-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JQPeki8dZTPvJJ21FvuzrWUhZrlzseJoNVUHkkw8+iXCN95hYXFbHoMjONzD5VDM syTEcG618GHzCIITYP92JA== 0000950144-97-011340.txt : 19971030 0000950144-97-011340.hdr.sgml : 19971030 ACCESSION NUMBER: 0000950144-97-011340 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19971029 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971029 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARBINGER CORP CENTRAL INDEX KEY: 0000947116 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 581817306 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 033-93804 FILM NUMBER: 97703162 BUSINESS ADDRESS: STREET 1: 1055 LENOX PARK BLVD CITY: ATLANTA STATE: GA ZIP: 30319 BUSINESS PHONE: 4048414334 8-K 1 HARBINGER CORP 1 ================================================================================ Securities and Exchange Commission Washington, D. C. 20549 -------------- FORM 8-K -------------- CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: October 29, 1997 (Date of earliest event reported): October 23, 1997 HARBINGER CORPORATION (Exact name of Company as specified in its charter) GEORGIA 0-26298 58-1817306 (State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.) incorporation or organization)
1055 LENOX PARK BOULEVARD, ATLANTA, GEORGIA 30319 (Address of principal executive offices) (Zip Code) (404) 467-3000 (Company's telephone number, including area code) ================================================================================ 2 Item 2. Acquisition or Disposition of Assets. Effective October 23, 1997, Harbinger Corporation, a Georgia corporation (the "Company"), acquired (the "Acquisition") all of the outstanding capital shares of API Systems, Limited, a company organized under the laws of England, and its affiliate (together, "Atlas"). The Acquisition was consummated in accordance with the terms of a Share Purchase Agreement ("Share Purchase Agreement"), dated as of October 23, 1997, among the Company, Allan Gray, Philip Bird, Tom Reynolds, C.G. Summers and Lancashire Enterprises Venture Fund (together, the "Shareholders"). The consideration paid by the Company in connection with the Acquisition was approximately 311,000 shares of Harbinger common stock. In connection with the Acquisition, which was accounted for under the pooling-of-interests method of accounting, the Company expects to take a $3-$5 million charge in the fourth quarter of 1997 for acquisition and integration related charges. The total consideration paid in the Acquisition was determined through arms-length negotiations between representatives of the Company and the Shareholders. Neither the Company nor any of its affiliates had, nor to the knowledge of the Company, did any director of officer or any associate of any such director or officer of the Company have, any material relationship with Atlas or the Shareholders prior to the Acquisition. The tangible assets acquired in the Acquisition were used in developing EDI software and the Company intends to use such assets for substantially the same purpose. The acquisition of Atlas gives the Company a strong presence in the EDI/electronic commerce industry throughout the U.K. Atlas, based in Manchester, England, has an installed base of over 2,500 customers on PC, UNIX, NT and DEC/VMS platforms. Atlas products are targeted to small and mid-sized businesses, and are distributed directly and through third party channels in the U.K., European and other markets around the world. The acquisition of Atlas provides the Company with an enhanced customer base as well as quality relationships in key industries including retail, finance, manufacturing and distribution. Additionally, Atlas provides extensive EDI/electronic commerce standards support for European and in particular the U.K., theaters. In connection with the Acquisition, the Company entered into a Registration Rights Agreement with the Shareholders. A copy of such agreement is filed as Exhibit 4.1. A copy of the Share Purchase Agreement is filed as Exhibit 2.1. Such agreements are incorporated herein by reference. The Atlas acquisition was not significant under Rule 3-05 of Regulation S-X as it relates to Item 7 of this Form 8-K. Item 5. Other Events. On October 23, 1997, the Company, announced that it has executed a definitive Merger Agreement, dated as of October 23, 1997 (the "Merger Agreement"), in which the Company has agreed to acquire all of the capital stock of Premenos Technology Corp., a Delaware corporation ("Premenos"). Under the Merger Agreement, each share of Premenos common stock will be converted into .45 of a share of the Company common stock. As of October 23, 1997, there were 11,784,615 shares of Premenos common stock issued and outstanding. All Premenos options and warrants will be converted into the Company's options and warrants with the exercise prices and the number of shares being adjusted in accordance with the conversion ratio. The transaction is subject to, among other things, the parties securing necessary regulatory approvals and approval of Harbinger shareholders and Premenos stockholders. The transaction is currently expected to close by December 31, 1997. A complete description of the proposed transaction is contained in the Merger Agreement filed as Exhibit 2.2 and incorporated herein by reference. In connection with the transaction, Harbinger entered into an Irrevocable Proxy Agreement with each of Lew Jenkins and David Hildes. The agreements provide, among other things, that Harbinger has the right to vote Messrs. Jenkins and Hildes shares in favor of the Merger Agreement and the transaction. Messrs. Jenkins and Hildes are each directors and executive officers of Premenos who collectively own approximately 43% of the outstanding shares of Premenos Common Stock. The Company has agreed in the agreements to publicly release a 30-day interim financial statement covering the first full calendar month of combined operations of the Company and Premenos as promptly as practicable, but no later than 25 days after the end of such full calendar month, and to deliver such statement to Messrs. Jenkins and Hildes at least five days prior to public release. The form of 3 agreements executed by each of Messrs. Jenkins and Hildes is filed as Exhibit 99.1, and is incorporated herein by reference. The Company issued the press releases filed as Exhibits 99.2, 99.3 and 99.4. Filed herewith as Exhibit 99.5 is the Safe Harbor Compliance Statement for Forward-Looking Statements of Harbinger Corporation, which supersedes the Safe Harbor Compliance Statement for Forward-Looking Statements filed as Exhibit 99.1 to the Current Report on Form 8-K dated July 16, 1997. Item 7. Financial Statements and Exhibits. c) Exhibits: 2.1 Share Purchase Agreement by and among Harbinger Corporation, Allan Gray, Philip Bird, Tom Reynolds, C.G. Summers and Lancashire Enterprises Venture Fund, dated as of October 23, 1997. The Exhibits and Disclosure Schedules, which are referenced in the table of contents and elsewhere in the Share Purchase Agreement, are hereby incorporated by reference. Such Exhibits and Disclosure Schedules have been omitted for purposes of this filing, but will be furnished supplementally to the Commission upon request. 2.2 Merger Agreement by and among Harbinger Corporation, Olympic Subsidiary Corporation and Premenos Technology Corp., dated as of October 23, 1997. The Exhibits and Disclosure Schedules, which are referenced in the table of contents and elsewhere in the Merger Agreement, are hereby incorporated by reference. Such Exhibits and Disclosure Schedules have been omitted for purposes of this filing, but will be furnished supplementally to the Commission upon request. 4.1 Registration Rights Agreement by and among Harbinger Corporation, Allan Gray, Philip Bird, Tom Reynolds, C.G. Summers and Lancashire Enterprises Venture Fund, dated October 23, 1997. 99.1 Form of Irrevocable Proxy Agreement, dated as of October 23, 1997, by and between Harbinger Corporation and each of Lew Jenkins and David Hildes. 99.2 Text of Press Release of Harbinger Corporation, dated October 23, 1997, relating to proposed merger with Premenos. 99.3 Text of Press Release of Harbinger Corporation, dated October 23, 1997, relating to 1997 third quarter operating results. 99.4 Text of Press Release of Harbinger Corporation, dated October 23, 1997, relating to acquisition of API Systems, Ltd. 99.5 Safe Harbor Compliance Statement for Forward-Looking Statements. 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HARBINGER CORPORATION /s/ Joel G. Katz ----------------------------- JOEL G. KATZ Chief Financial Officer (Principal Financial Officer; Principal Accounting Officer) Date: October 29, 1997 5 EXHIBIT INDEX
Exhibit Page No. ------- -------- 2.1 Share Purchase Agreement by and among Harbinger Corporation, Allen Gray, Philip Bird, Tom Reynolds, C.G. Summers and Lancashire Enterprises Venture Fund, dated as of October 23, 1997. The Exhibits and Disclosure Schedules, which are referenced in the table of contents and elsewhere in the Share Purchase Agreement, are hereby incorporated by reference. Such Exhibits and Disclosure Schedules have been omitted for purposes of this filing, but will be furnished supplementally to the Commission upon request. 2.2 Merger Agreement by and among Harbinger Corporation, Olympic Subsidiary Corporation and Premenos Technology Corp., dated as of October 23, 1997. The Exhibits and Disclosure Schedules, which are referenced in the table of contents and elsewhere in the Merger Agreement, are hereby incorporated by reference. Such Exhibits and Disclosure Schedules have been omitted for purposes of this filing, but will be furnished supplementally to the Commission upon request. 4.1 Registration Rights Agreement by and among Harbinger Corporation, Allan Gray, Philip Bird, Tom Reynolds, C.G. Summers and Lancashire Enterprises Venture Fund, dated October 23, 1997. 99.1 Form of Irrevocable Proxy Agreement, dated as of October 23, 1997, by and between Harbinger Corporation and each of Lew Jenkins and David Hildes. 99.2 Text of Press Release of Harbinger Corporation, dated October 23, 1997, relating to proposed merger with Premenos. 99.3 Text of Press Release of Harbinger Corporation, dated October 23, 1997, relating to 1997 third quarter operating results. 99.4 Text of Press Release of Harbinger Corporation, dated October 23, 1997, relating to acquisition of API Systems, Ltd. 99.5 Safe Harbor Compliance Statement for Forward-Looking Statements.
EX-2.1 2 SHARE PURCHASE AGREEMENT 1 Exhibit 2.1 EXECUTION COPY SHARE PURCHASE AGREEMENT THIS SHARE PURCHASE AGREEMENT, dated as of October 23, 1997 (the "Agreement"), by and among ALLAN W. GRAY, a resident of Lancashire, England ("Gray"), PHILIP J. BIRD, a resident of Cheshire, England ("Bird"), TOM P.C. REYNOLDS, a resident of Warrington, England ("Reynolds"), and C.G. SUMMERS, a resident of Surrey, England ("Summers"), and LANCASHIRE ENTERPRISES VENTURE FUND, a limited partnership formed under the laws of England and Wales ("Lancashire") (Gray, Bird, Reynolds and Summers are sometimes referred to herein as the "Management Sellers," and the Management Sellers and Lancashire are sometimes referred to herein collectively as the "Sellers" and individually as a "Seller") and HARBINGER CORPORATION, a Georgia corporation ("Buyer"). W I T N E S S E T H: WHEREAS, Sellers own all the issued and outstanding ordinary shares and cumulative participating preferred ordinary shares (collectively, the "Ordinary Shares"), and 8% cumulative redeemable preference shares (the "Preference Shares" and together with the Ordinary Shares, the "Shares"), of API Systems Limited, a company formed under the laws of England and Wales (Reg. No. 2942785) ("Company"), being all of the outstanding share capital of Company; WHEREAS, Company is engaged in the business of provision of information technology worldwide (the "Business"); WHEREAS, Buyer desires to purchase from Sellers and Sellers desire to sell to Buyer, all of the issued and outstanding Shares upon the terms and subject to conditions set forth herein (the "Transaction"); and WHEREAS, the parties desire that the Transaction be accounted for under the pooling-of-interests method of accounting; NOW THEREFORE, in consideration of the foregoing, the mutual covenants, agreements, representation and warranties contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows: ARTICLE 1. SALE OF SHARE CAPITAL; CLOSING Section 1.1. Purchase and Sale. On the basis of the representations, warranties, covenants and agreements set forth herein, Buyer hereby purchases from Sellers and Sellers hereby sell, convey and assign to Buyer all of the Shares, which Shares constitute all of the issued and outstanding share capital of Company. 2 Section 1.2. Purchase Price. In consideration of the sale of the Shares, and the representations, warranties, covenants and agreements of Sellers set forth herein, Buyer is paying and will issue to Sellers that number of shares of the common stock, par value $.0001 per share, of Buyer ("Buyer's Common Stock"), equal to U.S. $11,725,250 divided by the Average Closing Price. For purposes of this Agreement, the "Average Closing Price" shall be the arithmetic average of the closing price per share of Buyer's Common Stock in U.S. dollars, as reported on the Nasdaq National Market, for each of the twenty (20) consecutive trading days ending on the trading day immediately prior to the Closing Date (as hereinafter defined). The shares of Buyer's Common Stock issued to the Sellers pursuant to this Section 1.2 shall be referred to as the "Harbinger Shares." Subject to Section 1.3 below, Buyer shall deliver to Sellers at Closing certificates representing the Harbinger Shares in the amounts and proportions indicated on Exhibit A hereto, registered in such names and in such denominations as designated thereon. Section 1.3. Deposit of Shares in Escrow. Upon issuance of the certificates representing the Harbinger Shares, Management Sellers shall deliver into escrow stock certificates representing 10% of the total number of Harbinger Shares issued to Management Sellers pursuant to the terms of an Escrow Agreement in the form Exhibit B hereto. The Escrow Agreement sets forth the conditions under which the Escrow Shares shall be delivered to Sellers or Buyer. Section 1.4. Closing. The Closing of the purchase and sale of the Shares (the "Closing") is being held contemporaneously with the execution and delivery of this Agreement at the offices of the Company, Quay West, Trafford Wharf Road, Wharfside, Manchester, England M17 1HH, at 11:00 a.m., local time, on the date hereof, or such other place and such other time as the parties shall agree. The date of the Closing is referred to as the "Closing Date." Section 1.5. Further Assurances. Sellers from time to time after the Closing, at Buyer's request, will execute and acknowledge and deliver to Buyer such other instruments of conveyance and transfer and will take such other actions and execute and deliver such other documents, certifications and further assurances as Buyer may reasonably request in order to vest more effectively in Buyer, or to put Buyer more fully in possession of, any of the Shares. Each of the parties hereto will cooperate with the other and execute and deliver to the other such other instruments and documents and take such other actions as may be reasonably requested from time to time by any party hereto as necessary to carry out, evidence and confirm the intended purposes of this Agreement. Section 1.6. Fractional Shares. No scrip or fractional shares of Buyer's Common Stock shall be issued in the Transaction. All fractional shares of Buyer's Common Stock to which a Seller immediately prior to the Closing would otherwise be entitled pursuant to this Agreement shall be aggregated. If a fractional share results from such aggregation, a Seller shall be entitled to receive from Buyer an amount in cash in lieu of such fractional share, based on the Average Closing Price. -2- 3 Section 1.7 Waiver of Preemption. Each of the Sellers hereby irrevocably waives all and any rights of preemption which he may have under the Articles of Association of the Company or otherwise. ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND MANAGEMENT SELLERS With such exceptions as are set forth in a letter (the "Seller Disclosure Letter") signed and delivered by Sellers to Buyer immediately prior to the execution hereof and attached hereto as Exhibit C, each Management Seller hereby severally represents and warrants to Buyer as follows: Section 2.1. Organization. Each of Company and the Company Subsidiaries (as defined in Section 2.5 below) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Company and each of the Company Subsidiaries is duly qualified to transact business, and is in good standing, as a foreign corporation in each jurisdiction where the character of its activities requires such qualification, except where the failure to so qualify would not have a Company Material Adverse Effect (as defined below). A "Company Material Adverse Effect" means any event, condition or change which materially and adversely affects or could reasonably be expected to materially and adversely affect the assets, liabilities, financial results of operations, financial condition, business or prospects of Company or any Company Subsidiary. Company has made available to Buyer accurate and complete copies of the Memorandum and Articles of Incorporation or other governing documents, as currently in effect, of Company and each of the Company Subsidiaries, and has made available to Buyer the minute books and stock records of each thereof. The Seller Disclosure Letter contains a true and correct list of the jurisdictions in which Company or any of the Company Subsidiaries is qualified to do business as a foreign corporation. The Company and the Company Subsidiaries have each complied in all material respects with their respective Memorandum and Articles of Association. Section 2.2. Authorization. This Agreement has been duly executed and delivered by each of the Sellers and constitutes the legal, valid and binding agreement of each of the Sellers, enforceable against them in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. Section 2.3. Absence of Restrictions and Conflicts. The execution, delivery and performance of this Agreement, the consummation of the transactions contemplated by this Agreement and the fulfillment of and compliance with the terms and conditions of this Agreement do not and will not, with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any material benefit under, or permit the acceleration of any obligation under, (i) any term or provision of the Memorandum and Articles of Incorporation or other governing documents of Company or any of -3- 4 the Company Subsidiaries, (ii) any Company Material Contract (as defined in Section 2.10 hereof), (iii) any judgment, decree or order of any court or governmental authority or agency to which any of the Sellers, Company or any of the Company Subsidiaries is a party or by which any of the Sellers, Company or any of the Company Subsidiaries or any of their respective properties is bound, or (iv) any statute, law, regulation or rule applicable to any of the Sellers, Company or any of the Company Subsidiaries, so as, in the case of Company or the Company Subsidiaries, to have in the case of subsections (ii) through (iv) above, a Company Material Adverse Effect. Except for compliance with the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act") and applicable United Kingdom securities laws, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental agency or public or regulatory unit, agency, body or authority with respect to Company or any of the Company Subsidiaries is required in connection with the execution, delivery or performance of this Agreement by Seller or the consummation of the transactions contemplated by this Agreement by Sellers, the failure to obtain which would have a Company Material Adverse Effect. Section 2.4. Capitalization. The authorized share capital of Company consists of 70,000 ordinary shares, 30,000 cumulative participating preferred ordinary shares, and 170,000 8% cumulative redeemable preference shares. At the date of this Agreement, there were issued and outstanding 70,000 ordinary shares, 30,000 cumulative participating preferred ordinary shares and 85,000 8% cumulative redeemable preference shares. At the date of this Agreement, there were no other shares of share capital of Company authorized. Each share of Company Shares outstanding at the date of this Agreement is duly authorized, validly issued, fully paid and nonassessable free of preemptive rights, and is owned by Sellers. Each Seller owns of record and beneficially the number of shares of Company Shares issued and outstanding as set opposite the name of such Seller in the Seller Disclosure Letter, and the Seller Disclosure Letter sets forth for each Seller the percentage of Company Shares owned by such Seller (referred to elsewhere herein as such Seller's "Percentage Interest"); such Seller owns all rights, title and interest in and to such shares, free and clear of all liens (including those for estate or inheritance taxes), claims, pledges, options, rights of refusal or similar rights or other transfer restrictions or adverse claims and charges of any nature whatsoever (including any arising from existing or threatened litigation, but excluding transfer restrictions that may arise from applicable securities laws); and such Seller's transfer of his shares to Buyer pursuant to this Agreement will pass to Buyer all rights, title and interest to and in such shares free of any lien or any adverse interest, claim or charge whatsoever. The shares owned by each Seller were obtained by such Seller in transactions in full compliance with applicable securities laws, and each Seller has the exclusive right to vote the shares. Except as set forth above or in the Seller Disclosure Letter, there are no shares of share capital of Company outstanding, and there are no subscriptions, options, convertible securities, calls, puts, rights, warrants or other agreements, claims or commitments of any nature whatsoever obligating Company to purchase, redeem, issue, transfer, deliver or sell, or cause to be purchased, redeemed, issued, transferred, delivered or sold, additional shares of the share capital or other securities of Company or obligating Company to grant, extend or enter into any such agreement or commitment. No prior offer, issue, redemption, call, purchase, sale, transfer, negotiation or other transaction of any nature with respect to the share capital or equity interests of Company, or any corporation or organization which has been merged into Company, -4- 5 has given or may give rise to any valid claim or action by any person which is enforceable against Company or any of its affiliates and, to the best knowledge of the Management Sellers, no fact or circumstance exists which could give rise to any such right, claim or action on behalf of any person. Section 2.5. Subsidiaries. The Seller Disclosure Letter sets forth a true and complete list of all (i) corporations or other entities of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are, directly or indirectly, owned by Company, and (ii) partnerships or limited liability companies in which Company or a Company Subsidiary (as defined below) is (A) a general or limited partner or member or other owner and (B) entitled to receive more than 50% of the assets of any such partnership or such limited liability company on such partnership's or limited liability company's dissolution (collectively, the "Company Subsidiaries"), the jurisdiction in which each Company Subsidiary is incorporated or organized and all shares of share capital or of the ownership interests authorized, issued and outstanding of each Company Subsidiary. The outstanding shares of share capital or other equity interest of each Company Subsidiary have been duly authorized and are validly issued, fully paid and nonassessable. All shares of share capital or other equity interest of each Company Subsidiary owned by Company or any Company Subsidiary are set forth in the Seller Disclosure Letter and are owned by Company, directly or indirectly, free and clear of all liens, encumbrances, equities or claims. The Seller Disclosure Letter also sets forth a true and complete list of all corporations, partnerships, limited liability companies, and other entities in which Company or a Company Subsidiary owns an equity interest having a value in excess of U.S. $10,000, other than the Company Subsidiaries or any mutual funds or publicly traded companies. All shares of share capital or other equity interest of each such entity are set forth in the Seller Disclosure Letter and are owned by Company or a Company Subsidiary, as applicable, free and clear of all liens, encumbrances, equities or claims. Section 2.6. Financial Statements. Sellers have made available to Buyer (i) the audited consolidated profit and loss account of Company and its subsidiaries (to the extent that any such subsidiary existed as of such date) and balance sheets and consolidated balance sheets as of December 31, 1996 and 1995 and the related audited consolidated profit and loss account for the respective fiscal years then ended, including the notes thereto, examined by and accompanied by the report of Latham Crossley & Davis, chartered accountants ("Company Accountants"), and (ii) the audited consolidated profit and loss account of Company and its subsidiaries (to the extent that any such subsidiary existed as of such date) and balance sheet and consolidated balance sheet (the "Interim Balance Sheet") as of September 30, 1997 and the related audited consolidated profit and loss account for the nine month period then ended, including the notes thereto, examined by and accompanied by the report of KPMG Peat Marwick LLP, chartered accountants. All of the foregoing financial statements are collectively referred to as the "Company Financial Statements." The Company Financial Statements have been prepared from, and are in accordance with, the books and records of Company and its combined subsidiaries and, as applicable, give a true and fair view and present fairly the financial position, results of operations and changes in stockholders' equity of Company and its combined subsidiaries as of the dates and for the periods indicated, in each case in conformity with applicable Accounting -5- 6 Standards, consistently and reasonably applied throughout the periods covered thereby. As of the Closing Date, Company shall have no liability or obligation of any nature whatsoever, whether accrued, absolute, contingent or otherwise, other than (x) current liabilities and obligations that arise or have arisen in the ordinary course of business which are recurring in nature and not overdue on their terms, (y) liabilities and obligations reflected in and adequately provided for on the Interim Balance Sheet and (z) liabilities and obligations arising in the ordinary course of business of Company which alone or in the aggregate would not have a Company Material Adverse Effect. The Interim Balance Sheet contains all of the assets of the Company necessary to run the Business in the same manner after the Closing Date as before September 30, 1997. The Seller Disclosure Letter sets forth a true and complete list of all loss contingencies (within the meaning of Statement of Financial Accounting Standards No. 5), except those classified as "remote" (a "Loss Contingency") of Company exceeding U.S. $10,000 in the case of any single Loss Contingency or U.S. $100,000 in the case of all Loss Contingencies. Section 2.7. Absence of Certain Changes. (a) Since September 30, 1997, there has not been (i) any change in the assets, liabilities, results of operations, financial condition, business or prospects of Company and the Company Subsidiaries, taken as a whole, that has had a Company Material Adverse Effect, (ii) any damage, destruction, loss or casualty to property or assets of Company or any of the Company Subsidiaries, whether or not covered by insurance, which property or assets are material to the operations or business of Company and the Company Subsidiaries, taken as a whole, that has had a Company Material Adverse Effect, (iii) any declaration, setting aside or payment of any dividend or distribution (whether in cash, stock or property) in respect of the share capital of Company, any redemption or other acquisition by Company of any of the share capital of Company or any of the Company Subsidiaries or any split, combination or reclassification of shares of share capital declared or made by Company or (iv) any agreement to do any of the foregoing. Notwithstanding anything contained in this Agreement to the contrary, Sellers make no representations or warranties as to the future income or profitability of Company. (b) Since September 30, 1997, there have not been (i) any losses suffered which, in the aggregate, have resulted in a Company Material Adverse Effect, (ii) except as would not have a Company Material Adverse Effect, any assets mortgaged, pledged or made subject to any lien, charge or other encumbrance, (iii) any material liability or obligation (absolute, accrued or contingent) incurred or any material bad debt, contingency or other reserve increase suffered, except, in each such case, in the ordinary course of business and consistent with past practice, (iv) any material claims, liabilities or obligations (absolute, accrued or contingent) paid, discharged or satisfied, other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of claims, liabilities and obligations reflected or reserved against in the Company Financial Statements or incurred in the ordinary course of business and consistent with past practice, (v) any material guaranteed checks, notes or accounts receivable written off as uncollectible, except write-offs in the ordinary course of business and consistent with past practice, (vi) any write down (under Statement of Financial -6- 7 Accounting Standards No. 121 or other applicable accounting standards or otherwise) of the value of any material asset or investment on Company's books or records, except for depreciation and amortization taken in the ordinary course of business and consistent with past practice, (vii) any cancellation of any material debts or waiver of any material claims or rights of substantial value, or sale, transfer or other disposition of any material properties or assets (real, personal or mixed, tangible or intangible) of substantial value, except, in each such case, in transactions in the ordinary course of business and consistent with past practice, which, in the aggregate, have resulted in a Company Material Adverse Effect, (viii) any single capital expenditure or commitment in excess of U.S. $10,000, or aggregate capital expenditures and commitments in excess of U.S. $25,000 (on a consolidated basis, (ix) any obligations to pay royalties or license fees in excess of $10,000, (x) any Loss Contingency or Loss Contingencies of Company which, in the aggregate, have resulted in a Company Material Adverse Effect, (xi) any material transactions entered into other than in the ordinary course of business, (xii) any agreements to do any of the foregoing, or (xiii) any other events, developments or conditions (including any suit, action, claim, proceeding or investigation) of any character that have had or are reasonably likely to have a Company Material Adverse Effect. Section 2.8. Legal Proceedings. There are no suits, actions, claims, proceedings or investigations pending, or, to the best knowledge of Sellers, threatened against, relating to or involving Company or any of the Company Subsidiaries (or any of its officers or directors) or Sellers before any court, arbitrator or administrative or governmental body. Neither Company nor any of the Company Subsidiaries is subject to any judgment, decree, injunction, rule or order of any court, and, to the best knowledge of Sellers, neither Company nor any of the Company Subsidiaries is subject to any governmental restriction applicable to Company or any of the Company Subsidiaries, which is reasonably likely (i) to have a Company Material Adverse Effect or (ii) to cause a material limitation on Buyer's ability to operate the business of Company and the Company Subsidiaries after the Closing. Section 2.9. Compliance with Law. Each of Company and the Company Subsidiaries has all material authorizations, approvals, licenses and orders of and from all governmental and regulatory officers and bodies necessary to carry on its business as it is currently being conducted, to own or hold under lease the properties and assets it owns or holds under lease and to perform all of its obligations under the agreements to which it is a party, and each of Company and the Company Subsidiaries has been and is in compliance with all applicable laws, regulations and administrative orders of any country, state or municipality or of any subdivision of any thereof to which its business and its employment of labor or its use or occupancy of properties or any part thereof are subject, the failure to obtain or the violation of which would have a Company Material Adverse Effect. Section 2.10. Material Contracts. The Seller Disclosure Letter contains a list correct in all material respects of the following (the "Company Material Contracts"): (a) all bonds, debentures, notes, mortgages, indentures or guarantees securing indebtedness in excess of U.S. $10,000 individually to which Company or any of the Company -7- 8 Subsidiaries is a party or by which any of their properties or assets (real, personal or mixed, tangible or intangible) are bound; (b) all outstanding loans and credit commitments to Company or any of the Company Subsidiaries covering indebtedness in excess of U.S. $10,000 individually; (c) all contracts or agreements which limit or restrict in a substantial manner (i) Company or the Company Subsidiaries or any of the Sellers from engaging in any business in any jurisdiction or (ii) others from competing with Company or the Company Subsidiaries in any jurisdiction, except for employment contracts between Company or a Company Subsidiary and a current or former employee of Company or a Company Subsidiary; (d) all contracts or agreements requiring Company to register its share capital or securities under any applicable securities law; (e) all agreements or documentation evidencing currently outstanding loans or advances in excess of U.S. $10,000 individually made by Company or any of the Company Subsidiaries to or on behalf of its clients, other than accounts receivables incurred in the ordinary course of business, and identification of all bank accounts; and (f) all existing contracts and commitments (other than (i) those of the type described in subparagraphs (a), (b), (c), (d) or (e) of this Section 2.10), (ii) agreements, contracts or commitments pursuant to which Company or any of the Company Subsidiaries provides goods or services to its clients, (iii) the Company Benefit Plans (as defined in Section 2.14 hereof) and (iv) any leases with respect to real or personal property) to which Company or any of the Company Subsidiaries is a party or by which their properties or assets may be bound involving an annual commitment or annual payment by any party thereto of more than U.S. $10,000 individually or which by its terms requires performance thereunder by Company for more than two years following the Closing Date. All title deeds, agreements and other documents to which the Company is a party or under which the Company derives benefit and all other documents owned by or which ought to be in the possession of the Company are in its possession and are properly stamped. True and complete copies of all Company Material Contracts, including all amendments thereto, have been made available to Buyer. The Company Material Contracts are valid and enforceable in accordance with their respective terms with respect to Company and, to the knowledge of Sellers, valid and enforceable in accordance with their respective terms with respect to any other party thereto, in each case to the extent material to the business and operations of Company and the Company Subsidiaries taken as a whole and subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. Except for events or occurrences, the consequences of which, individually or in the aggregate, would not have a Company Material Adverse Effect, there is not under any of the Company Material Contracts any existing breach, default or event of default by Company or any of the Company Subsidiaries or event that with notice or lapse of time or both would constitute a breach, default or event of default by Company or any of the Company Subsidiaries, nor do the -8- 9 Sellers know of, and neither Company nor any of the Company Subsidiaries has received notice of, or made a claim with respect to, any breach or default by any other party thereto. Company is not a party to or subject to (i) any joint venture contract or arrangement or any other agreement which has involved or is expected to involve a sharing of profits, (ii) any original equipment manufacturer ("OEM"), reseller, distribution or equivalent agreement, volume purchase agreement, corporate end user license, sales or service agreement or other agreement or contract pursuant to which Company has granted or received most favored nation pricing provisions or exclusive marketing, reproduction, publishing, licensing or distribution rights related to any product, group of products or territory, or (iii) any agreement or contract containing a covenant or provision purporting to limit Company's freedom to compete or transact business in any line of business or in any geographic area. Neither Company nor any Company Subsidiary has any liabilities under that certain Factoring Agreement with International Factors Limited dated September 29, 1994 or any related guarantee thereof. Section 2.11. Company Client Contracts. The Seller Disclosure Letter sets forth a true and complete list of all agreements, contracts or commitments pursuant to which Company or any of the Company Subsidiaries provides goods or services to its clients (i) which produced annual payments in the year ending December 31, 1996 of at least U.S. $15,000 to Company or a Company Subsidiary or (ii) from which Seller reasonably expects Company to produce annual payments in excess of U.S. $15,000 in 1997 (the "Company Client Contracts"). Except as set forth in the Seller Disclosure Letter, the execution, delivery and performance of this Agreement by Sellers and the consummation of the transactions contemplated hereby will not, with the passing of time or the giving of notice or both, violate or constitute a default or give rise to a termination right under any Company Client Contract. True and complete copies of all written Company Client Contracts, including all amendments thereto, have been made available to Buyer. The Company Client Contracts are valid and enforceable in accordance with their respective terms with respect to Company or the Company Subsidiaries, as applicable, and, to the knowledge of Sellers, are valid and enforceable in accordance with their respective terms with respect to any other party thereto, in each case except as would not have a Company Material Adverse Effect. There is no existing breach, default or event of default by Company or any of the Company Subsidiaries, or event that solely as a result of notice or lapse of time or both would constitute a breach, default or event of default by Company or any of the Company Subsidiaries under the Company Client Contracts the consequences of which, individually or in the aggregate, would have a Company Material Adverse Effect. To the best knowledge of Sellers, neither Company nor any of the Company Subsidiaries has received notice of, or made a claim with respect to, any breach or default by any other party. Section 2.12. Tax Returns; Taxes. Each of Company and the Company Subsidiaries has duly filed all tax returns, information returns and governmental reports of every nature required by any Governmental Authority (as hereinafter defined) required to be filed by it (including employment and withholding tax returns) (collectively, "Governmental Returns") and has duly paid or made adequate provision for the payment of all taxes which are due and payable pursuant to such returns or pursuant to any assessment with respect to taxes in such jurisdictions, whether or not in connection with such returns, except as set forth in the Seller Disclosure Letter. The liability for taxes reflected in the Interim Balance Sheet is sufficient for the payment of all unpaid -9- 10 taxes, whether or not disputed, that are accrued or applicable for the period ended December 31, 1996 and for all years and periods ended prior thereto. Since the period ended December 31, 1996 neither Company nor any Company Subsidiary has entered into any transaction which has given rise or will give rise to a liability to tax upon it (or which would have done so or would or might do so but for the availability of any relief, allowance, deduction or credit) other than corporation tax on actual income (and not chargeable gains or deemed income) of the Company or a Company Subsidiary arising from transactions entered into in the ordinary course of business. All deficiencies asserted as a result of any examinations by any Governmental Authority have been paid, fully settled or adequately provided for in the Interim Balance Sheet. There are no pending claims asserted for taxes of Company or any Company Subsidiary or outstanding agreements or waivers extending the statutory period of limitation applicable to any tax return of Company or any Company Subsidiary for any period. Company and each of the Company Subsidiaries have made all estimated income tax deposits and all other required tax payments or deposits and has complied for all prior periods in all material respects with the tax withholding provisions of all applicable laws. Company and each of the Company Subsidiaries have made available to Buyer true, complete and correct copies of their income tax returns filed with any Governmental Authority for the last three taxable years and made available such other tax returns requested by Buyer. For purposes of this Agreement, the term "tax" shall include all forms of taxation, duties, imposts, levies and rates whenever imposed and whether of the United Kingdom or elsewhere and in particular (but without prejudice to the generality of the foregoing) includes income tax, withholding taxes, corporation tax, capital gains tax, inheritance tax, value added tax, customs duties, excise duties, betterment levy, development land tax, stamp duty, stamp duty reserve tax, capital duty, general and water rates, community charge, national insurance contributions, social security or other similar contributions and generally any other taxes, duties, imposts, levies or other amounts (whether of a like nature or not) and any interest, penalty or fine in connection therewith. The term "Governmental Authority" shall mean any and all foreign, federal, state or local government, governmental institutions, public authorities and governmental entities of any nature whatsoever, and any subdivisions or instrumentalities thereof, including, but not limited to, departments, boards, bureaus, commissions, agencies, courts, administrations and panels, and any divisions or instrumentalities thereof, whether permanent or ad hoc and whether or hereafter constituted and/or existing. Neither the Company nor any Company Subsidiary has since December 31, 1996, knowingly engaged in or been a party to any scheme or arrangement of which the main purpose or one of the main purposes was the avoidance of or a reduction in liability to taxes. Section 2.13. Officers, Directors and Employees. The Seller Disclosure Letter contains a true and complete list of all of the officers and directors (including shadow or alternate directors) of Company and each Company Subsidiary, specifying their office and annual rate of compensation, and a true and complete list of all of the employees of Company and each Company Subsidiary as of the date hereof with whom Company or a Company Subsidiary, as applicable, has a written employment agreement or, to the best knowledge of Sellers, to whom Company or a Company Subsidiary, as applicable, has made verbal commitments involving material terms which are binding on it and that involve annual compensation to such employees individually of at least U.S. $30,000 (including any estimated bonuses payable thereto). -10- 11 Section 2.14. Employee Benefit Plans. (a) Definition of Benefit Plans. For purposes of this Section 2.14, the term "Company Benefit Plan" means any plan, program, arrangement, fund, policy, practice or contract which, through which or under which Company or any Company Subsidiary provides benefits or compensation to or on behalf of employees or former employees of Company or any Company Subsidiary, whether formal or informal, whether or not written, including but not limited to the following: (i) Arrangements - any bonus, incentive compensation, stock option, deferred compensation, commission severance pay, golden parachute or other compensation plan or rabbi trust ("Specified Arrangements"); (ii) Employee Benefit Plans - any employee benefit plan, including, but not limited to, any defined benefit plan, profit sharing plan, pension plan, savings or thrift plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits ("Employee Benefit Plans"); and (iii) Other Employee Fringe Benefits - any stock purchase, vacation, scholarship, sick days, day care, prepaid legal services, dependent care or other fringe benefits plans, programs, arrangements, contracts or practices ("Fringe Benefit Plans"). (b) Identification of Benefits Plans. Except for Company Benefit Plans which have been terminated and with respect to which neither Company nor any Company Subsidiary has any current financial, administrative or other liability, obligation or responsibility, Company does not maintain, nor has it at any time established or maintained, nor has it at any time been obligated to make, or otherwise made, contributions to or under or otherwise participated in any Company Benefit Plan. (c) Compliance. Each Company Benefit Plan maintained by Company or a Company Subsidiary has been maintained, by its terms and in operation, in all material respects in accordance with all applicable laws, rules or regulations of any Governmental Authority. Further, there has been no failure to comply with applicable laws or other requirements concerning the filing of reports, documents and notices with the any Governmental Authority or the furnishing of such documents to participants or beneficiaries that could subject any Company Benefit Plan, Company or any Company Subsidiary to any material civil or criminal sanction. (d) Post-Retirement Medical Benefits. Neither Company nor any Company Subsidiary maintains, nor has at any time established or maintained, nor has at any time been obligated to make, or made, contributions to or under any plan which provides post-retirement medical or health benefits with respect to employees of Company or any Company. There is no lien upon any property of Company or any Company Subsidiary outstanding in favor of any -11- 12 Company Benefit Plan. No assets of Company or any Company Subsidiary have been provided as security for any Company Benefit Plan. (e) Documentation. Company has made available to Buyer a true and complete copy of the following documents, if applicable, with respect to each Company Benefit Plan identified in Seller Disclosure Letter: (i) all documents, including any insurance contracts and trust agreements, setting forth the terms of Company Benefit Plan, or if there are no such documents evidencing Company Benefit Plan, a full description of Company Benefit Plan, (ii) any summary of plan provisions provided to participants or beneficiaries for each such Company Benefit Plan, (iii) any annual reports filed with any Governmental Authority for the most recent three plan years and most recent financial statements or periodic accounting or related plan assets with respect to each Company Benefit Plan, (iv) the most recent favorable determination, notification letter, opinion or ruling from any Governmental Authority for each Company Benefit Plan, the assets of which are held in trust, to the effect that such trust is exempt from federal income tax, and any outstanding request for a determination letter and (v) each opinion or ruling from any Governmental Authority with respect to any such Company Benefit Plan. (f) Qualified Status. Each Company Benefit Plan that is funded through a trust or insurance contract has satisfied in all material respects, by its terms and in its operation, all applicable requirements for an exemption from federal income taxation under applicable law. Except for the plans identified as qualified plans in the Seller Disclosure Letter (the "Qualified Plans") neither Company nor any Company Subsidiary maintains or previously maintained a Company Benefit Plan which meets or was intended to meet the requirements of exemption from taxation pursuant to applicable law. Except as would not have a Company Material Adverse Effect, any determination, opinion or notification letter issued by any Governmental Authority to the effect that the Qualified Plans qualify under applicable law for exemption from taxation remains in effect and has not been revoked. Each of the Qualified Plans currently complies in form in all material respects with the requirements for exemption from taxation under applicable law, other than changes required by statutes, regulations and rulings for which amendments are not yet required. Each of the Qualified Plans has been administered according to its terms (except for those terms which are inconsistent with the changes required by statutes, regulations, and rulings for which changes are not yet required to be made, in which case the Qualified Plans have been administered in accordance with the provisions of those statutes, regulations and rulings) and in accordance with the requirements of applicable law. The Qualified Plans have been tested for compliance with, and in all material respects have satisfied the requirements applicable law for qualification for exemption from taxation, if applicable, for each plan year within the time periods permitted by law. (g) Legal Actions. Except as would not have a Company Material Adverse Effect, there are no actions, audits, suits or claims known to Company which are pending or, to the knowledge of Sellers, threatened against any Company Benefit Plan, any fiduciary of any of the Company Benefit Plans with respect to the Company Benefit Plans or against the assets of any of the Company Benefit Plans, except claims for benefits made in the ordinary course of the operation of such plans. -12- 13 (h) Funding. Company and each Company Subsidiary has made in all material respects full and timely payment of all amounts required to be contributed under the terms of each Company Benefit Plan and applicable law or required to be paid as expenses under such Company Benefit Plan and no excise taxes are assessable as a result of any nondeductible or other contributions made or not made to a Company Benefit Plan. The assets of all Company Benefit Plans which are required under applicable laws to be held in trust are in fact held in trust, and the assets of each such Company Benefit Plan equal or exceed the liabilities of each such plan. The liabilities of each other plan are in all material respects properly and accurately reported on the financial statements and records of Company. The assets of each Company Benefit Plan are reported at their fair market value on the books and records of each plan. (j) Liabilities. Neither Company nor any Company Subsidiary is subject to any material liability, tax or penalty whatsoever to any person whomsoever as a result of Company's or any Company Subsidiary's engaging in a prohibited transaction under applicable law governing the Company Benefit Plan, and Company has no knowledge of any circumstances which reasonably might result in any material liability, tax or penalty whatsoever as a result or a breach of fiduciary duty thereunder. (k) No Acceleration of Liability Under Benefit Plans. The consummation of the transactions contemplated hereby will not accelerate or increase any liability under any Company Benefit Plan because of an acceleration or increase of any of the rights or benefits to which employees of Company or any Company affiliate may be entitled thereunder. Section 2.15. Employment Taxes. All amounts for payment to the Inland Revenue, Customs & Excise in respect of income tax deductible prior to Closing under Schedule E by virtue of the P.A.Y.E. regulations for the time being in force and all National Insurance Contributions (both employer's and employee's) due in respect of Company's employees as at Closing will have been duly paid. The total liability of Company for all Income Tax (P.A.Y.E.) and National Insurance as at September 30, 1997 did not exceed (pound)16,000. All contracts of service with Company's employees may be terminated by not more than three months' notice without giving rise to any claim for damages or compensation (other than a statutory redundancy payment or statutory compensation for unfair dismissal). No moneys or benefits other than in respect of contractual emoluments are payable to any of Company's employees and Company is not under any present, future of contingent liability to pay compensation for loss of office of employment to any ex-officer or ex-employee of Company and no payments are due under the Employment Protection (Consolidation) Act 1978. Neither Company nor any Company Subsidiary has any liabilities outstanding under the Transfer of Undertakings (Protection of Employment) Regulations of 1981. Section 2.16. Labor Relations. Company and each Company Subsidiary has in relation to each of its employees (and so far as relevant to each of its former employees) complied with: (i) all obligations imposed on it by all statutes and regulations relevant to the relations between it and its employees or any trade union and has maintained current adequate and suitable records regarding the service of each of its employees; (ii) all collective agreements and customs and practices for the time dealing with such relations or the conditions of service of its employees; -13- 14 and (iii) all relevant orders and awards made under any relevant statute, regulation or code of conduct and practice affecting the conditions of service of its employees. Company is under no contractual or other obligation to make an increase in the rates of remuneration of or to make any bonus or incentive or other similar payments to any of its employees at any future date. Company is not involved in any industrial or trade disputes or any dispute or negotiation regarding a claim of material importance with any trade union or association of trade unions or organization or body of