UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
----------------------
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss. 240.14a-12
Group 1 Software, Inc.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.50 per share
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(2) Aggregate number of securities to which transaction applies:
17,891,841*
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
$23.00 per share in cash
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$411,512,343
------------------------------------------------------------------------
(5) Total fee paid:
$82,302.46
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* Includes 13,931,609 shares issued and outstanding as of April 30,
2004, plus 3,960,232 shares reserved for issuance upon exercise of
outstanding options and warrants.
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
[GROUP 1 LOGO]
Group 1 Software, Inc.
4200 Parliament Place
Suite 600
Lanham, Maryland 20706-1844
[ ] [ ], 2004
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of Group 1
Software, Inc. ("Group 1") to be held on [ ] [ ], 2004, at 10:00 a.m., local
time, at the offices of Cadwalader, Wickersham & Taft LLP, 100 Maiden Lane, New
York, NY 10038. At the special meeting, we will ask you to consider and vote
upon a proposal to approve and adopt the Agreement and Plan of Merger, dated as
of April 12, 2004, among Pitney Bowes Inc. ("Pitney Bowes"), Germanium
Acquisition Corporation, a wholly-owned subsidiary of Pitney Bowes, and Group 1
Software, Inc., and approve the merger contemplated by that agreement.
If the merger agreement is approved and adopted and the merger is completed,
Group 1 will become a wholly-owned subsidiary of Pitney Bowes, and you will
receive $23.00 in cash, without interest, for each share of your Group 1 common
stock, including the associated rights to purchase common stock issued under the
Group 1 rights plan.
Group 1's board of directors has carefully considered the merger agreement and
has determined that the terms of the merger agreement are advisable, fair to and
in the best interests of Group 1 and its stockholders. Your board of directors
unanimously recommends that you vote in favor of approval and adoption of the
merger agreement and approval of the merger.
Your vote is very important. We cannot complete the merger unless the merger
agreement is approved and adopted by holders of a majority of Group 1's
outstanding shares of common stock. Whether or not you plan to attend the
special meeting, we urge you to complete, sign, date and return the enclosed
proxy card, or to vote by telephone or via the Internet, to ensure that your
shares are represented at the special meeting.
This proxy statement provides you with detailed information about the proposed
transaction and related matters. We urge you to read this document carefully. In
making your decision, you should carefully consider all of the information in
the proxy statement. If you have any questions about the merger, please call
[ ], toll-free at 1-800-[ ].
On behalf of your board of directors, I thank you for your support and
appreciate your consideration of this matter.
Very truly yours,
Robert S. Bowen
Chief Executive Officer
This Proxy Statement is dated [ ] [ ], 2004 and is being first mailed to
Group 1 stockholders on or about [ ] [ ], 2004.
[GROUP 1 LOGO]
Group 1 Software, Inc.
4200 Parliament Place
Suite 600
Lanham, Maryland 20706-1844
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On [ ] [ ], 2004
A special meeting of the stockholders of Group 1 Software, Inc., a Delaware
corporation ("Group 1"), will be held at the offices of Cadwalader, Wickersham &
Taft LLP, 100 Maiden Lane, New York, NY 10038, on [ ] [ ], 2004, at 10:00
a.m., for the following purpose:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of April 12, 2004, among
Pitney Bowes Inc. ("Pitney Bowes"), Germanium Acquisition
Corporation, a wholly-owned subsidiary of Pitney Bowes, and Group 1,
and approve the merger contemplated by that agreement. If we
complete the merger, we will become a wholly-owned subsidiary of
Pitney Bowes, and you will have the right to receive $23.00 in cash,
without interest, for each of your shares of Group 1 common stock,
including the associated rights to purchase shares of common stock
issued under Group 1's rights plan. A copy of the merger agreement
is attached as Annex A to the proxy statement accompanying this
notice.
2. To consider and vote upon such other matters as may properly come
before the special meeting, including the approval of any
adjournment of the special meeting solely for the purpose of
soliciting additional proxies in favor of proposal 1, if necessary.
Only stockholders of record at the close of business on [ ], [ ], 2004
will be entitled to vote at the special meeting, or any adjournments or
postponements thereof. As of that date, there were [ ] shares of common
stock outstanding. Each share of common stock is entitled to one vote on each
matter properly brought before the meeting. A list of stockholders eligible to
vote at the special meeting will be available for inspection at the special
meeting and during business hours from [ ] [ ], 2004 to the date of the
special meeting at Group 1's corporate headquarters.
Your board of directors has unanimously determined that the merger is
advisable, fair to and in the best interests of Group 1 and its stockholders.
Accordingly, your board of directors unanimously recommends that you vote to
approve and adopt the merger agreement and approve the merger.
-ii-
By Order of the Board of Directors,
Edward Weiss
Secretary
4200 Parliament Place, Suite 600
Lanham, Maryland 20706-1844
[ ] [ ], 2004
- IMPORTANT -
Whether you expect to attend the special meeting or not, your vote is
important. To assure your representation at the meeting, please sign and date
the enclosed proxy card and return it promptly in the enclosed envelope, which
requires no additional postage if mailed in the United States or Canada. In this
way, if you are unable to attend in person, your shares can still be voted at
the special meeting. You can also vote by telephone or via the Internet by
following the instructions set forth in this proxy statement.
-iii-
TABLE OF CONTENTS
Page
SUMMARY ........................................................................ 1
The Parties ........................................................... 1
The Merger ............................................................ 2
What Group 1 Stockholders Will Receive ................................ 2
Recommendation of the Board of Directors .............................. 2
Reasons for the Merger ................................................ 2
Stockholder Vote Required ............................................. 3
The Special Meeting ................................................... 3
Group 1 Market Price Information ...................................... 3
Opinion of Financial Advisor .......................................... 4
Material Federal Income Tax Consequences of the Merger ................ 4
Regulatory Approvals .................................................. 4
Interests of Certain Persons in the Merger ............................ 4
Dissenters' Appraisal Rights .......................................... 5
Conditions to the Completion of the Merger ............................ 5
No Solicitation Covenant .............................................. 6
Termination of Merger Agreement ....................................... 6
Termination Fee ....................................................... 7
Procedures for Receipt of Merger Consideration ........................ 8
QUESTIONS AND ANSWERS ABOUT THE MERGER ......................................... 9
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS ...................... 13
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING ............................... 14
Matters Relating to the Special Meeting ............................... 14
Vote Necessary to Adopt the Merger Agreement and Approve the Merger ... 15
How to Vote ........................................................... 15
Other Business; Adjournments .......................................... 16
THE MERGER ..................................................................... 17
Background of the Merger .............................................. 17
Reasons for the Merger; Recommendation of the Board of Directors ...... 21
Opinion of Group 1's Financial Advisor ................................ 23
Material Federal Income Tax Consequences of the Merger ................ 30
Regulatory Matters Relating to the Merger ............................. 31
Appraisal Rights of Stockholders ...................................... 33
INTERESTS OF CERTAIN PERSONS IN THE MERGER ..................................... 37
Employment, Severance and Consulting Agreements with Executive Officers 37
Equity-Based Awards ................................................... 40
Directors' and Officers' Indemnification and Insurance ................ 41
OWNERSHIP OF VOTING STOCK BY MANAGEMENT ........................................ 41
OWNERSHIP OF VOTING STOCK BY CERTAIN BENEFICIAL OWNERS ......................... 43
DESCRIPTION OF THE TRANSACTION AGREEMENTS ...................................... 44
THE MERGER AGREEMENT ........................................................... 44
General ............................................................... 44
Charter and By-Laws ................................................... 44
Closing Matters ....................................................... 44
-iv-
Consideration to Be Received in the Merger ............................ 44
Treatment of Stock Options and Warrants ............................... 45
Exchange of Certificates in the Merger ................................ 45
Covenants ............................................................. 46
Other Covenants and Agreements ........................................ 49
Representations and Warranties ........................................ 50
Conditions ............................................................ 51
Termination of the Merger Agreement ................................... 53
Termination Fee ....................................................... 54
Amendments, Extensions and Waivers .................................... 55
THE VOTING AGREEMENT ........................................................... 55
Agreement to Vote ..................................................... 55
Restrictions on Transfer .............................................. 55
ADDITIONAL INFORMATION FOR STOCKHOLDERS ........................................ 56
Stockholder Proposals for the 2004 Annual Meeting ..................... 56
Where You Can Find More Information ................................... 56
ANNEXES
Annex A Agreement and Plan of Merger
Annex B Voting Agreement
Annex C Opinion of Friedman, Billings, Ramsey & Co., Inc.
Annex D Text of 262 of Delaware General Corporation Law
-v-
SUMMARY
This summary, together with the question and answer section, highlights
important information discussed in greater detail elsewhere in this proxy
statement. This summary may not contain all of the information you should
consider before voting on the merger agreement. To understand the merger more
fully, you should read carefully this entire proxy statement and all of its
annexes before voting on whether to adopt the merger agreement and approve the
merger. You can also refer to "Additional Information for Stockholders; Where
You Can Find More Information" on page __ for additional information about Group
1.
The Parties
Group 1 Software, Inc.
4200 Parliament Place
Suite 600
Lanham, Maryland 20706-1844
(301) 918-0400
Internet address: http://www.g1.com
Group 1 Software, Inc. is a Delaware corporation and together with its
wholly-owned subsidiaries is referred to herein as "Group 1," "us," "we" or
"our." Group 1 is a provider of software solutions for data quality, customer
communications management and direct marketing applications. Group 1 has offices
in the United States and in Canada, the United Kingdom, continental Europe,
Malaysia, Japan, South Korea, China and Latin America and is also represented by
distribution partners. Group 1 provides software solutions that enable
businesses to market smarter by helping them find, reach, and keep customers.
Our common stock is traded on The Nasdaq National Market under the symbol
"GSOF."
Pitney Bowes Inc.
World Headquarters
1 Elmcroft Road
Stamford, Connecticut 06926-0700
(203) 356-5000
Internet address: http://www.pb.com
Pitney Bowes Inc. ("Pitney Bowes") is a Delaware corporation and is
referred to herein as "Pitney Bowes." Pitney Bowes is a provider of leading-edge
global, integrated mail and document management solutions for organizations of
all sizes. Pitney Bowes and its subsidiaries operate in three business segments:
Global Mailstream Solutions, Global Enterprise Solutions and Capital Services.
Pitney Bowes operates both inside and outside the United States.
Pitney Bowes' common stock is traded on the New York Stock Exchange under
the symbol "PBI."
Germanium Acquisition Corporation
c/o Pitney Bowes Inc.
1 Elmcroft Road
Stamford, Connecticut 06926-0700
(203) 356-5000
Germanium Acquisition Corporation, which is referred to herein as "Merger
Sub," is a wholly-owned subsidiary of Pitney Bowes formed solely for the purpose
of the merger.
The Merger
Pursuant to the terms of the Agreement and Plan of Merger, dated as of
April 12, 2004, among Pitney Bowes, Merger Sub and Group 1, Merger Sub will
merge with and into Group 1, and all of the outstanding shares of Group 1 common
stock, together with the associated rights to purchase shares of common stock
issued under the Stockholder Protection Rights Agreement, dated as of August 12,
1999, between Group 1 and American Stock Transfer & Trust Company (the "Rights
Plan"), will be converted into the right to receive $23.00 in cash, without
interest. As a result, Group 1 will become a direct, wholly-owned subsidiary of
Pitney Bowes.
The merger agreement is attached as Annex A to this proxy statement. We
encourage you to read the merger agreement carefully in its entirety, as it is
the legal document that governs the merger. For a summary of the merger
agreement, see "Description of the Transaction Agreements; The Merger Agreement"
on page ___.
For a description of events leading to the approval of the merger agreement
by Group 1's board of directors you should refer to "The Merger; Background of
the Merger" on page ___.
What Group 1 Stockholders Will Receive
As a result of the merger, you will be entitled to receive $23.00 in cash
for each share of common stock you own, together with the associated rights
issued under the Rights Plan. No additional consideration will be paid for the
rights to purchase shares of common stock issued under the Rights Plan. See
"Description of the Transaction Agreements; The Merger Agreement" on page ___.
Recommendation of the Board of Directors
Your board of directors has unanimously determined that the merger is
advisable, fair to you and in the best interests of Group 1 and its stockholders
and recommends that you vote FOR the approval and adoption of the merger
agreement and approval of the merger. See "The Merger; Reasons for the Merger;
Recommendation of the Board of Directors" on page ___.
Reasons for the Merger
For a description of the reasons behind the Group 1 board of directors'
unanimous determination that the merger is in the best interests of Group 1 and
its stockholders, you should refer to "Reasons for the Merger; Recommendation of
the Board of Directors" on page ___.
2
Stockholder Vote Required
Approval of the merger requires the affirmative vote of the holders of a
majority of Group 1's outstanding shares of common stock.
The Special Meeting
o Date, Time and Place (page ___). The special meeting will be held
on [ ] [ ], 2004, at 10:00 a.m., local time, at the offices
of Cadwalader, Wickersham & Taft LLP, 100 Maiden Lane, New York,
NY 10038.
o Record Date (page ___). The record date for determining the
holders of shares of outstanding common stock entitled to vote at
the special meeting is [ ] [ ], 2004. On the record date,
[ ] shares of Group 1 common stock were outstanding and
entitled to vote on the proposal to approve and adopt the merger
agreement and approve the merger.
o Proxies (page ___). Shares of Group 1 common stock represented by
properly executed proxies received at or prior to the special
meeting that have not been revoked will be voted at the special
meeting in accordance with the instructions indicated on the
proxies. If you properly execute your proxy but do not give
instructions on how to vote your shares, your shares will be
voted "FOR" the adoption of the merger agreement. Your proxy may
be revoked at any time before it is voted.
o Procedure for Voting (page ___). You may vote in one of four
ways:
o by completing and returning the enclosed proxy card;
o by appearing at the special meeting;
o by telephone by calling [ ]; or
o by Internet, at [http://www.].
If you complete and return the enclosed proxy card but wish to revoke it,
you must either file with [ ], our proxy solicitor, a written,
later-dated notice of revocation, send a later-dated proxy card relating to the
same shares of Group 1 common stock to Group 1, or our proxy solicitor, at or
before the special meeting, revoke your vote by telephone or Internet, or attend
the special meeting and vote in person. Your attendance at the meeting will not,
by itself, revoke your proxy. For more detailed information concerning the
special meeting, see "Information About the Special Meeting and Voting" on page
___.
Group 1 Market Price Information
Group 1's common stock is quoted on The Nasdaq National Market under the
symbol "GSOF." On April 12, 2004, the last full trading day before the public
announcement of the proposed merger, the closing price of our common stock was
$16.49. On [ ] [ ], 2004, the most recent practicable date prior to the
mailing of this document, our closing common stock price was $[ ].
3
Opinion of Financial Advisor
In connection with the merger, the board of directors received the opinion
of Friedman, Billings, Ramsey & Co., Inc. ("FBR") that the $23.00 per share of
common stock in cash, without interest, to be received by Group 1 stockholders
pursuant to the merger agreement is fair, from a financial point of view, to
Group 1's stockholders. This opinion, which is attached as Annex C, sets forth
the assumptions made, matters considered and limitations on the review
undertaken in connection with the rendering of the opinion. We encourage you to
read this opinion in its entirety. See "The Merger; Opinion of Group 1's
Financial Advisor" on page ___.
This opinion is directed to the board of directors of Group 1 and is not a
recommendation to stockholders with respect to any matter relating to the
merger. The opinion speaks only as of its date and FBR is under no obligation to
confirm its opinion as of a later date.
Material Federal Income Tax Consequences of the Merger
The receipt of cash by a Group 1 stockholder will generally be a taxable
transaction for United States Federal income tax purposes. Generally speaking,
each stockholder will recognize taxable gain or loss equal to the difference, if
any, between the amount of cash received and such stockholder's adjusted tax
basis in its Group 1 common stock immediately prior to the merger. A holder's
gain or loss will generally be capital gain or loss, and will generally be
long-term capital gain or loss if the Group 1 common stock exchanged in the
merger had been held for more than one year at the time of the merger. See "The
Merger; Material Federal Income Tax Consequences of the Merger" on page ____.
The United States Federal income tax consequences described above may not
apply to certain holders of Group 1 common stock, including certain holders
specifically referred to in "Material Federal Income Tax Consequences of the
Merger." The tax consequences to you may vary depending on your particular
circumstances. Therefore, we strongly urge you to consult your own tax advisor
concerning the particular tax consequences of this merger to you, including the
application of any federal, state, local and foreign tax laws.
Regulatory Approvals
Completion of the merger will not occur until receipt of all material
regulatory approvals, including expiration or early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and clearance of the transaction by the Federal Cartel
Office pursuant to the German Act against Restraints of Competition. On May 5,
2004, we received notice from the Federal Trade Commission that we
received early termination of the waiting period under the HSR Act. See "The
Merger; Regulatory Matters Relating to the Merger" on page ___.
Interests of Certain Persons in the Merger
In considering whether to vote in favor of the approval and adoption of the
merger agreement and approval of the merger, you should be aware that a number
of Group 1 officers and directors may have interests in the merger that may be
different from, or in addition to, their interests as Group 1 stockholders,
including the fact that certain executive officers entered into employment
4
and consulting agreements in connection with the merger. See "Interests of
Certain Persons in the Merger" on page ____.
