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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT, is made this day of
, 1993, by and among POLICY MANAGEMENT SYSTEMS
CORPORATION, a South Carolina corporation (hereinafter referred to
as "Purchaser"), CYBERTEK CORPORATION, a Texas corporation
(hereinafter referred to as the "Acquired Company"), and C-TEK
ACQUISITION CORPORATION, a Texas corporation (hereinafter referred
to as the "Acquisition Sub").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquired Company,
the Acquisition Sub and Purchaser deem it advisable and in the best
interests of their respective shareholders that Purchaser acquire
the Acquired Company, and, on or prior to the date hereof such
Boards of Directors have approved the acquisition of the Acquired
Company upon the terms and subject to the conditions set forth
herein; and
WHEREAS, concurrently with the execution and delivery of
this Agreement and as a condition and inducement to the Acquisition
Sub's and Purchaser's willingness to enter into this Agreement, the
Acquired Company is entering into a certain Company Option
Agreement granting the Acquisition Sub an option to purchase
certain shares of Common Stock from the Acquired Company, under
certain circumstances, and certain holders of shares of Common
Stock of the Acquired Company are entering into a certain
Shareholder Option Agreement granting Purchaser or the Acquisition
Sub an option to purchase all of the shares of Common Stock held by
such shareholders.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein, the receipt, sufficiency and adequacy of which
are hereby acknowledged, and intending to be legally bound hereby,
the parties hereto agree as follows:
I. DEFINITIONS.
As used herein, the following terms shall have the
following meanings unless the context otherwise requires:
1.1 "Acquired Company" shall mean CYBERTEK Corporation,
a Texas corporation.
1.2 "Acquired Company Software" shall have the meaning
set forth in Section 3.13.2(iii).
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1.3 "Acquisition Sub" shall mean C-TEK Acquisition
Corporation, a Texas corporation and wholly-owned subsidiary of
Purchaser.
1.4 "Agreement" shall mean this Acquisition Agreement.
1.5 "Articles of Merger" shall mean the Articles of
Merger referred to in Section 2.2.3 hereof.
1.6 "Benefit Plans" shall have the meaning set forth in
Section 3.15.
1.7 "Certificates" shall have the meaning set forth in
Section 2.4.2 hereof.
1.8 "Closing" shall have the meaning set forth in
Section 2.2.13 hereof.
1.9 "Closing Date" shall mean the date on which the
Closing occurs pursuant to Section 2.2.13 hereof.
1.10 "Code" shall mean the Internal Revenue Code of 1986,
as amended.
1.11 "Common Stock" shall mean the common stock, $.01 par
value per share, of the Acquired Company.
1.12 "Company Option Agreement" shall mean the Company
Option Agreement among Purchaser, the Acquisition Sub and the
Acquired Company, substantially in the form attached as Exhibit
2.16.
1.13 "Covenants Not to Compete" shall mean the Covenants
Not to Compete among Purchaser, the Acquired Company, the
Acquisition Sub and each of the persons identified on Exhibit
2.10(a), substantially in the forms attached as Exhibit 2.10(b),
each of which may be individually referred to as a "Covenant Not to
Compete."
1.14 "Dissenting Shares" shall have the meaning set forth
in Section 2.3 hereof.
1.15 "DOL" shall mean the United States Department of
Labor.
1.16 "Effective Time" shall mean the time the Merger
becomes effective, as set forth in Section 2.2.3.
1.17 "Employee Options" shall have the meaning set forth
in Section 2.2.9(a).
1.18 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.19 "ERISA Affiliate" shall mean, with respect to a
Person, any other Person which is required to be aggregated with
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such Person under Code (Section) 414(b), (c), (m) and/or (o) at any time
prior to the Closing Date.
1.20 "ERISA Plan" shall have the meaning set forth in
Section 3.15
1.21 "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.22 "Exchange Agent" shall mean the person designated by
Purchaser as the Exchange Agent pursuant to Section 2.4.1 hereof.
1.23 "401(k) Plan" shall mean The CYBERSAVER 401(k) Plan
for Employees of CYBERTEK Corporation.
1.24 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
and Improvements Act of 1976, as amended.
1.25 "Hazardous Substance" shall have the meaning set
forth in Section 3.17.
1.26 "Information Statement" shall have the meaning set
forth in Section 2.2.12(b)(i) hereof.
1.27 "IRS" shall mean the United States Internal Revenue
Service.
1.28 "Licensed Software" shall have the meaning set forth
in Section 3.13.2(ii).
1.29 "Material Adverse Effect" shall mean a material
adverse effect on the businesses, properties, rights or operations
of the Acquired Company and the Subsidiaries, taken as a whole.
1.30 "Merger" shall mean the merger of the Acquisition
Sub with and into the Acquired Company, as set forth in Section
2.2.1.
1.31 "Merger Price" shall have the meaning set forth in
Section 2.2.7(a).
1.32 "Minimum Condition" shall have the meaning set forth
in Section 2.1.2 hereof.
1.33 "1985 and 1987 Plans" shall mean the 1985 Stock
Option Plan For Directors and Key Employees of CYBERTEK Computer
Products, Inc., and the 1987 Stock Option Plan For Directors,
Executive Officers and Key Employees of CYBERTEK Corporation.
1.34 "1983 Plan" shall mean the Cybertek Corporation Key
Employee Incentive Stock Option Plan.
1.35 "1991, 1992 and 1993 Financial Statements" shall
have the meaning set forth in Section 3.5.1.
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1.36 "1933 Act" shall mean the Securities Act of 1933, as
amended.
1.37 "Offer" shall have the meaning set forth in Section
2.1.1 hereof.
1.38 "Offer to Purchase" shall have the meaning set forth
in Section 2.1.1 hereof.
1.39 "Option Agreements" shall mean the Shareholder
Option Agreement and the Company Option Agreement.
1.40 "Option Shareholders" shall mean those shareholders
of the Acquired Company listed on Exhibit 2.15(a).
1.41 "Outstanding Shares" shall mean the issued and
outstanding shares of Common Stock.
1.42 "Owned Software" shall have the meaning set forth in
Section 3.13.2(i).
1.43 "PBGC" shall mean the Pension Benefit Guaranty
Corporation established under Title IV of ERISA.
1.44 "Person" shall include, but is not limited to, an
individual, a trust, an estate, a partnership, an association, a
company, a corporation, a sole proprietorship, a professional
corporation or a professional association.
1.45 "Preferred Stock" shall mean the Preferred Stock,
$.01 par value per share, that the Acquired Company is authorized
to issue.
1.46 "Proxy Statement" shall mean the Proxy Statement
referred to in Section 2.2.12(c)(i) hereof.
1.47 "Purchaser" shall mean Policy Management Systems
Corporation, a South Carolina corporation.
1.48 "Real Property" shall have the meaning set forth in
Section 3.17.
1.49 "SAR's" shall have the meaning set forth in Section
3.12.1 hereof.
1.50 "SEC" shall mean the Securities and Exchange
Commission.
1.51 "SEC Reports" shall mean the reports referred to in
Section 3.5.4 hereof.
1.52 "Schedule 14D-1" shall have the meaning set forth in
Section 2.1.1 hereof.
1.53 "Schedule 14D-9" shall have the meaning set forth in
Section 2.2.10(a) hereof.
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1.54 "Shareholder Option Agreement" shall mean the
Shareholder Option Agreement among Purchaser, the Acquisition Sub
and the Option Shareholders substantially in the form attached as
Exhibit 2.15(b).
1.55 "Stock Option Plans" shall mean the CYBERTEK
Computer Products, Inc. Key Employee Incentive Stock Option Plan,
the 1985 Stock Option Plan For Directors and Key Employees of
CYBERTEK Computer Products, Inc. and the 1987 Stock Option Plan For
Directors, Executive Officers and Key Employees of CYBERTEK
Corporation.
1.56 "Stock Purchase Plan" shall mean the CYBERTEK
Corporation Employee Stock Purchase Plan maintained by the Acquired
Company.
1.57 "Subsidiaries" shall mean the subsidiaries of the
Acquired Company, which are CYBERTEK Management Services, Inc., a
California corporation, CYBERTEK Computer Products International,
Inc., a California corporation, CYBERTEK Agency Services, Inc., a
Texas corporation, CYBERTEK LAN Software, Inc., a California
corporation, CYBERTEK Solutions, Inc., a Texas corporation, and
CYBERTEK-COGENSYS, Inc., a Delaware corporation.
1.58 "Surviving Corporation" shall have the meaning set
forth in Section 2.2.1 hereof.
1.59 "Takeover Proposal" shall have the meaning set forth
in Section 2.12 hereof.
1.60 "TBCA" shall mean the Texas Business Corporation
Act, as amended.
II. COVENANTS AND UNDERTAKINGS.
2.1 The Offer.
2.1.1. The Offer. As soon as practicable, but in
no event later than five business days from the public announcement
of the terms of this Agreement, Purchaser shall cause the
Acquisition Sub to commence an offer to purchase for cash (the
"Offer") all of the Outstanding Shares, at a price of Fifteen and
10/100ths Dollars ($15.10) per Outstanding Share, net to the
tendering shareholder in cash. The obligation of the Acquisition
Sub to commence the Offer and to accept for payment and pay for
Outstanding Shares tendered pursuant to the Offer shall be subject
only to the conditions set forth in Section 2.1.2 hereof. Prior to
the expiration of the Offer, the Acquisition Sub will not (i)
decrease the price payable in the Offer or the number of
Outstanding Shares subject to the Offer, (ii) change the conditions
to the Offer, (iii) impose additional conditions to the Offer, (iv)
extend the expiration date of the Offer beyond September 1, 1993,
or (v) amend any other term of the Offer in any manner adverse to
holders of Common Stock; provided, however, that the Offer may be
amended in connection with an increase in the consideration to be
paid pursuant to the Offer or to comply with the requirements
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imposed by the SEC. The Acquisition Sub and Purchaser, in their
sole discretion, shall have the right to waive any condition to the
Offer. The Acquired Company agrees that no shares of Common Stock
held by the Acquired Company or any subsidiary of the Acquired
Company shall be considered Outstanding Shares or be tendered
pursuant to the Offer. Purchaser hereby agrees to prepare, in
consultation with the Acquired Company, and file a Tender Offer
Statement on Schedule 14D-1 (together with all amendments and
supplements thereto, the "Schedule 14D-1") with respect to the
Offer with the SEC. The Schedule 14D-1 will contain as an exhibit
or will incorporate by reference the Offer to Purchase relating to
the Offer and forms of the related letters of transmittal and
summary advertisement and such other documentation as may be
required r appropriate under applicable federal securities laws
(the Offer to Purchase and related documents, together with any
amendments and supplements thereto, collectively referred to herein
as the "Offer to Purchase").
2.1.2. Conditions to Offer. Notwithstanding any
other provisions of the Offer and in addition to (and not in
limitation of) Purchaser's and the Acquisition Sub's rights to
extend and amend the Offer at any time in their sole discretion,
subject to this Agreement, neither Purchaser nor the Acquisition
Sub shall be required to accept for payment, purchase or pay for,
subject to Rule 14e-1(c) under the Exchange Act, any tendered
Outstanding Shares (whether or not any Outstanding Shares have
theretofore been accepted for payment or paid for pursuant to the
Offer), and may terminate the Offer as to any Outstanding Shares
not then paid for, if (i) there shall not have been validly
tendered pursuant to the Offer a number of Outstanding Shares that,
together with the Outstanding Shares owned by Purchaser and the
Acquisition Sub, equals sixty-six and two thirds percent (66-2/3%)
of the Outstanding Shares outstanding on a fully diluted basis (for
purposes of this condition the Outstanding Shares owned by
Purchaser shall include the Outstanding Shares subject to the
Shareholder Option Agreement, which the other parties to such
agreement are ready, willing and able to deliver to Purchaser, in
accordance with the terms of such agreements, immediately following
the expiration of the Offer, provided that all conditions to
Purchaser's or the Acquisition Sub's obligations under such
agreements shall be satisfied) (the "Minimum Condition"), (ii) any
applicable waiting period under the HSR Act shall not have expired
or been terminated prior to the expiration of the Offer or (iii) at
any time on or after the date of this Agreement and before the time
of acceptance for payment of any such Outstanding Shares any of the
following events shall have occurred:
(a) there shall have occurred and remain in effect
immediately prior to expiration of the Offer (i) any general
suspension of trading in securities on any national securities
exchange or the National Market System of the National Association
of Securities Dealers Automated Quotation System, (ii) a
declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States (whether or not
mandatory), (iii) a commencement of a war, declared by Congress, or
(iv) in the case of any of the foregoing existing at the time of
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the commencement of the Offer, a material acceleration or worsening
thereof; or
(b) there shall have been instituted or pending any
action, proceeding, application, claim or counterclaim by any
government or governmental authority or agency, domestic or
foreign, or Purchaser, the Acquisition Sub or the Acquired Company
shall have been notified by any such government, governmental
authority or agency (or a representative thereof) of its present
intention to commence, or recommend the commencement of, such an
action or proceeding, which (i) challenges the acquisition by
Purchaser or the Acquisition Sub of the Outstanding Shares,
restrains or prohibits or seeks to restrain or prohibit the making
or consummation of the Offer or the Merger or restrains or
prohibits or seeks to restrain or prohibit the performance of this
Agreement or the Option Agreements, (ii) prohibits or limits or
seeks to prohibit or limit the ownership or operation by Purchaser
or the Acquisition Sub of all or any substantial portion of the
business or assets of the Acquired Company or any of the
Subsidiaries or of Purchaser or any of its subsidiaries or compels
or seeks to compel Purchaser or the Acquisition Sub to dispose of
or to hold separate all or any substantial portion of the business
or assets of the Acquired Company or any of the Subsidiaries or of
Purchaser or any of its subsidiaries, or imposes or seeks to impose
any material limitation on the ability of Purchaser or the
Acquisition Sub to conduct such business or to own such assets, or
(iii) imposes or seeks to impose limitations on the ability of
Purchaser or the Acquisition Sub (or any other affiliate of
Purchaser) to acquire or hold or to exercise full rights of
ownership of the Outstanding Shares, including, but not limited to,
the right to vote the Outstanding Shares purchased by them on all
matters properly presented to the shareholder of the Acquired
Company;
(c) any statute, rule, regulation, order or injunction
shall be enacted, promulgated, entered, enforced or deemed
applicable to the Offer, the Merger, this Agreement or the Option
Agreements by any government, governmental authority or agency or
court, domestic or foreign, or a claim or action for such order or
injunction has been instituted before a court, government or
governmental authority or agency, or such has been proposed before
a legislative or regulatory body, that could be reasonably expected
to result in any of the consequences referred to in clauses (i)
through (iii) of subsection (b) above; or
(d) (i) the Acquired Company or any of the Subsidiaries
shall have authorized, recommended, proposed or announced an
agreement, or intention to enter into an agreement, with respect to
any merger, consolidation, share exchange, liquidation or business
combination, any acquisition or disposition of a material amount of
assets or securities, or any comparable event, not in the ordinary
course of business or (ii) the Acquired Company or its Board of
Directors shall have withdrawn, amended or modified in any respect
its recommendation of the Offer or the Merger or that shareholders
tender their Outstanding Shares pursuant to the Offer; or
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(e) any of the representations and warranties of the
Acquired Company set forth in this Agreement shall not be true and
correct as of the time when made or as of the time any of the
Outstanding Shares are purchased by Purchaser or the Acquisition
Sub pursuant to the Offer, as if made as of such time, or the
Acquired Company shall have breached any covenant contained in this
Agreement or shall have breached any covenant contained in the
Company Option Agreement or the Option Shareholders shall have
breached any covenant contained in the Shareholder Option
Agreement, if any or all of the misrepresentations, failures to be
so true and correct or breaches referred to in this Subsection
2.1.2(e), individually or in the aggregate, shall have a Material
Adverse Effect or, in the case of the Shareholder Option Agreement,
materially affect the ability of the parties to consummate the
transactions set forth herein; or
(f) the Acquired Company and Purchaser shall have agreed
that the Offer or this Agreement be terminated or amended or this
Agreement otherwise shall have been terminated in accordance with
its terms;
which, in any case, and regardless of the circumstances giving rise
to any such condition (including any action or inaction by
Purchaser or the Acquisition Sub), makes it inadvisable to proceed
with the Offer or with such acceptance for payment.
The foregoing conditions are for the sole benefit of
Purchaser and the Acquisition Sub and may be asserted by Purchaser
regardless of the circumstances giving rise to any such condition
and may be waived by Purchaser, in whole or in part, at any time
and from time to time, in the sole discretion of Purchaser. The
failure by Purchaser at any time to exercise any of the foregoing
rights will not be deemed a waiver of any other right and each
right will be deemed an ongoing right which may be asserted at any
time and from time to time.