employees. Company has complied with all recommendations made by the Advisory Conciliation and Arbitration Service and with all awards and declarations made by the Central Arbitration Committee. Each of Company and the Company Subsidiaries is in compliance with all national and local laws and regulations respecting employment and employment practices, terms and conditions of employment, wages and hours, and is not engaged in any unfair labor or unlawful employment practice. Except as would not result in a Company Material Adverse Effect, individually or in the aggregate, there is no (i) unlawful employment practice discrimination charge involving Company or any Company Subsidiary pending before any Governmental Authority; (ii) unfair labor practice charge or complaint against Company or any Company Subsidiary pending before any Governmental Authority; (iii) labor strike, dispute, slowdown or stoppage actually pending or, to the best knowledge of Sellers, threatened against or involving or affecting Company or any Company Subsidiary; (iv) grievance or arbitration proceeding pending against Company or any Company Subsidiary and no written claim therefor exists; or (v) collective bargaining agreement binding on Company or any Company Subsidiary. Section 2.17. Insurance. Each of Company and the Company Subsidiaries has provided to Buyer a true and complete list of its current insurance coverages, including names of carriers, amounts of coverage and premiums therefor. Sellers believe that each of Company and the Company Subsidiaries has been and is insured with respect to its properties and the conduct of its business in such amounts and against such risks as are reasonable in relation to its business. Company is not in default under any of its insurance policies or insurance policies under which it is covered, there are currently no claims pending or asserted under any of these policies relating to the products or services of Company, and Company has not been refused any insurance coverage. Sellers have made available to Buyer true and complete copies of all insurance policies covering each of Company and the Company Subsidiaries, their properties, assets, employees or operations. Section 2.18. Title to Properties and Related Matters. (a) Each of Company and the Company Subsidiaries has good and marketable title to or marketable leasehold interests in its properties reflected in the Interim Balance Sheet or acquired after the date thereof but before the Closing Date (other than properties sold or otherwise disposed of in the ordinary course of business), and all of such properties are held free and clear of all title defects, liens, encumbrances and restrictions, except, with respect to all such properties, (a) mortgages and liens securing debt reflected as liabilities on the Interim Balance Sheet and (b) (i) liens for current taxes and assessments not in default, (ii) mechanics', carriers', workmen's, repairmen's, statutory or common law liens either not delinquent or being contested in good faith, and (iii) liens, mortgages, encumbrances, covenants, rights of way, building or use -14- 15 restrictions, easements, exceptions, variances, reservations and other matters or limitations of any kind, if any, which either individually or in the aggregate do not have a Company Material Adverse Effect. Since December 31, 1996, neither Company nor any Company Subsidiary has granted any security interests or other liens upon or factored the accounts receivable of Company or any Company Subsidiary. There are no leasehold properties in respect of which Company or any Company Subsidiary has a contingent liability as original or intermediate tenant. (b) The Seller Disclosure Letter sets forth a true and complete list of all leases and agreements of Company or any Company Subsidiary granting possession of or rights to real or personal property with a value of at least U.S. $25,000, or in the case of real property, which provide for annual lease payments in excess of U.S. $25,000 (the "Scheduled Leases"). All such Scheduled Leases are in full force and effect and constitute the legal, valid, binding and enforceable obligations of Company or a Company Subsidiary, as applicable, and are legal, valid, binding and, to the knowledge of Sellers, enforceable in accordance with their respective terms with respect to each other party thereto, in each case to the extent material to the business and operations of Company and the Company Subsidiaries taken as a whole and subject in each case to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. Except as would not have a Company Material Adverse Effect, each of Company and the Company Subsidiaries has physical possession of all equipment and other assets which are covered by Scheduled Leases. Except as would not have a Company Material Adverse Effect, there are no existing defaults of Company or any Company Subsidiary with respect to such Scheduled Leases or, to the best knowledge of Sellers, of any of the other parties thereto (or events or conditions which, with notice or lapse of time, or both, would constitute a default). Section 2.19. Environmental Matters. To the best knowledge of Sellers, each of Company and the Company Subsidiaries is in compliance in all material respects with all statutes, regulations and ordinances relating to the protection of human health and the environment. There has been no release by Company or any Company Subsidiary or, to the actual knowledge of Sellers, by any other person of a hazardous substance into the environment at any property owned or leased by Company or any Company Subsidiary (the "Premises") including, without limitation, any such release in the soil or groundwater underlying the Premises. To the actual knowledge of and without any independent investigation by Sellers, there is no asbestos, polychlorinated biphenyls or underground storage tanks located on the Premises and there have been no releases of asbestos, polychlorinated biphenyls or materials stored in underground storage tanks, including, without limitation, petroleum or petroleum-based materials. Except as would not have a Company Material Adverse Effect, neither Company nor any Company Subsidiary has received notice of any violation of any environmental statute or regulation nor has it been advised of any claim or liability pursuant to any environmental statute or regulation brought by any governmental agency or private party (in each case, an "Environmental Notice"). Section 2.20. Patents, Trademarks, Trade Names. The Seller Disclosure Letter sets forth a true and complete list of (i) all trademarks, trade names (including all national and state -15- 16 registration pertaining thereto) and copyrights owned by Company or any Company Subsidiary (collectively, the "Proprietary Intellectual Property") and (ii) all patents, trademarks, trade names, copyrights, technology and processes used by Company or any Company Subsidiary in their businesses which are material to their businesses and are used pursuant to a license or other right granted by a third party (collectively, the "Licensed Intellectual Property", and together with the Proprietary Intellectual Property referred to as "Intellectual Property"). A true and complete list of all such licenses and agreements with respect to Licensed Intellectual Property is set forth in the Seller Disclosure Letter. To the best knowledge of Sellers, each of the national, state and other governmental registrations with any country pertaining to the Proprietary Intellectual Property is valid and in full force and effect. Company or a Company Subsidiary owns, or has the right to use pursuant to valid and effective agreements, all Intellectual Property, and the consummation of the transactions contemplated hereby will not materially adversely alter or impair any such rights. No claims are pending against Company or a Company Subsidiary, and Sellers are not aware of any factual basis for such a claim, by any person with respect to the use of any Intellectual Property or challenging or questioning the validity or effectiveness of any license or agreement relating to the same that would be likely to result in a Company Material Adverse Effect; and to the best of the Management Sellers' knowledge, information and belief, the current use by Company or a Company Subsidiary of the Intellectual Property does not in any material respect infringe upon the rights of any third party, including but not limited to any copyright, patent, trade secret, trademark, service mark, trade name, firm name, logo, trade dress, mask work, moral right, other intellectual property right, right of privacy or right in personal data of any person. The Seller Disclosure Letter sets forth a list of all jurisdictions in which Company or a Company Subsidiary is operating under a trade name, and each jurisdiction in which any such trade name is registered. Sellers are not aware of any potentially interfering patent or patent application of any third party which could reasonably be expected to interfere with the Company's intellectual property rights. Section 2.21. Company Computer Software and Hardware. (a) The Seller Disclosure Letter sets forth a true and complete list of: (i) all software and associated documentation owned by Company material to the business of Company, other than custom-developed software developed for and assigned to a Company customer (the "Company Proprietary Software"); (ii) all software (other than the Company Proprietary Software and "shrink-wrap" software) used in connection with the business of Company (the "Company Licensed Software" and together with the Company Proprietary Software, the "Company Software"). Company is in possession of all technical and descriptive materials to run its business in accordance with its historical practices, except as would not have a Company Material Adverse Effect. The Company Proprietary Software consists of: (i) source and object code embodied in magnetic media; and (ii) all development and procedural tools, documentation, and manuals necessary to maintain, enhance, develop derivative works, support and service the Company Proprietary Software, including licenses to use compilers, assemblers, libraries and other aids. No parties other than Company possess any current or contingent rights to any source code for the Company Proprietary Software. -16- 17 (b) Company has a valid right, title and interest in and to all intellectual property rights in the Company Proprietary Software, including all copyrights (registered and unregistered), trade secrets, and proprietary and confidential information rights therein. Company has developed the Company Proprietary Software entirely through its own efforts for its own account or has acquired prior to the date hereof valid right, title and interest in the Company Proprietary Software and the Company Proprietary Software is free and clear of all liens, claims and encumbrances. The Seller Disclosure Letter lists all parties other than employees of Company who have created any portion of, or otherwise have any rights in or to, the Company Software. Company has secured from all parties who have created any portion of, or otherwise have any rights in or to, the Company Proprietary Software valid and enforceable written assignments of any such work or other rights to Company and has provided true and complete copies of such assignments to Buyer. The use of the Company Licensed Software and the use and distribution of the Company Proprietary Software does not breach any terms of any contract between Company and any third party. To the best knowledge of Seller, Company has been granted under the license agreements relating to the Company Licensed Software (the "Company License Agreements") valid and subsisting license rights with respect to all software comprising the Company Licensed Software and such rights may be exercised in any jurisdiction in which Company currently conducts its business or could reasonably be expected to conduct its business in the future. Each of Company and the Company Subsidiaries is in compliance with each of the terms and conditions of each of the Company License Agreements except to the extent failure to so comply, individually or in the aggregate, would not have a Company Material Adverse Effect. To the best knowledge of Sellers, in the case of any commercially available "shrink-wrap" software programs (such as Lotus 1-2-3), Company has not made and is not using any unauthorized copies of any such software programs and, to the best knowledge of Sellers, none of the employees, agents or representatives of Company have made or are using any such unauthorized copies, except as would not have a Company Material Adverse Effect. (c) The Company Proprietary Software and, to the actual knowledge of Sellers, the Company Licensed Software do not infringe the patent, copyright, moral rights or trade secret rights or any other intellectual property or legal right of any third party which may exist anywhere in the world. (d) Neither Company nor any of the Company Subsidiaries has granted rights in the Company Software to any third party except for rights granted to value added resellers, distributors or customers in the ordinary course of business pursuant to contracts with customers. (e) To the best knowledge of Sellers, the Company Software and the related computer hardware used by Company in its operations (the "Company Hardware") are adequate in all material respects, when taken together with the other assets, resources and personnel of Company and the Company Subsidiaries, to run the business of Company and the Company Subsidiaries in the same manner as such business has operated since December 31, 1996, except as would not result in a Company Material Adverse Effect. The Seller Disclosure Letter contains a summary description of any problems experienced by Company in the past twelve months with respect to the Company Software or Company Hardware and the provision of services to -17- 18 Company clients which have arisen outside the ordinary course of business and could result in a Company Material Adverse Effect. (f) The Company Proprietary Software is "Millennium Compliant" (defined below). For the purposes of this Agreement "Millennium Compliant" means: (i) the functions, calculations, and other computing processes of the Company Proprietary Software (collectively, "Processes") perform in a consistent manner regardless of the date in time on which the Processes are actually performed and regardless of the date input to the Company Proprietary Software, whether before, on, or after January 1, 2000 and whether or not the dates are affected by leap years; (ii) the Company Proprietary Software accepts, calculates, compares, sorts, extracts, sequences, and otherwise processes date inputs and date values, and returns and displays date values, in a consistent manner regardless of the dates used, whether before, on, or after January 1, 2000; (iii) the Company Proprietary Software will function without interruptions caused by the date in time on which the Processes are actually performed or by the date input to the Company Proprietary Software, whether before, on, or after January 1, 2000; (iv) the Company Proprietary Software accepts and responds to two-digit year-date input in a manner that resolves any ambiguities as to the century in a defined, predetermined, and appropriate manner; and (v) the Company Proprietary Software stores and displays date information in ways that are unambiguous as to the determination of the century. (g) The Seller Disclosure Letter includes a true and complete list and summary of principal terms concerning support and maintenance agreements relating to the Company Software, including without limitation the identity of the parties entitled to receive such service or maintenance, the term of such agreements and any other provisions relating to the termination of such agreements. Section 2.22. Transactions with Affiliates. No officer, director or holder of 5% or more of the outstanding share capital of Company or any Company Subsidiary, or any person or affiliated group with whom any such stockholder, officer or director has any direct or indirect relation by blood, marriage or adoption, or any entity in which any such person, owns (other than through a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market and less than 1% of the stock of which is beneficially owned by all such persons) any beneficial interest in: (i) any contract, arrangement or understanding or any related series of the same involving aggregate consideration in excess of U.S. $10,000 with, or relating to, the business or operations of Company or any Company Subsidiary; (ii) any loan, arrangement, understanding, agreement or contract or any related series of the same for or -18- 19 relating to indebtedness of Company or a Company Subsidiary in excess of U.S. $10,000 in the aggregate; or (iii) any property or related group of properties with an aggregate value of at least U.S. $10,000 (real, personal or mixed), tangible or intangible, used or currently intended to be used in, the business or operations of Company or any Company Subsidiary. Section 2.23. Customers. The Seller Disclosure Letter includes a list of the top ten customers of Company, plus any other customer or group of related customers from whom payments were received which equaled or exceeded five percent (5%) of Company's gross sales for the fiscal years ended 1995 and 1996, or from whom payments are projected to equal or exceed such percentage for the current fiscal year (the "Large Customers"). Except as set forth on the Seller Disclosure Letter, Sellers have no knowledge that any of the Large Customers intends to terminate or otherwise modify adversely its relationship with Company or to materially decrease its purchases of goods or services from Company. Company has maintained its customer lists and related information on a confidential and proprietary basis and has not granted to any third party any right to use such customer lists for any purpose unrelated to the business of Company. Section 2.24. Brokers, Finders and Investment Bankers. None of the Sellers, Company or the Company Subsidiaries nor any of their officers, directors or employees has employed any broker, finder or investment banker or incurred any liability for any investment banking fees, financial advisory fees, brokerage fees or finders' fees in connection with the transactions contemplated hereby, other than Latham Crossley & Davis. Section 2.25. Disclosure. No representation, warranty or covenant made by Sellers in this Agreement, the Seller Disclosure Letter or the Exhibits attached hereto contains an untrue statement of a material fact or omits to state a material fact required to be stated herein or therein or necessary to make the statements contained herein or therein not misleading. Section 2.26. Requirements of Securities Laws. (a) Offshore Transaction. (i) At the time the discussions regarding the acquisition of Harbinger Shares originated, Seller was outside the United States; (ii) Seller is not a citizen of the United States; (iii) Seller is not a U.S. person nor is the Seller acquiring the Harbinger Shares for the benefit of a U.S. person. The term "U.S. Person," as defined in Regulation S, means: (A) any natural person resident in the United States; (B) any partnership or corporation organized or incorporated under the laws of the United States; -19- 20 (C) any estate of which any executor or administrator is a U.S. person, unless an executor or administrator who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate and the estate is governed by foreign law; (D) any trust of which any trustee is a U.S. person, unless a professional fiduciary (trustee) who is not a U.S. person has sole or shared investment discretion with respect the assets of the trust and no trust beneficiary (and no trust settlor if a revocable trust) is a U.S. person; (E) any agency or branch of a foreign entity located in the United States; (F) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (G) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States; and (H) any partnership or corporation if: (1) organized or incorporated under the laws of any foreign jurisdiction; and (2) formed by a U.S. person principally for the purpose of investing in Harbinger Shares not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts; With respect to any agencies or branches of U.S. persons located outside the United States for valid business reasons and engaged in the insurance or banking business, and subject to substantive insurance or banking regulation (as applicable) in the jurisdiction where located, the agency or branch is not considered to be a U.S. person. (b) Investment Representations. Seller is purchasing the Harbinger Shares for Seller's own account and for investment purposes and not with the view towards distribution. Seller does not have any contract, understanding or arrangement with any person to sell, transfer or grant participation to such person or any third person with respect to the Harbinger Shares. -20- 21 (c) Restrictions on Harbinger Shares. (i) Seller understands that the Harbinger Shares have not been registered under the Securities Act, any state securities law or the laws of any foreign jurisdiction; (ii) Seller understands that the Harbinger Shares are being offered and sold to Seller in reliance on the Regulation S safe harbor from the registration requirements of the Securities Act and on the exemptions contained in Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, and that Buyer is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of Seller set forth herein in order to determine the applicability of such safe harbor and exemptions and the suitability of Seller to acquire the Harbinger Shares; (iii) Seller represents and warrants to Buyer that Seller is an "accredited investor" as that term is defined in Rule 501(a) of the Securities Act. Sellers understand that, except as set forth in the Registration Rights Agreement (as defined in Section 6.1(j) hereof), Buyer is under no obligation to file a registration statement under the Securities Act covering the Harbinger Shares or to take any other action to enable Sellers to transfer or otherwise dispose of the Harbinger Shares. Sellers represent that they have consulted with counsel in regard to the Securities Act and that they are fully familiar with the circumstances under which they are required to hold the Harbinger Shares and the limitations upon the transfer or other disposition thereof; (iv) Seller agrees that from the date hereof until the forty-first (41st) day after the issuance to Seller of the Harbinger Shares pursuant to Regulation S (the "Restrictive Period"), the Seller, or any successor, or any Professional (as defined in Section 2.26(c)(v) hereof) (except for sales of any Harbinger Shares registered under the Securities Act or otherwise exempt from such registration) (a) will not sell any of the Harbinger Shares to a U.S. Person or for the account or benefit of a U.S. Person or anyone believed to be a U.S. Person, (b) will not engage in any efforts to sell the Harbinger Shares in the United States, and (c) will send to a Professional acting as agent or principal, a confirmation or other notice stating that the Professional is subject to the same restrictions on transfer to U.S. Persons or for the account of U.S. Persons during the Restrictive Period as provided herein. Buyer will not honor or register and will not be obligated to honor or register any transfer in violation of these provisions; to assure full compliance with the restrictions placed on the resale of Harbinger Shares offered pursuant to Regulation S, Buyer shall place on the certificates representing the Harbinger Shares the following restrictive legend: The shares evidenced by this certificate have not been registered under the Securities Act of 1933, as amended, or under the securities laws of any state, and -21- 22 such shares may not be sold, transferred, pledged or hypothecated unless (1) covered by an effective registration statement under the Securities Act of 1933; or (2) in accordance with some other transaction which is exempt from the registration requirements of such act. Furthermore, the shares evidenced by this certificate have been offered and sold in reliance on the exemption from registration provided by Regulation S and may not be sold, transferred, pledged or hypothecated to any U.S. Person (as defined therein) except as permitted by Regulation S. The shares represented by this certificate were issued pursuant to a business combination that is accounted for as a "pooling of interest" and may not be sold, nor may the owner thereof reduce his risk relative thereto in any way (except as permitted by SEC Staff Accounting Bulletin No. 76), until such time as Harbinger Corporation has published financial results covering at least 30 days of combined operations after the effective date of the event through which the business combination was effected. (v) A "Professional" is a "distributor" as defined in Rule 902(c) under the Securities Act (generally any underwriter, or other person, who participates, pursuant to a contractual arrangement, in the distribution of the Harbinger Shares); a dealer as defined in Section 2(12) of the Securities Exchange Act of 1934, as amended (encompassing those who engage in the business of trading or dealing in Harbinger Shares as agent, broker, or principal); or a person receiving a selling concession, fee or other remuneration in respect of the Harbinger Shares sold. (d) Access to Information. Seller has had access to all material and relevant information necessary to enable Seller to make an informed investment decision. All data requested by Seller from Buyer or its representatives concerning the business and financial condition of Buyer and the terms and conditions of the offering has been furnished to Seller's satisfaction. Seller has had the opportunity to ask questions and receive answers from Buyer concerning the terms and conditions of this Agreement and the Harbinger Shares, and to obtain from Buyer any additional information which Buyer possesses or may obtain without unreasonable effort or expense. Seller understands that there are numerous and substantial risks associated with the purchase of the Harbinger Shares which could result in a total loss of the Seller's investment. (e) Understanding of Investment Risks. Seller understands that realization of the objectives of Buyer is subject to significant economic and business risks. (f) No Government Recommendation or Approval. Seller understands that no Federal, State or foreign government agency has passed on or made any recommendation or endorsement of the Harbinger Shares. (g) Resales of Harbinger Shares. All subsequent offers and sales of the Harbinger Shares shall be made in compliance with Regulation S, pursuant to registration -22- 23 of the Harbinger Shares under the Securities Act or pursuant to another exemption from such registration. (h) Reliance On Representations. Seller understands that the issuance of the Harbinger Shares to Sellers pursuant to this Agreement is not being registered under the Securities Act. Buyer is relying on the rules governing offers and sales made outside the United States pursuant to Regulation S and Seller's representations hereunder. Section 2.27. Government Grants. The Seller Disclosure Letter contains full details of all grants subsidies or financial assistance applied for or received by the Company or any Company Subsidiary from any Governmental Authority or the European Community. Neither the Company nor any Company Subsidiary has done or omitted to do any act or thing which could result in all or part of any investment grant, employment subsidy or other similar payment made or due to be made to it becoming repayable or being forfeited or withheld in whole or in part and the signature or closing of this Agreement will not have that result. ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF LANCASHIRE With such exceptions as are set forth in a letter (the "Lancashire Disclosure Letter") signed and delivered by Lancashire to Buyer immediately prior to the execution hereof and attached hereto as Exhibit D, Lancashire hereby represents and warrants to Buyer as follows: Section 3.1. Organization. Lancashire is a limited partnership registered under the Limited Partnership Act of 1907, is duly organized and validly existing under such act and the other laws of the jurisdiction of its formation, and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Section 3.2. Authorization. Lancashire has power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Lancashire and the performance by Lancashire of its obligations hereunder and the consummation of the transactions provided for herein have been duly and validly authorized by all necessary action on the part of Lancashire. This Agreement has been duly executed and delivered by Lancashire and constitutes the legal, valid and binding agreement of Lancashire, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. Section 3.3. Ownership of Shares. Lancashire owns of record and beneficially the number of shares of Company Shares set opposite Lancashire's name in the Seller Disclosure Letter; Lancashire owns all rights, title and interest in and to such shares, free and clear of all liens (including those for estate or inheritance taxes), claims, pledges, options, rights of refusal or similar rights or other transfer restrictions or adverse claims and charges of any nature -23- 24 whatsoever (including any arising from existing or threatened litigation, but excluding transfer restrictions that may arise from applicable securities laws); and Lancashire's transfer of its shares to Buyer pursuant to this Agreement will pass to Buyer all rights, title and interest to and in such shares free of any lien or any adverse interest, claim or charge whatsoever. Such shares were obtained by Lancashire in transactions in full compliance with applicable securities laws, and Lancashire has the exclusive right to vote its shares. Section 3.4. No Governmental Consents Required. No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority on the part of Lancashire is required in connection with its execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. Section 3.5. Requirements of Securities Laws. (a) Offshore Transaction. (i) At the time the discussions regarding the acquisition of Harbinger Shares originated, Lancashire was outside the United States; (ii) Lancashire is not a citizen of the United States; (iii) Lancashire is not a U.S. person nor is the Lancashire acquiring the Harbinger Shares for the benefit of a U.S. person. The term "U.S. Person," as defined in Regulation S, means: (A) any natural person resident in the United States; (B) any partnership or corporation organized or incorporated under the laws of the United States; (C) any estate of which any executor or administrator is a U.S. person, unless an executor or administrator who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate and the estate is governed by foreign law; (D) any trust of which any trustee is a U.S. person, unless a professional fiduciary (trustee) who is not a U.S. person has sole or shared investment discretion with respect the assets of the trust and no trust beneficiary (and no trust settlor if a revocable trust) is a U.S. person; (E) any agency or branch of a foreign entity located in the United States; (F) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; -24- 25 (G) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States; and (H) any partnership or corporation if: (1) organized or incorporated under the laws of any foreign jurisdiction; and (2) formed by a U.S. person principally for the purpose of investing in Harbinger Shares not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts; With respect to any agencies or branches of U.S. persons located outside the United States for valid business reasons and engaged in the insurance or banking business, and subject to substantive insurance or banking regulation (as applicable) in the jurisdiction where located, the agency or branch is not considered to be a U.S. person. (b) Investment Representations. Lancashire is purchasing the Harbinger Shares for Lancashire's own account and for investment purposes and not with the view towards distribution. Except insofar as its limited partners have the right to call for distribution in kind pursuant to the terms of its limited partnership agreement dated September 20, 1991, Lancashire does not have any contract, understanding or arrangement with any person to sell, transfer or grant participation to such person or any third person with respect to the Harbinger Shares. (c) Restrictions on Harbinger Shares. (i) Lancashire understands that the Harbinger Shares have not been registered under the Securities Act, any state securities law or the laws of any foreign jurisdiction; (ii) Lancashire understands that the Harbinger Shares are being offered and sold to Lancashire in reliance on the Regulation S safe harbor from the registration requirements of the Securities Act and on the exemptions contained in Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, and that Buyer is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of Lancashire set forth herein in order to determine the applicability of such safe harbor and the suitability of Lancashire to acquire the Harbinger Shares; (iii) Lancashire represents and warrants to Buyer that Lancashire is an "accredited investor" as that term is defined in Rule 501(a) of the Securities Act. Lancashire understands that, except as set forth in the Registration Rights -25- 26 Agreement (as defined in Section 6.1(j) hereof), Buyer is under no obligation to file a registration statement under the Securities Act covering the Harbinger Shares or to take any other action to enable Lancashire to transfer or otherwise dispose of the Harbinger Shares. Lancashire represents that it has consulted with counsel in regard to the Securities Act and that it is fully familiar with the circumstances under which it is required to hold the Harbinger Shares and the limitations upon the transfer or other disposition thereof. (iv) Lancashire agrees that from the date hereof until the forty-first (41st) day after the issuance to Lancashire of the Harbinger Shares pursuant to Regulation S (the "Restrictive Period"), Lancashire, or any successor, or any Professional (as defined in Section 2.26(c)(v) hereof) (except for sales of any Harbinger Shares registered under the Securities Act or otherwise exempt from such registration) (a) will not sell any of the Harbinger Shares to a U.S. Person or for the account or benefit of a U.S. Person or anyone believed to be a U.S. Person, (b) will not engage in any efforts to sell the Harbinger Shares in the United States, and (c) will send to a Professional acting as agent or principal, a confirmation or other notice stating that the Professional is subject to the same restrictions on transfer to U.S. Persons or for the account of U.S. Persons during the Restrictive Period as provided herein. Buyer will not honor or register and will not be obligated to honor or register any transfer in violation of these provisions; to assure full compliance with the restrictions placed on the resale of Harbinger Shares offered pursuant to Regulation S, Buyer shall place on the certificates representing the Harbinger Shares the following restrictive legend: The shares evidenced by this certificate have not been registered under the Securities Act of 1933, as amended, or under the securities laws of any state, and such shares may not be sold, transferred, pledged or hypothecated unless (1) covered by an effective registration statement under the Securities Act of 1933; or (2) in accordance with some other transaction which is exempt from the registration requirements of such act. Furthermore, the shares evidenced by this certificate have been offered and sold in reliance on the exemption from registration provided by Regulation S and may not be sold, transferred, pledged or hypothecated to any U.S. Person (as defined therein) except as permitted by Regulation S. The shares represented by this certificate were issued pursuant to a business combination that is accounted for as a "pooling of interest" and may not be sold, nor may the owner thereof reduce his risk relative thereto in any way (except as permitted by SEC Staff Accounting Bulletin No. 76), until such time as Harbinger Corporation has published financial results covering at least 30 days of combined operations after the effective date of the event through which the business combination was effected. (d) Access to Information. Lancashire has had access to all material and relevant information necessary to enable Lancashire to make an informed investment decision. All data requested by Lancashire from Buyer or its representatives concerning -26- 27 the business and financial condition of Buyer and the terms and conditions of the offering has been furnished to Lancashire's satisfaction. Lancashire has had the opportunity to ask questions and receive answers from Buyer concerning the terms and conditions of this Agreement and the Harbinger Shares, and to obtain from Buyer any additional information which Buyer possesses or may obtain without unreasonable effort or expense. Lancashire understands that there are numerous and substantial risks associated with the purchase of the Harbinger Shares which could result in a total loss of the Lancashire's investment. (e) Understanding of Investment Risks. Lancashire understands that realization of the objectives of Buyer is subject to significant economic and business risks. (f) No Government Recommendation or Approval. Lancashire understands that no Federal, State or foreign government agency has passed on or made any recommendation or endorsement of the Harbinger Shares. (g) Resales of Harbinger Shares. All subsequent offers and sales of the Harbinger Shares shall be made in compliance with Regulation S, pursuant to registration of the Harbinger Shares under the Securities Act or pursuant to another exemption from such registration. (h) Non-Contravention. The execution and delivery of the Subscription Agreement and the consummation of the purchase of the Harbinger Shares and the transactions contemplated by this Subscription Agreement do not and will not conflict with or result in a breach by Lancashire of any of the terms or provision of, or constitute a default under, the organization documents (i.e., articles of incorporation and bylaws, partnership agreement, trust indenture, or similar documents) of Lancashire or any indenture, mortgage, deed of trust or other material agreement or instrument to which Lancashire is a party or by which its or any of its respective properties or assets are bound, or any existing applicable law, rule or regulation or any applicable law, rule or regulation or any applicable decree, judgment or order of any court or regulatory body, administrative agency or other governmental body having jurisdiction over Lancashire or any of its properties or assets. (i) Reliance On Representations. Lancashire understands that the issuance of the Harbinger Shares to it pursuant to this Agreement is not being registered under the Securities Act. Buyer is relying on the rules governing offers and sales made outside the United States pursuant to Regulation S and Lancashire's representations hereunder. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER With such exceptions as are set forth in a letter (the "Buyer Disclosure Letter") delivered by Buyer to Company immediately prior to the execution hereof and attached hereto as Exhibit E, Buyer hereby represents and warrants to Sellers as follows: -27- 28 Section 4.1. Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Buyer is duly qualified to transact business, and is in good standing, as a foreign corporation in each jurisdiction where the character of its activities requires such qualification, except where the failure to so qualify would not have a material adverse effect on the assets, liabilities, results of operations or financial condition, business or prospects of Buyer and its subsidiaries taken as a whole (a "Buyer Material Adverse Effect"). Buyer has delivered to Company accurate and complete copies of the Articles or Certificate of Incorporation and Bylaws, as currently in effect, and has made available to Company the minute books and stock records thereof. Section 4.2. Authorization. Buyer has full corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Buyer, the performance by Buyer of its obligations hereunder and the consummation of the transactions provided for herein have been duly and validly authorized by all necessary corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer and constitutes the valid and binding agreement of Buyer, enforceable against Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. Section 4.3. Absence of Restrictions and Conflicts. The execution, delivery and performance of this Agreement, the consummation of the transactions contemplated by this Agreement, and the fulfillment of and compliance with the terms and conditions of this Agreement do not and will not, with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any material benefit under, or permit the acceleration of any obligation under, (i) any term or provision of the Articles or Certificate of Incorporation or Bylaws of Buyer, (ii) any material contract to which Buyer is a party filed as an exhibit to Buyer's Form 10-K for the year ended December 31, 1996, or any subsequent report filed under the Exchange Act on or before the Closing Date, (iii) any judgment, decree or order of any court or governmental authority or agency to which Buyer is a party or by which Buyer or any of its properties is bound, or (iv) any statute, law, regulation or rule applicable to Buyer, so as to have, in the case of subsections (ii) through (iv) above, a Buyer Material Adverse Effect. Except for compliance with the applicable requirements of the Securities Act, the Exchange Act, and applicable United Kingdom securities laws, no consent, approval, order or authorization of, or registration, declaration or filing with, any government agency or public or regulatory unit, agency, body or authority with respect to Buyer is required in connection with the execution, delivery or performance of this Agreement by Buyer or the consummation of the transactions contemplated by this Agreement by Buyer, the failure to obtain which would have a Buyer Material Adverse Effect. Section 4.4. Capitalization of Buyer. The authorized capital stock of Buyer consists of 120,000,000 shares of capital stock consisting of 100,000,000 shares of common stock, $.0001 -28- 29 par value and 20,000,000 shares of preferred stock, $.0001 par value. At September 30, 1997, there were 21,500,070 shares of Buyer Common Stock issued and outstanding, no shares of preferred stock were issued or outstanding and options and warrants to purchase 3,731,151 shares of Buyer Common Stock (the "Options") were outstanding. Since September 30, 1997, no shares of Buyer Common Stock have been issued except pursuant to the exercise of Options outstanding on September 30, 1997. All shares of Buyer Common Stock outstanding as of the date hereof are duly authorized, validly issued, fully paid, nonassessable and free of pre-emptive rights. The shares of Buyer Common Stock to be issued to Seller pursuant to this Agreement will be validly issued, fully paid, nonassessable and free of pre-emptive rights. Section 4.5. Buyer Commission Reports. Buyer has made available to Company (i) Buyer's Annual Report on Form 10-K for the year ended December 31, 1996, including all exhibits thereto and items incorporated therein by reference, (ii) Buyer's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997, including all exhibits thereto and items incorporated therein by reference, (iii) the proxy statement relating to Buyer's Annual Meeting of Stockholders held on May 25, 1997 and (iv) all Current Reports on Form 8-K filed by Buyer with the Securities and Exchange Commission (the "Commission") since January 1, 1997, including all exhibits thereto and items incorporated therein by reference (items (i) through (iv) in this sentence being referred to collectively as the "Buyer Commission Reports"). As of their respective dates, the Buyer Commission Reports did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Since August 22, 1995, Buyer has filed all forms, reports and documents with the Commission required to be filed by it pursuant to the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder, each of which complied as to form, at the time such form, document or report was filed, in all material respects with the applicable requirements of the Securities Act and the Exchange Act and the applicable rules and regulations promulgated thereunder. Section 4.6. Absence of Certain Changes. Since June 30, 1997, there has not been (i) any change in the assets, liabilities, results of operations, financial condition or, to the best knowledge of the Buyer Executives (as hereinafter defined), business or prospects of Buyer and its subsidiaries taken as a whole that has had a Buyer Material Adverse Effect, (ii) any damage, destruction, loss or casualty to property or assets of Buyer or any of its subsidiaries, whether or not covered by insurance that has had a Buyer Material Adverse Effect, (iii) any declaration, setting aside or payment of any dividend or distribution (whether in cash, stock or property) in respect of the capital stock of Buyer or any redemption or other acquisition of any of the capital stock of Buyer or any of its subsidiaries (except for the acquisition of Buyer Common Stock in payment of the purchase price and related taxes upon the exercise of stock options) or any split, combination or reclassification of shares of capital stock declared or made by Buyer, or (iv) any agreement to do any of the foregoing. Section 4.7. Brokers, Finders and Investment Bankers. Neither Buyer nor any of its officers, directors or employees, has employed any broker, finder or investment banker or -29- 30 incurred any liability for any investment banking fees, financial advisory fees, brokerage fees or finders' fees in connection with the transactions contemplated hereby. Section 4.8. Disclosure. No representation, warranty or covenant made by Buyer in this Agreement, the Buyer Disclosure Letter or the Exhibits hereto contains any untrue statement of a material fact or omits to state a material fact required to be stated herein or therein or necessary to make the statements contained herein or therein not misleading. ARTICLE 5. POST-CLOSING COVENANTS AND ADDITIONAL AGREEMENTS OF SELLER AND BUYER Section 5.1. Confidentiality. All non-public information obtained by Buyer or Sellers or any of their representatives pursuant to this Agreement or in connection with the matters contemplated hereby concerning the business, operations or affairs of the other (including the Company) will be kept confidential and will not be used for any purpose other than the consummation of the transactions contemplated hereby, or be disclosed to any other person or entity, except for such disclosure to its employees, agents and representatives who have a need to know the same and who have been advised of the confidential nature of such information and who agree to abide by the terms hereof and except for such disclosure as may be required by applicable law, court order or governmental agency request. The obligations of confidentiality hereunder shall continue for a period of five years from the date of this Agreement, provided that, with respect to any item provided hereunder which constitutes a trade secret under applicable law, such period of confidentiality shall continue for so long as such item constitutes a trade secret under applicable law. Section 5.2. Employees. It is Buyer's current intention to retain the current employees of the Company who have received satisfactory or better reviews over the prior six months under the existing arrangements; provided that the Management Sellers will execute new employment agreements containing customary non-competition, non-disclosure and non-solicitation arrangements. It is agreed that no third party beneficiary rights are conferred by this Agreement. Section 5.3. Reasonable Efforts; Further Assurances; Cooperation. At any time and from time to time after the Closing, Sellers shall, at the request of Buyer, take any and all actions and execute and deliver such documents as may be necessary or reasonable to put Buyer in actual possession and operating control of the Company and its assets, or to otherwise effectuate or consummate any of the transactions contemplated hereby. Section 5.4. Noncompete and Nonsolicitation. (a) Coverage. The parties hereto acknowledge and agree that Company is engaged in the Business throughout the world (the "Territory"). Management Sellers acknowledge to adequately protect the interests of Buyer in Company, it is essential that any noncompete and nonsolicitation covenant with respect to Company cover all of the activities currently or reasonably expected to be undertaken by Company ("Company Activities"), all Affiliates of the Management Sellers and the entire Territory. For purposes of this Agreement, -30- 31 the term "Affiliate" shall mean any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under control with a party hereto. (b) Seller Covenants. Management Sellers hereby covenant and agree that Management Sellers and their Affiliates shall not, in any manner for the three (3) years following the Closing Date, directly or indirectly engage in, have any equity or profit interest in, make any loan to or for the benefit of, or render services to, any business which engages in Company Activities in the Territory without the prior written consent of Buyer, which consent shall be granted or withheld in Buyer's sole discretion, except for investments in publicly quoted stocks in which the Management Sellers' aggregate interest does not exceed 5%. (c) Employee Nonsolicitation. Management Sellers hereby covenant and agree that, for a period of three (3) years after the Closing Date, neither Management Sellers nor any of their Affiliates shall in any manner, directly or indirectly, employ or contract with or seek to employ or contract with on behalf of Management Sellers or their Affiliates, or on behalf of any other person, firm or corporation, any person who was an employee of or independent contractor to the Company during the period twelve (12) months prior to the Closing Date or during the twelve (12) month period after the Closing Date, without Buyer's prior written consent which may be given or withheld in Buyer's sole discretion. Section 5.5. Notification. Sellers shall notify the Buyer immediately if they become aware of any circumstances whereby there may be a breach of any representations and warranties. ARTICLE 6. DELIVERIES AT CLOSING Section 6.1. Deliveries by Seller. Sellers have delivered or have caused to be delivered to Buyer: (a) Duly completed and signed share transfers in favor of Buyer or as it may direct in respect of all of the Shares together with the relative share certificates; (b) A certificate as of the Closing Date of the Secretary of the Company containing true and correct copies of the Memorandum and Articles of Association (which contains or incorporates a copy of every resolution or agreement as is referred to in the Companies Act of 1985) of each of Company and each Company Subsidiary, and true and correct copies of the other governing documents of the Company and each Company Subsidiary, and such other matters as reasonably requested by Buyer; (c) Letters of resignation effective at the Closing executed by the officers and directors of Company listed on Exhibit F; (d) Employment Agreements in the forms agreed by the parties hereto; -31- 32 (e) Noncompetition Agreements executed by Gray, Bird, Reynolds and Summers, in substantially the form attached hereto as Exhibit H; (f) The Escrow Agreement executed by the Management Sellers; (g) Affiliate's Agreements executed by each of the Sellers in substantially the form attached hereto as Exhibit I; (h) A registration rights agreement substantially in the form attached hereto as Exhibit K (the "Registration Rights Agreement"). Section 6.2. Deliveries by Buyer. Buyer has delivered or caused to be delivered to Sellers: (a) A Good Standing Certificate relating to Buyer from the State of Georgia; (b) A Secretary's Certificate attesting to the incumbency of the officers executing this Agreement, resolutions authorizing the transaction and the other certificates and agreements delivered by Buyer at the Closing; (c) Stock Certificates representing the Harbinger Shares; (d) The Escrow Agreement, executed by Buyer and the Escrow Agent; (e) A letter from KPMG Peat Marwick, LLP, independent public accountants, advising Buyer that, in accordance with generally accepted accounting principles, the acquisition of the Shares qualifies to be treated as a "pooling of interests" for accounting purposes; and (f) The Registration Rights Agreement, executed by Buyer. ARTICLE 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION Section 7.1. Survival of Representations and Warranties. (a) All representations, warranties, agreements and covenants made or undertaken by the parties in this Agreement or the other agreements to be executed and delivered pursuant to this Agreement (the "Other Agreements") (i) are material, have been relied upon by the other parties hereto, shall survive the Closing hereunder, and shall not merge in the performance of any obligation by any party hereto, (ii) shall terminate and expire with respect to any Claim for which notice has not been given on the first anniversary of the Closing Date ("Claims Period"). As used in this Agreement, the term "Claim" means any claim based upon, arising out of or otherwise in respect of any inaccuracy in any representation or warranty or any breach of any covenant or agreement made or to be performed by any party pursuant to this Agreement or the Other Agreements. -32- 33 (b) Sellers acknowledge and agree that, except for matters specifically disclosed in the KPMG Report or the Due Diligence Report (as defined in the Seller Disclosure Letter), no due diligence or other investigation of Company will diminish or obviate any of the representations, warranties, covenants or agreements made or to be performed by Sellers pursuant to this Agreement or the Other Agreements or Buyer's right to fully rely upon such representations, warranties, covenants and agreements. Section 7.2. Indemnification by the Management Sellers. (a) Indemnification by Management Sellers. Subject to the other provisions of this Agreement, each of the Management Sellers shall severally (limited in proportion to each Management Seller's Allocation Percentage (as defined below)) but not jointly indemnify and hold harmless Buyer and its subsidiaries and affiliates, each of their respective officers, directors, employees, agents