Dissenters' Appraisal Rights
If you do not wish to accept the merger consideration of $23.00 for each
share of your Group 1 common stock together with the associated rights to
purchase Group 1 common stock issued under the Rights Plan, then, if you:
o make a written demand for appraisal of your shares prior to the
vote at the special meeting;
o do not vote in favor of the merger;
o continuously hold your shares of record through the date of the
merger; and
o otherwise comply with the procedures described in "The Merger;
Appraisal Rights of Stockholders,"
you will have the right under Delaware law to seek a judicial appraisal of your
shares to determine their "fair value." This amount may be more than, equal to
or less than $23.00 per share of Group 1 common stock. A proxy received by Group
1 which is properly executed but does not contain voting instructions will,
unless revoked, be voted in favor of the merger agreement. Therefore, if you
vote by proxy and wish to exercise appraisal rights, you must vote against the
merger agreement or abstain from voting on the merger agreement. For a more
detailed discussion of your appraisal rights, see "The Merger; Appraisal Rights
of Stockholders" on page ____.
Conditions to the Completion of the Merger
The completion of the merger depends upon a number of conditions, including
the following:
o approval by the Group 1 stockholders;
o expiration or early termination of the waiting period under the
HSR Act and clearance by the German Federal Cartel Office (on May
5, 2004, we received notice from the Federal Trade Commission
that we received early termination under the HSR Act);
o receipt of consents from governmental entities on terms that
would not reasonably be expected to result in a material adverse
effect;
o absence of any law or court order prohibiting the merger;
o material accuracy as of the closing of the representations and
warranties made by the other party;
o performance in all material respects by each party of the
obligations required to be performed by it prior to closing;
o no material adverse effect has occurred with respect to Group 1;
and
5
o other customary conditions specified in the merger agreement.
See "The Merger Agreement; Conditions" on page ____.
No Solicitation Covenant
We have agreed with Pitney Bowes that we will not encourage, solicit or
initiate any "acquisition proposals" (as that term is defined on page ___) from
a party other than Pitney Bowes. Nevertheless, our board of directors may, in
response to an unsolicited written proposal from a third party that our board of
directors determines to be reasonably likely to lead to a "superior proposal"
(as that term is defined on page ___), participate in discussions or
negotiations regarding such proposal if the failure to do so may result in a
breach of its fiduciary duties.
Termination of Merger Agreement
Pitney Bowes and Group 1 can mutually agree to terminate the merger
agreement without completing the merger, and either party can terminate the
merger agreement if:
o Group 1's stockholders do not approve the merger;
o the merger is not completed by September 30, 2004;
o any law or a final, nonappealable court order makes the merger
illegal or otherwise prohibits the merger;
o the other party breaches any of its representations or
warranties, which breach has had or would reasonably be expected
to have a material adverse effect; or
o the other party materially breaches any of its material covenants
or other agreements, which breach is incapable of being cured or
is not cured within 30 days after written notice.
Pitney Bowes may terminate the merger agreement if:
o prior to Group 1 stockholder approval, Group 1 (i) withdraws or
modifies its approval or recommendation of the merger agreement
or the merger or recommends, enters into, or publicly announces
its intention to enter into, an agreement with respect to a
superior proposal, (ii) breaches its obligation not to solicit an
alternative transaction, (iii) fails to affirm its recommendation
of the merger within 10 business days after any request from
Pitney Bowes, (iv) exempts any person from Section 203 of the
Delaware General Corporation Law ("DGCL") or (v) exempts any
person under its Rights Plan; or
o a person or group has acquired, or has the right to acquire, 25%
or more of Group 1's common stock or 25% or more of the book
value or fair market value of the assets of Group 1.
6
Group 1 may terminate the merger agreement if it enters into a definitive
agreement providing for the implementation of a superior proposal, subject to:
o Group 1 not breaching the covenant contained in the merger
agreement not to solicit an alternative transaction;
o providing Pitney Bowes 5 business days notice during which time
it will offer to negotiate with Pitney Bowes concerning any
adjustments to the terms of the merger agreement;
o a conclusion by Group 1's board of directors that the superior
proposal giving rise to Group 1's notice is still, after any
negotiation with Pitney Bowes, a superior proposal;
o terminating the merger agreement within 5 business days following
the 5 day period referred to above in which it has offered to
negotiate with Pitney Bowes; and
o payment of a termination fee.
See "The Merger Agreement; Termination of Merger Agreement" on page ___.
Termination Fee
Group 1 has agreed to pay Pitney Bowes a termination fee of $14,000,000 if
any of the following occurs:
o Pitney Bowes terminates the merger agreement because Group 1 (i)
withdraws or modifies its approval or recommendation of the
merger in a manner adverse to Pitney Bowes, or recommends, enters
into, or publicly announces its intention to enter into, an
agreement with respect to a superior proposal, (ii) breaches its
obligation not to solicit an alternative transaction, (iii) fails
to affirm its recommendation of the merger within 10 business
days after any request from Pitney Bowes, (iv) exempts any person
from Section 203 of the DGCL or (v) exempts any person under its
Rights Plan;
o Pitney Bowes terminates the merger agreement because a person or
group has acquired, or has the right to acquire, 25% or more of
Group 1's common stock or 25% or more of the book value or fair
market value of the assets of Group 1;
o Group 1 terminates the merger agreement upon entering into a
superior proposal;
o Pitney Bowes terminates the merger agreement because (i) Group 1
breaches or fails to perform any of its representations,
warranties or covenants or (ii) because Group 1 stockholder
approval is not obtained, and in either case, at the time of such
termination: (a) Pitney Bowes is not in breach of its
representations, warranties and covenants such that Group 1's
conditions to consummate the merger have been satisfied; and (b)
an acquisition proposal existed or has been previously announced
and within 1 year following termination Group 1 consummates an
acquisition proposal.
7
See "The Merger Agreement; Termination Fee" on page ____.
Procedures for Receipt of Merger Consideration
You should NOT send your share certificates to us or to the proxy solicitor
now. Shortly after the merger is completed, the paying agent appointed by Pitney
Bowes will send you written instructions explaining how to exchange your Group 1
common stock certificates for the merger consideration.
8
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers address briefly some commonly asked
questions regarding the special meeting and the proposed merger. The questions
and answers may not address all questions that may be important to you as a
Group 1 stockholder. Please refer to the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy statement and the
other documents we refer to in this proxy statement.
Q: What am I being asked to vote upon?
A: You are being asked to consider and vote upon a proposal to approve and
adopt the proposed merger agreement and to approve the merger contemplated
by that agreement. Under the merger agreement, Merger Sub will be merged
with and into Group 1, with Group 1 as the surviving corporation. If the
merger agreement and the merger are approved and adopted and the merger is
completed, Group 1 will no longer be a publicly held corporation, and you
will no longer own shares of Group 1 common stock, including the
associated rights to purchase shares of common stock issued under Group
1's Rights Plan.
Q: What will I receive if the merger is completed?
A: You will receive $23.00 in cash, without interest, for each share of your
Group 1 common stock, including the associated rights to purchase common
stock issued under the Group 1 Rights Plan. No additional consideration
will be paid for the associated rights issued under Group 1's Rights Plan.
Q: Does the Board of Directors recommend the approval and adoption of the
merger agreement?
A: Yes. Your board of directors believes that the merger is advisable, fair
to and in the best interest of Group 1 and its stockholders. After careful
consideration, your board of directors unanimously recommends that the
stockholders vote in favor of approval and adoption of the merger
agreement and approval of the merger.
Q: Will I receive any stock as a result of the merger?
A: No. You will not have any further ownership of Group 1, and you will not
receive any Pitney Bowes stock if the merger is completed.
Q: What will holders of options and/or warrants receive in the merger?
A: Upon completion of the merger, holders of options and/or warrants will
receive the excess, if any, of $23.00 over the per share exercise price of
each stock option or warrant, less any applicable withholding tax, except
for certain executives of Group 1 which entered into employment agreements
in connection with the merger whereby each executive agreed to waive 50%
of the cash out value with respect to the unvested Group 1 stock options
held by him at the effective time of the merger. See "Interests of Certain
9
Persons in the Merger; Employment, Severance and Consulting Agreements
with Executive Officers" on page __.
Q: What happens if the merger is not completed?
A: If the merger is not completed, both companies will continue to operate as
independent companies. Group 1 may be required to pay a termination fee to
Pitney Bowes if the merger is not completed for certain reasons.
Q: When do you expect the merger to be completed?
A: We hope to complete the merger as soon as reasonably practicable. If Group
1's stockholders approve and adopt the merger agreement and the other
conditions to the merger are satisfied or waived, we expect to complete
the merger in the third quarter of 2004. However, it is possible that
factors outside our control could cause the merger to be completed at a
later time. In addition, subject to certain exceptions, either Group 1 or
Pitney Bowes may terminate the merger agreement if the merger is not
completed by September 30, 2004.
Q: What is the vote required to adopt the merger agreement and approve the
merger?
A: Under Delaware law and our certificate of incorporation, the standard
required to adopt the merger agreement and approve the merger is the
affirmative vote of a majority of the outstanding shares of Group 1 common
stock. This means that the affirmative vote of at least [ ] shares of
Group 1 common stock is required for adoption of the merger agreement.
Robert S. Bowen, chief executive officer of Group 1, has entered into a
voting agreement in connection with the merger, pursuant to which he has
agreed to hold and vote all of his shares of Group 1 common stock in favor
of approval and adoption of the merger agreement and approval of the
merger. As of the record date, Mr. Bowen held [ ] shares of Group 1
common stock, which represents approximately [ ]% of the shares
outstanding. Accordingly, if Mr. Bowen votes in favor of the merger, the
vote of approximately [ ] additional shares of Group 1 common stock
(or [ ]% of the shares of Group 1 common stock outstanding as of
[ ] [ ], 2004) will be required to approve and adopt the merger
agreement and approve the merger.
Q: Which stockholders are entitled to vote on the merger?
A: Stockholders of record of Group 1 on [ ] [ ], 2004 are entitled to
vote on the merger at the special meeting.
Q: What are the "rights to purchase shares of common stock issued under the
Rights Plan"?
A: The rights to purchase shares of common stock were issued to all holders
of shares of common stock of Group 1 in connection with the adoption by
Group 1 of the Rights Plan (sometimes colloquially known as a "poison
pill"), but currently are not represented by
10
separate certificates. Instead, they are represented by the certificate
for the shares of common stock of Group 1.
Q: How can I vote?
A: You may vote by either completing and returning the enclosed proxy card,
appearing at the special meeting, by telephone at [ ], or by
Internet, at [http://www.].
Q: When and where is the special meeting?
A: The special meeting of Group 1 stockholders will take place on [ ] [
], 2004 at the offices of Cadwalader, Wickersham & Taft LLP, 100 Maiden
Lane, New York, NY 10038.
Q: What do I need to do now?
A: After you carefully read this document, including its annexes, mail your
signed proxy card in the enclosed return envelope as soon as possible, so
that your shares may be represented at the special meeting. In order to
assure that your vote is obtained, please vote your proxy as instructed on
the proxy card, or vote by telephone or via the Internet, even if you
currently plan to attend the special meeting in person.
Q: Can I change my vote after I have mailed my proxy card?
A: Yes. You can change your vote at any time before your proxy is voted at
the special meeting. You can do this in one of three ways:
o timely delivery of a valid, later-dated proxy (including a proxy
given by telephone or the Internet);
o written notice to Group 1's Secretary before the meeting that you
have revoked your proxy; or
o voting by ballot at the special meeting.
Q: What happens if I do not return a proxy card?
A: Failure to return your proxy card will have the same effect as voting
against the merger, unless you attend and vote in person at the special
meeting.
Q: If my shares are held in "street name" by my broker, will my broker vote
my shares for me?
A: No. If you do not provide your broker with instructions on how to vote
your "street name" shares, your broker will not be permitted to vote them
on the approval of the merger. If you do not give voting instructions to
your broker, you will, in effect, be voting against the merger unless you
appear in person at the special meeting with a legal, valid proxy from the
record holder. You should therefore be sure to provide your broker
11
with instructions on how to vote your shares. Please check the voting form
used by your broker to see if it offers telephone or Internet voting.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, Pitney Bowes will send you written
instructions for exchanging your certificates of Group 1 common stock for
a cash payment of $23.00 per share, including the associated rights to
purchase shares of common stock issued under the Group 1 Rights Plan,
without interest.
Q: Am I entitled to appraisal rights?
A: Yes. If you make a written demand for appraisal of your shares prior to
the vote at the special meeting, do not vote in favor of the adoption of
the merger agreement, continue to hold your shares of record through the
date of the merger and otherwise follow the procedural requirements of the
DGCL, you will be entitled to have your shares appraised by the Delaware
Court of Chancery and receive the fair value of your shares in cash, as
determined by the Court, which may be more than, equal to or less than
$23.00 per share. You may also be required to pay all or a portion of the
costs and expenses incurred in connection with the appraisal proceeding.
Q: Who can help me answer my questions about the special meeting or the
merger?
A: If you have questions about the special meeting or the merger, including
the procedures for voting your shares, you should contact:
[ ]
[ ]
[ ]
(800) [ ]-[ ]
12
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document that are subject
to risks and uncertainties. These statements are based on the beliefs and
assumptions of Group 1's management. Generally, forward-looking statements
include information concerning possible or assumed future actions, events or
results of operations of Group 1. Forward-looking statements include the
information in this document, specifically, regarding:
o conditions to, and the timetable for, o the economy
completing the merger o future economic performance
o combined operations o changes in government regulations
o management's plans
These statements may be preceded by, followed by or include the words
"believes," "expects," "anticipates," "intends," "plans," "estimates" or similar
expressions.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements contained in this proxy statement.
13
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
Group 1's board of directors is using this proxy statement to solicit
proxies from the holders of Group 1 common stock for use at the special meeting
of Group 1's stockholders. We are first mailing this proxy statement and the
accompanying form of proxy to Group 1 stockholders on or about [ ] [ ],
2004.
Matters Relating to the Special Meeting
Time and Place: 10:00 a.m. local time, on [ ] [ ],
2004, at the offices of Cadwalader,
Wickersham & Taft LLP, 100 Maiden Lane,
New York, NY 10038.
The Purpose of the Special Vote on a proposal to approve and adopt
Meeting is to: the merger agreement and approve the
merger. If we complete the merger, we
will become a wholly-owned subsidiary of
Pitney Bowes, and you will have the right
to receive $23.00 in cash, without
interest, for each of your shares of
Group 1 common stock, including the
associated rights to purchase shares of
common stock issued under the Rights
Plan.
Group 1 is also soliciting proxies to
grant discretionary authority to vote in
favor of any adjournment of the special
meeting solely for the purpose of
soliciting additional proxies in favor of
voting to approve and adopt the merger
agreement and approve the merger, if
necessary. Group 1 does not expect a vote
to be taken on any other matters at the
special meeting. However, if any other
matters are properly presented at the
special meeting for consideration, the
holders of the proxies will have
discretion to vote on these matters in
accordance with their best judgment.
Record Date: The record date for shares entitled to
vote is [ ] [ ], 2004.
Outstanding Shares Held As of [ ] [ ], 2004, there were
on Record Date: approximately [ ] shares of Group 1
common stock outstanding.
Shares Entitled to Vote: Shares entitled to vote are the shares of
Group 1 common stock held at the close of
business on the record date, [ ] [
], 2004.
Each share of Group 1 common stock that
you own on the record date entitles you
to one vote. Shares held by Group 1 in
its treasury are not voted.
14
Quorum Requirement: A quorum of stockholders is necessary to
hold a valid meeting.
According to our by-laws, the presence in
person or by proxy at the meeting of
holders of a majority of the outstanding
shares of Group 1 common stock entitled
to vote at the meeting will constitute a
quorum. Abstentions and broker
"non-votes" count as present for purposes
of establishing a quorum. Shares held by
Group 1 in its treasury do not count
toward a quorum.
A broker non-vote occurs on an item when
a broker is not permitted to vote on that
item without instruction from the
beneficial owner of the shares and no
instruction is given.
Shares Beneficially Owned 3,463,654 shares of Group 1 common stock,
by Group 1 Directors and including options that will become
Executive Officers as of exercisable upon stockholder approval of
April 30, 2004: the merger. These shares and options
represent in total approximately 21% of
the outstanding shares of
Group 1 common stock.
Vote Necessary to Adopt the Merger Agreement and Approve the Merger
Adoption of the merger agreement and approval of the merger requires the
affirmative vote of a majority of the outstanding shares of Group 1 common
stock. Abstentions and broker non-votes have the same effect as a vote against
the merger.
How to Vote
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the special meeting. You can always change your
vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote, one of the individuals named as
your proxy will vote your shares as you have directed. You may vote for or
against the proposal or abstain from voting.
How to Vote by Proxy. Mark your proxy, date and sign it, and return it to [
] in the postage-paid envelope provided. If the envelope is missing, please
address your completed proxy card to Group 1 Software, Inc., 4200 Parliament
Place, Suite 600, Lanham, MD, 20706-1844, Attention: Corporate Secretary.
If you submit your proxy but do not make a specific choice, your proxy will
follow the board of directors' recommendation and vote your shares "FOR" the
approval and adoption of the merger agreement and approval of the merger and
"FOR" the grant of discretionary authority to vote in favor of other matters
that come before the special meeting.
15
Revoking Your Proxy. You may revoke your proxy at any time before it is
voted by:
o timely delivery of a valid, later-dated proxy (including a proxy
given by telephone or the Internet);
o written notice to Group 1's secretary before the special meeting
that you have revoked your proxy; or
o voting by ballot in person at the special meeting.