2.2 The Merger.
2.2.1. The Merger. Upon the terms and subject to
the conditions set forth in this Agreement, and in accordance with
the TBCA, Purchaser or the Acquisition Sub shall be merged with and
into the Acquired Company (the "Merger"), as soon as practicable
following the satisfaction or waiver of the conditions set forth in
Articles VI and VII hereof. Following the Merger, the Acquired
Company shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of the
Acquisition Sub shall cease. Notwithstanding this Section 2.2.1,
if Purchaser and its affiliates have acquired at least eighty
percent (80%) of the Outstanding Shares, Purchaser may elect, at
any time prior to the date on which the Proxy Statement or
Information Statement is initially mailed to the Acquired Company's
shareholders pursuant to Sections 2.2.12(b)(i) or 2.2.12(c)(i)
hereof, instead of merging the Acquisition Sub into the Acquired
Company as hereinabove provided, to merge the Acquired Company with
and into the Acquisition Sub, in which case, the Acquisition Sub
shall be the "Surviving Corporation;" provided, however, that the
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Acquired Company shall not be deemed to have breached any of its
representations or warranties or covenants herein if such breaches
occur or are deemed to occur solely by reason of such election. In
such event, the parties agree to execute an appropriate amendment
to this Agreement in order to reflect the foregoing and to provide
that the Acquisition Sub or such other subsidiary shall be the
Surviving Corporation.
2.2.2. Manner of Approving Merger. In the event
Purchaser and the Acquisition Sub acquire, pursuant to the Offer
and the Option Agreements, at least ninety percent (90%) of the
Outstanding Shares, Purchaser and the Acquisition Sub may elect to
effect the Merger pursuant to a "short form" merger, as set forth
in Section 2.2.12(a) hereof. In the event Purchaser and the
Acquisition Sub acquire, pursuant to the Offer and the Option
Agreements, at least sixty-six and two-thirds percent (66 2/3%) but
less than ninety percent (90%) of the Outstanding Shares, the
Merger shall (and if above ninety percent (90%), may in the sole
discretion of Purchaser) be submitted for approval of the
shareholders of the Acquired Company, as set forth in Sections
2.2.12(b) or 2.2.12(c). In the event Purchaser and the Acquisition
Sub acquire, pursuant to the Offer and the Shareholder Option
Agreement, a majority (on a fully diluted basis) but less than
sixty-six and two-thirds percent (66 2/3%) of the Outstanding
Shares, Purchaser and the Acquisition Sub may request that a
shareholders meeting be held (and in such case the Acquired Company
shall cause a meeting to be held) for the purpose of voting on the
Merger.
2.2.3. Effective Time; Effects of the Merger.
The Merger shall become effective upon the filing with the
Secretary of State of Texas of articles of merger or, if
applicable, a certificate of merger (the "Articles of Merger"),
executed in accordance with the relevant provisions of the TBCA
(the time the Merger becomes effective being referred to as the
"Effective Time"). The Merger shall have the effects set forth in
the TBCA. As of the Effective Time the Surviving Corporation shall
be a, direct or indirect, wholly-owned subsidiary of Purchaser.
2.2.4. Articles of Incorporation and Bylaws. The
Articles of Incorporation of the Acquisition Sub as in effect
immediately preceding the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation; provided that, at the
Effective Time, Article I of the Articles of Incorporation shall
read as follows:
I.
The name of the Corporation is CYBERTEK CORPORATION.
The Bylaws of the Acquisition Sub as in effect immediately
preceding the Effective Time shall be the Bylaws of the Surviving
Corporation; provided that the name of the corporation as set forth
in the Bylaws shall be "CYBERTEK Corporation."
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2.2.5. Directors. The directors of the
Acquisition Sub immediately prior to the Effective Time shall be
the initial directors of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors
are duly elected or appointed and qualified in the manner provided
in the Articles of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.
2.2.6. Officers. The officers of the Acquisition
Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from
the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the
Articles of Incorporation and Bylaws of the Surviving Corporation,
or as otherwise provided by law.
2.2.7. Conversion of Shares. (a) Each
Outstanding Share issued and outstanding immediately prior to the
Effective Time (other than Outstanding Shares held by Purchaser or
any subsidiary of Purchaser and other than Dissenting Shares),
shall, at the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into the
right to receive the greater of (i) Fifteen and 10/100ths Dollars
($15.10) in cash or (ii) any higher price paid per Outstanding
Share in the Offer (the "Merger Price"), payable to the holder
thereof, without interest thereon, upon the surrender of the
certificate[s] formerly representing such Outstanding Share.
(b) Each share of Common Stock held in the
treasury of the Acquired Company and each Outstanding Share held by
Purchaser or any subsidiary of Purchaser immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, be
cancelled and retired and cease to exist.
2.2.8. Conversion of the Acquisition Sub's Common
Stock. Each share of common stock, $.01 par value per share, of
the Acquisition Sub issued and outstanding immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into one (1) share of Common Stock.
2.2.9. Employee Stock Options; Employee Stock
Purchase Plan. (a) Purchaser, the Acquisition Sub and the Acquired
Company agree as follows with respect to options granted under the
Stock Option Plans (collectively, "Employee Options"):
(i) On and after the date of this Agreement,
the Acquired Company (its Board of Directors or any committee
thereof) shall not issue any additional Employee Options or, except
as contemplated in this Section 2.2.9(a), amend the terms of any
outstanding Employee Option.
(ii) With respect to each Employee Option
outstanding as of the date of this Agreement under the 1985 and
1987 Plans, that by the terms of the applicable plan or the
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contract relating to such Employee Option terminates upon (i) the
Effective Date or (ii) the date on which Purchaser acquires 80% of
the Outstanding Shares, the holder of such option shall be entitled
to receive on the earlier of such dates if such options are not
previously exercised, from the Acquired Company (or, failing any
part of such payment by the Acquired Company, from Purchaser or the
Acquisition Sub), for each share of Common Stock into which such
option would have been convertible upon exercise, an amount in cash
equal to the excess, if any, of the Merger Price over the per share
exercise price of such option, less all applicable withholding
taxes. The payments under this Subsection (ii) shall be made
within a reasonable time after the Effective Time.
(iii) With respect to each Employee Option
outstanding as of the date of this Agreement under the 1983 Plan,
which by the terms of the 1983 Plan or the contract relating to
such Employee Option does not terminate upon the Effective Date or
upon the acquisition by Purchaser of 80% of the Outstanding Shares,
the Acquired Company shall prior to the initial scheduled
expiration date of the Offer enter into an agreement with the
holder of such option pursuant to which such option shall terminate
on or prior to the Effective Time and the holder of such option
shall be entitled to receive within a reasonable time after the
Effective Time from the Acquired Company (or Purchaser), for each
share of Common Stock into which such option would have been
convertible upon exercise, an amount in cash equal to the excess,
if any, of the Merger Price over the per share exercise price of
such option, less all applicable withholding taxes.
The Acquired Company shall take such actions as are necessary to
ensure that from and after the Effective Time neither the Acquired
Company nor any of the Subsidiaries or any ERISA Affiliates of the
Acquired Company is or will be bound by any options, warrants,
rights or agreements issued, granted or entered into by the
Acquired Company that would entitle any Person, other than
Purchaser or its wholly-owned subsidiaries, to beneficially own, or
receive any payments (other than as otherwise contemplated by
Section 2.2.7 hereof and this Section 2.2.9) in respect of, any
capital stock of the Acquired Company or the Surviving Corporation.
The Board of Directors of the Acquired Company shall pass such
resolutions, provide or direct the provision of such notices
(including the ten (10) day and other notices of termination
pursuant to the terms of the applicable plan), and take such other
actions as are necessary or appropriate to accomplish the
termination of the above-referenced options, including without
limitation any amendments to such plans as may be necessary or
appropriate, and the Board of Directors or the applicable plan's
governing committee shall take all actions necessary to cause all
options issued under the 1985 and 1987 Plans to become exercisable
from the commencement of the Offer.
(b) With respect to the Stock Purchase Plan, the
Acquired Company will: (i) immediately after the date hereof, cause
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the Stock Purchase Plan to be terminated effective as of the date
hereof but such termination shall be conditioned upon the
consummation of the Merger; (ii) as soon as practicable after the
Effective Time, cause all amounts deferred through payroll
deductions between the date hereof and the Effective Time to be
returned, without interest, to the participants who have deferred
such amounts; (iii) treat all other amounts deferred through
payroll deductions prior to the date hereof and not yet used to
purchase Common Stock pursuant to the terms of the Stock Purchase
Plan as if such amounts were used to purchase Common Stock at a
purchase price per share equal to eighty-five percent (85%) of the
lower of the closing price per share of the Acquired Company's
Common Stock on February 1, 1993 or the closing price per share of
the Acquired Company's Common Stock on the trading date last
preceding the date of this Agreement, as such closing price is
reported on the National Association of Securities Dealers
Automated Quotation System; and (iv) pay each participant
thereunder an amount equal to the product of (x) the number of
shares deemed purchased by such participant pursuant to subsection
(iii) above times (y) the Merger Price. Such product shall be
subject to all applicable withholding taxes. The Acquired Company
shall amend the Stock Purchase Plan, if necessary, and terminate
the Stock Purchase Plan and take such other actions as are
necessary to ensure that from and after the Effective Time, neither
the Acquired Company nor any of the Subsidiaries is or will be
bound by any obligations, rights or agreements which would entitle
any participant to own beneficially, or receive any payments (other
than as otherwise contemplated by Section 2.2.7 and this Section
2.2.9) in respect of, any capital stock of the Acquired Company or
the Surviving Corporation. Promptly following the release of the
initial joint pess release referred to in Section 11.6 below, the
Acquired Company shall inform the participants of the Stock
Purchase Plan of the provisions set forth in this Section 2.2.9(b).
(c) With respect to the stock appreciation rights
granted in section 3 of that certain offer letter identified on
Exhibit 2.2.9(c), the holder of such rights shall be entitled to
receive at the Effective Time, fifty percent (50%) of the product
of fifteen thousand (15,000) multiplied by the amount by which the
Merger Price exceeds Seven Dollars ($7.00) per share of Common
Stock. The Acquired Company shall, prior to the initial scheduled
expiration date of the Offer, enter into an agreement with such
right holder pursuant to which the provisions of section 2 (with
respect to stock purchases and grants) and section 3 of such offer
letter shall be terminated on or prior to the Effective Time
without any costs or expenses to the Acquired Company, except as
set forth in the previous sentence.
2.2.10. Acquired Company Actions. (a) The
Acquired Company hereby consents to the Offer and represents that
the Board of Directors of the Acquired Company, by unanimous vote
of all directors present at a meeting duly called and held, has,
(i) determined that each of the Offer and the Merger is fair to the
shareholders of the Acquired Company and is in the best interests
of the shareholders of the Acquired Company and (ii) resolved to
recommend acceptance of the Offer and approval of the Merger by the
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shareholders of the Acquired Company. The Acquired Company further
represents that Alex. Brown & Sons Incorporated, the Acquired
Company's financial advisor, has delivered to the Board of
Directors of the Acquired Company its written opinion that the
consideration to be received by the holders of Outstanding Shares
pursuant to this Agreement is fair from a financial point of view
to such holders. The Acquired Company hereby agrees, subject to
the Board of Directors' fiduciary obligations (as defined or
identified in the written opinion of outside counsel to the Board),
to prepare, in consultation with Purchaser, and file with the SEC
a Solicitation/Recommendation Statement on Schedule 14D-9 (together
with all amendments and supplements thereto, the "Schedule 14D-9")
containing the recommendations of the Board of Directors of the
Acquired Company with respect to the Offer and to mail such
Schedule 14D-9 to the shareholders of the Acquired Company
concurrent with the commencement of the Offer.
(b) In connection with the Offer, the Acquired
Company will no later than two (2) days after the date of the
execution hereof furnish the Acquisition Sub with mailing labels,
security position listings and any available listing or computer
file containing the names and addresses of the record holders of
all of the Outstanding Shares as of the most recent practicable
date and shall furnish the Acquisition Sub with such information
and assistance as the Acquisition Sub or its agents or
representatives reasonably may request in communicating the Offer
to the record and beneficial holders of Outstanding Shares.
2.2.11. The Acquired Company's Board of Directors.
Promptly following (i) payment for the Outstanding Shares to be
purchased pursuant to the Offer or (ii) the purchase of Outstanding
Shares by the Acquisition Sub pursuant to the Option Agreements and
from time to time thereafter, if requested by Purchaser, the
Acquired Company will (A) increase the number of directors of the
Acquired Company by up to two (2) directors, (B) amend the Bylaws
of the Acquired Company to remove the limitation contained in
Section 2 of Article III of the Bylaws of the Acquired Company to
permit the remaining members of the Board of Directors to fill any
number of vacancies in the Board that result from other than
increases in directorships (to conform with the limitations set
forth in the TBCA), and (C) otherwise use its reasonable best
efforts to take all other actions necessary to cause promptly a
number of persons (with such individuals to be designated by
Purchaser) (rounded up to the nearest whole number) designated by
Purchaser which bears the same ratio to the number of directors of
the Acquired Company as the ratio of total voting power of the
Outstanding Shares beneficially owned by Purchaser or the
Acquisition Sub bears to the total voting power of all of the
Outstanding Shares to become directors of the Acquired Company
(including, if necessary, requesting or accepting the resignations
of one or more of the Acquired Company's current directors). The
resolutions of the Board of Directors of the Acquired Company
approving this Agreement shall expressly indicate the unanimous
acknowledgment of the members of such Board of the provisions of
this Section 2.2.11 and shall contain their agreement to abide by
the terms of this Section 2.2.11. The Acquired Company's
14
obligations to appoint Purchaser's designees to the Acquired
Company's Board of Directors shall be subject to Section 14(f) of
the Exchange Act, and Rule 14f-1 promulgated thereunder. The
Acquired Company shall promptly take all actions required pursuant
to such Section and Rle in order to fulfill its obligations under
this Section 2.2.11 and shall include in the Schedule 14D-9 mailed
to shareholders as set forth in Section 2.2.10(a) above such
information with respect to the Acquired Company and its officers
and directors as is required under such Section and Rule in order
to fulfill its obligations under this Section 2.2.11. Purchaser
will supply any information with respect to itself and its
officers, directors and affiliates required by such Section and
Rule to the Acquired Company. Following the election or
appointment of Purchaser's designees pursuant to this Section
2.2.11 and prior to the Effective Time (as hereinafter defined),
any amendment or termination of this Agreement or any waiver of any
of the Acquired Company's rights or conditions hereunder or any
consent by the Acquired Company to terminate this Agreement
pursuant to Article X hereof will require the concurrence of a
majority of the directors of the Acquired Company not designated by
Purchaser.
2.2.12. Shareholders' Meeting; Merger Without
Meeting. (a) In the event that the Acquisition Sub shall acquire
at least 90% of the Outstanding Shares, the parties hereto agree,
at the request of the Acquisition Sub or Purchaser, to take all
necessary and appropriate action to cause the Merger to become
effective, as soon as practicable after the expiration of the
Offer, without a meeting of shareholders of the Acquired Company,
in accordance with Article 5.16 of the TBCA. In connection
therewith, Purchaser, the Acquisition Sub and the Acquired Company
are entering into the Company Option Agreement, pursuant to which,
subject to Purchaser and the Acquisition Sub collectively having
previously acquired at least 80% of the Outstanding Shares and
subject to the other conditions set forth therein, Purchaser or the
Acquisition Sub shall have the right to purchase from the Acquired
Company a sufficient number of shares of Common Stock such that
such shares of Common Stock, together with all other Outstanding
Shares acquired by Purchaser or the Acquisition Sub, would
represent at least 90% of the total Outstanding Shares (including
those purchased pursuant to the Company Option Agreement) and
permit the Merger to be effected without a meeting in accordance
with said Article 5.16 of the TBCA.