and representatives, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the "Buyer Indemnified Parties"), from, against and in respect of any and all claims, liabilities, obligations, losses, costs, expenses, penalties, fines and other judgments (at equity or at law) and damages whenever arising or incurred (including, without limitation, amounts paid in settlement, reasonable attorneys' fees and expenses) arising out of or relating to: (i) any breach of the representations, warranties, covenants or agreements made by Management Sellers in the Agreement which survive Closing pursuant to their terms or Section 7.1 of the Agreement; (ii) any breach of the representations, warranties, covenants or agreements made by Management Sellers in any certificate, agreement, exhibit or schedule (the "Seller Ancillary Documents") delivered by Management Sellers pursuant to this Agreement, which representation, warranty, covenant or agreement survives Closing pursuant to its terms or Section 7.1 of this Agreement; (iii) any claims arising from goods provided, services rendered or actions taken by the Company before the Closing Date or otherwise arising from the operations or business of the Company as conducted at any time before the Closing Date; and (iv) any fraud, willful misconduct, bad faith or intentional breach of any representation, warranty, covenant or agreement made by Management Sellers in any Management Seller Ancillary Document. The claims, liabilities, obligations, losses, costs, expenses, penalties, fines, judgments and damages of the Buyer Indemnified Parties described in this Section 7.2(a) as to which the Buyer Indemnified Parties are entitled to indemnification are referred to as "Buyer Losses" in this Agreement. -33- 34 For purposes of this Article 7, each Management Seller's Allocation Percentage shall be determined by dividing (i) such Management Seller's Percentage Interest (as defined in Section 2.4) by (ii) the sum of all of the Management Sellers' Percentage Interests. (b) Time Period for Claims. No Buyer Indemnified Party is entitled to make any claim for indemnification under this Agreement after the appropriate Claims Period (as defined in this Agreement); provided, however, that if prior to the close of business on the last day of the Claims Period any of the Sellers has been notified of a claim for indemnity under this Agreement and such claim has not been finally resolved or disposed of at such date, the basis for such claim shall continue to survive with respect to such claim and shall remain a basis for indemnity under this Agreement with respect to such claim until such claim is finally resolved or disposed of in accordance with the terms of this Agreement; provided, further, however, that the Buyer Indemnified Party and Sellers shall be obligated under this Agreement to exercise reasonable efforts to resolve any such claim as quickly as is reasonably practicable. (c) Indemnification Procedure. (i) Promptly after receipt by a Buyer Indemnified Party of notice by a third party of any complaint or the commencement of any action or proceeding with respect to which indemnification is being sought under this Agreement, such Buyer Indemnified Party shall notify the Seller Indemnitors Representative of such complaint or of the commencement of such action or proceeding; provided, however, that failure to so notify such party shall not relieve Sellers from liability for such claims arising other than under this Agreement and such failure to so notify the such party shall relieve Sellers from liability which Sellers may have under this Agreement with respect to such claim if, but only if, and only to the extent that, such failure to notify the Sellers results in the forfeiture by Sellers of rights and defenses otherwise available to Sellers with respect to such claim. Sellers shall have the right, upon written notice to the Buyer Indemnified Party from the Seller Indemnitors Representative, to assume the defense of such action or proceeding, including the employment of counsel reasonably satisfactory to the Buyer Indemnified Party and the payment of the fees and disbursements of such counsel as incurred. If Sellers do not elect to assume control of the defense of any such claims, Sellers shall be bound by the results otherwise obtained with respect to such claim. In the event, however, that Sellers decline or fail to assume the defense of the action or proceeding or to employ counsel reasonably satisfactory to such Buyer Indemnified Party, in either case in a timely manner, then such Buyer Indemnified Party may employ counsel to represent or defend it in any such action or proceeding and Sellers shall pay the reasonable fees and disbursements of such counsel upon receipt of an invoice; provided, however, that Sellers shall not be required to pay the fees and disbursements of more than one counsel for all Buyer Indemnified Parties in any jurisdiction in any single action or proceeding. In any action or proceeding with respect to which indemnification is being sought under this Agreement, the Buyer Indemnified Parties or Sellers, whichever is not assuming the defense of such action, shall have the right to -34- 35 participate in such litigation and to retain its own counsel at such party's own expense. The Buyer Indemnified Parties or Sellers, as the case may be, shall at all times use reasonable efforts to keep Sellers or the Buyer Indemnified Parties, as the case may be, reasonably apprised of the status of the defense of any claim the defense of which they are maintaining, and to cooperate in good faith with each other with respect to the defense of any such action. (ii) No Buyer Indemnified Party may settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought from Sellers under this Agreement without the prior written consent of each of the Sellers against whom indemnification is being sought, unless such settlement, compromise or consent includes an unconditional release of such Sellers from all liability arising out of such claim and does not contain any equitable order, judgment or term which affects, restrains or interferes with the business of such Sellers. Sellers shall not, without the prior written consent of Buyer, settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought under this Agreement unless such settlement, compromise or consent includes an unconditional release of the Buyer Indemnified Party from all liability arising out of such claim and does not contain any equitable order, judgment or term which in any manner affects, restrains or interferes with the business of Buyer, any of the Buyer Indemnified Parties or any of their respective affiliates. (iii) In the event that a Buyer Indemnified Party does claim a right to payment pursuant to Section 7.2(a) of this Agreement, such Buyer Indemnified Party shall send written notice of such claim to each of the Management Sellers. Such notice shall specify the basis for such claim. As promptly as possible after the Buyer Indemnified Party has given such notice, such Buyer Indemnified Party and the Seller Indemnitors Representative, shall establish the merits and amount of such claim (by mutual agreement, litigation, arbitration, mediation or otherwise) and, within five (5) business days of the final determination of the merits and amount of such claim, Sellers shall deliver to the Buyer Indemnified Party an amount of cash in immediately available funds in either case in an amount sufficient to satisfy and discharge in full such claim as determined under this Agreement; provided, however, that if Sellers still hold any of the Harbinger Shares, Sellers shall satisfy such claim to the maximum extent possible by delivering to the Buyer Indemnified Party Harbinger Shares (valued for these purposes using the Average Closing Price (as defined in Section 1.2)) and paying any balance in cash. Section 7.3. Appointment of Management Sellers Indemnitors Representative. Each Management Seller constitutes and appoints Allan W. Gray, the "Management Seller Indemnitors Representative," as his true and lawful attorney-in-fact to act for and on behalf of such Management Seller in all matters arising out of this Article 7 and the liability or asserted liability of such Management Seller under Section 7.2(a), including specifically, but without -35- 36 limitation, accepting and agreeing to the liability of such Management Seller with respect to any indemnification claim for, objecting to any claim, disputing the liability of such Management Seller, or the amount of such liability, with respect to any claim and prosecuting and resolving such dispute as herein provided, accepting the defense, compromise and settlement of any claim on behalf of such Management Seller or refusing to accept the same, settling and compromising the liability of such Management Seller hereunder, instituting and prosecuting such actions (including arbitration proceedings) as the Management Seller Indemnitors Representative shall deem appropriate in connection with any of the foregoing, all for the account of the Management Seller, such Management Seller agreeing to be fully bound by the acts, decisions and agreements of the Management Seller Indemnitor Representative taken and done pursuant to the authority herein granted. Each Management Seller hereby agrees to indemnify and to save and hold harmless the Management Seller Indemnitors Representative from any liability incurred by the Management Seller Indemnitors Representative based upon or arising out of any act, whether of omission or commission, of the Management Seller Indemnitors Representative pursuant to the authority herein granted, other than acts, whether of omission or commission, of the Management Seller Indemnitors Representative that constitute willful misconduct in the exercise by the Management Seller Indemnitors Representative of the authority herein granted. The death or incapacity of any Management Seller Indemnitors Representative shall terminate the authority and agency of the Management Seller Indemnitors Representative. In the event of the resignation of a Seller Indemnitor Representative, the resigning Management Seller Indemnitors Representative shall appoint a successor either from among the other Management Sellers or who shall otherwise be acceptable to Buyer and who shall agree in writing to accept such appointment, and the resigning Management Seller Indemnitors Representative's resignation shall not be effective until such a successor shall exist. If the Management Seller Indemnitor Representative is a natural person and if such Management Seller Indemnitors Representative should be or become incapacitated, them his successor shall be appointed within thirty (30) days of his death or incapacity by a majority of the Management Sellers, and such successor either shall be a Management Seller or shall otherwise be acceptable to Buyer. The choice of a successor Management Seller Indemnitors Representative appointed in any manner permitted above shall be final and binding upon all of the Management Sellers. The decisions and actions of any successor Management Seller Indemnitors Representative shall be, for all purposes, those of a Management Seller Indemnitors Representative as if originally named herein. Section 7.4. Indemnification by Buyer. (a) Subject to the other provisions of this Agreement, Buyer shall indemnify and hold harmless Sellers and, if applicable, their subsidiaries and affiliates, each of their respective officers, directors, employees, agents and representatives and each of their heirs, executors, successors and assigns (collectively, the "Seller Indemnified Parties"), from, against and in respect of any and all claims, liabilities, obligations, losses, costs, expenses, penalties, fines and other judgments (at equity or at law) and damages whenever arising or incurred (including, without limitation, amounts paid in settlement, costs of investigation and reasonable attorneys' fees and expenses) arising out of or relating to: -36- 37 (i) any breach of the representations, warranties, covenants or agreements made by Buyer in this Agreement which survives Closing pursuant to its terms or Section 7.1 of this Agreement; (ii) any breach of the representations, warranties, covenants or agreements made by Buyer in any certificate, agreement, exhibit or schedule (the "Buyer Ancillary Documents") delivered by Buyer pursuant to this Agreement, which representation, warranty, covenant or agreement survives Closing pursuant to its terms or Section 7.1 of this Agreement; (iii) unless a breach of a representation or warranty contained in Article 2, any claim arising from goods provided, services rendered or actions taken by the Company after the Closing Date or otherwise arising from the operations or business of the Company as conducted any time after the Closing Date (iv) any fraud, willful misconduct, bad faith or intentional breach of any representation, warranty, covenant or agreement made by Buyer in any Buyer Ancillary Document. The claims, liabilities, obligations, losses, costs, expenses, penalties, fines, judgments and damages of the Seller Indemnified Parties described in this Paragraph 7.4(a) as to which the Seller Indemnified Parties are entitled to indemnification are referred to as "Seller Losses" in this Agreement. (b) No Seller Indemnified Party is entitled to make any claim for indemnification under this Agreement after the appropriate Claims Period; provided, however, that if prior to the close of business on the last day of the Claims Period, Buyer has been notified of a claim for indemnity under this Agreement and such claim has not been finally resolved or disposed of at such date, the basis for such claim shall continue to survive with respect to such claim and shall remain a basis for indemnity under this Agreement with respect to such claim until such claim is finally resolved or disposed of in accordance with the terms of this Agreement; provided, further, however, that the Seller Indemnified Party and Buyer shall be obligated under this Agreement to exercise reasonable efforts to resolve any such claim as quickly as is reasonably practicable. (c) Indemnification Procedure. (i) Promptly after receipt by a Seller Indemnified Party of notice by a third party of any complaint or the commencement of any action or proceeding with respect to which indemnification is being sought under this Agreement, such Seller Indemnified Party shall notify Buyer of such complaint or of the commencement of such action or proceeding; provided, however, that failure to so notify Buyer does not relieve Buyer from liability for such claim arising otherwise than under this Agreement and such failure to so notify Buyer does relieve Buyer from liability which Buyer may have under this Agreement with respect to such claim if, but only if, and only to the extent that, such failure to notify Buyer results in the forfeiture by Buyer or any of its subsidiaries of rights and defenses otherwise available to Buyer or any of its subsidiaries with respect to such claim. -37- 38 Buyer will have the right, upon written notice to the Seller Indemnified Party, to assume the defense of such action or proceeding, including the employment of counsel reasonably satisfactory to the Seller Indemnified Party and the payment of the reasonable fees and disbursements of such counsel as incurred. If Buyer does not elect to assume control of the defense of any such claims, Buyer shall be bound by the results otherwise obtained with respect to such claim. In the event, however, that Buyer declines or fails to assume the defense of the action or proceeding or to employ counsel reasonably satisfactory to such Seller Indemnified Party, in either case in a timely manner, then such Seller Indemnified Party may employ counsel to represent or defend it in any such action or proceeding and Buyer shall pay the reasonable fees and disbursements of such counsel as incurred; provided, however, that Buyer is not required to pay the fees and disbursements of more than one counsel for all Seller Indemnified Parties in any jurisdiction in any single action or proceeding. In any action or proceeding with respect to which indemnification is being sought under this Agreement, the Seller Indemnified Parties or Buyer, whichever is not assuming the defense of such action, shall have the right to participate in such litigation and to retain its own counsel at such party's own expense. The Seller Indemnified Parties or Buyer, as the case may be, shall at all times use reasonable efforts to keep Buyer or the Seller Indemnified Parties, as the case may be, reasonably apprised of the status of the defense of any claim the defense of which they are maintaining and to cooperate in good faith with each other with respect to the defense of any such action. (ii) No Seller Indemnified Party may settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought from Buyer under this Agreement without the prior written consent of Buyer, unless such settlement, compromise or consent includes an unconditional release of Buyer and its affiliates from all liability arising out of such claim and does not contain any equitable order, judgment or term which in any manner affects, restrains or interferes with the business of Buyer, any of the Buyer Indemnified Parties or any of their respective affiliates. Buyer shall not, without the prior written consent of each of the Sellers, settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought under this Agreement unless such settlement, compromise or consent includes an unconditional release of the Seller Indemnified Party from all liability arising out of such claim and does not contain any equitable order, judgment or term which in any material manner affects, restrains or interferes with the business of the Seller Indemnified Parties or any of their respective affiliates. (iii) In the event that a Seller Indemnified Party does claim a right to payment pursuant to this Agreement, such Seller Indemnified Party shall send written notice of such claim to Buyer and the other Principal. Such notice shall specify the basis for such claim. As promptly as possible after such Seller -38- 39 Indemnified Party has given such notice, the Seller and Buyer shall establish the merits and amount of such claim (by mutual agreement, litigation, arbitration, mediation or otherwise) and, within five (5) business days of the final determination of the merits and amount of such claim, Buyer shall deliver an amount of Buyer Common Stock, valued for these purposes using the Average Closing Price (as defined in Section 1.2), to such Seller Indemnified Party as appropriate to satisfy such claim. Section 7.5. Liability Limits. (a) Sellers shall only be liable for Buyer Losses arising under this Agreement solely to the extent that any such Buyer Losses exceed, in the aggregate, U.S. $30,000 (the "Seller Basket Amount"); provided, however, that Buyer Losses arising under or pursuant to paragraph 7.2(a)(i) of this Agreement shall not be subject to the Seller Basket Amount to the extent that they relate to Sellers' breach of their representations and warranties in Section 2.4 or 3.3 of the Agreement. (b) Buyer shall only be liable for Seller Losses arising under this Agreement solely to the extent that any such Seller Losses exceed, in the aggregate, U.S. $30,000 (the "Buyer Basket Amount"). (c) The indemnification obligations of each Management Seller under this Agreement shall not exceed in the aggregate an amount (the "General Seller's Cap Amount") equal to the sum of (i) the value, as of the Closing, of the Harbinger Shares issued to such Seller pursuant to this Agreement plus (ii) such Management Seller's Allocation Percentage (as defined in Section 7.2(a) hereof) multiplied by U.S. $310,350; provided, however, that Buyer Losses arising under or pursuant to Section 7.2(a)(i) to the extent that they relate to Management Seller's breach of its representations and warranties in Section 2.4 of this Agreement or arising from Management Seller's fraudulent conduct shall not be subject to the General Seller's Cap Amount and there shall be no limitation on the indemnification obligations of the Management Seller with respect to Buyer Losses arising thereunder. (d) Buyer's indemnification obligations under this Agreement shall not exceed in the aggregate an amount equal to the value, as of the Closing, of the Harbinger Shares issued to the Sellers pursuant to this Agreement (the "Buyer Cap Amount"). (e) Once Buyer Losses exceed the Seller Basket Amount or Seller Losses exceed the Buyer Basket Amount, as the case may be, a breach for which a party is entitled to seek indemnification hereunder shall be deemed to occur upon the initial Buyer Loss or series of related Buyer Losses or Seller Loss or series of related Seller losses. ARTICLE 8. MISCELLANEOUS PROVISIONS Section 8.1. Notices. All notices, communications and deliveries hereunder shall be made in writing signed by the party making the same, shall specify the Section hereunder -39- 40 pursuant to which it is given or being made, and shall be delivered personally or by telecopy transmission or sent by registered or certified mail or by any express mail service (with postage and other fees prepaid) as follows (or to such other representative or at such other address of a party as such party hereto may furnish to the other parties in writing): To Buyer: Harbinger Corporation 1055 Lenox Park Blvd. Atlanta, GA 30319-5309 Attn: President with a copy to Loren Wimpfheimer, Esq. Director of Legal Affairs Telecopy No.: (404) 467-3476 To Management Sellers: c/o Allan W. Gray 17 Durham Close, Westhoughton, Lancashire, BLS 2RP, England, U.K. Telecopy No.: 01942-814712 with a copy to: Terry Montague, Esq. Berrymans Lace Mawer Castle Chambers 43 Castle Street Liverpool L2 9SU, England, U.K. Telecopy No.: 0151-236-2585 To Lancashire: Lancashire Enterprises Venture Fund Enterprise House 17 Ribblesdale Place Preston PR1 3NA, England, U.K. Attn: Richard Bamford, Director of Investment Telecopy No.: 01772-880697 with a copy to: John V. Gavan Laytons Solicitors DX 14382 Manchester LIX MAN012, England, U.K. Telecopy No.: 0161-834-6862
Section 8.2. Seller and Buyer Knowledge. As used in this Agreement, the terms "the best knowledge of Sellers," "known to Sellers" or words of similar import used herein with respect to Seller shall mean the actual knowledge of any Seller, together with the knowledge a reasonable business person would have obtained after making reasonable inquiry and after exercising reasonable diligence with respect to the matters at hand. As used in this Agreement, the terms "to the best knowledge of the Buyer Executives," "known to the Buyer Executives" or -40- 41 words of similar import used herein with respect to Buyer shall mean the actual knowledge of any Buyer Executive, together with the knowledge a reasonable business person would have obtained after making reasonable inquiry and after exercising reasonable diligence with respect to the matters at hand. The "Buyer Executives" shall consist of Messrs. David T. Leach, Joel G. Katz and Loren B. Wimpfheimer. Section 8.3. Entire Agreement; Modifications and Amendments. This Agreement, the Schedules, the Exhibits and the Other Agreements constitute the entire agreement between the parties relating to the subject matter hereof and thereof and supersede all prior oral and written agreements. This Agreement may not be amended, supplemented or otherwise modified except by an instrument in writing signed by each of the parties hereto and no oral waiver to this sentence shall be valid. Whenever terms defined in this Agreement are used in any Exhibit or Schedule hereto, such terms shall have the meanings ascribed to them herein also ascribed to them in such Exhibit or Schedules unless they are otherwise defined in such Exhibit or Schedule. The term "Agreement" shall mean this instrument and all Exhibits and Schedules hereto and the words "herein," "hereof," "hereunder," "hereto," "hereby," and words of similar tenor shall refer to this instrument in its entirety including the Exhibits and Schedules hereto. Section 8.4. Assignment; Successors-in-Interest. No assignment or transfer by Buyer or Seller of their respective rights and obligations hereunder shall be made except with the prior written consent of the other parties hereto. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their permitted successors and assigns, but no assignment shall relieve any party of its obligations hereunder. Any reference hereto shall also be a reference to a permitted successor or assign. Section 8.5. Number; Gender. Whenever the context so requires, the singular number shall include the plural and the plural shall include the singular, and the gender of any pronoun shall include the other gender. Section 8.6. Captions. The titles, captions and table of contents contained in this Agreement are inserted herein for convenience and for reference only and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof. Unless otherwise specified to the contrary, all references to Articles and Sections are references to Articles and Sections of this Agreement and all references to Schedules and Exhibits are references to Schedules and Exhibits to this Agreement. Section 8.7. Controlling Law; Integration. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Georgia, U.S.A., without reference to Georgia's choice of law rules. The parties hereto hereby agree that any legal proceeding instituted with respect to this Agreement may be brought in Atlanta, Georgia, U.S.A. and the parties hereby submit to personal jurisdiction therein and agree that venue properly lies therein. This Agreement supersedes all negotiations, agreements and understandings among the parties with respect to the subject matter hereof and constitutes the entire agreement among the parties hereto. -41- 42 Section 8.8. Severability. Any provision hereof which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by law, the parties hereto waive any provision of law which renders any such provision prohibited or unenforceable in any respect. Section 8.9. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 8.10. Enforcement of Certain Rights. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person, firm or corporation other than the parties hereto, and their successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, or result in such person, firm or corporation being deemed a third party beneficiary of this Agreement. Section 8.11. Waiver. Any agreement on the part of a party hereto to any extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. A waiver by one party of the performance of any covenant, agreement, obligation, condition, representation or warranty shall not be construed as a waiver of any other covenant, agreement, obligation, condition, representation or warranty. A waiver by any party of the performance of any act shall not constitute a waiver of the performance of any other act or an identical act required to be performed at a later time. Section 8.12. Fees and Expenses. Buyer shall pay its own fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including, but not limited to, the fees, costs and expenses of its financial advisors, accountants and counsel. At Closing, Buyer shall pay Company's and Sellers' fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including the reasonable fees and expenses of accountants and counsel for Company and Sellers, but such fees, costs and expenses shall not exceed in the aggregate the sum of U.S. $310,350. Any fees, costs and expenses of Company and/or Sellers in excess of such amount shall be paid by the Sellers. Section 8.13. Public Announcements. The timing and content of all announcements regarding any aspect of this Agreement to the financial community, government agencies, employees or the general public shall be mutually agreed upon in advance (unless Buyer or Seller is advised by counsel that any such announcement or other disclosure not mutually agreed upon in advance is required to be made by law, and then only after making a reasonable attempt to comply with the provisions of this Section). Section 8.14. Pooling of Interests. If any provision of this Agreement or the application of any such provision to any person or circumstance precludes the use of "pooling of interests" accounting treatment in connection with the Purchase Agreement, then such provision shall be of no force and effect to the extent, and solely to the extent necessary to preserve such accounting treatment pursuant to the Purchase Agreement, and in that event, the remainder of this -42- 43 Agreement shall not be affected, and in lieu of such provision there shall be added as part of this Agreement a provision as similar in terms as may be possible for the purchase pursuant to the Purchase Agreement to be treated as a "pooling of interests" for accounting purposes. -43- 44 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the date first above written. "BUYER": HARBINGER CORPORATION By: /s/ Theodore E. Ciochon -------------------------------------- Theodore E. Ciochon, Vice President "SELLERS": Lancashire Enterprises Venture Fund By: Lancashire Enterprises General Partner Limited By: /s/ Richard Bamford -------------------------------------- Title: Director of Investment /s/ Philip J. Bird ------------------------------------------ Philip J. Bird /s/ Allan W. Gray ------------------------------------------ Allan W. Gray /s/ Tom P. C. Reynolds ------------------------------------------ Tom P.C. Reynolds /s/ C.G. Summers ------------------------------------------ C.G. Summers -44- 45 EXECUTION COPY
TABLE OF CONTENTS Page ---- ARTICLE 1. SALE OF SHARE CAPITAL; CLOSING.........................................................................1 SECTION 1.1. PURCHASE AND SALE....................................................................................1 SECTION 1.2. PURCHASE PRICE.......................................................................................2 SECTION 1.3. DEPOSIT OF SHARES IN ESCROW..........................................................................2 SECTION 1.4. CLOSING..............................................................................................2 SECTION 1.5. FURTHER ASSURANCES...................................................................................2 SECTION 1.6. FRACTIONAL SHARES....................................................................................2 ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND MANAGEMENT SELLERS...........................................................................................................3 SECTION 2.1. ORGANIZATION.........................................................................................3 SECTION 2.2. AUTHORIZATION........................................................................................3 SECTION 2.3. ABSENCE OF RESTRICTIONS AND CONFLICTS................................................................3 SECTION 2.4. CAPITALIZATION.......................................................................................4 SECTION 2.5. SUBSIDIARIES.........................................................................................5 SECTION 2.6. FINANCIAL STATEMENTS.................................................................................5 SECTION 2.7. ABSENCE OF CERTAIN CHANGES...........................................................................6 SECTION 2.8. LEGAL PROCEEDINGS....................................................................................7 SECTION 2.9. COMPLIANCE WITH LAW..................................................................................7 SECTION 2.10. MATERIAL CONTRACTS..................................................................................7 SECTION 2.11. COMPANY CLIENT CONTRACTS............................................................................9 SECTION 2.12. TAX RETURNS; TAXES..................................................................................9 SECTION 2.13. OFFICERS, DIRECTORS AND EMPLOYEES..................................................................10 SECTION 2.14. EMPLOYEE BENEFIT PLANS.............................................................................11 SECTION 2.15. EMPLOYMENT TAXES...................................................................................13 SECTION 2.16. LABOR RELATIONS....................................................................................13 SECTION 2.17. INSURANCE..........................................................................................14 SECTION 2.18. TITLE TO PROPERTIES AND RELATED MATTERS............................................................14 SECTION 2.19. ENVIRONMENTAL MATTERS..............................................................................15 SECTION 2.20. PATENTS, TRADEMARKS, TRADE NAMES...................................................................15 SECTION 2.21. COMPANY COMPUTER SOFTWARE AND HARDWARE.............................................................16 SECTION 2.22. TRANSACTIONS WITH AFFILIATES.......................................................................18 SECTION 2.23. CUSTOMERS..........................................................................................19 SECTION 2.24. BROKERS, FINDERS AND INVESTMENT BANKERS............................................................19 SECTION 2.25. DISCLOSURE.........................................................................................19 SECTION 2.26. REQUIREMENTS OF SECURITIES LAWS....................................................................19 SECTION 2.27. GOVERNMENT GRANTS..................................................................................23 ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF LANCASHIRE.........................................................23 SECTION 3.1. ORGANIZATION........................................................................................23 SECTION 3.2. AUTHORIZATION.......................................................................................23 SECTION 3.3. OWNERSHIP OF SHARES.................................................................................23 SECTION 3.4. NO GOVERNMENTAL CONSENTS REQUIRED...................................................................24 SECTION 3.5. REQUIREMENTS OF SECURITIES LAWS.....................................................................24 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................27 SECTION 4.1. ORGANIZATION........................................................................................28 SECTION 4.2. AUTHORIZATION.......................................................................................28
46 SECTION 4.3. ABSENCE OF RESTRICTIONS AND CONFLICTS...............................................................28 SECTION 4.4. CAPITALIZATION OF BUYER.............................................................................28 SECTION 4.5. BUYER COMMISSION REPORTS............................................................................29 SECTION 4.6. ABSENCE OF CERTAIN CHANGES..........................................................................29 SECTION 4.7. BROKERS, FINDERS AND INVESTMENT BANKERS.............................................................29 SECTION 4.8. DISCLOSURE..........................................................................................30 ARTICLE 5. POST-CLOSING COVENANTS AND ADDITIONAL AGREEMENTS OF SELLER AND BUYER............................................................................................................30 SECTION 5.1. CONFIDENTIALITY.....................................................................................30 SECTION 5.2. EMPLOYEES...........................................................................................30 SECTION 5.3. REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION.................................................30 SECTION 5.4. NONCOMPETE AND NONSOLICITATION......................................................................30 SECTION 5.5. NOTIFICATION.......................................................................................31 ARTICLE 6. DELIVERIES AT CLOSING.................................................................................31 SECTION 6.1. DELIVERIES BY SELLER................................................................................31 SECTION 6.2. DELIVERIES BY BUYER.................................................................................32 ARTICLE 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.......................................32 SECTION 7.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................................................32 SECTION 7.2. INDEMNIFICATION BY THE MANAGEMENT SELLERS...........................................................33 SECTION 7.3. APPOINTMENT OF MANAGEMENT SELLERS INDEMNITORS REPRESENTATIVE........................................35 SECTION 7.4. INDEMNIFICATION BY BUYER............................................................................36 SECTION 7.5. LIABILITY LIMITS....................................................................................39 ARTICLE 8. MISCELLANEOUS PROVISIONS..............................................................................39 SECTION 8.1. NOTICES.............................................................................................39 SECTION 8.2. SELLER AND BUYER KNOWLEDGE..........................................................................40 SECTION 8.3. ENTIRE AGREEMENT; MODIFICATIONS AND AMENDMENTS......................................................41 SECTION 8.4. ASSIGNMENT; SUCCESSORS-IN-INTEREST..................................................................41 SECTION 8.5. NUMBER; GENDER......................................................................................41 SECTION 8.6. CAPTIONS............................................................................................41 SECTION 8.7. CONTROLLING LAW; INTEGRATION........................................................................41 SECTION 8.8. SEVERABILITY........................................................................................42 SECTION 8.9. COUNTERPARTS........................................................................................42 SECTION 8.10. ENFORCEMENT OF CERTAIN RIGHTS......................................................................42 SECTION 8.11. WAIVER............................................................................................42 SECTION 8.12. FEES AND EXPENSES..................................................................................42 SECTION 8.13. PUBLIC ANNOUNCEMENTS...............................................................................42 SECTION 8.14. POOLING OF INTERESTS...............................................................................42
46 47 EXECUTION COPY EXHIBITS Exhibit A Manner of Issuance of Harbinger Shares Exhibit B Escrow Agreement Exhibit C Seller Disclosure Letter Exhibit D Lancashire Disclosure Letter Exhibit E Buyer Disclosure Letter Exhibit F Resigning Officers and Directors Exhibit G [Reserved] Exhibit H Noncompetition Agreement Exhibit I Affiliate's Agreement Exhibit J [Reserved] Exhibit K Registration Rights Agreement EX-2.2 3 MERGER AGREEMENT 1 Exhibit 2.2 ANNEX A MERGER AGREEMENT BY AND AMONG HARBINGER CORPORATION, OLYMPIC SUBSIDIARY CORPORATION AND PREMENOS TECHNOLOGY CORP. AS OF OCTOBER 23, 1997 A-1 2 TABLE OF CONTENTS ARTICLE 1. THE MERGER...................................................... A-9 Section 1.1. Surviving Corporation....................................... A-9 Section 1.2. Certificate of Incorporation................................ A-9 Section 1.3. Bylaws...................................................... A-9 Section 1.4. Directors................................................... A-9 Section 1.5. Officers.................................................... A-10 Section 1.6. Effective Time.............................................. A-10 Section 1.7. Tax-Free Reorganization..................................... A-10 Section 1.8. Pooling of Interests Accounting............................. A-10 ARTICLE 2. CONVERSION OF SHARES; TREATMENT OF OPTIONS AND DERIVATIVES............................................ A-10 Section 2.1. Premenos Common Stock....................................... A-10 Section 2.2. Fractional Shares........................................... A-10 Section 2.3. Treatment of Premenos Employee Stock Options and Derivative Securities.................................................. A-10 Section 2.4. Exchange Agent.............................................. A-12 Section 2.5. Conversion Ratio and Adjustment Event....................... A-13 ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PREMENOS...................... A-13 Section 3.1. Organization................................................ A-13 Section 3.2. Authorization............................................... A-13 Section 3.3. Absence of Restrictions and Conflicts....................... A-14 Section 3.4. Capitalization.............................................. A-14 Section 3.5. Capital Stock of Premenos Subsidiaries...................... A-14 Section 3.6. SEC Reports................................................. A-14 Section 3.7. Financial Statements........................................ A-15 Section 3.8. Absence of Certain Changes.................................. A-15 Section 3.9. Legal Proceedings........................................... A-16 Section 3.10. Compliance with Law......................................... A-16 Section 3.11. Material Contracts.......................................... A-16 Section 3.12. Tax Returns; Taxes.......................................... A-17 Section 3.13. Employee Benefit Plans...................................... A-17 Section 3.14. Labor Relations............................................. A-20 Section 3.15. Insurance................................................... A-20 Section 3.16. Title to Properties and Related Matters..................... A-20 Section 3.17. Environmental Matters....................................... A-21 Section 3.18. Patents, Trademarks, Trade Names............................ A-21 Section 3.19. Licensed Software........................................... A-21 Section 3.20. Trade Secrets............................................... A-23 Section 3.21. Proxy Statement and Registration Statement.................. A-23 Section 3.22. Pooling..................................................... A-23 Section 3.23. Transactions with Affiliates................................ A-23 Section 3.24. Brokers, Finders and Investment Bankers..................... A-23 Section 3.25. Disclosure.................................................. A-23 Section 3.26. Opinion of Financial Advisor................................ A-24 Section 3.27. No Existing Discussions..................................... A-24 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF HARBINGER..................... A-24 Section 4.1. Organization................................................ A-24 Section 4.2. Authorization............................................... A-24 Section 4.3. Absence of Restrictions and Conflicts....................... A-24
A-2 3 Section 4.4. Capitalization.............................................. A-25 Section 4.5. Capital Stock of Harbinger Subsidiaries..................... A-25 Section 4.6. SEC Reports................................................. A-25 Section 4.7. Financial Statements........................................ A-26 Section 4.8. Absence of Certain Changes.................................. A-26 Section 4.9. Legal Proceedings........................................... A-27 Section 4.10. Compliance with Law......................................... A-27 Section 4.11. Patents, Trademarks, Trade Names............................ A-27 Section 4.12. Licensed Software........................................... A-28 Section 4.13. Trade Secrets............................................... A-29 Section 4.14. Proxy Statement and Registration Statement.................. A-29 Section 4.15. Pooling..................................................... A-29 Section 4.16. Brokers, Finders and Investment Bankers..................... A-29 Section 4.17. Disclosure.................................................. A-29 Section 4.18. Opinion of Financial Advisor................................ A-30 Section 4.19. Interim Operations of HarbingerSub.......................... A-30 ARTICLE 5. CERTAIN COVENANTS AND AGREEMENTS................................ A-30 Section 5.1. Conduct of Business by Premenos............................. A-30 Section 5.2. Conduct of Business by Harbinger............................ A-32 Section 5.3. Inspection and Access to Information........................ A-32 Section 5.4. Proxy Statement and Registration Statement.................. A-32 Section 5.5. Harbinger and Premenos Stockholders Meetings................ A-32 Section 5.6. The Nasdaq National Market Additional Shares Notification... A-33 Section 5.7. Premenos Affiliates......................................... A-33 Section 5.8. No Solicitation............................................. A-33 Section 5.9. Reasonable Efforts; Further Assurances; Cooperation......... A-35 Section 5.10. Public Announcements........................................ A-35 Section 5.11. Financial Statements and SEC Reports........................ A-35 Section 5.12. Supplements to Disclosure Letters........................... A-35 Section 5.13. Pooling of Interests Accounting............................. A-35 Section 5.14. Accountant's Review Report.................................. A-35 Section 5.15. Indemnification of Premenos Directors and Officers.......... A-36 Section 5.16. Harbinger Board of Directors................................ A-36 Section 5.17. Employment Agreements....................................... A-36 Section 5.18. Premenos Transactional Expenses............................. A-37 Section 5.19. Severance................................................... A-37 Section 5.20. Premenos Stock Options...................................... A-37 Section 5.21. Minority Interest........................................... A-37 ARTICLE 6. CONDITIONS...................................................... A-37 Section 6.1. Conditions to Each Party's Obligations...................... A-37 Section 6.2. Conditions to Obligations of Harbinger...................... A-38 Section 6.3. Conditions to Obligations of Premenos....................... A-39 ARTICLE 7. CLOSING......................................................... A-39 ARTICLE 8. TERMINATION..................................................... A-40 Section 8.1. Termination and Abandonment................................. A-40 Section 8.2. Specific Performance and Other Remedies..................... A-40 Section 8.3. Effect of Termination....................................... A-41 Section 8.4. Fees and Expenses........................................... A-41
A-3 4 ARTICLE 9. MISCELLANEOUS PROVISIONS........................................ A-42 Section 9.1. Notices..................................................... A-42 Section 9.2. Disclosure Letters and Exhibits............................. A-43 Section 9.3. Assignment; Successors in Interest.......................... A-43 Section 9.4. Investigations; Representations and Warranties.............. A-43 Section 9.5. Number; Gender.............................................. A-43 Section 9.6. Captions.................................................... A-43 Section 9.7. Controlling Law; Integration; Amendment..................... A-43 Section 9.8. Premenos and Harbinger Knowledge............................ A-44 Section 9.9. Severability................................................ A-44 Section 9.10. Counterparts................................................ A-44 Section 9.11. Enforcement of Certain Rights............................... A-44 Section 9.12. Waiver...................................................... A-44 Section 9.13. Merger...................................................... A-44
A-4 5 DEFINED TERMS
TERM SECTION ---- ---------- 1997 Balance Sheet.......................................... 3.7 Adjustment Event............................................ 2.5(b) Agreement................................................... Page 1 Alternative Transaction..................................... 8.4(d) Alternative Transaction Value............................... 8.4(b) Anticipated Merger Transaction Value........................ 2.5(a) Anticipated Premenos Transactional Expenses................. 5.18 Average Closing Price....................................... 2.2 Certificate................................................. 2.4(b) Certificate of Merger....................................... Page 1 Closing..................................................... Page 39 Closing Date................................................ Page 39 Code........................................................ Page 1 Competing Offer............................................. 5.8(a) Confidentiality Agreement................................... 5.8(a) Conversion Ratio............................................ 2.5(a) Coopers & Lybrand........................................... 3.7 Coopers & Lybrand Review Report............................. 5.14 DGCL........................................................ Page 1 EEOC........................................................ 3.14 Effective Time.............................................. 1.6 Employee Benefit Plan....................................... 3.13(a)(ii) ERISA....................................................... 3.13(a)(ii) Excess Parachute Payment.................................... 3.13(k) Exchange Act................................................ 3.3 Exchange Fund............................................... 2.4(a) Expense Cap................................................. 2.5(a) Exchange Agent.............................................. 2.4(a) GBCC........................................................ 6.1(b) Harbinger Executives........................................ 9.8 Harbinger Licensed Intellectual Property.................... 4.9 Harbinger Disclosure Letter................................. Page 24 Harbinger Proprietary Intellectual Property................. 4.9 Harbinger Intellectual Property............................. 4.9 Harbinger Proprietary Software.............................. 4.10(a) Harbinger Hardware.......................................... 4.10(a) Harbinger Licensed Software................................. 4.10(b) Harbinger Software.......................................... 4.10(b) Harbinger License Agreements................................ 4.10(b) Harbinger Shareholders Meeting.............................. 5.5(b) Harbinger Subsidiaries...................................... 4.5 Harbinger SEC Reports....................................... 4.6 Harbinger Preferred Stock................................... 4.4 Harbinger Financial Statements.............................. 4.7 Harbinger................................................... Page 1 Harbinger Balance Sheet..................................... 4.7 Harbinger Capital Stock..................................... 4.4 Harbinger Common Stock...................................... 2.1(a) HarbingerSub................................................ Page 1
A-5 6
TERM SECTION ---- ---------- Harbinger Termination Fee................................... 8.4(b) Harbinger Topping Fee....................................... 8.4(b) HSR Act..................................................... 3.3 Incremental Value........................................... 8.4(b) Indemnified Parties......................................... 5.15(b) Interim Statement........................................... 5.18 IRS......................................................... 3.13(f) KPMG Peat Marwick........................................... 4.7 Leased Employees............................................ 3.13(n) Merger...................................................... Page 1 Merger Transaction Value.................................... 8.4(b) Nasdaq Additional Shares Notification....................... 5.6 NLRB........................................................ 3.14 Non-Qualified Options....................................... 2.3(a) Old Options................................................. 2.3(a) PBGC........................................................ 3.13(f) Pension Benefit Plan........................................ 3.13(n) Premises.................................................... 3.17 Proxy Agreement............................................. Page 1 Proxy Statement............................................. 3.21 Premenos.................................................... Page 1 Premenos Intellectual Property.............................. 3.18 Premenos ERISA Affiliate.................................... 3.13(b) Premenos Disclosure Letter.................................. Page 13 Premenos Common Stock....................................... 2.1(a) Premenos Financial Statements............................... 3.7 Premenos Licensed Intellectual Property..................... 3.18 Premenos Proprietary Intellectual Property.................. 3.18 Premenos Executives......................................... 9.8 Premenos Hardware........................................... 3.19(a) Premenos License Agreements................................. 3.19(b) Premenos Licensed Software.................................. 3.19(a) Premenos Material Contracts................................. 3.11 Premenos Preferred Stock.................................... 3.4 Premenos Proprietary Software............................... 3.19(a) Premenos SEC Reports........................................ 3.6 Premenos Software........................................... 3.19(a) Premenos Stockholders....................................... 2.2 Premenos Subsidiaries....................................... 3.5 Premenos Benefit Plan....................................... 3.13(a) Premenos Stockholders Meeting............................... 5.5(c) Premenos Termination Fee.................................... 8.4(c)
A-6 7
TERM SECTION ---- ---------- Registration Statement...................................... 3.21 Reportable Event............................................ 3.13(o) Scheduled Leases............................................ 3.16(b) SEC......................................................... 2.3(e) Securities Act.............................................. 3.3 SO Plan..................................................... 2.3(a) Superior Proposal........................................... 5.8(a) Surviving Corporation....................................... 1.1 The Best Knowledge of Premenos.............................. 9.8 The Best Knowledge of Harbinger............................. 9.8
A-7 8 EXHIBITS