Voting in Person. If you plan to attend the special meeting and wish to
vote in person, we will give you a ballot at the meeting. However, if your
shares are held in the name of your broker, bank or other nominee, you must
bring an account statement or letter from the nominee indicating that you are
the beneficial owner of the shares on [ ] [ ], 2004 , the record date for
voting.
Proxy Solicitation. We will pay our own costs of soliciting proxies. In
addition to this mailing, proxies may be solicited by directors, officers or
employees of Group 1 in person or by telephone or electronic transmission.
Group 1 has hired [ ] to assist it in the distribution and
solicitation of proxies. Group 1 will pay [ ] a fee of approximately
$[ ], plus reasonable expenses for these services.
The extent to which these proxy soliciting efforts will be necessary
depends entirely upon how promptly proxies are submitted. You should send in
your proxy without delay by mail. We also reimburse brokers and other nominees
for their expenses in sending these materials to you and getting your voting
instructions.
Do not send in any stock certificates with your proxy cards. Pitney Bowes
will mail to you transmittal forms with instructions for surrendering your Group
1 stock certificates as soon as practicable after the completion of the merger.
Other Business; Adjournments
Although it is not expected, the special meeting may be adjourned for the
purpose of soliciting additional proxies in favor of voting to approve and adopt
the merger agreement and approve the merger, if necessary. Any adjournment of
the special meeting may be made without notice, other than by an announcement
made at the special meeting, by approval of the holders of a majority of the
outstanding shares of Group 1 common stock present in person or represented by
proxy at the special meeting, whether or not a quorum exists. Group 1 is
soliciting proxies to grant discretionary authority to vote in favor of
adjournment of the special meeting. In particular, discretionary authority is
expected to be exercised if the purpose of the adjournment is to provide
additional time to solicit votes to approve and adopt the merger agreement and
approve the merger. THE BOARD OF DIRECTORS RECOMMENDS THAT GROUP 1 STOCKHOLDERS
VOTE IN FAVOR OF THE PROPOSAL TO GRANT DISCRETIONARY AUTHORITY TO VOTE ON OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING, INCLUDING TO ADJOURN
THE SPECIAL MEETING.
16
THE MERGER
Background of the Merger
Group 1's board of directors and management have periodically considered a
variety of strategic alternatives as part of Group 1's long term strategy to
maximize stockholder value.
On February 14, 2002, Group 1 and Pitney Bowes entered into a distribution
agreement pursuant to which Group 1 granted Pitney Bowes a non-exclusive license
to market, distribute and sublicense Group 1's electronic document - "DOC1"
software products.
In March of 2002, a representative of the Document Messaging Technologies
Division of Pitney Bowes contacted Robert S. Bowen, Group 1's chief executive
officer, to discuss a potential business combination transaction between Group 1
and Pitney Bowes, and on April 3, 2002, Group 1 and Pitney Bowes entered into a
confidentiality agreement to allow the exchange of information between the two
companies and their respective legal and financial advisors.
During the period from October 21, 2002 through November 3, 2002, members
of Pitney Bowes' management team and its legal and financial advisors conducted
a preliminary diligence review of Group 1, primarily at the offices of Group 1's
legal advisors, Cadwalader, Wickersham & Taft LLP ("Cadwalader"). During this
period, Pitney Bowes' legal advisors, Paul, Weiss, Rifkind, Wharton & Garrison
LLP ("Paul Weiss") and Cadwalader exchanged preliminary drafts of a proposed
merger agreement and engaged in telephonic conferences to discuss preliminary
issues concerning a potential merger.
On November 5, 2002, Pitney Bowes informed Group 1 that they were not
prepared to proceed with the potential merger at that time.
On March 26, 2003, Mr. Bowen met with Matthew S. Kissner, executive vice
president--global enterprise solutions of Pitney Bowes, to explore the
possibility of expanding the existing distribution relationship between Group 1
and Pitney Bowes.
On May 22, 2003, Mr. Bowen met with Leslie Abi-Karam, president of the
Document Messaging Technologies Division of Pitney Bowes to discuss expanding
the distribution relationship between Group 1 and Pitney Bowes.
On June 25, 2003, representatives of Group 1, including Mr. Bowen, met with
Patrick Brand, vice president--global product management and marketing of Pitney
Bowes, and Bernie Gracie, vice president of enterprise integrity solutions of
Pitney Bowes, to further discuss expanding the distribution relationship between
Group 1 and Pitney Bowes.
On July 21, 2003, Group 1 and Pitney Bowes entered into a revised
confidentiality agreement to provide for the confidential treatment of
information that was to be exchanged by Pitney Bowes and Group 1 relating to
their consideration of a potential distribution arrangement on a going-forward
basis.
On July 23, 2003, certain members of the executive management team of Group
1, including Messrs. Bowen, Funston, Naden, Slater and Waggoner, met with
certain members of the
17
executive management team of Pitney Bowes, including Ms. Abi-Karam and Messrs.
Brand and Gracie, at Group 1's corporate headquarters in Lanham, Maryland, to
discuss Group 1' products and organizational structure.
On September 5, 2003, Group 1 and Pitney Bowes entered into a distribution
agreement pursuant to which Pitney Bowes granted Group 1's DOC-1 division a
non-exclusive license to market, distribute and sublicense Pitney Bowes'
"Streamweaver" software products.
On September 17, 2003, Ms. Abi-Karam called Mr. Bowen and indicated that
the possibility of acquiring Group 1 had been presented to the board of
directors of Pitney Bowes on a preliminary basis and that the board would likely
consider that possibility further at a board meeting in November of 2003.
On February 12, 2004, David Kleinman, vice president--corporate
development, and Adam Glucksman, Pitney Bowes' executive director of corporate
transactions, discussed with Mr. Bowen and Mr. Funston the possibility of Pitney
Bowes acquiring Group 1 at a preliminary indicative price of $17.50 per share in
cash, subject to a satisfactory diligence review of Group 1. Later that day, the
board of directors of Group 1 held a telephonic meeting at which management
reported that Pitney Bowes had indicated an interest in exploring an acquisition
of Group 1 at a price of $17.50 per share in cash. The Group 1 board of
directors instructed management to advise Pitney Bowes that $17.50 was
inadequate and authorized management to continue to negotiate with Pitney Bowes
if it appeared that Pitney Bowes might consider a higher price.
On February 23, 2004, Messrs. Funston, Kleinman and Glucksman held a
telephonic discussion regarding various methodologies that could be appropriate
to determine a range of equity values for Group 1. Mr. Funston informed Messrs.
Kleinman and Glucksman that, based on a preliminary analysis, he believed an
acceptable range for Group 1 would likely have to be well above Pitney Bowes'
current offer.
On February 27, 2004, Messrs. Kleinman and Glucksman informed Mr. Funston
that Pitney Bowes was prepared to increase their indicative price to up to $20
per share in cash, subject to a satisfactory diligence review of Group 1.
On March 2, 2004, Messrs. Bowen and Funston engaged in a telephone call
with Ms. Abi-Karam and Mr. Kleinman, to discuss, among other things, potential
synergies between the two companies. Mr. Bowen also indicated to Ms. Abi-Karam
and Mr. Kleinman that he would support a price of $23.00 and recommend such a
price to the Group 1 board of directors.
On March 5, 2004 and again on March 9, 2004, Messrs. Kleinman, Glucksman,
Bowen and Funston held telephone calls to discuss certain issues with respect to
a potential transaction, including price, retention of senior management of
Group 1 and timing for completing diligence.
On or about March 5, 2004, Group 1 engaged FBR to act as its financial
advisor in connection with a potential transaction with Pitney Bowes, and the
parties signed a formal engagement letter on March 10, 2004.
On March 10, 2004, Messrs. Kleinman and Glucksman called Messrs. Bowen and
Funston to inform them that Pitney Bowes was prepared to increase their
indicative price to $22.25, subject to a satisfactory diligence review of Group
1. Mr. Bowen indicated that this price would be
18
reported back to the Group 1 board of directors, but that he would not endorse a
price below $23.00.
On March 12, 2004, the board of directors of Group 1 met and discussed,
among other things, the potential transaction with Pitney Bowes. Mr. Bowen, as
well as the other members of the board, indicated that they would consider a
price of $23.00 per share depending on the other terms of the potential
transaction. The board of directors of Group 1 authorized management to proceed
with discussions with Pitney Bowes.
On March 17, 2004, Ms. Abi-Karam informed Mr. Bowen telephonically that
Pitney Bowes' senior executives had reviewed the proposed transaction with Group
1 and confirmed that Pitney Bowes was prepared to pay $23.00 per share, subject
to a satisfactory diligence review of Group 1 and was committed to commencing
diligence immediately with the goal of executing definitive documents by March
31, 2004.
During the period from March 18, 2004 through March 31, 2004, members of
Pitney Bowes' management team, its outside accountants and its legal and
financial advisors conducted a diligence review of Group 1 from an operational,
financial, accounting, tax and legal perspective, at the offices of Cadwalader.
On March 22, 2004, Paul Weiss presented to Group 1 and Cadwalader a draft
merger agreement.
On March 23, 2004, Ms. Abi-Karam informed Mr. Bowen that Pitney Bowes'
board of directors would not be able to consider a proposed transaction with
Group 1 until its regularly scheduled board meeting on April 12, 2004.
On March 25, 2004, Group 1's board of directors met, during which
management reported on the status of the Pitney Bowes transaction, including the
revised timetable for completing a potential transaction. Management also
discussed with the board matters with respect to the retention of Group 1 senior
executives.
On March 26, 2004, Group 1 and FBR met at the offices of Cadwalader with
Goldman Sachs & Co. ("Goldman Sachs"), Pitney Bowes' financial advisor, to
review financial information and forecasts regarding Group 1.
After completion of a substantial portion of their diligence review of
Group 1, on March 31, 2004, Pitney Bowes identified certain issues they wanted
to discuss further with Group 1. Mr. Bowen agreed to meet with Pitney Bowes at
their offices in Connecticut on April 2, 2004.
On April 1, 2004, the Group 1 board of directors met. Mr. Bowen updated the
board on the status of the negotiations with Pitney Bowes. The board then held
discussions regarding the relative benefits of the proposed transaction with
Pitney Bowes and authorized Mr. Bowen to proceed to negotiate a final agreement
with Pitney Bowes as long as the merger consideration remained at $23.00 per
share in cash. The offer of $23.00 per share was conveyed on March 17, 2004 by
Ms. Abi-Karam to Mr. Bowen prior to commencing the diligence investigation of
Group 1.
19
On April 2, 2004, Mr. Bowen met with Ms. Abi-Karam, Mr. Kleinman and other
representatives of Pitney Bowes at their offices. They discussed several of the
issues raised by Pitney Bowes' diligence investigation, as well as the proposed
merger consideration and matters related to Group 1's executives and employees.
During this meeting, Pitney Bowes' representatives confirmed, after substantial
discussion related to a reduction in the proposed price, that they would
recommend to the Pitney Bowes' board the offer conveyed on March 17, 2004 by Ms.
Abi-Karam to Mr. Bowen of $23.00 per share in cash and the parties also resolved
the proposed arrangements concerning Group 1's senior executives with the
combined company.
On April 4, 2004, Cadwalader distributed to Paul Weiss revisions to the
proposed merger agreement.
On April 5, 2004, the Group 1 board of directors met. Mr. Bowen reported on
his meeting with representatives of Pitney Bowes on April 2, 2004 and informed
the board that Pitney Bowes' representatives had agreed to recommend to its
board the offer conveyed on March 17, 2004 by Ms. Abi-Karam to Mr. Bowen of
$23.00 per share.
On April 6, 2004, representatives from Cadwalader and Paul Weiss engaged in
a telephonic conference call to discuss several issues regarding the merger
agreement, including the scope of the representations and warranties, the
restrictive operating covenants, the actions required to be taken by each party
to obtain required approvals, the non-solicitation provision, the break-up fee
and the circumstances under which such fee would be payable and whether the
proposed transaction would be structured as a front-end tender offer or a
merger.
Also on April 6, 2004, representatives from Pitney Bowes, Goldman Sachs,
FBR and Group 1 engaged in a telephonic conference call to discuss additional
financial information regarding Group 1, including its preliminary financial
results for the fiscal year ended March 31, 2004.
On April 9, 2004, Group 1's board of directors met. Representatives from
Cadwalader and Group 1's management updated the board as to the status of Group
1's negotiations with Pitney Bowes and unresolved issues concerning the merger
agreement and FBR discussed its preliminary analysis of the proposed
transaction. Counsel for Group 1 and Pitney Bowes continued to negotiate the
terms of the merger agreement and related documents, including (i) the voting
agreement to be entered into by Mr. Bowen, (ii) employment agreements for
Messrs. Bowen, Naden, Renehan, Slater and Waggoner and (iii) consulting
agreements for Messrs. Bebee, Funston and Weiss. Negotiation of the merger
agreement and the voting agreement continued through the weekend of April 10-11.
At 9:00 a.m. (Eastern daylight savings time) on April 12, 2004, the Group 1
board met to discuss and vote on the proposed merger agreement with Pitney
Bowes. Representatives of Cadwalader reviewed the proposed merger agreement in
detail with the members of the board of directors and discussed the fiduciary
duties of the board of directors in considering a possible business combination.
FBR presented a detailed analysis of the proposed transaction and rendered its
oral opinion, subsequently confirmed in writing, that, as of such date, the
consideration proposed to be paid to Group 1's stockholders in the merger was
fair, from a financial point of view, to such stockholders. After Group 1's
board of directors concluded their deliberations and discussions regarding the
proposed merger, the meeting was adjourned until the closing of the stock
market. At about 4:00 p.m. (Eastern daylight savings time), the meeting
20
reconvened, and Group 1's board of directors, after due deliberations and after
considering the conclusions of its financial advisor and the other factors
described under "Reasons for the Merger" on page __, voted unanimously to
declare the merger advisable, to adopt and approve the merger agreement and to
approve the merger and the other transactions contemplated by the merger
agreement.
The Pitney Bowes board of directors met on April 12, 2004 and, by unanimous
vote of the directors, approved the merger agreement with Group 1.
Following the board meetings on April 12, 2004, Group 1 and Pitney Bowes
finalized, executed and delivered the merger agreement.
Prior to the opening of business on April 13, 2004, Group 1 and Pitney
Bowes issued a joint press release announcing the signing of the merger
agreement.
Reasons for the Merger; Recommendation of the Board of Directors
At its meeting on April 12, 2004, the Group 1 board of directors
unanimously:
o determined that the merger agreement and the merger are advisable
and fair to, and in the best interests of, Group 1 and its
stockholders;
o approved the merger agreement and the transactions contemplated
thereby;
o directed that the merger agreement and the merger be submitted for
consideration by Group 1's stockholders; and
o recommended that stockholders vote FOR approval and adoption of the
merger agreement and approval of the merger.
In the course of reaching its decision to approve the merger agreement, the
board of directors of Group 1 consulted with Group 1's management, as well as
its legal counsel and financial advisors, and considered the following positive
factors:
o the consideration represents a premium of approximately 36% over
Group 1's closing stock price on April 8, 2004, the last trading day
before execution of the merger agreement;
o the fact that Group 1's employees continuing with the combined
company would be afforded the resources and stability associated
with a large, established company such as Pitney Bowes;
o the negotiations which took place between Group 1 and Pitney Bowes
with respect to the merger consideration and the belief by the board
that the merger consideration was the highest price that Pitney
Bowes would agree to pay;
o the analyses, presentations and opinion of FBR to the effect that,
as of the date of the opinion and subject to the matters set out in
its opinion, $23.00 per share of common stock in cash, without
interest, to be received by Group 1 stockholders
21
pursuant to the merger agreement was fair, from a financial point of
view, to Group 1's stockholders;
o the consideration for the merger is all cash, which provides
certainty of value to Group 1's stockholders compared with a
transaction in which they would receive stock or other non-cash
consideration;
o the fact that Pitney Bowes' obligations under the merger agreement
are not conditioned on its obtaining financing;
o the terms of the merger agreement, which provide the board with the
ability, should Group 1 receive a superior third party proposal, to
furnish information to and conduct negotiations with a third party
and, subject to certain requirements, including the payment of a
termination fee, enter into an agreement relating thereto;
o the board's view that the amount of the termination fee and the
circumstances under which such fee would be payable to Pitney Bowes
pursuant to the merger agreement, are reasonable in that the amount
of the termination fee would not be likely to deter potentially
interested third parties from pursuing a business combination
transaction with Group 1;
o the availability of appraisal rights under the DGCL to stockholders
who dissent from the merger, which provides stockholders who dispute
the adequacy of the merger consideration with an opportunity to have
a court determine the fair value of their shares; and
o the likelihood that regulatory approval would be obtained and the
proposed transaction would be consummated, in light of the fact that
there are no unusual requirements or conditions to the merger and
that Pitney Bowes has the financial resources (through available
cash and existing credit facilities) to consummate the merger
expeditiously.