(b) If a short form merger is not undertaken
pursuant to Section 2.2.12(a), following the purchase by the
Acquisition Sub or Purchaser of the Outstanding Shares tendered by
the holders thereof pursuant to the Offer, and if requested by
Purchaser, the Acquired Company, acting through its Board of
Directors, shall, in accordance with applicable law:
(i) prepare, file with the SEC and distribute
to its shareholders an information statement containing all the
information required by Schedule 14C pursuant to Section 14(c) of
the Exchange Act and the Rules and Regulations thereunder (together
with all amendments or supplements thereto, the "Information
15
Statement," which term shall refer to the information statement
required under this Section 2.2.12(b) or under Section 2.2.12(c));
(ii) duly give notice of, the proposed actions
to be taken and cause to be taken all actions to facilitate
obtaining the written consent of shareholders of the Acquired
Company holding at least sixty-six and two-thirds percent (66 2/3%)
of the Outstanding Shares approving this Agreement, the Merger and
any related matters, as appropriate, as soon as practicable
following the expiration or termination of the Offer;
(iii) include in the Information Statement the
recommendation of its Board of Directors that the shareholders of
the Acquired Company approve and consent in writing to the adoption
of this Agreement, unless the Board of Directors shall have
determined in good faith, based on the written advice of its
outside counsel, that withdrawing such recommendation is required
in the exercise of the Board of Directors' fiduciary duties under
applicable law; and
(iv) use its best efforts (A) to obtain and
furnish the information required to be included by it in the
Information Statement and, after consultation with Purchaser,
respond promptly to any comments made by the SEC with respect to
the Information Statement and any preliminary version thereof and
cause the Information Statement to be mailed to its shareholders at
the earliest practicable time following the expiration or
termination of the Offer and (B) subject to the Board of Directors'
fiduciary obligations based upon written advice of the outside
counsel, to obtain the necessary approval of the Merger by its
shareholders.
(c) If a short form merger is not undertaken
pursuant to Section 2.2.12(a), and if Purchaser has not requested
pursuant to Section 2.2.12(b) that the written consent of
Shareholders of the Acquired Company be obtained, following the
purchase by the Acquisition Sub or Purchaser of the Outstanding
Shares tendered by the holders thereof pursuant to the Offer, and
if requested by Purchaser, the Acquired Company, acting through its
Board of Directors, shall, in accordance with applicable law:
(i) prepare, file with the SEC and distribute
to its shareholders a proxy statement containing all the
information required by Schedule 14A pursuant to Section 14(a) of
the Exchange Act and the Rules and Regulations thereunder (together
with all amendments or supplements thereto, the "Proxy Statement")
(or if Purchaser requests a meeting of shareholders of the Acquired
Company but does not request that the Acquired Company solicit
proxies, an Information Statement);
(ii) duly call, give notice of, convene and
hold a special meeting of its shareholders and submit this
Agreement and any related matters, as appropriate, and the Merger
16
to a vote of the Acquired Company's shareholders as soon as
practicable following the expiration or termination of the Offer
for the purpose of considering and taking action upon this
Agreement and any such related matters;
(iii) include in the Proxy Statement (or
Information Statement) the recommendation of its Board of Directors
that the shareholders of the Acquired Company vote in favor of the
approval and adoption of this Agreement, unless the Board of
Directors shall have determined in good faith, based on the written
advice of its outside counsel, that withdrawing such recommendation
is required in the exercise of the Board of Directors' fiduciary
duties under applicable law; and
(iv) use its best efforts (A) to obtain and
furnish the information required to be included by it in the Proxy
Statement (or Information Statement) and, after consultation with
Purchaser, respond promptly to any comments made by the SEC with
respect to the Proxy Statement (or Information Statement) and any
preliminary version thereof and cause the Proxy Statement (or
Information Statement) to be mailed to its shareholders at the
earliest practicable time following the expiration or termination
of the Offer and (B) subject to the Board of Director's fiduciary
obligations based upon written advice of outside counsel, to obtain
the necessary approval of the Merger by its shareholders.
2.2.13. Closing; Filing of Articles of Merger.
Upon the terms and subject to the conditions hereof, as soon as
practicable following the satisfaction or waiver of the conditions
set forth in Articles VI and VII hereof, the Acquired Company and
the Acquisition Sub shall execute and file the Articles of Merger
in the manner required by the TBCA, and the parties hereto shall
take all such other and further actions as may be required by law
to make the Merger effective. Prior to the filing referred to in
this Section 2.2.13, a closing (the "Closing") will be held as set
forth in Section 8.1 hereof, for the purpose of confirming all of
the foregoing.
2.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Outstanding Shares which are issued and
outstanding immediately prior to the Effective Time and which are
held by shareholders who have complied with the procedures for
appraisal set forth in the TBCA (the "Dissenting Shares") shall not
be converted into or be exchangeable for the right to receive the
consideration provided for in Section 2.2.7 hereof, unless and
until such holder shall have failed to perfect or shall have
effectively withdrawn or lost his or her right to appraisal and
payment under the TBCA. If such holder shall have so failed to
perfect or shall have effectively withdrawn or lost such right, his
or her Outstanding Shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the consideration provided for
in Section 2.2.7 hereof, without any interest thereon. The
Acquired Company will not settle, compromise or pay any amount with
17
respect to any claim for appraisal in connection with the Merger
without the prior written consent of Purchaser.
2.4 Payment for Outstanding Shares.
2.4.1. Exchange Agent; Funding. Prior to the
Effective Time, Purchaser shall designate a bank or trust company
to act as Exchange Agent in connection with the Merger (the
"Exchange Agent"). At the Effective Time, Purchaser will take all
steps necessary to enable and cause the Surviving Corporation to
provide the Exchange Agent with the funds necessary to make the
payments contemplated by Section 2.2.7 hereof prior to the time
that such payments are required to be made by the Exchange Agent.
2.4.2. Surrender of Certificate; Payment.
Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder (as of the Effective Time) of an outstanding
certificate or certificates which immediately prior to the
Effective Time represented Outstanding Shares (the "Certificates")
a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and instructions for use in effecting the surrender
of the Certificates for payment therefor. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of
transmittal duly executed, and any other required documents, the
holder of such Certificate shall be entitled to receive in exchange
therefor the consideration set forth in Section 2.2.7 hereof, and
such Certificate shall forthwith be cancelled. No interest will be
paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a Person other than the
Person in whose name the Certificate surrendered is registered, it
shall be a condition of payment that the Certificate so surrendered
shall be properly endorsed or otherwise in proper form for transfer
and that the Person requesting such payment shall pay any transfer
or other taxes required by reason of the payment to a Person other
than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in
accordance with the provisions of this Section 2.4.2, each
Certificate (other than Certificates representing Outstanding
Shares held by Purchaser or the Acquisition Sub or any of their
subsidiaries and Dissenting Shares) shall represent for all
purposes only the right to receive the consideration set forth in
Section 2.2.7 hereof, without any interest thereon.
2.4.3. Transfers After Effective Time. After the
Effective Time there shall be no transfers on the stock transfer
books of the Acquired Company of the shares of Common Stock that
were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates representing shares of
Common Stock which were outstanding immediately prior to the
Effective Time are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the consideration provided in
Section 2.2.7 in accordance with the procedures set forth in this
Section 2.4.
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2.5 Conduct of the Business of the Acquired Company and
its Subsidiaries Prior to Closing.
2.5.1. Except (i) with the prior consent in
writing of Purchaser or with the consent of Purchaser's directors
designated pursuant to Section 2.2.11, (ii) as may be required to
effect the transactions contemplated by this Agreement or (iii) as
provided otherwise in this Agreement, the Company Option Agreement
and in the Covenants Not To Compete, the Acquired Company covenants
that, between the date of this Agreement and the Effective Time,
the Acquired Company and the Subsidiaries will conduct their
respective business in the ordinary course, and that they will:
(a) use their reasonable best efforts to preserve the organization
of the Acquired Company and the Subsidiaries intact and to preserve
the goodwill of customers and others having business relations with
the Acquired Company or the Subsidiaries; (b) maintain the
properties of the Acquired Company and the Subsidiaries in
substantially the same working order and condition as such
properties are in as of the date of this Agreement, reasonable wear
and tear excepted; (c) keep in force at no less than their present
limits all existing bonds and policies of insurance or comparable
replacements thereof insuring the Acquired Company, the
Subsidiaries and their respective properties; (d) not enter into
any contract, commitment, arrangement or transaction of the type
described in Section 3.12 hereof or suffer, permit or incur any of
the transactions or events described in Section 3.9 hereof to the
extent such events or transactions are within the control of the
Acquired Company or any of the Subsidiaries (except that the
Acquired Company and the Subsidiaries may enter into new license
agreements, maintenance agreements and SAR's in the ordinary course
of business on terms and prices consistent with historical
practices and except for payment of bonuses accrued in the 1993
Financial Statements); (e) not make or permit any change in the
Acquired Company's, or any of the Subsidiaries' Articles or
Certificates of Incorporation or Bylaws, or in their authorized,
issued or outstnding securities (except for the issuance of Common
Stock pursuant to exercise of stock options pursuant to the 1983
Plan and the 1985 and 1987 Plans); (f) not grant any stock option
or right to purchase any security of the Acquired Company or any of
the Subsidiaries, issue any security convertible into such
securities, purchase, redeem, retire or otherwise acquire any of
such securities, or agree to do any of the foregoing or declare,
set aside or pay any dividend or other distribution in respect of
such securities; (g) not make any contribution to or distribution
from any employee benefit plan, pension plan, stock bonus plan,
401(k) plan or profit sharing plan (except for the payment of any
health, disability and life insurance premiums which may become due
and except for contributions or distributions required to be made
(and not discretionary) pursuant to the terms of any Benefit Plans)
and (h) promptly advise Purchaser in writing of any matters arising
or discovered after the date of this Agreement which, if existing
or known at the date hereof, would be required to be set forth or
described in this Agreement or the Exhibits hereto.
2.5.2. Except after prior notification to, and
with the prior written consent of, Purchaser, which consent will
19
not be unreasonably withheld, the Acquired Company will not make or
permit any Subsidiary to make, between the date of this Agreement
and the Effective Time, any change in their banking or safe deposit
arrangements or grant any powers of attorney. A list of all bank
accounts, safe deposit boxes (and the contents thereof) and powers
of attorney of the Acquired Company and of each Subsidiary (listed
by company) and of all persons authorized to act with respect
thereto is attached hereto as Exhibit 2.5.2.
2.5.3. Except with the prior consent in writing
of Purchaser, the Acquired Company will not make or permit any
Subsidiary to make, between the date of this Agreement and the
Effective Time, any material changes in their accounting methods or
practices.
2.6 Filing of Tax Returns. The Acquired Company shall
cause all of the Acquired Company's and the Subsidiaries' federal,
state and local tax returns required to be timely filed before the
Effective Time to be timely and accurately filed with the
appropriate taxing authorities. For purposes of this Section 2.6,
such returns shall be deemed timely filed if the Acquired Company
or the applicable Subsidiary has obtained an extension from the
appropriate taxing authority as to the time in which it may file
such tax returns. The Acquired Company shall submit all such tax
returns to Purchaser at least fifteen days prior to the date they
must be filed, and Purchaser shall have the opportunity to comment
on and approve such returns, which approval will not unreasonably
be withheld. Purchaser or the Surviving Corporation will file all
such tax returns due after the Effective Time. All such
information shall be true, correct and accurate in all respects.
2.7 Resignation. The Acquired Company shall deliver at
the Closing the resignation of each of the directors (other than
directors designated by Purchaser pursuant to Section 2.2.11) and
officers of the Acquired Company and the Subsidiaries and each
trustee under any Benefit Plan maintained by the Acquired Company
or any Subsidiary, such resignations to be effective immediately
prior to the Effective Time.
2.8 Examination of Property and Records. Between the
date of this Agreement and the Effective Time, the Acquired Company
will allow Purchaser, its counsel and other representatives full
access to all the books, records, files, documents, assets,
properties, contracts and agreements of the Acquired Company and
the Subsidiaries which may be reasonably requested, and the
Acquired Company shall furnish Purchaser and the Acquisition Sub,
their officers and representatives during such period with all
information concerning the affairs of the Acquired Company and the
Subsidiaries which may be reasonably requested. Purchaser and the
Acquisition Sub will conduct any investigation in a manner which
will not unreasonably interfere with the businesses of the Acquired
Company and the Subsidiaries. Such information and materials, to
the extent they constitute "Evaluation Material," as defined in
that certain confidentiality letter from the Acquired Company to
Purchaser dated April 6, 1993, shall be held (and returned or
20
destroyed, if necessary) by Purchaser and the Merger Sub in
accordance with the terms of such confidentiality letter.
2.9 Consents and Approvals. The Acquired Company shall
use its, and shall cause the Subsidiaries to use their, reasonable
best efforts (without requiring the payment of money) to obtain the
waiver, consent and approval of all persons whose waiver, consent
or approval (i) is required in order to consummate the transactions
contemplated by this Agreement or (ii) is required by any
agreement, lease, instrument, arrangement, judgment, decree, order
or license to which the Acquired Company or any Subsidiary is a
party or subject on the Effective Time and (a) which would prohibit
or require the waiver, consent or approval of any person to such
transactions or (b) under which, without such waiver, consent or
approval, such transactions would constitute an occurrence of
default under the provisions thereof, result in the acceleration
of any obligation thereunder or give rise to a right of any party
thereto to terminate its obligations thereunder. All obtained
written waivers, consents and approvals shall be produced at
Closing in form and content reasonably satisfactory to Purchaser.
2.10 Covenants Not to Compete. The parties hereto
acknowledge that contemporaneously with the execution of this
Agreement, those Persons identified on Exhibit 2.10(a) have entered
into Covenants Not To Compete substantially in the forms set forth
as Exhibit 2.10(b) hereto.
2.11 Supplying of Financial Statements. The Acquired
Company shall deliver to Purchaser all regularly prepared audited
and unaudited consolidated and consolidating financial statements
of the Acquired Company and the Subsidiaries prepared after the
date of this Agreement, in format historically published or
utilized internally (as applicable), and any Financial Statements
prepared for filing with the SEC, as soon as each is available.
2.12 No Solicitation. The Acquired Company shall not,
and shall not permit any of the Subsidiaries to, and the Acquired
Company and the Subsidiaries shall not authorize or permit any
officer, director or employee of, or any financial advisor,
attorney, accountant or other advisor or representative retained
by, the Acquired Company or any of the Subsidiaries to, solicit,
initiate, encourage (including by way of furnishing information),
endorse or enter into any agreement with respect to, or take any
other action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead
to, any Takeover Proposal (as hereafter defined). The Acquired
Company shall immediately advise Purchaser orally and in writing of
any Takeover Proposal or any inquiries or discussions with respect
thereto. Neither the Board of Directors of the Acquired Company
nor any committee thereof shall (a) withdraw or modify, or propose
to withdraw or modify, in a manner adverse to Purchaser or the
Acquisition Sub the approval or recommendation by the Board of
Directors of the Acquired Company of the Offer, the Merger, this
Agreement or the Option Agreements or (b) approve or recommend, or
propose to approve or recommend, any Takeover Proposal or any other
acquisition of Outstanding Shares other than pursuant to the Offer,
21
the Merger, this Agreement and the Option Agreements.
Notwithstanding the foregoing, nothing contained in this Agreement
shall prevent the Board of Directors of the Acquired Company or any
such committee from (i) furnishing or causing to be furnished
information concerning the Acquired Company and its businesses,
properties or assets to a third party, (ii) engaging in
negotiations with a third party and (iii) taking and disclosing to
the Acquired Company's shareholders a position with respect to any
Takeover Proposal (and, in connection therewith, withdrawing or
modifying the approval or recommendation by the Board of Directors
of the Offer, the Merger, this Agreement or the Option Agrement)
but in each case referred to in the foregoing clauses (i) through
(iii) only to the extent the Board of Directors of the Acquired
Company shall have determined in good faith, based on the written
advice of its outside counsel, that such action is required under
applicable law in the exercise of its fiduciary duties. As used in
this Agreement, "Takeover Proposal" shall mean any tender or
exchange offer, proposal, other than a proposal by Purchaser or any
of its affiliates, for a merger, share exchange or other business
combination involving the Acquired Company or any of the
Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in the Acquired Company or any of the
Subsidiaries or a substantial portion of the assets of the Acquired
Company or any of the Subsidiaries.