EXHIBIT NUMBER - ------- -------- Certificate of Merger -- Delaware........................... 1.1 Proxy Agreement............................................. 1.2 Form of King & Spalding Tax Opinion......................... 6.1(d) Form of Bryan Cave LLP Opinion.............................. 6.2(c) Form of King & Spalding Opinion............................. 6.3(c) Form of Registration Rights Agreement....................... 6.3(g)
A-8 9 MERGER AGREEMENT THIS MERGER AGREEMENT, dated as of October 23, 1997 (the "Agreement"), by and among HARBINGER CORPORATION, a Georgia corporation ("Harbinger"), OLYMPIC SUBSIDIARY CORPORATION, a Delaware corporation and a wholly owned subsidiary of Harbinger ("HarbingerSub"), and PREMENOS TECHNOLOGY CORP., a Delaware corporation ("Premenos"). WHEREAS, the Board of Directors of Harbinger, HarbingerSub and Premenos deem it advisable and in the best interests of each corporation and its respective shareholders or stockholders, as applicable, that Harbinger and Premenos combine in order to advance the long-term business strategies, goals and interests of Harbinger and Premenos; WHEREAS, the Board of Directors of Harbinger, HarbingerSub and Premenos each have approved this Agreement and the merger (the "Merger"), pursuant to this Agreement and the certificate of merger in the form attached hereto as Exhibit 1.1 (the "Certificate of Merger") of HarbingerSub with and into Premenos on the terms and conditions contained in this Agreement and in accordance with the Delaware General Corporation law (the "DGCL"); WHEREAS, Harbinger, as the sole stockholder of HarbingerSub, has approved this Agreement, the Merger and the transactions contemplated by this Agreement pursuant to action taken by unanimous written consent in accordance with the requirements of the DGCL and the Certificate of Incorporation and Bylaws of HarbingerSub; WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to Harbinger's willingness to enter into this Agreement, David Hildes and Lew Jenkins have each duly executed and delivered to Harbinger an irrevocable proxy agreement in the form attached hereto as Exhibit 1.2 (the "Proxy Agreements"); WHEREAS, the parties to this Agreement intend that the Merger qualify as a "reorganization" within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"); and WHEREAS, the parties to this Agreement intend that the Merger be accounted for as a pooling of interests pursuant to APB Opinion No. 16 and related pronouncements thereunder. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the parties agree as follows: ARTICLE 1 THE MERGER Section 1.1. Surviving Corporation. Subject to the provisions of this Agreement and the DGCL, at the Effective Time, HarbingerSub shall be merged with and into Premenos, and the separate corporate existence of HarbingerSub shall cease. Premenos shall be the surviving corporation in the Merger (sometimes called the "Surviving Corporation") and shall continue its corporate existence under the laws of the State of Delaware. The Merger shall have the effects set forth in Section 259 of the DGCL. Section 1.2. Certificate of Incorporation. The Certificate of Incorporation of Premenos shall be the Certificate of Incorporation of the Surviving Corporation until amended after the Effective Time. Section 1.3. Bylaws. The Bylaws of Premenos shall be the Bylaws of the Surviving Corporation until amended after the Effective Time. Section 1.4. Directors. The directors of the Surviving Corporation shall consist of the directors of HarbingerSub immediately prior to the Effective Time, such directors to hold office from the Effective Time until their respective successors are duly elected and qualify. A-9 10 Section 1.5. Officers. The officers of the Surviving Corporation shall consist of the officers of HarbingerSub immediately prior to the Effective Time, such officers to hold office from the Effective Time until their respective successors are duly elected and qualify. Section 1.6. Effective Time. If all of the conditions set forth in Article 6 have been fulfilled or waived in accordance with the terms of this Agreement and this Agreement has not been terminated in accordance with Article 8, the parties shall cause the Certificate of Merger to be properly executed and filed on the Closing Date with the Secretary of State of the State of Delaware. The Merger shall become effective as of the time of filing of a properly executed Certificate of Merger. The date and time when the Merger becomes effective is referred to as the Effective Time. Section 1.7. Tax-Free Reorganization. The Merger is intended to be a reorganization within the meaning of Section 368 of the Code, and this Agreement is intended to be a "plan of reorganization" within the meaning of the regulations promulgated under Section 368 of the Code. Section 1.8. Pooling of Interests Accounting. The Merger is intended to be accounted for as a pooling of interests within the meaning of APB Opinion No. 16 and related pronouncements thereunder. ARTICLE 2 CONVERSION OF SHARES; TREATMENT OF OPTIONS AND DERIVATIVES Section 2.1. Premenos Common Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of any Premenos Stockholder: (a) Subject to Section 2.2, each share of common stock, par value $.01 per share, of Premenos ("Premenos Common Stock") issued and outstanding immediately prior to the Effective Time (except for treasury shares and any shares held by Harbinger or a direct or indirect subsidiary of Harbinger) shall be converted, without any further action, into the right to receive such fraction of a share of Common Stock, par value $.0001 per share, of Harbinger ("Harbinger Common Stock") as is equal to the Conversion Ratio. (b) Each share of Premenos Common Stock issued immediately prior to the Effective Time that is then held in Premenos's treasury shall be canceled and retired and all rights in respect of such stock shall cease to exist, without any conversion thereof or payment of any consideration therefor. (c) Each share of common stock, par value $.0001 per share, of HarbingerSub that is issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock, par value $.0001 per share, of the Surviving Corporation. Section 2.2. Fractional Shares. No scrip or fractional shares of Harbinger Common Stock shall be issued in the Merger. All fractional shares of Harbinger Common Stock to which a holder of Premenos Common Stock (each a "Premenos Stockholder") immediately prior to the Effective Time would otherwise be entitled at the Effective Time shall be aggregated. If a fractional share results from such aggregation, a Premenos Stockholder shall be entitled, after the later of (a) the Effective Time or (b) the surrender of such Premenos Stockholder's Certificate(s) that represent such shares of Premenos Common Stock, to receive from Harbinger an amount in cash in lieu of such fractional share, based on the Average Closing Price. For purposes of this Agreement, the "Average Closing Price" shall be the arithmetic average of the closing price per share of Harbinger Common Stock, as reported on the Nasdaq National Market, for each of the ten consecutive trading days ending on the fifth trading day immediately prior to the date of the Premenos Stockholders Meeting. Section 2.3. Treatment of Premenos Employee Stock Options and Derivative Securities. (a) At the Effective Time, Harbinger shall assume all of Premenos's rights and obligations with respect to the outstanding stock options held by certain employees and non-employee directors of Premenos pursuant to Premenos's 1995 Incentive Program, as amended (the "SO Plan"), as set forth in the Premenos Disclosure A-10 11 Letter, which are outstanding and unexercised at the Effective Time (the "Old Options"), whether or not the Old Options are then exercisable. Promptly following such assumption, Harbinger shall substitute for the Old Options options to be granted under the Harbinger 1996 Stock Option Plan (the "Harbinger Options"), which Harbinger Options will contain vesting terms and conditions matching those contained in the Old Options. Harbinger agrees to issue incentive stock options under the Harbinger 1996 Stock Option Plan in substitution for each Old Option that qualified as an incentive stock option prior to the Effective Time and to issue non-qualified stock options under the Harbinger 1996 Stock Option Plan in substitution for each Old Option that constituted a non-qualified stock option prior to the Effective Time. Each Harbinger Option shall thereafter evidence the right to purchase the number of shares of Harbinger Common Stock equal to the product (rounded up or down as appropriate to a whole share) of (i) the number of shares of Premenos Common Stock covered by such Old Option immediately prior to the Effective Time, multiplied by (ii) the Conversion Ratio. The exercise price of such Harbinger Options for each share of Harbinger Common Stock subject to such options shall be equal to the quotient (rounded up or down as appropriate to a whole cent) obtained by dividing (i) the per-share exercise price for shares of Premenos Common Stock subject to such Old Option immediately prior to the Effective Time, by (ii) the Conversion Ratio. It is intended that the assumption and substitution of the Harbinger Options for the Old Options, as set forth herein, shall (i) not give to any holder thereof any benefits in addition to those which any such holder had prior to such assumption and substitution so that the assumption and substitution by Harbinger of the Old Options will comply with the requirements of Section 424(a) of the Code and (ii) be undertaken in a manner that will not constitute a "Modification" as defined in Section 424(b) of the Code as to any Old Option which is an incentive stock option. (b) At the Effective Time, Harbinger shall assume all of Premenos's rights and obligations with respect to certain outstanding warrants and other rights to acquire Premenos Common Stock as set forth in the Premenos Disclosure Letter (which description in the Premenos Disclosure Letter shall include the number of shares of Premenos Common Stock obtainable upon exercise and the strike price of each such warrant or right) which are outstanding and unexercised at the Effective Time (the "Premenos Derivative Securities"), whether or not the Premenos Derivative Securities are then exercisable. Immediately following such assumption and in accordance with the terms and conditions of the Premenos Derivative Securities, each such Premenos Derivative Security shall thereafter evidence the right to purchase: (i) the number of shares of Harbinger Common Stock equal to the product (rounded up or down as appropriate to the next whole share) of (W) the number of shares of Premenos Common Stock covered by such Premenos Derivative Security immediately prior to the Effective Time multiplied by (X) the Conversion Ratio; and (ii) the exercise price of such assumed Premenos Derivative Security shall thereafter be equal to the quotient obtained by dividing (Y) the per share exercise price for shares of Premenos Common Stock subject to such Premenos Derivative Security immediately prior to the Effective Time, by (Z) the Conversion Ratio. From and after the Effective Time, the number of shares of Harbinger Common Stock subject to such Premenos Derivative Securities and the exercise price for such shares shall be subject to further adjustment in accordance with the provisions of such Premenos Derivative Securities. (c) As soon as practicable after the Effective Time, Harbinger shall deliver to each holder of an Old Option an appropriate written notice and option agreement setting forth Harbinger's assumption of the Old Option and substitution of the Harbinger Option in accordance with the terms of this Section 2.3. The form of such notice and option agreement shall be delivered to Premenos prior to the Effective Time and shall be subject to its reasonable approval. Premenos shall not grant any options under the SO Plan or otherwise after the date of this Agreement. (d) As soon as practicable after the Effective Time, Harbinger shall deliver to each holder of a Premenos Derivative Security such additional documentation as may be required pursuant to the express terms of such Premenos Derivative Security to properly evidence Harbinger's assumption of Premenos's rights and obligations thereunder. (e) Harbinger agrees to cause the shares of Harbinger Common Stock issuable upon exercise of the Harbinger Options to be registered with the Securities and Exchange Commission (the "SEC") on a Form S-8 Registration Statement as promptly following the Effective Time as is reasonably practicable. A-11 12 (f) Approval by the Premenos Stockholders of this Agreement shall constitute authorization and approval of any and all of the actions described in this Section 2.3. (g) The offering period under Premenos's 1995 Employee Stock Purchase Plan (the "Stock Plan") which ends December 31, 1997, shall be the final offering period under the Stock Plan, and the Board of Directors of Premenos shall terminate the Stock Plan as of the earlier to occur of the Effective Time or December 31, 1997, in accordance with its terms. Employees of Premenos who participate in the final offering period of the Stock Plan shall have shares of Premenos purchased on their behalf prior to the termination of the Stock Plan in accordance with its terms. Section 2.4. Exchange Agent. (a) Harbinger shall authorize First Union National Bank of North Carolina to serve as exchange agent hereunder (the "Exchange Agent"). Promptly after the Effective Time, Harbinger shall deposit or shall cause to be deposited in trust with the Exchange Agent certificates representing the number of whole shares of Harbinger Common Stock to which the holders of Premenos Common Stock (other than treasury shares and other than Harbinger or a direct or indirect subsidiary of Harbinger) are entitled pursuant to Section 2.1, together with cash sufficient to pay for fractional shares then known to Harbinger pursuant to Section 2.2 (such cash amounts and certificates being hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable instructions received from Harbinger, deliver the number of shares and pay the amounts of cash provided for in Sections 2.1 and 2.2 out of the Exchange Fund. Additional amounts of cash, if any, needed from time to time by the Exchange Agent to make payments for fractional shares shall be provided by Harbinger and shall become part of the Exchange Fund. (b) As soon as is reasonably practicable after the Effective Time, the Exchange Agent shall make available to each record holder (other than treasury shares and other than Harbinger or a direct or indirect subsidiary of Harbinger) who, as of the Effective Time, was a holder of an outstanding certificate or certificates which immediately prior to the Effective Time represented shares of Premenos Common Stock (the "Certificate" or "Certificates"), a form of letter of transmittal and instructions for use in effecting the surrender of the Certificates for payment therefor and conversion thereof. Delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and the form of letter of transmittal shall so reflect. Upon surrender to the Exchange Agent of a Certificate, together with such letter of transmittal duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor (i) one or more certificates as requested by the holder (properly issued, executed and countersigned, as appropriate) representing that number of whole shares of Harbinger Common Stock to which such holder of Premenos Common Stock shall have become entitled pursuant to the provisions of Section 2.1, and (ii) as to any fractional share, a check representing the cash consideration to which such holder shall have become entitled pursuant to Section 2.1, and the Certificate so surrendered shall forthwith be canceled. No interest will be paid or accrued on the cash payable upon the surrender of the Certificates. If any portion of the consideration to be received pursuant to Sections 2.1 and 2.2 upon exchange of a Certificate (whether a certificate representing shares of Harbinger Common Stock or a check representing cash for a fractional share) is to be issued or paid to a person other than the person in whose name the Certificate surrendered in exchange therefor is registered, it shall be a condition of such issuance and payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such exchange shall pay in advance any transfer or other taxes required by reason of the issuance of a certificate representing shares of Harbinger Common Stock or a check representing cash for a fractional share to such other person, or establish to the satisfaction of the Exchange Agent that such tax has been paid or that no such tax is applicable. From the Effective Time until surrender in accordance with the provisions of this Section 2.4, each Certificate shall represent for all purposes only the right to receive the consideration provided in Sections 2.1 and 2.2. All payments in respect of shares of Premenos Common Stock that are made in accordance with the terms hereof shall be deemed to have been made in full satisfaction of all rights pertaining to such securities. (c) In the case of any lost, mislaid, stolen or destroyed Certificate, the holder may be required, as a condition precedent to delivery to such holder of the consideration described in Sections 2.1 and 2.2, to deliver to Harbinger a bond in such reasonable sum or a reasonably satisfactory indemnity agreement as Harbinger A-12 13 may direct as indemnity against any claim that may be made against Harbinger or the Surviving Corporation with respect to the Certificate alleged to have been lost, mislaid, stolen or destroyed. (d) After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of the shares of Premenos Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for transfer, they shall be canceled and exchanged for the consideration described in Sections 2.1 and 2.2. (e) Any shares of Harbinger Common Stock or cash due former Premenos Stockholders pursuant to Sections 2.1 and 2.2 that remains unclaimed by such former Premenos Stockholder for six months after the Effective Time shall be held by Harbinger; and any former Premenos Stockholder who has not prior to those dates complied with Section 2.4(b) can thereafter look only to Harbinger for issuance of the number of shares of Harbinger Common Stock and other consideration to which such holder has become entitled pursuant to the provisions of Sections 2.1 and 2.2; except that neither Harbinger nor any other party to this Agreement shall be liable to a former Premenos Stockholder for any amount required to be paid to a public official pursuant to any applicable abandoned property, escheat or similar law. Section 2.5. Conversion Ratio and Adjustment Event. (a) The "Conversion Ratio" shall be equal to .45. (b) In the event of any change in Harbinger Common Stock or Premenos Common Stock between the date of this Agreement and the Effective Time by reason of any stock dividend, subdivision, reclassification, recapitalization, combination, exchange of shares or the like (an "Adjustment Event"), the Conversion Ratio shall be appropriately adjusted so each holder of Premenos Common Stock will receive in the Merger the amount of Harbinger Common Stock such holder would have been entitled to receive if the Effective Time had been immediately prior to such Adjustment Event. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PREMENOS With such exceptions as are set forth in a letter (the "Premenos Disclosure Letter") delivered by Premenos to Harbinger prior to the date of this Agreement, Premenos represents and warrants to Harbinger as follows: Section 3.1. Organization. Premenos and each of its subsidiaries are each a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and have all requisite corporate power and authority to own, lease and operate their respective properties and to carry on their respective businesses as now being conducted. Premenos and its subsidiaries are each qualified to transact business, and are in good standing, as a foreign corporation in each jurisdiction where the character of their activities requires such qualification, except where the failure to so qualify would not have a material adverse effect on the assets, liabilities, results of operations, financial condition, business or prospects of Premenos. Premenos has made available to Harbinger accurate and complete copies of the Certificate of Incorporation and Bylaws, as currently in effect, of Premenos, the minute books and stock records of Premenos and the same documents of each subsidiary. The Premenos Disclosure Letter contains a true and correct list of the jurisdictions in which Premenos or its subsidiaries is qualified to do business as a foreign corporation. Section 3.2. Authorization. Premenos has full corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement and to consummate the Merger and the other transactions contemplated by this Agreement. The execution and delivery of this Agreement by Premenos and the performance by Premenos of its obligations under this Agreement and the consummation of the Merger and the other transactions provided for by this Agreement have been duly and validly authorized by all necessary corporate action on the part of Premenos. The Board of Directors of Premenos has approved the execution, delivery and performance of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by Premenos and constitutes the legal, valid and binding agreement of Premenos, enforceable against it in A-13 14 accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. Section 3.3. Absence of Restrictions and Conflicts. The execution, delivery and performance of this Agreement, the consummation of the Merger and the other transactions contemplated by this Agreement and the fulfillment of and compliance with the terms and conditions of this Agreement do not and will not, with the passing of time or the giving of notice or both, violate or conflict with, constitute a breach of or default under, result in the loss of any material benefit under, or permit the acceleration of any obligation under, (i) any term or provision of the Certificate of Incorporation or Bylaws of Premenos, (ii) any Premenos Material Contract, (iii) any judgment, decree or order of any court or governmental authority or agency to which Premenos or any of its subsidiaries is a party or by which Premenos or its subsidiaries or any of their respective properties is bound, or (iv) any statute, law, regulation or rule applicable to Premenos or its subsidiaries, so as to have in the case of subsections (ii) through (iv) above, a material adverse effect on the assets, liabilities, results of operations or financial condition, of Premenos. Except for compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"), applicable state securities laws and the filing and recordation of the Certificate of Merger as required by the DGCL, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental agency or public or regulatory unit, agency, body or authority with respect to Premenos or its subsidiaries is required in connection with the execution, delivery or performance of this Agreement by Premenos or the consummation of the transactions contemplated by this Agreement by Premenos, the failure to obtain which would have a material adverse effect upon the assets, liabilities, results of operations or financial condition of Premenos. Section 3.4. Capitalization. The authorized capital stock of Premenos consists of 25,000,000 shares of common stock, $.01 par value per share and 1,000,000 shares of preferred stock, $.01 par value per share (the "Premenos Preferred Stock"). As of October 23, 1997, there were 11,784,615 shares of Premenos Common Stock issued and outstanding, 1,838,079 shares of Premenos Common Stock reserved for issuance upon exercise of outstanding stock options, 472,101 shares of Premenos Common Stock reserved for issuance under the Premenos Employee Stock Purchase Plan and no shares of Premenos Preferred Stock issued and outstanding. Each share of Premenos Common Stock outstanding as of the date of this Agreement is duly authorized, validly issued, fully paid and nonassessable and free of pre-emptive rights. Except as set forth in this Section 3.4, there are no shares of Premenos Common Stock outstanding, and there are no subscriptions, options, convertible securities, calls, puts, rights, warrants or other agreements, claims or commitments of any nature whatsoever obligating Premenos or any of its Subsidiaries to purchase, redeem, issue, transfer, deliver or sell, or cause to be purchased, redeemed, issued, transferred, delivered or sold, additional shares of the capital stock or other securities of Premenos or obligating Premenos to grant, extend or enter into any such agreement or commitment. Section 3.5. Capital Stock of Premenos Subsidiaries. The Premenos Disclosure Letter sets forth a true and complete list of all corporations, partnerships and other entities in which Premenos owns an equity interest (such corporations, partnerships and other entities being hereinafter referred to as the "Premenos Subsidiaries"), the jurisdiction in which each Premenos Subsidiary is incorporated or organized, and all shares of capital stock or other ownership interests authorized, issued and outstanding of each Premenos Subsidiary. The outstanding shares of capital stock or other equity interests of each Premenos Subsidiary have been duly authorized and are validly issued, fully paid and nonassessable. All shares of capital stock or other equity interests of each Premenos Subsidiary owned by Premenos or any of its subsidiaries are set forth in the Premenos Disclosure Letter and are owned by Premenos, either directly or indirectly, free and clear of all liens, encumbrances, equities or claims (except for applicable restrictions under the securities laws). Section 3.6. SEC Reports. Premenos has made available to Harbinger (i) Premenos's Annual Report on Form 10-K for the year ended December 31, 1996, including all exhibits and items incorporated by reference, (ii) Premenos's Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 1997, including all exhibits and items incorporated by reference, (iii) the proxy statement relating to A-14 15 Premenos's Annual Meeting of Stockholders on May 29, 1997 and (iv) all Current Reports on Form 8-K filed by Premenos with the SEC since January 1, 1997, including all exhibits and items incorporated by reference (items (i) through (iv) in this sentence being referred to collectively as the "Premenos SEC Reports"). As of their respective dates, the Premenos SEC Reports did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Since December 31, 1995, Premenos has filed all forms, reports and documents with the SEC required to be filed by it pursuant to the Securities Act and the Exchange Act and the rules and regulations promulgated under such acts, each of which complied as to form, at the time such form, document or report was filed, in all material respects with the applicable requirements of the Securities Act and the Exchange Act and the applicable rules and regulations promulgated under such acts. Section 3.7. Financial Statements. Premenos has made available to Harbinger: (i) the audited balance sheets of Premenos as of December 31, 1995 and 1996, and the related audited statements of income, changes in stockholders' equity and cash flows for the respective fiscal years then ended, including the notes to such financial statements, examined by and accompanied by the report of Coopers & Lybrand LLP ("Coopers & Lybrand"), independent public accountants; and (ii) the unaudited balance sheet of Premenos as of September 30, 1997 (the "1997 Balance Sheet") and the unaudited statements of income and cash flows for the 9-month period then ended and unaudited statement of changes in stockholders' equity for the 6-month period ended June 30, 1997. All of the foregoing financial statements are collectively referred to as the "Premenos Financial Statements." The Premenos Financial Statements have been prepared from, and are in accordance with, the books and records of Premenos and its consolidated subsidiaries and, as applicable, present fairly the consolidated financial position, consolidated results of operations, changes in stockholders' equity and consolidated cash flows of Premenos and its subsidiaries as of the date and for the periods indicated in conformity with generally accepted accounting principles, consistently applied. The Premenos Disclosure Letter sets forth a true and complete list of all loss contingencies (within the meaning of Statement of Financial Accounting Standards No. 5) of Premenos recorded during the period covered by the Premenos Financial Statements and exceeding $25,000 in the case of any single loss contingency or $50,000 in the case of all loss contingencies. Section 3.8. Absence of Certain Changes. (a) Since December 31, 1996 and except for items specifically disclosed in the Premenos SEC Reports filed subsequent to December 31, 1996, there has not been (i) any material adverse change in the assets, liabilities, results of operations, financial condition, business or prospects of Premenos, (ii) any damage, destruction, loss or casualty to property or assets of Premenos, whether or not covered by insurance, which property or assets are material to the operations or business of Premenos, (iii) any declaration, setting aside or payment of any dividend or distribution (whether in cash, stock or property) in respect of the capital stock of Premenos, any redemption or other acquisition by Premenos of any of the capital stock of Premenos or any split, combination or reclassification of shares of capital stock declared or made by Premenos or (iv) any agreement to do any of the foregoing. (b) Since December 31, 1996 and except for items specifically disclosed in the Premenos SEC Reports filed subsequent to December 31, 1996, there have not been (i) any extraordinary losses suffered, (ii) any material assets mortgaged, pledged or made subject to any lien, charge or other encumbrance, (iii) any material liability or obligation (absolute, accrued or contingent) incurred or any material bad debt, contingency or other reserve increase suffered, except, in each such case, in the ordinary course of business and consistent with past practice, (iv) any claims, liabilities or obligations (absolute, accrued or contingent) paid, discharged or satisfied, other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of claims, liabilities and obligations reflected or reserved against in the Premenos Financial Statements or incurred in the ordinary course of business and consistent with past practice, (v) any material guaranteed checks, notes or accounts receivable written off as uncollectible, except write-offs in the ordinary course of business and consistent with past practice, (vi) any write down (under Statement of Financial Accounting Standards No. 121 or otherwise) of the value of any material asset or investment on Premenos's books or records, except for depreciation and amortization taken in the ordinary course of business and consistent with past practice, (vii) any cancellation of any material debts or waiver of A-15 16 any material claims or rights of substantial value, or sale, transfer or other disposition of any material properties or assets (real, personal or mixed, tangible or intangible) of substantial value, except, in each such case, in transactions in the ordinary course of business and consistent with past practice and which in any event do not exceed $50,000 in the aggregate, (viii) any single capital expenditure or commitment in excess of $50,000 for additions to property or equipment, or aggregate capital expenditures and commitments in excess of $250,000 (on a consolidated basis) for additions to property or equipment or for capitalized research and development, (ix) any transactions entered into other than in the ordinary course of business, (x) any agreements to do any of the foregoing, or (xi) any other events, developments or conditions of any character that have had or are reasonably likely to have a material adverse effect on the assets, liabilities, results of operations, financial condition, business or prospects of Premenos. Section 3.9. Legal Proceedings. There are no suits, actions, claims, proceedings or investigations pending, or, to the best knowledge of Premenos, threatened against, relating to or involving Premenos or any of its subsidiaries (or any of their officers or directors) before any court, arbitrator or administrative or governmental body, which, if finally determined adversely, are reasonably likely, individually or in the aggregate, to have a material adverse effect on the assets, liabilities, results of operations or financial condition of Premenos. All pending suits, actions, claims, proceedings or investigations relating to or involving Premenos or its subsidiaries (or any of their officers or directors) before any court, arbitrator or administrative or governmental body are adequately provided for in the 1997 Balance Sheet if and to the extent such a provision is required by generally accepted accounting principles. Neither Premenos nor any of its subsidiaries is subject to any judgment, decree, injunction, rule or order of any court, and, to the best knowledge of Premenos, neither Premenos nor any of its subsidiaries is subject to any governmental restriction applicable to Premenos, which is reasonably likely (i) to have a material adverse effect on the assets, liabilities, results of operations or financial condition of Premenos or any of its subsidiaries or (ii) to cause a material limitation on Harbinger's ability to operate the business of Premenos or any of its subsidiaries after the Closing. Section 3.10. Compliance with Law. Premenos and each of its subsidiaries have all material authorizations, approvals, licenses and orders of and from all governmental and regulatory offices and bodies necessary to carry on their businesses as they are currently being conducted, to own or hold under lease the properties and assets they own or hold under lease and to perform all of their obligations under the agreements to which they are a party, and each has been and is in compliance with all applicable laws, regulations and administrative orders of any country, state or municipality or of any subdivision of any thereof to which its business and its employment of labor or its use or occupancy of properties or any part thereof are subject, the failure to obtain or the violation of which would have a material adverse effect upon the assets, liabilities, results of operations or financial condition of Premenos. Section 3.11. Material Contracts. The Premenos Disclosure Letter contains a correct and complete list of the following (the "Premenos Material Contracts"): (a) all bonds, debentures, notes, loans, mortgages, indentures or guarantees to which Premenos or its subsidiaries is a party or by which any of its properties or assets (real, personal or mixed, tangible or intangible) is bound; (b) all leases to which Premenos or its subsidiaries is a party or by which any of its properties or assets (real, personal or mixed, tangible or intangible) is bound involving an annual rental payment in excess of $25,000 individually; (c) all credit or loan commitments to Premenos or its subsidiaries which are outstanding, together with a brief description of such commitments and the name of each financial institution granting the same; (d) all contracts or agreements which limit or restrict Premenos, its subsidiaries or any of the Premenos Executives from engaging in any business in any jurisdiction and all contracts or agreements that limit or restrict others from competing with Premenos or its subsidiaries in any jurisdiction; (e) all contracts or agreements requiring Premenos or its subsidiaries to register its capital stock or securities under federal or state securities law; and A-16 17 (f) all existing contracts and commitments (other than those described in subparagraphs (a), (b), (c), (d) or (e) of this Section 3.11 and the Premenos Benefit Plans) to which Premenos or any of its subsidiaries is a party or by which its properties or assets may be bound involving an annual commitment or annual payment by any party to such contract or commitment of more than $50,000 individually. True and complete copies of all Premenos Material Contracts, including all amendments, have been made available to Harbinger. The Premenos Material Contracts are valid and enforceable in accordance with their respective terms with respect to Premenos and valid and, to the best knowledge of Premenos, enforceable in accordance with their respective terms with respect to any other party to a Premenos Material Contract, in each case to the extent material to the business and operations of Premenos and subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. To the best knowledge of Premenos and except for events or occurrences, the consequences of which, individually or in the aggregate, would not have a material adverse effect on the assets, liabilities, results of operations or financial condition of Premenos, there is not under any of the Premenos Material Contracts any existing breach, default or event of default by Premenos or its subsidiaries or event that with notice or lapse of time or both would constitute a breach, default or event of default by Premenos or its subsidiaries, nor has Premenos received notice of, or made a claim with respect to, any breach or default by any other party to a Premenos Material Contract. Section 3.12. Tax Returns; Taxes. Premenos and each of its subsidiaries have duly filed all federal, state, local and foreign tax returns required to be filed by them and have duly paid or made adequate provision for the payment of all taxes which are due and payable pursuant to such returns or pursuant to any assessment with respect to taxes in such jurisdictions, whether or not in connection with such returns. The liability for taxes reflected in the 1997 Balance Sheet is sufficient for the payment of all unpaid taxes, whether or not disputed, that are accrued or applicable for the period ended September 30, 1997 and for all years and periods ended prior to that date. All deficiencies asserted as a result of any examinations by the Internal Revenue Service or any other taxing authority have been paid, fully settled or adequately provided for in the 1997 Balance Sheet. There are no pending claims asserted for taxes of Premenos or its subsidiaries or outstanding agreements or waivers extending the statutory period of limitation applicable to any tax return of Premenos or its subsidiaries for any period. Each of Premenos and its subsidiaries has made all estimated income tax deposits and all other required tax payments or deposits and has complied for all prior periods in all material respects with the tax withholding provisions of all applicable federal, state, local, foreign and other laws. Premenos has made available to Harbinger true, complete and correct copies of its federal income tax returns for the last three taxable years and made available all other tax returns requested by Harbinger. Section 3.13. Employee Benefit Plans. (a) Definition of Benefit Plans. For purposes of this Section 3.13, the term "Premenos Benefit Plan" means any plan, program, arrangement, fund, policy, practice or contract which, through which or under which Premenos or any Premenos ERISA Affiliate provides or has an obligation to provide benefits or compensation to or on behalf of employees or former employees of Premenos or any Premenos ERISA Affiliate, whether formal or informal, whether or not written, including but not limited to the following: (i) Arrangements -- any bonus, incentive compensation, stock option, deferred compensation, commission, severance pay, golden parachute or other compensation plan or rabbi trust; (ii) ERISA Plans -- any "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), including, but not limited to, any multiemployer plan (as defined in Section 3(37) and Section 4001(a) (3) of ERISA), defined benefit plan, profit sharing plan, money purchase pension plan, 401(k) plan, savings or thrift plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits; and (iii) Other Employee Fringe Benefits -- any stock purchase, vacation, scholarship, sick days, day care, prepaid legal services, dependent care or other fringe benefits plans, programs, arrangements, contracts or practices. A-17 18 (b) Premenos ERISA Affiliate. For purposes of this Section 3.13, the term "Premenos ERISA Affiliate" means each trade or business (whether or not incorporated) which together with Premenos is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code. (c) Identification of Benefits Plans. Except as set forth in the Premenos Disclosure Letter and except for Premenos Benefit Plans which have been terminated and with respect to which neither Premenos nor any Premenos ERISA Affiliate has any financial, administrative or other liability, obligation or responsibility, Premenos does not maintain, nor has it at any time established or maintained, nor has it at any time been obligated to make, or otherwise made, contributions to or under or otherwise participated in any Premenos Benefit Plan. (d) Compliance With All Statutes, Orders and Rules. Premenos and each Premenos ERISA Affiliate is in compliance with the requirements prescribed by and all statutes, orders and governmental rules and regulations applicable to Premenos Benefit Plans and all reports and disclosures relating to Premenos Benefit Plans required to be filed with or furnished to any governmental entity, participants or beneficiaries prior to the Closing Date have been or will be properly completed and filed or furnished in a timely manner and in accordance with applicable laws. Each Premenos Benefit Plan has been administered according to its terms (except for those terms which are inconsistent with the changes required by statutes, regulations, and rulings for which changes are not yet required to be made, in which case the plan has been administered in accordance with the provisions of those statutes, regulations and rulings) and applicable law. (e) MEPPA Liability/Post-Retirement Medical Benefits. Neither Premenos nor any Premenos ERISA Affiliate maintains, or has at anytime established or maintained, or has at any time been obligated to make, or made, contributions to or under any multiemployer plan (as defined in Section 3(37) and Section 4001(a)(3) of ERISA). Premenos does not maintain, nor has at any time established or maintained, nor has at any time been obligated to make, or made, contributions to or under any plan which provides post-retirement medical or health benefits with respect to former employees of Premenos. There is no lien upon any property of Premenos or any Premenos ERISA Affiliate outstanding pursuant to Section 412(n) of the Code in favor of any Premenos Benefit Plan. No assets of Premenos or any Premenos ERISA Affiliate have been provided as security for any Premenos Benefit Plan pursuant to Section 401(a) (29) of the Code. (f) Documentation. Premenos has made available to Harbinger a true and complete copy of the following documents, if applicable, with respect to each Premenos Benefit Plan identified in Premenos Disclosure Letter: (1) all documents, including any insurance contracts and trust agreements, setting forth the terms of Premenos Benefit Plan, or if there are no such documents evidencing Premenos Benefit Plan, a full (in all material respects) description of Premenos Benefit Plan, (2) any required ERISA summary plan description and any other summary of plan provisions provided to participants or beneficiaries for each such Premenos Benefit Plan, (3) any required annual reports filed for the most recent three plan years and most recent financial statements or periodic accounting or related plan assets with respect to each Premenos Benefit Plan, (4) each favorable determination letter, opinion or ruling from the Internal Revenue Service ("IRS") for each Premenos Benefit Plan, the assets of which are held in trust, to the effect that such trust is exempt from federal income tax, including any outstanding request for a determination letter and (5) each opinion or ruling from the Department of Labor or the Pension Benefit Guaranty Corporation ("PBGC") with respect to any such Premenos Benefit Plan. (g) Qualified Status. Each Premenos Benefit Plan identified in the Premenos Disclosure Letter that is funded through a trust or insurance contract has at all times satisfied in all material respects, by its terms and in its operation, all applicable requirements for an exemption from federal income taxation under Section 501(a) of the Code. Except for the Premenos 401(k) Savings & Retirement Plan (the "Premenos 401(k) Plan") neither Premenos nor any Premenos ERISA Affiliate maintains or previously maintained a Premenos Benefit Plan which meets or was intended to meet the requirements of Section 401(a) of the Code. Any determination letter issued by the IRS to the effect that the Premenos 401(k) Plan qualifies under Section 401(a) of the Code and that the related trust is exempt from taxation under Section 501(a) of the Code remains in effect and has not been revoked. A-18 19 The Premenos 401(k) Plan has been tested for compliance with, and has satisfied the requirements of, Section 401(k)(3), 401(m)(2) and 415 of the Code for each plan year ending prior to the Closing Date. (h) Legal Actions. There are no actions, audits, suits or claims known to Premenos which are pending or threatened against any Premenos Benefit Plan, any fiduciary of any of the Premenos Benefit Plans with respect to the Premenos Benefit Plans or against the assets of any of the Premenos Benefit Plans, except claims for benefits made in the ordinary course of the operation of such plans. (i) Funding. Premenos and each Premenos ERISA Affiliate has made fully and timely payment of all amounts required to be contributed under the terms of each Premenos Benefit Plan and applicable law or required to be paid as expenses under such Premenos Benefit Plan and no excise taxes are assessable as a result of any nondeductible or other contributions made or not made to a Premenos Benefit Plan. The assets of all Premenos Benefit Plans which are required under applicable laws to be held in trust are in fact held in trust, and the assets of each such Premenos Benefit Plan equal or exceed the liabilities of each such plan. The liabilities of each other Premenos Benefit Plan are properly and accurately reported on the financial statements and records of Premenos. The assets of each Premenos Benefit Plan are reported at their fair market value on the books and records of each plan. (ii) Liabilities. Neither Premenos nor any Premenos ERISA Affiliate is subject to any material liability, tax or penalty whatsoever to any person whomsoever as a result of Premenos's or any Premenos ERISA Affiliate's engaging in a breach of fiduciary duty or a prohibited transaction under ERISA or the Code, and Premenos has no knowledge of any circumstances which reasonably might result in any such material liability, tax or penalty as a result of any breach of fiduciary duty under ERISA or in any duty to indemnify any other person for any such liability. (i) Excess Parachute Payments. No payment required to be made to any employee associated with Premenos as a result of the transactions contemplated hereby under any contract or otherwise will, if made, constitute an "excess parachute payment" within the meaning of Section 280G of the Code. (j) COBRA. Premenos and each Premenos ERISA Affiliate have complied in all material respects with the continuation coverage requirements of Section 4980B of the Code and ERISA Sections 601 through 608. (k) No Acceleration of Liability Under Benefit Plans. The consummation of the transactions contemplated hereby will not accelerate or increase any liability under any Premenos Benefit Plan because of an acceleration or increase of any of the rights or benefits to which employees of Premenos or any Premenos ERISA Affiliate may be entitled thereunder. (l) Leased Employees. Premenos has made no representations or warranties (whether written or oral, express or implied) contractually or otherwise to any client or customer of Premenos that Premenos employees rendering services to such client or customer cannot be treated as "leased employees" (within the meaning of Section 414(n) of the Code) of such client or customer or that such employees would not be required to participate under any pension benefit plan (within the meaning of Section 3(2) of ERISA) (a "Pension Benefit Plan") of such client or customer of Premenos. (m) Defined Benefit Plans/Money Purchase Plans. With respect to any Premenos Benefit Plan, no termination liability to the PBGC has been or is expected to be incurred or would be incurred if such Premenos Benefit Plan were terminated on the Closing Date and the current present value of all projected benefit liabilities under each of the Premenos Benefit Plans subject to Title IV of ERISA would not, as of the Closing Date, exceed the then current value of the assets of such Premenos Benefit Plan. No Premenos Benefit Plan which is subject to Section 302 of ERISA or Section 412 of the Code has suffered any accumulated funding deficiency within the meaning of Section 302 of ERISA and Section 412 of the Code. Neither Premenos nor any Premenos ERISA Affiliate has any outstanding liability under Section 4971 of the Code. As of the Closing Date, all required premium payments for Premenos Benefit Plans have been made, when due, to the PBGC, and all required premium payments for the Premenos Benefit Plans for plan years commencing in the plan year which would include the Closing Date have been made to the PBGC. No event or condition exists with respect to any Premenos Benefit Plan which could be deemed a "reportable event" as A-19 20 defined in Section 4043 of ERISA, with respect to which the 30-day notice requirement has not been waived and which could result in a liability to Harbinger, and no condition exists which would subject Harbinger to a fine under Section 4071 of ERISA. There is no lien upon any property of Premenos or any Premenos ERISA Affiliate outstanding pursuant to Section 4068 of ERISA in favor of the PBGC. Section 3.14. Labor Relations. Each of Premenos and its subsidiaries is in compliance in all material respects with all federal and state laws respecting employment and employment practices, terms and conditions of employment, wages and hours, and is not engaged in any unfair labor or unlawful employment practice. There is no unlawful employment practice discrimination charge involving Premenos or its subsidiaries pending before the Equal Employment Opportunity Commission ("EEOC"), EEOC recognized state "referral agency" or any other governmental agency. There is no unfair labor practice or similar charge or complaint against Premenos or its subsidiaries pending before the National Labor Relations Board ("NLRB") or any other governmental agency. There is no labor strike, dispute, slowdown or stoppage actually pending or, to the best knowledge of the executive officers of Premenos, threatened against or involving or affecting Premenos or its subsidiaries and no NLRB or other labor union representation question exists respecting any employees of Premenos or its subsidiaries. No grievance or arbitration proceeding is pending against Premenos or its subsidiaries and no written claim therefor exists. There is no collective bargaining agreement that is binding on Premenos or its subsidiaries. Section 3.15. Insurance. Premenos has provided to Harbinger a true and complete list of its current insurance coverages for Premenos and its subsidiaries, including names of carriers, amounts of coverage and premiums therefor. Each of Premenos and its subsidiaries believes that such corporation has been and is insured with respect to its properties and the conduct of its business in such amounts and against such risks as are reasonable in relation to its business and will use its reasonable efforts to maintain such insurance at least through the Effective Time. Premenos has made available to Harbinger true and complete copies of all insurance policies covering Premenos or its subsidiaries, their properties, assets, employees or operations. Section 3.16. Title to Properties and Related Matters. (a) Premenos and its subsidiaries have good and valid title to or valid leasehold interests in its properties reflected in the 1997 Balance Sheet or acquired after the date of the 1997 Balance Sheet (other than properties sold or otherwise disposed of in the ordinary course of business), and all of such properties are held free and clear of all title defects, liens, encumbrances and restrictions, except, with respect to all such properties, (a) mortgages and liens securing debt reflected as liabilities on the 1997 Balance Sheet and (b) (i) liens for current taxes and assessments not in default, (ii) mechanics', carriers', workmen's, repairmen's, statutory or common law liens either not delinquent or being contested in good faith, and (iii) liens, mortgages, encumbrances, covenants, rights of way, building or use restrictions, easements, exceptions, variances, reservations and other matters or limitations of any kind, if any, which either individually or in the aggregate do not have a material adverse effect on Premenos's or any of its subsidiaries' use of the property affected. The provisions of this Section 3.16 do not apply to intellectual property rights. (b) The Premenos Disclosure Letter sets forth a true and complete list of all leases and agreements of Premenos or its subsidiaries granting possession of or rights to real or personal property and involving an annual commitment or annual payment of more than $10,000 individually in the case of any real property and $25,000 individually in the case of any personal property (the "Scheduled Leases"). All such Scheduled Leases are in full force and effect and constitute the legal, valid, binding and enforceable obligations of Premenos or its subsidiaries, and, to the best knowledge of Premenos, are legal, valid, binding and enforceable in accordance with their respective terms with respect to each other party to a Scheduled Lease, in each case to the extent material to the business and operations of Premenos taken as a whole and subject in each case to applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. Premenos or one of its subsidiaries has physical possession of all real property, equipment and other assets which are covered by Scheduled Leases. Except for events and occurrences, the consequences of which, individually or in the aggregate, would not have a material adverse effect on the assets, liabilities, results of operations or financial position of Premenos, there are no existing defaults of Premenos or its subsidiaries with respect to A-20 21 such Scheduled Leases or, to the best knowledge of Premenos, any of the other parties to such Scheduled Leases (or events or conditions which, with notice or lapse of time, or both, would constitute a default). Section 3.17. Environmental Matters. To the best knowledge of Premenos, Premenos is in compliance in all material respects with all statutes, regulations and ordinances relating to the protection of human health and the environment including, without limitation, the Clean Water Act, 33 U.S.C. sec. 1251 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. sec. 6901 et seq., the Clean Air Act, 42 U.S.C. sec. 