In addition, the board of directors of Group 1 consulted with Group 1's
management, as well as its legal counsel and financial advisors in order to
identify and consider a number of potentially adverse factors in its
deliberations concerning the proposed transaction, including the following:
o the risk that the transaction might not be consummated;
o in the event that the transaction is not consummated, the possible
negative effects on Group 1's customers, vendors, employees and
stock price;
o the possibility that Group 1 would be substantially more profitable
than expected or that another acquiror would be willing to pay a
higher price sometime in the future;
22
o the public announcement of the transaction may have a significant
negative effect on the continuing commitment of the Group 1's
management, employees and customers pending completion of the
merger;
o the sale of Group 1 for cash in a merger transaction will generally
be a taxable event to Group 1 stockholders; and
o because Group 1's stockholders are receiving cash in exchange for
their shares of common stock, they will not participate as
stockholders in any potential future growth of either Group 1 or
Pitney Bowes.
The board's decision was based on their determination that the benefits of
the merger outweighed its potential negatives. This description of the
information and factors considered by the board is not intended to be
exhaustive, but is believed to include all material factors that the board
considered. In view of the variety of factors and the amount of information
considered, Group 1's board of directors did not find it practicable to and did
not quantify, rank or otherwise assign relative weights to the specific factors
it considered in reaching its decision. The determination was made after
consideration of all of the factors as a whole. In addition, individual members
of Group 1's board of directors may have given different weight to different
factors.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE MERGER AND BELIEVES THAT THE TERMS OF THE MERGER ARE ADVISABLE AND FAIR TO,
AND IN THE BEST INTERESTS OF, GROUP 1 AND ITS STOCKHOLDERS. YOUR BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AND APPROVAL OF THE MERGER.
Opinion of Group 1's Financial Advisor
Pursuant to an engagement letter dated March 19, 2003, as amended March 10,
2004, Group 1 retained FBR as its financial advisor in connection with the
proposed merger.
At the meeting of the board of directors of Group 1 on April 12, 2004, FBR
rendered its oral opinion to the board of directors of Group 1, subsequently
confirmed in writing, that, as of such date and based upon and subject to the
various considerations set forth in the opinion, the consideration to be paid to
Group 1's stockholders in the proposed merger was fair, from a financial point
of view, to such stockholders. No limitations or other instructions were imposed
by Group 1's board of directors upon FBR with respect to the investigations made
or procedures followed by it in rendering its opinion.
The full text of the written opinion of FBR dated April 12, 2004, which
sets forth the assumptions made, procedures followed, matters considered and
limits on the scope of the review undertaken by FBR, is attached as Annex B to
this Proxy Statement and is incorporated herein by reference. Group 1's
stockholders are urged to read the opinion in its entirety. FBR's written
opinion, which is addressed to the board of directors of Group 1, is directed
only to the fairness of the $23.00 per share of common stock in cash to be
received by Group 1 stockholders pursuant to the merger agreement, from a
financial point of view of such stockholders, as of the date of the opinion. It
does not address any other aspect of the proposed merger, nor does it
23
constitute a recommendation to any stockholder of Group 1 as to how such
stockholder should vote at the special meeting of Group 1's stockholders. The
summary of the opinion of FBR set forth in this Proxy Statement is qualified in
its entirety by reference to the full text of such opinion.
In arriving at its opinion, FBR, among other things:
o reviewed drafts of the merger agreement and the financial terms and
conditions set forth therein;
o reviewed Group 1's annual and quarterly disclosure filings and
current reports filed under the Securities Exchange Act of 1934 for
periods ranging from January 1, 2003 to the date of the opinion;
o reviewed Pitney Bowes' annual and quarterly disclosure filings and
current reports filed under the Securities Exchange Act of 1934 for
periods ranging from January 1, 2003 to the date of the opinion;
o reviewed certain other publicly available business and financial
information of Group 1 and Pitney Bowes;
o reviewed certain internal financial statements and other financial
and operating data of Group 1 prepared by Group 1's management team;
o reviewed certain publicly available estimates of research analysts
regarding Group 1 and Pitney Bowes;
o held discussions with the senior management team, advisors and legal
counsel of Group 1 regarding the proposed merger as well as the
business, past and current operations, financial condition and
future prospects of Group 1;
o compared the financial performance of Group 1 with that of certain
other comparable companies with publicly traded securities;
o compared the financial terms of the proposed merger with the
financial terms, to the extent publicly available, of other relevant
announced and completed transactions;
o compared the per share premiums paid for publicly-traded companies
to the per share premium represented by the proposed merger
consideration offered to Group 1's stockholders;
o prepared a discounted cash flow analysis of Group 1;
o reviewed general industry information for the software and
technology industries in which Group 1 operates;
o participated as an advisor in discussions among representatives of
Group 1 and their advisors or consultants during negotiations with
Pitney Bowes;
24
o held discussions with the management of Group 1 regarding the
business lines, customers and operations of Group 1; and
o made such other studies and inquires, and reviewed such other data,
as FBR deemed relevant.
FBR assumed and relied, without independent verification, upon the accuracy
and completeness of all information reviewed by it for the purposes of its
opinion. With respect to the financial projections, FBR has assumed that such
projections were prepared in good faith on reasonable bases reflecting the best
estimates and judgments of Group 1's future financial performance by Group 1's
management, and that the historical and projected financial information prepared
by Group 1 accurately reflected the historical and projected operations of Group
1. FBR did not make any independent evaluation or appraisal of the assets or
liabilities of Group 1, nor was it furnished with any such evaluation or
appraisal. FBR also did not make an independent evaluation or appraisal of Group
1 and Pitney Bowes, and accordingly expressed no opinion as to the future
prospects, plans, valuation or viability of Group 1 and Pitney Bowes after
completion of the proposed merger. The opinion provided by FBR is based on
market, economic, financial and other circumstances and conditions as they
existed and were evaluated as of the date of the opinion.
The following represents a brief summary of the material financial analyses
performed by FBR in connection with providing its opinion to the Group 1 board
of directors. The value in cash of the consideration offered by Pitney Bowes to
common stockholders of Group 1 is $23.00 per share of Group 1 common stock.
Using data provided by Group 1 pertaining to common stock, treasury stock, and
common stock options, the total equity value of the proposed merger was
determined to be $382.8 million (using the treasury stock method). Based on
guidance from Group 1 concerning cash, cash equivalent, and debt balances, the
implied enterprise value of the proposed merger was determined to be $323.8
million. Enterprise value is calculated as equity value less cash and cash
equivalents plus debt. Some of the summaries of financial analyses performed by
FBR include information presented in tabular format. In order to fully
understand the financial analyses performed by FBR, the tables should be read
together with the text of each summary. The tables alone do not constitute a
complete description of the financial analyses.
Comparable Company Analysis
In performing a comparable company analysis, FBR examined public companies
it considered to have characteristics reasonably similar to Group 1, either in
terms of the industry group, business model and/or financial and operational
characteristics. While no company was identified as having exactly the same
risks, financial and operating characteristics, relevant markets, customer bases
and demographics and other comparable factors as Group 1, companies with similar
business characteristics, including the type of services offered, service lines,
markets, distribution channels, customer bases, growth prospects or operating
strategies were identified. The comparable companies FBR analyzed included:
Ascential Software Corporation
Business Objects SA
Cognos, Inc.
Docucorp International, Inc.
25
FileNet Corporation
Hummingbird Ltd.
Informatica Corporation
Interwoven, Inc.
Open Text Corporation
Stellent, Inc.
Vignette Corporation
In performing its analysis, FBR made certain judgments and assumptions,
many of which are beyond the control of Group 1 and Pitney Bowes, such as the
impact of competition on Group 1 or the industry generally, industry growth, and
the absence of any material adverse change in the financial condition and
prospects of Group 1, the industry or the financial markets in general.
All the projected financial information for Group 1 used in the comparable
company analysis was based on projections provided by Group 1. All the projected
financial data for the comparable companies used in the comparable company
analysis were obtained from public filings, news articles, published Wall Street
research analysts' reports and forecasts and other publicly available third
party sources.
Because no company was identical to Group 1, complex considerations,
decisions and judgments were made concerning differences in the financial and
operating characteristics of the comparable company group. As a result FBR felt
that no one analytical method would be a sufficient basis upon which to
determine the fairness of the consideration. Accordingly, FBR used the following
multiple analytical methods to reach its fairness determination.
Enterprise Value to Revenue Analysis
The following table sets forth the implied range of equity values indicated
by this analysis:
FY2004 FY2005
Comparable Company Median Multiple 2.6 x to 2.4 x
Implied Enterprise Value (millions) $301.5 to $353.6
Implied Equity Value (millions) $360.5 to $412.6
FBR observed that the total equity value of $382.8 million being paid for
Group 1 fell within the range obtained from the comparable group, and that, in
general, the comparable companies had lower projected revenue growth rates than
Group 1.
Enterprise Value to EBITDA Analysis
FBR adjusted the estimated EBITDA for Group 1 by treating capitalized
software costs as a component of research and development expense. This
adjustment was made to Group 1's EBITDA because a significant majority of the
comparable companies did not capitalize software costs. The following table sets
forth the implied range of equity values indicated by this analysis:
FY2004 FY2005
Comparable Company Median Multiple 25.6 x to 16.4 x
Implied Enterprise Value (millions) $441.0 to $386.8
Implied Equity Value (millions) $500.0 to $445.8
26
FBR noted that the total equity value of $382.8 million being paid for
Group 1 fell below the range obtained from the comparable group, and that, in
general, the comparable companies had higher projected EBITDA growth rates than
Group 1.
Equity Value to Net Income Analysis
The following table sets forth the implied range of equity values indicated
by this analysis:
FY2004 FY2005
Comparable Company Median Multiple 33.4 x to 35.7 x
Implied Equity Value (millions) $303.0 to $432.2
FBR observed that the total equity value of $382.8 million being paid for
Group 1 fell within the range obtained from the comparable group, and that, in
general, the comparable companies had projected net income growth rates that
were slightly lower than Group 1.
Comparable Transactions Analysis
Using publicly available information, FBR reviewed the terms of certain
announced, pending or completed merger and acquisition transactions and compared
relevant operating and valuation metrics for these transactions to similar
operating and valuation metrics of Group 1.
In performing its analysis, FBR selected transactions that (i) involved
target businesses in the software industry, (ii) were announced or completed
since January 1, 2003 and (iii) had total consideration of greater than $50.0
million at the time of the announcement. In each case, FBR used estimates based
on public filings, news articles, published Wall Street research analysts'
reports and forecasts and other publicly available third party sources.
- -------------------------------------------------------------------------------------------------------
Announcement Date Name of Acquirer Name of Target
- -------------------------------------------------------------------------------------------------------
January 12, 2004 Stellent Optika
- -------------------------------------------------------------------------------------------------------
October 21, 2003 Open Text IXOS Software
- -------------------------------------------------------------------------------------------------------
January 22, 2004 Vignette Tower Technology
- -------------------------------------------------------------------------------------------------------
October 14, 2003 EMC Documentum
- -------------------------------------------------------------------------------------------------------
August 11, 2003 Pervasive Software Data Junction
- -------------------------------------------------------------------------------------------------------
August 6, 2003 Interwoven iManage
- -------------------------------------------------------------------------------------------------------
July 16, 2003 Sage Group Timberline Software
- -------------------------------------------------------------------------------------------------------
June 2, 2003 PeopleSoft JD Edwards
- -------------------------------------------------------------------------------------------------------
December 6, 2002 IBM Rational Software
- -------------------------------------------------------------------------------------------------------
For each acquired entity, FBR analyzed the total consideration relative to
both the trailing and forward twelve months revenues as of the announcement
date. The following table sets forth the implied range of equity values
indicated by this analysis:
TTM FTM
Comparable Transactions Median Multiple 2.6 x to 1.6 x
Implied Enterprise Value (millions) $290.7 to $225.2
Implied Equity Value (millions) $349.7 to $284.2
FBR observed that the total equity value of $382.8 million being paid for
Group 1 fell above the range based on the comparable group. FBR noted that the
comparable transaction analysis was just one of several analyses used by FBR to
reach its fairness determination. No company,
27
business or transaction utilized in the comparable transaction analysis is
identical to Group 1 or the Merger. Accordingly, an analysis of the foregoing
involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
acquisition, public trading and other values of comparable companies, precedent
transactions or the business segment, company or transactions to which they are
being compared.
Premiums Analysis
Using publicly available information, FBR reviewed the premiums paid by the
acquirer relative to the one-trading day, five-trading day, and thirty-trading
day stock prices prior to the announcement dates. In performing its analysis,
FBR selected transactions that (i) involved only the purchase of all of the
outstanding stock of a public company, (ii) were announced or completed since
January 1, 1999, (iii) had a target entity with a deal value or base equity
price of greater than $50.0 million and (iv) involved a target entity in the
software industry. The following table sets forth the implied range of equity
values indicated by this analysis:
Trading Days Prior to Announcement
----------------------------------------
One Five Thirty
--- ---- ------
Median Premium Paid 28% 35% 47%
Implied Group 1 Per Share Price $21.59 $22.94 $21.68
Implied Equity Value (millions) $357.6 $381.6 $359.2
FBR observed that the total equity value of $382.8 million being paid for
Group 1 fell above the range based on the comparable group. FBR noted that, for
reasons previously stated above, premium analysis was just one of several
analyses used by FBR to reach its fairness determination.
Discounted Cash Flow Analysis
FBR performed a discounted cash flow analysis for Group 1 in which it
calculated the present value of the projected future free cash flows of Group 1
based on the financial projections provided by Group 1. FBR estimated a range of
theoretical values for Group 1 based on the sum of the net present value of the
Group 1's implied annual cash flows plus a terminal value for Group 1 in 2009,
which was calculated based on a multiple of free cash flow. FBR applied a range
of discount rates from 15.5% to 19.5% and a range of terminal value multiples
from 7.0x to 9.0x of forecasted fiscal 2009 free cash flow. This analysis
resulted in implied equity values ranging from $255.7 million to $323.0 million.
FBR observed that the total equity value of $382.8 million being paid for
Group 1 fell above the range based on the comparable group. FBR noted that, for
reasons previously stated above, discounted cash flow analysis was just one of
several analyses used by FBR to reach its fairness determination.
Other Considerations
The preparation of a fairness opinion is a complex process that involves
the application of subjective business judgment in determining the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, is not necessarily
susceptible to partial consideration of the analyses or summary
28
description. FBR believes that its analyses must be considered as a whole and
that selecting certain portions of the analyses and of the factors considered,
without keeping them in the proper context of full information, would create an
incomplete or misleading view of the processes underlying its opinion.
In view of the wide variety of factors considered in connection with its
evaluation of the fairness of the total consideration to be paid, from a
financial point of view, FBR did not find it practicable to assign relative
weights to the factors considered in reaching its opinion. No single company or
transaction used in the above analyses as a comparison was identical to Group 1
nor was any transaction identical to the proposed merger. The analyses were
prepared solely to provide information upon which FBR could render an opinion as
to whether or not the total consideration to be paid, from a financial point of
view, to stockholders of Group 1 was fair. The analyses performed by FBR are not
intended to be appraisals or to reflect the prices at which businesses or
securities actually may be sold in different circumstances.
In connection with its analyses, FBR made, based on information provided by
Group 1's management, numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond Group 1's or Pitney Bowes' control. Analyses based upon forecasts of
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by these analyses.
Because these analyses are inherently subject to uncertainty, and are based upon
numerous factors or events beyond the control of Group 1, Pitney Bowes, or their
advisors, none of Group 1, Pitney Bowes, FBR, or any other person assumes
responsibility if future results or actual values are materially different from
these forecasts or assumptions.
The consideration payable in the proposed merger was determined through
negotiation between Group 1 and Pitney Bowes and the decision to enter into the
merger agreement was solely that of Group 1's board of directors. FBR provided
advice to Group 1 during these negotiations, but did not recommend any specific
amount of consideration to Group 1. FBR also did not recommend that any specific
amount of consideration constituted the only appropriate amount of consideration
for the merger.
FBR is a nationally recognized investment banking firm and, as part of its
investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted securities, private placements and valuations for corporate and
other purposes. FBR was selected because of its expertise, reputation and
familiarity with the software industry, and because its investment banking
professionals have substantial experience in transactions comparable to this
transaction.
As compensation for its services in connection with the merger, we have
agreed to pay FBR a success fee based on the value, at closing, of the
consideration paid by Pitney Bowes. In addition, FBR received a fee from Group 1
for rendering its fairness opinion, which amount will be credited toward payment
of the success fee. In addition, we have agreed to reimburse FBR for reasonable
out-of-pocket expenses incurred in connection with its engagement and to
indemnify FBR for certain liabilities that may arise out of its engagement by us
and the rendering of the FBR opinion.
29
In the ordinary course of its business, FBR may actively trade in the
securities of Group 1 and Pitney Bowes for its own account and for the accounts
of its customers and, accordingly, may at any time hold a long or short position
in such securities.
Material Federal Income Tax Consequences of the Merger
The following general discussion summarizes the material United States
federal income tax consequences of the merger to Group 1 stockholders that hold
their Group 1 common stock as a capital asset. It does not address all aspects
of federal income taxation that may be relevant to a holder of Group 1 common
stock in light of that stockholder's particular circumstances or to a
stockholder subject to special rules, such as:
o a stockholder that is not a citizen or resident of the United States
and other foreign persons;
o a financial institution or insurance company;
o a mutual fund;
o a tax-exempt organization;
o a dealer or broker in securities or foreign currencies;
o a trader in securities that elects to apply a mark-to-market method
of accounting;
o a stockholder that holds its Group 1 common stock as part of a
hedge, appreciated financial position, straddle or conversion
transaction; or
o a stockholder that acquired its Group 1 common stock pursuant to the
exercise of options or otherwise as compensation.
