition, as the case may be, other than that which is
specified in the extension or waiver. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS
9.1 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties or agreements in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time, except
for the agreements contained in Article II, Sections 6.8, 6.11 and 6.12 and
Article IX.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly delivered (i) four (4) Business Days after
being sent by registered or certified mail, return receipt requested, postage
prepaid, (ii) one Business Day after being sent for next Business Day delivery,
fees prepaid, via a reputable nationwide overnight courier service, or (iii) on
the date of confirmation of
A-44
receipt (or, the first Business Day following such receipt if the date of such
receipt is not a Business Day) of transmission by facsimile, in each case to the
intended recipient as set forth below:
(a) if to the Buyer or the Transitory Subsidiary, to
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, NY 11749
Attn: General Counsel
Telecopy: (631) 342-4866
with a copy to:
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004
Attn: James C. Morphy, Esq.
Keith A. Pagnani, Esq.
Telecopy: (212) 558-3588
(b) if to the Company, to
Netegrity, Inc.
201 Jones Road
Waltham, MA 02451
Attn: Chief Executive Officer
Telecopy: (781) 697-0400
with a copy to:
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Mark G. Borden, Esq.
Peter N. Handrinos, Esq.
Telecopy: (617) 526-5000
Any party to this Agreement may give any notice or other communication hereunder
using any other means (including personal delivery, messenger service, telex,
ordinary mail or electronic mail), but no such notice or other communication
shall be deemed to have been duly given unless and until it actually is received
by the party for whom it is intended. Any party to this Agreement may change the
address to which notices and other communications hereunder are to be delivered
by giving the other parties to this Agreement notice in the manner herein set
forth.
9.3 Entire Agreement. This Agreement (including the Schedules and Exhibits
hereto and the documents and instruments referred to herein that are to be
delivered at the Closing), the Confidentiality Agreement and the Company
Stockholder Agreements (the "Transaction Documents") constitutes the entire
agreement among the parties with respect to the subject matter of the
Transaction Documents and supersede any prior understandings, agreements or
representations by or among the parties hereto, or any of them, written or oral,
with respect to the subject matter thereof.
9.4 No Third Party Beneficiaries. Notwithstanding anything to the contrary
in this Agreement, (i) except as provided in Section 6.8 (with respect to which
the Indemnified Parties shall be third party beneficiaries), this Agreement is
not intended, and shall not be deemed or construed, to confer any rights or
remedies upon any Person other than the parties hereto and their respective
successors and permitted assigns, to create any agreement of employment with any
Person or to otherwise create any third-party beneficiary hereto and (ii) the
rights of third party beneficiaries under Section 6.8 shall not arise unless and
until the Effective Time occurs.
A-45
9.5 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, and any such assignment without such
prior written consent shall be null and void. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.
9.6 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.
9.7 Counterparts and Signature. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed and delivered by
facsimile transmission.
9.8 Interpretation. When reference is made in this Agreement to an Article
or a Section, such reference shall be to an Article or Section of this
Agreement, unless otherwise indicated. The table of contents, table of defined
terms and headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any party. Whenever the
context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." No summary of this Agreement prepared by any party shall
affect the meaning or interpretation of this Agreement.
9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.
9.10 Remedies. 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. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
9.11 Submission to Jurisdiction. Each of the parties to this Agreement (a)
consents to submit itself to the personal jurisdiction of any state or federal
court sitting in Wilmington, Delaware in any action or
A-46
proceeding arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that all claims in
respect of such action or proceeding may be heard and determined in any such
court, (c) agrees that it shall not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (d)
agrees not to bring any action or proceeding arising out of or relating to this
Agreement or any of the transaction contemplated by this Agreement in any other
court. Each of the parties hereto waives any defense of inconvenient forum to
the maintenance of any action or proceeding so brought and waives any bond,
surety or other security that might be required of any other party with respect
thereto. Any party hereto may make service on another party by sending or
delivering a copy of the process to the party to be served at the address and in
the manner provided for the giving of notices in Section 9.2. Nothing in this
Section 9.11, however, shall affect the right of any party to serve legal
process in any other manner permitted by law.