2.13 Indemnification; Directors' and Officers. Unless
otherwise required by law, for a six (6) year period following the
purchase by Purchaser or the Acquisition Sub of the Outstanding
Shares tendered in the Offer or the purchase of the Outstanding
Shares held by the Option Shareholders pursuant to the Shareholder
Option Agreement, the Acquired Company prior to the Merger, and the
Surviving Corporation following the Merger, shall keep in effect in
their respective Articles of Incorporation and Bylaws, with respect
to matters occurring prior to or at the Effective Time, those
provisions regarding indemnification of, and limitations on,
liability of directors and officers contained in Article Eleven and
Section 5.1 of the Acquisition Sub's Articles of Incorporation and
Bylaws, respectively, as set forth in Exhibit 5.1, or in the event
either of such provisions is repealed or amended during such
six-year period, the Acquired Company or the Surviving Corporation,
as applicable, shall provide in connection with any such amendment
that neither the repeal nor amendment of such provision shall
eliminate or reduce the effect of such provision with respect to
matters occurring prior to the Effective Time with respect to
directors and officers of the Acquired Company. In the case of
matters occurring prior to the Effective Time for which a claim for
indemnification is made during said six-year period that have not
been resolved prior to the expiration of such six-year period, the
above described indemnification and limitation of liability
provisions shall remain in effect until such matters are finally
resolved. During such six-year period, neither Purchaser nor the
Acquisition Sub shall cause the Acquired Company, or the Surviving
Corporation, as applicable, to be reincorporated or merged into
another corporation in any state other than Texas unless (i) such
state permits indemnification and limitations on liabilities of the
directors and officers of the Acquired Company, with respect to
22
events occurring prior to the Merger,comparable to that provided in
the Acquisition Sub's Articles of Incorporation and Bylaws or (ii)
such new corporation provides otherwise for comparable protections
to the officers and directors of the Acquired Company with respect
to events occurring prior to the Merger. The Acquired Company
represents to Purchaser and the Acquisition Sub that the only
rights to indemnification existing in favor of any of the officers
or directors of the Acquired Company are pursuant to the Articles
of Incorporation and Bylaws of the Acquired Company or the TBCA.
Purchaser shall use its reasonable best efforts to cause to be
maintained in effect during such six-year period, with respect to
the Acquired Company prior to the Merger and the Surviving
Corporation after the Merger, policies of directors and officers
liability insurance, with respect to matters occurring prior to the
Effective Time at such coverage levels as can be purchased for One
Hundred Fifty-Five Thousand Dollars ($155,000.00) per year, but in
no event with less coverage than the "limit of liability" and
"deductibles" contained in the Acquired Company's current directors
and officers liability policy (The Aetna Casualty & Surety Company
Policy #095 LB 100 688 413 BCA).
2.14 HSR Act Filings. As promptly as practicable after
the execution of this Agreement, and in any event not later than
the third business day following the date of this Agreement,
Purchaser and the Acquired Company shall each, in cooperation with
the other, make the required filings in connection with the
transactions contemplated by this Agreement under the HSR Act with
the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice, and, as promptly as
practicable from time to time thereafter, each party shall make all
such further filings and submissions, and take such further action,
as may be required in connection therewith. Purchaser and the
Acquired Company shall each request early termination of the
waiting period with respect to such filings. Each party shall
furnish the other all information in its or their possession
necessary for compliance by the other with the provisions of this
Section 2.14. Purchaser and the Acquired Company shall each notify
the other immediately upon receiving any request for additional
information with respect to such filings from either the Antitrust
Division of the Department of Justice or the Federal Trade
Commission and the party receiving the request shall use its best
efforts to comply with such request as soon as possible. Neither
party shall withdraw any such filing or submission without the
written consent of the other party.
2.15 Shareholder Option Agreement. Simultaneously with
the execution of this Agreement, Purchaser, the Acquisition Sub and
each shareholder listed on Exhibit 2.15(a) (collectively, the
"Option Shareholders") have entered into a Shareholder Option
Agreement substantially in the form set forth in Exhibit 2.15(b).
2.16 Company Option Agreement. Simultaneously with the
execution of this Agreement, the Acquired Company, the Acquisition
Sub and Purchaser have entered into a Company Option Agreement,
substantially in the form set forth in Exhibit 2.16.
23
2.17 Termination of Split Dollar Arrangement. Between
the date hereof and the expiration of the Offer, the Acquired
Company shall cause the split dollar arrangement identified on
Exhibit 2.17 to be terminated in a manner such that the Acquired
Company shall receive the cash surrender value which, if
surrendered on the date hereof, would approximate One Million Three
Hundred Ninety-Four Thousand Three Hundred Sixty-Six Dollars
($1,394,366.00). The difference between the premiums paid for such
arrangement (which premiums as of the date hereof are One Million
Three Hundred Nineteen Thousand Five Hundred Seventy-Four Dollars
($1,319,574.00)) and such cash surrender value shall be remitted to
the party for whose benefit such arrangement was maintained, less
an amount equal to Thirty-Four Thousand Nine Hundred Twenty-Eight
Dollars ($34,928.00) for taxes in connection with the termination
of such arrangement. Thus, if the payment were made on the date
hereof, it would approximate Thirty-Nine Thousand Eight Hundred
Sixty-Four Dollars ($39,864.00). Any federal, state, local or
other income, excise or other taxes in excess of Thirty-Four
Thousand Nine Hundred Twenty-Eight Dollars ($34,928.00) that the
Acquired Company is required to pay in connection with such
termination will be deducted from the amount payable under the
second preceding sentence to the party for whose benefit such
arrangement was maintained.
III. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANY.
The Acquired Company represents and warrants to Purchaser
and the Acquisition Sub as follows:
3.1 Organization, Standing and Foreign Qualification.
3.1.1. Each of the Acquired Company and the
Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the respective jurisdiction of
its incorporation as set forth in Exhibit 3.1 and has the requisite
corporate power and authority to carry on its business in the
places and as it is now being conducted and to own and lease the
properties and assets which it now owns or leases.
3.1.2. Each of the Acquired Company and the
Subsidiaries is duly qualified and/or licensed to transact business
and in good standing as a foreign corporation in the jurisdictions
listed in Exhibit 3.1 hereto, and the character of the property
owned or leased by the Acquired Company and the Subsidiaries and
the nature of the business conducted by them do not require such
qualification and/or licensing in any other jurisdiction.
3.2 Authority and Status. The Acquired Company has the
capacity and authority to execute and deliver this Agreement and
the Company Option Agreement, to perform hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby
without the necessity of any act or consent of any other Person
whomsoever, except as set forth on Exhibit 3.8. The execution,
delivery and performance by the Acquired Company of this Agreement
and each and every other agreement, document and instrument
provided for herein have been duly authorized and approved by the
24
Board of Directors of the Acquired Company. Assuming this
Agreement and each and every agreement, document or instrument to
be executed, delivered and performed by the Acquired Company in
connection herewith are valid and legally binding obligations of
Purchaser and the Acquisition Sub, this Agreement and each and
every agreement, document and instrument to be executed, delivered
and performed by the Acquired Company in connection herewith
constitute or will, when executed and delivered, constitute the
valid and legally binding obligation of the Acquired Company
enforceable against it in accordance with their respective terms,
except as enforceability may be limited by applicable equitable
principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws from time to time in effect affecting
the enforcement of creditors' rights generally. Attached hereto as
Exhibit 3.2 are true, correct and complete copies of the Articles
or Certificates of Incorporation and Bylaws of the Acquired Company
and the Subsidiaries.
3.3 Capitalization. The entire authorized capital stock
of the Acquired Company consists of Sixteen Million (16,000,000)
shares of stock, of which Fifteen Million (15,000,000) shares are
designated Common Stock, par value $.01 per share, and One Million
(1,000,000) shares are designated Preferred Stock, par value $.01
per share. Of the total authorized Common Stock, as of June 18,
1993, Three Million Seven Hundred Eighty-Four Thousand Eight
Hundred Eighty-Seven (3,784,887) shares were issued and outstanding
and Seventy Thousand One Hundred Eighty-One (70,181) shares were
held in the Acquired Company's treasury. Of the total authorized
Preferred Stock, no shares have been issued. As of June 18, 1993,
there were options outstanding under the 1983 Plan and the 1985 and
1987 Plan entitling the optionees thereunder, upon valid exercise,
to acquire in the aggregate Two Hundred Nine Thousand Four Hundred
(209,400) shares of Common Stock. As of June 15, 1993, there was
Seventy-One Thousand Seven Hundred Forty-Nine and 38/100 Dollars
($71,749.38) held in the Stock Purchase Plan representing
contributions by the participants thereof. All of the issued and
outstanding shares of each of the Subsidiaries owned by the
Acquired Company are held free and clear of all liens, claims,
charges and encumbrances of any nature whatsoever. All of the
Outstanding Shares (and any shares issued pursuant to presently
outstanding options, if exercised and purchased at the applicable
exercise price) were duly authorized (or will be when issued and
the option price paid), validly issued, fully paid and
nonassessable. None of the capital stock of the Acquired Company
is entitled to or subject to preemptive rights. Other than the
requisite shareholder vote to consummate the Merger, the
authorization or consent of no other person or entity is required
in order to consummate the transactions contemplated herein by
virtue of any such person or entity having an equitable or
beneficial interest in the Acquired Company or any Subsidiary or
the caital stock of the Acquired Company or any Subsidiary. Except
as set forth on Exhibit 3.3, there are no outstanding options,
warrants, calls, commitments or plans by the Acquired Company or
any Subsidiary to issue any additional shares of their capital
stock, to pay any dividends on such shares or to purchase, redeem,
or retire any outstanding shares of their capital stock, nor are
25
there outstanding any securities or obligations which are
convertible into or exchangeable for any shares of capital stock of
the Acquired Company. Following the Merger, the Acquired Company
will have no obligation to issue, transfer or sell any shares of
capital stock of any of the Subsidiaries. Except for the Option
Agreements, there are not now, and at the Effective Time there will
not be, any voting trusts or other agreements or understandings to
which the Acquired Company or any of the Subsidiaries is a party or
is bound with respect to the voting of the capital stock of the
Acquired Company or any of the Subsidiaries.
3.4 Absence of Equity Investments. Except for the
Subsidiaries and as described in Exhibit 3.4 hereto, the Acquired
Company does not, either directly or indirectly, own of record or
beneficially any shares or other equity interests in any
corporation, partnership, limited partnership, joint venture, trust
or other business entity, other than any corporation or business
that the Acquired Company would not be required to disclose in its
Annual Report on Form 10-K or in an exhibit thereto.
3.5 Liabilities and Obligations of the Acquired Company
and the Subsidiaries; SEC Reports.
3.5.1. Attached hereto as Exhibit 3.5.1 are true,
correct and complete copies of the Acquired Company's (and the
Subsidiaries') audited consolidated balance sheets as of March 31,
1991, March 31, 1992 and March 31, 1993 and the related
consolidated statements of earnings and retained earnings and cash
flows for the years then ended, together with the reports of Ernst
& Young thereon (respectively, the "1991, 1992 and 1993 Financial
Statements"). The 1991, 1992 and 1993 Financial Statements are
complete, have been prepared in accordance with generally accepted
accounting principles, consistently applied, fairly present in all
material respects the consolidated financial condition of the
Acquired Company and the Subsidiaries as of the respective dates
thereof and disclose all liabilities of the Acquired Company and
the Subsidiaries, whether absolute, contingent, accrued or
otherwise, existing as of the date thereof which are of a nature
required to be reflected in financial statements prepared in
accordance with generally accepted accounting principles.
3.5.2. Neither the Acquired Company nor any
Subsidiary has any liability or obligation (whether accrued,
absolute, contingent or otherwise) which is of a nature required to
be reflected in financial statements prepared in accordance with
generally accepted accounting principles, consistently applied,
including, without limitation, any liability which might result
from an audit of their tax returns by any appropriate authority,
except for (a) the liabilities and obligations of the Acquired
Company and the Subsidiaries that are disclosed or reserved against
in the 1993 Financial Statements or Exhibit 3.5.2 hereto, to the
extent and in the amounts so disclosed or reserved against, and (b)
liabilities incurred or accrued in the ordinary course of business
since March 31, 1993 and liabilities incurred in connection with
the transactions referred to herein.
26
3.5.3. Except as disclosed in the 1993 Financial
Statements or Exhibit 3.5.2, neither the Acquired Company nor any
Subsidiary is in default with respect to any liabilities or
obligations, and all such liabilities or obligations shown or
reflected in the 1993 Financial Statements or Exhibit 3.5.2 and
such liabilities incurred or accrued subsequent to March 31, 1993
have been, or are being, paid and discharged as they become due,
and all such liabilities and obligations were incurred in the
ordinary course of business except as indicated in Exhibit 3.5.2.
3.5.4. The Acquired Company has filed all required
forms, reports, documents and registration statements
(collectively, the "SEC Reports") with the SEC that were required
to be filed by it under the Exchange Act or the 1933 Act, all of
which were complete and correct in all material respects and have
complied in all material respects with all applicable requirements
of the 1933 Act and the Exchange Act and the Rules and Regulations
promulgated thereunder. As of the time filed, none of the SEC
Reports, including without limitation any financial statements or
schedules included therein, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein
not misleading.
3.6 Tax Returns. Except as described on Exhibit 3.6,
the Acquired Company and the Subsidiaries have, as of the date
hereof, and will prior to the Effective Time have, timely and
accurately filed all federal, state, foreign and local tax returns
and reports required to be filed by them prior to such dates and
have timely paid, or will prior to the Effective Time timely pay,
all taxes shown on such returns as owed for the periods of such
returns, including all withholding or other payroll related taxes
shown on such returns. The tax basis of all assets of the Acquired
Company and the Subsidiaries as reflected on their books and
records is correct and accurate for use in tax periods ending after
the Effective Time, assuming no Section 338 election has been made
by Purchaser under the Code, and assuming that no change in
applicable federal or state tax laws occurs subsequent to the
Effective Time. Except as described on Exhibit 3.6, neither the
Acquired Company nor any Subsidiary is, nor will any of them
become, subject to any additional taxes, interest, penalties or
other similar charges as a result of the failure to file timely or
accurately, as required by applicable law, any such tax return or
to pay timely any amount shown to be due thereon, including,
without limitation, any such taxes, interest, penalties or charges
resulting from the obtaining of an extension of time to file any
return or to pay any tax. No assessments or notices of deficiency
or other communications have been received by the Acquired Company
or any Subsidiary with respect to any such tax return which has not
been paid, discharged or fully reserved in the 1993 Financial
Statements or Exhibit 3.6 hereto, and no amendments or applications
for refund have been filed or are planned with respect to any such
return. Except as set forth on Exhibit 3.6, there are no
agreements between the Acquired Company or any Subsidiary and any
taxing authority, including, without limitation, the IRS, waiving
or extending any statute of limitations with respect o any tax
27
return, and neither the Acquired Company nor any Subsidiary has
filed any consent or election under the Code, including, without
limitation, any election under Section 341(f) of the Code, other
than such consents and elections, if any, reflected in the Acquired
Company's consolidated federal income tax return for its taxable
year ended March 31, 1992, a true and complete copy of which is
attached as Exhibit 3.6.
3.7 Ownership of Assets and Leases. Exhibit 3.7
attached hereto is a complete and correct list as of the date of
this Agreement of all real property and material items of personal
property, owned, leased or licensed by the Acquired Company or any
Subsidiary (such list identifying which of such properties are
owned by the Acquired Company or any Subsidiary and all of the
leases, licenses or agreements under which the Acquired Company or
any Subsidiary is lessee or licensee or holds or operates any
property, real or personal). The Acquired Company and the
Subsidiaries have title to all of their respective property and
assets, other than leased or licensed property, including those
listed and described in Exhibit 3.7 as owned property and assets,
in each case free and clear of any liens, security interests,
claims, charges, options, rights of tenants or other encumbrances,
except as disclosed or reserved against in Exhibit 3.7 (to the
extent and in the amounts so disclosed or reserved against) and
except for liens arising from current taxes not yet due and
payable. Each of the leases, licenses and agreements described in
Exhibit 3.7 is in full force and effect and constitutes a legal,
valid and binding obligation of the Acquired Company or the
applicable Subsidiary and the other respective parties thereto and
is enforceable in accordance with its terms, except as
enforceability may be limited by applicable equitable principles or
by bankruptcy, insolvency, reorganization, moratorium, or similar
laws from time to time in effect affecting the enforcement of
creditors' rights generally, and there is not under any of such
leases, licenses or agreements any default of the Acquired Company
or the applicable Subsidiary or of any other parties thereto (or
event or condition which, with notice or lapse of time, or both,
would constitute a default). Neither the Acquired Company, nor any
Subsidiary, has received any payment from a lessor or licensee in
connection with or as inducement for entering into a lease or
license in wich the Acquired Company or a Subsidiary is a lessee or
licensee, except licenses, fees and similar payment in historical
amounts and in the ordinary course of business. All buildings and
material items of machinery and equipment owned or leased by the
Acquired Company or any Subsidiary are in good operating condition
and reasonable state of repair, subject only to ordinary wear and
tear. The inventories of the Acquired Company and the Subsidiaries
consist only of items of supplies of a quality and quantity usable
in the normal course of their businesses and no value therefor is
reflected in the 1993 Financial Statements. Neither the Acquired
Company nor any Subsidiary has received any notice of violation of
any applicable zoning regulation, ordinance or other law,
regulation or requirement relating to their operations and
properties, whether owned or leased, and there is no such violation
or grounds therefor. All of the accounts receivable of the
Acquired Company and the Subsidiaries as of the Effective Time will
28
reflect actual transactions and will have arisen in the ordinary
course of business. Except pursuant to this Agreement, neither the
Acquired Company nor any Subsidiary is a party to any contract or
obligation whereby there has been granted to anyone an absolute or
contingent right to purchase, obtain or acquire any rights in any
material items of the assets, properties or operations of which are
owned by the Acquired Company or any Subsidiary or which are used
in connection with the business of the Acquired Company or any
Subsidiary.
