EXHIBIT 2.01
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
VERISIGN, INC.,
VERISIGN MERGER CORP.
SECUREIT, INC.
AND
SHAREHOLDERS OF SECUREIT, INC.
JULY 6, 1998
TABLE OF CONTENTS
Page
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1. PLAN OF REORGANIZATION................................. 1
1.1 The Merger....................................... 1
1.2 Escrow Agreement................................. 3
1.3 Exchange of Certificates......................... 4
1.4 Effects of the Merger............................ 5
1.5 Further Assurances............................... 5
1.6 Securities Law Issues............................ 5
1.7 S-3 Registration Rights.......................... 6
1.8 Listing of Additional Shares..................... 6
1.9 Form S-8 Registration............................ 6
1.10 Tax-Free Reorganization.......................... 6
1.11 Pooling of Interests............................. 7
2. REPRESENTATIONS AND WARRANTIES OF SECUREIT AND
THE SECUREIT SHAREHOLDERS........................ 7
2.1 Organization and Good Standing................... 7
2.2 Power, Authorization and Validity................ 7
2.3 Capitalization................................... 8
2.4 Subsidiaries..................................... 9
2.5 No Violation of Existing Agreements.............. 9
2.6 Litigation....................................... 9
2.7 SecureIT Financial Statements.................... 10
2.8 Taxes............................................ 10
2.9 Title to Properties.............................. 11
2.10 Absence of Certain Changes....................... 12
2.11 Agreements and Commitments....................... 13
2.12 Intellectual Property............................ 15
2.13 Compliance with Laws............................. 16
2.14 Certain Transactions and Agreements.............. 17
2.15 Employees........................................ 17
2.16 Corporate Documents.............................. 19
2.17 No Brokers....................................... 19
2.18 Disclosure....................................... 20
2.19 Books and Records................................ 20
2.20 Insurance........................................ 20
2.21 Environmental Matters............................ 20
2.22 Government Contracts............................. 21
2.23 Investor Representations......................... 22
3. REPRESENTATIONS AND WARRANTIES OF VERISIGN................... 25
3.1 Organization and Good Standing......................... 25
3.2 Power, Authorization and Validity...................... 25
3.3 No Violation of Certificate of Incorporation or Laws... 25
3.4 Capitalization......................................... 26
3.5 Disclosure............................................. 26
3.6 No Undisclosed Liabilities............................. 26
3.7 Absence of Certain Changes or Events................... 26
3.8 Validity of Shares..................................... 26
4. DOCUMENTS DELIVERED TO SECUREIT.............................. 27
4.1 Accuracy of Representations and Warranties............. 27
4.2 VeriSign Affiliates Agreements......................... 27
4.3 Opinion of VeriSign's Counsel.......................... 27
4.4 Registration Rights Agreement.......................... 27
4.5 Requisite Approvals.................................... 27
4.6 Tax Opinion............................................ 27
4.7 Pooling Letter......................................... 27
4.8 Escrow................................................. 27
4.9 Employment and Non-Competition Agreements.............. 28
4.10 Certificate of Merger.................................. 28
4.11 Tax Representation Certificates........................ 28
5. DOCUMENTS DELIVERED TO VERISIGN.............................. 28
5.1 Accuracy of Representations and Warranties............. 28
5.2 No Material Adverse Change............................. 28
5.3 SecureIT Affiliates Agreements......................... 28
5.4 Opinion of SecureIT's Counsel.......................... 28
5.5 Registration Rights Agreement.......................... 28
5.6 Requisite Approvals.................................... 28
5.7 Tax Opinion............................................ 28
5.8 Pooling Letter......................................... 29
5.9 Escrow................................................. 29
5.10 Employment and Non-Competition Agreements.............. 29
5.11 Certificate of Merger.................................. 29
5.12 Tax Representation Certificates........................ 29
5.13 Resignation of Directors and Officers.................. 29
5.14 Financial Statements................................... 29
5.15 Non-Competition Agreement.............................. 29
6. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND
REMEDIES, CONTINUING COVENANTS..................... 29
6.1 Survival of Representations........................ 29
6.2 Indemnification by SecureIT Shareholders........... 29
7. MISCELLANEOUS............................................ 32
7.1 Governing Law; Dispute Resolution.................. 32
7.2 Assignment; Binding upon Successors and Assigns.... 34
7.3 Severability....................................... 34
7.4 Counterparts....................................... 34
7.5 Other Remedies..................................... 34
7.6 Amendment and Waivers.............................. 34
7.7 No Waiver.......................................... 34
7.8 Expenses........................................... 34
7.9 Notices............................................ 35
7.10 Construction of Agreement.......................... 35
7.11 No Joint Venture................................... 36
7.12 Further Assurances................................. 36
7.13 Absence of Third Party Beneficiary Rights.......... 36
7.14 Public Announcement................................ 36
7.15 Confidentiality.................................... 36
7.16 Entire Agreement................................... 37
7.17 Post-Closing Covenant.............................. 37
Exhibits
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Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Registration Rights Agreement
Exhibit D SecureIT Affiliate Agreement
Exhibit E VeriSign Affiliate Agreement
Exhibit F Employment and Non-Competition Agreements
Exhibit G Non-Competition Agreement
Exhibit 1.10 Officers' Tax Representation Certificate
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is entered
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into as of July 6, 1998 ("Effective Date"), by and among VeriSign, Inc., a
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Delaware corporation ("VeriSign"), VeriSign Merger Corp., a Georgia corporation
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and wholly owned subsidiary of VeriSign ("Newco"), SecureIT, Inc., a Georgia
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corporation ("SecureIT"), and the undersigned shareholders of SecureIT (the
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"SecureIT Shareholders").
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RECITALS
A. Newco will merge with and into SecureIT in a reverse triangular
merger (the "Merger"), with SecureIT to be the surviving corporation of the
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Merger, all pursuant to the terms and conditions of this Agreement and the
Certificate of Merger in the form of Exhibit A hereto (the "Certificate of
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Merger") and the applicable provisions of the laws of Georgia. Upon the
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effectiveness of the Merger, the outstanding capital stock of SecureIT will be
converted into shares of Common Stock of VeriSign and outstanding stock options
to purchase shares of capital stock of SecureIT will be assumed by VeriSign and
converted into options to purchase shares of Common Stock of VeriSign, in the
manner and on the basis determined herein and as provided in the Certificate of
Merger.
B. The Merger is intended to be treated as a "pooling of interests" for
accounting and financial reporting purposes and a tax-free reorganization
pursuant to the provisions of Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"), by virtue of the provisions of Section
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368(a)(2)(E) of the Code.
NOW, THEREFORE, in consideration of the above-recited facts and the mutual
promises, covenants and conditions contained herein, the parties hereto agree as
follows:
1. PLAN OF REORGANIZATION
1.1 The Merger. The Certificate of Merger has been filed with the
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Secretary of State of the State of Georgia on the Effective Date. The effective
time of the Merger (the "Effective Time") will occur as specified in the
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Certificate of Merger or upon the filing of the Certificate of Merger. Subject
to the terms and conditions of this Agreement and the Certificate of Merger,
Newco will be merged with and into SecureIT in a statutory merger pursuant to
the Certificate of Merger and in accordance with the applicable provisions of
Georgia laws as follows:
1.1.1 Conversion of SecureIT Shares. Each share of common
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stock, no par value of SecureIT (the "SecureIT Common Stock"), that is issued
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and outstanding immediately prior to the Effective Time will, by virtue of the
Merger and at the Effective Time,
and without further action on the part of any holder thereof, be converted into
a number of fully paid and nonassessable shares of Common Stock, $0.001 par
value of VeriSign ("VeriSign Common Stock") that is equal to the Conversion
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Ratio (as defined in Section 1.1.2 below), subject to the provisions of Section
1.1.3 regarding the elimination of fractional shares.
1.1.2 Conversion Ratio. The "Conversion Ratio" for the conversion of
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SecureIT Common Stock means 0.164806 of a share of VeriSign Common Stock for
each share of SecureIT Common Stock, provided, however, that in no event shall
the number of shares of VeriSign Common Stock issued or issuable by VeriSign
under this Agreement exceed 1,875,000.
1.1.3 Fractional Shares. No fractional shares of VeriSign Common
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Stock will be issued in connection with the Merger, but in lieu thereof, the
holder of any shares of SecureIT Common Stock who would otherwise be entitled to
receive a fraction of a share of VeriSign Common Stock pursuant to Section
1.1.1, after aggregating all shares of VeriSign Common Stock to be received by
such holder pursuant to Section 1.1.1, will receive from VeriSign, promptly
after the Effective Time, an amount of cash equal to the per share market value
of VeriSign Common Stock (based on the closing sale price of VeriSign Common
Stock on the last trading day prior to the Effective Date, as quoted on the
Nasdaq National Market and as reported in the Wall Street Journal (the "Closing
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Price") multiplied by the fraction of a share of VeriSign Common Stock to which
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such holder would otherwise be entitled.
1.1.4 Conversion of Newco Shares. Each share of Newco Common Stock,
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no par value ("Newco Common Stock"), that is issued and outstanding immediately
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prior to the Effective Time will, by virtue of the Merger and without further
action on the part of the sole stockholder of Newco, be converted into and
become one (1) share of SecureIT Common Stock that is issued and outstanding
immediately after the Effective Time, and the share of SecureIT Common Stock
into which the shares of Newco Common Stock are so converted shall be the only
share of capital stock of SecureIT that is issued and outstanding immediately
after the Effective Time.
1.1.5 Assumption and Conversion of SecureIT Options. Each option
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issued by SecureIT heretofore to acquire SecureIT Common Stock ("SecureIT
Option") that is outstanding immediately prior to the Effective Time will, by
virtue of the Merger and at the Effective Time and without any further action on
the part of any holder thereof, be assumed by VeriSign and converted into an
option (a "VeriSign Option") to purchase that number of shares of VeriSign
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Common Stock determined by multiplying the number of shares of SecureIT Common
Stock subject to such SecureIT Option immediately prior to the Effective Time by
the Conversion Ratio, at an exercise price per share of VeriSign Common Stock
equal to the exercise price per share of SecureIT Common Stock that was in
effect for such SecureIT Option immediately prior to the Effective Time divided
by the Conversion Ratio; provided, however, that if the foregoing calculation
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would result in an assumed and converted SecureIT Option being converted into a
VeriSign Option that, after aggregating all the shares of VeriSign Common Stock
issuable upon the exercise of such VeriSign Option, would be exercisable for a
fraction of a share of VeriSign Common Stock, then the number of shares of
VeriSign Common Stock
subject to such VeriSign Option will be rounded down to the nearest whole number
of shares of VeriSign Common Stock. The terms, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the Code (if
applicable) or as a nonqualified stock option, and all other terms and
conditions of each SecureIT Option that is converted into an VeriSign Option in
the Merger will (except as otherwise provided in the terms of such SecureIT
Options), to the extent permitted by law and otherwise reasonably practicable,
be unchanged and continue in effect after the Merger. Pre-Merger employment
service with SecureIT will be credited to each holder of a SecureIT Option for
purposes of applying any vesting schedule contained in a SecureIT Option to
determine the number of shares of VeriSign Common Stock that are exercisable
under the VeriSign Option into which such SecureIT Option is converted in the
Merger.
1.2 Escrow Agreement.
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1.2.1 Escrow. At the Effective Time, VeriSign will withhold 176,619
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shares of VeriSign Common Stock to be issued to the SecureIT Shareholders in the
Merger pursuant to Section 1.1.1 (the "Escrow Shares") and will deliver
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certificates representing such Escrow Shares to Chase Manhattan Bank & Trust
Company N.A., San Francisco, California, or a similar institution, as escrow
agent (the "Escrow Agent"), together with related stock transfer powers, to be
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held by the Escrow Agent as security for the SecureIT Shareholders'
indemnification obligations under Section 6 and pursuant to the provisions of an
escrow agreement in substantially the form of Exhibit B entered into by
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VeriSign, the Escrow Agent, the SecureIT Shareholders and the Representative (as
defined in Section 1.2.2 below) (the "Escrow Agreement"). The Escrow Shares
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will be represented by a certificate or certificates issued in the names of the
SecureIT Shareholders in proportion to their respective interests therein and
will be held by the Escrow Agent during the time periods specified in the Escrow
Agreement.