9.12 WAIVER OF JURY TRIAL. EACH OF THE BUYER, THE TRANSITORY SUBSIDIARY
AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF THE BUYER, THE TRANSITORY SUBSIDIARY OR
THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF
THIS AGREEMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
A-47
IN WITNESS WHEREOF, the Buyer, the Transitory Subsidiary and the Company
have caused this Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
COMPUTER ASSOCIATES INTERNATIONAL,
INC.
By: /s/ RUSSELL ARTZT
--------------------------------------
Title: Executive Vice President
NOVA ACQUISITION CORP.
By: /s/ ROBERT LAMM
--------------------------------------
Title: Vice President & Secretary
NETEGRITY, INC.
By: /s/ BARRY N. BYCOFF
--------------------------------------
Title: Chief Executive Officer
A-48
ANNEX B
[BROADVIEW INTERNATIONAL LETTERHEAD]
October 5, 2004
Board of Directors
Netegrity, Inc.
201 Jones Road
Waltham, MA 02451
Dear Members of the Board:
We understand that Netegrity, Inc. ("Netegrity" or the "Company"), Computer
Associates International, Inc. ("Computer Associates" or "Parent") and Buyer
Subsidiary, Inc., a wholly owned subsidiary of Parent ("Transitory Subsidiary"),
propose to enter into an Agreement and Plan of Merger (the "Agreement") pursuant
to which Transitory Subsidiary will merge with and into Netegrity (the
"Merger"), as a result of which the Company shall continue its existence and
become a wholly owned subsidiary of the Buyer. Pursuant to the Merger, each
issued and outstanding share of Netegrity common stock will be converted into
the right to receive $10.75 in cash (the "Merger Consideration"). The terms and
conditions of the Merger are more fully detailed in the Agreement.
You have requested our opinion as to whether the Merger Consideration is
fair, from a financial point of view, to holders of Netegrity common stock.
Broadview International ("Broadview"), a division of Jefferies & Company,
Inc. ("Jefferies"), focuses on providing merger and acquisition advisory
services to information technology ("IT"), communications, healthcare
technology, and media companies. In this capacity, we are continually engaged in
valuing such businesses, and we maintain an extensive database of IT,
communications, healthcare technology, and media mergers and acquisitions for
comparative purposes. We have in the past provided financial and investment
banking services to the Company and have currently been retained by Netegrity's
Board of Directors to determine the fairness of the Merger Consideration to
holders of Netegrity common stock from a financial point of view and will
receive fees from Netegrity upon the delivery of this opinion and upon
completion of the Merger. In the ordinary course of their businesses, Jefferies
and its affiliates may publish research reports regarding the securities of the
Company and/or Computer Associates and their respective affiliates, may trade or
hold such securities for their own accounts and for the accounts of their
customers and, accordingly, may at any time hold long or short positions in
those securities.
In rendering our opinion, we have, among other things:
1.) reviewed the terms of the Agreement in the form of the draft
furnished to us by the Company's legal counsel on October 5, 2004, which,
for the purposes of this opinion, we have assumed, with your permission, to
be identical in all material respects to the agreement to be executed;
2.) reviewed Netegrity's annual report on Form 10-K for the fiscal
year ended December 31, 2003, including the audited financial statements
included therein, Netegrity's quarterly report on Form 10-Q for the period
ended June 30, 2004, including the unaudited financial statements included
therein and the preliminary revenue results for the quarter ended September
30, 2004 in draft and unaudited form, prepared and furnished to us by
Netegrity management;
3.) reviewed certain internal financial and operating information
concerning Netegrity, including quarterly projections through December 31,
2006, prepared and furnished to us by Netegrity management;
B-1
Netegrity, Inc. Board of Directors
Page 2
4.) participated in discussions with Netegrity management concerning
the operations, business strategy, current financial performance and
prospects for the Company;
5.) discussed with Netegrity management its view of the strategic
rationale for the Merger;
6.) reviewed the recent reported closing prices and trading activity
for Netegrity common stock;
7.) compared certain aspects of Netegrity's financial performance with
public companies we deemed comparable;
8.) analyzed available information, both public and private,
concerning other mergers and acquisitions we believe to be comparable in
whole or in part to the Merger;
9.) reviewed recent equity research analyst reports covering
Netegrity, including quarterly projections through December 31, 2005,
contained therein;
10.) assisted in negotiations and discussions related to the Merger
among Netegrity, Computer Associates and their respective financial and
legal advisors; and