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et seq., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. sec. 11001 et seq., the regulations developed pursuant to these statutes and the corresponding state and local statutes, ordinances and regulations. There has been no release by Premenos, its subsidiaries or, to the best knowledge of Premenos, by any other person of a hazardous substance as that term is defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. sec. 9601(14), into the environment at any property owned or leased by Premenos or its subsidiaries (the "Premises") including, without limitation, any such release in the soil or groundwater underlying the Premises the liability for which could have a material adverse effect on the assets, liabilities, results of operations or financial position of Premenos and its subsidiaries. To the best knowledge of Premenos, there is no asbestos, polychlorinated biphenyls or underground storage tanks located on the Premises and there have been no releases of asbestos, polychlorinated biphenyls or materials stored in underground storage tanks, including, without limitation, petroleum or petroleum-based materials. Neither Premenos nor any of its subsidiaries has received notice of any violation of any environmental statute or regulation nor has it been advised of any claim or liability pursuant to any environmental statute or regulation brought by any governmental agency or private party. Section 3.18. Patents, Trademarks, Trade Names. The Premenos Disclosure Letter sets forth a true and complete list of (i) all patents, trademarks, trade names (including all U.S. federal and state registrations and foreign registrations and applications pertaining thereto) and registered copyrights owned by Premenos or its subsidiaries (collectively, the "Premenos Proprietary Intellectual Property") and (ii) all patents, trademarks, trade names, copyrights, technology and processes used by Premenos or its subsidiaries in its business which are material to its business and are used pursuant to a license or other right granted by a third party (collectively, the "Premenos Licensed Intellectual Property", and together with the Premenos Proprietary Intellectual Property referred to as "Premenos Intellectual Property"). A true and complete list of all such licenses with respect to Premenos Licensed Intellectual Property is set forth in the Premenos Disclosure Letter. Neither Premenos nor any of its subsidiaries has granted any right, license or other interest in the Premenos Proprietary Intellectual Property to any third party, except for enduser licenses granted by Premenos to its customers in the ordinary course. Each of the federal, state and foreign registrations pertaining to the Premenos Proprietary Intellectual Property is valid and in full force and effect. All required filings in association with such registrations have been properly made and all required fees have been paid. Premenos and its subsidiaries own, or have the right to use pursuant to valid and effective agreements, all Premenos Intellectual Property, free and clear of any lien, claim or encumbrance, and the consummation of the transactions contemplated by this Agreement will not alter or impair any such rights. No claims are pending against Premenos or any of its subsidiaries by any person with respect to the use of any Premenos Intellectual Property or challenging or questioning the validity or effectiveness of any license or agreement relating to the same, and the current use by Premenos and its subsidiaries of the Premenos Intellectual Property does not, to the best knowledge of Premenos, infringe on the rights of any third party. The conduct by Premenos and its subsidiaries of their respective business, including the provision of services to customers, as currently conducted and as proposed to be conducted by Premenos, does not and will not conflict with or infringe upon any patent, copyright, trade secret, trademark or other intellectual property right of any third party, and Premenos has not received notice of any such alleged infringement. The Premenos Disclosure Letter sets forth a list of all jurisdictions in which Premenos or any of its subsidiaries is operating under a trade name, and each jurisdiction in which any such trade name is registered. Section 3.19. Licensed Software. (a) The Premenos Disclosure Letter sets forth a true and complete list of: (i) all software owned by Premenos and each of its subsidiaries and used in connection with the business of Premenos and its subsidiaries or licensed to third parties (the "Premenos Proprietary Software"); A-21 22 and (ii) all software (other than the Premenos Proprietary Software) used in connection with the business of Premenos and its subsidiaries (the "Premenos Licensed Software" and together with the Premenos Proprietary Software, the "Premenos Software"). Premenos's proprietary software products may incorporate Premenos Proprietary Software (that is, software owned by Premenos and identified as such in the Premenos Disclosure Letter) and code software that is owned by third parties and licensed to Premenos (all of such third party software is included in the Premenos Licensed Software and identified as such in the Premenos Disclosure Letter). The Premenos Proprietary Software consists of: (i) source and object code embodied in magnetic media; and (ii) all development and procedural tools necessary to maintain the Premenos Proprietary Software, including licenses to use compilers, assemblers, libraries and other aids. Premenos and each of its subsidiaries employ individuals who are qualified to maintain the Premenos Software and the related computer hardware used by such corporation in its operations (the "Premenos Hardware"). (b) Premenos and each of its subsidiaries have all right, title and interest in and to all intellectual property rights in the Premenos Proprietary Software (other than any defects in title which are not, individually or in the aggregate, material), and subject to the rights of end-user licensees under licenses granted by Premenos to its customers in the ordinary course of business. The Premenos Proprietary Software is free and clear of all liens, claims and encumbrances (other than any liens, claims or encumbrances which are not, individually or in the aggregate, material). The use of the Premenos Licensed Software and the use and distribution of the Premenos Proprietary Software does not breach any material terms of any material contract between Premenos and any of its subsidiaries and any third party. The Premenos Disclosure Letter sets forth a true and complete list of all license agreements in favor of Premenos or any of its subsidiaries relating to the Premenos Licensed Software (the "Premenos License Agreements"). To the best knowledge of Premenos, Premenos and each of its subsidiaries have been granted under the Premenos License Agreements valid and subsisting license rights with respect to all software comprising the Premenos Licensed Software. Premenos and each of its subsidiaries are in compliance in all material respects with each of the terms and conditions of each of the Premenos License Agreements. In the case of any commercially available "shrink-wrap" software programs (such as Lotus 1-2-3), Premenos and its subsidiaries have not made and are not using any unauthorized copies of any such software programs and none of the employees, agents or representatives of Premenos or its subsidiaries have made or are using any such unauthorized copies. (c) To the best knowledge of Premenos, the Premenos Proprietary Software and the Premenos Licensed Software does not infringe any patent, copyright, or trade secret or any other intellectual property right of any third party. The source code for the Premenos Proprietary Software has been maintained in confidence. (d) The Premenos Proprietary Software was developed by Premenos entirely for its own account, and the Premenos Proprietary Software was: (i) developed by Premenos's employees working within the scope of their employment at the time of such development; (ii) developed by agents, consultants, contractors or others who have executed appropriate instruments of assignment in favor of Premenos as assignee that have conveyed to Premenos ownership of all of their intellectual property rights in the Premenos Proprietary Software; or (iii) acquired by Premenos in connection with acquisitions in which Premenos obtained appropriate representations and warranties from the transferring party relating to the title to such Premenos Proprietary Software. Neither Premenos nor any of its subsidiaries has received notice from any third party claiming any right, title or interest in the Premenos Proprietary Software. (e) There are no agreements or arrangements in effect with respect to the marketing, distribution, licensing or promotion of the Premenos Proprietary Software by any independent sales person, distributor, sublicensee or other remarketer or sales organization. (f) Neither Premenos nor any of its subsidiaries has granted any rights or licenses in or to the Premenos Software to any third party, except for end-user license agreements granted by Premenos to its customers in the ordinary course of business. (g) The Premenos Software and the Premenos Hardware are adequate in all material respects with the other assets of Premenos and its subsidiaries to run the business of Premenos and its subsidiaries in the same manner as such business has operated since September 30, 1996. The Premenos Disclosure Letter contains a summary description of any problems experienced by Premenos or its subsidiaries in the past twelve months A-22 23 with respect to the Premenos Software or Premenos Hardware and the provision of services to Premenos clients which resulted, or reasonably could be expected to result, in a material disruption of the provision of services by Premenos or its subsidiaries to clients generally for a period equal to or exceeding five days. (h) All Premenos Software is year 2000 compliant (that is, (i) the Premenos Software is capable of correctly processing, providing and receiving data within and between the 20th and 21st centuries (including accounting for all required leap year calculations) and (ii) all date fields in the Premenos Software used for (4) digit year fields). Section 3.20. Trade Secrets. To the best knowledge of Premenos, no third party has claimed that any officer, director or former or present employee of Premenos or any of its subsidiaries has, in respect of his or its activities on behalf of Premenos or any of its subsidiaries to date, violated any of the terms or conditions of his or her employment contract with such third party, or disclosed or utilized any trade secrets or proprietary information or documentation of such third party, or interfered in the employment relationship between such third party and any of his or her or its employees nor has any such violation, disclosure or utilization occurred. Neither Premenos or any of its subsidiaries nor, to the best knowledge of Premenos, any of their officers, directors or employees have wrongfully utilized any trade secrets or any information or documentation proprietary to any other person or entity, including, but not limited to, confidential business information, and neither Premenos or its subsidiaries nor, to the best knowledge of Premenos, any of its officers, directors or employees has violated any obligations of confidentiality with any third party in connection with the development, manufacture and sale of any products or services of Premenos or any of its subsidiaries. Section 3.21. Proxy Statement and Registration Statement. The information with respect to Premenos, its officers, directors and affiliates in the definitive proxy statement to be furnished to the stockholders of Premenos and Harbinger (the "Proxy Statement") that will form a part of the Registration Statement on Form S-4 relating to the shares of Harbinger Common Stock to be issued in the Merger (the "Registration Statement") or in the Registration Statement will not, in the case of the Proxy Statement, on the date the Proxy Statement is first mailed to stockholders of Premenos or on the date of the stockholders meetings referred to in Section 5.5, or, in the case of the Registration Statement, at the time it becomes effective and at the Effective Time, as such Proxy Statement or Registration Statement is then amended or supplemented, contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Section 3.22. Pooling. Coopers & Lybrand has advised Premenos that based upon inquiries and their examination of the financial statements of Premenos they believe that the criteria for pooling accounting treatment relative to Premenos has been satisfied. Section 3.23. Transactions with Affiliates. No stockholder, officer or director of Premenos or its subsidiaries, or any person with whom any such stockholder, officer or director has any direct or indirect relation by blood, marriage or adoption, or any entity in which any such person, owns any beneficial interest (other than a publicly held corporation whose stock is traded on a national securities exchange or in the over-the-counter market and less than 1% of the stock of which is beneficially owned by all such persons) has any interest in: (i) any contract, arrangement or understanding with, or relating to, the business or operations of Premenos or its subsidiaries; (ii) any loan, arrangement, understanding, agreement or contract for or relating to indebtedness of Premenos or its subsidiaries; or (iii) any property (real, personal or mixed), tangible or intangible, used or currently intended to be used in, the business or operations of Premenos or its subsidiaries. Section 3.24. Brokers, Finders and Investment Bankers. Neither Premenos nor any of its officers, directors or employees has employed any broker, finder or investment banker or incurred any liability for any investment banking fees, financial advisory fees, brokerage fees or finders' fees in connection with the transactions contemplated by this Agreement, other than Premenos employing Hambrecht & Quist LLC and The Great Circle Group LLC, the fees and expenses of which will be paid by Premenos. Section 3.25. Disclosure. No representation, warranty or covenant made by Premenos in this Agreement, the Premenos Disclosure Letter or the Exhibits attached to this Agreement contains an untrue A-23 24 statement of a material fact or omits to state a material fact required to be stated herein or therein or necessary to make the statements contained herein or therein not misleading. Section 3.26. Opinion of Financial Advisor. The financial advisor of Premenos, Hambrecht & Quist LLC, has delivered to Premenos an opinion dated the date of this Agreement to the effect that the consideration to be received by the holders of Premenos Common Stock in the Merger is fair to Premenos from a financial point of view. Section 3.27. No Existing Discussions. As of the date hereof, Premenos is not engaged, directly or indirectly, in any negotiations or discussions with any other party with respect to a Competing Offer (as defined in Section 5.8). ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF HARBINGER With such exceptions as are set forth in a letter (the "Harbinger Disclosure Letter") delivered by Harbinger to Premenos prior to the execution of this Agreement, Harbinger represents and warrants to Premenos as follows: Section 4.1. Organization. Each of Harbinger and its two material operating subsidiaries identified in the Harbinger Disclosure Letter (the "Harbinger Subsidiaries") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of Harbinger and the Harbinger Subsidiaries is duly qualified to transact business, and is in good standing, as a foreign corporation in each jurisdiction where the character of its activities requires such qualification, except where the failure to so qualify would not have a material adverse effect on the assets, liabilities, results of operations or financial condition of Harbinger and the Harbinger Subsidiaries taken as a whole. Harbinger has delivered to Premenos accurate and complete copies of the Articles or Certificate of Incorporation and Bylaws, as currently in effect, of Harbinger and the Harbinger Subsidiaries, and has made available to Premenos the minute books and stock records of Harbinger and the Harbinger Subsidiaries. The Harbinger Disclosure Letter contains a true and correct list of all of the jurisdictions in which each of Harbinger or the Harbinger Subsidiaries is qualified to do business as a foreign corporation. Section 4.2. Authorization. Each of Harbinger and HarbingerSub has full corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement and to consummate the Merger and the other transactions contemplated by this Agreement. The execution and delivery of this Agreement by Harbinger and HarbingerSub, the performance by each of Harbinger and HarbingerSub of its respective obligations under this Agreement and the consummation of the Merger and the other transactions provided for in this Agreement have been duly and validly authorized by all necessary corporate action on the part of Harbinger and HarbingerSub. The Boards of Directors of Harbinger and HarbingerSub have approved the execution, delivery and performance of this Agreement and the consummation of the Merger and the other transactions provided for in this Agreement. This Agreement has been duly executed and delivered by each of Harbinger and HarbingerSub and constitutes the valid and binding agreement of each of Harbinger and HarbingerSub, enforceable against each of Harbinger and HarbingerSub in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. Section 4.3. Absence of Restrictions and Conflicts. The execution, delivery and performance of this Agreement, the consummation of the Merger and the other transactions contemplated by this Agreement, and the fulfillment of and compliance with the terms and conditions of this Agreement do not violate or conflict with, constitute a breach of or default under, result in the loss of any material benefit under, or permit the acceleration of any obligation under, (i) any term or provision of the Articles or Certificate of Incorporation or Bylaws of Harbinger or the Harbinger Subsidiaries, (ii) any material Harbinger contract, (iii) any judgment, decree or order of any court or governmental authority or agency to which Harbinger or any of the Harbinger A-24 25 Subsidiaries is a party or by which Harbinger, the Harbinger Subsidiaries or any of their respective properties is bound, or (iv) any statute, law, regulation or rule applicable to Harbinger, the Harbinger Subsidiaries, so as to have, in the case of subsections (ii) through (iv) above, a material adverse effect on the assets, liabilities, results of operations or financial condition of Harbinger and the Harbinger Subsidiaries taken as a whole. Except for compliance with the applicable requirements of the HSR Act, the Securities Act, the Exchange Act, applicable Canadian law, applicable state securities laws and filing and recordation of the Certificate of Merger as required by the DGCL no consent, approval, order or authorization of, or registration, declaration or filing with, any government agency or public or regulatory unit, agency, body or authority with respect to Harbinger and the Harbinger Subsidiaries is required in connection with the execution, delivery or performance of this Agreement by Harbinger or HarbingerSub or the consummation of the transactions contemplated by this Agreement by Harbinger or HarbingerSub , the failure to obtain which would have a material adverse effect upon the assets, liabilities, results of operations or financial condition of Harbinger and the Harbinger Subsidiaries taken as a whole. Section 4.4. Capitalization. The authorized capital stock of Harbinger consists of (i) 100,000,000 shares of common stock, $.0001 par value per share, (ii) 20,000,000 shares of preferred stock, $.0001 par value per share ("Harbinger Preferred Stock"), 4,000,000 shares of which have been designated Zero Coupon Preferred Stock, (iii) 395,000 shares of Preferred Stock, Series B, $10.00 par value per share (the "Series B Preferred Stock"), and (iv) 250,000 shares of Preferred Stock, Series C, par value $10.00 per share (the "Series C Preferred Stock" and, together with Harbinger Common Stock, Harbinger Preferred Stock and Series B Preferred Stock "Harbinger Capital Stock"). At September 30, 1997, there were 21,500,070 shares of Harbinger Common Stock issued and outstanding, 4,000,000 shares of Zero Coupon Preferred Stock issued and outstanding, no shares of Series B preferred stock issued and outstanding and no shares of Series C Preferred Stock issued and outstanding. All shares of Harbinger Capital Stock outstanding as of the date hereof are duly authorized, validly issued, fully paid, nonassessable and free of pre-emptive rights. The shares of Harbinger Common Stock to be issued in the Merger will be validly issued, fully paid, nonassessable and free of pre-emptive rights. Except as set forth in this Section 4.4, there are no shares of capital stock of Harbinger outstanding, and there are no subscriptions, options, convertible securities, calls, rights, warrants or other agreements, claims or commitments of any nature whatsoever obligating Harbinger or the Harbinger Subsidiaries to issue, transfer, deliver or sell, or cause to be issued, transferred, delivered or sold, additional shares of the capital stock or obligating Harbinger or the Harbinger Subsidiaries to grant, extend or enter into any such agreement or commitment. Section 4.5. Capital Stock of Harbinger Subsidiaries. The Harbinger Disclosure Letter sets forth a true and complete list of the Harbinger Subsidiaries, the jurisdiction in which each Harbinger Subsidiary is incorporated or organized, and all shares of capital stock or other ownership interests authorized, issued and outstanding of each Harbinger Subsidiary. The outstanding shares of capital stock or other equity interests of each Harbinger Subsidiary have been duly authorized and are validly issued, fully paid and nonassessable. All shares of capital stock or other equity interests of each Harbinger Subsidiary owned by Harbinger or the Harbinger Subsidiaries are owned by Harbinger, either directly or indirectly, free and clear of all liens, encumbrances, equities or claims. Section 4.6. SEC Reports. Harbinger has made available to Premenos (i) Harbinger's Annual Report on Form 10-K for the year ended December 31, 1996, including all exhibits and items incorporated by reference, (ii) Harbinger's Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 1997, including all exhibits and items incorporated by reference, (iii) the proxy statement relating to Harbinger's Annual Meeting of Shareholders held on April 25, 1997 and (iv) all Current Reports on Form 8-K filed by Harbinger with the SEC since January 1, 1997, including all exhibits and items incorporated by reference (items (i) through (iv) in this sentence being referred to collectively as the "Harbinger SEC Reports"). As of their respective dates, the Harbinger SEC Reports did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Since December 31, 1995, Harbinger has filed all forms, reports and documents with the SEC required to be filed by it pursuant to the Securities Act and the Exchange Act and the rules and regulations promulgated A-25 26 under such acts, each of which complied as to form, at the time such form, document or report was filed, in all material respects with the applicable requirements of the Securities Act and the Exchange Act and the applicable rules and regulations promulgated under such acts. Section 4.7. Financial Statements. Harbinger has delivered to Premenos (i) the audited consolidated balance sheets of Harbinger and its subsidiaries as of December 31, 1996 and its audited consolidated statements of operations, changes in shareholders' equity and cash flows for the fiscal years then ended, including the notes thereto, examined by and accompanied by the report of KPMG Peat Marwick LLP ("KPMG Peat Marwick"), independent public accountants and (ii) the unaudited consolidated balance sheet of Harbinger and its subsidiaries as of September 30, 1997, (the "Harbinger Balance Sheet") and its unaudited consolidated statements of operations, stockholders' equity and cash flows for the nine-month period then ended (all of the financial statements referred to in this Section 4.7 are collectively referred to as the "Harbinger Financial Statements"). The Harbinger Financial Statements have been prepared from, and are in accordance with, the books and records of Harbinger and its consolidated subsidiaries and, as applicable, present fairly the consolidated financial position, consolidated results of operations, changes in stockholders' equity and consolidated cash flows of Harbinger and its consolidated subsidiaries as of the dates and for the periods indicated, in each case in conformity with generally accepted accounting principles, consistently applied. The Harbinger Disclosure Letter sets forth a true and complete list of all loss contingencies (within the meaning of Statement of Financial Accounting Standards No. 5) of Harbinger recorded during the period covered by the Harbinger Financial Statements and exceeding $100,000 in the case of any single loss contingency or $250,000 in the case of all loss contingencies. Section 4.8. Absence of Certain Changes. (a) Since December 31, 1996 and except for items specifically disclosed in the Harbinger SEC Reports filed subsequent to December 31, 1996, there has not been (i) any material adverse change in the assets, liabilities, results of operations, financial condition or, to the best knowledge of Harbinger, business or prospects of Harbinger and the Harbinger Subsidiaries taken as a whole, (ii) any damage, destruction, loss or casualty to property or assets of Harbinger or the Harbinger Subsidiaries, whether or not covered by insurance, which property or assets are material to the operations or business of Harbinger and the Harbinger Subsidiaries taken as a whole, (iii) any declaration, setting aside or payment of any dividend or distribution (whether in cash, stock or property) in respect of the capital stock of Harbinger or any redemption or other acquisition of any of the capital stock of Harbinger or the Harbinger Subsidiaries (except for the acquisition of Harbinger Common Stock in payment of the purchase price and related taxes upon the exercise of stock options) or any split, combination or reclassification of shares of capital stock declared or made by Harbinger, or (iv) any agreement to do any of the foregoing. (b) Since December 31, 1996 and except for items specifically disclosed in the Harbinger SEC Reports filed subsequent to December 31, 1996, there have not been (i) any extraordinary losses suffered, (ii) any material assets mortgaged, pledged or made subject to any lien, charge or other encumbrance, (iii) any material liability or obligation (absolute, accrued or contingent) incurred or any material bad debt, contingency or other reserve increase suffered, except, in each such case, in the ordinary course of business and consistent with past practice, (iv) any material claims, liabilities or obligations (absolute, accrued or contingent) paid, discharged or satisfied, other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of claims, liabilities and obligations reflected or reserved against in Harbinger Financial Statements or incurred in the ordinary course of business and consistent with past practice, (v) any material guaranteed checks, notes or accounts receivable written off as uncollectible, except write-offs in the ordinary course of business and consistent with past practice, (vi) any write down of the value of any material asset or investment on Harbinger's books or records, except for depreciation and amortization taken in the ordinary course of business and consistent with past practice, (vii) any cancellation of any material debts or waiver of any material claims or rights of substantial value, or sale, transfer or other disposition of any properties or assets (real, personal or mixed, tangible or intangible) of substantial value, except, in each such case, in transactions in the ordinary course of business and consistent with past practice and which in any event do not exceed $250,000 in the aggregate, (viii) any single capital expenditure or commitment in excess of $500,000 for additions to property or equipment, or aggregate capital expenditures and commitments in excess of $10,000,000 (on a consolidated basis) for additions to property or equipment, A-26 27 (ix) any transactions entered into other than in the ordinary course of business, (x) any agreements to do any of the foregoing, or (xi) any other events, developments or conditions of any character that has had or is reasonably likely to have a material adverse effect on the assets, liabilities, results of operations, financial condition or the business or prospects of Harbinger and the Harbinger Subsidiaries taken as a whole. Section 4.9. Legal Proceedings. There are no suits, actions, claims, proceedings or investigations pending, or, to the best knowledge of Harbinger, threatened against, relating to or involving Harbinger or the Harbinger Subsidiaries (or any of their officers or directors) before any court, arbitrator or administrative or governmental body, which, if finally determined adversely, are reasonably likely, individually or in the aggregate, to have a material adverse effect on the assets, liabilities, results of operations or financial condition of Harbinger. All pending suits, actions, claims, proceedings or investigations relating to or involving Harbinger or the Harbinger Subsidiaries (or any of their officers or directors) before any court, arbitrator or administrative or governmental body are adequately provided for in the Harbinger Balance Sheet if and to the extent such a provision is required by generally accepted accounting principles. Neither Harbinger nor the Harbinger Subsidiaries is subject to any judgment, decree, injunction, rule or order of any court, and, to the best knowledge of Harbinger, neither Harbinger nor the Harbinger Subsidiaries is subject to any governmental restriction applicable to Harbinger, which is reasonably likely (i) to have a material adverse effect on the assets, liabilities, results of operations or financial condition of Harbinger or the Harbinger Subsidiaries or (ii) to cause a material limitation on Harbinger's ability to operate the business of Harbinger or the Harbinger Subsidiaries after the Closing. Section 4.10. Compliance with Law. Harbinger and the Harbinger Subsidiaries have all material authorizations, approvals, licenses and orders of and from all governmental and regulatory offices and bodies necessary to carry on their businesses as they are currently being conducted, to own or hold under lease the properties and assets they own or hold under lease and to perform all of their obligations under the agreements to which they are a party, and each has been and is in compliance with all applicable laws, regulations and administrative orders of any country, state or municipality or of any subdivision of any thereof to which its business and its employment of labor or its use or occupancy of properties or any part thereof are subject, the failure to obtain or the violation of which would have a material adverse effect upon the assets, liabilities, results of operations or financial condition of Harbinger. Section 4.11. Patents, Trademarks, Trade Names. The Harbinger Disclosure Letter sets forth a true and complete list of (i) all patents, trademarks, trade names (including all U.S. federal and state registrations and foreign registrations and applications pertaining thereto) and registered copyrights owned by Harbinger or the Harbinger Subsidiaries (collectively, the "Harbinger Proprietary Intellectual Property") and (ii) all patents, trademarks, trade names, copyrights, technology and processes used by Harbinger or the Harbinger Subsidiaries in their respective businesses which are material to their respective businesses and are used pursuant to a license or other right granted by a third party (collectively, the "Harbinger Licensed Intellectual Property", and together with the Harbinger Proprietary Intellectual Property referred to as "Harbinger Intellectual Property"). A true and complete list of all such licenses with respect to Harbinger Licensed Intellectual Property is set forth in the Harbinger Disclosure Letter. Neither Harbinger nor any of the Harbinger Subsidiaries has granted any right, license or other interest in the Harbinger Proprietary Intellectual Property to any third party, except for end-user licenses granted by Harbinger to its customers in the ordinary course. Each of the federal, state and foreign registrations pertaining to the Harbinger Proprietary Intellectual Property is valid and in full force and effect. All required filings in association with such registrations have been properly made and all required fees have been paid. Harbinger and each of the Harbinger Subsidiaries own, or have the right to use pursuant to valid and effective agreements, all Harbinger Intellectual Property, free and clear of any lien, claim or encumbrance, and the consummation of the transactions contemplated by this Agreement will not alter or impair any such rights. No claims are pending against Harbinger or the Harbinger Subsidiaries by any person with respect to the use of any Harbinger Intellectual Property or challenging or questioning the validity or effectiveness of any license or agreement relating to the same, and to the best knowledge of Harbinger, the current use by Harbinger and the Harbinger Subsidiaries of the Harbinger Intellectual Property does not infringe on the rights of any third party. The conduct by Harbinger and the Harbinger Subsidiaries of their respective businesses, including the provision of A-27 28 services to customers, as currently conducted and as proposed to be conducted, does not and will not conflict with or infringe, to the best knowledge of Harbinger, upon any patent, copyright, trade secret, trademark or other intellectual property right of any third party, and Harbinger has not received notice of any such alleged infringement. The Harbinger Disclosure Letter sets forth a list of all jurisdictions in which Harbinger or the Harbinger Subsidiaries is operating under a trade name, and each jurisdiction in which any such trade name is registered. Section 4.12. Licensed Software. (a) The software owned by Harbinger for license to or use in connection with the business of Harbinger (the "Harbinger Proprietary Software") consists of: (i) source and object code embodied in magnetic media; and (ii) all development and procedural tools necessary to maintain the Harbinger Proprietary Software, including licenses to use compilers, assemblers, libraries and other aids. Harbinger employs individuals who are familiar with the business of Harbinger and who are qualified to maintain the Harbinger Proprietary Software and the related computer hardware used by Harbinger in its operations (the "Harbinger Hardware"). (b) Harbinger has all right, title and interest in and to all intellectual property rights in the Harbinger Proprietary Software (other than any defects in title which are not, individually or in the aggregate, material), and subject to the rights of end-user licensees under licenses granted by Harbinger to its customers in the ordinary course of business). The Harbinger Proprietary Software is free and clear of all liens, claims and encumbrances (other than any liens, claims or encumbrances which are not, individually or in the aggregate, material). The use of the software (other than the Harbinger Proprietary Software) used by Harbinger in connection with the business of Harbinger (the "Harbinger Licensed Software" and together with the Harbinger Proprietary Software, the "Harbinger Software") and the use and distribution of the Harbinger Proprietary Software does not breach any material terms of any material contract between Harbinger and any third party. Harbinger proprietary software products may incorporate Harbinger Proprietary Software (that is, software owned by Harbinger) and code software that is owned by third parties and licensed to Harbinger (all of which such third party software is included in the Harbinger Licensed Software). To the best knowledge of Harbinger, Harbinger has been granted under the license agreements relating to the Harbinger Licensed Software (the "Harbinger License Agreements") valid and subsisting license rights with respect to all software comprising the Harbinger Licensed Software. Harbinger is in compliance in all respects with each of the terms and conditions of each of the Harbinger License Agreements. In the case of any commercially available "shrink-wrap" software programs (such as Lotus 1-2-3), Harbinger has not made and is not using any unauthorized copies of any such software programs and none of the employees, agents or representatives of Harbinger have made or are using any such unauthorized copies. (c) To the best knowledge of Harbinger, the Harbinger Proprietary Software and the Harbinger Licensed Software do not infringe any United States patent, copyright, or trade secret or any other intellectual property right of any third party. The source code for the Harbinger Proprietary Software has been maintained in confidence. (d) The Harbinger Proprietary Software was developed by Harbinger for its own account, and the Harbinger Proprietary Software was: (i) developed by Harbinger employees working within the scope of their employment at the time of such development; (ii) developed by agents, consultants, contractors or others who have executed appropriate instruments of assignment in favor of Harbinger as assignee that have conveyed to Harbinger ownership of all of their intellectual property rights in the Harbinger Proprietary Software; or (iii) acquired by Harbinger in connection with acquisitions in which Harbinger obtained appropriate representations and warranties from the transferring party relating to the title to such Harbinger Proprietary Software. Harbinger has not received notice from any third-party claiming any right, title or interest in the Harbinger Proprietary Software. (e) There are no agreements or arrangements in effect with respect to the marketing, distribution, licensing or promotion of the Harbinger Proprietary Software by any independent sales person, distributor, sublicensee or other remarketer or sales organization. A-28 29 (f) Harbinger has not granted any rights or licenses in or to the Harbinger Software to any third party, except for end-user license agreements granted by Harbinger to its customers in the ordinary course of business. (g) The Harbinger Software and the Harbinger Hardware are adequate in all material respects with the other assets of Harbinger to run the business of Harbinger in the same manner as such business has operated since September 30, 1996. The Harbinger Disclosure Letter contains a summary description of any problems experienced by Harbinger in the past twelve months with respect to the Harbinger Software or Harbinger Hardware and the provision of services to Harbinger's clients which resulted, or reasonably could be expected to result, in any material disruption of the provision of services by Harbinger to clients generally for a period equal to or exceeding five days. (h) All Harbinger Software is year 2000 compliant (that is, (i) the Harbinger Software is capable of correctly processing, providing and receiving data within and between the 20th and 21st centuries (including accounting for all required leap year calculations) and (ii) all date fields in the Harbinger Software used for (4) digit year fields). Section 4.13. Trade Secrets. To the best knowledge of Harbinger, no third party has claimed that any officer, director or former or present employee of Harbinger or the Harbinger Subsidiaries has, in respect of his or its activities on behalf of Harbinger or the Harbinger Subsidiaries to date, violated any of the terms or conditions of his or her employment contract with such third party, or disclosed or utilized any trade secrets or proprietary information or documentation of such third party, or interfered in the employment relationship between such third party and any of his or her or its employees nor has any such violation, disclosure or utilization occurred. Neither Harbinger or the Harbinger Subsidiaries nor, to the best knowledge of Harbinger, any of their officers, directors or employees have wrongfully utilized any trade secrets or any information or documentation proprietary to any other person or entity, including, but not limited to, confidential business information, and neither Harbinger or the Harbinger Subsidiaries nor, to the best knowledge of Harbinger, any of its officers, directors or employees has violated any obligations of confidentiality with any third party in connection with the development, manufacture and sale of any products or services of Harbinger or the Harbinger Subsidiaries. Section 4.14. Proxy Statement and Registration Statement. The information with respect to Harbinger and the Harbinger Subsidiaries and each of their respective officers, directors and affiliates in the Proxy Statement or in the Registration Statement, will not, in the case of the Proxy Statement, on the date the Proxy Statement is first mailed to stockholders of Premenos or on the date of the stockholders' meetings referred to in Section 5.5, or, in the case of the Registration Statement, at the time it becomes effective and at the Effective Time, as such Proxy Statement or Registration Statement is then amended or supplemented, contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Registration Statement and the Proxy Statement will comply as to form with the applicable provisions of the Securities Act and the Exchange Act. Section 4.15. Pooling. KPMG Peat Marwick has advised Harbinger that, in accordance with generally accepted accounting principles, the Merger qualifies to be treated as a "pooling of interests" for accounting purposes. Section 4.16. Brokers, Finders and Investment Bankers. Neither Harbinger nor any of the Harbinger Subsidiaries, nor any of their respective officers, directors or employees, has employed any broker, finder or investment banker or incurred any liability for any investment banking fees, financial advisory fees, brokerage fees or finders' fees in connection with the transactions contemplated by this Agreement, other than Harbinger employing BT Alex. Brown Incorporated and Endeavor Capital Management, the fees and expenses of which will be paid by Harbinger. Section 4.17. Disclosure. No representation, warranty or covenant made by Harbinger in this Agreement, the Harbinger Disclosure Letter or the Exhibits hereto contains any untrue statement of a material fact A-29 30 or omits to state a material fact required to be stated herein or therein or necessary to make the statements contained herein or therein not misleading. Section 4.18. Opinion of Financial Advisor. The financial advisor of Harbinger, BT Alex. Brown Incorporated, has delivered to Harbinger an opinion dated the date of this Agreement to the effect that the Conversion Ratio is fair to Harbinger from a financial point of view. Section 4.19. Interim Operations of HarbingerSub. HarbingerSub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities and has conducted its operations only as contemplated by this Agreement. ARTICLE 5 CERTAIN COVENANTS AND AGREEMENTS Section 5.1. Conduct of Business by Premenos. From the date of this Agreement to the Effective Time, Premenos will and will cause each of its subsidiaries to, except as required in connection with the Merger and the other transactions contemplated by this Agreement and except as otherwise specifically permitted hereunder or disclosed in the Premenos Disclosure Letter or consented to in writing by Harbinger: (a) Carry on its businesses in the ordinary course in substantially the same manner as previously conducted and not engage in any new line of business or enter into any agreement, transaction or activity or make any commitment except those in the ordinary course of business and not otherwise prohibited under this Section 5.1; (b) Neither change nor amend its Certificate of Incorporation or Bylaws; (c) Other than pursuant to the exercise of employee stock options, warrants and other convertible securities outstanding on the date hereof and set forth in the Premenos Disclosure Letter, not issue, sell or grant options, warrants or rights to purchase or subscribe to, or enter into any arrangement or contract with respect to the issuance or sale of any of the capital stock of Premenos or any of its subsidiaries or rights or obligations convertible into or exchangeable for any shares of the capital stock of Premenos or any of its subsidiaries and not make any changes (by split-up, stock dividend, combination, reorganization or otherwise) in the capital structure of Premenos or any of its subsidiaries; (d) Not declare, pay or set aside for payment any dividend or other distribution in respect of the capital stock or other equity securities of Premenos or any of its subsidiaries and not redeem, purchase or otherwise acquire any shares of the capital stock or other securities of Premenos or any of its subsidiaries or rights or obligations convertible into or exchangeable for any shares of the capital stock or other securities of Premenos or any of its subsidiaries or obligations convertible into such, or any options, warrants or other rights to purchase or subscribe to any of the foregoing; (e) Not acquire or enter into an agreement to acquire, by merger, consolidation or purchase of stock or assets, any business or entity; (f) Use its reasonable efforts to preserve intact the corporate existence, goodwill and business organization of Premenos and its subsidiaries, to keep the officers and employees of Premenos and its subsidiaries available to Harbinger and to preserve the relationships of Premenos and its subsidiaries with customers, suppliers and others having business relations with Premenos or any of its subsidiaries; (g) Not (i) create, incur or assume any long-term debt (including obligations in respect of capital leases which individually involve annual payments in excess of $10,000) or, except in the ordinary course of business under existing lines of credit, create, incur or assume any short-term debt for borrowed money, (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except in the ordinary course of business and consistent with past practice, (iii) make any loans or advances to any other person, except in the ordinary course of business and consistent with past practice, (iv) make any capital contributions to, or investments in, any person, except in the ordinary course of business and consistent with past practices A-30 31 with respect to investments, or (v) make any capital expenditure involving in excess of $50,000 in the case of any single expenditure or $250,000 in the case of all capital expenditures; (h) Not enter into, modify or extend in any manner the terms of any employment, severance or similar agreements with officers or directors or grant any increase in the compensation of officers or directors, whether now or in the future payable, including any increase pursuant to any option, bonus, stock purchase, pension, profit-sharing, deferred compensation, retirement or other plan, arrangement, contract or commitment; (i) Perform in all material respects all of its obligations under all Premenos Material Contracts (except those being contested in good faith), not enter into, assume or amend any contract or commitment that would be a Premenos Material Contract other than contracts to provide products and services entered into in the ordinary course of business; (j) Use its reasonable efforts to maintain in full force and effect and in the same amounts policies of insurance comparable in amount and scope of coverage to that now maintained by Premenos; (k) Use its reasonable efforts to continue to collect its accounts receivable and pay its accounts payable in the ordinary course of business and consistent with past practices; (l) Prepare and file all federal, state, local and foreign returns for taxes and other tax reports, filings and amendments thereto required to be filed by it, and allow Harbinger, at its request, to review all such returns, reports, filings and amendments at Premenos's offices prior to the filing thereof, which review shall not interfere with the timely filing of such returns; (m) Not take any action the effect of which would be to cause the Merger to be treated as a taxable transaction; and (n) Not take any action the effect of which would be to cause the Merger to be accounted for on a basis other than a pooling of interests. In connection with the continued operation of the business of Premenos and its subsidiaries between the date of this Agreement and the Effective Time, Premenos shall confer in good faith on a regular and frequent basis with one or more representatives of Harbinger designated in writing with respect to the ongoing operations of Premenos. Premenos acknowledges that Harbinger does not and will not waive any rights it may have under this Agreement as a result of such consultations. Section 5.2. Conduct of Business by Harbinger. From the date of this Agreement to the Effective Time, Harbinger will, and will cause each of its subsidiaries to, except as required in connection with the Merger and the other transactions contemplated by this Agreement and except as otherwise specifically permitted hereunder or disclosed in the Harbinger Disclosure Letter or consented to in writing by Premenos: (a) Carry on its businesses in the ordinary course in substantially the same manner as heretofore conducted; (b) Neither change nor amend its Articles or Certificate of Incorporation or Bylaws; (c) Other than pursuant to the exercise of employee stock options or warrants outstanding on the date of this Agreement, not issue, sell or grant options, warrants or rights to purchase or subscribe to, or enter into any arrangement or contract with respect to the issuance or sale of any of the capital stock of Harbinger or any of its subsidiaries or rights or obligations convertible into or exchangeable for any shares of the capital stock of Harbinger or any of its subsidiaries and not alter the terms of any presently outstanding options or make any changes (by split-up, combination, reorganization or otherwise) in the capital structure of Harbinger or any of its subsidiaries; provided, however, that Harbinger shall have the right to: (i) issue Harbinger Common Stock and options, warrants or rights to acquire Harbinger Common Stock to employees and consultants in transactions approved in good faith by the Board of Directors of Harbinger or a committee thereof; and (ii) issue Harbinger Common Stock or options or rights to acquire Harbinger Common Stock in any Specified Acquisition as defined in the Harbinger Disclosure Letter; A-31 32 (d) Not take any action the effect of which would be to cause the Merger to be treated as a taxable transaction; (e) Not take any action the effect of which would be to cause the Merger to be accounted for on a basis other than a pooling of interests; and (f) Use its reasonable efforts to preserve intact the corporate existence, goodwill and business organization of Harbinger and the Harbinger Subsidiaries. In connection with the continued operation of the business of Harbinger and the Harbinger Subsidiaries between the date of this Agreement and the Effective Time, Harbinger shall confer in good faith on a regular and frequent basis with one or more representatives of Premenos designated in writing with respect to the ongoing operations and acquisition activity of Harbinger. Harbinger acknowledges that Premenos does not and will not waive any rights it may have under this Agreement as a result of such consultations. Section 5.3. Inspection and Access to Information. (a) Between the date of this Agreement and the Effective Time, each party to this Agreement will provide each other party and its accountants, counsel and other authorized representatives full access, during reasonable business hours and under reasonable circumstances to any and all of its premises, properties, contracts, commitments, books, records and other information (including tax returns filed and those in preparation) and will cause their respective officers to furnish to the other party and its authorized representatives any and all financial, technical and operating data and other information pertaining to its business, as each other party shall from time to time reasonably request. (b) All non-public information obtained by Harbinger or Premenos or any of their representatives pursuant to this Agreement or in connection with the matters contemplated by this Agreement concerning the business, operations or affairs of the other will be kept confidential and will not be used for any purpose other than the consummation of the transactions contemplated by this Agreement, or be disclosed to any other person or entity, except for disclosure to its employees, agents and representatives who have a need to know the same, who have been advised of the confidential nature of such information and who agree to abide by the terms of this Section 5.3(b) and except for such disclosure as may be required by applicable law, court order or governmental agency request. In the event Harbinger or Premenos is required by law to disclose information of a confidential nature, the disclosing party shall provide the non-disclosing party with prompt notice of any such request or requirement (written if practical) so that the nondisclosing party may have the opportunity to seek an appropriate protective order, otherwise contest the disclosure, or waive compliance with this Section 5.3(b). If this Agreement is terminated in accordance with its terms, any non-public information furnished by any party to any other party to this Agreement will be promptly returned. Section 5.4. Proxy Statement and Registration Statement. Harbinger shall prepare and file with the SEC as soon as is reasonably practicable the Registration Statement and shall use all reasonable, best efforts to have the Registration Statement declared effective by the SEC as promptly as is practicable. Harbinger also shall take any action required to be taken under state Blue Sky or securities laws in connection with the issuance of the Harbinger Common Stock pursuant to the Merger. Harbinger and Premenos will furnish each