1.2.2 Escrow Agreement Representative. By their approval of the
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Merger, the SecureIT Shareholders will be conclusively deemed to have consented
to, approved and agreed to be personally bound by: (i) the indemnification
provisions of Section 6; (ii) the Escrow Agreement; and (iii) the appointment of
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as the representative of the SecureIT Shareholders (the
"Representative") under the Escrow Agreement and as the attorney-in-fact and
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agent for and on behalf of each SecureIT Shareholder as provided in the Escrow
Agreement; and (iv) the taking by the Representative of any and all actions and
the making of any decisions required or permitted to be taken by the
Representative under the Escrow Agreement, including, without limitation, the
exercise of the power to: (a) authorize delivery to VeriSign of Escrow Shares
in satisfaction of indemnity claims by VeriSign or any other Indemnified Person
(as defined herein) pursuant to Section 6 hereof and/or the Escrow Agreement;
(b) agree to, negotiate, enter into settlements and compromises of, demand
arbitration of, and comply with orders of courts and awards of arbitrators with
respect to, such claims; (c) arbitrate, resolve, settle or compromise any claim
for indemnity made pursuant to Section 6; and (d) take all actions necessary in
the judgment of the Representative for the accomplishment of the foregoing. The
Representative will have unlimited authority and power
to act on behalf of each SecureIT Shareholder with respect to the Escrow
Agreement and the disposition, settlement or other handling of all claims
governed by the Escrow Agreement, and all rights or obligations arising under
the Escrow Agreement so long as all SecureIT Shareholders are treated in the
same manner. The SecureIT Shareholders will be bound by all actions taken by the
Representative in connection with the Escrow Agreement, and VeriSign will be
entitled to rely on any action or decision of the Representative. In performing
the functions specified in this Agreement and the Escrow Agreement, the
Representative will not be liable to any SecureIT Shareholder in the absence of
gross negligence or willful misconduct. Any out-of-pocket costs and expenses
reasonably incurred by the Representative in connection with actions taken
pursuant to the terms of the Escrow Agreement will be paid by the SecureIT
Shareholders to the Representative pro rata in proportion to their respective
percentage interests in the Escrow Shares.
1.3 Exchange of Certificates. At and after the Effective Time, each
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certificate representing outstanding shares of SecureIT Common Stock will
represent the number of shares of VeriSign Common Stock into which such shares
of SecureIT Common Stock have been converted, and such shares of VeriSign Common
Stock will be deemed registered in the name of the holder of such certificate.
As soon as practicable after the Effective Time, each holder of shares of
SecureIT Common Stock will surrender (a) the certificates for such shares (the
"SecureIT Certificates") to VeriSign for cancellation or (b) an affidavit of
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lost certificate (or nonissued) and a bond in form reasonably satisfactory to
VeriSign or its transfer agent (a "Bond"). Promptly following the Effective
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Time and receipt of the SecureIT Certificates and/or the Bonds, VeriSign will
cause its transfer agent to issue to such surrendering holder certificate(s) for
the number of shares of VeriSign Common Stock to which such holder is entitled
pursuant to Section 1.1.1, subject to Section 1.1.3 hereof, less the shares of
VeriSign Common Stock deposited into escrow pursuant to Section 1.2 hereof, and
VeriSign or its transfer agent will pay by check to each tendering holder cash
in lieu of fractional shares in the amount payable to such holder under Section
1.1.3.
1.3.1 All shares of VeriSign Common Stock (and, if applicable,
cash in lieu of fractional shares) delivered upon the surrender of SecureIT
Certificates in accordance with the terms hereof will be delivered to the
registered holder or placed in escrow with the Escrow Agent, as applicable.
After the Effective Time, there will be no further registration of transfers of
the shares of SecureIT Common Stock on the stock transfer books of SecureIT. If,
after the Effective Time, SecureIT Certificates are presented for transfer or
for any other reason, they will be canceled and exchanged and certificates
therefor will be delivered or placed in escrow as provided in Section 1.2
Notwithstanding anything herein to the contrary, except to the extent waived by
VeriSign, any SecureIT Certificate that is not properly submitted to VeriSign
for exchange and cancellation within three years after the Effective Time shall
no longer evidence ownership of or any right to receive shares of VeriSign
Common Stock and all rights of the holder of such SecureIT Certificate, with
respect to the shares previously evidenced by such SecureIT Certificate, shall
cease.
1.3.2 Until SecureIT Certificates representing SecureIT Common
Stock outstanding prior to the Merger are surrendered pursuant to Section 1.3
above, such certificates will be deemed, for all purposes, to evidence ownership
of (a) the number of shares of VeriSign Common Stock into which the shares of
SecureIT Common Stock will have been converted, subject to the obligation to
place a portion thereof in escrow as required hereby, and (b) if applicable,
cash in lieu of fractional shares.
1.4 Effects of the Merger. At the Effective Time: (a) the separate
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existence of Newco will cease and Newco will be merged with and into SecureIT
and SecureIT will be the surviving corporation of the Merger (the "Surviving
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Corporation") pursuant to the terms of this Agreement and the Certificate of
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Merger; (b) the Articles of Incorporation and Bylaws of Newco will continue
unchanged as the Articles of Incorporation and Bylaws of the Surviving
Corporation; (c) each share of SecureIT Common Stock and each SecureIT Option
that is outstanding immediately prior to the Effective Time will be converted
into VeriSign Common Stock or a VeriSign Option, respectively, as provided in
this Section 1 and the Certificate of Merger; (d) each share of Newco Common
Stock outstanding immediately prior to the Effective Time will be converted into
one (1) outstanding share of SecureIT Common Stock; (e) the directors of Newco
will be the directors of the Surviving Corporation; (f) the officers of Newco
will be the officers of the Surviving Corporation, (g) the Merger will, at and
after the Effective Time, have all of the effects provided by applicable law.
1.5 Further Assurances. SecureIT and each of the SecureIT
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Shareholders agree that if, at any time after the Effective Time, VeriSign
considers or is advised that any further deeds, assignments, instruments or
assurances are reasonably necessary or desirable to consummate the Merger or to
carry out the purposes and intent of this Agreement at or after the Effective
Time, then VeriSign, the Surviving Corporation, and their respective officers
and directors may, and each SecureIT Shareholder will, execute and deliver all
such proper deeds, assignments, instruments and assurances and do all other
things necessary or desirable to consummate the Merger and to carry out the
purposes of this Agreement, in the name of SecureIT or otherwise. VeriSign
shall reimburse the SecureIT Shareholders for all reasonable expenses incurred
after the Effective Time in complying with the obligations hereunder, provided
however that the SecureIT Shareholders shall be responsible for any expenses
incurred by them with respect to any audits by the Internal Revenue Service or
any state taxing agency or authority for tax years or periods prior to the
Effective Time and with respect to the preparation of each such SecureIT
Shareholder's tax return with respect to the tax year of SecureIT ended at the
Effective Time.
1.6 Securities Law Issues. Based in part on the representations of
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the SecureIT Shareholders herein, the VeriSign Common Stock and the VeriSign
Options to be issued in the Merger will be issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and/or Regulation D promulgated under the Securities Act and
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applicable state securities laws.
1.7 S-3 Registration Rights. Effective upon the Effective Time, each
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SecureIT Shareholder who receives shares of VeriSign Common Stock in the Merger
pursuant to Section 1.1.1 will be granted registration rights on Form S-3 under
the Securities Act on the terms, and subject to the conditions and limitations,
of the Registration Rights Agreement attached hereto as Exhibit C (the
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"Registration Rights Agreement") upon such SecureIT Shareholder's execution and
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delivery of such Registration Rights Agreement to VeriSign.
1.8 Listing of Additional Shares. On the Effective Date, or as soon
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thereafter as practicable, VeriSign agrees to file with the Nasdaq National
Market a Notification Form for Listing of Additional Shares with respect to the
shares of VeriSign Common Stock being issued upon conversion of the SecureIT
Common Stock in the Merger and upon exercise of the VeriSign Options to be
issued in the Merger upon conversion of outstanding SecureIT Options.
1.9 Form S-8 Registration. VeriSign will (with the cooperation and
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assistance of SecureIT and the SecureIT Shareholders) cause the shares of
VeriSign Common Stock that are subject to the VeriSign Options that are to be
issued upon the conversion of the SecureIT Options under Section 1.1.4 to be
registered on a registration statement on Form S-8 (or successor form)
promulgated by the Securities and Exchange Commission ("SEC") under the
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Securities Act, as soon as reasonably practicable after the Effective Time, and
will use its best efforts to maintain the effectiveness of such Form S-8
registration statement or registration statements for so long as such VeriSign
Options remain outstanding and VeriSign Common Stock is registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"). VeriSign will use
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its best efforts to file a Form S-8 registration statement covering the shares
of VeriSign Common Stock that are subject to the VeriSign Options referred to
above within five (5) business days after the Effective Time.
1.10 Tax-Free Reorganization. The parties intend to adopt this
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Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code, by virtue of
the provisions of Section 368(a)(2)(E) of the Code. The shares of VeriSign
Common Stock issued in the Merger will be issued solely in exchange for the
issued and outstanding shares of SecureIT Common Stock pursuant to this
Agreement, and no other transaction other than the Merger represents, provides
for or is intended to be an adjustment to the consideration paid for the
SecureIT Common Stock. Except for cash paid in lieu of fractional shares, no
consideration that could constitute "other property" within the meaning of
Section 356 of the Code will be paid by VeriSign for shares of SecureIT Common
Stock in the Merger. In addition, VeriSign represents that it presently
intends, and that at the Effective Time it will intend, to continue SecureIT's
historic business or use a significant portion of SecureIT's business assets in
a business. On the Effective Date, the officers of VeriSign and officers of
SecureIT have executed and delivered officers' tax representation certificates
in the form of Exhibit 1.10, and the representations and other statements set
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forth therein are incorporated in this Agreement by this reference to the same
extent as if VeriSign or SecureIT, respectively, had made such statements
herein. Notwithstanding anything to the contrary herein, VeriSign makes no
representation or warranty to SecureIT or to any SecureIT Shareholder regarding
the tax treatment of the Merger or whether the Merger will qualify as a tax-free
plan of
reorganization under the Code. Each SecureIT Shareholder agrees to rely on such
SecureIT Shareholder's own tax advisers as to the tax attributes of the Merger
to such SecureIT Shareholder and understands that neither VeriSign's legal
counsel and accountants nor SecureIT has guaranteed nor will guarantee to such
SecureIT Shareholder that the Merger will be a tax-free reorganization.
1.11 Pooling of Interests. The parties acknowledge that, as a
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material inducement to VeriSign to enter into this Agreement and consummate the
Merger, the Merger is intended to be treated as a "pooling of interests" for
accounting and financial reporting purposes. Accordingly, concurrently with the
execution of this Agreement, each SecureIT Shareholder shall execute and deliver
to VeriSign a SecureIT Affiliate Agreement in the form of Exhibit D hereto (the
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"SecureIT Affiliate Agreement"). Such agreement shall provide that, among other
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things, such affiliates have not made and will not make any disposition (a) of
SecureIT Common Stock or of VeriSign Common Stock in the 30-day period prior to
the Effective Time or (b) of VeriSign Common Stock after the Effective Time
until VeriSign shall have publicly released its first report of quarterly
financial statements that include the combined financial results of VeriSign and
SecureIT for a period of at least 30 days of combined operations.
2. REPRESENTATIONS AND WARRANTIES OF SECUREIT AND THE SECUREIT
SHAREHOLDERS
SecureIT and the SecureIT Shareholders hereby jointly and severally
represent and warrant to VeriSign as follows:
2.1 Organization and Good Standing. SecureIT is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Georgia, has the corporate power and authority to own, operate and lease its
properties, and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to transact business as a foreign corporation in
each jurisdiction in which its failure to be so qualified would have a Material
Adverse Effect. As used in this Agreement, the term "Material Adverse Effect",
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when used with reference to SecureIT, means any event, change, or effect that is
(or will with the passage of time be) materially adverse to SecureIT's condition
(financial or otherwise), properties, assets, liabilities, business, operations
and results of operations.
2.2 Power, Authorization and Validity.
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2.2.1 SecureIT has the corporate right, power, legal capacity
and authority to enter into, execute, deliver, and perform its obligations under
this Agreement and all agreements to which SecureIT is or will be a party that
are contemplated under this Agreement (the "SecureIT Ancillary Agreements") and
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to consummate the Merger. This Agreement and the SecureIT Ancillary Agreements,
and the execution, delivery and performance thereof by SecureIT, have been duly
and validly approved by the SecureIT Board of Directors and the shareholders of
SecureIT, as required by applicable law and the Articles of Incorporation and
Bylaws of SecureIT, both as currently in effect. Each of the SecureIT
Shareholders has the right, power, legal capacity and authority to enter into,
execute, deliver and perform such SecureIT
Shareholder's obligations under this Agreement and each agreement to which such
SecureIT Shareholder is or will be a party that is required to be executed
pursuant to this Agreement (a "SecureIT Shareholder Ancillary Agreement").
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2.2.2 No filing, authorization, consent, order or approval,
governmental or otherwise, is necessary to enable SecureIT, or any SecureIT
Shareholder, to enter into, and to perform its or his respective obligations
under, this Agreement and each of the SecureIT Ancillary Agreements and each of
the SecureIT Shareholder Ancillary Agreements, except for (a) the filing of the
Certificate of Merger with the Secretary of State of the State of Georgia, the
filing of such other documents as are required to effectuate the Merger under
Georgia law and the filing of appropriate documents with the relevant
authorities of the states other than Georgia in which SecureIT is qualified to
do business, if any, (b) such filings as may be required to comply with federal
and state securities laws, and (c) consents required under contracts disclosed
in Schedule 2.5 to the letter addressed to VeriSign and dated as of the date of
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this Agreement delivered by SecureIT to VeriSign concurrently herewith (the
"SecureIT Disclosure Letter") as exceptions to the representation made in the
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last sentence of Section 2.5 below.
2.2.3 This Agreement and the SecureIT Ancillary Agreements are
valid and binding obligations of SecureIT enforceable against SecureIT in
accordance with their respective terms, except as such enforceability may be
limited by (a) applicable bankruptcy and other similar laws affecting the rights
of creditors generally and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies. This Agreement and each of the
SecureIT Shareholder Ancillary Agreements are, or when executed by a SecureIT
Shareholder will be, a valid and binding obligation of such SecureIT
Shareholder, enforceable against such SecureIT Shareholder in accordance with
their respective terms, subject only to the limitation on enforceability by (a)
applicable bankruptcy and other similar laws affecting the rights of creditors
generally, and (b) rules of law governing specific performance, injunctive
relief and other equitable remedies.