11.) conducted other financial studies, analyses and investigations as
we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification,
on the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by Netegrity or
its advisors. With respect to the financial projections examined by us, we have
assumed, with your permission, that they were reasonably prepared and reflected
the best available estimates and good faith judgments of the management of the
Company as to the future performance of the Company. We have also assumed, with
your permission, that in the course of obtaining the necessary regulatory and
third party approvals, consents and releases for the Merger, no modification,
delay, limitation, restriction or condition will be imposed that will have a
material adverse effect on the Merger and that the Merger will be consummated in
accordance with applicable laws and regulations and the terms of the Merger
Agreement as set forth in the October 5, 2004 draft thereof, without waiver,
amendment or modification of any material term, condition or agreement. Our
opinion does not address the relative merits of the Merger as compared to other
business strategies that might be available to the Company, nor does it address
the underlying business decision of the Company to proceed with the Merger. We
have not made or taken into account any independent appraisal or valuation of
any of Netegrity's assets or liabilities. We express no view as to the federal,
state or local tax consequences of the Merger.
For purposes of this opinion, we have assumed that Netegrity is not
currently involved in any material transaction other than the Merger, other
publicly announced transactions and those activities undertaken in the ordinary
course of conducting its business. Our opinion is necessarily based upon market,
economic, financial and other conditions as they exist and can be evaluated as
of the date of this opinion. It should be understood that, although subsequent
developments may affect this opinion, we have no obligation to update, revise or
reaffirm the opinion.
Based upon and subject to the foregoing qualifications and limitations and
those set forth below, we are of the opinion that, as of the date hereof, the
Merger Consideration is fair, from a financial point of view, to holders of
Netegrity common stock.
This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of Netegrity in
connection with its consideration of the Merger and does not constitute a
recommendation to any holder of Netegrity common stock, or any other person, as
to how such person should vote on the Merger. This opinion may not be used for
any other purpose whatsoever or disclosed, referred to, or communicated (in
whole or in part) to any third party for any purpose
B-2
Netegrity, Inc. Board of Directors
Page 3
whatsoever except with our prior written approval; except that this opinion may
be included in its entirety, if required, in any filing made by the Company in
respect of the Merger with the Securities and Exchange Commission, provided that
this opinion is reproduced in such filing in full and any description of or
reference to us or summary of this opinion and the related analysis in such
filing is in a form acceptable to us and our counsel.
Sincerely,
/s/ BROADVIEW INTERNATIONAL
--------------------------------------
Broadview International
A Division of Jefferies & Company,
Inc.
B-3
ANNEX C
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
SEC. 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 sec. 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 sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 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 sec. 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
sec.sec. 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.
C-1
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 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 sec. 228
or sec. 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,
C-2
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If
no record date is fixed and the notice is given prior to the effective
date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with 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
C-3
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses 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. (8 Del. C. 1953,
sec. 262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186, sec. 24; 57 Del. Laws, c.
148, sec.sec. 27-29; 59 Del. Laws, c. 106, sec. 12; 60 Del. Laws, c. 371,
sec.sec. 3-12; 63 Del. Laws, c. 25, sec. 14; 63 Del. Laws, c. 152, sec.sec. 1,
2; 64 Del. Laws, c. 112, sec.sec. 46-54; 66 Del. Laws, c. 136, sec.sec. 30-32;
66 Del. Laws, c. 352, sec. 9; 67 Del. Laws, c. 376, sec.sec. 19, 20; 68 Del.
Laws, c. 337, sec.sec. 3, 4; 69 Del. Laws, c. 61, sec. 10; 69 Del. Laws, c. 262,
sec.sec. 1-9; 70 Del. Laws, c. 79, sec. 16; 70 Del. Laws, c. 186, sec. 1; 70
Del. Laws, c. 299, sec.sec. 2, 3; 70 Del. Laws, c. 349, sec. 22; 71 Del. Laws,
c. 120, sec. 15; 71 Del. Laws, c. 339, sec.sec. 49-52; 73 Del. Laws, c. 82,
sec. 21.)
