LETTER OF INTENT
Between
PC-Ware Information Technologies AG, Blochstra(beta)e 1, D - 04329 Leipzig,
represented by its
Chief Executive Officer, Dr. Knut Loschke,
- in the following referred to as "PC-Ware" -
and
Programmer's Paradise, Inc., 1157 Shrewsbury Avenue, Shrewsbury, NJ 07702-4321,
USA,
represented by its
Chief Executive Officer, Mr. William H. Willett,
- in the following referred to as "PP"-.
A. Preamble
This letter will set forth the principal terms upon which PC-Ware Information
Technologies AG proposes to acquire (the "Acquisition") from Programmer's
Paradise, Inc. 100 % of the shares (the "Acquired Shares") of PP's European
subsidiaries: ISP*D International Software Partners GmbH, Logicsoft Holding BV,
System Science Limited, Lifeboat Associates Italia and ISPF International
Software Partners France (the Acquired Companies"). PP will transfer their
shares in the Acquired Companies into a Holding Company situated in Germany or
the Netherlands.
B. Purchase Price
The purchase price is Euro 14.500.000,00 (Euro fourteen million five hundred
thousand).
The purchase price will be paid as follows:
a) A down-payment (the "Down-Payment") equal to 5 % of the purchase price (the
"Purchase Price") for the Acquired Shares (Euro 725.000,00) will be paid
upon the date of execution ("Execution Date") of the Purchase Agreement
(the "Agreement") and the balance upon the closing of the Purchase of the
Acquired Shares (the "Closing Date"). The Down-Payment will be retained by
PP if PC-Ware shall fail to close for any reason other than by a material
breach by PP of its obligations under the Agreement or failure to obtain
clearance of the Cartel Authorities.
b) Euro 9.275.000,00 of the Purchase Price will be paid in cash at Closing
Date.
c) Euro 4.500.000,00 will be paid at Closing Date by
(i) delivery of 100.000 shares (the "Shares") of PC-Ware and
(ii)delivery to an escrow agent acceptable to both patties of an amount in
cash in Euros or a letter of credit or bank guarantee equal to Euro
4.500.000 minus 100.000 multiplied by the closing market price of the
PC-Ware stock on the business day immediately proceeding the Closing
Date. The foregoing will be subject to adjustment as follows:
(1) During the Measurement Period (defined below) PP agrees to use all
reasonable efforts to sell the Shares in the market after consultation
with and the cooperation of PC-Ware. Measurement Period shall mean the
period commencing with the business day following the Closing Date and
ending 60 calendar days thereafter or February 28, 2001, whichever is
later.
If all of the Shares are sold during the Measurement Period:
A) with net proceeds of less than Euro 4.500.000,00 (the
"Deficiency"), PC-Ware will promptly pay the Deficiency to PP in
cash in Euros or in additional Shares (using the Share price at
the closing on the last day of the Measurement Period) as PP shall
have elected, or
B) with net proceeds of more than Euro 4.500.000,00 (the "Excess"),
PP will promptly pay PC-Ware 50 % of the Excess in Euros.
(2) If less than all of the Shares are sold ("Sale Shares") during the
Measurement Period
(x) the Deficiency will be apportionately adjusted by multiplying
100.000 by a fraction, the numerator of which is the Sales Shares
and the denominator of which is 100.000 and
(y) the Excess shall be calculated as provided in (3) below.
(3) The Excess for the Shares which are not Sale Shares ("Unsold Shares")
shall equal 75% of the average closing market prices of the PC-Ware
stock during the Measurement Period or 100 % of the price specified in
a binding written offer to purchase, furnished to PP during the
Measurement Period, whether or not PP accepts such offer. In no event
shall the per share price for the Unsold Shares used to calculate such
Excess be less than Euro 45 per Share.
(4) After the Measurement Period PC-Ware shall have no obligation to pay
the Deficiency as to the Unsold Shares to PP and PP shall have no
obligation to pay PC-Ware 50 % of the Excess as to the Unsold Shares.
(5) The obligation of PP to share the Excess shall be secured by the Euro
3.275.000,00 Letter of Credit/ bank guarantee referred to in H.a.
(6) The obligation of PC-Ware to pay the Deficiency shall be secured by the
establishment of an escrow account or, at PC-Ware's discretion, letter
of credit/ bank guarantee of a reputable German bank for an amount as
described above under B.c(ii).
C. Execution Date
Execution Date will occur not later than October 23rd, 2000. Both parties will
prepare the Purchase Agreement in such a way, that
(i) the provisions are final by September 8th, 2000,
(ii) the Purchase Agreement could be executed by October 23rd, 2000,
(iii) PP can call its special shareholders' meeting to approve the
Agreement in November 2000,
(iv)PP can start the necessary procedures with respect to the SEC about
September 8th, 2000 and
(v) the Closing Date will occur in December 2000 effective as of December
31st, 2000.