2.3 Capitalization.
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(a) Authorized/Outstanding Capital Stock. The authorized capital
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stock of SecureIT consists of 12,000,000 shares of SecureIT Common Stock, no par
value. 10,110,000 shares of SecureIT Common Stock are issued and outstanding as
of the Effective Date, all of which are held of record and owned as set forth on
Schedule 2.3(a) to the SecureIT Disclosure Letter. No shares of preferred stock
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are authorized, issued or outstanding. All issued and outstanding shares of
SecureIT Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable, and, except as set forth in Schedule 2.3(a), are not
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subject to any claim, lien, preemptive right, right of first refusal, right of
first offer, co-sale right or right of rescission and have been offered, issued,
sold and delivered by SecureIT in compliance with all registration or
qualification requirements (or applicable exemptions therefrom) of applicable
federal and state securities laws. SecureIT has no shareholders other than the
SecureIT Shareholders. During the two year period immediately prior to the date
of this
Agreement, SecureIT has not redeemed, repurchased or otherwise reacquired any
shares of its capital stock from any shareholder of SecureIT, except as set
forth in Schedule 2.3(a).
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(b) Options/Rights. Except for SecureIT Options to purchase an
--------------
aggregate of 1,267,000 shares of SecureIT Common Stock that are outstanding
under the SecureIT 1997 Stock Option Plan as of the Effective Date, there are no
stock appreciation rights, options, warrants, convertible securities, or other
securities, calls, commitments, conversion privileges, preemptive or other
rights or agreements outstanding to purchase or otherwise acquire any of
SecureIT's authorized but unissued capital stock; there are no options,
warrants, convertible securities, or other securities, calls, commitments,
conversion privileges, preemptive or other rights or agreements, to the best of
SecureIT's knowledge, involving the purchase or other acquisition of any
outstanding shares of SecureIT capital stock; there is no liability for
dividends accrued but unpaid; and there are no voting agreements, voting trusts,
registration rights, or other restrictions (other than normal restrictions on
transfer under applicable federal and state securities laws) applicable to any
of SecureIT's outstanding securities. A list of all holders of the SecureIT
Options, the number of SecureIT Options held by each such person, and the
exercise price and vesting schedule of each SecureIT Option held by each such
person, is set forth in Schedule 2.3(b) to the SecureIT Disclosure Letter.
---------------
Except as set forth in Schedule 2.3(b), during the two year period immediately
---------------
prior to the Effective Date, SecureIT has not authorized, or taken any action to
authorize, the acceleration of the time during which any holder of any option,
warrant or other right to purchase or acquire any share of capital stock of
SecureIT may exercise such option, warrant or right.
2.4 Subsidiaries. SecureIT does not have any subsidiaries or any
------------
equity interest, direct or indirect, in any corporation, partnership, limited
liability company, joint venture or other business entity.
2.5 No Violation of Existing Agreements. Neither the execution and
-----------------------------------
delivery of this Agreement nor any SecureIT Ancillary Agreement, nor the
consummation of the transactions provided for herein or therein, will conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, (a) any provision of the
Articles of Incorporation or Bylaws of SecureIT, as currently in effect, (b) any
material instrument, agreement, contract, undertaking, understanding or
commitment (whether verbal or in writing) to which SecureIT is a party or by
which SecureIT or any of its assets are bound, or (c)any federal, state, local
or foreign judgment, writ, decree, order, statute, rule or regulation applicable
to SecureIT or its assets or properties. The consummation of the Merger and
succession by VeriSign to all rights, licenses, franchises, leases and
agreements of SecureIT in and of themselves will not require the consent of any
third party and will not have a material adverse effect upon any such rights,
licenses, franchises, leases or agreements pursuant to the terms of those
agreements other than as set forth in Schedule 2.5 to the SecureIT Disclosure
------------
Letter.
2.6 Litigation. Except as set forth in Schedule 2.6 to the SecureIT
---------- ------------
Disclosure Letter, there is no action, claim, suit, arbitration, mediation,
proceeding or investigation pending
or, to the best of SecureIT's knowledge, threatened against SecureIT before any
court, arbitrator or administrative agency that, if determined adversely to
SecureIT, may have a Material Adverse Effect or in which the adverse party or
parties seek to recover in excess of $25,000 against SecureIT. There is no basis
for any person, firm, corporation or entity to assert a claim against SecureIT
or VeriSign as successor in interest to SecureIT based upon: (a) ownership or
rights to ownership of any shares of SecureIT Common Stock, (b) any rights as a
SecureIT securities holder, including, without limitation, any option or other
right to acquire any SecureIT securities, any preemptive rights or any rights to
notice or to vote, (c) any rights under any agreement between SecureIT and any
SecureIT securities holder or former SecureIT securities holder in such holder's
capacity as such, or (d) SecureIT entering into this Agreement or any SecureIT
Ancillary Agreement or the consummation of any of the transactions contemplated
herein or therein. There is no judgment, decree, injunction, rule or order of
any governmental entity, court or arbitrator outstanding against SecureIT.
2.7 SecureIT Financial Statements. SecureIT has delivered to
-----------------------------
VeriSign as Schedule 2.7 to the SecureIT Disclosure Letter SecureIT's audited
------------
balance sheet as of December 31, 1997, SecureIT's audited statement of income,
statement of cash flows and statement of stockholders' equity for the period
from SecureIT's inception through December 31, 1997, SecureIT's unaudited
balance sheet (the "Balance Sheet") as of March 31, 1998 (the "Balance Sheet
------------- -------------
Date") and SecureIT's unaudited statement of income, statement of cash flows and
----
statement of stockholders' equity for the three month period ended March 31,
1998 (collectively, the "SecureIT Financial Statements"). The SecureIT
-----------------------------
Financial Statements for the period ended March 31, 1998 have been reviewed by
SecureIT's independent accountants. The SecureIT Financial Statements (a) are
derived from and in accordance with the books and records of SecureIT and (b)
present fairly in all material respects the financial condition of SecureIT at
the respective dates specified therein and the results of operations for the
respective periods specified therein in accordance with generally accepted
accounting principles ("GAAP") applied consistently, except that the interim
----
financial statements may not contain any year-end adjustments and any or all
footnotes required by GAAP. Except as set forth in Schedule 2.7 to the SecureIT
------------
Disclosure Letter, SecureIT has no material debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, that is not reflected, reserved against or disclosed in the
SecureIT Financial Statements and SecureIT Disclosure Letter except for those
that may have been incurred after the Balance Sheet Date in the ordinary course
of SecureIT's business and that are not material in amount either individually
or collectively. All reserves established by SecureIT and set forth in the
Balance Sheet are reasonably adequate. At the Balance Sheet Date, there were no
material loss contingencies which are not adequately provided for in the Balance
Sheet as required by Statement of Financial Accounting Standards No. 5 issued by
the Financial Accounting Standards Board.
2.8 Taxes. SecureIT has timely filed all federal, state, local and
-----
foreign tax and material information returns required to be filed by it prior to
the date hereof, has timely paid all taxes required to be paid by it with
respect to all periods prior to the date hereof for which returns have been
filed, has made all necessary estimated tax payments, and has no liability for
taxes in excess of the amount so paid and the amounts of accruals or reserves
that have been established in the SecureIT Financial Statements. True, correct
and complete copies of all such tax and information returns have been provided
or made available by SecureIT to VeriSign. SecureIT is not delinquent in the
filing of any tax returns and the payment of any taxes due pursuant to such tax
returns, and no deficiencies for any tax have been threatened, claimed, proposed
or assessed which have not been settled or paid. No tax return of SecureIT has
ever been audited by the Internal Revenue Service or any state or local taxing
agency or authority. No tax liens have been filed against any of SecureIT's
assets. For the purposes of this Agreement, the terms "tax," "taxes," "Tax" and
---- ------ ---
"Taxes" include all federal, state, local and foreign income, gains, franchise,
-----
excise, property, sales, use, employment, license, payroll, occupation,
recording, value added or transfer taxes, governmental charges, fees, levies or
assessments (whether payable directly or by withholding), and, with respect to
such taxes, any estimated tax, interest and penalties or additions to tax and
interest on such penalties and additions to tax. Except as set forth in
Schedule 2.9 of the SecureIT Disclosure Letter, since its inception, SecureIT
has made an effective election under the Code and state income tax laws to be
treated as a S corporation and such election has not been rescinded, revoked, or
terminated. Such election will remain valid through the Effective Time. All
tax liabilities of the SecureIT Shareholders or SecureIT arising by reason of
such election (including, but not limited to, the corporate level built in gain
and capital gain taxes described in Section 1374 of the Code or a predecessor
section of the Code) have been or will be paid by the SecureIT Shareholders no
matter when assessed. SecureIT and the SecureIT Shareholders have validly and
timely filed all elections and notices with the taxing authorities of any state
or jurisdiction having jurisdiction over SecureIT for income tax purposes that
are required by the laws of any such jurisdiction to be filed in order to enable
SecureIT to be taxed as a S corporation under such tax laws for all tax periods
for which SecureIT has prepared its tax returns on the basis that it was a S
corporation within the meaning of the Code. SecureIT's election to be treated
as a S corporation has been acknowledged by the Internal Revenue Service and by
the taxing authorities of all other taxing authorities having jurisdiction over
SecureIT for income tax purposes or Taxes to such other taxing authorities have
been timely paid or the amounts have been accrued or reserved in the financial
books and records of SecureIT. Except as set forth in Schedule 2.9 of the
SecureIT Disclosure Letter, SecureIT has not taken any actions inconsistent with
the requirements for S corporations, and such election has not been rescinded,
revoked or terminated. The SecureIT shareholders have not taken, caused or
permitted, and will not prior to the Effective Time, take, permit, or cause any
action inconsistent with the requirements for S corporations. SecureIT has no
current or deferred federal income tax liabilities and will not, as a result of
the Merger, become liable for any income tax for periods prior to the Effective
Time not adequately reserved against on the Financial Statements. SecureIT has
not filed a consent pursuant to Section 341(f) of the Code. SecureIT is not a
"personal holding company" within the meaning of Section 542 of the Code.
2.9 Title to Properties. SecureIT has good and marketable title to
-------------------
all of its assets and properties free and clear of all liens, mortgages, deeds
of trust, security interests, pledges, title retention devices, collateral
assignments, claims, charges or encumbrances ("Liens") (other than for taxes not
-----
yet due and payable and Permitted Liens as defined below), other than such
assets as were sold or licensed by SecureIT in the ordinary course of business
since the Balance Sheet Date or which are subject to capitalized leases.
"Permitted Liens" means any lien, mortgage, encumbrance or restriction which is
----------------
reflected in the SecureIT Financial Statements and is not in excess of $25,000
and which does not materially detract from the value or materially interfere
with the use, as currently utilized, of the properties subject thereto or
affected thereby or otherwise materially impair the business operations being
conducted thereon. Except as set forth in Schedule 2.9 to the SecureIT
Disclosure Letter, there are no UCC financing statements of record with any
state naming SecureIT as debtor. The machinery, vehicles, equipment and other
tangible personal property included in such assets are in good condition and
repair, normal wear and tear excepted, and all leases of real or personal
property to which SecureIT is a party are fully effective and afford SecureIT
peaceful and undisturbed possession of the real or personal property that is the
subject matter of the lease. SecureIT does not own any real property.
2.10 Absence of Certain Changes. Since the Balance Sheet Date,
--------------------------
SecureIT has carried on its business in the ordinary course substantially in
accordance with the procedures and practices in effect on the Balance Sheet
Date, and except as set forth in Schedule 2.10 to the SecureIT Disclosure
-------------
Letter, since the Balance Sheet Date there has not been with respect to
SecureIT:
(a) any change in the condition (financial or otherwise),
properties, assets, liabilities, business or results of operations of SecureIT,
which change by itself or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has had or can reasonably be
expected to have a Material Adverse Effect;
(b) any contingent liability incurred by SecureIT as guarantor or
surety with respect to the obligations of others, except in connection with the
endorsement of checks in the ordinary course of business;
(c) any incurrence, creation or assumption by SecureIT of any
Lien;
(d) any material obligation or liability, or any indebtedness for
borrowed money, incurred by SecureIT;
(e) any purchase, license, assignment, sale or other disposition
or transfer, or any agreement or other arrangement for the purchase, license,
assignment sale or other disposition or transfer, of any of the properties,
assets or goodwill of SecureIT other than in the ordinary course of business
consistent with past practice;
(f) any damage, destruction or loss, whether or not covered by
insurance, having (or likely to have) a Material Adverse Effect;
(g) any declaration, setting aside or payment of any dividend on,
or the making of any other distribution in respect of, the capital stock of
SecureIT, any split, stock dividend, combination or recapitalization of the
capital stock of SecureIT or any direct or indirect redemption, purchase or
other acquisition by SecureIT of the capital stock of SecureIT or any
change in any rights, preferences, privileges or restrictions of any outstanding
security of SecureIT;
(h) any labor dispute or claim of material unfair labor
practices, or any change in the compensation payable or to become payable to any
of SecureIT's officers, employees or agents, or any bonus or pension, insurance
or other benefit payment or arrangement (including without limitation stock
awards, stock appreciation rights or stock option grants) made to or with any of
such officers, employees or agents other than in connection with normal employee
salary or performance reviews or otherwise in the ordinary course of business
consistent with past practice;
(i) any change with respect to the management, supervisory,
development or other key personnel of SecureIT;
(j) any payment or discharge of a material Lien, which Lien or
liability was not either (i) shown on the Balance Sheet or (ii) incurred in the
ordinary course of business after the Balance Sheet Date;
(k) any obligation or liability incurred by SecureIT to any of
its officers, directors, shareholders or affiliates, or any loans or advances
made to any of its officers, directors, shareholders or affiliates, except
normal compensation and expense allowances payable to officers.