C-4
Appendix
PROXY
NETEGRITY, INC.
SPECIAL MEETING OF STOCKHOLDERS
__________, 2004
By signing on the reverse side, the undersigned hereby appoints Barry N.
Bycoff, Regina O. Sommer and M. Colette Cooke, and each of them, as proxies,
with full power of substitution, to vote all shares of capital stock of
Netegrity, Inc. (the "Company") which the undersigned is entitled to vote as
indicated upon the matters on the reverse side at the Special Meeting of
Stockholders of the Company to be held on ____________, 2004, at 9:00 a.m.,
local time, at the offices of Wilmer Cutler Pickering Hale and Dorr LLP located
at 60 State Street, Boston, MA 02109 and at any adjournments thereof. You can
revoke your proxy at any time before it is voted at the Special Meeting by: (i)
submitting another properly completed proxy bearing a later date; (ii) giving
written notice of revocation to any of the persons named as proxies or to the
Secretary of Netegrity; (iii) if you submitted a proxy through the Internet or
by telephone, by submitting a proxy again through the Internet or telephone
prior to the close of the Internet voting facility or the telephone voting
facility; or (iv) voting in person at the Special Meeting. If the undersigned
holds any of the shares of common stock in a fiduciary, custodial or joint
capacity or capacities, this proxy is signed by the undersigned in every such
capacity as well as individually.
The undersigned acknowledges receipt from Netegrity, Inc. prior to the
execution of this proxy of a Notice of Special Meeting of Stockholders and a
proxy statement dated ____________, 2004.
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PLEASE ACT PROMPTLY
DATE AND SIGN THIS PROXY IN THE SPACE PROVIDED AND RETURN IT IN THE
ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON.
--------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE DO YOU HAVE ANY COMMENTS?
CORRECT THE ADDRESS IN THE SPACE
PROVIDED BELOW AND RETURN THIS
PORTION IN THE ENVELOPE PROVIDED.
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
NETEGRITY, INC.
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
----------------------------------
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YOUR VOTE IS IMPORTANT. PLEASE VOTE IMMEDIATELY.
------------------------------------ ----------------------------------
VOTE-BY-INTERNET [COMPUTER ICON] OR VOTE-BY-TELEPHONE [PHONE ICON]
LOG ON TO THE INTERNET AND GO TO CALL TOLL-FREE
HTTP://WWW.EPROXYVOTE.COM/NETE 1-877-PRX-VOTE (1-877-779-8683)
------------------------------------ ----------------------------------
IF YOU VOTE OVER THE INTERNET OR BY TELEPHONE, PLEASE DO NOT MAIL YOUR CARD.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 1 AND
PROPOSAL 2.
1. Adoption of the Agreement and Plan of Merger, FOR AGAINST ABSTAIN
dated as of October 6, 2004, by and among [ ] [ ] [ ]
Computer Associates International, Inc., Nova
Acquisition Corp. and Netegrity, Inc., as more
fully described in the accompanying proxy
statement.
2. To act upon such other business as may [ ] [ ] [ ]
properly come before the Special Meeting or
any adjournment or postponement of the
meeting, including to consider any
procedural matters incident to the conduct
of the Special Meeting, such as adjournment
or postponement to solicit additional
proxies in favor of the proposal to adopt
the Agreement and Plan of Merger
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE
SHARES REPRESENTED WILL BE VOTED FOR THE PROPOSAL. IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Mark box at right if you plan to attend the Special Meeting. [ ]
Mark box at right if an address change or comment has been [ ]
noted on the reverse side of this card.
Please sign this proxy exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, administrator,
trustee, guardian, or other fiduciary please give full title as such. If a
corporation, please sign in corporate name, by authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature:______________ Date:________ Signature:______________ Date:________