The tax treatment of a partner in a partnership that holds Group 1 common
stock will generally depend on the status of the partner and the activities of
the partnership. A partner in a partnership that holds Group 1 common stock
should consult his, her or its tax advisor regarding the particular tax
consequences to the partner.
The following discussion is based on the Internal Revenue Code of 1986, as
amended, final, temporary and proposed Treasury regulations promulgated
thereunder, judicial decisions and administrative rulings, each as in effect as
of the date hereof and all of which are subject to change, possibly with
retroactive effect which may adversely affect the accuracy of the statements and
conclusions described in this document. The consequences under state, local,
foreign and estate and gift taxation laws are not addressed. STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE MERGER.
Group 1 stockholders' receipt of cash pursuant to the merger (including
pursuant to the exercise of dissenter's rights of appraisal) will be a taxable
transaction for United States Federal income tax purposes. A Group 1 stockholder
will generally recognize taxable gain or loss for United States Federal income
tax purposes equal to the difference between the amount of cash
30
received by the stockholder and the stockholder's aggregate adjusted tax basis
in its Group 1 common stock converted into cash in the merger. Gain or loss will
be calculated separately for each block of Group 1 common stock.
Gain or loss recognized by a Group 1 stockholder will be capital gain or
loss, and will be long-term capital gain or loss if the stockholder's holding
period for its shares of Group 1 common stock exceeds one year. In general,
noncorporate stockholders will be eligible for a reduced United States Federal
income tax rate on long-term capital gains. Stockholders will also be subject to
limits on the deductibility of any capital losses.
Certain holders of Group 1 common stock may be subject to backup
withholding. Backup withholding generally applies if the holder (i) fails to
furnish its social security number or other taxpayer identification number
("TIN"), (ii) furnishes an incorrect TIN, (iii) fails properly to report
interest or dividends or (iv) under certain circumstances, fails to provide a
certified statement, signed under penalty of perjury, that the TIN provided is
correct and that the holder is not subject to backup withholding. Backup
withholding is not an additional tax but merely an advance payment of tax, which
may be refunded to the extent it results in an overpayment of tax. Certain
persons are exempt from backup withholding, including, in certain circumstances,
corporations and financial institutions.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER IN LIGHT OF HIS, HER
OR ITS PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. TAX MATTERS ARE
COMPLEX AND MAY VARY DEPENDING ON YOUR PARTICULAR CIRCUMSTANCES. THEREFORE, WE
STRONGLY URGE YOU TO CONSULT YOUR OWN TAX ADVISORS CONCERNING THE PARTICULAR TAX
CONSEQUENCES TO YOU OF THIS MERGER, INCLUDING THE APPLICATION OF ANY FEDERAL,
STATE, LOCAL AND FOREIGN TAX LAWS.
Regulatory Matters Relating to the Merger
The proposed transaction is subject to the requirements of the HSR Act,
which prevents certain transactions from being completed until required
information and materials are furnished to the Antitrust Division of the
Department of Justice and the Federal Trade Commission and the appropriate
waiting periods expire or are terminated. We filed the required information and
materials with the Department of Justice and the Federal Trade Commission on
April 26, 2004. On May 5, 2004, we received notice from the Federal Trade
Commission that we received early termination of the waiting period under the
HSR Act. The requirements of Hart-Scott-Rodino will be satisfied if the merger
is completed within one year from the termination of the waiting period.
The Antitrust Division of the Department of Justice or the Federal Trade
Commission may challenge the merger on antitrust grounds either before or after
expiration of the waiting period. Accordingly, at any time before or after the
completion of the merger, either the Antitrust Division of the Department of
Justice or the Federal Trade Commission could take action under the antitrust
laws. Certain other persons could take action under the antitrust laws,
including seeking to enjoin the merger. Additionally, at any time before or
after the completion of the
31
merger, notwithstanding that the applicable waiting period was terminated, any
state could take action under the antitrust laws. A challenge to the merger
could be made and if a challenge is made there is no assurance that we would
prevail.
The proposed transaction is also subject to the German Act against
Restraints of Competition, which requires certain transactions to be notified to
the Federal Cartel Office of the Federal Republic of Germany (the "Federal
Cartel Office"). A transaction which is subject to notification to the Federal
Cartel Office may be completed only after the Federal Cartel Office has granted
clearance of the transaction or if the Federal Cartel Office fails to inform the
notifying party within one month of receiving a complete notification
documentation that it intends to initiate formal merger control proceedings. In
the event that such proceedings are initiated, the transaction may be completed
upon clearance or if the Federal Cartel Office fails to prohibit the transaction
within four months after initiation of such proceedings. We filed the required
information for notifying the Federal Cartel Office of the transaction on May 3,
2004.
After initiation of formal merger control proceedings, the Federal Cartel
Office must prohibit the merger if it leads to the creation or strengthening of
a dominant position on any of the affected markets. The Federal Cartel Office
may also grant clearance only subject to certain conditions which the notifying
party would be obliged to comply with. Legal action may be taken against the
decision to prohibit the transaction or against conditions to which the decision
to clear the merger was subjected, but there is no assurance that an
unconditional clearance could then be obtained. Alternatively, an exemption by
the Federal Secretary of the Economy of Germany may be applied for, but there is
no assurance that such exemption would be granted.
Third parties whose interests would be affected by the decision to grant
clearance of the merger may apply to the Federal Cartel Office to be admitted to
the procedures as parties. Such parties may challenge the merger during the
merger control proceedings or take legal action against the decision to clear
the merger within one month of the delivery of such decision. If the decision to
clear the merger is challenged there is no assurance that we would prevail.
The Federal Cartel Office may repeal its decision to clear the merger on
the grounds that it was based on wrongful information supplied by the notifying
parties or on the grounds of non-compliance with conditions to which the Federal
Cartel Office subjected its decision. The repeal of the decision to clear the
merger would trigger the obligation to divest the merged businesses. Legal
action may be taken against the repeal of the decision to clear the merger or an
exemption by the Federal Secretary of the Economy of Germany may be applied for,
but there is no assurance that clearance could then be obtained.
Under the Brazilian Competition laws, the merger agreement must be
submitted to the Administrative Economic Protection Council ("CADE") for review.
We filed the required information and materials on May 4, 2004. It is believed
that clearance by CADE of the transactions contemplated by the merger agreement
is not required to be obtained prior to closing of the merger. Under Law No.
8.8884/94, CADE's approval is retroactive to the date of the execution of the
merger agreement.
We are not aware of any other material governmental or regulatory approval
required for completion of the merger, other than compliance with the applicable
corporate law of Delaware.
32
Appraisal Rights of Stockholders
If the merger is consummated, stockholders who do not vote "FOR" the
adoption of the merger agreement, who hold shares of common stock of record on
the date of making a written demand for appraisal as described below, who
continuously hold shares of common stock through the closing of the merger, and
who otherwise comply fully with Section 262 of the DGCL ("Section 262"), will be
entitled to a judicial determination of the fair value of their shares of common
stock exclusive of any element of value arising from the accomplishment of the
merger in accordance with the provisions of Section 262 and to receive from us
payment of such fair value in cash together with a fair rate of interest, if
any, as determined by such court. This amount may be more than, equal to or less
than $23.00 per share of Group 1 common stock. A proxy returned to us that does
not contain voting instructions will, unless revoked, be voted in favor of the
merger agreement. Therefore, a stockholder who votes by proxy and who wishes to
exercise appraisal rights must vote against the merger agreement or abstain from
voting on the merger agreement.
Under Section 262, not less than 20 calendar days prior to the special
meeting, we must notify each of the holders of Group 1 stock who was a
stockholder on the record date for the special meeting that such appraisal
rights are available and include in each such notice, a copy of Section 262.
This proxy statement constitutes such notice to the holders of record of Group 1
common stock and we attach the applicable statutory provisions to this proxy
statement as Annex D.
The following is a summary of the procedures to be followed under Section
262, the full text of which is attached as Annex D to this proxy statement. The
following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to Annex D.
Stockholders should read carefully the full text of Section 262 because failure
to follow any Section 262 procedure may result in the loss of appraisal rights.
Any stockholder who desires to exercise appraisal rights should carefully review
Section 262 before electing or attempting to exercise appraisal rights.
Holders of record of shares of Group 1 common stock who desire to exercise
appraisal rights must not vote in favor of the merger or consent to the merger
in writing (including by returning a signed proxy card without indicating any
voting instructions as to the proposal) and must deliver a separate written
demand for appraisal of such shares to us prior to the taking of the vote on the
merger agreement. A holder of shares of Group 1 common stock wishing to exercise
appraisal rights must hold of record such shares on the date the written demand
for appraisal is made and must continue to hold such shares of record through
the effective time of the merger. The demand for appraisal will be sufficient if
it reasonably informs us of the identity of the stockholder and that the
stockholder intends to demand an appraisal of the fair value of shares of Group
1 common stock.
If the shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, the demand must be executed by or for the record
owner, and if the shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand must be made by or for all owners
of record. An authorized agent, including an agent for two or more joint owners,
may execute the demand for appraisal for a holder of record provided the agent
33
identifies the record owner or owners and expressly discloses in such demand
that the agent is acting as agent for the record owner or owners of such shares.
A record holder, such as a broker, who holds shares of common stock as a
nominee for beneficial owners, some or all of whom desire to demand appraisal,
must exercise appraisal rights on behalf of such beneficial owners with respect
to the shares held for such beneficial owners. In such case, the written demand
for appraisal should set forth the number of shares covered by such demand.
Unless a demand for appraisal specifies a number of shares, the demand will be
presumed to be applicable to all shares outstanding in the name of such record
owner. If a stockholder holds shares of common stock through a broker which in
turn holds the shares through a central securities depository nominee such as
Cede & Co., a demand for appraisal of such shares must be made by or on behalf
of the depository nominee and must identify the depository nominee as record
holder. BENEFICIAL OWNERS WHO ARE NOT RECORD OWNERS AND WHO INTEND TO EXERCISE
APPRAISAL RIGHTS SHOULD INSTRUCT THE RECORD OWNER TO COMPLY STRICTLY WITH THE
STATUTORY REQUIREMENTS WITH RESPECT TO THE DELIVERY OF WRITTEN DEMAND FOR
APPRAISAL. A DEMAND FOR APPRAISAL SUBMITTED BY A BENEFICIAL OWNER WHO IS NOT THE
RECORD OWNER WILL NOT BE HONORED.
A proxy or vote against the adoption of the merger agreement will not
constitute a demand for appraisal. Stockholders should not expect to receive any
additional notice with respect to the deadline for demanding appraisal rights.
Any holder of record of common stock must deliver the written demand for
appraisal prior to the taking of the vote on the merger agreement. All demands
for appraisal should be addressed to Group 1 Software, 4200 Parliament Place,
Suite 600, Lanham, MD, 20706-1844, Attention: Edward Weiss, Secretary.
If the merger agreement is adopted, then within 10 days after the effective
date of the merger, the surviving corporation will provide notice of the
effective date of the merger to all stockholders who have complied with Section
262 and who have not voted in favor of or consented to the merger. In addition,
the surviving corporation will notify these stockholders that they have 120 days
from the effective date of the merger to exercise their appraisal rights.
A stockholder may withdraw a demand for appraisal in writing within 60 days
after the effective time of the merger and accept the terms of the merger.
Thereafter, approval of the surviving corporation will be needed for such a
withdrawal. In all events, if a petition for appraisal has been filed in the
Delaware Court of Chancery, a stockholder may not withdraw without the approval
of the Court.
Within 120 days after the effective date of the merger, in compliance with
Section 262, any stockholder who has properly demanded an appraisal and who has
not withdrawn his or her demand as provided above and the surviving corporation
each has the right to file in the Delaware Court of Chancery a petition, with a
copy served on the surviving corporation in the case of a petition filed by a
dissenting stockholder, demanding a determination of the fair value of the
shares held by all dissenting stockholders. If, within the 120-day period
following the effective time of the merger, no petition has been filed as
provided above, all rights to appraisal will cease and all dissenting
stockholders who owned shares of common stock will become
34
entitled to receive the merger consideration for each share of Group 1 common
stock held, without interest.
Any dissenting stockholder is entitled, within the 120-day period following
the effective time of the merger and upon written request to the surviving
corporation, to receive from the surviving corporation a statement setting
forth:
o the aggregate number of shares of Group 1 common stock not voted in
favor of the merger and with respect to which demands for appraisal
have been received, and
o the aggregate number of dissenting stockholders.
Such statement must be mailed within ten days after a written request for
such statement has been received by the surviving corporation, or within ten
days after the expiration of the period for delivery of demands for appraisal,
as described above, whichever is later.
Upon the filing of a petition, the Delaware Court of Chancery is empowered
to determine which dissenting stockholders have complied with the provisions of
Section 262 and are entitled to an appraisal of their shares. The Delaware Court
of Chancery may require that dissenting stockholders submit their share
certificates for notation thereon of the pendency of the appraisal proceedings
and the Delaware court may dismiss the proceedings as to any dissenting
stockholder who does not comply with such requirement.
After determining the stockholders entitled to appraisal, the Delaware
Court of Chancery will appraise shares of Group 1 common stock owned by the
dissenting stockholders, determining the fair value of such shares exclusive of
any element of value arising from the accomplishment or expectation of the
merger.
Stockholders considering seeking appraisal should consider that the fair
value of their shares determined by the Delaware Court of Chancery under Section
262 could be more than, equal to or less than, the $23.00 per share of Group 1
common stock in cash payable pursuant to the merger agreement.
The Delaware court may also:
o determine a fair rate of interest, if any, to be paid to dissenting
stockholders in addition to the fair value of the shares;
o determine the costs of the proceeding and assess such costs against
the parties as the Delaware Court of Chancery deems equitable
(however, costs do not include attorneys' and expert witnesses'
fees); and
o upon application of a dissenting stockholder, order all or a portion
of the expenses incurred by any dissenting stockholder in connection
with the appraisal proceeding, including, without limitation,
reasonable attorneys' fees and fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal.
35
No appraisal proceedings in the Delaware Court of Chancery will be
dismissed as to any dissenting stockholder without the approval of the Delaware
court, and this approval may be conditioned upon terms which the Delaware court
deems just.
Failure to take any required step in connection with appraisal rights may
result in the loss of such rights. Any stockholder who loses such rights will
only be entitled to receive the consideration offered in the merger without
interest.
36
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of Group 1's board of directors with
respect to the merger, stockholders should be aware that certain officers and
directors of Group 1 have interests in the merger that may be different from, or
in addition to, the interests of stockholders of Group 1. The board of directors
of Group 1 was aware of these interests and considered them, among other
matters, in making their recommendation.
Employment, Severance and Consulting Agreements with Executive Officers
Existing Employment Agreement of Mr. Bowen. Group 1 and Mr. Bowen, as chief
executive officer of Group 1, are party to an amended and restated employment
agreement, dated as of April 1, 2003 (the "Existing Agreement"). The Existing
Agreement provides, among other things, that, following a "change in control"
(as defined in the Existing Agreement), if Mr. Bowen's employment is terminated
by Group 1 without "cause" or by Mr. Bowen with "good reason," Group 1 is
obligated to provide Mr. Bowen with the following:
o payment equal to 2 times the sum of (i) highest annual rate of
salary in effect during twelve-month period prior to termination and
(ii) target annual bonus for the then-current fiscal year, which
will equal the amount Mr. Bowen would have earned under his bonus
formula if Group 1 had attained its earnings projections for such
fiscal year, or such greater amount as approved by the Group 1 board
of directors prior to such fiscal year;
o payment of pro-rated incentive compensation (including the annual
bonus) for year of termination and of all accumulated, but unpaid
deferred bonus amounts;
o continuation of welfare benefits for 2 years following his
termination of employment;
o 2 years of out-placement expenses with a value of up to 20% of Mr.
Bowen's base salary;
o vesting of unvested 401(k) benefits or payment for forfeited
benefits, and vesting of unvested stock options; and
o a gross-up for any excise tax incurred in connection with the change
in control such that Mr. Bowen is placed in same after-tax position
as if no excise taxes has been imposed.
Mr. Bowen has the right to terminate employment following the one-year
anniversary of a change in control and receive the foregoing severance. The
Existing Agreement provides that Mr. Bowen is subject to a 2-year
non-competition covenant upon termination of employment for any reason.
New Employment Agreement of Mr. Bowen. In connection with the execution of
the merger agreement, Mr. Bowen entered into an employment agreement dated as of
April 12, 2004 with Group 1, which will become effective upon the completion of
the merger (the "New
37
Agreement") and supersede the Existing Agreement. On April 12, 2004, Mr. Bowen
also entered into an amendment to the Existing Agreement and a Change in Control
Agreement, both of which became effective as of April 12, 2004. The amendment
eliminates Mr. Bowen's severance entitlement under the Existing Agreement, and
in lieu thereof, the Change in Control Agreement provides for a lump sum payment
of $2,476,178 upon the earlier of (i) the second anniversary of a change in
control or (ii) the termination of Mr. Bowen's employment for any reason
following a change in control.
The New Agreement provides for compensation and benefits that are
substantially similar to those under the Existing Agreement, including a gross
up for excise taxes. However, the New Agreement does not provide for a severance
payment. Unlike the Existing Agreement, the New Agreement provides for a
guaranteed minimum incentive bonus of $500,000. In addition, under the New
Agreement, Mr. Bowen agrees to waive 50% of the cash out value with respect to
the unvested Group 1 stock options held by him at the effective time of the
merger. This amount will be paid, subject to Mr. Bowen's continuing employment,
as a "retention bonus" in two equal payments on each of the first two
anniversaries of the effective time of the merger. The retention bonus will also
be payable in the event of a termination of Mr. Bowen's employment by Group 1
without "cause" or by him with "good reason." The New Agreement provides that
Mr. Bowen is subject to a 5-year non-competition covenant upon termination of
employment for any reason.