3.8 Agreement Does Not Violate Other Instruments.
Except as listed in Exhibit 3.8, the execution and delivery of this
Agreement by the Acquired Company does not, and the consummation of
the transactions contemplated hereby will not, violate any
provision of the Articles of Incorporation or Certificate of
Incorporation, as amended, or Bylaws, as amended, of the Acquired
Company or any Subsidiary or violate or constitute an occurrence of
default under any provision of, or conflict with, or result in
acceleration of any obligation under, or give rise to a right by
any party to terminate its obligations under, any mortgage, deed of
trust, conveyance to secure debt, note, loan, lien, lease,
agreement, instrument, or any order, judgment, decree or other
arrangement to which the Acquired Company or any Subsidiary is a
party or is bound or by which the Acquired Company's or any
Subsidiaries' assets are affected. Except for the applicable
requirements of the HSR Act and as listed or described on Exhibit
3.8 attached hereto, no consent, approval, order or authorization
of, or registration, declaration or filing with, any governmental
entity is required to be obtained or made by or with respect to the
Acquired Company, any Subsidiary or any assets, properties or
operations of the Acquired Company or any Subsidiary in connection
with the execution and delivery by the Acquired Company of this
Agreement or the consummation of the transactions contemplated
hereby.
3.9 Absence of Certain Changes or Events. Except as
disclosed on Exhibit 3.9, since March 31, 1993, the Acquired
Company and each of the Subsidiaries has operated in the ordinary
course of business and there has not been (i) any damage,
destruction or other casualty loss with respect to property owned
or leased by the Acquired Company or any of the Subsidiaries,
whether or not covered by insurance, or any strike, work stoppage
or slowdown or other labor trouble involving the Acquired Company
or any of the Subsidiaries, (ii) any increase in dividends or
employee compensation or benefits payable by the Acquired Company
except for normal increases in compensation consistent, in amounts
and timing, with historical practices, (iii) any change in
accounting methods, or (iv) any transaction, commitment, dispute or
other event or condition that would result in any adverse change in
the assets, business, operations, condition (financial or
otherwise) or results of operations of the Acquired Company and the
Subsidiaries.
3.10 Litigation. Except as otherwise set forth in
Exhibit 3.10 hereto, there is no suit, action, proceeding, claim or
investigation pending or, to the best knowledge and belief of the
29
Acquired Company, threatened against or affecting the Acquired
Company or any Subsidiary, and, to the best knowledge and belief of
the Acquired Company, there exists no basis or grounds for any such
suit, action, proceeding, claim or investigation.
3.11 Licenses and Permits; Compliance With Law. The
Acquired Company and the Subsidiaries hold all licenses,
certificates, permits, franchises and rights from all appropriate
federal, state or other public authorities necessary for the
conduct of their respective businesses and the use of their
respective assets. All such licenses, certificates, permits,
franchises and rights are listed in Exhibit 3.11. Except as noted
in Exhibit 3.11, the Acquired Company and the Subsidiaries
presently are conducting their respective businesses so as to
comply with all applicable statutes, ordinances, rules, regulations
and orders of any governmental authority. Further, the Acquired
Company and the Subsidiaries are neither presently charged with, or
under governmental investigation with respect to, any actual or
alleged violation of any statute, ordinance, rule or regulation,
nor presently the subject of any pending or, to the best knowledge
and belief of the Acquired Company, threatened adverse proceeding
by any regulatory authority having jurisdiction over their
respective businesses, properties or operations. Neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will result in the termination
of any license, certificate, permit, franchise or right held by the
Acquired Company or any Subsidiary, and all such licenses,
certificates, permits, franchises and rights will inure to the
benefit of the Surviving Corporation after the transactions
contemplated by this Agreement.
3.12 Contracts, Etc. Exhibit 3.12 hereto consists of a
true and complete list of all contracts, agreements, commitments
and other instruments (whether oral or written) to which the
Acquired Company or any Subsidiary is a party that: (i) involve a
receipt or an expenditure by the Acquired Company or any Subsidiary
or require the performance of services or delivery of goods to, by,
through, on behalf of or for the benefit of the Acquired Company or
any Subsidiary, which in each case relates to a contract,
agreement, commitment or instrument that either (A) requires
payments or receipts in excess of $25,000.00 per year or (B) is not
terminable by the Acquired Company on notice of thirty (30) days or
less without penalty or the Acquired Company being liable for
damages; or (ii) involve an obligation for the performance of
services or delivery of goods by the Acquired Company that cannot,
or in reasonable probability will not, be performed within thirty
(30) days from the dates as of which these representations are
made. Exhibit 3.12 also sets forth (whether oral or written):
3.12.1. Any contracts, agreements, commitments or
other instrument with any customer of the Acquired Company or any
Subsidiary, including without limitation any Service Authorization
Requests ("SAR's"), information systems support agreements,
consulting services agreements, processing services agreements,
software license agreements or other licenses, maintenance or
30
service agreements, purchase commitments, installation agreements
or data processing agreements;
3.12.2. Any lease, rental agreement or other
contract or commitment affecting the ownership or leasing of, title
to or use of any interest in real or personal property and any
maintenance or service agreements relating to any real or personal
property;
3.12.3. Any note receivable;
3.12.4. Any contract or commitment providing for
payments based in any manner upon the sales, purchases, receipts,
income or profits of the Acquired Company or any Subsidiary;
3.12.5. Any franchise agreement, marketing
agreement or royalty agreement (and with respect to each such
agreement, Exhibit 3.12 sets forth the aggregate royalties or
similar payment paid or payable thereunder by the Acquired Company
or any Subsidiary as of the date hereof);
3.12.6. Any employment contract or arrangement
regarding employees or independent contractors (including without
limitation any standard form contracts such as employee
nondisclosure agreements or microcomputer software
consultant/employee agreements), or for any continuing payment of
any type or nature, including, without limitation, any severance,
termination, parachute, or other payments (whether due to a change
in control, termination or otherwise) and bonuses and vested
commissions. Exhibit 3.12 also includes a listing of any such
agreements for which the standard form was materially or
substantially modified or materially or substantially altered, and
any contracts that are not in the standard form. Other than the
standard form agreements listed on Exhibit 3.12, those listed
variations from the standard form agreements and those listed
agreements that are not in the standard form, there are no other
agreements of the type referred to in this Section 3.12.6;
3.12.7. Any contract, agreement, understanding or
arrangement restricting the Acquired Company or any Subsidiary from
carrying on its business anywhere in the world; and
3.12.8. Any instrument or arrangement evidencing
or related to indebtedness for money borrowed or to be borrowed,
whether directly or indirectly, by way of purchase money
obligation, guaranty, subordination, conditional sale,
lease-purchase or otherwise.
Contemporaneously with the delivery of the Exhibits to
this Agreement, the Acquired Company has delivered a true and
complete copy of each such written contract, agreement, commitment
or instrument and a comprehensive summary of each such oral
contract, agreement, commitment or instrument, certified as such by
a duly authorized officer of the Acquired Company. All of the
contracts, agreements, policies of insurance or instruments
described in Exhibits 3.7, 3.12, 3.13.2, 3.15 or 3.18 hereto are
31
valid and binding upon the Acquired Company or the applicable
Subsidiary and the other parties thereto and are in full force and
effect and enforceable in accordance with their terms, and neither
the Acquired Company, the applicable Subsidiary nor, to the best
knowledge and belief of the Acquired Company, any other party to
any such contract, commitment or arrangement has breached any
provision of, or is in default under, the terms thereof; and there
are no existing facts or circumstances which would prevent the work
in process of the Acquired Company or any Subsidiary or their
contracts and agreements from maturing upon performance by the
Acquired Company or the applicable Subsidiary into collectible
accounts receivable in the aggregate in amounts consistent with
historical experience. Except as set forth on Exhibit 3.12, there
are no contracts or commitments that require the performance of
services or provision of goods by the Acquired Company at a direct
cost or with a value for each such contract or commitment in excess
of the revenue to be derived pursuant to the terms of such contract
or commitment. Except for terms specifically described in Exhibit
3.12, neither the Acquired Company nor any Subsidiary has received
any payment from any contracting party in connection with or as an
inducement for entering into any contract, agreement, policy or
instrument except for payment for actual services rendered or to be
rendered by such Acquired Company or Subsidiary consistent with
amount historically charged for such servies.
3.13 Intellectual Property; Computer Software.
3.13.1. Exhibit 3.13.1 hereto sets forth a
complete and correct list of all trademarks, tradenames, service
marks, service names, brand names, copyrights and patents,
registrations thereof and applications therefor, applicable to or
used in the businesses of the Acquired Company or any Subsidiary,
together with a complete list of all licenses granted by or to the
Acquired Company or any Subsidiary with respect to any of the
above. All such trademarks, tradenames, service marks, service
names, brand names, copyrights and patents are owned by the
Acquired Company or a Subsidiary, free and clear of all liens,
claims, security interests and encumbrances. Except as set forth
on Exhibit 3.13.1, neither the Acquired Company nor any Subsidiary
is currently in receipt of any notice of any violation of, and
neither the Acquired Company nor any Subsidiary is violating, the
rights of others in any trademark, tradename, service mark,
copyright, patent, trade secret, know-how or other intangible
asset.
3.13.2. (i) Exhibit 3.13.2(i) contains a complete
and accurate list of all computer software owned by the Acquired
Company or a Subsidiary (the "Owned Software"). Except as set
forth on Exhibit 3.13.2(i), the Acquired Company has title to the
Owned Software, free and clear of all claims, including claims or
rights of employees, agents, consultants, customers, licensees or
other parties involved in the development, creation, marketing,
maintenance, enhancement or licensing of such computer software.
Except as set forth on Exhibit 3.13.2(i) and except for
commercially available, over-the-counter "shrinkwrap" software, the
Owned Software is not dependent on any Licensed Software (as
32
defined in subsection (ii) below) in order to fully operate in the
manner in which it is intended. No Owned Software has been
published or disclosed to any other parties, except as set forth on
Exhibit 3.13.2(i), and except pursuant to contracts requiring such
other parties to keep the Owned Software confidential. No such
other party has, to the best knowledge and belief of the Acquired
Company, breached any such obligation of confidentiality.
3.13.2(ii) Exhibit 3.13.2(ii) contains a complete
and accurate list of all software (other than commercially
available over-the-counter "shrinkwrap" software) (the "Licensed
Software") under which the Acquired Company or any Subsidiary is a
licensee, lessee or otherwise has obtained the right to use.
Exhibit 3.13.2(ii) also sets forth a list of all license fees,
rents, royalties or other charges that the Acquired Company or any
Subsidiary is required or obligated to pay with respect to Licensed
Software. The Acquired Company and any Subsidiary utilizing such
Licensed Software has the right and license to use, sublicense,
modify and copy Licensed Software as set forth in any license
agreements listed in Exhibit 3.13.2(ii), free of any other
limitations or encumbrances. The Acquired Company and the
Subsidiaries are in full compliance with all provisions of any
license, lease or other similar agreement pursuant to which any of
them has rights to use the Licensed Software. Except as disclosed
on Exhibit 3.13.2(ii), none of the Licensed Software has been
incorporated into or made a part of any Owned Software or any other
Licensed Software. Neither the Acquired Company nor any Subsidiary
has published or disclosed any Licensed Software to any other party
except, in the case of Licensed Software which the Acquired Company
or a Subsidiary leases or markets to others, in accordance with and
as permitted by any license, lease or similar agreement relating to
the Licensed Software and except pursuant to contracts requiring
such other parties to keep the Licensed Software confidential. No
party to whom the Acquired Company or a Subsidiary has disclosed
Licensed Software has, to the best knowledge and belief of the
Acquired Company, breached such obligation of confidentiality.
3.13.2(iii) The Owned Software and Licensed Software
and commercially available over-the-counter "shrinkwrap" software
constitute all software used in the businesses of the Acquired
Company and the Subsidiaries (the "Acquired Company Software").
Exhibit 3.13.2(iii) sets forth a list of all contract programmers,
independent contractors, nonemployee agents and persons or other
entities (other than employees) who have performed, within the last
three (3) years, computer programming services for the Acquired
Company or any Subsidiary and identifies all contracts and
agreements pursuant to which such services were performed. Except
as set forth on Exhibit 3.13.2(iii), each such Person providing
computer programming services for the Acquired Company or any
Subsidiary has executed a copy of the form contract set forth on
Exhibit 3.13.2(iii). The contracts containing any material
exceptions to the standard forms are set forth in Exhibit
3.13.2(iii). The transactions contemplated herein will not cause
a breach or default under any licenses, leases or similar
agreements relating to the Acquired Company Software or impair
Purchaser's, the Acquisition Sub's, the Acquired Company's or any
33
Subsidiary's ability to use the Acquired Company Software in the
same manner as such computer software is currently used by the
Acquired Company or the Subsidiaries. Neither the Acquired Company
nor any Subsidiary is infringing any intellectual property rights
of any other person or entity with respect to the Acquired Company
Software, and, to the best knowledge and belief of the Acquired
Company, no other person or entity is infringing any intellectual
property rights of the Acquired Company or any Subsidiary with
respect to the Acquired Company Software.
3.13.2(iv) The Acquired Company, the Subsidiaries
and, to the best knowledge and belief of the Acquired Company, all
other parties to any licensing, leasing or similar arrangements
under which the Acquired Company or a Subsidiary is the licensor,
lessor or has otherwise granted the right to use the Acquired
Company Software are in full compliance therewith and are not in
breach of their obligations with respect thereto. Neither the
Acquired Company nor any Subsidiary is a party to any license,
installation agreement, maintenance agreement, data processing
agreement, services agreement or other agreement pursuant to which
it is committed to perform software installation, modifications,
enhancements, maintenance or services without payment or for
payments which, in the aggregate for each such agreement, are less
than the cost to perform such installation, modifications,
enhancements, maintenance or services, except as set forth on
Exhibit 3.13.2(iv). Except for licenses listed on Exhibit
3.13.2(iv), neither the Acquired Company nor any Subsidiary has
granted any licenses, leases or other rights and has no obligations
to grant licenses, leases or other rights with respect to the
Acquired Company Software. The Acquired Company and the
Subsidiaries have complied with their obligations to their
customers, licensees and lessees in respect of the Acquired Company
Software.
3.13.2(v) Exhibit 3.13.2(v) lists and separately
identifies all agreements pursuant to which the Acquired Company or
any Subsidiary has been granted rights to market software owned by
third parties and all agreements pursuant to which the Acquired
Company or any Subsidiary has granted marketing rights in the
Acquired Company Software to third parties. With respect to
marketing rights granted by a third party to the Acquired Company
or any Subsidiary, except as set forth on Exhibit 3.13.2(v) hereto,
such marketing rights have been granted exclusively to the Acquired
Company or a Subsidiary.
3.13.2(vi) The Acquired Company and the Subsidiaries
have not taken or failed to take any actions under the law of any
applicable foreign jurisdictions where the Acquired Company or a
Subsidiary has marketed or licensed Acquired Company Software that
would restrict or limit the ability of the Acquired Company or any
Subsidiary to protect, or prevent them from protecting, their
ownership interests in, confidentiality rights of, and rights to
market, license, modify or enhance, the Acquired Company Software.
3.14 Labor Matters. Exhibit 3.14 sets forth a list of
all current employees and independent contractors of the Acquired
34
Company and the Subsidiaries and their current salaries or rates.
Except as set forth on Exhibit 3.14, within the last three (3)
years neither the Acquired Company nor any Subsidiary has been the
subject of any union activity or labor dispute, nor has there been
any strike of any kind called or, to the best knowledge and belief
of the Acquired Company, threatened to be called against either of
them. Except as set forth on Exhibit 3.14, neither the Acquired
Company nor any Subsidiary has violated any applicable federal or
state law or regulation relating to labor or labor practices.