(l) any material change in the manner in which SecureIT extends
discounts or credits to customers or otherwise deals with its customers;
(m) any entering into, amendment of, relinquishment, termination
or non-renewal by SecureIT of any contract, lease, transaction, commitment or
other right or obligation other than in the ordinary course of its business, or
any written or oral indication or assertion by the other party thereto of
problems with SecureIT's services or performance under such contract, lease,
transaction, commitment or other right or obligation or its desire to so amend,
relinquish, terminate or not renew any such contract, lease, transaction,
commitment or other right or obligation;
(n) any transfer or grant of a right under any SecureIT IP Rights
(as defined in Section 2.12 below), other than those transferred or granted in
the ordinary course of SecureIT's business, consistent with past practice; or
(o) any agreement or arrangement made by SecureIT to take any
action which, if taken prior to the date of this Agreement, would have made any
representation or warranty of SecureIT set forth in this Agreement untrue or
incorrect as of the date when made.
2.11 Agreements and Commitments. Except as set forth in Schedule
-------------------------- --------
2.11 to the SecureIT Disclosure Letter, or as listed in Schedule 2.12, Schedule
---- ------------- --------
2.15.3, Schedule 2.15.4 or Schedule 2.15.5 to the SecureIT Disclosure Letter as
------ --------------- ---------------
required by Section 2.12, Section 2.15.3,
Section 2.15.4 or Section 2.15.5, as the case may be, SecureIT is not a party or
subject to any oral or written executory agreement, obligation or commitment
that is material to SecureIT, its financial condition or business that is not
terminable within 60 days without cost or penalty to SecureIT or the performance
of which will not be completed within 90 days, including but not limited to the
following:
(a) Any contract, commitment, letter agreement, quotation or
purchase order providing for payments by or to SecureIT in an aggregate amount
of (i) $50,000 or more in the ordinary course of business, or (ii) $25,000 or
more outside the ordinary course of business;
(b) Any license agreement under which SecureIT is licensor
(except for any nonexclusive software license granted by SecureIT to end-user
customers where the form of the license, excluding standard immaterial
deviations, has been provided to VeriSign's counsel) or under which SecureIT is
licensee (except for standard "shrink wrap" licenses for off-the-shelf software
products), and any other contract relating to the sale or license of SecureIT IP
Rights;
(c) Any agreement by SecureIT to encumber, transfer or sell
rights in or with respect to any SecureIT IP Rights except licenses of SecureIT
IP Rights in the ordinary course of business;
(d) Any agreement for the sale or lease of real or tangible
personal property involving aggregate payments of more than $25,000 per year;
(e) Any dealer, distributor, sales representative, original
equipment manufacturer, value added reseller or other agreement for the
distribution of SecureIT's products;
(f) Any franchise agreement or financing statement;
(g) Any stock redemption or purchase agreement;
(h) Any joint venture or partnership contract or arrangement or
any other agreement that involves a sharing of profits with other persons or the
payment of royalties to any other person;
(i) Any instrument evidencing indebtedness for borrowed money by
way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee or otherwise, except for trade indebtedness or any
advance to any employee of SecureIT incurred or made in the ordinary course of
business, and except as disclosed in the SecureIT Financial Statements; or
(j) Any contract containing covenants purporting to limit
SecureIT's freedom to compete in any line of business in any geographic area or
any contract in which SecureIT has granted or received most favored customer
pricing provisions or exclusive marketing rights relating to any product or
service, group of products or services or territory;
(k) Any contract providing for the development of software by or
for SecureIT;
(l) Any agreement relating to the sale, issuance, grant,
exercise, award, purchase, repurchase or redemption of any shares of capital
stock or other securities of SecureIT;
(m) Any contract with or commitment to any labor union; or
(n) Any other agreement, contract, commitment or instrument that
is material to the business of the Company or that involves a commitment by the
Company in excess of $50,000.
All agreements, obligations and commitments listed in Schedule
--------
2.11, Schedule 2.15.3, Schedule 2.15.4 or Schedule 2.15.5 to the SecureIT
---- --------------- --------------- ---------------
Disclosure Letter as required by Section 2.11, Section 2.15.3, Section 2.15.4 or
Section 2.15.5, as the case may be, are valid and in full force and effect, and
except as expressly noted, a true and complete copy of each has been delivered
to VeriSign or VeriSign's counsel. Except as noted on Schedule 2.11 to the
-------------
SecureIT Disclosure Letter, neither SecureIT nor, to the best of SecureIT's
knowledge, any other party is in breach of or default under any material term of
any such agreement, obligation or commitment. SecureIT is not a party to any
contract or arrangement that it reasonably expects will have a Material Adverse
Effect. SecureIT has no liability for renegotiation of government contracts or
subcontracts which are material to SecureIT, its financial condition, business
or prospects.
2.12 Intellectual Property.
---------------------
2.12.1 Except as set forth in Schedule 2.12.1 to the SecureIT
---------------
Disclosure Letter, SecureIT owns all right, title and interest in, or has the
right to use, all patent applications, patents, trademark applications,
trademarks, service marks, trade names, copyright applications, copyrights, mask
work rights, trade secrets, know-how, inventions, technology, customer lists,
supplier lists, source and object code, development tools, designs,
specifications, media and documentation and other intellectual property and
proprietary rights used in or reasonably necessary to the conduct of its
business as presently conducted and the business of the development, production,
marketing, licensing and sale of commercial products and services using such
intellectual property and proprietary rights (the "SecureIT IP Rights").
------------------
2.12.2 Set forth on Schedule 2.12.2 to the SecureIT Disclosure
---------------
Letter is a true and complete list of all copyright, mask work and trademark
registrations and applications and all patents and patent applications held by
SecureIT. SecureIT is not aware of any material loss, cancellation, termination
or expiration of any such registration or patent except as set forth on Schedule
--------
2.12.2 to the SecureIT Disclosure Letter. SecureIT has the unrestricted U.S.
------
right to reproduce, manufacture, sell, license and distribute all of its
products and provide its services (such products and services being set forth in
Schedule 2.12.2 to the SecureIT Disclosure Letter) and the right to use all of
------
its registered user lists. There are no royalties, honoraria, fees or other
payments payable by SecureIT to any person by reason of the ownership, use,
license, sale or disposition of the SecureIT IP Rights. SecureIT has not agreed
to indemnify any person for any infringement of any intellectual property rights
of any third party by any product or service that has been sold, licensed,
leased, supplied or provided by SecureIT, except as set forth in Schedule 2.12.2
------
to the SecureIT Disclosure Letter.
2.12.3 Neither the manufacture, marketing, license, sale,
furnishing or intended use of any product or service currently licensed,
utilized, sold, provided or furnished by SecureIT or currently under development
by SecureIT violates any license or agreement between SecureIT and any third
party or infringes any intellectual property right of any other party (provided,
however that, with respect to infringement of third party patents and patent
applications, this representation is made only to the best of SecureIT's
knowledge); and there is no pending or, to the best of SecureIT's knowledge,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any SecureIT IP Right nor, to the best of
SecureIT's knowledge, is there any basis for any such claim, nor has SecureIT
received any notice asserting that any SecureIT IP Right or the proposed use,
sale, license or disposition thereof conflicts or will conflict with the rights
of any other party, nor, to the best of SecureIT's knowledge, is there any basis
for any such assertion.
2.12.4 The execution, delivery and performance of this Agreement,
the Certificate of Merger and the consummation of the Merger and the other
transactions contemplated hereby and/or by the SecureIT Ancillary Agreements
and/or the SecureIT Shareholder Ancillary Agreements will not constitute a
material breach of or default under any instrument, contract, license or other
agreement governing any SecureIT IP Rights, will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination, of any
SecureIT IP Rights or materially impair the right of SecureIT or the Surviving
Corporation to use, sell or license any SecureIT IP Right or portion thereof
(except where such breach, forfeiture or termination would not have a Material
Adverse Effect on SecureIT).
2.12.5 SecureIT has taken reasonable and practicable steps
designed to protect, preserve and maintain the secrecy and confidentiality of
SecureIT IP Rights and all of SecureIT's proprietary rights therein. Except as
set forth in Schedule 2.12.5 to the SecureIT Disclosure Letter, all officers,
employees and consultants of SecureIT having access to proprietary information
have executed and delivered to SecureIT an agreement regarding the protection of
such proprietary information and the assignment of inventions to SecureIT; and
copies of the form of all such agreements have been delivered to VeriSign or
VeriSign's counsel. To the best of SecureIT's knowledge, no employee of SecureIT
is in violation of any term of any employment contract, patent disclosure
agreement, noncompetition agreement, non-solicitation agreement or any other
contract or agreement, or any restrictive covenant relating to the right of any
such employee to be employed thereby, or to use trade secrets or proprietary
information of others, and the employment of such employees does not subject
SecureIT to any liability.
2.13 Compliance with Laws. SecureIT has complied with all applicable
--------------------
laws, ordinances, regulations and rules, and all orders, writs, injunctions,
awards, judgments and
decrees, applicable to SecureIT or to the assets, properties and business of
SecureIT, including, without limitation: (a) all applicable federal and state
securities laws and regulations, (b) all applicable federal, state and local
laws, ordinances and regulations, and all orders, writs, injunctions, awards,
judgments and decrees, pertaining to (i) the sale, licensing, leasing, ownership
or management of SecureIT's owned, leased or licensed real or personal property,
products or technical data, (ii) employment or employment practices, terms and
conditions of employment, or wages and hours or (iii) safety, health, fire
prevention, environmental protection, building standards, zoning or other
similar matters, (c) the Export Administration Act and regulations promulgated
thereunder or other laws, regulations, rules, orders, writs, injunctions,
judgments or decrees applicable to the export or re-export of controlled
commodities or technical data or (d) the Immigration Reform and Control Act for
which its failure to so comply would have a Material Adverse Effect on SecureIT.
SecureIT has received all material permits and approvals from, and has made all
material filings with, third parties, including government agencies and
authorities, that are necessary to the conduct of its business as presently
conducted.
2.14 Certain Transactions and Agreements. No person who is an
-----------------------------------
officer, director, employee or shareholder of SecureIT, nor any member of their
immediate families, has any direct or indirect ownership interest in, or any
employment or consulting agreement with, any firm or corporation that competes
with SecureIT or VeriSign (except with respect to any interest in less than 1%
of the outstanding voting shares of any corporation whose stock is publicly
traded). Except as set forth in Schedule 2.14 to the SecureIT Disclosure
-------------
Letter, none of said officers, directors, employees or shareholders or any
member of their immediate families is directly or indirectly interested in any
material contract or informal arrangement with SecureIT, including, but not
limited to, any loan arrangements, except for compensation for services as an
officer or employee of SecureIT (listed in Schedule 2.15.5 to the SecureIT
---------------
Disclosure Letter), and except for the normal rights of a shareholder or option
holder. Except as set forth in Schedule 2.14 to the SecureIT Disclosure Letter,
-------------
none of said officers, directors, employees or shareholders or immediate family
members has any interest in any property, real or personal, tangible or
intangible, including, without limitation, inventions, patents, copyrights,
trademarks, trade names or trade secrets, used in the business of SecureIT,
except for the normal rights of a shareholder or option holder.
2.15 Employees.
---------
2.15.1 Except as set forth in Schedule 2.15.1 to the SecureIT
---------------
Disclosure Letter, (i) SecureIT has no employment contract or consulting
agreement currently in effect that is not terminable at will without penalty or
payment of compensation by SecureIT (other than agreements with the sole purpose
of providing for the confidentiality of proprietary information or assignment of
inventions) and (ii) all employees and consultants of SecureIT have executed
SecureIT's standard form of invention assignment and confidentiality agreement,
a copy of which has been provided to VeriSign or VeriSign's counsel.
2.15.2 SecureIT (a) has never been and is not now subject to a
union organizing effort, (b) is not subject to any collective bargaining
agreement with respect to any of
its employees, (c) is not subject to any other contract, written or oral, with
any trade or labor union, employees' association or similar organization, and
(d) has no current labor dispute. SecureIT has good labor relations, and
SecureIT has no knowledge of any facts indicating that the consummation of the
transactions provided for herein will have a Material Adverse Effect on its
labor relations. To SecureIT's knowledge (which shall mean the knowledge of
SecureIT's executive officers and directors for the purpose of this
representation), none of SecureIT's key employees (each of whom is listed on
Schedule 2.15.2 to the SecureIT Disclosure Letter) intends to leave its employ.