other with all information concerning themselves, their subsidiaries, directors, officers and stockholders and such other matters as may be necessary or advisable for the Registration Statement, the Proxy Statement, the Nasdaq Additional Shares Notification, filings under the Blue Sky laws, and any other statement or application made by or on behalf of Harbinger or Premenos to any governmental body in connection with the Merger and the other transactions contemplated by this Agreement. Section 5.5. Harbinger and Premenos Stockholders Meetings. (a) Each of Harbinger and Premenos shall call a meeting of its shareholders or stockholders, as applicable, to be held as soon as practicable after the date hereof for the purpose of voting upon the matters relating to this Agreement. The meeting of Harbinger's shareholders shall be held prior to or contemporaneously with the meeting of Premenos's stockholders. (b) Harbinger will use its reasonable, best efforts to hold its shareholders meeting as promptly as practicable and will, through its Board of Directors, recommend to its shareholders approval of the Merger and this Agreement at such shareholders meeting (the "Harbinger Shareholders Meeting"); provided, however, A-32 33 that the Board of Directors of Harbinger may withdraw such recommendation if the Harbinger Board of Directors determines in good faith (after consultation with and based upon the advice of its outside legal counsel and after providing notice to Premenos and giving Premenos the opportunity to consult with Harbinger with regard to such withdrawal) that the fiduciary duties of the Harbinger Board of Directors to its shareholders under applicable law require that the Harbinger Board of Directors withdraw such recommendation. Unless otherwise required to comply with the fiduciary duties of the Board of Directors of Harbinger, as determined by the Harbinger Board of Directors in good faith (after consultation with and based upon the advice of its outside legal counsel), Harbinger shall use reasonable, best efforts to solicit from its shareholders proxies in favor of all matters to be voted upon at the Harbinger Shareholders Meeting. (c) Premenos will use its reasonable, best efforts to hold its stockholders meeting as promptly as practicable and will, through its Board of Directors, recommend to its stockholders approval of the Merger and this Agreement at such stockholders meeting (the "Premenos Stockholders Meeting"); provided, however, that the Board of Directors of Premenos may withdraw such recommendation if the Premenos Board of Directors determines in good faith (after consultation with and based upon the advice of its outside legal counsel and after providing notice to Harbinger and giving Harbinger the opportunity to consult with Premenos with regard to such withdrawal) that the fiduciary duties of the Premenos Board of Directors to its stockholders under applicable law require that the Premenos Board of Directors withdraw such recommendation. Unless otherwise required to comply with the fiduciary duties of the Board of Directors of Premenos, as determined by the Board of Directors of Premenos in good faith (after consultation with and based upon the advice of its outside legal counsel), Premenos shall use its reasonable, best efforts to solicit from its stockholders' proxies in favor of all matters to be acted upon at the Premenos Stockholders Meeting. Section 5.6. The Nasdaq National Market Additional Shares Notification. Harbinger will file an additional shares notification with The Nasdaq National Market (the "Nasdaq Additional Shares Notification") to approve for listing, subject to official notice of its issuance, the shares of Harbinger Common Stock to be issued in connection with the Merger. Harbinger shall exercise reasonable good faith efforts to cause the shares of Harbinger Common Stock to be issued in the Merger to be approved for listing on The Nasdaq National Market, subject to official notice of issuance, prior to the Effective Time. Section 5.7. Premenos Affiliates. (a) Premenos shall deliver to Harbinger a letter identifying all persons who are, at the time the Merger is submitted to a vote to the stockholders of Premenos, "affiliates" of Premenos for purposes of Rule 145 under the Securities Act. Premenos shall cause each person who is identified as an "affiliate" in such letter to deliver to Harbinger on or prior to the Effective Time a written statement, in form satisfactory to Harbinger and Premenos, that such person will not offer to sell, transfer or otherwise dispose of any of the shares of Harbinger Common Stock issued to such person pursuant to the Merger, except (i) in accordance with the applicable provisions of the Securities Act and the rules and regulations thereunder and (ii) until such time as financial results covering at least thirty (30) days of combined operations of Harbinger and Premenos have been published within the meaning of Section 201.01 of the SEC's Codification of Financial Reporting Policies. Harbinger shall be entitled to place legends on any certificates of Harbinger Common Stock issued to such affiliates to restrict transfer of such shares as set forth above. (b) Harbinger shall identify all persons who are, at the time the Merger is submitted to a vote to the shareholders of Harbinger, "affiliates" of Harbinger for purposes of Rule 145 under the Securities Act. Harbinger shall cause each person who is identified as an "affiliate" to deliver to Harbinger on or prior to the Effective Time a written statement that such person will not offer to sell, transfer or otherwise dispose of any shares of Harbinger Common Stock owned by such affiliate, except (i) in accordance with the applicable provisions of the Securities Act and the rules and regulations thereunder and (ii) until such time as financial results covering at least thirty (30) days of combined operations of Harbinger and Premenos have been published within the meaning of Section 201.01 of the SEC's Codification of Financial Reporting Policies. Section 5.8. No Solicitation. (a) Premenos agrees that it shall not, directly or indirectly, through any officer, director, employee, representative or agent (i) solicit, initiate, or encourage any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, A-33 34 business combination, sale of substantial assets, sale of shares of capital stock (including, without limitation, by way of a tender offer) or similar transactions involving Premenos or any of its subsidiaries, other than the transactions contemplated or permitted by this Agreement (any of the foregoing inquiries or proposals being referred to in this Agreement as a "Competing Offer"), (ii) engage in negotiations or discussions concerning, or provide any non-public information to any person or entity relating to, any Competing Offer, or (iii) agree to, approve or recommend any Competing Offer; provided, however, that nothing contained in this Agreement shall prevent Premenos or its Board of Directors from furnishing non-public information to, or entering into discussions or negotiations with, any person or entity in connection with an unsolicited bona fide written Competing Offer by such person or entity or recommending such an unsolicited bona fide written Competing Offer to the stockholders of Premenos, if and only to the extent that (1) the Board of Directors of Premenos determines in good faith (after consultation with and based upon the written advice of its financial advisor) that such Competing Offer would, if consummated, result in a transaction more favorable to Premenos stockholders than the transaction contemplated by this Agreement (and any such more favorable Competing Offer being referred to in this Agreement as a "Superior Proposal") and that the person or entity making such Superior Proposal has the financial means, or the ability to obtain the necessary financing, to conclude such transaction, (2) the Board of Directors of Premenos determines in good faith (after consultation with and based upon the advice of its outside legal counsel), that the fiduciary duties of the Premenos Board of Directors to its stockholders under applicable law require that Premenos take such action, and (3) prior to furnishing such non-public information to, or entering into discussions or negotiations with, such person or entity, the Premenos Board of Directors receives from such person or entity an executed confidentiality agreement with confidentiality covenants not materially less favorable to Premenos than those contained in the Confidentiality Agreement by and between Harbinger and Premenos dated June 27, 1996. (b) Premenos shall notify Harbinger no later than twenty-four (24) hours after receipt by Premenos (or its agents or advisors) of any Competing Offer or any requests for non-public information in connection with a Competing Offer or for access to the properties, books or records of Premenos by any person or entity that informs Premenos that it is considering making, or has made, a Competing Offer. Such notice to Harbinger shall be made orally and in writing and shall indicate in reasonable detail the identity of the person or entity making such proposal, inquiry or contact and the terms and conditions thereof; provided, however, to the extent Premenos's outside legal counsel shall advise Premenos's Board of Directors that complying with such notification requirements will result in a breach of the terms of any confidentiality agreement executed by Premenos on or prior to the date hereof, then Premenos shall be entitled to comply with such notice requirement to the maximum extent possible without breaching the terms of such confidentiality agreement. Section 5.9. Reasonable Efforts; Further Assurances; Cooperation. Subject to the other provisions of this Agreement, the parties hereto shall each use their reasonable, good faith efforts to perform their obligations herein and to take, or cause to be taken or do, or cause to be done, all things necessary, proper or advisable under applicable law to obtain all regulatory approvals and satisfy all conditions to the obligations of the parties under this Agreement and to cause the Merger and the other transactions contemplated by this Agreement to be effected on or prior to December 31, 1997 in accordance with the terms of this Agreement and shall cooperate fully with each other and their respective officers, directors, employees, agents, counsel, accountants and other designees in connection with any steps required to be taken as a part of their respective obligations under this Agreement, including without limitation: (a) Premenos and Harbinger shall promptly make their respective filings and submissions and shall take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to obtain any required approval of any other federal, state or local governmental agency or regulatory body with jurisdiction over the transactions contemplated by this Agreement. (b) If any claim, action, suit, investigation or other proceeding by any governmental body or other person is commenced which questions the validity or legality of the Merger or any of the other transactions contemplated by this Agreement or seeks damages in connection with this Agreement, the parties agree to cooperate and use all reasonable efforts to defend against such claim, action, suit, investigation or other proceeding and, if an injunction or other order is issued in any such action, suit or A-34 35 other proceeding, to use all reasonable efforts to have such injunction or other order lifted, and to cooperate reasonably regarding any other impediment to the consummation of the transactions contemplated by this Agreement. (c) Each party shall give prompt written notice to the other of (i) the occurrence, or failure to occur, of any event which occurrence or failure would be likely to cause any representation or warranty of Premenos or Harbinger, whether such occurrence or failure is with respect to its own representations or warranties, or with respect to the other party's representations and warranties, contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date of this Agreement to the Effective Time or that will or may result in the failure to satisfy any of the conditions specified in Article 6 and (ii) any failure of Premenos or Harbinger, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. (d) Without the prior written consent of Harbinger and except as set forth in the Premenos Disclosure Letter, Premenos will not terminate any employee if such termination would result in the payment of any amounts pursuant to "change in control" provisions of any employment agreement or arrangement. Section 5.10. Public Announcements. The timing and content of all announcements regarding any aspect of this Agreement or the Merger to the financial community, government agencies, employees or the general public shall be mutually agreed upon in advance (unless Harbinger or Premenos is advised by counsel that any such announcement or other disclosure not mutually agreed upon in advance is required to be made by law or applicable rule of The Nasdaq National Market and then only after making a reasonable attempt to comply with the provisions of this Section 5.10 and providing notice to the non-disclosing party simultaneously with such disclosure). This Section 5.10 shall not apply to disclosures made to senior managers prior to the date of this Agreement in accordance with the understanding of Harbinger and Premenos. Section 5.11. Financial Statements and SEC Reports. Prior to the Effective Time, each party to this Agreement shall deliver to the other, as soon as available but in no event later than 45 days after the end of each fiscal quarter (or 90 days after the end of a fiscal year), a consolidated balance sheet as of the last day of such fiscal period and the consolidated statements of income, stockholders' equity and cash flows of such party and its subsidiaries for the fiscal period then ended prepared in accordance with generally accepted accounting principles and the requirements of Form 10-Q (or Form 10-K as the case may be) under the Exchange Act. Prior to the Effective Time, each party to this Agreement shall deliver to the other, as soon as available, a copy of each form, report and other document filed by such party with the SEC. Section 5.12. Supplements to Disclosure Letters. From time to time prior to the Effective Time, Premenos and Harbinger will each promptly supplement or amend the respective disclosure letters which they have delivered pursuant to this Agreement with respect to any matter arising after the date of this Agreement which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in any such disclosure letter or which is necessary to correct any information in any such disclosure letter which has been rendered inaccurate by such matter. No supplement or amendment to any such disclosure letter shall have any effect for the purpose of determining satisfaction of the conditions set forth in Sections 6.2(a) or 6.3(a). Section 5.13. Pooling of Interests Accounting. Except for other actions specifically permitted to be taken hereunder and from and after the date of this Agreement and until the Effective Time, neither Harbinger nor Premenos nor any of their respective subsidiaries or other affiliates shall take, or fail to take, any action that would jeopardize the treatment of Harbinger's acquisition of Premenos as a "pooling of interests" for accounting purposes. Following the Effective Time, Harbinger shall use its reasonable efforts to conduct the business of Harbinger in a manner that would not jeopardize the characterization of the Merger as a "pooling of interests" for accounting purposes. Section 5.14. Accountant's Review Report. Premenos agrees to exercise reasonable efforts to cause Coopers & Lybrand to deliver to Harbinger prior to the filing of the Registration Statement a limited review A-35 36 report covering the unaudited financial statements of Premenos included in the Registration Statement in form and substance reasonably acceptable to Harbinger (the "Coopers & Lybrand Review Report"). Section 5.15. Indemnification of Premenos Directors and Officers. (a) Harbinger and the Surviving Corporation agree that the indemnification obligations set forth in Premenos's Certificate of Incorporation and Bylaws, in each case as of the date hereof, shall survive the Merger and shall not be amended, repealed or otherwise modified for a period of six (6) years after the Effective Time in any manner that would adversely affect the rights thereunder of the individuals who on or prior to the Effective Time, were directors, officers, employees or agents of Premenos or any of its subsidiaries. (b) After the Effective Time, Harbinger and the Surviving Corporation shall, to the fullest extent permitted under applicable law, indemnify and hold harmless, each present and former director or officer of Premenos and each of its subsidiaries and each such person who served at the request of Premenos or any of its subsidiaries as a director, officer, trustee, partner, fiduciary, employee or agent of Premenos or any of its subsidiaries or of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (collectively, the "Indemnified Parties") against all costs and expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), whether civil, administrative or investigative, arising out of or pertaining to any action or omission in their capacity as an officer, director, employee, agent or other person to whom this Section 5.15 applies, in each case occurring before the Effective Time (including the transactions contemplated by this Agreement). (c) In the event Harbinger or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity in such consolidation or merger, or (ii) transfers all or substantially all of its properties to any person, then, and in each case, proper provision shall be made so that the successors and assigns of Harbinger or the Surviving Corporation, as the case may be, honor the indemnification obligations set forth in this Section 5.15. (d) The obligations of Harbinger and the Surviving Corporation under this Section 5.15 shall not be terminated or modified in such a manner as to adversely affect any director, officer, employee, agent or other person to whom this Section 5.15 applies without the consent of such affected director, officer, employee, agent or other person (it being expressly agreed that each such director, officer, employee, agent or other person to whom this Section 5.15 applies shall be a third-party beneficiary of this Section 5.15). Section 5.16. Harbinger Board of Directors. Harbinger shall take all actions reasonably necessary to elect David Hildes to Harbinger's Board of Directors in the class of directors with the longest unexpired term at the time of his election, such election to be effective as of the Effective Time. If the unexpired term of the class of directors to which David Hildes is elected is less than one year, then Harbinger agrees to use its reasonable, best efforts to (i) nominate David Hildes for election as a director at the next annual meeting of Harbinger's shareholders and (ii) recommend his election to Harbinger's shareholders. Section 5.17. Employment Agreements. As promptly as reasonably practicable after the date of this Agreement, Harbinger shall deliver to Premenos a list of names of key senior managers of Premenos that Harbinger requests to sign two-year employment agreements on terms which shall include customary compensation, non-competition, non-solicitation and non-disclosure provisions. Harbinger and Premenos agree to cooperate in using their reasonable best efforts to cause such key senior managers to enter into such agreements at the Effective Time. Harbinger further agrees to engage in discussions with the Chairman of Premenos regarding establishing an appropriate transition role for the Chairman of Premenos after the Effective Time and future business relationships between Harbinger and the Chairman of Premenos on terms which will include non-competition provisions prohibiting competition by the Chairman in the electronic data interchange ("EDI") and value-added networks ("VAN") businesses and non-solicitation and non-disclosure provisions as are customary in the business of Harbinger; provided that such roles or relationships shall not include full-time employment. The Chairman of Premenos shall execute and deliver to Harbinger an agreement containing such non-competition, non-solicitation and non-disclosure provisions in a form reasonably satisfactory to Harbinger on or prior to the Closing Date. A-36 37 Section 5.18. Premenos Transactional Expenses. Premenos agrees that the aggregate amount of fees, costs and expenses to be incurred by Premenos in connection with this Agreement and transactions contemplated hereby, including, without limitation, the fees, costs and expenses of financial advisors, accountants and counsel shall not exceed Two Million Three Hundred Thousand Dollars ($2,300,000). Premenos further agrees to periodically apprise Harbinger of the aggregate amount of the transaction fees and expenses incurred and anticipated to be incurred in connection with this Agreement and the matters contemplated hereby. Section 5.19. Severance. Harbinger agrees to honor the severance policy of Premenos set forth in the Premenos Disclosure Letter with respect to any Premenos employees whose employment is terminated during the twelve (12) month period following the Effective Time. Section 5.20. Premenos Stock Options. Premenos will cause holders of Old Options representing at least 95% of the shares of Premenos Common Stock issuable pursuant to Old Options to execute and deliver to Harbinger prior to the Closing option assumption agreements in form mutually satisfactory to Harbinger and Premenos to effect the conversion of such Old Options to Harbinger Options as contemplated in Section 2.3. Section 5.21. Minority Interest. Premenos shall use its reasonable best efforts to effectuate the share exchanges with the stockholders of Premenos Corp. as set forth in the Premenos Disclosure Letter as quickly as reasonably practicable, and such share exchanges shall become effective and there shall be no further minority interests in Premenos Corp. on the Closing Date. ARTICLE 6 CONDITIONS Section 6.1. Conditions to Each Party's Obligations. The respective obligations of each party to effect the Merger shall be subject to the fulfillment at or prior to the Closing of each of the following conditions: (a) Premenos Stockholder Approval. The Merger, this Agreement and the transactions contemplated by this Agreement shall have been approved at the meeting of Premenos Stockholders duly called and held in accordance with the DGCL by the holders of a majority of the outstanding shares of Premenos Common Stock having the right to vote on such matters. (b) Harbinger Shareholder Approval. The Merger, this Agreement and the transactions contemplated by this Agreement, including the issuance of shares of Harbinger Common Stock pursuant to the Merger and the amendment of the Harbinger 1996 Stock Option Plan increasing the number of shares of Harbinger Common Stock available for grant thereunder to facilitate the conversion of the Old Options as contemplated in Section 2.3 shall have been approved at the Harbinger Shareholders Meeting duly called and held in accordance with the Georgia Business Corporation Code ("GBCC") by the holders of a majority of the outstanding shares of Harbinger Common Stock having the right to vote on such matters. (c) Injunction. At the Effective Time there shall be no effective injunction, writ or preliminary restraining order or any order of any nature issued by a court or governmental agency of competent jurisdiction to the effect that the Merger may not be consummated as provided in this Agreement, no proceeding or lawsuit shall have been commenced by any governmental or regulatory agency for the purpose of obtaining any such injunction, writ or preliminary restraining order and no written notice shall have been received from any such agency indicating an intent to restrain, prevent, materially delay or restructure the transactions contemplated by this Agreement. (d) Tax Opinion. Premenos and Harbinger shall each have received a written opinion of King & Spalding concerning certain federal income tax consequences of the Merger, substantially in the form attached as Exhibit 6.1(d). A-37 38 (e) Registration Statement. The Registration Statement shall be effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for such purpose, or under the proxy rules of the SEC pursuant to the Exchange Act and with respect to the transactions contemplated by this Agreement, shall be pending before or threatened by the SEC. All applicable state securities laws shall have been complied with in connection with the issuance of Harbinger Common Stock to be issued pursuant to the Merger, and no stop order suspending the effectiveness of any qualification or registration of such Harbinger Common Stock under such state securities laws shall have been issued and pending or threatened by the authorities of any such state. The joint proxy statement/prospectus that comprises part of the Registration Statement shall have been mailed or sent to Premenos Stockholders and Harbinger shareholders not less than twenty business days prior to the meetings described in Section 6.1(a) and Section 6.1(b), respectively, as the term "business days" is defined for purposes of Form S-4 under the Securities Act. (f) Pooling. Harbinger shall have been advised in writing, as of the Effective Time, by KPMG Peat Marwick that, in accordance with generally accepted accounting principles, the Merger qualifies to be treated as a "pooling of interests" for accounting purposes. Premenos shall have been advised in writing, as of the Effective Time, by Coopers & Lybrand that, based on inquiries and their examination of the financial statements of Premenos, they believe that the criteria for pooling accounting treatment relative to Premenos has been satisfied. (g) The Nasdaq National Market Additional Shares Notification. The Harbinger Common Stock to be issued pursuant to this Agreement shall have been approved for listing on The Nasdaq National Market, subject only to official notice of issuance by Harbinger. (h) HSR Act. The applicable waiting periods shall have expired or been terminated early under the HSR Act. Section 6.2. Conditions to Obligations of Harbinger. The obligation of Harbinger to effect the Merger shall be subject to the fulfillment at or prior to the Closing of each of the following additional conditions: (a) Representations and Warranties. The representations and warranties of Premenos set forth in Article 3 of this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the Effective Time. (b) Performance of Obligations of Premenos. Premenos shall have performed in all material respects all covenants and agreements required to be performed by it under this Agreement. (c) Opinion of Premenos Counsel. Harbinger shall have received an opinion of Bryan Cave LLP, dated the Closing Date, substantially in the form attached as Exhibit 6.2(c). (d) Authorization of Merger. All corporate action necessary by Premenos to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement shall have been duly and validly taken. (e) Consents. All consents, authorizations, orders and approvals of (or filings or registrations with) any governmental commission, board or other regulatory body required in connection with the execution, delivery and performance of this Agreement shall have been obtained or made, except for filing of the Delaware Certificate of Merger and any other documents required to be filed after the Effective Time and except where the failure to have obtained or made any such consent, authorization, order, approval, filing or registration would not have a material adverse effect on the business of Harbinger and Premenos following the Effective Time. (f) Certificates. Premenos shall have furnished Harbinger with a certificate of its appropriate officers as to compliance with the conditions set forth in Sections 6.2(a), (b) and (d). (g) Accountant's Review Report and Letter. Harbinger shall have received: (i) the Coopers & Lybrand Review Report in accordance with Section 5.14 and (ii) a letter from Coopers & Lybrand dated the effective date of the Registration Statement under the Securities Act, with respect to certain financial A-38 39 and statistical information concerning Premenos included in the Registration Statement in form and substance customary in transactions of the nature of the Merger. (h) Material and Client Contracts. Harbinger shall have received consents to assignment of all Premenos Material Contracts or written waivers of the provisions of any Premenos Material Contracts requiring the consents of third parties as set forth in the Premenos Disclosure Letter except where the failure to have received any such consent would not have a material adverse effect on the business of Harbinger and Premenos following the Effective Time. (i) Resignation Letters. Each of the directors of Premenos shall have tendered to Harbinger resignation letters in form and substance reasonably acceptable to Harbinger on or prior to the Closing Date, such resignations to be effective immediately following the Closing Date. Section 6.3. Conditions to Obligations of Premenos. The obligation of Premenos to effect the Merger shall be subject to the fulfillment at or prior to the Closing of each of the following additional conditions: (a) Representations and Warranties. The representations and warranties of Harbinger set forth in Article 4 of this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the Effective Time. (b) Performance of Obligations by Harbinger. Harbinger shall have performed in all material respects all covenants and agreements required to be performed by it under this Agreement. (c) Opinion of Harbinger Counsel. Premenos shall have received an opinion of King & Spalding, counsel to Harbinger, substantially in the form of Exhibit 6.3(c). (d) Authorization of Merger. All corporate action necessary by Harbinger to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement shall have been duly and validly taken. (e) Consents. All consents, authorizations, orders and approvals of (or filings or registrations with) any governmental commission, board or other regulatory body required in connection with the execution, delivery and performance of this Agreement shall have been obtained or made, except for filing of the Delaware Certificate of Merger and any other documents required to be filed after the Effective Time and except where the failure to have obtained or made any such consent, authorization, order, approval, filing or registration would not have a material adverse effect on the business of Harbinger and Premenos following the Effective Time. (f) Certificates. Harbinger shall have furnished Premenos with a certificate of its appropriate officers as to compliance with the conditions set forth in Sections 6.3(a), (b) and (d). (g) Harbinger shall have executed and delivered the registration rights agreement substantially in the form of Exhibit 6.3(g). ARTICLE 7 CLOSING The consummation of the transactions contemplated by this Agreement is referred to as the "Closing." The "Closing Date" is the date on which the Closing occurs. The Closing shall occur as soon as possible following the Harbinger and Premenos stockholders meetings described in Section 5.5 as is reasonably practicable and in any event within three business days of the satisfaction or waiver of the other conditions set forth in Article 6. The Closing shall take place at the offices of King & Spalding, 191 Peachtree Street, Atlanta, Georgia, or at such other place as Premenos and Harbinger may mutually agree. A-39 40 ARTICLE 8 TERMINATION Section 8.1. Termination and Abandonment. This Agreement may be terminated at any time prior to the Closing Date, whether before or after approval by the shareholders and stockholders of Harbinger and Premenos, respectively: (a) by mutual agreement of the Boards of Directors of Harbinger and Premenos; (b) by Harbinger, if the conditions set forth in Sections 6.1 and 6.2 are not complied with or performed and such noncompliance or nonperformance has not been cured or eliminated (or by its nature cannot be cured or eliminated) by Premenos on or before March 31, 1998; and (c) by Premenos, if the conditions set forth in Sections 6.1 and 6.3 are not complied with or performed and such noncompliance or nonperformance has not been cured or eliminated (or by its nature cannot be cured or eliminated) by Harbinger on or before March 31, 1998; (d) by Harbinger or Premenos if, at the Harbinger Shareholders Meeting or the Premenos Stockholders Meeting (including any adjournment or postponement thereof), the requisite vote of the stockholders in favor of this Agreement and the Merger shall not have been obtained; provided, however, that the right to terminate this Agreement under this Section 8.1(d) shall not be available to any party which has not complied with its obligations under Section 5.5; (e) by Harbinger if, (i) the Board of Directors of Premenos shall have withdrawn or modified its recommendation of this Agreement or the Merger in a manner adverse to Harbinger or shall have resolved or publicly announced or disclosed to any third party its intention to do so, (ii) an Alternative Transaction involving Premenos shall have taken place or the Board of Directors of Premenos shall have recommended such an Alternative Transaction (or a proposal or offer therefor) to the stockholders of Premenos or shall have resolved or publicly announced or disclosed to any third party its intention to recommend or engage in such an Alternative Transaction, or (iii) a tender offer or exchange offer for twenty percent (20%) or more of the outstanding shares of Premenos Common Stock shall have been commenced or a registration statement with respect thereto shall have been filed (other than by Harbinger or an affiliate thereof), and the Board of Directors of Premenos shall have (A) recommended (or shall have resolved or publicly announced or disclosed to any third party its intention to recommend) that the stockholders of Premenos tender their shares in such tender or exchange offer or (B) resolved or publicly announced or disclosed to any third party its intention to take no position with respect to such tender or exchange offer; (f) by Premenos if, the Board of Directors of Harbinger shall have withdrawn or modified its recommendation of this Agreement or the Merger in a manner adverse to Premenos or shall have resolved or publicly announced or disclosed to any third party its intention to do so; (g) by Harbinger, if the Board of Directors of Harbinger shall have determined to withdraw its recommendation of this Agreement or the Merger in accordance with Section 5.5(b) hereof; (h) by Premenos, if the Board of Directors of Premenos shall have withdrawn its recommendation of this Agreement or the Merger in accordance with Section 5.5(c); (i) by Premenos, if Harbinger breaches the covenant set forth in Section 5.2(c) hereof; and (j) by Harbinger if either David Hildes or Lew Jenkins sells any shares of Premenos Common Stock subject to the Proxy Agreements on or prior to the Closing Date. Section 8.2. Specific Performance and Other Remedies. The parties each acknowledge that the rights of each party to consummate the transactions contemplated by this Agreement are special, unique and of extraordinary character, and that, if any party violates or fails or refuses to perform any covenant or agreement made by it in this Agreement, the non-breaching party may be without an adequate remedy at law. The parties each agree, therefore, that if either party violates or fails or refuses to perform any covenant or agreement A-40 41 made by such party in this Agreement, the nonbreaching party or parties may, subject to the terms of this Agreement and in addition to any remedies at law for damages or other relief, institute and prosecute an action in any court of competent jurisdiction to enforce specific performance of such covenant or agreement or seek any other equitable relief. Section 8.3. Effect of Termination. In the event of termination of this Agreement pursuant to this Article 8, this Agreement shall forthwith become void and there shall be no liability on the part of any party or its respective officers, directors or shareholders or stockholders, as applicable, except for obligations under Section 5.3(b), Section 5.10, Section 8.4, and this Section, all of which shall survive the termination. Notwithstanding the foregoing, nothing contained in this Section 8.3 shall relieve any party from liability for any breach of any covenant or agreement in this Agreement. Section 8.4. Fees and Expenses. (a) Except as set forth in this Section 8.4 and in Section 2.5(a), all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Merger is consummated; provided, however, that Harbinger and Premenos shall share equally all fees and expenses, other than attorneys' and accounting fees and expenses, incurred in relation to the printing and filing of the Proxy Statement and the Registration Statement and any amendments or supplements thereto and the fees required to be paid in connection with filing(s) required under the HSR Act in connection with the transactions contemplated by this Agreement. (b) If this Agreement is terminated (i) by Harbinger pursuant to Section 8.1(e), (ii) by Premenos pursuant to Section 8.1(h), (iii) by Harbinger pursuant to Section 8.1(d) as a result of the failure to receive the requisite vote for approval of this Agreement and the Merger at the Premenos Stockholders Meeting and at the time of the Premenos Stockholders Meeting an Alternative Transaction involving Premenos shall have been announced which shall not have been absolutely and unconditionally withdrawn and abandoned, or (iv) by Harbinger pursuant to Section 8.1(j), then Premenos shall pay to Harbinger a termination fee of Four Million Dollars ($4,000,000) in cash (the "Harbinger Termination Fee") to reimburse and compensate Harbinger for its time, expenses and lost opportunity costs of pursuing the Merger, which Harbinger Termination Fee shall be paid to Harbinger within two (2) days of the termination of this Agreement pursuant to such Sections. If Premenos shall enter into a definitive agreement to consummate an Alternative Transaction within one (1) year of the payment of the Harbinger Termination Fee, then Premenos shall pay to Harbinger the Harbinger Topping Fee, which fee shall be payable in cash and shall be paid within two (2) days of Premenos's having entered into such definitive agreement to consummate an Alternative Transaction. The Harbinger Topping Fee shall be equal to the product obtained by multiplying (a) twenty five percent (25%), by (b) the Incremental Value, but in no case shall the Harbinger Topping Fee be less than Four Million Dollars ($4,000,000). The Incremental Value shall be equal to the amount by which the Alternative Transaction Value shall exceed the Merger Transaction Value. The Alternative Transaction Value shall mean the aggregate value of the Alternative Transaction to the stockholders of Premenos, valued as of the date of the definitive agreement relating to such Alternative Transaction and calculated in accordance with generally recognized and accepted valuation methodologies employed by nationally recognized investment banking firms for valuing comparable transactions. The Merger Transaction Value shall mean the aggregate value of the Merger to the stockholders of Premenos, valued as of the date of the termination of this Agreement and calculated in accordance with generally recognized and accepted valuation methodologies employed by nationally recognized investment banking firms for valuing comparable transactions. In the event that the parties do not agree as to the Alternative Transaction Value or the Merger Transaction Value, Harbinger and Premenos shall negotiate with one another in good faith for a period of ten days to resolve such dispute. If, after the expiration of such ten-day period, the parties do not agree as to the Alternative Transaction Value or the Merger Transaction Value, Harbinger and Premenos shall each engage a nationally-recognized investment banking firm to calculate the Alternative Transaction Value or the Merger Transaction Value, or both, as the case may be. In the event that such investment banking firms do not agree as to such disputed valuation(s) after 30 days, such firms shall together appoint a third nationally-recognized investment banking firm to resolve such dispute by calculating the disputed valuation(s). The calculation of such third investment banking firm shall be conclusive as to the disputed valuation(s). Each party shall bear the fees and expenses of A-41 42 the investment banking firm engaged by it pursuant to this Section, and the fees and expenses of a third investment banking firm, if necessary, shall be borne equally by Harbinger and Premenos. (c) If this Agreement is terminated (i) by Premenos pursuant to Section 8.1(f) or (ii) by Harbinger pursuant to 8.1(g), then Harbinger shall pay to Premenos a termination fee of Four Million Dollars ($4,000,000) in cash (the "Premenos Termination Fee") to reimburse and compensate Premenos for its time, expenses and lost opportunity costs of pursuing the Merger, which Premenos Termination Fee shall be paid to Premenos within two (2) days of the termination of this Agreement pursuant to such Sections. (d) As used in this Agreement, an "Alternative Transaction" shall mean (i) a transaction or series of transactions pursuant to which any person or group (as such term is defined under the Exchange Act) other than Harbinger, Premenos or any affiliate thereof as of the date hereof (a "Third Party") acquires or would acquire (upon completion of such transaction or series of transactions) shares (or securities exercisable for or convertible into shares) representing more than fifty percent (50%) of the outstanding shares of Premenos Common Stock, pursuant to a tender offer or exchange offer or otherwise, (ii) a merger, consolidation, share exchange or other business combination involving Premenos or any of its subsidiaries, upon completion of such merger, consolidation, share exchange or other business combination such Third Party owns or would own more than fifty percent (50%) of the outstanding equity securities of Premenos or any of its subsidiaries or the entity surviving such merger or business combination or resulting from such consolidation, (iii) any other transaction or series of transactions pursuant to which any Third Party acquires or would acquire (upon completion of such transaction or series of transactions) control of assets of Premenos or any of its subsidiaries (including, for this purpose, outstanding equities securities of Premenos's subsidiaries) having a fair market value equal to or more than fifty percent (50%) of the fair market value of all consolidated assets of Premenos and its subsidiaries immediately prior to such transaction or series of transactions, or (iv) any transaction or series of transactions pursuant to which any Third Party acquires or would acquire (upon completion of such transaction or series of transactions) control of the Board of Directors of Premenos or by which nominees of any Third Party are (or would be) elected or appointed to a majority of the seats on the Board of Directors of Premenos. (e) In no event shall Harbinger or Premenos, as the case may be, be required to pay any fee pursuant to this Section 8.4 if, immediately prior to the applicable termination of this Agreement, the party that otherwise would be entitled to receive such fee pursuant to this Section 8.4 was in material breach of any of its obligations under this Agreement. (f) If one party fails to promptly pay to the other any fee or expense due hereunder, the defaulting party shall pay the costs and expenses (including reasonable attorneys' fees and expenses) in connection with any action, including the filing of any lawsuit or other legal action, taken to collect payment, together with interest on any unpaid fee at the publicly announced prime rate of First Union National Bank of North Carolina from the date such fee was required to be paid. ARTICLE 9 MISCELLANEOUS PROVISIONS Section 9.1. Notices. Each notice, communication and delivery under this Agreement must be made in writing signed by the party making the same, must specify the Section pursuant to which it is given or being made, and must be delivered personally or by telecopy transmission, by recognized overnight courier or sent by registered or certified mail or by any express mail service (with postage and other fees prepaid) as follows: To Harbinger: Harbinger Corporation 1055 Lenox Park Boulevard Atlanta, Georgia 30319-5309 Attn: C. Tycho Howle Telecopy No.: (404) 848-2861 A-42 43 with a copy to: King & Spalding 191 Peachtree Street Atlanta, Georgia 30303 Attn: William R. Spalding, Esq. Telecopy No.: (404) 572-5145 To Premenos:Premenos Technology Corp. 1000 Burnett Avenue Concord, California 94520 Attn: Lew Jenkins Telecopy No.: (510) 825-9184 with a copy to: Bryan Cave LLP 245 Park Avenue New York, New York 10167 Attn: Stephan Mallenbaum, Esq. Telecopy No.: (212) 692-1900 or to such other representative or at such other address of a party as such party may furnish to the other parties in writing. Section 9.2. Disclosure Letters and Exhibits. The Premenos Disclosure Letter and the Harbinger Disclosure Letter and all Exhibits are hereby incorporated into this Agreement and are made a part of this Agreement as if set out in full in this Agreement. Section 9.3. Assignment; Successors in Interest. No assignment or transfer by Harbinger, HarbingerSub or Premenos of their respective rights and obligations under this Agreement prior to the Closing shall be made except with the prior written consent of the other parties. This Agreement shall be binding upon and shall inure to the benefit of the parties and their permitted successors and assigns, and any reference to a party shall also be a reference to a permitted successor or assign. Section 9.4. Investigations; Representations and Warranties. The representations and warranties of Harbinger and Premenos set forth in this Agreement shall terminate immediately after Closing. The covenants and agreements of each of Harbinger, HarbingerSub and Premenos set forth in this Agreement and the exhibits to this Agreement shall survive the Closing and shall remain in full force and effect until performed or satisfied by the applicable party responsible for the same in this Agreement or the exhibits to this Agreement. The respective representations and warranties of Harbinger, HarbingerSub and Premenos contained in this Agreement or in any certificate, or other document delivered by any party prior to Closing shall not be deemed waived or otherwise affected by any investigation made by a party. Section 9.5. Number; Gender. Whenever this Agreement so requires, the singular number shall include the plural and the plural shall include the singular, and the gender of any pronoun shall include the other genders. Section 9.6. Captions. The titles, captions and table of contents contained in this Agreement are inserted herein only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision of this Agreement. Unless otherwise specified to the contrary, all references to Articles and Sections are references to Articles and Sections of this Agreement and all references to Exhibits are references to Exhibits to this Agreement and the Premenos Disclosure Letter and the Harbinger Disclosure Letter. Section 9.7. Controlling Law; Integration; Amendment. (a) This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without reference to Delaware's choice of law rules and the parties agree that any legal proceeding instituted with respect to this Agreement shall be brought exclusively in any state or federal court in the State of Delaware and the parties submit to personal jurisdiction therein and agree that venue properly lies in any such court in the State of A-43 44 Delaware. This Agreement supersedes all negotiations, agreements and understandings among the parties with respect to the subject matter of this Agreement and constitutes the entire agreement among the parties. (b) This Agreement may not be amended, modified or supplemented except by written agreement of the parties. Section 9.8. Premenos and Harbinger Knowledge. As used in this Agreement, the terms "the best knowledge of Premenos," "known to Premenos" or words of similar import used herein with respect to Premenos shall mean the actual knowledge of any Premenos Executive, together with the knowledge a reasonable business person would have obtained after making reasonable inquiry and after exercising reasonable diligence with respect to the matters at hand. The "Premenos Executives" shall consist of Messrs. Lew Jenkins, David Hildes, Timothy A. Dreisbach, and H. Ward Wolff. As used in this Agreement, the terms "the best knowledge of Harbinger," "known to Harbinger" or words of similar import used herein with respect to Harbinger shall mean the actual knowledge of any Harbinger Executive, together with the knowledge a reasonable business person would have obtained after making reasonable inquiry and after exercising reasonable diligence with respect to the matters at hand. The "Harbinger Executives" shall consist of Messrs. C. Tycho Howle, David T. Leach, James C. Davis and Joel G. Katz. Section 9.9. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by law, the parties waive any provision of law which renders any such provision prohibited or unenforceable in any respect. Section 9.10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement or the terms hereof to produce or account for more than one of such counterparts. Section 9.11. Enforcement of Certain Rights. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person, firm or corporation other than the parties, and their permitted successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, or result in such person, firm or corporation being deemed a third party beneficiary of this Agreement. Section 9.12. Waiver. At any time prior to the Effective Time, the parties, by or pursuant to action taken by their respective Boards of Directors, may, to the extent legally permitted: (i) extend the time for the performance of any of the obligations or other acts of any other party; (ii) waive any inaccuracies in the representations or warranties of any other party contained in this Agreement or in any document or certificate delivered pursuant to this Agreement; (iii) waive compliance or performance by any other party with any of the covenants, agreements or obligations of such party contained in this Agreement; and (iv) waive the satisfaction of any condition that is precedent to the performance by the party so waiving of any of its obligations under this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. A waiver by one party of the performance of any covenant, agreement, obligation, condition, representation or warranty shall not be construed as a waiver of any other covenant, agreement, obligation, condition, representation or warranty. A waiver by any party of the performance of any act shall not constitute a waiver of the performance of any other act or an identical act required to be performed at a later time. Section 9.13. Merger. Harbinger, HarbingerSub and Premenos each acknowledges and agrees that it has not relied on, or been induced to enter into this Agreement on account of, any representation or warranty of any kind, whether oral or written, express or implied, except for such representations and warranties of Harbinger, HarbingerSub and Premenos as are set forth in this Agreement. A-44 45 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, as of the date first above written. HARBINGER CORPORATION [Corporate Seal] Attest: By: JAMES C. DAVIS ------------------------------------------------- Title: President and Chief Operating Officer ------------------------------------------- By: /s/ JOEL G. KATZ --------------------------------------------------- Title: Secretary --------------------------------------------- OLYMPIC SUBSIDIARY CORPORATION [Corporate Seal] Attest: By: JAMES C. DAVIS ------------------------------------------------- Title: President and Chief Operating Officer ------------------------------------------- By: /s/ JOEL G. KATZ --------------------------------------------------- Title: Secretary --------------------------------------------- PREMENOS TECHNOLOGY CORP. [Corporate Seal] Attest: By: LEW JENKINS ------------------------------------------------- Title: Chairman ------------------------------------------- By: /s/ H. WARD WOLFF --------------------------------------------------- Title: Secretary ---------------------------------------------