Existing Change-in-Control Agreements of Executives. Group 1 entered into
change in control agreements with each of Messrs. Bebee, Funston, Naden, Slater,
Waggoner and Weiss on March 7, 2003 and with Mr. Renehan on September 4, 2003.
Each of the change in control agreements provide that, if within 3 years
following a "change in control," the employment of any of the foregoing officers
is terminated by Group 1 "without cause" or by such officer with "good reason,"
Group 1 is obligated to provide the terminated officer with the following:
o payment equal to 2 times the sum of (i) the highest annual rate of
salary in effect during twelve-month period prior to termination
plus (ii) the target annual bonus for the then-current fiscal year;
o continuation of welfare benefits for 2 years from the date of
termination of employment;
o 2 years of outplacement expenses (not to exceed 20% of base salary);
o vesting of unvested 401(k) benefits or payment for forfeited
benefits and vesting of unvested stock options; and
o a gross-up for any excise tax incurred such that the officer is
placed in same after-tax position as if no excise tax had been
imposed.
Under each agreement, each officer has agreed to be bound to a
non-competition covenant that is effective regardless of whether any change in
control in Group 1 occurs and which applies during the officer's employment with
Group 1 and for 12 months thereafter.
New Employment Agreements of Messrs. Naden, Renehan, Slater and Waggoner.
In connection with the execution of the merger agreement, Messrs. Naden,
Renehan, Slater and Waggoner entered into employment agreements dated as of
April 12, 2004 with Group 1, which
38
will become effective upon the completion of the merger and supersede their
existing change in control agreements. The employment agreements have a term of
two years after which time the executives will become "at-will" employees. The
employment agreements provide for payment of base salary and minimum guaranteed
bonuses (i.e. the "Target Bonuses") for the first year, the grant of stock
options (each as set forth in the chart below) and the provision of various
standard benefits, including a car allowance.
- ----------------------------------------------------------------------------------------------------
Naden Renehan Slater Waggoner
- ----------------------------------------------------------------------------------------------------
Base Salary $250,000 $145,000 $280,000 $185,000
- ----------------------------------------------------------------------------------------------------
Target Bonus $200,000 $100,000 $155,000 $125,000
- ----------------------------------------------------------------------------------------------------
Pitney Bowes Options 8,000 shares 4,000 shares 8,000 shares 6,000 shares
- ----------------------------------------------------------------------------------------------------
In the event of a termination of an executive's employment by Group 1
without "cause" or by the executive with "good reason" during the term, the
executive will be entitled to severance equal to 2 times base salary and target
bonus and two years of benefits continuation, which is comparable to the
severance provided for in the existing change in control agreements. The
employment agreements also retain the excise tax gross up provision from the
change in control agreements.
Under the employment agreements, each executive also agrees to waive 50% of
the cash out value with respect to the unvested Group 1 stock options held by
him at the effective time of the merger. This amount will be paid, subject to
the executive's continuing employment, as a "retention bonus" in two equal
payments on each of the first two anniversaries of the effective time of the
merger. The retention bonus will also be payable in the event of a termination
of an executive's employment by Group 1 without "cause" or by the executive with
"good reason." The executives are subject to a one-year non-competition covenant
upon a termination of employment for any reason.
New Consulting Agreements of Messrs. Bebee, Funston and Weiss. In
connection with the execution of the merger agreement, Messrs. Bebee, Funston
and Weiss entered into consulting agreements dated as of April 12, 2004 with
Group 1, which will become effective upon the completion of the merger.
Immediately prior to the effective time of the merger, Group 1 will terminate
the executives' employment, and upon execution of a separation and release
agreement, they will be paid severance benefits under their existing change in
control agreements. The consulting agreements provide for a monthly consulting
fee and a final payment (except for Mr. Bebee) at the end of the consulting term
(as set forth below), which payments will be prorated in the event of a
consultant's death or disability.
- -------------------------------------------------------------------------------------------------------------------
Bebee Funston Weiss
- -------------------------------------------------------------------------------------------------------------------
Term 3 months 6 months 6 months; renewable at Group 1's
election for an additional 6 months
- -------------------------------------------------------------------------------------------------------------------
Monthly Fee $14,200 $16,666 $14,166
- -------------------------------------------------------------------------------------------------------------------
Final Payment None $165,004 $140,004
- -------------------------------------------------------------------------------------------------------------------
39
Equity-Based Awards
The 1986 Comnet Corporation Incentive Stock Option, Non-Qualified Stock
Option and Stock Appreciation Unit Plan provides that each stock option granted
thereunder will automatically become fully vested and exercisable as of the date
on which Group 1 entered into the merger agreement. In addition, the 1995 Comnet
Corporation Incentive Stock Option, Non-Qualified Stock Option and Stock
Appreciation Unit Plan, the 1995 Group 1 Software, Inc. Non-Employee Directors'
Stock Option Plan and the 1996 Group 1 Software, Inc. Incentive Stock Option,
Non-Qualified Stock Option and Stock Appreciation Rights Plan provide that, upon
approval of Group 1's compensation committee, the stock options granted under
such plans shall become vested and exercisable as of the date on which Group 1
entered into the merger agreement. Given that both vested and unvested stock
options will be cancelled and converted into the right to receive an amount in
cash equal to the difference between $23.00 and the applicable exercise price
per share of the option, less applicable withholding taxes, at the effective
time of the merger, the compensation committee has not granted, and does not
intend to grant, such approval. Stock options granted under the Comnet
Corporation 1992 Non-Employee Directors Stock Option Plan and the Comnet
Corporation 1995 Non-Employee Directors' Stock Option Plan vest and become
exercisable upon approval of the merger agreement by Group 1's stockholders. As
of April 30, 2004, the directors and executive officers of Group 1 listed below
held unvested options to purchase the number of shares of Group 1 common stock
opposite their name.
Name Number of Unvested
Options/Warrants
----------------------- ------------------
Robert S. Bowen 239,997
Alan P. Slater 46,996
Stephen R. Bebee 23,800
Andrew W. Naden 38,000
Mark D. Funston 29,000
Edward Weiss 8,000
John C. Renehan 15,600
James P. Marden 21,000
Charles A. Mele 21,000
Charles J. Sindelar 21,000
James V. Manning 21,000
Richard H. Eisenberg 21,000
Bruce J. Spohler 21,000*
Thomas S. Buchsbaum 21,000
- -------------
*Represents warrants to purchase 21,000 shares of Group 1 common stock. Pursuant
to the terms of the merger agreement, each warrant to purchase common stock,
whether vested or unvested, will, at the effective time of the merger, be
converted into the right to receive $23.00 in cash less the per share exercise
price.
As discussed above, Messrs. Bowen, Naden, Renehan, Slater and Waggoner
entered into employment agreements in connection with the merger whereby each
executive agreed to waive 50% of the cash out value with respect to the unvested
Group 1 stock options held by him at the effective time of the merger.
40
Directors' and Officers' Indemnification and Insurance
In the merger agreement, Pitney Bowes has agreed that all rights to
indemnification existing in favor of the present or former directors, officers
and employees of Group 1 and its subsidiaries as provided in Group 1's
certificate of incorporation and by-laws (or the similar organizational
documents of any of Group 1's subsidiaries) or under any indemnification
agreements of Group 1 with its current or former directors will be assumed by
the surviving corporation and Pitney Bowes and will continue in full force and
effect without modification for a period of not less than the statute of
limitations applicable to such matters.
Pitney Bowes is also obligated, for a 6-year period after the merger, to
maintain in effect directors' and officers' liability insurance covering present
or former directors, officers and employees of Group 1 and its subsidiaries in
respect of acts or omissions occurring prior to the effective time of the
merger, provided that Pitney Bowes is not required to pay annual premiums for
such insurance in excess of 200% of the amount of the current premiums.
OWNERSHIP OF VOTING STOCK BY MANAGEMENT
The following table gives information concerning the beneficial ownership
of Group 1's common stock as of April 30, 2004, by each director, the chief
executive officer and each of our most highly compensated executive officers,
and all directors and executive officers of Group 1 as a group. Unless otherwise
indicated below, the person included in the table has sole voting and investment
power with respect to all shares included therein.
Total Shares Direct Percent
Name of Beneficial Owner Beneficially Owned (1) Ownership Right To Acquire Of Class
- ------------------------------------ --------------------- --------- ---------------- --------
Robert S. Bowen 1,788,136(2) 599,703 1,188,433 11.83%
Alan P. Slater 215,278 -- 215,278 1.52%
Stephen R. Bebee 110,330 1,000 109,330 0.79%
Andrew W. Naden 55,000 -- 55,000 0.39%
Mark D. Funston 119,000 10,000 109,000 0.85%
Edward Weiss 42,450 17,450 25,000 0.30%
John C. Renehan 27,400 4,200 23,200 0.20%
James P. Marden 145,000 2,000 143,000 1.03%
Charles A. Mele 242,584 45,114 197,470 1.72%
Charles J. Sindelar 146,960 4,960 142,000 1.04%
James V. Manning 160,000 15,000 145,000 1.14%
Richard H. Eisenberg 113,900 900 113,000 0.81%
Bruce J. Spohler 210,859 125,859 85,000 1.50%
Thomas S. Buchsbaum 86,757 45,307 41,450 0.62%
All directors and executive officers 3,463,654 871,493 2,592,161 20.96%
as a group
- -------------
(1) The information as to beneficial ownership is based on statements furnished
to Group 1 by its executive officers and directors. Unless otherwise
indicated, each executive officer and director has sole voting and sole
investment power with respect to his respective shares listed above.
41
(2) Mr. Bowen has entered into a voting agreement in connection with the
merger, pursuant to which he has agreed to hold and vote all of his Group 1
shares in favor of the approval and adoption of the merger agreement and
approval of the merger. See "Description of the Transaction Agreements -
The Voting Agreement."
42
Ownership of Voting Stock by Certain Beneficial Owners
The following table sets forth information with respect to the only people
who, to the best knowledge of Group 1, beneficially owned more than five percent
of the common stock of Group 1 as of April 21, 2004. Unless otherwise indicated,
the persons included in the table have sole voting and investment power with
respect to all shares included therein.
Amount And Nature Of Right To Percent Of
Name And Address Of Beneficial Owner Beneficial Ownership Direct Ownership Acquire Class
- ------------------------------------ -------------------- ---------------- --------- ----------
Robert S. Bowen 1,788,136(1) 599,703 1,188,433 11.83%
4200 Parliament Place
Suite 600
Lanham, MD 20706
Wachovia Securities, Inc. 962,261 962,261 -- 6.91%
901 East Byrd Street
Richmond, VA 23219
John Spohler 761,208 761,208 -- 5.46%
383 Madison Avenue
New York, NY 10179
- ------------------
(1) Mr. Bowen has entered into a voting agreement in connection with the
merger, pursuant to which he has agreed to hold and vote all of his Group 1
shares in favor of the approval and adoption of the merger agreement and
approval of the merger. See "Description of the Transaction Agreements -
The Voting Agreement."
43
DESCRIPTION OF THE TRANSACTION AGREEMENTS
THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement.
This summary does not purport to describe all the terms of the merger agreement
and is qualified by the complete merger agreement which is attached as Annex A
to this proxy statement and incorporated herein by reference. All stockholders
of Group 1 are urged to read the merger agreement carefully and in its entirety.
General
Under the merger agreement, Merger Sub, a wholly-owned subsidiary of Pitney
Bowes, will merge with and into Group 1, with Group 1 continuing as the
surviving corporation and a wholly-owned subsidiary of Pitney Bowes. Each share
of Group 1 common stock, together with the associated rights to purchase common
stock issued under the Group 1 Rights Plan, will be converted into the right to
receive $23.00 in cash, without interest.
Charter and By-Laws
The certificate of incorporation of Group 1 will be amended at the
effective time of the merger, as provided for in the merger agreement, and will
be the certificate of incorporation of the surviving corporation. The by-laws of
Group 1 will be amended at the effective time of the merger to conform to the
by-laws of Merger Sub, and will be the by-laws of the surviving corporation.
Closing Matters
Unless the parties agree otherwise, the closing of the merger will take
place two business days after all closing conditions have been fulfilled or
waived, at which time the parties will file a certificate of merger in such form
as is required by and executed in accordance with the relevant provisions of the
DGCL and make all other required filings or recordings. The merger will become
effective when the certificate of merger is filed with the Delaware Secretary of
State or at such later time as may be stated in the certificate of merger. See
"The Merger Agreement; Conditions" below for a more complete description of the
conditions that must be satisfied prior to closing.
Consideration to Be Received in the Merger
The merger agreement provides that each share of Group 1 common stock
issued and outstanding immediately prior to the effective time of the merger,
together with the associated rights to purchase common stock issued under the
Group 1 Rights Plan, will be converted into, and become exchangeable for the
right to receive, $23.00 in cash, without interest.
In addition, any shares of Group 1 common stock owned by Pitney Bowes,
Merger Sub or any other subsidiary or affiliate of Pitney Bowes or Merger Sub or
held by Group 1 as treasury stock will be automatically canceled, and will not
be exchanged for any consideration.
44
Treatment of Stock Options and Warrants
The merger agreement provides that each unexercised stock option, whether
or not then vested or exercisable, that remains outstanding at the effective
time of the merger will be cancelled and converted into the right to receive an
amount in cash equal to the difference between $23.00 and the applicable
exercise price per share of the option, less any applicable withholding taxes.
However, Messrs. Bowen, Naden, Renehan, Slater and Waggoner entered into
employment agreements in connection with the merger whereby each executive
agreed to waive 50% of the cash out value with respect to the unvested Group 1
stock options held by him at the effective time of the merger. See "Interests of
Certain Persons in the Merger; Employment, Severance and Consulting Agreements
with Executive Officers" on page ___.
Each holder of a warrant to purchase Group 1 common stock outstanding at
the effective time of the merger will be entitled to receive an amount in cash,
without interest, equal to the excess, if any, of $23.00 over the per share
exercise price of each warrant, less any applicable withholding taxes.
Exchange of Certificates in the Merger
Prior to the effective time of the merger, Pitney Bowes will deposit with a
paying agent reasonably acceptable to Group 1 an amount of cash sufficient to
pay the merger consideration. As soon as reasonably practicable after the
effective time of the merger (but not later than 10 business days thereafter),
the paying agent will mail to each registered holder of Group 1 common stock a
letter of transmittal containing instructions for surrendering their stock
certificates in exchange for the merger consideration. Upon proper surrender of
a stock certificate, together with such letter of transmittal, duly completed in
accordance with the instructions thereto, Group 1 stockholders will receive
$23.00 in cash, without interest, per share of Group 1 common stock surrendered.
If any shares of Group 1 common stock are lost, stolen or destroyed, the
holder of such shares, after making an affidavit of that fact, and, if required
by the surviving corporation, the posting by such holder of a bond in a
reasonable amount as the surviving corporation may direct as indemnity against
any claim made against it with respect to such lost, stolen or destroyed shares,
the paying agent will deliver the applicable merger consideration for the lost,
stolen or destroyed shares.
Any portion of the aggregate merger consideration (including the proceeds
from any investments thereof) that remains unclaimed by stockholders of Group 1
for a period of 6 months after the completion of the merger will be repaid to
Pitney Bowes. After the 6-month period noted above, former stockholders of Group
1 may only look to Pitney Bowes (subject to abandoned property, escheat or other
similar laws) for payment of their claim of the applicable merger consideration,
without interest, upon the surrender of the shares of Group 1 common stock held
by such stockholder. Neither Pitney Bowes, the surviving corporation nor the
paying agent will be liable to any stockholder of Group 1 for any of the merger
consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar laws.
45
Covenants
Group 1 has undertaken certain covenants in the merger agreement concerning
the conduct of its business between the date the merger agreement was signed and
the completion of the merger. The following summarizes the more significant of
these covenants.
No Solicitation. Group 1 has agreed that neither it nor any of its
subsidiaries or affiliates or any of their respective officers, directors,
employees, representatives or other agents will, directly or indirectly:
o encourage, solicit or initiate any proposal or offer with respect to
an "acquisition proposal" (as defined below); or
o participate in any discussions or negotiations with, or provide,
furnish or disclose any information to, any person concerning any
acquisition proposal.
In the event that Group 1 receives any acquisition proposal, Group 1 will
as promptly as practicable notify Pitney Bowes of the receipt and provide Pitney
Bowes with the identity of the potential acquiror and a copy of the acquisition
proposal or a reasonably detailed written summary setting forth the material
terms and conditions thereof.
However, in the event that a potential acquiror makes an unsolicited
written acquisition proposal, Group 1 may furnish information with respect to it
and its subsidiaries and participate in discussions and negotiations regarding
such acquisition proposal, if:
o the Group 1 board of directors determines in good faith, (i) after
consultation with its independent financial advisor, that such
acquisition proposal is reasonably likely to result in the making of
a "superior proposal" (as defined below) and (ii) after consultation
with its outside legal counsel, that the failure to take such action
in their reasonable judgment may result in a breach of its fiduciary
duties;
o Group 1 in its reasonable judgment keeps Pitney Bowes advised of any
material developments with respect to such acquisition proposal;
o Group 1 receives from the potential acquiror an executed
confidentiality agreement in customary form; and
o Group 1 furnishes to Pitney Bowes the same information provided to
the potential acquiror (to the extent not previously furnished or
made available).