---------------
2.15.3 Schedule 2.15.3 to the SecureIT Disclosure Letter
---------------
contains a list of all employment and consulting agreements, pension,
retirement, disability, medical, dental or other health plans, life insurance or
other death benefit plans, profit sharing, deferred compensation agreements,
stock, option, bonus or other incentive plans, vacation, sick, holiday or other
paid leave plans, severance plans or other similar employee benefit plans
maintained by SecureIT (the "Employee Plans"), including without limitation all
--------------
"employee benefit plans" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). SecureIT has delivered true
-----
and complete copies or descriptions of all the Employee Plans to VeriSign and
VeriSign's counsel. Except as set forth in Schedule 2.15.3 to the SecureIT
---------------
Disclosure Letter, each of the Employee Plans, and its operation and
administration, is, in all material respects, in compliance with all applicable,
federal, state, local and other governmental laws and ordinances, orders, rules
and regulations, including the requirements of ERISA and the Code. Except as
set forth in Schedule 2.15.3 to the SecureIT Disclosure Letter, all such
--------------
Employee Plans that are "employee pension benefit plans" (as defined in Section
3(2) of ERISA) which are intended to qualify under Section 401(a) of the Code
either (a) have received favorable determination letters that such plans satisfy
the qualification requirements under the Code, including all amendments to the
Code effected by the Tax Reform Act of 1986 and subsequent legislation or has
remaining a period of time under applicable regulations or IRS pronouncements in
which to apply for such a letter and make any amendments necessary to obtains
such a letter or (b) are standardized prototype plans and SecureIT may rely on a
favorable opinion letter issued by the IRS to the sponsor of the form of
standardized prototype plan. In addition, SecureIT has never been a participant
in any "prohibited transaction," within the meaning of Section 406 of ERISA with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) which SecureIT sponsors as employer or in which SecureIT participates as
an employer, which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a) of ERISA), or
which could result in an excise tax under the Code. The group health plans, as
defined in Section 4980B(g) of the Code, that benefit employees of SecureIT are
in material compliance with the continuation coverage requirements of subsection
4980B of the Code. There are no outstanding violations of Section 4980B of the
Code with respect to any Employee Plan, covered employees or qualified
beneficiaries. Except as set forth in Schedule 2.15.3 to the SecureIT
---------------
Disclosure Letter, no employee of SecureIT and no person subject to any SecureIT
health plan has made medical claims through such health plan during the twelve
months preceding the date hereof for more than $10,000 or more, in the
aggregate, or has any catastrophic illness. SecureIT has taken
all actions necessary to terminate the 401(k) plan it sponsors effective
immediately prior to the Closing.
2.15.4 Except as set forth in Schedule 2.15.4 to the SecureIT
---------------
Disclosure Letter, SecureIT is not a party to any (a) agreement with any
executive officer or other key employee of SecureIT (i) the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving SecureIT in the nature of any of the
transactions contemplated by this Agreement and the Agreement of Merger, (ii)
providing any term of employment or compensation guarantee or (iii) providing
severance benefits or other benefits after the termination of employment of such
employee regardless of the reason for such termination of employment, or (b)
agreement or plan, including, without limitation, any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of which
will be materially increased, or the vesting of benefits of which will be
materially accelerated, by the occurrence of any of the transactions
contemplated by this Agreement and the Agreement of Merger or the value of any
of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement and the Agreement of Merger.
SecureIT is not obligated to make any excess parachute payment, as defined in
Section 280G(b)(1) of the Code, nor will any excess parachute payment be deemed
to have occurred as a result of or arising out of the Merger to the extent
Section 280G of the Code is applicable to SecureIT.
2.15.5 A list of all employees, officers and engineering
consultants of SecureIT and their current compensation and benefits as of the
date of this Agreement is set forth on Schedule 2.15.5 to the SecureIT
---------------
Disclosure Letter.
2.15.6 All contributions due from SecureIT with respect to any
of the Employee Plans have been made or accrued on the SecureIT Financial
Statements, and no further contributions will be due or will have accrued
thereunder as of the Closing Date.
2.16 Corporate Documents. SecureIT has made available to VeriSign
-------------------
for examination all documents and information listed in the SecureIT Disclosure
Letter including Schedule 2.1 through 2.22 thereto or other exhibits called for
------------ ----
by this Agreement including, without limitation, the following: (a) copies of
SecureIT's Article s of Incorporation and Bylaws as currently in effect; (b)
SecureIT's minute book containing all records of all proceedings, consents,
actions and meetings of SecureIT's directors and shareholders; (c) SecureIT's
stock ledger, journal and other records reflecting all stock issuances and
transfers; and (d) all permits, orders and consents issued by any regulatory
agency with respect to SecureIT, or any securities of SecureIT, and all
applications for such permits, orders and consents.
2.17 No Brokers. Except as set forth in Schedule 2.17 to the
---------- -------------
SecureIT Disclosure Letter, SecureIT is not obligated for the payment of fees or
expenses of any investment banker, broker or finder in connection with the
origin, negotiation or execution of this Agreement or the Agreement of Merger or
in connection with any transaction provided for herein or therein.
2.18 Disclosure. This Agreement, its exhibits and schedules, and the
----------
certificates or documents to be delivered by SecureIT to VeriSign under this
Agreement, or other material documents delivered by SecureIT to VeriSign
regarding SecureIT's business, taken together, do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein and therein, in light of the
circumstances under which such statements were made, not misleading, except
that, with respect to any financial projections submitted to VeriSign, SecureIT
represents and warrants only that such financial projections were prepared in
good faith based on reasonable assumptions at the time of preparation. To the
best of SecureIT's knowledge the financial projections fairly present its
management's good faith estimates as of the date of this Agreement.
2.19 Books and Records. The books, records and accounts of SecureIT
-----------------
(a) are in all material respects true and complete, (b) have been maintained in
accordance with reasonable business practices on a consistent basis, (c) are
stated in reasonable detail and accurately and fairly reflect the transactions
and dispositions of the assets of SecureIT, and (d) fairly reflect the basis for
the SecureIT Financial Statements.
2.20 Insurance. SecureIT maintains fire and casualty, business
---------
interruption, error and omissions, workers compensation and general liability
insurance as set forth on Schedule 2.20 to the SecureIT Disclosure Letter which
-------------
it believes to be reasonably prudent for similarly sized and similarly situated
businesses.
2.21 Environmental Matters.
---------------------
2.21.1 During the period that SecureIT has leased the premises
currently occupied by it and those premises occupied by it since the date of its
incorporation, there have been no disposals, releases or threatened releases of
Hazardous Materials (as defined below) on any such premises that would have a
Material Adverse Effect. SecureIT has no knowledge of any presence, disposals,
releases or threatened releases of Hazardous Materials on or from any of such
premises, which may have occurred prior to SecureIT having taken possession of
any of such premises that would have a Material Adverse Effect. For purposes of
this Agreement, the terms "disposal," "release," and "threatened release" have
-------- ------- ------------------
the definitions assigned thereto by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., as amended
("CERCLA"). For the purposes of this Section 2.22, "Hazardous Materials" mean
------ -------------------
any hazardous or toxic substance, material or waste which is or becomes prior to
the Closing Date (as defined in Section 6.1 hereof) regulated under, or defined
as a "hazardous substance," "pollutant," "contaminant," "toxic chemical,"
"hazardous material," "toxic substance" or "hazardous chemical" under (i)
CERCLA; (ii) the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Section 11001 et seq.; (iii) the Hazardous Materials Transportation Act, 49
-- ---
U.S.C. Section 1801, et seq.; (iv) the Toxic Substances Control Act, 15 U.S.C.
-- ---
Section 2601 et seq.; (v) the Occupational Safety and Health Act of 1970, 29
-- ---
U.S.C. Section 651 et seq.; (vi) regulations promulgated under any of the above
-- ---
statutes; or (vii) any applicable state or local statute, ordinance, rule or
regulation that has a scope or purpose similar to those identified above.
2.21.2 During the time that SecureIT has leased the premises, to
SecureIT's knowledge, none of the premises currently leased by SecureIT is, or
any premises previously occupied by SecureIT was in violation of any federal,
state or local law, ordinance, regulation or order relating to industrial
hygiene or to the environmental conditions in such premises.
2.21.3 During the time that SecureIT has leased the premises
currently occupied by it or any premises previously occupied by SecureIT,
neither SecureIT nor, to SecureIT's knowledge, any third party, has used,
generated, manufactured or stored in such premises or transported to or from
such premises any Hazardous Materials that would have a Material Adverse Effect.
2.21.4 During the time that SecureIT has leased the premises
currently occupied by it or any premises previously occupied by SecureIT, there
has been no litigation, proceeding or administrative action brought or
threatened in writing against SecureIT, or any settlement reached by SecureIT
with, any party or parties alleging the presence, disposal, release or
threatened release of any Hazardous Materials on, from or under any of such
premises.
2.21.5 During the period that SecureIT has leased the premises
currently occupied by it or any premises previously occupied by SecureIT, no
Hazardous Materials have been transported from such premises to any site or
facility now listed or proposed for listing on the National Priorities List, at
40 C.F.R. Part 300, or any list with a similar scope or purpose published by any
state authority.
2.22 Government Contracts. All representations, certifications and
--------------------
disclosures made by SecureIT to any Government Contract Party (as defined below)
have been in all material respects current, complete and accurate at the times
they were made. There have been no acts, omissions or noncompliance with regard
to any applicable public contracting statute, regulation or contract requirement
(whether express or incorporated by reference) relating to any of SecureIT's
contracts with any Government Contract Party (as defined below) in either case
that have led to or could lead to, either before or after the Closing Date (as
defined in Section 6.1 hereof), (a) any claim or dispute involving SecureIT
and/or VeriSign as successor in interest to SecureIT and any Government Contract
Party or (b) any suspension, debarment or contract termination, or proceeding
related thereto. There has been no act or omission that relates to the
marketing, licensing or selling to any Government Contract Party (as defined
below) of any of SecureIT technical data and computer software and that has led
to or could lead to, either before or after the Closing Date (as defined in
Section 6.1 hereof), to the unrestricted use by any Government Contract Party of
any material technical data or computer software of SecureIT. All of SecureIT's
development of technical data and computer software was developed exclusively at
private expense. For purposes of this Section 2.22, the term "Government
----------
Contract Party" means any independent or executive agency, division,
--------------
subdivision, audit group or procuring office of the federal government,
including any prime contractor of the federal government and any higher level
subcontractor of a prime contractor of the federal government, and including any
employees or agents thereof, in each case acting in such capacity.
2.23 Investor Representations.
------------------------
2.23.1 Information. Each of the SecureIT Shareholders acknowledges
-----------
that he has received, read and understands the VeriSign Disclosure Package (as
defined in Section 3.4 of this Agreement).
2.23.2 Access to Other Information. Each of the SecureIT
---------------------------
Shareholders recognizes that VeriSign has made available to such SecureIT
Shareholder the opportunity to examine such additional documents from VeriSign
and to ask questions of, and receive full answers from, VeriSign and its
management concerning, among other things, VeriSign, its business, its financial
condition, its management, its activities and any other information which the
SecureIT Shareholder considers relevant or appropriate in connection with
entering into this Agreement. The SecureIT Shareholder further represents that
the oral information provided by VeriSign's management, if any, has been
consistent with the information set forth in the VeriSign Disclosure Package.
2.23.3 Risks of Investment; Tax Consequences. Each of the SecureIT
-------------------------------------
Shareholders acknowledges that the shares of VeriSign Common Stock issued in
connection with the Merger (the "Restricted Securities") are unregistered and
---------------------
may not be resold publicly for a period of at least one year under Rule 144
unless the shares are registered with the SEC. Each of the SecureIT
Shareholders accepts the risks of holding such shares indefinitely and the other
risks set forth in the VeriSign Disclosure Package. Each of the SecureIT
Shareholders, together with his, her or its advisors, is capable of assessing
the risks of an investment in VeriSign Common Stock and is fully aware of the
economic risks thereof. Each of the SecureIT Shareholders acknowledges that
VeriSign's operating results in the current period and in future periods may not
meet the expectations of securities analysts and that failure to meets such
expectations would be likely to have a material adverse effect on the trading
price of VeriSign Common Stock. Each of the SecureIT Shareholders understands
the financial hazards involved in making the investment in the Restricted
Securities and understands the tax consequences of such investment. No SecureIT
Shareholder has relied on VeriSign or its counsel or auditors for any advice
regarding the tax consequences of the Merger. No SecureIT Shareholder has
relied on VeriSign or its counsel for any advice regarding such SecureIT
Shareholder's investment in the Restricted Securities except for the
representations, warranties and covenants of VeriSign set forth herein.
2.23.4 Investment Intent. Each of the SecureIT Shareholders is
-----------------
receiving the Restricted Securities in the Merger for investment for such
SecureIT Shareholder's own account only and not with a view to, or for resale in
connection with, any unlawful "distribution" thereof within the meaning of the
Securities Act. No person or entity, other than the SecureIT Shareholders, has
any beneficial interest in the Restricted Securities except as set forth in
Schedule 2.23.4 of the SecureIT Disclosure Letter.