A-45 EX-4.1 4 REGISTRATION RIGHTS AGREEMENT 1 Exhibit 4.1 EXECUTION COPY REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") dated as of the 23rd day of October, 1997, is made by and between Harbinger Corporation, a Georgia corporation (the "Company"), and the holders of the common stock of the Company listed in Schedule I, attached hereto (the "Shareholders"). W I T N E S S E T H: WHEREAS, the Shareholders are the owners of the shares of Common Stock of the Company listed on Schedule I hereto; WHEREAS, it is a condition to the consummation of the transactions contemplated by that certain Share Purchase Agreement, dated as of the date hereof, by and among the Company and the Shareholders (the "Purchase Agreement"), that this Agreement be executed by the parties hereto; WHEREAS, pursuant to the Purchase Agreement, the Company has acquired all of the share capital of API Systems Limited, a company formed under the laws of England and Wales (Reg. No. 2942785) ("API") in consideration of the issuance of certain shares of Common Stock of the Company to the Shareholders; and WHEREAS, the parties are willing to execute this Agreement and to be bound by the provisions hereof. NOW, THEREFORE, in consideration of the mutual agreements and promises contained herein, in the Purchase Agreement and in the other agreements contemplated thereby, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Shareholders and the Company, each with the other, do hereby agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the following terms shall have the following respective meanings: "Common Stock" means the common stock, $0.0001 par value per share, of the Company. "Commission" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 2 "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Holder" means any Shareholder and any permitted transferee of Shareholder's rights under this Agreement pursuant to Section 2.8. "Lancashire Holder" means Lancashire Enterprise Ventures Limited and any transferee of Lancashire Enterprise Ventures Limited's rights under this Agreement pursuant to Section 2.8. "Lancashire Holder Representative" means Lancashire Enterprise Ventures Limited. "Management Holder" means any Shareholder other than Lancashire Enterprise Ventures Limited and any permitted transferee of any such Shareholder's rights under this Agreement pursuant to Section 2.8. "Management Holder Representative" means Allan W. Gray or, such time that he no longer owns any Registrable Securities, the Management Holder who owns the largest number of Registrable Securities. "Registrable Securities" means the Shares as the same may be adjusted from time to time to reflect any stock split, stock dividend or other distribution of capital stock in respect thereof, or issuance of capital stock in replacement thereof or exchange therefor. The term "Registrable Securities" does not include shares of Common Stock that have been registered, as defined below, and sold pursuant to such registration. The terms "register," "registered," and "registration" refer to a registration effected by preparing the filing of a registration statement in compliance with the Securities Act, and the declaration or order by the Commission of the effectiveness of such registration statement. "Requesting Lancashire Holders" has the meaning assigned to it in Section 2.2. "Requesting Management Holders" has the meaning assigned to it in Section 2.1. "Restricted Period" means the period beginning on the Closing Date (as defined in the Purchase Agreement) and ending on the earlier of (i) the date of filing by the Company with the Commission of the Company's annual report on Form 10-K, quarterly report on Form 10-Q or other filing with the Commission, or (ii) the date of dissemination by the Company of a press release, that reports the combined financial results of the Company and API covering at least 30 days of combined operations of the Company and API within the meaning of Section 201.01 of the Commission's Codification of Financial Reporting Policies. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. 2 3 "Shareholders" means the persons listed on Schedule I attached hereto. "Shares" means the shares of Common Stock of the Company listed on Schedule I hereto. In the event the Company shall declare a stock split, stock dividend or other distribution of capital stock in respect of, or issue capital stock in replacement of or exchange for, the Shares, such additional shares shall be Shares within the meaning of this Agreement. "Underwritten Public Offering" means a public offering of Common Stock for cash which is offered and sold in a registered transaction on a firm commitment underwritten basis through one or more underwriters, all pursuant to an underwriting agreement between the Company and any selling shareholders on the one hand and such underwriters on the other hand. ARTICLE II REGISTRATION RIGHTS Section 2.1 Demand Registration Rights of Management Holders. (a) Upon written notice delivered by the Management Holder Representative (as defined below) to the Company following the expiration of the Restricted Period, the Company agrees to effect on behalf of the Management Holders designated in the written notice (the "Requesting Management Holders") on one occasion a registration with respect to such number of Registrable Securities of the Requesting Management Holders as designated in the written notice, subject to the terms hereof, on a "shelf" registration statement for sale in the open market for a period not to exceed 45 days as provided in this Section 2.1; provided, however, that the parties shall agree in good faith to a reasonable number of days for the "shelf" registration statement to be effective for sale in the open market for a reasonable period in excess of 45 days if the "shelf" registration statement offers in excess of one million shares of Common Stock of the Company. Such registration statement shall be on Form S-3 if the Company is eligible to use such form. The fees and expenses of such registration and offering pursuant to this Section 2.1 shall be borne by the Company; provided, however, that the Requesting Management Holders will pay all of the underwriting discounts and commissions, transfer taxes and the expenses, disbursements and charges of their own counsel with respect to the Registrable Securities and, in the case of an Underwritten Public Offering, the expenses of the Company, including travel expenses, incurred in connection with the marketing of the Registrable Securities; provided, however, that if the Company includes any securities to be offered and sold by it in such registration statement, then the Company shall pay its relative percentage (equal to its percentage of the total number of shares being registered) of all out-of-pocket expenses (including travel expenses) incurred by the Company in connection with the marketing of the Registrable Securities. Each Management Holder agrees that the Management Holder Representative shall have the authority to act, or to forebear from acting, pursuant to this Agreement as he or she may determine in his or her discretion. (b) Whenever required under this Section 2.1 to effect the registration of the Registrable Securities, the Company shall use its reasonable best efforts to: 3 4 (i) As promptly as reasonably practicable, prepare and file with the Commission a registration statement with respect to all of the Registrable Securities, cause such registration statement to become effective as promptly as reasonably practicable, and keep such registration statement effective for the earlier of (A) forty-five (45) days or such longer period as is agreed upon by the Company and the Management Holder Representative for registration of in excess of one million shares or (B) until all such shares are sold; and (ii) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement (including documents incorporated therein) as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement. (c) The Management Holder Representative may request that the offer and sale of Registrable Securities by the Requesting Management Holders be made in an Underwritten Public Offering and shall include in its request made pursuant to this Section 2.1 the name of the managing underwriter or underwriters, if any, that the Management Holder Representative would propose to employ in connection with the public offering proposed to be made pursuant to the registration requested. The Company may reasonably object to any managing underwriter or underwriters proposed by the Management Holder Representative, in which case the Management Holder Representative shall propose another managing underwriter or underwriters that is or are reasonably acceptable to the Company. The Company and each Requesting Management Holder shall use its reasonable efforts to enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting in the manner set forth above. The Company will take such reasonable actions as are necessary to comply with the terms and obligations of such underwriting agreement and will furnish such underwriters and their respective representatives full access to all information reasonably requested in connection with their due diligence review of the Company and its operations. (d) The Company shall be entitled to defer for a reasonable period of time, but not exceeding one hundred twenty (120) days, the filing of any registration statement otherwise required to be prepared and filed by it pursuant to this Section 2.1 if the Company's Board of Directors determines in good faith that such deferral is necessary to avoid a requirement to disclose prematurely information regarding a possible merger or acquisition transaction or they otherwise determine in good faith that such registration would be materially opposed to the best interests of the Company and its shareholders; provided that such right to defer registration shall be exercised no more than one time in any six month period. If the Company shall so postpone the filing of a registration statement, the Management Holder Representative shall have the right to withdraw such request for registration by giving written notice to the Company within fifteen (15) days after receipt of notice from the Company of such postponement. In the event of such withdrawal, such request shall not be counted for purposes of Section 2.1 hereof. 4 5 (e) The Company shall be entitled to include in any registration statement referred to in this Section 2.1, for sale in accordance with the method of disposition specified by the Management Holder Representative, shares of the Company's Common Stock to be sold by the Company for its own account, or other shareholders for their own account (except as and to the extent that, in the opinion of the managing underwriter if such method of disposition shall be effected as an Underwritten Public Offering, such inclusion would result in any of the Registrable Securities being excluded from the offering or would materially adversely affect the marketing of the Registrable Securities). (f) Anything in this Section 2.1 to the contrary notwithstanding, the Company shall not be required to file a registration statement requested pursuant to this Section 2.1 which would be declared effective after the last day of a fiscal year of the Company and prior to the date on which the Company's audited financial statements for such fiscal year are first available, if such registration would require the inclusion of audited financial statements other than such audited financial statements. (g) No request for registration under this Section 2.1 may be made within three (3) months after the effective date of any other registration statement filed by the Company, provided that the Holders were eligible to participate in such registration and were permitted to include in such registration all Registrable Securities sought to be included therein. A registration statement requested pursuant to this Section 2.1 which does not become effective after the Company has commenced preparation of such registration statement by reason of the withdrawal from such registration (other than pursuant to Section 2.1(d)), prior to effectiveness, by Holders of a majority of the Registrable Securities participating in such registration (other than a withdrawal based on advice of counsel relating to a matter primarily with respect to disclosure relating to the Company) shall be deemed to satisfy the Company's obligation to register once upon the request of the Holders unless such Holders shall have elected to pay or reimburse all costs and expenses incurred by the Company in connection with such registration. Notwithstanding the foregoing, such obligation shall be deemed not satisfied (i) if the offering is prevented by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason other than by reason of some act or omission of any Holder of Registrable Securities participating in such registration, or (ii) if the conditions to closing agreed to be the Company specified in any underwriting agreement entered into in connection with such registration are not satisfied by reason of a breach by the Company of its covenants contained therein. Section 2.2 Demand Registration Rights of Lancashire Holders. (a) Upon written notice delivered by the Lancashire Holder Representative (as defined below) to the Company following the expiration of the Restricted Period, the Company agrees to effect on behalf of the Lancashire Holders designated in the written notice (the "Requesting Lancashire Holders") on one occasion a registration with respect to such number of Registrable Securities of the Requesting Lancashire Holders as designated in the written notice, subject to the terms hereof, on a "shelf" registration statement for sale in the open market for a period not to exceed 45 days as provided in this Section 2.2; provided, however, that the parties shall agree in good faith to a reasonable number of days for the "shelf" registration statement to be effective for sale in the 5 6 open market for a reasonable period in excess of 45 days if the "shelf" registration statement offers in excess of one million shares of Common Stock of the Company. Such registration statement shall be on Form S-3 if the Company is eligible to use such form. The fees and expenses of such registration and offering pursuant to this Section 2.2 shall be borne by the Company; provided, however, that the Requesting Lancashire Holders will pay all of the underwriting discounts and commissions, transfer taxes and the expenses, disbursements and charges of their own counsel with respect to the Registrable Securities and, in the case of an Underwritten Public Offering, the expenses of the Company, including travel expenses, incurred in connection with the marketing of the Registrable Securities; provided, however, that if the Company includes any securities to be offered and sold by it in such registration statement, then the Company shall pay its relative percentage (equal to its percentage of the total number of shares being registered) of all out-of-pocket expenses (including travel expenses) incurred by the Company in connection with the marketing of the Registrable Securities. Each Lancashire Holder agrees that the Lancashire Holder Representative shall have the authority to act, or to forebear from acting, pursuant to this Agreement as he or she may determine in his or her discretion. (b) Whenever required under this Section 2.2 to effect the registration of the Registrable Securities, the Company shall use its reasonable best efforts to: (i) As promptly as reasonably practicable, prepare and file with the Commission a registration statement with respect to all of the Registrable Securities, cause such registration statement to become effective as promptly as reasonably practicable, and keep such registration statement effective for the earlier of (A) forty-five (45) days or such longer period as is agreed upon by the Company and the Lancashire Holder Representative for registration of in excess of one million shares or (B) until all such shares are sold; and (ii) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement (including documents incorporated therein) as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement. (c) The Lancashire Holder Representative may request that the offer and sale of Registrable Securities by the Requesting Lancashire Holders be made in an Underwritten Public Offering and shall include in its request made pursuant to this Section 2.2 the name of the managing underwriter or underwriters, if any, that the Lancashire Holder Representative would propose to employ in connection with the public offering proposed to be made pursuant to the registration requested. The Company may reasonably object to any managing underwriter or underwriters proposed by the Holder Representative, in which case the Holder Representative shall propose another managing underwriter or underwriters that is or are reasonably acceptable to the Company. The Company and each Requesting Holder shall use its reasonable efforts to 6 7 enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting in the manner set forth above. The Company will take such reasonable actions as are necessary to comply with the terms and obligations of such underwriting agreement and will furnish such underwriters and their respective representatives full access to all information reasonably requested in connection with their due diligence review of the Company and its operations. (d) The Company shall be entitled to defer for a reasonable period of time, but not exceeding one hundred twenty (120) days, the filing of any registration statement otherwise required to be prepared and filed by it pursuant to this Section 2.2 if the Company's Board of Directors determines in good faith that such deferral is necessary to avoid a requirement to disclose prematurely information regarding a possible merger or acquisition transaction or they otherwise determine in good faith that such registration would be materially opposed to the best interests of the Company and its shareholders; provided that such right to defer registration shall be exercised no more than one time in any six month period. If the Company shall so postpone the filing of a registration statement, the Holder Representative shall have the right to withdraw such request for registration by giving written notice to the Company within fifteen (15) days after receipt of notice from the Company of such postponement. In the event of such withdrawal, such request shall not be counted for purposes of Section 2.2 hereof. (e) The Company shall be entitled to include in any registration statement referred to in this Section 2.2, for sale in accordance with the method of disposition specified by the Holder Representative, shares of the Company's Common Stock to be sold by the Company for its own account, or other shareholders for their own account (except as and to the extent that, in the opinion of the managing underwriter if such method of disposition shall be effected as an Underwritten Public Offering, such inclusion would result in any of the Registrable Securities being excluded from the offering or would materially adversely affect the marketing of the Registrable Securities). (f) Anything in this Section 2.2 to the contrary notwithstanding, the Company shall not be required to file a registration statement requested pursuant to this Section 2.2 which would be declared effective after the last day of a fiscal year of the Company and prior to the date on which the Company's audited financial statements for such fiscal year are first available, if such registration would require the inclusion of audited financial statements other than such audited financial statements. (g) No request for registration under this Section 2.2 may be made within three (3) months after the effective date of any other registration statement filed by the Company, provided that the Holders were eligible to participate in such registration and were permitted to include in such registration all Registrable Securities sought to be included therein. A registration statement requested pursuant to this Section 2.2 which does not become effective after the Company has commenced preparation of such registration statement by reason of the withdrawal from such registration (other than pursuant to Section 2.2(d)), prior to effectiveness, by Holders of a majority of the Registrable Securities participating in such registration (other than a withdrawal based on advice of counsel relating to a matter primarily with respect to 7 8 disclosure relating to the Company) shall be deemed to satisfy the Company's obligation to register once upon the request of the Holders unless such Holders shall have elected to pay or reimburse all costs and expenses incurred by the Company in connection with such registration. Notwithstanding the foregoing, such obligation shall be deemed not satisfied (i) if the offering is prevented by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason other than by reason of some act or omission of any Holder of Registrable Securities participating in such registration, or (ii) if the conditions to closing agreed to be the Company specified in any underwriting agreement entered into in connection with such registration are not satisfied by reason of a breach by the Company of its covenants contained therein. Section 2.3 "Piggyback" Registration Rights. If the Company, at any time after the expiration of the Restricted Period and prior to the earlier of (i) the date on which all Registrable Securities shall have been disposed of by the Holders thereof or (ii) one year after the date of this Agreement, proposes to register under the Securities Act any class of the Company's equity or debt securities for sale to the public on a registration statement on Form S-1, S-2, S-3 or any successor form for the sale of equity securities to the public, then and in each such case the Company shall give fifteen (15) days prior written notice of such proposed registration to the Management Holder Representative and the Lancashire Holder Representative and shall cause such number of Registrable Securities as shall be requested by the Holder Representatives on behalf of the Holders included in such request within ten (10) days thereafter to be included, upon the same terms (including the method of distribution), in any such offering. The Company may, without the consent of the Management Holder Representative and/or the Lancashire Holder Representative, as applicable, withdraw any such registration and abandon any proposed offering if in the reasonable good faith belief of the Board of Directors of the Company such withdrawal and abandonment appears to be in the Company's best interests. The failure of any Holder to exercise its rights hereunder with respect to any registration shall not constitute a waiver of its rights to participate in any other registration. The foregoing obligations shall be subject to the following conditions and limitations: (i) The Company shall not be required to give such notice or include any Registrable Securities in any form of registration statement unless such Registrable Securities of such Holder are eligible for inclusion in the applicable form of registration statement as described above; (ii) In an Underwritten Public Offering of the Registrable Securities, each Holder shall agree (a) to have the Registrable Securities sold to or by such underwriter or managing agent on terms substantially equivalent to the terms upon which the Company is selling the securities so registered by it, and (b) to delay the sale of any securities of the Company not sold by it in such registration statement for the period requested by such underwriter or managing agent up to 180 days (or such lesser amount of time if permitted by such underwriter or managing agent) following the effective date of such registration statement, provided that the length of time which the Company shall be required to maintain the effectiveness of any shelf 8 9 registration statement which shall then be effective pursuant to Section 2.1 or Section 2.2 shall be extended by the number of days of such delay; (iii) If any underwriter in such Underwritten Public Offering shall advise the Company that it declines to include a portion of the Registrable Securities requested by the Holders to be included in the registration statement, then in case of an exclusion as to a portion of such Registrable Securities, such portion shall be allocated among the Holders in proportion to the respective number of shares of common stock requested to be registered by such Holders of the Company's securities. The Holders hereby acknowledge and agree that the Holders shall be subordinate in priority of registration to any person to whom the Company has granted registration rights prior to the date hereof, and the Company hereby acknowledges and agrees that the Holders shall rank pari passu in priority of registration to any person to whom the Company may grant rights to registration after the date hereof and that the Company shall not grant any "piggyback" or incidental registration rights after the date hereof which shall be superior in priority of registration to the rights of the Holders; and (iv) The fees and expenses of the offering shall be borne by the Company; provided, however, that the Holders will pay all of the underwriting discounts and commissions, transfer taxes, transfer agent fees and the expenses, disbursements and charges of their own counsel with respect to the Registrable Securities. Section 2.4 Undertakings of Holders. As a condition of the registration provided for in this Section 2, each Holder who includes Registrable Securities in such registration shall (a) furnish such information concerning itself and the terms of its proposed offering to the Company as requested in connection with such registration; (b) agree to indemnify the Company (and each of its officers and directors who have signed the registration statement relating to the registration) and each person, if any, who controls the Company within the meaning of the Securities Act, the underwriters and each person, if any, who controls such underwriter within the meaning of the Securities Act, to the extent customary and reasonably deemed necessary by the Company with respect to the accuracy of any information so furnished by such Holder; and (c) reasonably cooperate with the Company and its representatives to cause such registration to become effective at the earliest practicable time. Section 2.5 Additional Undertakings of the Company. Without limiting the generality of the provisions of this Section 2, if and whenever the Company is under an obligation to effect the registration of any Registrable Securities, the Company shall at its sole cost and expense: (i) furnish to the Holder such numbers of each prospectus (including each preliminary prospectus and prospectus supplement) in conformity with the requirements of the Securities Act, and such other documents as are 9 10 reasonably requested by the Holder to facilitate the public offering of its Registrable Securities; and (ii) use its reasonable efforts to register or qualify the Registrable Securities covered by such registration under the securities or blue sky laws of such jurisdictions (and shall do any and all other acts or things) as is reasonable to enable the Holder to consummate the public sale or the disposition of its Registrable Securities; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. Section 2.6 Indemnification. (a) In the case of each registration effected by the Company pursuant to this Agreement in which any Holder's Registrable Securities are included, the Company agrees to indemnify and hold harmless such Holder against any and all losses, claims, damages or liabilities to which they or any of them may become subject under the Securities Act or any other statute or common law, including any amount paid in settlement of any litigation, commenced or threatened, if such settlement is effected with the written consent of the Company, and to reimburse them for any reasonable legal or other reasonable expenses incurred by them in connection with the investigation of any claims and defenses of any actions (subject to Section 2.6(c)), insofar as any such losses, claims, damages, liabilities or actions arise out of or are based upon: any untrue statement or alleged untrue statement of a material fact contained in the registration statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto or any document incorporated by reference therein, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the indemnification agreement contained in this Section 2.6(a) shall not apply to such losses, claims, damages, liabilities or actions arising out of, or based upon, any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was made in reliance upon and in conformity with information furnished to the Company in writing by a Holder for use in connection with the preparation of the registration statement or any preliminary prospectus or final prospectus contained in the registration statement or any such amendment thereof or supplement thereto or any document incorporated by reference therein. (b) In the case of each registration effected by the Company pursuant to this Agreement in which any Holder's Registrable Securities are included, such Holder shall be obligated, in the same manner and to the same extent as set forth in Section 2.6(a), to indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, its directors and officers, with respect to any statement or alleged untrue statement in, or omission or alleged omission from, such registration statement or any post-effective amendment thereof or any preliminary prospectus or final prospectus (as amended or supplemented, if amended or supplemented as aforesaid) contained in such registration statement, if such statement or omission was made in reliance upon and in 10 11 conformity with information furnished in writing to the Company by such indemnifying person for use in connection with the preparation of such registration statement or any preliminary prospectus or final prospectus contained in such registration statement or any such amendment thereof or supplement thereto; provided, however, that the liability of each Holder hereunder shall be limited to the proceeds received by each Holder from the sale of Registrable Securities covered by such registration statement, amendment, supplement or prospectus, as the case may be. (c) Each person to be indemnified pursuant to this Section 2.6 shall, promptly after its receipt of written notice of the commencement of any action against such indemnified person in respect of which indemnity may be sought from an indemnifying person under this Section 2.6, notify the indemnifying person in writing of the commencement thereof. The omission of any indemnified person to so notify an indemnifying person of the commencement of any such action shall not relieve the indemnifying person from any liability in respect of such action which it may have to such indemnified person on account of the indemnity agreement contained in this Section 2.6 except to the extent the indemnifying person shall be prejudiced thereby. If any such action shall be brought against any indemnified person and it shall notify an indemnifying person of the commencement thereof, the indemnifying person shall be entitled to participate therein and, to the extent it may desire, jointly with any other indemnifying persons similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified person, and after notice from the indemnifying person to such indemnified person of its election so to assume the defense thereof, the indemnifying person shall not be liable to such indemnified person under this Section 2.6 for any legal or other expenses subsequently incurred by such indemnified person in connection with the defense thereof other than reasonable costs of investigation unless (i) the indemnified party shall have employed counsel in an action in which the indemnified party and indemnifying party are both defendants and there is a conflict of interest between such parties that would prevent counsel from adequately representing both parties, (ii) the indemnifying party shall not have employed counsel satisfactory within the exercise of reasonable judgment of the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. The undertaking contained in this Section 2.6 shall be in addition to any liabilities which the indemnifying person may have pursuant to law. (d) If the indemnification provided for in this Section 2.6 is unavailable to or insufficient to hold harmless an indemnified party under Section 2.6 (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company and the Holders in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by 11 12 the Company or the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Section 2.7 Rule 144 Requirements. For a period commencing on the date of this Agreement ending upon the first to occur of (i) the second anniversary of the date of this Agreement or (ii) the sale of all Registrable Securities by the Holders, with a view to making available to each Holder the benefits of Rule 144 (or any successor rule thereto) promulgated under the Securities Act, the Company agrees to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act. Each Holder's right to require the Company to register the Registrable Securities pursuant to Sections 2.1, 2.2 and 2.3 shall expire at such time as the Registrable Securities held by such Holder are eligible for sale in the open market pursuant to Rule 144 (or any successor rule thereto) under the Securities Act or Section 4(1) thereof. Section 2.8 Transfer of Registration Rights. The registration rights described in this Section 2 shall not be transferable without the prior consent of the Company; provided, however, that a Holder may transfer such registration rights to a permitted transferee of Shares so long as (i) such transfer of Shares is conducted in compliance with all applicable transfer restrictions, whether imposed by contract, applicable law or otherwise, and (ii) such transferee is (a) a member of the Holder's immediate family or is a trust or family limited partnership established for the benefit of such a family member or (b) an affiliate, partner or shareholder of any Holder that is not a natural person; provided further, that such registration rights shall not be transferable by any transferee contemplated by the foregoing proviso who is a natural person. ARTICLE III TRANSFERABILITY Section 3.1 Transferability. Transfer of the Shares shall be made only on the books of the Company by the holders of record thereof or by their legal representatives who shall furnish proper evidence of authority to transfer, or by their attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Company, subject to the restrictions set forth in the Purchase Agreement and the documents and agreements contemplated thereby. The Holder(s) in whose name the Shares stand on the books of the Company shall be deemed by the Company to be owner(s) thereof for all purposes. Section 3.2 Restrictive Legends. Unless and until otherwise permitted by this Section, each instrument evidencing Shares shall contain or otherwise be imprinted with a suitable legend in substantially the following form: The shares evidenced by this certificate have not been registered under the Securities Act of 1933, as amended, or under the securities laws of any state, and such shares may not be sold, transferred, pledged or hypothecated unless (1) covered by an effective registration statement under the Securities Act of 1933; (2) in accordance with Rule 144 of the rules and regulations of such act; or (3) in accordance with some other transaction which is exempt from the registration requirements of such act. Furthermore, the shares evidenced by this certificate 12 13 have been offered and sold in reliance on the exemption from registration provided by Regulation S and/or other exemptions promulgated under the Securities Act of 1933. The shares represented by this certificate were issued pursuant to a business combination that is accounted for as a "pooling of interest" and may not be sold, nor may the owner thereof reduce his risk relative thereto in any way (except as permitted by SEC Staff Accounting Bulletin No. 76), until such time as Harbinger Corporation has published financial results covering at least 30 days of combined operations after the effective date of the event through which the business combination was effected. The Company is hereby authorized to place "stop transfer" instructions on its records or to instruct any transfer agent to prevent the transfer of such shares except in conformity with this Article. Upon the request of the Holder, the Company shall cause the certificates representing the Shares to be reissued free of any legend relating to restrictions or transfer, as soon as practicable after the Company has been furnished evidence satisfactory to it that the restrictions of Regulation S are no longer applicable or, if the issuance of such shares was not pursuant to Regulation S, that the shares can be transferred pursuant to Rule 144(k). Section 3.3 Restriction on Transfer. No Shares may be transferred prior to the expiration of the Restricted Period. In addition, no Shareholder may transfer Shares other than under Sections 2.1, 2.2 and 2.3 until it has delivered written notice to the Company describing briefly the manner of any such proposed transfer and until (i) the Company has received from the Shareholder's counsel an opinion (reasonably satisfactory in form and substance to the Company's counsel) that such transfer can be made without compliance with the registration provisions of the Securities Act or any state securities law, or (ii) such transfer complies with Rule 144 or Regulation S (or comparable successor provisions) promulgated under the said Securities Act and applicable state securities act requirements, or (iii) a registration statement filed by the Company is declared effective by the SEC and under applicable state securities laws or steps necessary to perfect exemptions from such registration are completed. Notwithstanding anything to the contrary herein, in the event that there is an Underwritten Public Offering of securities of the Company pursuant to a registration covering Registrable Securities and a Holder of Registrable Securities does not sell his Registrable Securities to the underwriters of the Company's securities in connection with such offering, such Holder shall refrain from selling such Registrable Securities during the period of distribution of the Company's securities by such underwriters and the period in which the underwriting syndicate participates in the after market; provided, however, that such Holder shall, in any event, be entitled to sell its Registrable Securities commencing on the ninetieth (90th) day after the effective date of such registration statement in accordance with the terms hereof or such other amount of time that may be required by the underwriter of similarly situated holders of the Company's securities and provided further that the length of time which the Company shall be required to maintain the effectiveness of any shelf registration statement which shall then be 13 14 effective pursuant to Section 2.1 or Section 2.2 shall be extended by the number of days of which the Holders shall be required to refrain from selling pursuant to this paragraph. ARTICLE IV MISCELLANEOUS Section 4.1 Notices. All notices, communications and deliveries hereunder shall be made in writing signed by the party making the same, shall specify the Section hereunder pursuant to which it is given or being made, and shall be delivered personally or by telecopy transmission or sent by registered or certified mail or by any express mail service (with postage and other fees prepaid) as follows: If to Company: Harbinger Corporation 1055 Lenox Park Blvd. Atlanta, Georgia 30319-5309 Attn: President Telecopy No.: 404/467-3476 with a copy to: Harbinger Corporation 1055 Lenox Park Boulevard Atlanta, Georgia 30319-5309 Attn: Mr. Loren B. Wimpfheimer Telecopy No. 404/467-3476 and a copy to: Morris, Manning & Martin, L.L.P. 3343 Peachtree Road, N.E. Suite 1600 Atlanta, Georgia 30326 Attn: John C. Yates, Esq. Telecopy No.: 404/365-9532 If to the Management Holders: c/o Allan W. Gray 17 Durham Close, Westhoughton, Lancashire, BLS 2RP, England, U.K. Telecopy No.: 01942 814712 If to the Lancashire Holders: c/o Lancashire Enterprise Ventures Limited 17 Ribblesdale Place Preston PR1 3NA, England, U.K. Attn: Mr. Richard Bamford Telecopy No.: 011-44-1772-880697 14 15 with a copy to: LAYTONS 22 St. John Street Manchester M3 4EB, England, U.K. Attn: John Gavan Telecopy No.: 011-44-161-834-6862 Section 4.2 Remedies. Each party hereto acknowledges that a remedy at law for any breach or attempted breach of this Agreement will be inadequate, agrees that each other party hereto shall be entitled to specific performance and injunctive and other equitable relief in case of any such breach or attempted breach, and further agrees to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or any other equitable relief. Section 4.3 Effect of Sale. Any Holder who sells all of his Registrable Securities pursuant to the terms of this Agreement shall cease to be a party to this Agreement and shall have no further rights or obligations hereunder. Section 4.4 Amendment. This Agreement may not be modified or amended except in a writing signed by the Company and the holders of 66-2/3% of the total Registrable Securities outstanding at such time (with any shares of Registrable Securities issuable upon conversion of other securities deemed to be outstanding for these purposes). Section 4.5 Governing Law. This Agreement shall be subject to and governed by the laws of the State of Georgia, U.S.A. Section 4.6 Jurisdiction. All legal actions to enforce or interpret the provisions of this Agreement shall be filed in a court of the State of Georgia or of the United States District Court having jurisdiction over Fulton County, Georgia. All parties irrevocably waive any objection they may have to the laying of venue of any suit, action or proceeding arising out of or relating hereto brought in any such court, irrevocably waive any claim that any such suit, action or proceeding so brought has been brought in an inconvenient forum and further waive the right to object that such court does not have jurisdiction over such party. No party shall bring a suit, action or proceeding in respect of this Agreement in any other jurisdiction than as aforesaid. Section 4.7 Successors and Assigns. This Agreement shall be binding upon and inure to the parties contained in this Agreement and their respective heirs, executors, distributees, successors (including successors by merger) and permitted assigns. Section 4.8 Invalid Provisions. Should any portion of this Agreement be adjudged or held to be invalid, unenforceable or void, such holding shall not have the effect of invalidating or voiding the remainder of this Agreement and the parties hereby agree that the portion so held invalid, unenforceable or void shall, if possible, be deemed amended or reduced in scope, or to otherwise be stricken from this Agreement to the extent required for the purposes of validity and enforcement thereof. 15 16 Section 4.9 Section Headings. The section and paragraph headings contained herein are for reference purposes only and shall not in any way affect the meaning and interpretation of this Agreement. Section 4.10 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and such counterparts together shall constitute only one instrument. Section 4.11 Entire Agreement. This Agreement constitutes the sole and entire agreement between the parties hereto with respect to the subject matter hereof. Section 4.12 Time of the Essence. Time is of the essence with respect to every provision of this Agreement. Section 4.13 Pooling of Interests. If any provision of this Agreement or the application of any such provision to any person or circumstance precludes the use of "pooling of interests" accounting treatment in connection with the Purchase Agreement, then such provision shall be of no force and effect to the extent, and solely to the extent necessary to preserve such accounting treatment pursuant to the Purchase Agreement, and in that event, the remainder of this Agreement shall not be affected, and in lieu of such provision there shall be added as part of this Agreement a provision as similar in terms as may be possible for the purchase under the Purchase Agreement to be treated as a "pooling of interests" for accounting purposes. Section 4.14 Number; Gender. Whenever the context so requires, the singular number shall include the plural and the plural shall include the singular, and the gender of any pronoun shall include the other gender. 16 17 IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf and its corporate seal to be hereunto affixed by its duly authorized officers and the Shareholders have executed this Agreement, as of the day and year first above written. HARBINGER CORPORATION By: ---------------------------------------- Name: Theodore E. Ciochon Title: Vice President SHAREHOLDERS: LANCASHIRE ENTERPRISE VENTURES LIMITED By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- -------------------------------------------- Philip J. Bird -------------------------------------------- Allan W. Gray -------------------------------------------- Tom P.C. Reynolds -------------------------------------------- C.G. Summers 17 18 Schedule I
Shareholder Number of Shares ----------- ---------------- Lancashire Enterprise Ventures Limited 84,837 Philip J. Bird 84,152 Allan W. Gray 84,152 Tom P.C. Reynolds 29,129 C.G. Summers 29,129
18 EX-99.1 5 FORM OF IRREVOCABLE PROXY AGREEMENT 1 EXHIBIT 99.1 IRREVOCABLE PROXY AGREEMENT THIS PROXY AGREEMENT (the "Agreement"), dated as of October 23, 1997, by and between _______________, a stockholder ("Premenos Stockholder") of Premenos Technology Corp., a Delaware corporation ("Premenos"), and HARBINGER CORPORATION, a Georgia corporation (the "Company"). W I T N E S S E T H: WHEREAS, the Company, Premenos and Olympic Subsidiary Corporation, a Delaware corporation and a wholly owned subsidiary of the Company ("Merger Sub"), have entered into an Merger Agreement, dated as of October 23, 1997 (the "Merger Agreement"), pursuant to which Merger Sub will be merged with and into Premenos with Premenos as the surviving corporation (the "Merger"); WHEREAS, Premenos Stockholder is the owner of the number of shares (the "Shares") of Common Stock, par value $.01 per share, of Premenos (the "Premenos Common Stock") set forth on Annex I (the term "Shares" shall also include any shares of Premenos Common Stock of which Premenos Stockholder currently has beneficial ownership (including sole voting power) or obtains beneficial ownership during the term of this Agreement); WHEREAS, concurrently with the execution and delivery of the Merger Agreement and as a condition and inducement to the Company's willingness to enter into the Merger Agreement, Premenos Stockholder desires to grant to the Company an irrevocable proxy to vote the Shares; NOW, THEREFORE, in consideration of the premises and the agreements herein contained and intending to be legally bound, the parties agree as follows: 1. Proxy. Subject to the terms and conditions hereof, Premenos Stockholder hereby appoints the Company, with full power of substitution, as proxy holder (the duly authorized officers of the Company hereinafter referred to as the "Proxy Committee"), to represent and to vote the Shares in favor of the Merger Agreement and the Merger, at any meeting (whether special or annual, and whether or not adjourned) or by written action of stockholders of Premenos; the authority granted hereunder (the "Proxy") shall be irrevocable during the term of this Agreement and deemed to be coupled with an interest sufficient in law as required by Section 212(e) of the Delaware General Corporation Law. 2. Changes in Shares. For all purposes of this Agreement, the Shares shall include any securities issued or exchanged with respect to such Shares upon any recapitalization, reclassification, merger, consolidation, spin-off, partial or complete liquidation, stock dividend, split-up or combination of the securities of Premenos or any other change in Premenos's capital structure. 1 2 3. Representations and Warranties of Premenos Stockholder. Premenos Stockholder represents and warrants to the Company as follows: 3.1 Ownership of the Shares. Premenos Stockholder has valid and marketable title to the Shares listed on Annex I, free and clear of all security interests, liens, claims, pledges, assessments, options, equities, charges and encumbrances whatsoever, and with no proxies or restrictions on the voting rights or other incidents of record or beneficial ownership pertaining thereto (except for the Proxy being granted pursuant to this Agreement, the Voting Agreement dated July 12, 1995 between David Hildes and Lew Jenkins (the "Voting Agreement") and any applicable restrictions under the securities laws) and there are no outstanding options, warrants or rights to purchase or acquire or agreements relating to any of such Shares. Such Shares are validly issued and outstanding, fully paid and non-assessable with no personal liability attaching to the ownership thereof. 3.2 Valid and Binding Agreement; No Violation. This Agreement constitutes a valid and binding agreement of Premenos Stockholder, enforceable in accordance with its terms. Neither the execution of this Agreement, the granting of the Proxy, nor the voting of the Shares by the Proxy Committee, will constitute a violation of, or conflict with, or result in a default under, any contract, commitment, agreement, understanding, arrangement or restriction of any kind to which Premenos Stockholder is a party or by which Premenos Stockholder is bound or to which Premenos Stockholder's Shares are subject. 4. Representations and Warranties of the Company. The Company represents and warrants to Premenos Stockholder as follows: 4.1 Authorization. The execution and delivery of this Agreement by the Company has been duly authorized by all requisite corporate action. 4.2 Valid and Binding Agreement. This Agreement constitutes a valid and binding agreement of the Company, enforceable in accordance with its terms. 5. Impact on Voting Agreement. Premenos Stockholder hereby acknowledges that, during the term of this Agreement, this Agreement supersedes the Voting Agreement with respect to all matters governed by this Agreement. 6. Publication of Interim Financial Results. The Company agrees to: (a) publicly release a thirty (30) day interim financial statement (that includes the combined operations of the Company and Premenos) covering the first full calendar month of combined operations following the Closing (as defined in the Merger Agreement) within the meaning of Section 201.01 of the SEC Codification of Financial Reporting Policies as promptly as reasonably practicable, but in any event no later than twenty-five (25) days following the end of such first full calendar month (the "Interim Statement"); and (b) to deliver the Interim Statement to Premenos Stockholder at least five (5) days prior to its public release. 2 3 7. Covenants of Premenos Stockholder. Premenos Stockholder hereby covenants and agrees as follows: 7.1 Inquires or Proposals. From the date of execution of this Agreement to termination hereof, Premenos Stockholder shall not, directly or indirectly, through any officer, director, employee, representative or agent (i) solicit, initiate, or encourage any inquiries or proposals that constitute, or could reasonably be expected to lead to, a "Competing Offer" (as defined in the Merger Agreement), or (ii) engage in negotiations or discussions concerning, or provide any non-public information to any person or entity relating to, any Competing Offer. 7.2 Legend. Until termination of this Agreement, each certificate representing the Shares (the "Certificates") shall include a legend (the "Legend") in substantially the following form: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN IRREVOCABLE PROXY AGREEMENT, DATED AS OF OCTOBER 23, 1997, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE CORPORATION. NO VOTE OR TRANSFER OF ANY SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID UNLESS MADE IN ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. Within 10 days of the execution of this Agreement, Premenos Stockholder shall deliver the Certificates to the Company for purposes of affixing the Legend. The Legend shall be removed upon the termination of this Agreement pursuant to Section 8.8 hereof. 7.3 Stockholder Capacity. Premenos Stockholder has executed this Agreement in his capacity as a Stockholder of Premenos and not in his capacity as an officer or director of Premenos. Without limiting the foregoing, nothing herein shall limit or affect any actions taken by Premenos Stockholder in his capacity as an officer or director of Premenos in exercising Premenos's rights under the Merger Agreement. 8. Miscellaneous. 8.1 Expenses. All costs and expenses (including legal fees) incurred in connection with this Agreement shall be paid by the party incurring such expense. 8.2 Survival of Representations. Notwithstanding any provision of this Agreement, all representations, warranties, covenants and agreements made by Premenos Stockholder and the Company in this Agreement shall survive until the earlier of (a) the closing of the Merger or (b) the termination of the Merger Agreement in accordance with its terms; provided, however, if the Merger is closed in accordance with the terms of the Merger Agreement, Section 6 of this Agreement shall survive termination of this Agreement until satisfied in accordance with the terms thereof. 8.3 Further Assurance and Cooperation. From time to time, and without further consideration, each party will execute and deliver to the other such documents and take such action 3 4 as the other may reasonably request in order to consummate more effectively the terms of this Agreement. 8.4 Parties in Interest; Complete Agreement; Amendment. All authority herein conferred or agreed to be conferred by Premenos Stockholder shall survive Premenos Stockholder's death, incapacity, dissolution, liquidation or termination. This Agreement constitutes the sole understanding of the parties hereto with respect to the subject matter hereof; provided, however, that this provision is not intended to abrogate any other written agreement between or among the parties executed with or after this Agreement or any written agreement pertaining to another subject matter. No amendment of this Agreement shall be binding unless made in writing and duly executed by the Company and Premenos Stockholder. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the Company (if such assigning party is Premenos Stockholder) or Premenos Stockholder (if such assigning party is the Company). 8.5 Specific Performance. Each party acknowledges that its obligations hereunder are unique, and agrees that the other shall have the right, in addition to any other rights it may have at law, to specific performance or equitable relief by way of injunction if it shall fail to perform any of its obligations hereunder. 8.6 Law Governing; Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware. Unless otherwise expressly provided herein, all references in this Agreement to Section(s) shall refer to the Section(s) of this Agreement. The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning of this Agreement. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 8.7 Consent to Jurisdiction; Venue. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware, for the purpose of any action or proceeding arising out of or relating to this Agreement, and each of the parties hereto irrevocably agrees that all claims in respect to such action or proceeding may be heard and determined exclusively in any state or federal court sitting in Wilmington, Delaware. Each of the parties hereto agrees that a final judgment in any action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each of the parties hereto irrevocably consents to the service of any summons and complaints and any other process in any other action or proceeding relating to this Agreement, on behalf of itself or its property, by the personal delivery of copies of such process to such party. Nothing in this Section 6.7 shall affect the right of any party hereto to serve legal process in any other manner permitted by law. 4 5 8.8 Term of the Agreement. This Agreement shall terminate upon the first to occur of (i) the termination of the Merger Agreement in accordance with its terms, or (ii) the closing of the Merger. 5 6 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. HARBINGER CORPORATION By: ------------------------- Name: ------------------- PREMENOS STOCKHOLDER ----------------------------- 6 7 Annex I
Name Shares