The foregoing dates may vary and the actual closing date will be two business
days after satisfaction of all conditions.
D. Board approval
The respective Boards of Directors of PP and PC Ware have approved the
Acquisition on the terms set forth herein.
E. Audit of the financial figures of Acquired Companies
PC-Ware will have the right, at its sole expense, to audit the financial figures
of Acquired Companies as of August 31st, 2000 instead of fully completing its
due diligence.
If at the end of this audit, October 20th, 2000 at the latest, PC-Ware decides
that the commercial situation (technical, financial, tax, legal) of the Acquired
Companies, is not satisfying in the sense that PC-Ware is willing to proceed
with the Acquisition, PC-Ware may decide not to execute the Purchase Agreement
and finish the Acquisition by a written notice to PP.
F. Press Release
Attached is a joint press release with respect to the Acquisition which will be
released immediately after the execution of this letter of intent.
G. Obligation of the parties
Until the execution and delivery of the Agreement neither party will be under
any obligation to the other except as set forth in the Confidentiality
Agreement, dated May 22nd, 2000 and the in Section H, f. and in the
exclusiveness provisions in Section M.
H. Representations, Warranties and Conditions
The Agreement will contain customary representations, warranties and conditions
and the following provisions:
a) PP will deliver a letter of credit/ bank guarantee of a reputable
German bank or a German establishment of a reputable international bank
to the amount of Euro 3.275.000,00 to PC-Ware at Closing Date. This
will serve as security for a possible Excess as dealt with in Section
B, c and any claim of PC-Ware based on a breach of representations,
warranties and conditions of the Purchase Agreement.
b) PP will have no responsibility to PC-Ware for alleged breaches of
representations or agreements specified in the Agreement:
(i) Unless PC-Ware makes a claim for breach of the Agreement ("Claim")
specifying the nature of the alleged breach prior to 240 days
following the Closing,
(ii) Until the aggregate amount of Claims exceed Euro 300.000,00 but
not more than Euro 7.500.000,00. If the aggregate amount exceeds
Euro 300.000,00 there will be a liability only to the extent such
amount is exceeded (Freibetrag).
c) Any Claim by PP against PC-Ware or by PC-Ware against PP for breach of
obligations under the Purchase Agreement will be dealt with by an
Arbitral Tribunal established according to the rules of the German
Institution of Arbitration (DIS); the costs of such Arbitration will be
allocated between the parties according to the quota to which parties
will succeed or fail before this tribunal. Place of arbitration shall
be Dusseldorf.
d) The substantive law governing the Agreement shall be that of the
Federal Republic of Germany.
e) Any claim by PC-Ware or PP shall be reduced by any tax benefits
realized by PC-Ware or PP with respect to the subject matter underlying
such Claim.
f) The Acquired Companies will conduct business only in the ordinary
course and in accordance with budgets and business plans submitted to
PC-Ware for approval and shall advise PC-Ware of any proposed deviation
from such budgets and business plans and any non-ordinary action for
approval and shall not undertake such action if PC-Ware shall object
within 5 business days after notice thereof. PP and PC-Ware will
establish a steering committee which will advise the Acquired Companies
in their conduct of business.
g) PP and PC-Ware may enter into an agreement of mutual support at
conditions which are normal between third parties (arms length). PP
will continue to support the Acquired Companies by deliveries of goods,
software and other services as usual.
h) Either party may terminate the Agreement by notice to the other party
if the Closing shall not have occurred by December 31st, 2000, unless
the reason therefor is either a breach of such party of an obligation
under the Agreement or any condition has not yet been fulfilled which
cannot be influenced by the parties.
I. Approvals to the Acquisition
It is understood that PP must obtain stockholder approval of the Acquisition.
The Boards of Directors of both PC Ware and PP have each unanimously approved
the Acquisition and
(i) PP will recommend that its stockholders vote in favour of the Acquisition
and
(ii) the management of PP shall vote their shares in favour of the Acquisition.
J. Approval of Official Authorities
In addition, due to PC-Ware's position as a German listed company, the Closing
will be conditional upon the following:
a) Satisfaction of the requirements of the Frankfurt Stock Exchange; and
b) Clearances from all necessary European competition authorities and
other regulators, if required.