---------------
2.23.5 Restricted Securities; Registration Rights. Each of the
------------------------------------------
SecureIT Shareholders acknowledges and understands that the terms of the Merger
have not been reviewed
by the SEC or by any state securities authorities, that the Restricted
Securities to be received by the SecureIT Shareholder pursuant to the Merger
have not been registered under the Securities Act and constitute "restricted
securities" under Rule 144(d) of the Securities Act, and have been issued in
reliance on the exemptions for non-public offerings provided by Rule 506 and
Section 4(2) of the Securities Act, which exemptions depend upon, among other
things, the accuracy of the representations made and information furnished by
the SecureIT Shareholder, including the bona fide nature of the SecureIT
Shareholder's investment intent as expressed above. Each of the SecureIT
Shareholders acknowledges that the SecureIT Shareholders have certain rights to
register such Restricted Securities as set forth in the Registration Rights
Agreement being entered into pursuant to this Agreement and that they may not be
sold or transferred except in accordance with such provisions and Rule 144. The
SecureIT Shareholder further acknowledges and understands that VeriSign is
obligated to register the Restricted Securities to be issued to the SecureIT
Shareholders only as provided in the Registration Rights Agreement.
2.23.6 Rule 144. Each of the SecureIT Shareholders acknowledges
--------
that, absent such registration of the Restricted Securities, the SecureIT
Shareholder will not be able to publicly sell the Restricted Securities until
one year after the Effective Time. After that date, the SecureIT Shareholder
may sell the Restricted Securities under Rule 144. Each SecureIT Shareholder is
familiar with the provisions of Rule 144 promulgated under the Securities Act
which permit limited public resale of "restricted securities," subject to the
satisfaction of certain conditions. Each of the SecureIT Shareholders
understands that in the event all of the applicable requirements of Rule 144 are
not satisfied, registration under the Securities Act or some other exemption
from the registration requirements of the Securities Act will be required in
order to dispose of the Restricted Securities, and that such stockholder may be
required to hold his/its/her shares for a significant period to time prior to
reselling them. Each of the SecureIT Shareholders acknowledge that if he is or
becomes an "affiliate" of VeriSign, then certain restrictions, including volume
limits, imposed by Rule 144 will continue to apply to such SecureIT Shareholder
beyond the first anniversary of the date on which such SecureIT Shareholder
acquires the Restricted Securities.
2.23.7 Legends. Each of the SecureIT Shareholders also understands
-------
and agrees that there will be placed on the certificates evidencing the
ownership of the Restricted Securities, the following legends, in addition to
any legends required by applicable state laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS THERE IS AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT (1) A REGISTRATION
STATEMENT UNDER THE ACT (AND
CURRENT PROSPECTUS) IS IN EFFECT AS TO THE SECURITIES, (2) AN
EXEMPTION THEREFROM IS AVAILABLE, OR (3) THE SECURITIES ARE SOLD
PURSUANT TO RULE 144 OF THE ACT.
2.23.8 Stop Transfer Instructions; No Requirement to Transfer. Each
------------------------------------------------------
of the SecureIT Shareholders agrees that, in order to ensure compliance with the
restrictions referred to herein, VeriSign may issue appropriate "stop transfer"
instructions to its transfer agent. VeriSign shall not be required (i) to
transfer or have transferred on its books any VeriSign Common Stock that has
been sold or otherwise transferred in violation of any of the provisions of this
Agreement or the Registration Rights Agreement or (ii) to treat as owner of such
VeriSign Common Stock or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such VeriSign Common Stock shall have been
so transferred in violation of any provision of this Agreement, the Registration
Rights Agreement or the SecureIT Affiliates Agreement. VeriSign agrees that
such stop transfer instructions and legends will be promptly removed if the
provisions of the Registration Rights Agreement, the SecureIT Affiliates
Agreement and the Securities Act are complied with.
2.23.9 Accuracy of Information. All information that each of the
-----------------------
SecureIT Shareholders provides to VeriSign hereunder concerning such SecureIT
Shareholder's financial position and knowledge of financial and business matters
is correct and complete as of the date set forth above.
2.23.10 Ability to Bear Economic Risk. Each of the SecureIT
-----------------------------
Shareholders represents that he (i) is able to bear the economic risk of the
SecureIT Shareholder's investment, (ii) is able to hold the Restricted
Securities for an indefinite period of time, (iii) can afford a complete loss of
the SecureIT Shareholder's investment in the Restricted Securities and (iv) has
adequate means of providing for the SecureIT Shareholder's current needs and
possible personal contingencies and has no need for liquidity in this
investment.
2.23.11 No Public Solicitation. Each of the SecureIT Shareholders
----------------------
represents that at no time was such SecureIT Shareholder presented with or
solicited by any general mailing, leaflet, public promotional meeting, newspaper
or magazine article, radio or television advertisement, or any other form of
general advertising or general solicitation in connection with the Merger.
2.23.12 Accredited Investor Status. Each SecureIT Shareholder (other
--------------------------
than the Trust for the benefit of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇) is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act (i.e. a
----
person whose individual net worth, or joint net worth with that person's spouse,
exceeds $1,000,000; or a person who had an individual income of $200,000 in each
of the two most recent years, or joint income with that person's spouse in
excess of $300,000 in each of such years, and has a reasonable expectation of
reaching the same income level in the current year).
3. REPRESENTATIONS AND WARRANTIES OF VERISIGN
VeriSign hereby represents and warrants to SecureIT and the SecureIT
Shareholders, except as set forth in the letter addressed to SecureIT and the
SecureIT Shareholders and dated as of the date of this Agreement which has been
delivered by VeriSign to SecureIT concurrently herewith (the "VeriSign
--------
Disclosure Letter"), as follows:
-----------------
3.1 Organization and Good Standing. VeriSign is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as proposed to be
conducted.
3.2 Power, Authorization and Validity.
---------------------------------
3.2.1 VeriSign has the corporate right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement, and
all agreements to which VeriSign is or will be a party that are contemplated
under this Agreement (the "VeriSign Ancillary Agreements"). The execution,
-----------------------------
delivery and performance of this Agreement and the VeriSign Ancillary Agreements
have been duly and validly approved and authorized by VeriSign's Board of
Directors. No vote of VeriSign's stockholders is required under applicable law
or under the Certificate of Incorporation or Bylaws of VeriSign, as currently in
effect.
3.2.2 No filing, authorization, consent, order or approval,
governmental or otherwise, is necessary to enable VeriSign to enter into, and to
perform its obligations under, this Agreement and the VeriSign Ancillary
Agreements, except for (a) the filing of the Certificate of Merger with the
Georgia Secretary of State, the filing of such officers' certificates and other
documents as are required to effectuate the Merger under Georgia law, and (b)
such filings as may be required to comply with federal and state securities
laws.
3.2.3 This Agreement and the VeriSign Ancillary Agreements are, or
when executed by VeriSign will be, valid and binding obligations of VeriSign,
enforceable against VeriSign in accordance with their respective terms, except
as such enforceability may be limited by (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally, and (b) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.3 No Violation of Certificate of Incorporation or Laws. Neither
----------------------------------------------------
the execution nor delivery of this Agreement or any VeriSign Ancillary
Agreement, nor the consummation of the transactions contemplated hereby or
thereby, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of (a) any
provision of the Certificate of Incorporation or Bylaws of VeriSign, as
currently in effect, or (b) any contract that is material to VeriSign's business
or (c) any federal, state, local or foreign judgment, writ, decree, order,
statute or regulation applicable to and that would have a material adverse
effect on VeriSign or its assets or properties.
3.4 Capitalization. The authorized capital stock of VeriSign
--------------
consists of 50,000,000 shares of Common Stock, $0.001 par value, and 5,000,000
shares of undesignated Preferred Stock, $0.001 par value, of which 20,824,492
shares of VeriSign Common Stock were issued and outstanding and no shares of
Preferred Stock were issued or outstanding as of June 30, 1998. There were
outstanding options, warrants, convertible securities and other rights to
purchase or otherwise acquire 2,500,652 shares of VeriSign Common Stock as of
June 30, 1998.
3.5 Disclosure. VeriSign has furnished SecureIT with its
----------
Registration Statement on Form S-1 filed with the SEC and declared effective on
January 29, 1998, its quarterly report on Form 10-Q for the fiscal quarter ended
March 31, 1998 and all other reports or documents required to be filed by
VeriSign pursuant to Section 13(a) or 15(d) of the 1934 Act since the filing of
the most recent quarterly report on Form 10-Q (the "VeriSign Disclosure
-------------------
Package"). The VeriSign Disclosure Package, this Agreement, the exhibits and
schedules hereto, and any certificates or documents to be delivered to SecureIT
pursuant to this Agreement, when taken together, do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances under which such statements were made, not misleading.
3.6 No Undisclosed Liabilities. Except as disclosed in the VeriSign
--------------------------
Disclosure Package, and except for normal or recurring liabilities incurred
since March 31, 1998 in the ordinary course of business consistent with past
practices, VeriSign (including its subsidiaries) does not have any known
liabilities, either accrued, contingent or otherwise (whether or not required to
be reflected in financial statements in accordance with GAAP), and whether due
or to become due, which individually or in the aggregate are reasonably likely
to have a Material Adverse Effect on VeriSign.
3.7 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
VeriSign Disclosure Package, during the period commencing on March 31, 1998 and
ending on the date of this Agreement, there has not been (i) any change in the
financial condition, results of operations, business or properties of VeriSign,
taken as a whole, which has had or could reasonably be expected to have a
Material Adverse Effect on VeriSign; (ii) any damage, destruction or loss
(whether or not covered by insurance) with respect to VeriSign which could
reasonably be expected to have a Material Adverse Effect on VeriSign; (iii) any
material change by VeriSign in its accounting methods, principles or practices
of which VeriSign has not advised SecureIT; or (iv) any revaluation by VeriSign
of any of its assets having a Material Adverse Effect on VeriSign.
3.8 Validity of Shares. The shares of VeriSign Common Stock to be
------------------
issued pursuant to the Merger will, when issued: (a) be duly authorized, validly
issued, fully paid and nonassessable and free of liens and encumbrances created
by VeriSign, and (b) will be free and clear of any liens and encumbrances except
for applicable securities law restrictions on transfer, including those imposed
by Regulation D or Section 4(2) of the Securities Act and Rule 144 promulgated
under the Securities Act, under applicable "blue sky" state securities laws and
under any SecureIT Affiliate Agreement to be executed pursuant to this
Agreement.
4. DOCUMENTS DELIVERED TO SECUREIT
VeriSign has delivered to SecureIT the following documents, receipt of
which is hereby acknowledged by SecureIT:
4.1 Accuracy of Representations and Warranties. A Certificate of
------------------------------------------
VeriSign executed on behalf of VeriSign by its Chief Financial Officer to the
effect that the warranties and representations of VeriSign set forth in Section
3 (as qualified by the VeriSign Disclosure Letter) are true and correct in every
material respect on the date hereof.
4.2 VeriSign Affiliates Agreements. An agreement in the form
------------------------------
attached hereto as Exhibit E (the "VeriSign Affiliate Agreement") duly executed
--------- ----------------------------
by each of the affiliates of VeriSign which provides that such person has not
made and will not make any disposition of VeriSign Common Stock (a) in the 30-
day period prior to the Effective Time or (b) after the Effective Time until
VeriSign shall have publicly released its first report of quarterly financial
statements that include the combined financial results of VeriSign and SecureIT
for a period of at least 30 days of combined operations, other than dispositions
within the " de minimis" exception to the rules governing availability of
pooling accounting treatment for the Merger.
4.3 Opinion of VeriSign's Counsel. An opinion of Fenwick & West LLP,
-----------------------------
counsel to VeriSign.
4.4 Registration Rights Agreement. The Registration Rights Agreement
-----------------------------
duly executed on behalf of VeriSign.
4.5 Requisite Approvals. (a) Certified resolutions adopted by the
-------------------
Board of Directors of VeriSign approving the principal terms of this Agreement
and the VeriSign Ancillary Agreements in accordance with applicable law and
VeriSign's Certificate of Incorporation and Bylaws and a certified copy of the
Bylaws of VeriSign and (b) certified resolutions adopted by the Board of
Directors and sole shareholder of Newco approving the principal terms of this
Agreement and the Certificate of Merger in accordance with applicable law and
Newco's Certificate of Incorporation and Bylaws, as then in effect and a
certified copy of the Bylaws of Newco.
4.6 Tax Opinion. A copy of the tax opinion of counsel to VeriSign
-----------
addressed to VeriSign to the effect that the Merger will be treated for federal
income tax purposes as a tax-free reorganization within the meaning of Section
368 of the Code.
4.7 Pooling Letter. A copy of the letter from KPMG Peat Marwick LLP
--------------
stating that it concurs with VeriSign management's conclusion that the Merger
will be treated as a "pooling of interests" for accounting purposes.
4.8 Escrow. The Escrow Agreement duly executed on behalf of VeriSign
------
and the Escrow Agent and the delivery by VeriSign of the Escrow Shares to the
Escrow Agent.
4.9 Employment and Non-Competition Agreements. Employment and Non-
-----------------------------------------
Competition Agreements in the form attached hereto as Exhibit F to be entered
---------
into with each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Key Employees") duly
-------------
executed on behalf of VeriSign.
4.10 Certificate of Merger. The Certificate of Merger duly executed
---------------------
on behalf of SecureIT and authorized for filing with the Secretary of State of
Georgia.
4.11 Tax Representation Certificates. The officers tax
-------------------------------
representation certificates in the form attached as Exhibit 1.10 hereto duly
------------
executed by the appropriate officers of VeriSign.