Exhibit 3.14 sets forth a true, correct and complete list of
employer loans or advances from the Acquired Company and each
Subsidiary to their employees. As of the Closing Date, the
Acquired Company and all Subsidiaries are in substantial compliance
with all applicable requirements of the Immigration and Nationality
Act of 1952, as amended by the Immigration Reform and Control Act
of 1986 and the regulations promulgated thereunder (hereinafter
collectively referred to as the "Immigration Laws"), including,
without limitation, the requirements that:
(1) the Acquired Companies and the Subsidiaries
employ only United States citizens and aliens lawfully authorized
to work in the United States;
(2) within 3 days of the actual commencement of
employment, each employee hired by the Acquired Company or any of
the Subsidiaries on or after June 1, 1987 has completed and
executed an Employment Eligibility Verification form ("Form I-9")
and that an authorized agent or representative of such employing
entity has completed (which includes the examination of identity
and employment eligibility documents recognized under the
Immigration Laws and provided for inspection by such employees) and
executed the Form I-9 for each such employee; and
(3) by September 1, 1987, all employees hired
between November 7, 1986 and May 31, 1987, inclusive, who were on
the payroll of the Acquired Company or any of the Subsidiaries as
of June 1, 1987, had completed and executed a Form I-9 and that an
authorized agent or representative of such employing entity
completed and executed the Form I-9 for each such employee.
All such Forms I-9 have been retained and updated in accordance
with the Immigration Laws, and shall remain the property of such
employing entity subsequent to the Closing. All employees for whom
there are no completed and executed Forms I-9 on file with such
employing entity, which employees are listed, together with their
dates of hire by such employing entity, on Exhibit 3.14(a) attached
hereto, were hired on or before November 6, 1986 and have worked
since that time continuously for such employing entity such that
they are "grandfathered" employees within the meaning of the
Immigration Laws. Neither the Acquired Company nor the
Subsidiaries are, as of the Closing Date, in violation of the
Immigration Laws and have never been found by the Immigration and
Naturalization Service or any court to be in violation of the
Immigration Laws.
35
3.15 Benefit Plans.
3.15.1. Exhibit 3.15 lists every pension,
retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus or other
incentive plan, any medical, vision, dental or other health plan,
any life insurance plan or any other employee benefit plan or
fringe benefit plan, any other written or unwritten employee
program, arrangement, agreement or understanding, commitments or
methods of contribution or compensation (whether arrived at through
collective bargaining or otherwise), whether formal or informal,
whether funded or unfunded, and whether legally binding or not,
including, without limitation, any "employee benefit plan," as that
term is defined in Section 3(3) of ERISA, which is currently or
previously adopted, maintained, sponsored in whole or in part, or
contributed to by the Acquired Company or any ERISA Affiliate of
the Acquired Company, for the benefit of, providing any
remuneration or benefits to, or covering any current or former
employee, retiree, dependent, spouse or other family member or
beneficiary of such employee or retiree, director, independent
contractor, shareholder, officer or consultant of the Acquired
Company or any ERISA Affiliate of the Acquired Company or under (or
in connection with) which the Acquired Company or an ERISA
Affiliate of the Acquired Company has any contingent or
noncontingent liability of any kind whether or not probable of
assertion (collectively, the "Benefit Plans"). Any of the Benefit
Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, or an "employee welfare benefit
plan" as that term is defined in Section 3(1) of ERISA, is referred
to herein as an "ERISA Plan." No Benefit Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
3.15.2. Exhibit 3.15 also lists, with respect to
all Benefit Plans listed in Exhibit 3.15: (a) all trust agreements
or other funding arrangements, including insurance contracts, all
annuity contracts, financial contributions, actuarial statements or
valuations, fidelity bonds, fiduciary liability policies,
investment manager or advisory contracts, corporate resolutions of
memoranda, administrative committee minutes or memoranda or
records, and all amendments (if any) thereto, (b) where applicable,
with respect to any such plans or plan amendments, the most recent
determination letters issued by the IRS, (c) all communications or
other correspondence issued within the last six (6) years by any
governmental agency, including without limitation, the IRS, DOL and
the PBGC with respect to such Benefit Plan, (d) annual reports or
returns and audited or unaudited financial statements for the most
recent three plan years and any amendments thereto, and (e) the
most recent summary plan descriptions, any material modifications
thereto, and all material employee communications with respect to
such Benefit Plans. Contemporaneous with the delivery of the
Exhibits to this Agreement, the Acquired Company has delivered a
true and complete copy of each such Benefit Plan, agreements,
letters, rulings, opinions, letters, reports, returns, financial
statements and summary plan descriptions described in Sections
3.15.1 or 3.15.2 hereof, certified as such by a duly authorized
officer of the Acquired Company.
36
3.15.3. All the Benefit Plans and any related
trusts subject to ERISA comply with and have been administered in
substantial compliance with the provisions of ERISA, all applicable
provisions of the Code relating to qualification and tax exemption
under Code Sections 401(a) and 501(a) or otherwise necessary to
secure intended tax consequences, all applicable state or federal
securities laws and all other applicable laws, rules and
regulations and collective bargaining agreements, and the Acquired
Company has not received any notice from any governmental agency or
instrumentality questioning or challenging such compliance. All
available governmental approvals for the Benefit Plans which have
been obtained, including, but not limited to, timely determination
letters on the qualification of the ERISA Plans and tax exemption
of related trusts, as applicable, under the Code and timely
registration and disclosure under applicable securities laws, and
all such governmental approvals continue in full force and effect.
No event has occurred which will or could give rise to
disqualification of any such Benefit Plan under sections 401(a) or
501(a) of the Code or to a tax under Section 511 of the Code.
3.15.4. Neither the Acquired Company nor, to the
best knowledge and belief of the Acquired Company, any
administrator or fiduciary of any such Benefit Plan (or agent or
delegate of any of the foregoing) has engaged in any transaction or
acted or failed to act in any manner which could subject the
Acquired Company to any direct or indirect liability (by indemnity
or otherwise) for a breach of any fiduciary, co-fiduciary or other
duty under ERISA. No material oral or written representation or
communication with respect to any aspect of the Benefit Plans has
been or will be made to employees of the Acquired Company prior to
the Closing Date which is not in accordance with the written or
otherwise preexisting terms and provisions of such Benefit Plans in
effect immediately prior to the Closing Date, except for any
amendments or terminations required by the terms of this Agreement.
There are no unresolved claims or disputes under the terms of, or
in connection with, the Benefit Plans (other than routine
undisputed claims for benefits under the health care plans
maintained by the Acquired Company), and no action, legal or
otherwise, has been commenced with respect to any claim (including
claims for benefits under the health care plans maintained by the
Acquired Company).
3.15.5. All annual reports or returns, audited or
unaudited financial statements, actuarial valuations, summary
annual reports and summary plan descriptions issued with respect to
the Benefit Plans are correct and accurate in all material respects
as of the dates thereof; and there have been no amendments filed to
any of such reports, returns, statements, valuations or
descriptions or required to make the information therein true and
accurate.
3.15.6. Neither the Acquired Company nor, to the
best knowledge and belief of the Acquired Company, any other "party
in interest" (as defined in Section 3(14) of ERISA) or
"disqualified person" (as defined in Section 4975(e)(2) of the
Code) of any Benefit Plan has engaged in any "prohibited
37
transaction" (within the meaning of Sections 503(b) or 4975(c) of
the Code or Section 406 of ERISA) with respect to such Benefit
Plan, for which there is no statutory, regulatory or individual or
class exemption. There has been no (a) "reportable event" (as
defined in Section 4043 of ERISA), or event described in Section
4063(a) of ERISA or (b) termination or partial termination,
withdrawal or partial withdrawal with respect to any of the ERISA
Plans which the Acquired Company or any ERISA Affiliate of the
Acquired Company maintains or contributes to or has maintained or
contributed to or was required to maintain or contribute to for the
benefit of employees of the Acquired Company or any ERISA Affiliate
of the Acquired Company now or formerly in existence.
3.15.7. For any ERISA Plan which is an employee
pension benefit plan as defined in ERISA Section 3(2), the fair
market value of such Benefit Plan's assets equals or exceeds the
present value of all benefits (whether vested or not) accrued to
date by all participants in such Benefit Plan. For this purpose
the assumptions prescribed by the Pension Benefit Guaranty
Corporation for valuing plan assets or liabilities upon plan
termination shall be applied and the term "benefits" shall include
the value of any early retirement or ancillary benefits (including
shutdown benefits) provided under any Benefit Plan. As of the
Closing Date, full payment will have been made of all amounts which
the Acquired Company is required to have made at or prior to such
time, under any applicable law, as a contribution to any Benefit
Plan of the Acquired Company or of an ERISA Affiliate of the
Acquired Company, and no accumulated funding deficiency (as defined
in ERISA (Section) 302 or Code (Section) 412), whether or not waived, will
exist with respect to any Benefit Plan.
3.15.8. As of March 31, 1993, the Acquired Company
had no current or future liability with respect to any events or
matters occurring, arising or accruing on or prior to such date
under any Benefit Plan that was not reflected in the 1993 Financial
Statements.
3.15.9. The Acquired Company does not maintain any
Benefit Plan providing deferred or stock based compensation which
is not reflected in the 1993 Financial Statements.
3.15.10. Neither the Acquired Company nor any ERISA
Affiliate of the Acquired Company has maintained, and neither now
maintains, a Benefit Plan providing welfare benefits (as defined in
ERISA Section 3(1)) to employees after retirement or other
separation of service except to the extent required under Part 6 of
Title I of ERISA and Code Section 4980B.
3.15.11. The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or
former employee (or any spouse, dependent or other family member of
such employee) of the Acquired Company or any ERISA Affiliate of
the Acquired Company to severance pay, unemployment compensation or
any payment contingent upon a change in control or ownership of the
Acquired Company, or (ii) accelerate the time of payment or
vesting, or increase the amount, of any compensation due to any
38
such employee or former employee (or any spouse, dependent or other
family member of such employee) (other than pursuant to the 1983
Plan, the 1985 and 1987 Plans and the offer letter referred to on
Exhibit 2.2.9(c)).
3.15.12. All Benefit Plans subject to section 4980B
of the Code as amended from time to time or Part 6 of Title I of
ERISA or both have been maintained in good faith compliance with
the requirements of such laws and any regulations (proposed or
otherwise) issued thereunder.
3.15.13. No liability to the PBGC has been incurred
as of the Closing Date by the Acquired Company or any ERISA
Affiliate of the Acquired Company, except for PBGC insurance
premiums, and all such insurance premiums incurred or accrued up to
and including the Closing Date have been timely paid.
3.16 Customers. Exhibit 3.16 attached hereto consists
of a true and correct list of all of the customers of the Acquired
Company and the Subsidiaries within the preceding twenty-four
months setting forth as to each customer its name, address,
telephone number and principal person of contact. Neither the
Acquired Company nor the Subsidiaries has received any notice, or
has knowledge that any customer of the Acquired Company or the
Subsidiaries as of March 31, 1993 has taken or will take any steps
which could disrupt the business relationship of the Acquired
Company or the Subsidiaries with such customer or could result in
a diminution in the value of the business of the Acquired Company
or such Subsidiary as a going concern.
3.17 Environmental Matters. Except as set forth in
Exhibit 3.17, no real property now or previously owned or used by
the Acquired Company or any Subsidiary or now or previously owned
or leased by the Acquired Company or any Subsidiary (the "Real
Property") has been used by the Acquired Company or any Subsidiary
or, to the best knowledge and belief of the Acquired Company, any
other party for the handling, treatment, storage or disposal of any
Hazardous Substance. Except as set forth in Exhibit 3.17, no
release, discharge, spillage or disposal into the environment of
any Hazardous Substance and no soil, water or air contamination by
any Hazardous Substance has occurred or is occurring in, from or on
the Real Property (a) by virtue of the actions or failure to act of
any of the Acquired Company or any Subsidiary or (b) to the best
knowledge and belief of the Acquired Company and all Subsidiaries,
by virtue of the actions or failure to act of any other party.
Except as set forth in Exhibit 3.17, the Acquired Company and all
Subsidiaries have complied with all reporting requirements under
any applicable federal, state or local environmental laws and
permits with respect to the Real Property, and there are no
existing violations by the Acquired Company or any Subsidiary of
any such environmental laws or permits with respect to the Real
Property. Except as set forth in Exhibit 3.17, there are no
claims, actions, suits, proceedings or investigations related to
the presence, release, production, handling, discharge, spillage,
transportation or disposal of any Hazardous Substance or ambient
air conditions or contamination of soil, water or air by any
39
Hazardous Substance pending or threatened (1) with respect to the
Real Property (a) by virtue of the actions or failure to act of the
Acquired Company or any Subsidiary or (b) to the best knowledge and
belief of the Acquired Company or any Subsidiary, by virtue of the
actions or failure to act of any other party, or (2) otherwise
against the Acquired Company or any Subsidiary,in any court or
before any state, federal or other governmental agency or private
arbitration tribunal and, to the best knowledge and belief of the
Acquired Company, there is no basis for any such claim, action,
suit, proceeding or investigation (i) with respect to the Real
Property (a) by virtue of the actions or failure to act of the
Acquired Company or any Subsidiary or (b) to the best knowledge and
belief of the Acquired Company or any Subsidiary, by virtue of the
actions or failure to act of any other party, or (ii) otherwise
against the Acquired Company or any Subsidiary. Except as
disclosed on Exhibit 3.17, to the best knowledge and belief of the
Acquired Company or any Subsidiary, there are no underground
storage tanks on the Real Property. To the best knowledge and
belief of the Acquired Company or any Subsidiary, no building or
other improvement included in the Real Property contains any
exposed or friable asbestos or any asbestos-containing materials,
and such buildings and improvements are free from radon
contamination. For the purposes of this Agreement, "Hazardous
Substance" shall mean any hazardous or toxic substance or waste as
those terms are defined by any applicable federal, state or local
law, ordinance, regulation, policy, judgment, decision, order or
decree, including, without limitation, the Comprehensive
Environmental Recovery Compensation and Liability Act, 42 U.S.C.
9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
(Section) 1801 et. seq. and the Resource Conservation and Recovery Act, 42
U.S.C. 6901 et seq., and petroleum, petroleum products and oil.
3.18 Insurance. Set forth in Exhibit 3.18 is a complete
list of all insurance policies which the Acquired Company and the
Subsidiaries maintained with respect to its businesses, properties
or employees within the preceding thirty-six months. Except as set
forth in Exhibit 3.18, such policies are in full force and effect
and no event has occurred which would give any insurance carrier a
right to terminate any such policy. Such policies are adequate to
insure against risks to which the Acquired Company, any Subsidiary
and their respective properties and assets are exposed in the
operation of their respective businesses in such amounts and types
of coverage as are commercially reasonable and are consistent with
practices in the industry in which the Acquired Company operates.
Except as set forth in Exhibit 3.18, since March 31, 1992, there
has not been any change in the Acquired Company's or any
Subsidiaries' relationship with their respective insurers or in the
premiums payable pursuant to such policies.
3.19 Related Party Relationships. Except as set forth in
Exhibit 3.19, no shareholder owning greater than a five percent
(5%) interest in the Acquired Company, no affiliate or member of
the immediate family of any such shareholder, and no officer or
director or member of the immediate family of such officer or
director of the Acquired Company or any Subsidiary possesses,
directly or indirectly, any beneficial interest in, or is a
40
director, officer or employee of, or member of the immediate family
of a director, officer or employee of, any corporation,
partnership, firm, association or business organization that is a
client, supplier, customer, lessor, lessee, lender, creditor,
borrower, debtor or contracting party with or of the Acquired
Company or any Subsidiary (except as a stockholder holding less
than a one percent interest in a corporation whose shares are
traded on a national or regional securities exchange or in the
over-the-counter market).
3.20 Schedule 14D-9; Proxy Statement; Information
Statement; Offer to Purchase and Schedule 14D-1. Except for
information supplied by Purchaser in writing for inclusion therein,
the Schedule 14D-9, including any amendments or supplements
thereto, and any proxy or information statement and related
materials distributed to the Acquired Company's shareholders in
connection with a special meeting of the Acquired Company's
shareholders called to vote on, or with a consent action with
respect to, the Merger will comply in all respects with the
requirements of the Exchange Act and the rules and regulations
thereunder. None of the information supplied by the Acquired
Company for inclusion in the Offer to Purchase or Schedule 14D-1
relating to the Offer, will be false or misleading with respect to
any material fact or will omit to state any material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading.
3.21 Exhibits. All Exhibits attached hereto are true,
correct and complete as of the date of this Agreement and will be
true, correct and complete as of the date the Purchaser and the
Acquired Company purchase the Outstanding Shares tendered in the
Offer, except to the extent that such Exhibits may be untrue,
incorrect or incomplete due to changes occurring due to the
operation of the Acquired Company and the Subsidiaries in the
ordinary course. Matters disclosed on each Exhibit shall be deemed
disclosed only for purposes of the matters to be disclosed on such
Exhibit and shall not be deemed to be disclosed for any other
purpose unless expressly provided therein.