An "acquisition proposal" means (i) any offer or proposal, or any
indication of interest in making an offer or proposal, made by a person which is
structured to permit such person to acquire, directly or indirectly, beneficial
ownership of at least 20% of the assets of Group 1 and its subsidiaries taken as
a whole, or at least 20% of the outstanding shares of capital stock of Group 1
pursuant to a merger, consolidation or other business combination, joint
venture, dissolution, liquidation, sale of shares of capital stock, sale of
assets, tender offer or exchange offer or similar transaction and (ii) any offer
or proposal made in the context of a proxy contest with respect to any of the
foregoing.
46
A "superior proposal" means any unsolicited, bona fide written acquisition
proposal which would result in a person (or in the case of a direct merger
between a person and Group 1, the stockholders of the person) acquiring,
directly or indirectly, more than 50% of the voting power of the shares of
common stock of Group 1 or all or substantially all the assets of Group 1 and
its subsidiaries, taken as a whole, which the Group 1 board of directors (acting
by a majority of the entire board) determines in its good faith judgment (after
consultation with its independent financial advisors and independent legal
counsel) taking into account all relevant aspects of the acquisition proposal,
that (i) such acquisition proposal is more favorable from a financial point of
view to the Group 1 stockholders than the merger agreement, (ii) the conditions
to the consummation of such acquisition proposal are reasonably capable of being
satisfied promptly and (iii) financing for such transaction, to the extent
required, is then committed or for which the Group 1 board of directors after
consultation with its outside financial advisor concludes in good faith is
reasonably likely to be available on commercially reasonable terms.
Group 1 Board of Directors' Covenant to Recommend. Group 1's board of
directors has agreed to unanimously and unconditionally recommend approval and
adoption of the merger agreement and approval of the merger to Group 1
stockholders. However, the Group 1 board of directors is permitted to approve or
recommend a superior proposal or authorize Group 1 to enter into a definitive
written agreement with respect to a superior proposal in accordance with the
termination provisions described in "The Merger Agreement; Termination of the
Merger Agreement."
Operations of Group 1 Pending Closing. Group 1 has undertaken a separate
covenant that places restrictions on itself and its subsidiaries until the
effective time of the merger. In general, Group 1 and its subsidiaries are
required to conduct themselves in the ordinary course of business consistent
with past practice and to use commercially reasonable efforts to (i) preserve
intact their business organizations, (ii) ensure the continued employment of
their current officers and employees, (iii) preserve their material
relationships with third parties that have significant dealings with them and
(iv) ensure continued compliance with the Sarbanes-Oxley Act.
In addition to this covenant, Group 1 and its subsidiaries have certain
other interim covenants, including:
o restrictions with respect to the issuance of securities and options;
o a requirement not to acquire, redeem, or amend any of their
securities;
o restrictions with respect to the paying or declaring of any
dividends or distributions and to the splitting, combining, or
reclassifying its capital stock;
o restrictions with respect to amending its certificate of
incorporation or by-laws;
o restrictions with respect to amending its Rights Plan, other than
amendments contemplated by the merger agreement;
o restrictions with respect to granting any stock related performance
or similar awards to any employees of Group 1;
47
o restrictions on entering into or amending any employment, severance
or other similar agreements with any officers, directors or
employees, or increasing the compensation of any officers, directors
or employees (other than normal increases to persons who are not
officers or directors in the ordinary course consistent with past
practice and that, in the aggregate, do not result in a material
increase in benefits or compensation expense of Group 1);
o restrictions with respect to acquisitions, other than the
acquisition of assets which are immaterial to Group 1 in the
ordinary course of business consistent with past practice;
o restrictions with respect to selling, licensing, leasing mortgaging
or to otherwise encumbering any of its properties or assets;
o restrictions with respect to entering into, amending, modifying or
terminating any material contracts, other than in the ordinary
course of business consistent with past practice;
o restrictions with respect to incurring any indebtedness or
guaranteeing any debt securities or issuing any debt securities or
the making of any loans, capital contributions or investments;
o restrictions with respect to entering into any or amending any
collective bargaining arrangements, bonus arrangements, retirement
plans, deferred compensation plans or similar arrangements;
o restrictions with respect to changing its accounting methods (except
as required by law or a change in generally accepted accounting
principles) or making material tax elections;
o a requirement that Group 1 not change its material existing
insurance policies;
o a requirement that Group 1 not pay or discharge any claims or
liabilities except in the ordinary course of business or for
obligations not to exceed $100,000 individually or $500,000 in the
aggregate or waive any rights of material value pursuant to any
material contract other than in the ordinary course of business
consistent with past practices;
o a requirement that Group 1 not adopt any plans of liquidation,
dissolution, merger, consolidation, restructuring, recapitalization
or reorganization;
o restrictions with respect to settling material litigation;
o a requirement that Group 1 not engage in any "related party"
transactions;
o a requirement that Group 1 not effectuate a plant closing or mass
layoff affecting in whole or in part any site of employment,
facility, operating unit or employee of Group 1 or its subsidiaries;
48
o a requirement that Group 1 take commercially reasonable actions to
protect its intellectual property and notify Pitney Bowes upon any
abandonment of its intellectual property, upon notice of any adverse
determination or development regarding its ownership or right to use
its intellectual property, and upon any material infringement of its
intellectual property of which it becomes aware; and
o a requirement that Group 1 not agree, in writing or otherwise, to
take any action that would violate these covenants.
Reasonable Efforts Covenant/HSR Filings. Group 1 and Pitney Bowes have
agreed to use their commercially reasonable efforts to take all actions and do
all things advisable or necessary under the merger agreement and applicable laws
to complete the merger and the other transactions contemplated by the merger
agreement. Group 1 and Pitney Bowes have also agreed:
o to make the required filings under the HSR Act and any similar
foreign antitrust laws as promptly as practicable;
o to comply at the earliest practicable date with any request under
the HSR Act or any similar foreign antitrust laws for additional
information; and
o to cooperate with the other party in connection with any such filing
and in connection with resolving any investigation or inquiry of any
such governmental entity.
However, neither Pitney Bowes nor Group 1 will be required to dispose of or
hold separate, or agree to dispose of or hold separate or restrict its ownership
or operation of, all or any part of the business or assets of itself or any of
its subsidiaries.
Employee Matters. Pitney Bowes has agreed to honor all existing employment,
severance and consulting agreements of any current or former officer, director,
employee or consultant of Group 1 or its subsidiaries, so long as such
agreements were disclosed to Pitney Bowes pursuant to the merger agreement. In
addition, the merger agreement provides that Pitney Bowes will, for a period of
one year from the effective time of the merger, provide compensation and benefit
plans to employees of Group 1 that are in the aggregate no less favorable than
those provided under the existing Group 1 employee benefit plans.
Other Covenants and Agreements
Meeting of Stockholders. The merger agreement stipulates that Group 1 will
convene a meeting of its stockholders as promptly as reasonably practicable
after the mailing of this proxy statement, to consider and vote upon the merger
agreement. Group 1 will use its commercially reasonable efforts to solicit from
its stockholders proxies in favor of the approval of the agreement and will take
any necessary or advisable action to secure the required stockholder approval to
effect the agreement, except to the extent the Group 1 board changes or
withdraws its recommendation of the agreement as provided by the agreement.
Insurance and Indemnification. Pitney Bowes has agreed that all rights to
indemnification existing in favor of the present or former directors, officers
and employees of Group 1 and its
49
subsidiaries as provided in Group 1's certificate of incorporation and by-laws
(or the similar organizational documents of any of Group 1's subsidiaries) or
under any indemnification agreements of Group 1 with its current or former
directors will be assumed by the surviving corporation and Pitney Bowes and will
continue in full force and effect without modification for a period of not less
than the statute of limitations applicable to such matters.
Pitney Bowes is also obligated, for a 6-year period after the merger, to
maintain in effect current directors' and officers' liability insurance covering
present or former directors, officers and employees of Group 1 and its
subsidiaries in respect of acts or omissions occurring prior to the effective
time of the merger, provided that Pitney Bowes is not required to pay annual
premiums for such insurance in excess of 200% of the amount of the current
premiums.
Expenses. Pitney Bowes and Group 1 have each agreed to pay their own costs
and expenses incurred in connection with the merger and the merger agreement,
other than the termination fees payable as described under "The Merger
Agreement; Termination Fees."
Representations and Warranties
The merger agreement contains representations and warranties of Group 1 as
to, among other things:
o due organization and qualification;
o capital structure;
o authority to enter into the merger agreement;
o required consents and approvals; no conflicts;
o compliance with applicable laws;
o board approval and recommendation to stockholders;
o timely filing of SEC reports and accuracy of financial statements;
o material compliance with Sarbanes-Oxley;
o absence of liabilities and no material adverse changes;
o brokers and finders;
o disclosure and maintenance of employee benefit plans;
o compliance with labor and employment laws;
o pending and threatened litigation;
o taxes;
o compliance with environmental laws;
o good title or valid license to intellectual property;
50
o title or valid lease to real property used in the conduct of its
business;
o disclosure of material agreements;
o receipt of fairness opinion;
o state takeover statutes and the Rights Plan;
o maintenance of insurance policies;
o material trade relations;
o warranties and product claims;
o potential conflicts of interest;
o amendment of the Rights Plan; and
o required vote to approve the merger.
Pitney Bowes and Merger Sub represent and warrant as to:
o due organization and qualification;
o authority to enter into the merger agreement;
o accuracy of information supplied in this proxy statement;
o required consents and approvals; no conflicts;
o no business activities of Merger Sub;
o adequacy of funds; and
o brokers and finders.
The representations and warranties in the merger agreement do not survive
the effective time of the merger.
Conditions
The respective obligations of Pitney Bowes and Group 1 to complete the
merger are subject to the satisfaction or waiver of the following conditions:
o the approval and adoption of the merger agreement and approval of
the merger by Group 1 stockholders;
o expiration or early termination of the waiting period under the HSR
Act and clearance by the German Federal Cartel Office and receipt of
consents from governmental entities on terms that would not
reasonably be expected to result in a material adverse effect (on
May 5, 2004, we received notice from the Federal Trade Commission
that we received early termination of the waiting period under the
HSR Act);
51
o absence of a law or order of any court or other governmental entity
restraining, enjoining or otherwise prohibiting the completion of
the merger.
The obligation of Pitney Bowes and Merger Sub to complete the merger is
subject to the satisfaction or waiver of the following conditions:
o the representations and warranties of Group 1 contained in the
merger agreement, disregarding all qualifications and exceptions
contained in the merger agreement relating to materiality or
material adverse effect, must be true and correct as of the time of
closing, except for the failure to be true and correct which,
individually or in the aggregate, would not be expected to result in
a material adverse effect;
o performance by Group 1 in all material respects of all of its
obligations as set forth in the merger agreement;
o absence of a material adverse effect on Group 1;
o receipt by Group 1 of all required consents, the failure of which to
obtain would have a material adverse effect;
o no distribution date under the Group 1 Rights Plan having occurred;
and
o absence of any action or proceeding instituted, pending or
threatened by a governmental entity:
o challenging or otherwise prohibiting the merger;
o seeking to obtain material damages;
o seeking to restrain or prohibit Pitney Bowes' ownership of Group 1
or compelling Pitney Bowes to dispose of or hold separate any
portion of its assets;
o seeking to materially limit Pitney Bowes' ability to exercise full
rights of ownership of Group 1;
o seeking to require divestiture by Pitney Bowes of any shares of
Group 1; or
o that would otherwise reasonably be expected to have a material
adverse effect.
The obligation of Group 1 to complete the merger is subject to the
satisfaction or waiver of the following conditions:
o the representations and warranties of Pitney Bowes and Merger Sub
contained in the merger agreement, disregarding all qualifications
and exceptions contained in the merger agreement relating to
materiality or material adverse effect, must be true and correct as
of the time of closing, except for the failure to be true and
correct which, individually or in the aggregate, would not be
expected to result in a material adverse effect; and
52
o performance by Pitney Bowes and Merger Sub in all material respects
of all of their obligations as set forth in the merger agreement.
Termination of the Merger Agreement
Pitney Bowes and Group 1 can mutually agree to terminate the merger
agreement by written consent without completing the merger. Pitney Bowes or
Group 1 can terminate the merger agreement by written notice if:
o Group 1's stockholders do not approve the merger at the special
meeting or at any adjournment or postponement thereof;
o the merger has not been completed by September 30, 2004;
o any law or rule prohibits the completion of the merger or if any
governmental entity issues an order, judgment, decree or injunction
which prohibits completion of the merger and such order, judgment,
decree or injunction is final and nonappealable; or
o there has been (i) a breach by the other party of any representation
or warranty contained in the merger agreement which would reasonably
be expected to have a material adverse effect or (ii) a material
breach of any of the material covenants or agreements set forth in
the merger agreement on the part of the other party, which breach is
incapable of being cured or is not cured within 30 days after
written notice.
Pitney Bowes may terminate the merger agreement if, prior to Group 1
stockholder approval:
o Group 1's board of directors withdraws or modifies, in a manner
adverse to Pitney Bowes, its approval or recommendation of the
merger, or recommends, enters into, or publicly announces its
intention to enter into, an agreement with respect to a superior
proposal;
o Group 1 breaches its covenant under the merger agreement not to
solicit an alternative transaction;
o Group 1's board of directors refuses to affirm its approval and
recommendation of the merger and the merger agreement within 10
business days after any written request from Pitney Bowes;
o Group 1's board of directors exempts any person from Section 203 of
the DGCL; or
o Group 1's board of directors exempts any person under its Rights
Plan.
Pitney Bowes may also terminate the merger agreement if a person or group,
other than Pitney Bowes or its affiliates, has acquired, or has the right to
acquire, 25% or more of Group 1's common stock or 25% or more of the book value
or fair market value of the assets of Group 1.
53
Group 1 may terminate the merger agreement if it enters into a definitive
agreement providing for the implementation of a superior proposal, subject to:
o Group 1 not breaching the covenant contained in the merger agreement
not to solicit an alternative transaction;
o Group 1 providing Pitney Bowes 5 business days notice during which
time it will offer to negotiate with Pitney Bowes concerning any
commercially reasonable adjustments to the terms of the merger
agreement as would enable Group 1 to proceed with the completion of
the merger;
o Group 1's board of directors having concluded that the superior
proposal giving rise to Group 1's notice is still, after any
negotiation with Pitney Bowes, a superior proposal;
o Group 1 terminating the merger agreement within 5 business days
following the 5 day period referred to above in which it has offered
to negotiate with Pitney Bowes; and
o Payment of the termination fee.
Termination Fee
Group 1 has agreed to pay Pitney Bowes a termination fee of $14,000,000 if
any of the following occurs:
o Pitney Bowes terminates the merger agreement because:
o Group 1's board of directors withdraws or modifies, in a
manner adverse to Pitney Bowes, its approval or recommendation
of the merger, or recommends, enters into, or publicly
announces its intention to enter into, an agreement with
respect to a superior proposal;
o Group 1 breaches its covenant under the merger agreement not
to solicit an alternative transaction;
o Group 1's board of directors refuses to affirm its approval
and recommendation of the merger and the merger agreement
within 10 business days after any written request from Pitney
Bowes;
o Group 1's board of directors exempts any person from Section
203 of the DGCL; or
o Group 1's board of directors exempts any person under its
Rights Plan.
o Pitney Bowes terminates the merger agreement because a person or group,
other than Pitney Bowes or its affiliates, has acquired, or has the right
to acquire, 25% or more of Group 1's common stock or 25% or more of the
book value or fair market value of the assets of Group 1;
54
o Group 1 terminates the merger agreement upon entering into a
superior proposal; or
o Pitney Bowes terminates the merger agreement because Group 1 has
breached or failed to perform any of its representations, warranties
or covenants, or because Group 1 stockholder approval is not
obtained, and in either case at the time of such termination: (a)
Pitney Bowes is not in breach of its representations, warranties and
covenants such that Group 1's conditions to consummate the merger
have been satisfied; and (b) an acquisition proposal existed or has
been previously announced and within 1 year Group 1 consummates an
acquisition proposal.
Amendments, Extensions and Waivers
The merger agreement may be amended by the parties at any time, with
agreement of the board of directors of each company. All amendments to the
merger agreement must be in writing signed by each party. Prior to the effective
time of the merger either party may extend the time for compliance by or waive
performance of any representation, warranty, condition or obligation of the
other party.
THE VOTING AGREEMENT
In connection with the merger agreement, Pitney Bowes has entered into a
voting agreement with Mr. Bowen. The following is a summary of the material
terms of the voting agreement. This summary does not purport to describe all the
terms of the voting agreement and is qualified by the complete voting agreement
which is attached as Annex B to this proxy statement and incorporated herein by
reference. All stockholders of Group 1 are urged to read the voting agreement
carefully and in its entirety.
Agreement to Vote
Pursuant to the terms of the voting agreement, Mr. Bowen agrees to vote all
of his shares in favor of the approval and adoption of the merger agreement,
approval of the transactions contemplated by the merger agreement and against
any proposal relating to any recapitalization, dissolution, liquidation or sale
of assets or merger or other business combination or any other action that is
intended or could reasonably be expected to interfere with or delay the
completion of merger or the transactions contemplated thereby.