5. DOCUMENTS DELIVERED TO VERISIGN
SecureIT has delivered to VeriSign the following documents, receipt of
which is hereby acknowledged by VeriSign:
5.1 Accuracy of Representations and Warranties. A certificate of
------------------------------------------
SecureIT executed on SecureIT's behalf by its Chief Executive Officer to the
effect that the warranties and representations of SecureIT set forth in Section
2 (as qualified by the SecureIT Disclosure Letter) are true and correct in every
material respect on the date hereof.
5.2 No Material Adverse Change. A certificate of SecureIT executed
--------------------------
on SecureIT's behalf by its Chief Executive Officer to the effect that there has
been no material adverse change in the financial condition, properties, assets,
liabilities, business or results of operations of SecureIT since the Balance
Sheet Date.
5.3 SecureIT Affiliates Agreements. The SecureIT Affiliate
------------------------------
Agreements duly executed by each of the affiliates of SecureIT.
5.4 Opinion of SecureIT's Counsel. An opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇
-----------------------------
LLP, counsel to SecureIT.
5.5 Registration Rights Agreement. The Registration Rights Agreement
-----------------------------
duly executed on behalf of each of the SecureIT Shareholders.
5.6 Requisite Approvals. Certified resolutions adopted by the Board
-------------------
of Directors and by the shareholders of SecureIT approving the principal terms
of this Agreement and the SecureIT Ancillary Agreements in accordance with
applicable law and SecureIT's Certificate of Incorporation and Bylaws and a
certified copy of the Bylaws of SecureIT.
5.7 Tax Opinion. A copy of the tax opinion of counsel to SecureIT
-----------
addressed to SecureIT to the effect that the Merger will be treated for federal
income tax purposes as a tax-free reorganization within the meaning of Section
368 of the Code.
5.8 Pooling Letter. A copy of the letter from BDO ▇▇▇▇▇▇▇ LLP
--------------
stating that it concurs with SecureIT management's conclusion that the Merger
will be treated as a "pooling of interests" for accounting purposes.
5.9 Escrow. The Escrow Agreement duly executed by each of the
------
SecureIT Shareholders and the duly executed stock power and assignments of each
of the SecureIT Shareholders as contemplated by the Escrow Agreement.
5.10 Employment and Non-Competition Agreements. The Employment and
-----------------------------------------
Non-Competition Agreements duly executed by the Key Employees.
5.11 Certificate of Merger. The Certificate of Merger duly executed
---------------------
on behalf of SecureIT and authorized for filing with the Secretary of State of
Georgia.
5.12 Tax Representation Certificates. Officers tax representation
-------------------------------
certificates in the form attached as Exhibit 1.10 duly executed by the
-------------
appropriate officers of SecureIT.
5.13 Resignation of Directors and Officers. The resignations of the
-------------------------------------
directors and officers of SecureIT effective as of the Effective Time.
5.14 Financial Statements. The Financial Statements of SecureIT
--------------------
referred to in Section 2.7.
5.15 Noncompetition Agreement. A Noncompetition Agreement in the
------------------------
form attached hereto as Exhibit G duly executed by P. Jyoti ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
---------
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
6. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES, CONTINUING
COVENANTS
6.1 Survival of Representations.
---------------------------
6.1.1 Representations of SecureIT and the SecureIT Shareholders.
---------------------------------------------------------
Subject to Sections 6.2.3(b) and 6.2.6, all representations, warranties and
covenants of SecureIT and the SecureIT Shareholders contained in this Agreement
will remain operative and in full force and effect, regardless of any
investigation made by or on behalf of VeriSign, until that date (the "ESCROW
RELEASE DATE") which is the earlier of (i) the termination of this Agreement or
(ii) May 1, 1999; provided, however, that those representations and warranties
-------- -------
respecting matters addressed by the audited financial statements of the combined
corporation for the fiscal year ended December 31, 1998, together with a report
thereon from VeriSign's independent auditors, shall expire upon the date on
which such financial statements are first released to the public.
6.2 Indemnification by SecureIT Shareholders.
----------------------------------------
6.2.1 Agreement to Indemnify. The SecureIT Shareholders will
----------------------
jointly and severally indemnify and hold harmless VeriSign and the Surviving
Corporation and their
respective officers, directors, agents, stockholders and employees, and each
person, if any, who controls or may control VeriSign or the Surviving
Corporation within the meaning of the Securities Act (each hereinafter referred
to individually as an "Indemnified Person " and collectively as "Indemnified
------------------ -----------
Persons") from and against any and all claims, demands, suits, causes actions,
-------
of actions, losses, costs, demonstrable damages, liabilities and reasonable
expenses including, without limitation, reasonable attorneys' fees, other
professionals' and experts' reasonable fees and court or arbitration costs
(hereinafter collectively referred to as "Damages") incurred and arising out of
-------
any breach of, or default in, any of the representations, warranties or
covenants given or made by SecureIT in this Agreement or in the SecureIT
Disclosure Letter or any certificate delivered by or on behalf of the SecureIT
pursuant hereto (if such breach or default existed at the Effective Date). Any
claim of indemnity made by an Indemnified Person under this Section 6.2 must be
raised in a writing delivered to the Representative and the Escrow Agent by no
later than the Escrow Release Date.
6.2.2 Limitation. Notwithstanding anything herein to the contrary,
----------
in seeking indemnification for Damages under Section 6.2.1, the Indemnified
Persons will exercise their remedies with respect to the Escrow Shares and any
other assets deposited in escrow pursuant to the Escrow Agreement. Except as
set forth in Section 6.2.3, (i) no SecureIT Shareholder will have any liability
to an Indemnified Person under Section 6.2.1 of this Agreement except to the
extent of such SecureIT Shareholder's portion of the Escrow Shares deposited
under the Escrow Agreement and (ii) the remedies set forth in this Section 6.2.2
will be the exclusive remedies of VeriSign and the other Indemnified Persons
under Section 6.2.1 of this Agreement against any SecureIT Shareholder for any
breach of, or default in, any of the representations, warranties or covenants
given or made by the SecureIT in this Agreement or in any certificate, document
or instrument delivered by or on behalf of the SecureIT pursuant hereto. In
addition, the indemnification provided for in Section 6.2.1 shall not apply
unless and until the aggregate Damages for which one or more Indemnified Persons
seeks or has sought indemnification hereunder exceeds a cumulative aggregate of
One Hundred Thousand Dollars ($100,000) (the "Deductible"), in which event the
----------
SecureIT Shareholders shall, subject to the foregoing limitations, be liable to
indemnify the Indemnified Persons for all Damages in excess of the Deductible.
The limitations on the indemnification obligations set forth in this Section
6.2.2 shall not be applicable to Damages incurred and arising out of any matters
---
set forth in Section 6.2.3 or 6.2.6 below.
6.2.3 Exceptions to Indemnity Limitations.
-----------------------------------
(a) In addition to, and separate from, the foregoing agreement to
indemnify set forth in Section 6.2.1, each SecureIT Shareholder agrees,
severally and not jointly, to defend and indemnify VeriSign and each other
-------------------------
Indemnified Person from and against any and all Damages incurred and arising out
of (i) claims of intentional fraudulent conduct, intentional misrepresentation
or other willful misconduct by such SecureIT Shareholder, (ii) any criminal
matters involving SecureIT or any such SecureIT Shareholder, (iii) any failure
of such SecureIT Shareholder to have good, valid and marketable title to any
issued and outstanding shares of SecureIT Common Stock held (or asserted to have
been held) by such SecureIT Shareholder, free
and clear of all liens, claims and encumbrances, or to have the full right,
capacity and authority to enter into this Agreement and to vote such person's
shares of SecureIT Stock in favor of the Merger and any other transactions
contemplated by this Agreement, (iv) any claim concerning the breach of the
representations and warranties set forth in Section 2.3 (including without
limitation any claim on account of purchases or repurchases of SecureIT stock
arising prior to the Effective Time), (v) any action or inaction by the SecureIT
Shareholders inconsistent with the requirements for S corporations, and (vi) any
claim under Section 7.8 below. A SecureIT Shareholder's liability under the
indemnification provided for in this Section 6.2.3 shall be in addition to any
liability of such SecureIT Shareholder under Section 6.2.1 and shall not be
subject to the limitations on such SecureIT Shareholder's liability set forth in
Section 6.2.2 and shall not be limited to such SecureIT Shareholder's Escrow
Shares.
(b) Any claim for Damages made by an Indemnified Person against the
SecureIT Shareholders as a result of any failure of SecureIT and/or the SecureIT
Shareholders to have an effective S election for any taxable period prior to the
Effective Time shall not be subject to the limitations set forth in Sections
6.1.1 or 6.2.2. Nevertheless, for purposes of this Section 6.2.3(b), Damages
for which VeriSign may make a claim shall be limited to the excess of (i) the
total amount of all Taxes for which SecureIT may be liable as a C corporation
for federal and state income tax purposes for taxable periods prior to the
Effective Time (calculating SecureIT's C corporation taxable income for purposes
of this Section 6.2.3(b) by a hypothetical closing of SecureIT's books and
records immediately prior to the Effective Time), all interest and penalties
incurred in connection therewith, and reasonable fees and expenses of
professionals engaged in connection with the resolution of any claim arising
with respect to such Taxes over (ii) the Tax Dividend (as hereinafter defined)
that would have been paid to the SecureIT Shareholders had SecureIT had an
effective S election, but which was not paid by SecureIT to the SecureIT
Shareholders. For purposes of this Section 6.2.3(b), "Tax Dividend" means the
amount payable pursuant to the cash distribution to the SecureIT Shareholders
declared by the Board of Directors of SecureIT on July 3, 1998 as if the S
election were effective. Recovery of such claims shall be made only from the
Tax Escrow Shares, as defined in, and subject to the terms and conditions of,
the Escrow Agreement.
6.2.4 Survival of Claims. Notwithstanding anything to the contrary,
------------------
if, prior to the expiration of a particular representation, warranty or
obligation, an Indemnified Person makes a claim for indemnification under either
this Agreement or the Escrow Agreement with respect to a breach of such
representation or warranty, then the Indemnified Person's rights to
indemnification under this Section 6.2 for such claim shall survive any
expiration of such representation, warranty or obligation.
6.2.5 Indemnification Procedures. Promptly after the receipt by
--------------------------
VeriSign of notice or discovery of any claim, damage or legal action or
proceeding giving rise to indemnification rights under this Agreement, VeriSign
will give the Representative and the Escrow Agent written notice of such claim,
damage, legal action or proceeding (a "Claim") in accordance with Section 1(c)
-----
of the Escrow Agreement. Within ten days of delivery of such written notice,
the Representative may, at the expense of the SecureIT Shareholders, elect to
take
all necessary steps properly to contest any Claim involving third parties or to
prosecute such Claim to conclusion or settlement satisfactory to the
Representative. If the Representative makes the foregoing election, VeriSign
will have the right to participate at its own expense in all proceedings. If the
Representative does not make such election, VeriSign shall be free to handle the
prosecution or defense of any such Claim, will take all necessary steps to
contest the Claim involving third parties or to prosecute such Claim to
conclusion or settlement satisfactory to VeriSign, and will notify the
Representative of the progress of any such Claim, will permit the
Representative, at the sole cost of the Representative or the SecureIT
Shareholders, to participate in such prosecution or defense and will provide the
Representative with reasonable access to all relevant information and
documentation relating to the Claim and VeriSign's prosecution or defense
thereof. In any case, the party not in control of the Claim will cooperate with
the other party in the conduct of the prosecution or defense of such Claim.
Neither party will compromise or settle any such Claim without the written
consent of either VeriSign (if the Representative defends the Claim) or the
Representative (if VeriSign defends the Claim), such consent not to be
unreasonably withheld.
6.2.6 ▇▇▇▇ Litigation. Notwithstanding the foregoing, with respect
---------------
to the action entitled ▇▇▇▇▇▇▇▇ ▇▇▇▇ v. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇.▇. ▇▇▇▇▇▇▇▇"), P.
---------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇. ▇. ▇▇▇▇▇▇▇▇") and SecureIT, Inc., filed in the United States
----------------------------------------------------
District Court for the Northern District of Georgia (the "▇▇▇▇ Litigation"),
---------------
▇.▇. ▇▇▇▇▇▇▇▇ and ▇.▇. ▇▇▇▇▇▇▇▇ (collectively, "▇▇▇▇▇▇▇▇") shall take all steps
--------
to contest these claims and to defend against such claims to conclusion or
settlement at the sole expense of ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇ will notify SecureIT of
the progress of any such claims. In the defense thereof by ▇▇▇▇▇▇▇▇, SecureIT
(including the Surviving Corporation) will cooperate with ▇▇▇▇▇▇▇▇ and will
provide ▇▇▇▇▇▇▇▇ with reasonable access to all relevant information and
documentation relating to the claims in the control or possession of SecureIT.
▇▇▇▇▇▇▇▇ will indemnify and hold harmless SecureIT, the Surviving Corporation,
VeriSign and the Indemnified Persons from Damages incurred or arising out of the
▇▇▇▇ Litigation, including all amounts paid in settlement thereof (provided the
settlement is approved by ▇▇▇▇▇▇▇▇). ▇▇▇▇▇▇▇▇'▇ liability under the
indemnification provided for in this Section 6.2.6 shall be in addition to any
liability of ▇▇▇▇▇▇▇▇ under Section 6.2.1 and shall not be subject to the
limitations on liability set forth in Sections 6.1.1 and 6.2.2 and shall not be
limited to Chaudhry's Escrow Shares.