3.22 Disclosure and Absence of Undisclosed Liabilities.
No statement contained herein or in any certificate, schedule,
list, exhibit or other instrument furnished to Purchaser pursuant
to the provisions hereof contains or will contain any untrue
statement of any material fact.
IV. SECURITIES LAWS.
In connection with the transactions contemplated by this
Agreement, the parties hereto agree to cooperate with one another
in complying with the provisions of the 1933 Act and the Exchange
Act, and the General Rules and Regulations thereunder, and all
other applicable federal and state securities laws, and each of
them agrees to furnish the other, or its counsel, with such
41
information and to take such actions, as may be reasonably
requested in respect of such compliance.
V. REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND THE ACQUISITION SUB.
Purchaser and the Acquisition Sub, jointly and severally,
represent and warrant to the Acquired Company as follows:
5.1 Organization and Standing. Purchaser is a duly
organized and validly existing corporation in good standing under
the laws of the State of South Carolina. The Acquisition Sub is a
duly organized and validly existing corporation in good standing
under the laws of the State of Texas, and attached hereto as
Exhibit 15.1 are true and correct copies of the Articles of
Incorporation and Bylaws of the Acquisition Sub.
5.2 Corporate Power and Authority. Each of Purchaser
and the Acquisition Sub has the capacity and authority to execute
and deliver this Agreement, to perform hereunder and to consummate
the transactions contemplated hereby without the necessity of any
act or consent of any other Person whomsoever. The execution,
delivery and performance by Purchaser and the Acquisition Sub of
this Agreement and each and every agreement, document and
instrument provided for herein have been duly authorized and
approved by their respective Boards of Directors (or Executive
Committees thereof). Assuming this Agreement, and each and every
other agreement, document and instrument to be executed, delivered
and performed by Purchaser and the Acquisition Sub in connection
herewith are valid and legally binding on the Acquired Company or
the Option Shareholders, this Agreement, and each and every other
agreement, document and instrument to be executed, delivered and
performed by Purchaser and the Acquisition Sub in connection
herewith, constitute or will, when executed and delivered,
constitute the valid and legally binding obligations of Purchaser
and the Acquisition Sub, as applicable, enforceable against each of
them in accordance with their respective terms, except as
enforceability may be limited by applicable equitable principles,
or by bankruptcy, insolvency, reorganization, moratorium, or
similar laws from time to time in effect affecting the enforcement
of creditors' rights generally.
5.3 Agreement Does Not Violate Other Instruments.
Except as set forth on Exhibit 5.3, the execution and delivery of
this Agreement by Purchaser and the Acquisition Sub do not, and the
consummation of the transactions contemplated hereby will not,
violate any provisions of the Articles of Incorporation, as
amended, or Bylaws, as amended, of Purchaser or of the Acquisition
Sub, or violate or constitute an occurrence of default under any
provision of, or conflict with, result in acceleration of any
obligation under, or give rise to a right by any party to terminate
its obligations under, any mortgage, deed of trust, conveyance to
secure debt, note, loan, lien, lease, agreement, instrument, or any
order, judgment, decree or other arrangement to which Purchaser or
42
the Acquisition Sub is a party or is bound or by which any of their
respective assets are affected. Except for the applicable
requirements of the HSR Act and as set forth on Exhibit 5.3, no
consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental entity is required to
be obtained or made by or with respect to Purchaser or the
Acquisition Sub or any assets, properties or operations of
Purchaser or the Acquisition Sub in connection with the execution
and delivery by Purchaser and the Acquisition Sub of this Agreement
or the consummation of the transactions contemplated hereby.
5.4 Financing. Purchaser will, prior to the earliest
date on which it will be able to purchase Outstanding Shares
pursuant to the Offer and the Merger, respectively, in accordance
with the terms thereof, have available funds sufficient to complete
the Offer and the Merger and to pay in full for all of the
Outstanding Shares and payments to option holders and employees
pursuant to Sections 2.2.9 (a), (b) and (c) hereof.
VI. CONDITIONS PRECEDENT TO OBLIGATIONS OF
PURCHASER AND THE ACQUISITION SUB.
All of the obligations of Purchaser and the Acquisition
Sub to consummate the Merger shall be contingent upon and subject
to the satisfaction, on or before the Closing, of each and every
one of the following conditions, except, with respect to any
condition that is not satisfied, where the failure of any such
condition to be satisfied is the direct result of the actions of
those directors of the Acquired Company designated by the Purchaser
pursuant to Section 2.2.11. The following conditions are for the
sole benefit of Purchaser and the Acquisition Sub and may be
asserted by Purchaser regardless of the circumstances giving rise
to any such condition and may be waived by Purchaser, in whole or
in part, at any time and from time to time, in the sole discretion
of Purchaser. The failure by Purchaser at any time to exercise any
of the foregoing rights will not be deemed a waiver of any other
right and each right will be deemed an ongoing right which may be
asserted at any time and from time to time.
6.1 Certain Events. There shall not be in effect (i)
any general suspension of trading in securities on any national
securities exchange or the National Market System of the National
Association of Securities Dealers Automated Quotation System, (ii)
a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States (whether or not
mandatory), (iii) a commencement of a war, declared by Congress, or
(iv) in the case of any of the foregoing existing at the date of
this Agreement, a material acceleration or worsening thereof.
6.2 Actions of Governmental Authorities. There shall
not have been instituted or pending any action, proceeding,
application, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, and
Purchaser, the Acquisition Sub or the Acquired Company shall not
43
have been notified by any such government, governmental authority
or agency (or a representative thereof) of its present intention to
commence, or recommend the commencement of, such an action or
proceeding, which (i) challenges the acquisition by Purchaser or
the Acquisition Sub of the Outstanding Shares, restrains or
prohibits or seeks to restrain or prohibit the making or
consummation of the Offer or the Merger or restrains or prohibits
or seeks to restrain or prohibit the performance of this Agreement
or the Option Agreements, (ii) prohibits or limits or seeks to
prohibit or limit the ownership or operation by Purchaser or the
Acquisition Sub of all or any substantial portion of the business
or assets of the Acquired Company or any of the Subsidiaries or of
Purchaser or any of its subsidiaries or compels or seeks to compel
Purchaser or the Acquisition Sub to dispose of or to hold separate
all or any substantial portion of the business or assets of the
Acquired Company or any of the Subsidiaries or of Purchaser or any
of its subsidiaries, or imposes or seeks to impose any material
limitation on the ability of Purchaser or the Acquisition Sub to
conduct such business or to own such assets, or (iii) imposes or
seeks to impose limitations on the ability of Purchaser or the
Acquisition Sub (or any other affiliate of Purchaser) to acquire or
hold or to exercise full rights of ownership of the Outstanding
Shares, including, but not limited to, the right to vote the
Outstanding Shares purchased by them on all matters properly
presented to the shareholders of the Acquired Company.
6.3 Other Legal Actions. There shall not have been any
statute, rule, regulation, order or injunction enacted,
promulgated, entered, enforced or deemed applicable to the Offer,
the Merger, this Agreement or the Option Agreements by any
government, governmental authority or agency or court, domestic or
foreign, and no claim or action for such shall have been instituted
before a court, government or governmental authority or agency, and
such shall not have been proposed before a legislative or
regulatory body that could be reasonably expected to result in any
of the consequences referred to in clauses (i) through (iii) of
Section 6.2 above.
6.4 Legal Approvals. The execution and the delivery of
this Agreement and the consummation of the transactions
contemplated hereby shall have been approved by all regulatory
authorities whose approvals are required by law and the waiting
period under the HSR Act shall have expired or have been
terminated.
6.5 Shareholder Approval. This Agreement and the Merger
shall have been adopted and approved by the affirmative vote or
written consent of the holders of Outstanding Shares by the vote or
written consent required by, and in accordance with, the TBCA, if
such vote or written consent is required by the TBCA.
6.6 Tendered Shares Purchased. Purchaser or the
Acquisition Sub shall have accepted for payment and paid for the
Outstanding Shares tendered pursuant to the Offer or subject to the
44
Shareholder Option Agreement, provided that this condition shall be
deemed satisfied if Purchaser and the Acquisition Sub fail, in
violation of the terms of the Offer, to accept for payment and pay
for any Outstanding Shares tendered pursuant to the Offer or the
Shareholder Option Agreement.
VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE ACQUIRED COMPANY.
All of the obligations of the Acquired Company to
consummate the Merger shall be contingent upon and subject to the
satisfaction, on or before the Closing, of each and every one of
the following conditions. The following conditions are for the
sole benefit of the Acquired Company and may be asserted by the
Acquired Company regardless of the circumstances giving rise to any
such condition and may be waived by the Acquired Company, in whole
or in part, at any time and from time to time, in the sole
discretion of the Acquired Company for purposes of consummating the
transactions contemplated herein. The failure by the Acquired
Company at any time to exercise any of the foregoing rights will
not be deemed a waiver of any other right and each right will be
deemed an ongoing right which may be asserted at any time and from
time to time.
7.1 Certain Events. There shall not be in effect (i)
any general suspension of trading in securities on any national
securities exchange or the National Market System of the National
Association of Securities Dealers Automated Quotation System, (ii)
a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States (whether or not
mandatory), (iii) a commencement of a war, declared by Congress, or
(iv) in the case of any of the foregoing existing at the date of
this Agreement, a material acceleration or worsening thereof.
7.2 Actions of Governmental Authorities. There shall
not have been instituted or pending any action, proceeding,
application, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, and
Purchaser, the Acquisition Sub or the Acquired Company shall not
have been notified by any such government, governmental authority
or agency (or a representative thereof) of its present intention to
commence, or recommend the commencement of, such an action or
proceeding, which (i) challenges the acquisition by Purchaser or
the Acquisition Sub of the Outstanding Shares, restrains or
prohibits or seeks to restrain or prohibit the making or
consummation of the Offer or the Merger or restrains or prohibits
or seeks to restrain or prohibit the performance of this Agreement
or the Option Agreements, (ii) prohibits or limits or seeks to
prohibit or limit the ownership or operation by Purchaser or the
Acquisition Sub of all or any substantial portion of the business
or assets of the Acquired Company or any of the Subsidiaries or of
Purchaser or any of its subsidiaries or compels or seeks to compel
Purchaser or the Acquisition Sub to dispose of or to hold separate
all or any substantial portion of the business or assets of the
45
Acquired Company or any of the Subsidiaries or of Purchaser or any
of its subsidiaries, or imposes or seeks to impose any material
limitation on the ability of Purchaser or the Acquisition Sub to
conduct such business or to own such assets, or (iii) imposes or
seeks to impose limitations on the ability of Purchaser or the
Acquisition Sub (or any other affiliate of Purchaser) to acquire or
hold or to exercise full rights of ownership of the Outstanding
Shares, including, but not limited to, the right to vote the
Outstanding Shares purchased by them on all matters properly
presented to the shareholders of the Acquired Company.
7.3 Other Legal Actions. There shall not have been any
statute, rule, regulation, order or injunction enacted,
promulgated, entered, enforced or deemed applicable to the Offer,
the Merger, this Agreement or the Option Agreements by any
government, governmental authority or agency or court, domestic or
foreign, and no claim or action for such shall have been instituted
before a court, government or governmental authority or agency, and
such shall not have been proposed before a legislative or
regulatory body that could be reasonably expected to result in any
of the consequences referred to in clauses (i) through (iii) of
Section 7.2 above.
7.4 Legal Approvals. The execution and the delivery of
this Agreement and the consummation of the transactions
contemplated hereby shall have been approved by all regulatory
authorities whose approvals are required by law and the waiting
period under the HSR Act shall have expired or been terminated.
7.5 Shareholder Approval. This Agreement and the Merger
shall have been adopted and approved by the affirmative vote or
written consent of the holders of Outstanding Shares by the vote or
written consent required by, and in accordance with, the TBCA, if
such vote or written consent is required by the TBCA.
VIII. CLOSING.
8.1 Time and Place of Closing. The Closing shall be
held at the offices of Jones, Day, Reavis & Pogue, 3500 One
Peachtree Center, 303 Peachtree Street N.E., Atlanta, Georgia
30308-3242, commencing at 10:00 a.m. Eastern Time, within five (5)
business days of the last to occur of (i) the expiration or
termination of the waiting period under the HSR Act, (ii) the
expiration of the term of the Offer, (iii) the satisfaction or
waiver of the conditions set forth in Sections 6.4 and 6.6, and
(iv) the Merger having been approved by the shareholders of the
Acquired Company pursuant to the TBCA or the 90% threshold set
forth in Section 2.2.12(a) hereof having been met and a
shareholders meeting not being required, unless another place or
date is agreed to in writing by the Acquired Company and Purchaser,
but in no event will the Closing be held later than September 1,
1993; provided, however, that in the event the Purchaser or the
Acquired Company have purchased the Outstanding Shares tendered
46
pursuant to the Offer, in no event will the Closing be later than
October 31, 1993.
8.2 Transactions at Closing. At the Closing, each of
the following transactions shall occur:
8.2.1. The Acquired Company's Performance. At
the Closing, the Acquired Company shall deliver to Purchaser and
the Acquisition Sub, the following:
(a) copies of the consents and waivers
described in Section 2.9;
(b) satisfactory evidences of the approvals
described in Section 6.4;
(c) satisfactory evidence of the termination
of the stock options under the 1983 Plan and the 1985 and 1987
Plans as required in Section 2.2.9(a);
(d) satisfactory evidence of the termination
of the Stock Purchase Plan and the stock option rights thereunder
as required in Section 2.2.9(b);
(e) satisfactory evidence of the termination
of the stock appreciation rights and stock purchase and grant
rights as required in Section 2.2.9(c);
(f) certificates of compliance or certificates
of good standing of the Acquired Company and of the Subsidiaries,
as of the most recent practicable date, from the appropriate
governmental authority of the jurisdiction of their respective
incorporation and any other jurisdiction which is set forth in
Exhibit 3.1 hereto;
(g) certified copies of resolutions of the
Board of Directors of the Acquired Company approving the
transactions set forth in this Agreement;
(h) certificates of incumbency for the
officers of the Acquired Company;
(i) resignations of each director and officer
of the Acquired Company and of the Subsidiaries and resignations of
each trustee of each Benefit Plan;
47
(j) Articles of Merger and a Plan of Merger,
each in form and content that complies with the TBCA, executed by
the Acquired Company; and
(k) such other evidence of the performance of
all covenants and satisfaction of all conditions required of the
Acquired Company by this Agreement, at or prior to the Closing, as
Purchaser or its counsel may reasonably require.
8.2.2. Performance by Purchaser and the
Acquisition Sub. At the Closing, Purchaser and the Acquisition
Sub shall deliver to the Acquired Company the following:
(a) satisfactory evidence of the approvals
described in Section 7.4;
(b) certificate of incumbency of the officers
of Purchaser and of the Acquisition Sub who are executing this
Agreement and the other documents contemplated hereunder;
(c) certified copy of resolutions of the
Boards of Directors of Purchaser and of the Acquisition Sub (or
Executive Committees thereof) approving the transactions set forth
in this Agreement;
(d) Articles of Merger and a Plan of Merger,
each in form and content that complies with the TBCA, executed by
Purchaser or the Acquisition Sub; and
(e) such other evidence of the performance of
all the covenants and satisfaction of all of the conditions
required of Purchaser and of the Acquisition Sub by this Agreement
at or before the Closing as the Acquired Company or its counsel may
reasonably require.
IX. NON-SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND AGREEMENTS.
9.1 All representations, warranties and agreements
(except for the agreements contained in Section 2.13 of this
Agreement) in this Agreement or in any instrument delivered
pursuant to this Agreement (other than the Covenants Not To
Compete) will not survive the Closing and thereafter no party
hereto and no officer, director or employee of any such party shall
have any liability whatsoever with respect to any such
representation, warranty or agreement except for liabilities
arising from fraud, willful misconduct or criminal acts.