K. Financial Statements
PP will furnish PC-Ware
(i) with the consolidated financial statements of the Acquired Companies for
the Year 1999 (consolidated financial statements of the European units,
audited on the basis of the audit of the PP-group) and
(ii) the financial statements of the Acquired Companies of the Year 1999
(audited with respect to the companies in Germany and The Netherlands and
subject to a limited review with respect to the other European Companies)
and
(iii)for the six months ended June 30th, 2000 (unaudited) consolidated
financial statements of the Acquired Companies for the six months ended
June 30th, 2000.
(iv) PP will furnish PC-Ware with monthly consolidated (unaudited) financial
statements for the Acquired Companies for the months after June 2000 within
20 business days after the end of the month.
L. Free of charges and titles of third parties
At the Closing PP will deliver to PC-Ware opinions of counsel in the form and
with the content customary in the respective jurisdictions regarding the good
standing of the Acquired Companies and their subsidiaries and the good title to
the shares in the Acquired Companies and their subsidiaries and the freedom of
such shares from any rights of third patties.
M. Exclusiveness
Until the execution of the definitive Agreement
(i) PP will not solicit other offers with respect to the sale or merger or any
other kind of transaction involving the sale, directly or indirectly, of
the Acquired Companies ("Other Offers") or their subsidiaries and
(ii) will inform PC Ware of bona fide Other Offers and
(iii)will give PC-Ware a period of 10 business days during which it may elect
to match the terms of such bona fide Other Offers by written notice to PP.
It is understood that, after the execution of the Agreement and until the
closing or termination thereof, PP will not entertain or negotiate Other
Offers.
N. Obligations
Neither PC Ware nor PP will be under any obligation to the other under this
letter of intent - with the exception of Section G) and M) and duties under the
doctrine of culpa in contrahendo - until the Agreement is executed. PC-Ware's
counsel will prepare an initial draft of the Agreement as promptly as
practicable after execution of this letter of intent.
O. Insider Information
PP is aware, and has made the Acquired Companies aware, that the fact of
PC-Ware's interest in the proposed transaction may be considered insider
information" within, and as such be prohibited by, the insider dealing
legislation in Germany and PP should therefore refrain from dealing in or
encouraging others to deal in any listed securities of PC-Ware.
P. Costs
Both sides are to bear their own cost in relation to the Acquisition.
Dusseldorf, August 2nd 2000
By /s/ Dr. Knut Loschke By /s/ William H. Willett
------------------------- ----------------------------
Dr. Knut Loschke William H. Willett
Vorstandsvorsitzender Chairman of the Board and
Chief Executive Officer
PC-Ware Information Technologies AG Programmer's Paradise, lnc.
Company Contact:
Bill Willett
Programmer's Paradise(R), Inc.
Chairman and Chief Executive Officer
(732) 389-8950
bill.willett@programmers.com
----------------------------
PROGRAMMER'S PARADISE(R), INC. ANNOUNCES LETTER OF INTENT
WITH PC-WARE INFORMATION TECHNOLOGIES AG
Shrewsbury, NJ, August 3, 2000 - PC-Ware Information Technologies AG ("PC-Ware")
of Leipzig, Germany and Programmer's Paradise(R), Inc. ("Programmer's") of
Shrewsbury, New Jersey, USA announced today (August 3, 2000) that they had
executed a letter of intent which contemplates the purchase (the "Purchase") by
PC-Ware of the stock of Programmer's European subsidiaries. The proposed
purchase price is 14,500,000.00 Euro dollars, of which 70% will be paid in cash
at the time of closing and the remainder in shares of PC-Ware.
The Purchase will require the approval of the stockholders of both parties and
is subject to execution of a definitive agreement containing customary
representations and conditions. The Purchase is expected to close in the late
fall of this year.
PC-Ware is a specialist service provider and developer for information
technology with a focus on software and associated services. PC-Ware's full
service concept includes not only procurement and license management for
software but also customized consulting and support services. PC-Ware is one of
the three largest Microsoft Select Partners in Germany.
Programmer's Paradise(R), Inc. is an international marketer of software
targeting the software development professional and information technology
professionals within enterprise organizations. Programmer's Paradise enhances
software development productivity by providing a single-source for software
development tools from industry-leading vendors selected on the basis of
features, quality, price and warranty. The Company offers over 58,000 SKUs from
more than 2,000 publishers and manufacturers and distributes these products
through multiple distribution channels. The Programmer's Paradise web site
address is www.programmersparadise.com. Bill Willett can be e-mailed at
bill.willett@programmers.com.
PC-Ware is listed on the Frankfurt Stock Exchange (PCW) and Programmer's is
listed on the NASDAQ (PROG).
For further information contact Dr. Knut Loschke of PC-Ware at
knut.loeschke@pc-ware.de and William H. Willett, CEO or William H. Sheehy, CFO
on 732-389-8950.