7. MISCELLANEOUS
7.1 Governing Law; Dispute Resolution. The internal laws of the
---------------------------------
State of California (irrespective of its choice of law principles) will govern
the validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the parties hereto.
Any dispute hereunder ("Dispute") shall be settled by arbitration in (a) San
-------
Francisco, California, in the case of an arbitration initiated by the SecureIT
Shareholders and (b) in Atlanta, Georgia, in the case of an arbitration
initiated by VeriSign and, except as herein specifically stated, any such
arbitration shall be conducted in accordance with the commercial arbitration
rules of the American Arbitration Association ("AAA Rules") then in effect.
---------
However, in all events, these arbitration provisions shall govern over any
conflicting
rules which may now or hereafter be contained in the AAA Rules. Any judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction over the subject matter thereof. The arbitrator shall have the
authority to grant any equitable and legal remedies that would be available in
any judicial proceeding instituted to resolve a Dispute.
7.1.1 Compensation of Arbitrator. Any such arbitration will be
--------------------------
conducted before a single arbitrator who will be compensated for his or her
services at a rate to be determined by the parties or by the American
Arbitration Association, but based upon reasonable hourly or daily consulting
rates for the arbitrator in the event the parties are not able to agree upon his
or her rate of compensation.
7.1.2 Selection of Arbitrator. The American Arbitration Association
-----------------------
will have the authority to select an arbitrator from a list of arbitrators who
are lawyers familiar with contract law and mergers and acquisitions; provided,
however, that such lawyers cannot work for a firm then performing services for
either party, that each party will have the opportunity to make such reasonable
objection to any of the arbitrators listed as such party may wish and that the
American Arbitration Association will select the arbitrator from the list of
arbitrators as to whom neither party makes any such objection. In the event
that the foregoing procedure is not followed, each party will choose one person
from the list of arbitrators provided by the American Arbitration Association
(provided that such person does not have a conflict of interest), and the two
persons so selected will select from the list provided by the American
Arbitration Association the person who will act as the arbitrator.
7.1.3 Payment of Costs. VeriSign and SecureIT or the SecureIT
----------------
Shareholders after the Closing will bear the expense of deposits and advances
required by the arbitrator in equal proportions, but either party may advance
such amounts, subject to recovery as an addition or offset to any award. The
arbitrator will award to the prevailing party, as determined by the arbitrator,
all costs, fees and expenses related to the arbitration, including reasonable
fees and expenses of attorneys, accountants and other professionals incurred by
the prevailing party.
7.1.4 Burden of Proof. For any Dispute submitted to arbitration, the
---------------
burden of proof will be as it would be if the claim were litigated in a judicial
proceeding.
7.1.5 Award. Upon the conclusion of any arbitration proceedings
-----
hereunder, the arbitrator will render findings of fact and conclusions of law
and a written opinion setting forth the basis and reasons for any decision
reached and will deliver such documents to each party to this Agreement along
with a signed copy of the award.
7.1.6 Terms of Arbitration. The arbitrator chosen in accordance with
--------------------
these provisions will not have the power to alter, amend or otherwise affect the
terms of these arbitration provisions or the provisions of this Agreement.
7.1.7 Exclusive Remedy. Except as specifically otherwise
----------------
provided in this Agreement, arbitration will be the sole and exclusive remedy of
the parties for any Dispute arising out of this Agreement.
7.2 Assignment; Binding Upon Successors and Assigns. Neither party
-----------------------------------------------
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other party hereto. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
7.3 Severability. If any provision of this Agreement, or the
------------
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
7.4 Counterparts. This Agreement may be executed in counterparts,
------------
each of which will be an original as regards any party whose name appears
thereon and all of which together will constitute one and the same instrument.
This Agreement will become binding when one or more counterparts hereof,
individually or taken together, bear the signatures of both parties reflected
hereon as signatories.
7.5 Other 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 on such party,
and the exercise of any one remedy will not preclude the exercise of any other.
7.6 Amendment and Waivers. Any term or provision of this Agreement
---------------------
may be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto at any
time before or after approval of the SecureIT Shareholders.
7.7 No Waiver. The failure of any party to enforce any of the
---------
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by any party of the
right to enforce any of the provisions hereof on any occasion will not be
construed to be a waiver of the right of such party to enforce such provision on
any other occasion.
7.8 Expenses. Each party will bear its respective expenses and fees
--------
of its own accountants, attorneys, investment bankers and other professionals
incurred with respect to this Agreement and the transactions contemplated
hereby. VeriSign will pay at or immediately
following the Effective Date the reasonable accounting, attorneys' and
investment banker fees and expenses and other fees and expenses incurred by
SecureIT in connection with the Merger in an amount not to exceed $1,200,000
(the "Maximum Fee Amount"). In the event that such Merger expenses exceed
------------------
the Maximum Fee Amount, any such excess fees or expenses shall be paid by
VeriSign but shall be reimbursed to VeriSign as a "Claim" (as such term is
defined in the Escrow Agreement) under the Escrow Agreement.
7.9 Notices. Any notice or other communication required or permitted
-------
to be given under this Agreement will be in writing, will be delivered
personally or by mail or express delivery, postage prepaid, and will be deemed
given upon actual delivery or, if mailed by registered or certified mail, on the
third business day following deposit in the mails, addressed as follows:
(i) If to VeriSign: VeriSign, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
with a copy to: Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to SecureIT: SecureIT, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(iii) If to a SecureIT Shareholder, to such SecureIT
Shareholder's address listed on the signature pages
hereof
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 7.9.
7.10 Construction of Agreement. The language hereof will not be
-------------------------
construed for or against either party. A reference to an article, section or
exhibit will mean an article or section in, or an exhibit to, this Agreement,
unless otherwise explicitly set forth. The titles and headings in this
Agreement are for reference purposes only and will not in any manner limit the
construction of this Agreement. For the purposes of such construction, this
Agreement will be considered as a whole.
7.11 No Joint Venture. Nothing contained in this Agreement will be
----------------
deemed or construed as creating a joint venture or partnership between the
parties hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other, and the parties'
status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold itself out as having
any authority or relationship in contravention of this Section.
7.12 Further Assurances. Each party agrees to cooperate fully with
------------------
the other party and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by the other party to evidence and reflect the transactions provided
for herein and to carry into effect the intent of this Agreement.
7.13 Absence of Third Party Beneficiary Rights. No provisions of
-----------------------------------------
this Agreement are intended, nor will be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, partner or employee of any party hereto or any other person
or entity, unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof will be personal solely between the parties to
this Agreement.
7.14 Public Announcement. VeriSign and SecureIT will issue a press
-------------------
release approved by both parties announcing the Merger as soon as practicable
following the execution of this Agreement. VeriSign may issue such press
releases, and make such other disclosures regarding the Merger, as it determines
to be required or appropriate under applicable securities laws or NASD rules
after reasonable consultation, where possible, with SecureIT. SecureIT will not
make any other public announcement or disclosure of the transactions
contemplated by this Agreement. SecureIT will take all reasonable precautions
to prevent any trading in the securities of VeriSign by officers, directors,
employees and agents of SecureIT, (a) having knowledge of any material
information regarding VeriSign provided hereunder until the information in
question has been publicly disclosed or (b) to the extent that such trading
would adversely affect the treatment of the Merger as a "pooling of interests"
for accounting purposes.
7.15 Confidentiality. Except as expressly authorized by VeriSign in
---------------
writing, SecureIT will not directly or indirectly divulge to any person or
entity or use any VeriSign Confidential Information, except as required for the
performance of its duties under this Agreement. Except as expressly authorized
by SecureIT in writing, VeriSign will not directly or indirectly divulge to any
person or entity or use any SecureIT Confidential Information, except as
required for the performance of its duties under this Agreement. As used
herein, "VeriSign Confidential Information" consists of (a) any information
---------------------------------
designated by VeriSign as confidential whether developed by VeriSign or
disclosed to VeriSign by a third party, (b) the source code to any VeriSign
software and any trade secrets relating to any of the foregoing, and
(c) any information relating to VeriSign's product plans, product designs,
product costs, product prices, product names, finances, marketing plans,
business opportunities, personnel, research development or know-how. As used
herein, "SecureIT Confidential Information" consists of (x) any information
----------------------------------
designated by SecureIT as confidential whether developed by SecureIT or
disclosed to SecureIT by a third party, (y) the source code to any SecureIT
software, and any trade secrets related to any of the foregoing, and (z) any
information relating to SecureIT product plans, product designs, product costs,
product prices, product names, finances, marketing plan, business opportunities,
personnel, research, development or know-how. "VeriSign Confidential
Information" and "SecureIT Confidential Information" also include the terms and
conditions of this Agreement, except as disclosed in accordance with Section
7.14 above. The foregoing restriction will apply to information about a party
whether or not it was obtained from such party's employees, acquired or
developed by the other party during such other party's performance under this
Agreement, or otherwise learned. The foregoing restrictions will not apply to
information that (i) has become publicly known through no wrongful act of the
receiving party, (ii) has been rightfully received from a third party authorized
by the party which is the owner, creator or compiler to make such disclosure
without restriction, (iii) has been approved or released by written
authorization of the party which is the owner, creator or compiler, or (iv) is
being or has therefore been disclosed pursuant to a valid court order after a
reasonable attempt has been made to notify the party which is the owner, creator
or compiler.
7.16 Entire Agreement. This Agreement, the exhibits hereto and the
----------------
accompanying letter from VeriSign regarding SecureIT employees constitute the
entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect to the subject matter hereof. The express
terms hereof control and supersede any course of performance or usage of trade
inconsistent with any of the terms hereof.
7.17 Post-Closing Covenant. VeriSign, SecureIT and each of the
---------------------
SecureIT Shareholders hereby agree to co-operate with each other in good faith
following the Effective Date to agree the allocation of items of tax
significance (such as income, deductions, and credits, etc.) between the short
tax year of SecureIT ended at the Effective Time and the remaining tax year of
SecureIT commencing immediately after the Effective Time. VeriSign shall
prepare or cause to be prepared and file or cause to be filed all tax returns
for SecureIT for the period ending on or prior to the Effective Date that are
due to be filed after the Effective Date. VeriSign shall permit the SecureIT
Shareholders to review and comment on each such tax return described in the
preceding sentence prior to filing. The Secure IT Shareholders may request
revisions to such tax returns, which revisions shall be made subject to
VeriSign's consent, which consent shall not be unreasonably withheld. VeriSign,
SecureIT and the SecureIT Shareholders hereby also agree to cooperate with each
other in good faith following the Effective Date in connection with any audit,
litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the providing of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of
any material provided hereunder. VeriSign, SecureIT and the SecureIT
Shareholders agree: (i) to retain all books and records with respect to Tax
matters pertinent to SecureIT relating to any taxable period beginning before
the Effective Date until the expiration of the statute of limitations (and, to
the extent notified by VeriSign, SecureIT or any SecureIT Shareholder, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii) to
give the other parties reasonable notice prior to transferring, destroying or
discarding any such books and records and, if any other party so requests,
VeriSign, SecureIT or any SecureIT Shareholder, as the case may be, shall allow
the other party to take possession of such books and records. If, following the
Effective Date, SecureIT becomes subject to an audit by the Internal Revenue
Service or any state taxing agency or authority for tax years or periods prior
to the Effective Time (including, but not limited to, any such short tax year
resulting from the Merger), the SecureIT Shareholders will be responsible for
such audit(s) and shall use all reasonable efforts to resolve all such audits in
a manner consistent with the intentions of SecureIT and VeriSign as expressed in
this Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
VERISIGN, INC. SECUREIT, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
__________________________ _____________________________
Title: Chief Executive Officer Title: President
_______________________ __________________________
VERISIGN MERGER CORP.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
__________________________
Title: Chief Executive Officer
_______________________
THE SHAREHOLDERS
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
__________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ P. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
__________________________________
P. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
__________________________________
▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Title: President
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▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ Foundation
/s/ ▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇, Trustee for the Benefit of P. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Deep ▇▇▇▇▇▇▇▇ under Trust
Agreement dated 1/17/97
/s/ ▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇, Trustee for the Benefit of P. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ and Yash ▇▇▇▇ ▇▇▇▇▇▇▇▇ under Trust
Agreement dated 1/17/97
/s/ ▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇, Trustee for the Benefit of P. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ and Samir ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ under Trust
Agreement dated 1/17/97
/s/ ▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇, Trustee for the Benefit of ▇▇▇▇▇▇▇▇
▇▇▇▇▇ under Trust Agreement dated 1/19/97
EXHIBIT A
CERTIFICATE OF MERGER
EXHIBIT B
ESCROW AGREEMENT
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
EXHIBIT D
SECUREIT AFFILIATE AGREEMENT
EXHIBIT E
VERISIGN AFFILIATE AGREEMENT
EXHIBIT F
EMPLOYMENT AND NON-COMPETITION AGREEMENTS
EXHIBIT G
NON-COMPETITION AGREEMENT
EXHIBIT 1.10
OFFICERS' TAX REPRESENTATION CERTIFICATE