7 EX-99.2 6 TEXT OF PRESS RELEASE 1 EXHIBIT 99.2 Contacts: Harbinger Corporation Premenos Corporation Joel Katz, CFO Ward Wolff, SVP/CFO Phone: 404-467-3011 510-688-2718 Email: jkatz@harbinger.com wardw@premenos.com For Immediate Release... HARBINGER AND PREMENOS SIGN DEFINITIVE MERGER AGREEMENT LEADING MARKET POSITION INCREASES TO SERVE OVER 50,000 ELECTRONIC COMMERCE AND EDI CUSTOMERS. Atlanta, GA and Concord, CA - October 23, 1997 - Harbinger Corporation (NASDAQ:HRBC), the world's leading provider of single-source Electronic Commerce and EDI solutions, announced today that it has executed a definitive agreement to acquire Premenos Corporation (NASDAQ:PRMO), the market leader for midrange EDI software and Internet-based EC solutions. Harbinger will issue 0.45 share of Harbinger common stock in exchange for each share of Premenos common stock. All Premenos options and warrants will be converted into Harbinger options and warrants, and adjusted in accordance with the exchange ratio. The transaction is subject to, among other things, Harbinger and Premenos shareholder approvals, and necessary regulatory approvals. The company expects the transaction to be accounted for as a pooling of interests. Harbinger also expects to take a 4Q97 charge between $20-30 million for expenses related to the transaction which is expected to close on or before December 31, 1997. The company anticipates that the combination will be accretive to Harbinger shareholders in 1998. The announcement marks Harbinger's fourth transaction this year and continues a series of related activities over the last several years to solidify its rank as the leading independent supplier of standards-based Electronic Commerce software and services. C. Tycho Howle, Harbinger Chairman and Lew Jenkins, Premenos Chairman expressed their enthusiasm for the combination in terms of shared vision, improved distribution, market leadership and operating efficiencies. The Harbinger and Premenos merger builds on an already formidable presence in the EDI/EC industry. Harbinger is the largest supplier of EDI software and services by customer count that includes over 35,000 desktop installations. The combined company also becomes the world's largest supplier of EDI software to the midrange systems market (AS/400, UNIX and NT) with more than 8,000 installs. The combined company, with over 1,000 employees and projected revenues in excess of $120 million on a pro forma basis for 1997, will serve over 50,000 worldwide customers. "Premenos is clearly a leader in the midrange EDI software market and we have always maintained great respect for their work in pioneering Internet-based EC and EDI," said Howle. "We were impressed with Premenos' technologies throughout the due diligence process, particularly in view of the synergies to be gained from our own work in standards-based software for the Internet and Value-Added Networks (VAN). Premenos was first to introduce a robust EDI encryption product for secure Internet transactions, Templar, now the industry leader with 2 full-strength exportable encryption. Premenos followed Templar's introduction with PowerDox and WebDox, forms-based EDI products for VANs and the Web. Together, we can offer the marketplace the industry's most popular EDI solutions as a single-source supplier for desktop, midrange or mainframe systems, with delivery over the Internet and/or VAN," continued Howle. Jenkins noted, "Our companies share a common vision for Electronic Commerce, both for the Internet and VAN paradigms. We see a large opportunity to improve our distribution through Harbinger channels - in software sales as well as in offering mass deployment and network services to Premenos' client base, many of whom are hubs or mini-hubs. Coupling Harbinger's services with EDI/Open, EDI/400 and Templar presents us with an opportunity to offer fully integrated solutions to new customers, as well as to our 5,000+ current customers." "As a larger entity we will benefit from increased operating leverage in R&D, support, administration, and professional services," said David Leach, Harbinger CEO. "Harbinger has grown revenue at a compound annual rate of more than 50% for the last seven years and at annual rates of approximately 70% and 80% during 1995 and 1996, respectively. It's difficult to attract rapidly the experienced people required to service these growth rates. Premenos brings us a core team of over 275 talented, capable people with many years of collective EC and EDI experience. I'm confident that the Premenos team will play a major role in our continued growth and make significant contributions to our progress in many areas," added Leach. Premenos President and CEO Tim Dreisbach commented, "It has been a privilege to bring Premenos to this next phase of growth. I am especially proud of our loyal customers and employees, in particular the current management team who has executed a profit-oriented financial strategy while continuing our commitment to product quality, customer service, and investments for growth. With the considerable synergies between Premenos and Harbinger, we will be able to move even faster towards accomplishing these common goals." About Harbinger Harbinger Corporation is a world-leading, single-source provider of Electronic Commerce and EDI solutions servicing over 46,000 software and network customers. The company is dedicated to providing comprehensive and scalable EC/EDI software and Value-Added Network services from desktops to mainframes, and additionally meeting emerging market needs for Internet- and Web-based commerce solutions. In addition to millions of EDI transactions, over $1.5 billion in Automated Clearing House (ACH) transfers flow through the Harbinger Network each month. Harbinger is headquartered in Atlanta, Georgia and provides worldwide support to customers with over 750 experienced employees in multiple U.S. and overseas operations facilities. For information on Harbinger's full line of products and services, please visit the World Wide Web at www.Harbinger.com. About Premenos Premenos (NASDAQ: PRMO) is a leading provider of electronic commerce solutions for established and emerging trading communities. Its standards-based business applications leverage the strengths of traditional EDI systems, TCP/IP networks, secure information and Web technologies. Premenos has a history of market-proven innovation, including the first open-network technology for secure, auditable data transmission over the Internet. Through partnerships with leading application and integrated solutions vendors, Premenos empowers businesses to 3 lower costs, shorten trading cycles and increase competitive advantage. Premenos' renowned Electronic Commerce Resource Guide can be reached at www.Premenos.com. This press release contains statements which may constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. 15 U.S.C.A. Sections 77Z-2 and 18U-5 (Supp. 1996). Those statements include statements regarding the intent, belief or current expectations of Harbinger Corporation and members of its management as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements are set forth in the Safe Harbor Compliance Statement for Forward-Looking Statements included as Exhibit 99.1 to the Company's Current Report on Form 8-K dated and filed July 16, 1997. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. ### Harbinger and the Harbinger logo are registered trademarks of Harbinger Corporation. Premenos, EDI/Open and Templar are the trademarks of Premenos Corp. All other company and product names referenced herein are registered trademarks or trademarks of their respective owners. EX-99.3 7 TEXT OF PRESS RELEASE 1 EXHIBIT 99.3 Contact: Joel Katz, CFO 404-467-3011 jkatz@harbinger.com For Immediate Release... HARBINGER CORPORATION ANNOUNCES RECORD THIRD QUARTER REVENUES AND OPERATING INCOME Atlanta, GA - October 23, 1997 - Harbinger Corporation (NASDAQ:HRBC) is pleased to announce record revenues and operating income for the quarter ended September 30, 1997. Unless otherwise noted, all comparisons with prior periods reflect the effect of the retroactive restatement resulting from a pooling-of-interests transaction with SupplyTech Inc., and affiliates ("STI") which was completed on January 3, 1997. Revenues for the third quarter increased 37% to $21.5 million compared to pooled revenues of $15.7 million for the same period last year. The net loss applicable to common shareholders for the third quarter was $9.7 million or ($0.47) per share compared to the pooled net loss applicable to common shareholders of $1.2 million or ($0.07) per share in the same period in 1996. Operating income for the third quarter (excluding charges for in-process product development and acquisitions) increased to $4.9 million compared to pooled operating income of $849,000 a year ago. Net income from the Company's core business (excluding the aforementioned charges, and the equity in loss of Harbinger NET Services, LLC ("HNS") in 1996, net of related income taxes) was $3.3 million or $0.15 per share as compared to pooled income of $498,000 or $0.03 per share in the prior year. Compared to Harbinger Corporation's third quarter 1996 performance as originally reported, revenue increased 93% from $11.2 million to $21.5 million and operating income (excluding charges for in-process product development and acquisitions) increased 171% from $1.8 million to $4.9 million. Net income for the period from core operations (excluding the aforementioned charges, and the equity in loss of HNS in 1996, net of related income taxes) as compared to amounts originally reported increased 197% to $3.3 million or $0.15 per share from $1.1 million or $0.06 per share one year earlier. Operating margins, excluding charges for in-process product development and acquisitions, increased from 5.4% on a pooled basis and 16.1% as originally reported in the third quarter of 1996 to 22.6% in the third quarter of 1997 primarily reflecting both increased operating leverage on higher revenues and operating synergies realized from the STI merger. Active revenue generating customers, representing customers to whom Harbinger provides products and services on an ongoing basis, also reached a new record, increasing 74% over the last 12 months to more than 46,000 at the end of the third quarter. This increase includes approximately 9,000 additional customers as the result of the STI merger. "We are pleased to announce another record quarter. "Not only did most of our business units have a strong quarter, but Harbinger successfully raised $60 million in a secondary offering and acquired ACQUION, Inc., a leading supplier of Electronic Procurement Catalogs to major corporations," said C. Tycho Howle, Chairman. Added Harbinger CEO David Leach, "While our revenue was impacted somewhat by currency fluctuations and 2 softness in some European markets, we are pleased we were able to meet our earnings targets. Our SupplyTech and Enterprise Solutions Divisions, in particular had strong growth rates over the prior years." About Harbinger Harbinger Corporation is a world-leading, single-source provider of Electronic Commerce and EDI solutions servicing over 46,000 software and network customers. The company is dedicated to providing comprehensive and scalable EC/EDI software and Value-Added Network services from desktops to mainframes, and additionally meeting emerging market needs for Internet- and Web-based commerce solutions. In addition to millions of EDI transactions, over $1.5 billion in Automated Clearing House (ACH) transfers flow through the Harbinger Network each month. Harbinger is headquartered in Atlanta, Georgia and provides worldwide support to customers with over 750 experienced employees in multiple U.S. and overseas operations facilities. For information on Harbinger's full line of products and services, please visit the World Wide Web at www.Harbinger.com. This press release contains statements which may constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. 15 U.S.C.A. Sections 77Z-2 and 18U-5 (Supp. 1996). Those statements include statements regarding the intent, belief or current expectations of Harbinger Corporation and members of its management as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements are set forth in the Safe Harbor Compliance Statement for Forward-Looking Statements included as Exhibit 99.1 to the Company's Current Report on Form 8-K dated and filed July 16, 1997. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. ### Harbinger and the Harbinger logo are registered trademarks of Harbinger Corporation. All other company and product names referenced herein are registered trademarks or trademarks of their respective owners. EX-99.4 8 TEXT OF PRESS RELEASE 1 EXHIBIT 99.4 Contacts: Joel Katz, CFO Rebecca Metzger, Public Relations 404-467-3011 404-467-3211 jkatz@harbinger.com rmetzger@harbinger.com For Immediate Release... HARBINGER CORPORATION ACQUIRES ATLAS PRODUCTS INTERNATIONAL LIMITED Harbinger to become major EC player in the U.K. market. Atlanta, GA - October 23, 1997 - Harbinger Corporation (NASDAQ: HRBC), the world's leading provider of single-source Electronic Commerce and Electronic Data Interchange (EDI) solutions, today announced the acquisition of Atlas Products International Limited, a leading provider of EDI translation software in the U.K. The acquisition of Atlas gives Harbinger a strong presence in the EC/EDI industry throughout the U.K. Atlas, based in Manchester, England, has an install base of over 2,500 customers on PC, UNIX and DEC/VMS platforms. Atlas products are targeted to small and mid-sized businesses, and are distributed directly and through third party channels in the U.K., European and other markets around the world. The acquisition of Atlas brings with it a substantial customer base as well as quality relationships in key industries including retail, finance, manufacturing and distribution. Additionally, Atlas' products provide extensive EC/EDI standards support for European, and in particular the U.K., theaters. Harbinger acquired Atlas for $11.8 million payable in Harbinger common stock. Harbinger will issue approximately 313,000 new shares of Harbinger common stock, in exchange for 100% of the capital stock of privately held Atlas. The transaction will be accounted for as a pooling of interests. Harbinger expects to take a 4Q97 charge for acquisition and integration related expenses of between $3-5 million related to this transaction, and expects that the transaction will be non-dilutive to earnings in the fourth quarter 1997 and accretive in calendar year 1998, exclusive of the charge. "Atlas' products, infrastructure and customer base, combined with Harbinger's existing European operations, products and IVAS-based services enables us to quickly become a major player in the U.K. market," said David Leach, CEO, Harbinger Corporation. "This is an exciting opportunity for us to market Atlas' products and services using Harbinger's channels throughout Europe, and to make Harbinger's TrustedLink Enterprise solutions available in the U.K.," said Allan Gray, Managing Director, Atlas. "Harbinger's mass deployment engine will provide hub companies with the ability to rapidly grow their trading communities in Europe." "Atlas is an essential element of Harbinger's European expansion strategy," said Willem van Nieuwenhuyzen, GM Europe, Middle East and Africa. "Atlas provides Harbinger with an established suite of EC products tailored to the needs of the European market and the U.K. in particular. As one of the UK's leading vendors of desktop EDI translation software, Atlas has successfully expanded into the Windows NT and UNIX 2 markets. This strength, combined with our existing operations in the U.K., make Harbinger a major player in the market with the ability to offer a complete suite of EC software and services across all platforms from the desktop to the mainframe." About Harbinger Harbinger Corporation is a world-leading, single-source provider of Electronic Commerce and EDI solutions servicing over 46,000 software and network customers. The company is dedicated to providing comprehensive and scalable EC/EDI software and Value-Added Network services from desktops to mainframes, and additionally meeting emerging market needs for Internet- and Web-based commerce solutions. In addition to millions of EDI transactions, over $1.5 billion in Automated Clearing House (ACH) transfers flow through the Harbinger Network each month. Harbinger is headquartered in Atlanta, Georgia and provides worldwide support to customers with over 750 experienced employees in multiple U.S. and overseas operations facilities. For information on Harbinger's full line of products and services, please visit the World Wide Web at www.Harbinger.com. This press release contains statements which may constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. 15 U.S.C.A. Sections 77Z-2 and 18U-5 (Supp. 1996). Those statements include statements regarding the intent, belief or current expectations of Harbinger Corporation and members of its management as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements are set forth in the Safe Harbor Compliance Statement for Forward-Looking Statements included as Exhibit 99.1 to the Company's Current Report on Form 8-K dated and filed July 16, 1997. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. ### Harbinger and the Harbinger logo are registered trademarks, and TrustedLink a trademark of Harbinger Corporation. Atlas and ____are the trademarks of Atlas EX-99.5 9 SAFE HARBOR COMPLIANCE STATEMENT 1 EXHIBIT 99.5 PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS In passing the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress encouraged public companies to make "forward-looking statements" by creating a safe harbor to protect companies from securities law liability in connection with forward-looking statements. Harbinger Corporation ("Harbinger" or the "Company") intends to qualify both its written and oral forward-looking statements for protection under the Reform Act and any other similar safe harbor provisions. "Forward-looking statements" are defined by the Reform Act. Generally, forward-looking statements include expressed expectations of future events and the assumptions on which the expressed expectations are based. All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties which could cause actual events or results to differ materially from those projected. Due to those uncertainties and risks, the investment community is urged not to place undue reliance on written or oral forward-looking statements of Harbinger. the Company undertakes no obligation to update or revise this Safe Harbor Compliance Statement for Forward-Looking Statements (the "Safe Harbor Statement") to reflect future developments. In addition, Harbinger undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. This Safe Harbor Statement supersedes that certain Safe Harbor Statement filed as Exhibit 99.1 to the Company's Current Report on Form 8-K dated July 16, 1997. Harbinger provides the following risk factor disclosure in connection with its continuing effort to qualify its written and oral forward-looking statements for the safe harbor protection of the Reform Act and any other similar safe harbor provisions. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following: 2 Integration of Recent Acquisitions; Future Acquisitions. Harbinger Corporation ("Harbinger" or "Company") has completed a number of acquisitions since January 1, 1996, including the acquisitions of Atlas Products International, Limited and it affiliate ("Atlas"), Acquion, Inc. ("Acquion"), SupplyTech, Inc. and its affiliated entities (collectively, "SupplyTech"), and the minority interests of Harbinger NET Services, LLC ("HNS"). Acquion, SupplyTech and HNS have historically reported significant operating losses. In addition, the proposed acquisition of Premenos Technology Corp. ("Premenos") represents Harbinger's largest acquisition to date and will require significant management time and attention to successfully integrate the business and operation of the two companies. Harbinger's acquisitions present a number of risks and challenges, including the historical operating losses of Acquion, SupplyTech and HNS, the integration of the software products of the acquired companies into Harbinger's current suite of products, the integration of the sales forces of acquired companies into Harbinger's existing sales operations, the coordination of customer support services, the integration of international operations of acquired companies with Harbinger's international affiliates, and the diversion of management's attention from other business concerns. In connection with its prior acquisitions, Harbinger has experienced the following effects during the periods subsequent to such acquisitions: integration costs and expenses associated with such acquisition transactions; refinement of the acquired companies business operations to conform to Harbinger's mission and strategy, and the discontinuance of the non-core business operations of the acquired company; and elimination of certain revenue opportunities as a result of product overlap, channel conflict, or other competitive overlap. Management of Harbinger currently anticipates that all or certain of the foregoing factors may impact future operating results of Harbinger following consummation of the Merger of Premenos (the "Merger") including, but not limited to, growth in revenue and operating income in future periods. Several of the newly acquired products address the same markets as, and may therefore be competitive with, or redundant with, existing Harbinger products. There can be no assurance that Harbinger can successfully assimilate its operations and integrate its software products with these recently acquired operations, software products and technologies, that Harbinger will be successful in repositioning its products on a timely basis to achieve market acceptance or that the integration efforts associated with recent acquisitions will not have a material adverse effect upon Harbinger's business or results of operations in future periods. Any delay in such integration efforts or adverse developments associated therewith could have a material adverse effect on Harbinger. Harbinger's growth has been significantly enhanced through acquisitions of other businesses, products and licenses. There can be no assurance that in the future Harbinger will be able to identify suitable acquisition candidates available for sale at reasonable prices, consummate any acquisition or successfully integrate any acquired business into Harbinger's operations. Operational and software integration problems may arise if Harbinger undertakes future acquisitions of complementary products, technologies or businesses. Future acquisitions may also result in potentially dilutive issuances of equity securities, the incurrence of additional debt, the write-off of in-process product development and capitalized product costs, integration costs, and the amortization of expenses related to goodwill and other intangible assets, all of which could have a material adverse effect on Harbinger. Acquisitions involve numerous additional risks, including difficulties in the assimilation of the operations, products and personnel of the acquired company, differing company cultures, the diversion of management's attention from other business concerns, risks of entering markets in which Harbinger has little or no direct prior experience, and the potential loss of key employees of the acquired company. Customer satisfaction or performance problems at a single acquired firm could have a material adverse impact on the reputation of Harbinger as a whole. Although Harbinger expects to have cash resources of approximately $100 million upon conclusion of the Merger, to the extent Harbinger desires to finance a future acquisition, there can be no assurance that Harbinger will be able to secure financing for such a transaction on reasonable terms or at all. See "Ability to Manage Growth." Factors Affecting Operating Results; Potential Fluctuations in Quarterly Results. Although Harbinger has been able to grow its revenue and operating income (before special charges) in the past, there can be no assurance that Harbinger will be able to continue to grow its revenue and operating income at historical levels in the future or that fluctuations in revenue or operating income growth will not occur in future periods. Factors currently known to management that could impact rate of growth in revenue or operating income in 3 future periods include, but are not limited to, the management time and effect currently anticipated in connection with the integration of recently acquired businesses, and a slow down in the rate of growth of AS/400 EDI sales. In addition, Harbinger's quarterly operating results have in the past and may in the future vary or decrease significantly depending on factors such as revenue from software sales, the timing of new product and service announcements, changes in pricing policies by Harbinger and its competitors, market acceptance of new and enhanced versions of Harbinger's products, the size and timing of significant orders, changes in operating expenses, changes in Harbinger's strategy, personnel changes, government regulation, the introduction of alternative technologies, the effect of acquisitions and general economic factors. Harbinger has limited or no control over many of these factors. Harbinger has experienced losses in the past, and at September 30, 1997, Harbinger had an accumulated deficit of approximately $44.3 million. Harbinger operates with virtually no software product order backlog because its software products typically are shipped shortly after orders are received. As a result, revenues in any quarter are substantially dependent on the quantity of purchases of services requested and product orders received in that quarter. Quarterly revenues also are difficult to forecast because the market for electronic commerce and EDI software products is rapidly evolving and Harbinger's revenues in any period may be significantly affected by the announcements and product offerings of Harbinger's competitors as well as alternative technologies. Harbinger's IVAS product is more complex and expensive compared to Harbinger's other electronic commerce and Internet products introduced to date, and will generally involve significant investment decisions by prospective customers. Accordingly, Harbinger expects that in selling its IVAS product it will encounter risks typical of companies that rely on large dollar purchase decisions, including the reluctance of purchasers to commit to major investments in new products and protracted sales cycles, both of which add to the difficulty of predicting future revenues and may result in quarterly fluctuations. Harbinger's expense levels are based, in part, on its expectations as to future revenues. If revenue levels are below expectations, Harbinger may be unable or unwilling to reduce expenses proportionately and operating results are likely to be adversely affected. As a result, Harbinger believes that period-to-period comparisons of its results of operations are not necessarily meaningful and should not be relied upon as indications of future performance. Due to all of the foregoing factors, it is likely that in some future quarter or quarters Harbinger's operating results will be below the expectations of public market analysts and investors. In such event, the price of the Harbinger Common Stock will likely be adversely affected in a material manner. Harbinger recognizes revenues for software license fees upon shipment, net of estimated returns. Customers using Harbinger's PC products are permitted to return products after delivery for a specified period, generally 60 days. Harbinger generally has experienced returns of approximately 20% to 30% of the PC product license fees, and Harbinger records revenues after a deduction for estimated returns. Any material increase in Harbinger's return experience could have an adverse effect on its operating results. See "Integration of Recent Acquisitions; Future Acquisitions." Acquisition-Related and Other Charges; Expected Loss in Year Ending December 31, 1997. In the first quarter of 1997, Harbinger incurred approximately $16.3 million in acquisition related charges and $2.4 million in losses on early debt extinguishment. In the third quarter, Harbinger incurred aggregate charges of approximately $14.9 million. Harbinger currently anticipates that it will incur charges in the range of $20.0 to $30.0 million in the fourth quarter of 1997 relating primarily to the Merger and certain costs and charges associated therewith. To the extent that the Merger is not consummated in the fourth quarter of 1997, approximately $2.0 to $3.0 million of integration activity costs associated with such acquisition will be incurred in the fourth quarter of 1997, with the remaining Merger-related costs occurring in the period in which the transaction closes. Of the charges incurred in the first and third quarters of 1997, $17.6 million consisted of charges for integration activities associated with acquisitions consummated in such periods. As a result of these charges, Harbinger incurred a net loss for the first and third quarters of 1997 and expects to incur a net loss for the year ending December 31, 1997. Certain of the costs and expenses incurred in connection with these integration activities and reflected in such charges included internal expense allocations which may recur in other expense categories in the future and may result in an increase in some expense categories in Harbinger's results of operations in future periods. 2 4 Ability to Manage Growth. Harbinger has recently experienced significant growth in revenue, operations and personnel as it has made strategic acquisitions, added subscribers to the Harbinger VAN and IVAS and increased the number of licensees of its software products. This growth may increase as a result of the contemplated transactions with Premenos. This growth could continue to place a significant strain on Harbinger's management and operations, including its sales, marketing, customer support, research and development, finance and administrative operations. Achieving and maintaining profitability during a period of expansion will depend, among other things, on Harbinger's ability to successfully expand its products, services and markets and to manage its operations and acquisitions effectively. Difficulties in managing growth, including difficulties in obtaining and retaining talented management and product development personnel, especially following an acquisition, could have a material adverse effect on Harbinger. Ability to Respond to Rapid Change. Harbinger's future success will depend significantly on its ability to enhance its current products and develop or acquire and market new products which keep pace with technological developments and evolving industry standards as well as respond to changes in customer needs. The market for EDI products and services, VAN services and Internet software products and services is characterized by rapidly changing technology, evolving industry standards and customer demands, and frequent new product introductions and enhancements. There can be no assurance that Harbinger will be successful in developing or acquiring product enhancements or new products to address changing technologies and customer requirements adequately, that it will introduce such products on a timely basis, or that any such products or enhancements will be successful in the marketplace. Harbinger's delay or failure to develop or acquire technological improvements or to adapt its products to technological change would have a material adverse effect on Harbinger's business, results of operations and financial condition. In addition, there is no assurance that the Premenos' products and services will not undergo diminished market acceptance due to the rapidly evolving technologies and the development of technological enhancements by competing products and services and that, as a result, the combined company's position in the marketplace will decline. The failure of Harbinger's management team to respond effectively to and manage rapidly changing technological and business conditions as well as the growth of its own business, should it occur, could have a material adverse impact on Harbinger's business, results of operations and prospects. Intense Competition. The electronic commerce, EDI and network services and products businesses are intensely competitive, and Harbinger has many competitors with substantially greater financial, marketing, personnel and technological resources than Harbinger. Other companies offer products and services that may be considered by customers to be acceptable alternatives to Harbinger's products and services. Certain companies also operate private computer networks for transacting business with their trading partners and Harbinger expects other companies to offer products and services competitive with the Templar, TrustedLink Guardian and IVAS products and services. It is expected that other companies may develop and implement similar computer-to-computer networks, some of which may be "public" networks such as Harbinger's and others may be "private," providing services only to a specific group of trading partners, thereby reducing Harbinger's ability to increase sales of its network services. In addition, several companies offer PC-based, midrange NT and UNIX, and mainframe and Internet computer software products which compete with Harbinger's software products. Advanced operating systems and applications software from Microsoft and other vendors also may offer electronic commerce functions that limit Harbinger's ability to sell its software products. Harbinger believes that the continuing acceptance of electronic commerce and EDI will attract new competitors, including software applications and operating systems companies that may bundle electronic commerce solutions with their programs, and alternative technologies that may be more sophisticated and cost effective than Harbinger's products and services. Competitive companies may offer certain electronic commerce products or services, such as communications software or network transactional services, at no charge or a deeply discounted charge, in order to obtain the sale of other products or services. Since Harbinger's agreements with its network subscribers are terminable upon 30 days' notice, Harbinger does not have the contractual right to prevent its customers from changing to a competing network. See "Dependence on New Products; Industry Standards." Competitors that offer products and/or services that compete with various of Harbinger's products and services include, among others, Advantis Systems, Inc.; AT&T; Computer Associates International, Inc.; EDS; General Electric Information Systems; QuickResponse Services, Inc.; Sterling Commerce, Inc. and a joint venture between British Telecommunications Plc and 3 5 MCI Communications Corporation; as well as the internal programming staffs of various businesses engaging in electronic commerce. Emergence of Electronic Commerce Over the Internet. The Internet provides an alternative means of providing electronic commerce to business trading partners. The market for Internet software and services is both emerging and highly competitive, ranging from small companies with limited resources to large companies with substantially greater financial, technical and marketing resources than Harbinger. In addition to Harbinger's Internet related products and services, several existing competitors of Harbinger have introduced their own Internet electronic commerce products and services. Moreover, new competitors, which may include telephone companies and media companies, are likely to increase the provision of business-to-business data transmission services using the Internet. There is no assurance that the Internet will become an accepted method of electronic commerce. There is no assurance that Harbinger's TrustedLink Guardian end user software and IVAS or Premenos' Templor Products, which enable electronic commerce over the Internet, will be accepted in the Internet market or can be competitive with other products based on evolving technologies. If the Internet becomes an accepted method of electronic commerce, Harbinger could lose network customers from its VAN which would reduce recurring revenue from network services and have a material adverse effect on Harbinger. Even if customers choose Harbinger's Internet solutions, the revenue gained from the sale of these solutions may not offset the loss of revenue from the sale of Harbinger's traditional EDI solutions. The use of Harbinger's and Premenos' Internet electronic commerce products and services will depend in large part upon the continued development of the infrastructure for providing Internet access and services. Use of the Internet for business-to-business electronic commerce services raises numerous issues that greatly impact the development of this market. These issues include reliability, data security and data integrity, timely transmission, and pricing of products and services. Because global commerce and online exchange of information on the Internet is new and evolving, it is difficult to predict with any assurance whether the Internet will prove to be a viable commercial marketplace. The Internet has experienced, and is expected to continue to experience, substantial growth in the number of users and the amount of traffic. There can be no assurance that the Internet will continue to be able to support the demands placed on it by this continued growth. In addition, the Internet could lose its viability due to delays in the adoption of new standards and protocols to handle increased levels of Internet activity, or due to increased governmental regulation. There can be no assurance that the infrastructure or complementary services necessary to make the Internet a viable commercial marketplace will be developed, or, if developed, that the Internet will become a viable commercial marketplace for products and services such as those offered by Harbinger and Premenos. If the necessary infrastructure or complementary services or facilities are not developed, or if the Internet does not become a viable commercial marketplace, Harbinger's business, operating results or financial condition will be materially adversely affected. Dependence on New Products; Industry Standards. The electronic commerce industry is characterized by rapid technological change, frequent new product and service introductions and evolving industry standards. Harbinger's future success will depend in significant part on its ability to anticipate industry standards, continue to apply advances in electronic commerce product and service technologies, enhance existing products and services and introduce and acquire new products and services on a timely basis to keep pace with technological developments. There can be no assurance that Harbinger will be successful in developing,acquiring or marketing new or enhanced products or services that respond to technological change or evolving industry standards, that Harbinger will not experience difficulties that could delay or prevent the successful development, acquisition or marketing of such products or services or that its new or enhanced products and services will adequately meet the requirements of the marketplace and achieve market acceptance. In the past, Harbinger has experienced delays in the commencement of commercial shipments of new products and enhancements, resulting in delays or losses of product revenues. Such delays or failure in the introduction of new or enhanced products or services, or the failure of such products or services to achieve market acceptance, could have a material adverse effect on the business, results of operations and financial condition of Harbinger. 4 6 Investment in International Subsidiaries; International Growth and Operations. Harbinger believes that its continued growth and profitability will require expansion of its international operations through its international subsidiaries, including Atlas, NTEX Holding, B.V. and INOVIS GmbH & Co. in Germany as well as the international operations of SupplyTech in the United Kingdom, Italy and Mexico (collectively, the "International Subsidiaries"). The combined company will also have an office in Paris, France. This expansion will require financial resources and significant management attention, particularly by certain members of the management of Harbinger. Harbinger's ability to successfully expand its business internationally will also depend upon its ability to attract and retain both talented and qualified managerial, technical and sales personnel and electronic commerce services customers outside the United States and its ability to continue to effectively manage its domestic operations while focusing on international expansion. Certain of the International Subsidiaries have experienced operating losses in their recent histories and some have experienced significant operating losses in their recent histories. To the extent that the International Subsidiaries are unable to penetrate international markets in a timely and profitable manner, Harbinger's growth, if any, in international sales will be limited, and Harbinger could be materially adversely affected. During the third quarter of 1997, Harbinger's growth in revenue was adversely affected by a fluctuation in currency exchange rates, management issues associated with its European operations, and general softness in demand in the European markets. Moreover, Harbinger's ability to successfully implement its international strategy may require installation and operation of a value-added network and implementation of its IVAS software in other countries, as well as additional improvements to its infrastructure and management information systems, including its international customer support systems. In addition, there can be no assurance that Harbinger will be able to maintain or increase international market demand for Harbinger's products or services. International operations are subject to certain inherent risks, including unexpected changes in regulatory requirements and tariffs, longer payment cycles, increased difficulties in collecting accounts receivable and potentially adverse tax consequences. To the extent international sales are denominated in foreign currencies, gains and losses on the conversion to U.S. dollars of revenues, operating expenses, accounts receivable and accounts payable arising from international operations may contribute to fluctuations in Harbinger's results of operations. Harbinger has not entered into any hedging or other arrangements for the purpose of guarding against the risk of currency fluctuation. In addition, sales in Europe and certain other parts of the world typically are adversely affected in the third calendar quarter of each year because many customers reduce their business activities in the summer months. Dependence on Key Management and Personnel; Ability to Attract and Retain Qualified Personnel. Harbinger's success is largely dependent upon its executive officers and key sales and technical personnel, the loss of one or more of whom could have a material adverse effect on Harbinger. The future success of Harbinger will depend in large part upon its ability to attract and retain talented and qualified personnel. In particular, Harbinger believes that it will be important for Harbinger to hire experienced product development and sales personnel. Competition in the recruitment of highly-qualified personnel in the computer software and electronic commerce industries is intense. The inability of Harbinger to locate and retain such personnel may have a material adverse effect on Harbinger. No assurance can be given that Harbinger can retain its key employees or that it can attract qualified personnel in the future. Harbinger currently carries key-person life insurance policies on the lives of Messrs. Howle, Leach and Davis. Dependence on Alliance Partners. Harbinger has various agreements with alliance partners for the distribution and marketing of certain software products of Harbinger. These alliance partners pay Harbinger royalties representing a percentage of fees generated from the sale of software licensed from Harbinger. For the years ended December 31, 1995 and 1996, revenues from one of these alliance partners were approximately $1.4 million and $5.7 million, respectively, which equaled the contractual minimum royalty during those years. There is no minimum royalty obligation after 1996, and Harbinger has experienced and believes that revenues from this alliance partner will substantially decline in 1997 as compared to 1996. Further, based on recent amendments to the arrangement, Harbinger has experienced and believes that the average collection period related to cash flows derived from royalty revenues earned from this alliance partner will lengthen substantially. In addition, Premenos is dependent on a distribution partner for approximately 6% of its 5 7 revenues, arising principally from this partner's distribution efforts in Europe and other overseas locations. There can be no assurance that this partner will continue to distribute Premenos products after the Merger, or that such distribution efforts, if continued, will achieve the same degree of results. Risks of Product Development. Software products as complex as those offered by Harbinger may contain undetected errors or failures when first introduced or when new versions are released. If software errors are discovered after introduction, Harbinger could experience delays or lost revenues during the period required to correct these errors. There can be no assurance that, despite testing by Harbinger and by current and potential customers, errors will not be found in new products or releases after commencement of commercial shipments, resulting in loss of or delay in market acceptance, additional and unexpected expenses to fund further product development or to add programming personnel to complete a development project, and loss of revenue because of the inability to sell the new product on a timely basis, any one or more of which could have a material adverse effect on Harbinger. Dependence on Data Centers. The network service operations of Harbinger are dependent upon the ability to protect computer equipment and the information stored in Harbinger's data centers against damage that may be caused by fire, power loss, telecommunication failures, unauthorized intrusion, computer viruses and disabling devices and other similar events. Notwithstanding precautions Harbinger has taken, there can be no assurance that a fire or other natural disaster, including national, regional or local telecommunications outages, would not result in a prolonged outage of Harbinger's network services. In the event of a disaster, and depending on the nature of the disaster, it may take from several hours to several days before Harbinger's off-site computer system can become operational for all of Harbinger's customers, and use of the alternative off-site computer would result in substantial additional cost to Harbinger. In the event that an outage of Harbinger's network extends for more than several hours, Harbinger will experience a reduction in revenues by reason of such outage. In the event that such outage extends for one or more days, Harbinger could potentially lose many of its customers, which may have a material adverse effect on Harbinger. Dependence upon Certain Licenses. Harbinger relies on certain technology that it licenses from third parties and other products that are integrated with internally developed software and used in Harbinger's products to perform key functions or to add important features. There can be no assurance that Harbinger will be successful in negotiating third-party technology licenses on suitable terms or that such licenses will not be terminated in the future. Moreover, any delay or product problems experienced by such third party suppliers could result in delays in introduction of Harbinger's products and services until equivalent technology, if available, is identified, licensed and integrated, which could have a material adverse effect on Harbinger's business, operating results and financial condition. Limited Protection of Proprietary Technology; Risks of Infringement. Harbinger relies primarily on a combination of copyright, patent and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights. Harbinger seeks to protect its software, documentation and other written materials principally under trade secret and copyright laws, which afford only limited protection. Harbinger presently has one patent for an electronic document interchange test facility and a patent application pending for an EDI communication system. Despite Harbinger's efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of Harbinger's products or to obtain and use information that Harbinger regards as proprietary. There can be no assurance that Harbinger's means of protecting its proprietary rights will be adequate or that Harbinger's competitors will not independently develop similar technology. In distributing many of its products, Harbinger relies primarily on "shrink wrap" licenses that are not signed by licensees and, therefore, may be unenforceable under the laws of certain jurisdictions. In addition, Harbinger has licensed it products to users and distributors in other countries, and the laws of some foreign countries do not protect Harbinger's proprietary rights to as great an extent as the laws of the United States. Harbinger does not believe that any of its products infringe the proprietary rights of third parties. There can be no assurance, however, that third parties will not claim infringement by Harbinger with respect to current or future products, and Harbinger has agreed to indemnify many of its customers against such claims. Harbinger expects that software product developers will increasingly be subject to infringement claims as the number of products and competitors in electronic commerce grows and the functionality of products in different industry segments overlaps. Any such claims, with or without merit, 6 8 could be time-consuming, result in costly litigation, cause product shipment delays or require Harbinger to enter into royalty or licensing agreements and indemnify its customers against resulting liability, if any. Such royalty or licensing agreements, if required, may not be available on terms acceptable to Harbinger or at all, which could have a material adverse effect on Harbinger. Government Regulatory and Industrial Policy Risks. Harbinger's network services are transmitted to its customers over dedicated and public telephone lines. These lines are governed by Federal and state regulations establishing the rates, terms and conditions for their use. Changes in the legislative and regulatory environment relating to online services, EDI or the Internet access industry, including regulatory or legislative changes which directly or indirectly affect telecommunication costs, restrict content or increase the likelihood of competition from regional telephone companies or others, could have a material adverse effect on Harbinger's business. The Telecommunications Act of 1996 ("Act") amended the federal telecommunications laws by lifting restrictions on regional telephone companies and others competing with Harbinger and imposed certain restrictions regarding obscene and indecent content communicated to minors over the Internet or through interactive computer services. The Act set in motion certain events that will lead to the elimination of restrictions on regional telephone companies providing transport between defined geographic boundaries associated with the provision of their own information services. This will enable regional telephone companies to more readily compete with Harbinger by packaging information service offerings with other services and providing them on a wider geographic scale. While provisions of the Act prohibiting the use of a telecommunications device or interactive computer service to send or display indecent material to minors have been held by the U.S. Supreme Court to be unconstitutional, there can be no assurance that future legislative or regulatory efforts to limit use of the Internet in a manner harmful to Harbinger will not be successful. The Clinton administration has announced an initiative to establish a framework for global electronic commerce. Also, some countries such as Germany have adopted laws regulating aspects of the Internet, and there are a number of bills currently being considered in the United States at the federal and state levels involving encryption and digital signatures, all of which may impact Harbinger. Harbinger cannot predict the impact, if any, that the Act and future court opinions, legislation, regulations or regulatory changes in the United States or other countries may have on its business. Management believes that Harbinger is in compliance with all material applicable regulations. Harbinger's Trusted Link Guardian product and the Templar product both incorporate encryption technology which is subject to U.S. export control regulations. Although both products are currently exportable under licenses granted by the Commerce Department, government regulation in this area is subject to frequent change and there can be no assurance that these products will remain exportable. Shares Eligible for Future Sale; Possible Adverse Effect on Future Market Prices. Sales of substantial numbers of shares of Harbinger Common Stock in the public market could adversely affect the market price of the Harbinger Common Stock and make it more difficult for Harbinger to raise funds through equity offerings in the future. Two of Premenos' principal stockholders will hold, and several current Harbinger shareholders do hold, in excess of 1 million shares of the outstanding Harbinger Common Stock and a sale by one or more of these stockholders of a substantial portion of their shares could adversely affect the market price of the Harbinger Common Stock. Anti-Takeover Provisions. The Harbinger Board has authority to issue up to 20,000,000 shares of preferred stock and to fix the rights, preferences, privileges and restrictions, including voting rights, of the preferred stock without further vote or action by Harbinger Shareholders. The rights of the holders of Harbinger Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. While Harbinger has no present intention to issue additional shares of preferred stock, such issuance, while providing desired flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of Harbinger. In addition, the Harbinger Charter and the Harbinger Bylaws contain provisions that may discourage proposals or bids to acquire Harbinger. This could limit the price that certain investors might be willing to pay in the future for shares of Harbinger Common Stock. The Harbinger Charter provides for a classified board of directors with three-year, staggered terms for its members. The classification of the Harbinger Board could have the effect of making it more difficult for a third party to acquire control of Harbinger. 7 -----END PRIVACY-ENHANCED MESSAGE-----