48
X. TERMINATION.
10.1 Method of Termination. This Agreement constitutes
the binding and irrevocable agreement of the parties to consummate
the transactions contemplated hereby, the consideration for which
is (a) the covenants set forth in Article II hereof, and (b)
expenditures and obligations incurred and to be incurred by
Purchaser and the Acquisition Sub, on the one hand, and by the
Acquired Company, on the other hand, in respect of this Agreement,
and this Agreement may be terminated or abandoned only as follows:
10.1.1. By the mutual consent of the Boards of
Directors of the Acquired Company and Purchaser, notwithstanding
prior approval by the shareholders of any or all of such
corporations;
10.1.2. By the Board of Directors of the Acquired
Company if Purchaser or the Acquisition Sub have not caused the
Offer to be commenced within five (5) business days following the
date of this Agreement or after September 1, 1993, if any of the
conditions set forth in Article VII hereof, to which the Acquired
Company's obligations are subject, have not been fulfilled or
waived, unless such fulfillment has been frustrated or made
impossible by any act or failure to act of it or the Subsidiaries;
provided, however, if Purchaser or the Acquisition Sub has
purchased the Outstanding Shares tendered pursuant to the Offer,
the Acquired Company cannot terminate this Agreement pursuant to
this Section 10.1.2 until after October 31, 1993; or
10.1.3. By Purchaser after September 1, 1993, if
any of the conditions set forth in Article VI hereof, to which the
obligations of Purchaser and the Acquisition Sub are subject, have
not been fulfilled or waived, unless such fulfillment has been
frustrated or made impossible by any act or failure to act of
Purchaser or the Acquisition Sub; provided, however, if Purchaser
or the Acquisition Sub has purchased the Outstanding Shares
tendered pursuant to the Offer, the Purchaser cannot terminate this
Agreement pursuant to this Section 10.1.3 until after October 31,
1993.
10.2 Effect of Termination. In the event of a
termination of this Agreement pursuant to Section 10.1.1 hereof,
each party shall pay the costs and expenses incurred by it in
connection with this Agreement, and no party (or any of its
officers, directors, employees, agents, representatives or
shareholders) shall be liable to any other party for any costs,
expenses, damage or loss of anticipated profits hereunder. In the
event of any other termination, the parties shall retain any and
all rights attendant to a breach of any covenant, representation or
warranty made hereunder. In addition to any other rights Purchaser
and the Acquisition Sub may have hereunder or at law, the Acquired
Company shall pay Purchaser a fee in the amount of Two Million
Dollars ($2,000,000.00) in the event:
49
(a) this Agreement is terminated by the Acquired Company
(except as permitted in Section 10.1.1) or the Board of Directors
of the Acquired Company does not recommend or withdraws its
recommendation to its shareholders that the Offer be accepted; or
(b) this Agreement is terminated for any reason or in
accordance with any other provision hereof (provided, however, that
neither Purchaser nor the Acquisition Sub was in material breach of
this Agreement at the time of the termination of this Agreement)
and within twelve (12) months of such termination:
(i) the Acquired Company is acquired by merger or
otherwise by another party;
(ii) the Acquired Company enters into a merger or
other agreement or agreement in principle which contemplates the
acquisition of the Acquired Company;
(iii) the Acquired Company, another entity, person
or group of persons acting together (including current shareholders
who either acquire additional shares (or convertible securities) or
join with other present or future shareholders with the result that
such shareholders or group of shareholders owns more than one-half
of such shares or interests) acquires more than one-half of the
Acquired Company's total assets;
(iv) another entity, person or group of persons
acting together acquires more than one-half of the outstanding
Common Stock of the Acquired Company or acquires securities that
are convertible into Common Stock that separately or in combination
with Common Stock acquired or owned directly exceeds one-half of
voting or equity interests of the Acquired Company (including
current shareholders who either acquire additional shares (or
convertible securities) or join with other present or future
shareholders with the result that such shareholders or group of
shareholders owns more than one-half of such shares or interests);
(v) the Acquired Company adopts a plan of
liquidation relating to more than one-half of the Acquired
Company's total assets or declares a distribution to its
shareholders of more than one-half of its total assets;
(vi) the Acquired Company repurchases more than
one-half of its outstanding Common Stock; or
(vii) there is a public announcement with respect
to a plan or intention by the Acquired Company or another entity,
50
person or group of persons to effect any of the foregoing
transactions.
10.3 Risk of Loss. The Acquired Company retains all risk
of condemnation, destruction, loss or damage due to fire or other
casualty from the date of this Agreement up to the Effective Time.
If the condemnation, destruction, loss, or damage is such that the
business of the Acquired Company and the Subsidiaries, taken as a
whole, is materially interrupted or curtailed or the assets of the
Acquired Company and the Subsidiaries, taken as a whole, are
materially affected, then Purchaser shall have the right to
terminate this Agreement.
XI. GENERAL PROVISIONS.
11.1 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered
by hand or mailed by certified mail, return receipt requested,
first class postage prepaid, or sent by Federal Express or
similarly recognized overnight delivery service with receipt
acknowledged addressed as follows:
11.1.1. If to the Acquired Company:
CYBERTEK Corporation
7800 North Stemmons Freeway,
Suite 600
Dallas, Texas 75247-4217
Attn: Vaughn W. Morgan
and to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
Attn: William J. Grant, Jr., Esq.
11.1.2. If to Purchaser or the Acquisition Sub:
Policy Management Systems Corporation
One PMS Center, Wilson Road
Blythewood, South Carolina 29016
Attn: Mr. Robert L. Gresham
Executive Vice President
51
and to:
Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
Attention: Barry J. Stein, Esq.
11.1.3. If delivered personally, the date on which
a notice, request, instruction or document is delivered shall be
the date on which such delivery is made and, if delivered by mail
or by overnight delivery service, the date on which such notice,
request, instruction or document is received shall be the date of
delivery. In the event any such notice, request, instruction or
document is mailed or shipped by overnight delivery service to a
party in accordance with this Section 11.1 and is returned to the
sender as nondeliverable, then such notice, request, instruction or
document shall be deemed to have been delivered or received on the
fifth day following the deposit of such notice, request,
instruction or document in the United States mails or the delivery
to the overnight delivery service.
11.1.4. Any party hereto may change its address
specified for notices herein by designating a new address by notice
in accordance with this Section 11.1.
11.2 Brokers. Purchaser and the Acquisition Sub, jointly
and severally, represent and warrant to the Acquired Company that,
except for The Robinson-Humphrey Company, Inc. (for whose fees
Purchaser shall be liable), no broker or finder has acted for them
or any entity controlling, controlled by or under common control
with them in connection with this Agreement. The Acquired Company
represents and warrants to Purchaser and the Acquisition Sub that,
except for Alex. Brown & Sons Incorporated, which has been employed
by the Acquired Company pursuant to that certain agreement dated
April 1, 1991, (and JMI, Inc., which will be entitled to a portion
of the fees of Alex. Brown & Sons, Incorporated), no broker or
finder has acted for it or any entity controlling, controlled by or
under common control with it in connection with this Agreement.
Purchaser and the Acquisition Sub, jointly and severally, agree to
indemnify and hold harmless the Acquired Company against any fee,
loss or expense arising out of any claim by any broker or finder
employed or alleged to have been employed by them or either of
them, and the Acquired Company agrees to indemnify and hold
harmless Purchaser and the Acquisition Sub against any fee, loss,
or expense arising out of any claim by Alex. Brown & Sons
Incorporated, JMI, Inc. or any other broker or finder employed or
alleged to have been employed by it or any of its shareholders.
The fees and other expenses of Alex. Brown & Sons, Incorporated,
JMI, Inc. and any other broker or finder shall be paid by the
Acquired Company, subject to the limitations set forth in Section
11.5 in conjunction with such other fees set forth in Section 11.5
52
(the parties acknowledging that Alex. Brown & Sons Incorporated is
sharing a portion of its fee with JMI, Inc.).
11.3 Further Assurances. Each party covenants that at
any time, and from time to time, after the Effective Time, it will
execute such additional instruments and take such actions as may be
reasonably requested by the other parties to confirm or perfect or
otherwise to carry out the intent and purposes of this Agreement.
11.4 Waiver. Any failure on the part of any party hereto
to comply with any of its obligations, agreements or conditions
hereunder may be waived by any other party to whom such compliance
is owed. No waiver of any provision of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a
continuing waiver.
11.5 Expenses. Except to the extent set forth in Section
10.2 hereof, all expenses incurred by the parties hereto in
connection with or related to the authorization, preparation and
execution of this Agreement and the Closing of the transactions
contemplated hereby, including, without limitation of the
generality of the foregoing, all fees and expenses of agents,
representatives, counsel and accountants employed by any such party
shall be borne solely and entirely by the party which has incurred
the same. Notwithstanding the provisions of Section 7.8 of the
401(k) Plan, the Acquired Company shall reimburse the 401(k) Plan
Trustee for its costs of distributing information to 401(k) Plan
participants and any other costs and expenses of the Trustee or the
401(k) Plan in connection with the transactions contemplated
herein. Notwithstanding the foregoing, all fees, costs and
expenses of counsel, accountants, agents, representatives,
investment bankers, and the 401(k) Plan Trustee incurred by the
Acquired Company (and the Subsidiaries, if any) shall not exceed
One Million One Hundred Fifty Thousand Dollars ($1,150,000.00). As
reflected in Exhibit 11.5, such professionals are divided into
groups one and two for purposes of the computation of the
limitation set forth herein, and the fees, costs and expenses of
each such professional shall be as set forth on Exhibit 11.5. Of
the One Million One Hundred Fifty Thousand Dollar ($1,150,000.00)
limitation, One Million Seventy-Seven Thousand Dollars
($1,077,000.00) shall be allocated to group one and Seventy-Three
Thousand Dollars ($73,000.00) shall be allocated to group two.
Prior to the execution hereof, each professional listed in group
one has provided to the Acquired Company and Purchaser a written
acknowledgment of such professional agreeing that the extent to
which the Acquired Company shall be liable for its fees, costs and
expenses shall be limited to the amount set forth opposite its name
in group one of Exhibit 11.5, subject to possible adjustment as set
forth belo. With respect to group two, in the event the aggregate
of the actual fees, costs and expenses of the professionals within
group two is less than Seventy-Three Thousand Dollars ($73,000.00),
the amount of such difference may be used to pay the fees, costs
53
and expenses of other such professionals (including those
professionals listed in group one). Notwithstanding the foregoing,
the limitation on fees, costs and expenses set forth above shall
not apply to any actual fees, costs and expenses directly related
to any complications or changes in the transactions contemplated
herein that arise as a result of any governmental investigation
under the HSR Act, as a result of any third party or derivative
suit to enjoin, or seek damages in connection with, the
transactions contemplated herein, or as a result of a third party
announcing a competing tender offer for the Outstanding Shares or
a proxy solicitation or other attempt to acquire control of the
Acquired Company. All such agents, counsel, accountants and other
representatives shall maintain separate records relating to such
additional matters and shall provide Purchaser with reasonable
proof of any such amounts; and with respect to such additional
matters, the Acquired Company shall only pay the amounts for which
such separate records are maintained. The parties acknowledge that
the fees, costs and expenses of Ernst & Young (including those
relating to the annual audit of the Acquired Company) shall not be
included in the group two professionals except to the extent such
exceed the amount previously budgeted by the Acquired Company for
Ernst & Young's fees, costs and expenses relating to the annual
audit. The Acquired Company will not engage any professionals in
connection with this transaction other than those listed in Exhibit
11.5, except as required in the event of any of the occurrences set
forth in the third preceding sentence.
11.6 Press Releases and Disclosure. The parties will
release the joint press release attached hereto as Exhibit 11.6,
initially disclosing the transactions contemplated by this
Agreement as soon as reasonably practicable after the execution of
this Agreement. In the event that either party proposes to issue,
make or distribute any press release, public announcement or other
written publicity or disclosure after the joint press release
referred to above and prior to the Closing Date that refers to the
transactions contemplated herein, the party proposing to make such
disclosure shall provide a copy of such disclosure to the other
parties and shall afford the other parties reasonable opportunity
(subject to any legal obligation of prompt disclosure) to comment
on such disclosure or the portion thereof which refers to the
transactions contemplated herein prior to making such disclosure.
The Acquired Company, on the one hand, and Purchaser and the
Acquisition Sub, on the other, covenant and agree that following
the execution of this Agreement and prior to the Closing, except as
otherwise agreed or in connection with seeking advice from counsel
and other professionals, it and they shall not disclose to any
person, individual or entity any of such terms, conditions or
matters and shall keep the same confidential, to the extent not
otherwise publicly known and except to the extent reasonably
necessary in connection with the Offer and the shareholders'
approval process and to obtain the consents or approvals required
by the terms of the Agreement or as otherwise required by law. The
Acquired Company will not, and will cause the Subsidiaries not to,
54
issue any press release or otherwise make any public statement or
respond to any press inquiry with respect to this Agreement or the
Option Agreements or the transactions contemplated hereby without
the prior approval of Purchaser which will not be unreasonably
withheld, except as may be required by law in the written opinion
of outside counsel.
11.7 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, executors, administrators,
successors and assigns.
11.8 Headings. The section and other headings in this
Agreement are inserted solely as a matter of convenience and for
reference, and are not a part of this Agreement.
11.9 Entire Agreement. This Agreement, the Option
Agreements and the Covenants Not To Compete constitute the entire
agreement among the parties hereto and supersede and cancel any
prior agreements, representations, warranties, or communications,
whether oral or written, among the parties hereto relating to the
transactions contemplated hereby or the subject matter herein.
Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only by an agreement
in writing signed by the party against whom or which the
enforcement of such change, waiver, discharge or termination is
sought.
11.10 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State
of South Carolina.
11.11 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.
11.12 No Agreement Until Executed. This Agreement
shall not constitute or be deemed to evidence a contract or
agreement among the parties hereto unless and until executed by all
parties hereto, irrespective, of negotiations among the parties or
the exchanging of drafts of this Agreement.
11.13 Pronouns. All pronouns used herein shall be
deemed to refer to the masculine, feminine or neuter gender as the
context requires.
11.14 Exhibits Incorporated. All Exhibits attached
hereto are an integral part of this Agreement.
11.15 Time of Essence. Time is of the essence in
this Agreement.
55
IN WITNESS WHEREOF, each party hereto has executed or
caused this Agreement to be executed on its behalf, all on the day
and year first above written.
POLICY MANAGEMENT SYSTEMS CORPORATION
"PURCHASER"
By: Robert L. Gresham
Title: Executive Vice President
C-TEK ACQUISITION CORPORATION
"ACQUISITION SUB"
By: Robert L. Gresham
Title: Vice President
CYBERTEK CORPORATION
"ACQUIRED COMPANY"
By: Vaughn W. Morgan
Title: CEO and Chariman
56
LIST OF EXHIBITS
EXHIBITS
2.2.9(c) Stock Appreciation Right.
2.5.2 List of Bank Accounts, Safe Deposit Boxes and Powers of
Attorney.
2.10(a) Persons to Enter Into Covenants Not To Compete.
2.10(b) Form of Covenant Not to Compete.
2.15(a) List of Option Shareholders.
2.15(b) Form of Shareholder Option Agreement.
2.16 Form of Company Option Agreement.
2.17 Split Dollar Arrangement.
3.1 List of Jurisdiction of Incorporation and Jurisdictions where
there is Good Standing Status.
3.2 Articles or Certificates of Incorporation and Bylaws of the
Acquired Company and the Subsidiaries.
3.3 Commitments With Respect To Capital Stock.
3.4 List of Equity Investments.
3.5.1 1991, 1992 and 1993 Financial Statements.
3.5.2 List of Liabilities Not Disclosed in the 1993 Financial
Statements and List of Defaults.
3.6 List of Tax Matters and Copy of Federal Income Tax Return for
the fiscal year ended March 31, 1992.
3.7 List of Assets and Leases; List of Encumbrances.
3.8 List of Required Consents.
3.9 List of Changes.
3.10 List of Litigation.
3.11 List of Licenses and Permits and List of Noncompliance with
Laws.
3.12 List of Contracts.
57
3.13.1 List of Trademarks, Trade Names, Service Marks, Service
Names, Etc.
3.13.2(i) List of Owned Software.
3.13.2(ii) List of Licensed Software, List of Problems with
Software Licenses.
3.13.2(iii) List of Computer Programming Services Providers.
3.13.2(iv) List of Software Licenses.
3.13.2(v) Software Marketing Agreements and Nonexclusive Software
Marketing Rights.
3.14 List of Employees, Independent Contractors, Salaries, Rates,
Employee Loans or Advances, and Labor Matters.
3.14(a) List of Employees for which Forms I-9 are not Available
3.15 List of Benefit Plans.
3.16 List of Customers, Addresses, Telephone Numbers and Principal
Person to Contact and List of Problems with Customers.
3.17 List of Environmental Matters.
3.18 List of Insurance Matters.
3.19 List of Related Party Relationships.
5.1 Articles of Incorporation and Bylaws of the Acquisition Sub.
5.3 List of Purchaser's or the Acquisition Sub's Required
Consents.
11.5 Schedule of Professionals' Fees, Costs and Expenses.
11.6 Joint Press Release.