Restrictions on Transfer
Mr. Bowen is prohibited from selling, transferring, pledging, encumbering,
assigning or otherwise disposing of any of his shares of Group 1 common stock,
unless such transferee agrees to be bound by the terms of the voting agreement
until termination of the voting agreement upon the earlier to occur of (i) the
termination of the merger agreement or (ii) the completion of the merger.
55
ADDITIONAL INFORMATION FOR STOCKHOLDERS
Stockholder Proposals for the 2004 Annual Meeting
Group 1 does not currently expect to hold a 2004 Annual Meeting of
Stockholders, as Group 1's common stock will be delisted and deregistered and
will no longer be publicly traded after the merger.
If the merger is not consummated, Group 1 will hold a 2004 Annual Meeting
of Stockholders. In order for a stockholder to have a proposal included in Group
1's proxy materials for the 2004 Annual Meeting of Stockholders, Group 1 must
have received such proposal at its principal executive office at 4200 Parliament
Place, Suite 600, Lanham, Maryland 20706-1844, Attention: Edward Weiss,
Secretary, by April 6, 2004.
In addition, if stockholders wish to bring a proposal before the 2004
Annual Meeting of Stockholders but do not wish to have such proposal included in
Group 1's proxy statement for that meeting, the stockholder must give Group 1
written notice of such proposal at the address set forth in the preceding
paragraph, on or before June 18, 2004 in order for such proposal to be
considered timely. The persons designated as proxies in connection with the 2004
Annual Meeting of Stockholders will have discretionary voting authority with
respect to any stockholder proposal not received timely.
Each proposal submitted should include the full and correct name and
address of the stockholder making the proposal, the number of shares
beneficially owned and their date of acquisition. If beneficial ownership is
claimed, proof thereof should also be submitted with the proposal. The
stockholder or his or her representative must appear in person at the annual
meeting and must present the proposal, unless he or she can show good reason for
not doing so.
Where You Can Find More Information
Group 1 files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information we file at the Securities and
Exchange Commission's Public Reference Room, located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference rooms. Our
Securities and Exchange Commission filings are also available to the public from
commercial document retrieval services and at the website maintained by the
Securities and Exchange Commission at http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Group 1 at the offices of the National Association of Securities Dealers, 1735 K
Street, Washington, D.C. 20006.
WE HAVE AUTHORIZED NO ONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ABOUT THE MERGER OR GROUP 1 THAT DIFFERS FROM OR ADDS TO THE
INFORMATION CONTAINED IN THIS DOCUMENT OR IN THE DOCUMENTS GROUP 1 HAS PUBLICLY
FILED WITH THE SEC. THEREFORE, IF ANYONE SHOULD GIVE YOU ANY DIFFERENT OR
ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
56
THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE
INDICATED ON THE COVER OF THIS DOCUMENT UNLESS THE INFORMATION SPECIFICALLY
INDICATES THAT ANOTHER DATE APPLIES.
With respect to the information contained in this document, Group 1 has
supplied the information concerning Group 1, and Pitney Bowes has supplied the
information concerning Pitney Bowes and Merger Sub.
57
Annex A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PITNEY BOWES INC.
GERMANIUM ACQUISITION CORPORATION
and
GROUP 1 SOFTWARE, INC.
Dated as of April 12, 2004
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER...................................................... A-1
SECTION 1.1 The Merger............................................ A-1
SECTION 1.2 Closing............................................... A-2
SECTION 1.3 Effective Time........................................ A-2
SECTION 1.4 Effects of the Merger................................. A-2
SECTION 1.5 The Certificate of Incorporation...................... A-2
SECTION 1.6 The By-Laws........................................... A-2
SECTION 1.7 Directors and Officers................................ A-2
SECTION 1.8 Additional Actions.................................... A-3
ARTICLE II EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES............................................... A-3
SECTION 2.1 Effect on Capital Stock of the Company................ A-3
SECTION 2.2 Conversion of Common Stock of Merger Sub.............. A-4
SECTION 2.3 Payment for Shares.................................... A-4
SECTION 2.4 Existing Stock Options; Warrants...................... A-5
SECTION 2.5 Dissenting Shares..................................... A-7
SECTION 2.6 Adjustments........................................... A-7
SECTION 2.7 Withholding Taxes..................................... A-7
SECTION 2.8 Closing of the Company's Transfer Books............... A-8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. A-8
SECTION 3.1 Organization and Qualification........................ A-8
SECTION 3.2 Capitalization........................................ A-8
SECTION 3.3 Authority for this Agreement; Binding Effect.......... A-10
SECTION 3.4 Consents and Approvals; No Violation.................. A-11
SECTION 3.5 Reports; Financial Statements......................... A-12
SECTION 3.6 Absence of Certain Changes............................ A-13
SECTION 3.7 Proxy Statement....................................... A-13
SECTION 3.8 Brokers............................................... A-13
SECTION 3.9 Employee Benefit Matters.............................. A-13
SECTION 3.10 Litigation, etc....................................... A-17
SECTION 3.11 Tax Matters........................................... A-17
SECTION 3.12 Compliance with Law................................... A-18
SECTION 3.13 Environmental Matters................................. A-19
SECTION 3.14 Intellectual Property................................. A-19
SECTION 3.15 Real Property......................................... A-22
SECTION 3.16 Material Contracts.................................... A-23
SECTION 3.17 Opinion of Financial Advisor.......................... A-24
SECTION 3.18 Anti-takeover Plan; State Takeover Statutes........... A-24
SECTION 3.19 Insurance............................................. A-25
A-i
SECTION 3.20 Trade Relations....................................... A-25
SECTION 3.21 Warranties; Product Claims............................ A-25
SECTION 3.22 Potential Conflicts of Interest....................... A-26
SECTION 3.23 Amendment to the Company Rights Plan.................. A-26
SECTION 3.24 Voting Requirements................................... A-27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........ A-27
SECTION 4.1 Organization and Qualification........................ A-27
SECTION 4.2 Authority for this Agreement.......................... A-27
SECTION 4.3 Proxy Statement....................................... A-27
SECTION 4.4 Consents and Approvals; No Violation.................. A-27
SECTION 4.5 Operations of Merger Sub.............................. A-28
SECTION 4.6 Funds................................................. A-28
SECTION 4.7 Brokers............................................... A-28
ARTICLE V COVENANTS....................................................... A-28
SECTION 5.1 Conduct of Business of the Company.................... A-28
SECTION 5.2 No Solicitation....................................... A-32
SECTION 5.3 Access to Information................................. A-34
SECTION 5.4 Reasonable Efforts; Further Actions................... A-34
SECTION 5.5 Indemnification and Insurance......................... A-35
SECTION 5.6 Proxy Statement....................................... A-36
SECTION 5.7 Special Meeting....................................... A-38
SECTION 5.8 Notification of Certain Matters....................... A-38
SECTION 5.9 Press Releases and Communications..................... A-38
SECTION 5.10 Employee Benefits Matters............................. A-39
SECTION 5.11 HSR Act Filings....................................... A-39
SECTION 5.12 Stockholder Litigation................................ A-41
SECTION 5.13 Rights Agreement...................................... A-41
SECTION 5.14 Resignations of Directors and Officers................ A-41
SECTION 5.15 FIRPTA Affidavit...................................... A-41
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER....................... A-41
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Merger................................................ A-41
SECTION 6.2 Conditions to Obligations of Parent and Merger Sub.... A-42
SECTION 6.3 Conditions to Obligation of the Company............... A-43
ARTICLE VII TERMINATION; AMENDMENT; WAIVER................................ A-44
SECTION 7.1 Termination........................................... A-44
SECTION 7.2 Effect of Termination................................. A-46
SECTION 7.3 Fees and Expenses..................................... A-46
SECTION 7.4 Amendment............................................. A-47
SECTION 7.5 Extension; Waiver; Remedies........................... A-47
ARTICLE VIII MISCELLANEOUS................................................ A-48
A-ii
SECTION 8.1 Definitions........................................... A-48
SECTION 8.2 Survival of Representations and Warranties............ A-54
SECTION 8.3 Entire Agreement; Assignment.......................... A-54
SECTION 8.4 Validity.............................................. A-54
SECTION 8.5 Notices............................................... A-54
SECTION 8.6 GOVERNING LAW......................................... A-55
SECTION 8.7 Jurisdiction.......................................... A-56
SECTION 8.8 Waiver of Jury Trial.................................. A-56
SECTION 8.9 Descriptive Headings.................................. A-56
SECTION 8.10 Parties in Interest................................... A-56
SECTION 8.11 Counterparts.......................................... A-56
SECTION 8.12 Further Assurances.................................... A-56
SECTION 8.13 Specific Performance.................................. A-57
Exhibits
Exhibit A Form of Voting Agreement
Exhibit B Form of Certificate of Incorporation of the Surviving Corporation
A-iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 12, 2004 (as
amended, modified or supplemented from time to time, this "Agreement"), by and
among Pitney Bowes Inc., a Delaware corporation ("Parent"), Germanium
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and Group 1 Software, Inc., a Delaware corporation (the
"Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have each determined that this Agreement and the transactions
contemplated hereby, including the Merger (as hereinafter defined), are
advisable and fair to, and in the best interests of, their respective
stockholders;
WHEREAS, the Board of Directors of the Company has adopted
resolutions approving the acquisition of the Company by Parent and Merger Sub,
this Agreement and the transactions contemplated by this Agreement, and has
agreed to recommend that the stockholders of the Company approve this Agreement,
the Merger and the transactions contemplated by this Agreement;
WHEREAS, concurrently with the execution of this Agreement, as a
condition to the willingness of Parent to enter into this Agreement, a certain
stockholder of the Company is entering into a Voting Agreement, a copy of which
is attached hereto as Exhibit A (the "Voting Agreement"), providing for, among
other things, the agreement of such stockholder to vote his Shares (as
hereinafter defined), and an irrevocable proxy to vote his Shares, in each case
in favor of the approval and adoption of this Agreement and the Merger at the
Special Meeting;
WHEREAS, capitalized terms used and not otherwise defined herein
shall have the respective meanings ascribed to them in Section 8.1; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
----------
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time and in accordance with the
A-1
General Corporation Law of the State of Delaware (the "Corporation Law"), Merger
Sub shall be merged with and into the Company (the "Merger") in accordance with
this Agreement and the separate corporate existence of Merger Sub shall cease.
The Company shall be the successor or the surviving corporation in the Merger
(sometimes referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware, and the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The Company and Merger Sub
are sometimes referred to herein, collectively, as the "Constituent
Corporations."
SECTION 1.2 Closing. Unless this Agreement shall have terminated and
the transactions contemplated in the Agreement shall have been abandoned
pursuant to Section 7.1 hereof, the closing of the Merger (the "Closing") shall
take place (a) at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285
Avenue of the Americas, New York, New York, at 10:00 a.m. on the second (2nd)
Business Day after the day on which the last to be fulfilled or waived of the
conditions set forth in Article VI (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions) shall be satisfied or waived in accordance with this
Agreement or (b) at such other place and time and/or on such other date as
Parent and the Company may agree in writing (the "Closing Date").
SECTION 1.3 Effective Time. As soon as practicable following the
Closing, the parties hereto will cause a Certificate of Merger (the "Certificate
of Merger") to be signed, acknowledged and delivered for filing with the
Secretary of State of the State of Delaware as provided in Section 251 of the
Corporation Law. The Merger shall become effective at the time when the
Certificate of Merger has been duly filed with the Secretary of State of the
State of Delaware or such other subsequent date or time as shall be agreed upon
by the parties and set forth in the Certificate of Merger and in accordance with
the Corporation Law (the time the Merger becomes effective being referred to
herein as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects
set forth in the Corporation Law, including Section 259 of the Corporation Law.
SECTION 1.5 The Certificate of Incorporation. The certificate of
incorporation of the Company in effect immediately prior to the Effective Time
shall be amended at the Effective Time to read in its entirety as set forth in
Exhibit B attached hereto, until duly amended as provided therein or by
applicable Law.
SECTION 1.6 The By-Laws. The by-laws of the Company in effect
immediately prior to the Effective Time shall be amended at the Effective Time
to read in their entirety as the by-laws of Merger Sub then read and shall, as
so amended, from and after the Effective Time, be the by-laws of the Surviving
Corporation until duly amended as provided therein or by applicable Law.
SECTION 1.7 Directors and Officers. From and after the Effective
Time, the officers of the Company shall be the officers of the Surviving
Corporation and
A-2
the directors of Merger Sub shall be the directors of the Surviving Corporation,
in each case until their respective death, permanent disability, resignation or
removal or until their respective successors are duly elected and qualified all
in accordance with applicable Law.
SECTION 1.8 Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are necessary or
desirable (i) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation, title to and possession of any property or right of
either Constituent Corporation acquired or to be acquired by reason of, or as a
result of, the Merger, or (ii) otherwise to carry out the purposes of this
Agreement, each Constituent Corporation hereby grants to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
deeds, assignments and assurances in law and to do all acts necessary or proper
to vest, perfect or confirm title to and possession of such property or rights
in the Surviving Corporation and otherwise to carry out the purposes of this
Agreement; and the officers and directors of the Surviving Corporation shall be
fully authorized in the name of either Constituent Corporation to take any and
all such action.
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
------------------------
SECTION 2.1 Effect on Capital Stock of the Company. At the Effective
Time, as a result of the Merger and without any action on the part of the holder
of any capital stock of the Company:
(a) Merger Consideration. Each share of the common stock, par
value $0.50 per share, of the Company (the "Common Stock"), including the
associated rights ("Rights") to purchase shares of Common Stock, issued pursuant
to the Company Rights Plan (the Common Stock together with the Rights are
hereinafter referred to each as a "Share" and collectively, the "Shares") issued
and outstanding immediately prior to the Effective Time (other than Excluded
Shares and Dissenting Shares) shall be converted by virtue of the Merger and
without any action on the part of the holder thereof into the right to receive
and become exchangeable for TWENTY-THREE UNITED STATES DOLLARS ($23.00) in cash
(the "Merger Consideration"), without interest thereon, upon surrender of the
certificates representing such shares of Common Stock as provided in Section
2.3. The amount of the Merger Consideration shall be subject to adjustment as
provided in Section 2.6.
(b) Cancellation of Shares. Each Share issued and outstanding
and owned by Parent, Merger Sub or any other Subsidiary or affiliate of Parent
or Merger Sub or Shares that are owned by the Company and in each case not held
on behalf of third parties (collectively, "Excluded Shares") immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder of such
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Excluded Share, no longer be outstanding, shall be canceled and retired without
payment of any consideration therefor and shall cease to exist.
SECTION 2.2 Conversion of Common Stock of Merger Sub. Each share of
common stock, par value $0.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become one share of common stock of the Surviving Corporation.
SECTION 2.3 Payment for Shares.
(a) Prior to the Effective Time, Parent will, or will cause
Merger Sub to make available to a bank or trust company designated by Parent and
reasonably acceptable to the Company (the "Paying Agent") sufficient funds to
make the payments pursuant to Section 2.1(a) hereof on a timely basis to holders
(other than holders of Excluded Shares) of Shares that are issued and
outstanding immediately prior to the Effective Time (such amounts being
hereinafter referred to as the "Payment Fund"). The Paying Agent shall make the
payments provided for in the preceding sentence out of the Payment Fund. The
Payment Fund shall not be used for any other purpose, except as provided in this
Agreement. Parent shall pay all fees and expenses of the Paying Agent.
(b) As soon as reasonably practicable after the Effective Time
but in no event later than 10 Business Days thereafter, the Surviving
Corporation shall cause the Paying Agent to mail to each record holder (other
than Parent or Merger Sub or any of their respective Subsidiaries or
affiliates), as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Certificates"), a form of letter of transmittal (each a "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 Paying Agent) and customary instructions for use in
effecting the surrender of the Certificate and receiving payment therefor.
Following surrender to the Paying Agent of a Certificate, together with such
Letter of Transmittal duly executed and such other documents as may be
reasonably required by the Paying Agent, the holder of such Certificate shall
promptly be paid in exchange therefor cash in an amount (subject to any
applicable withholding tax as specified in Section 2.7 hereof) equal to the
product of the number of Shares represented by such Certificate multiplied by
the Merger Consideration, and each such Certificate shall forthwith be canceled.
No interest shall 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 be in proper form for transfer and that the Person requesting such
payment (A) 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 (B)
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. From and after the Effective Time and until
surrendered in accordance with the provisions of this Section 2.3(b), each
Certificate (other than Certificates representing Excluded Shares and
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Dissenting Shares) shall represent for all purposes solely the right to receive,
in accordance with the terms hereof, the Merger Consideration in cash multiplied
by the number of Shares evidenced by such Certificate.
(c) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Paying Agent
will deliver in exchange for such affidavit, the applicable Merger Consideration
with respect to the Shares formerly represented by such Certificate.
(d) Any portion of the aggregate Merger Consideration made
available to the Paying Agent to pay for Shares for which appraisal rights have
been perfected shall be returned to Parent upon demand. Any portion of the
Payment Fund (including the proceeds of any investments thereof) that remains
unclaimed by the former stockholders of the Company for six (6) months after the
Effective Time shall be repaid to Parent. Any former stockholders of the Company
who have not complied with this Section 2.3(d) hereof prior to the end of such
six (6) month period shall thereafter look only to Parent (subject to abandoned
property, escheat or other similar Law) but only as general creditors thereof
for payment of their claim for the Merger Consideration, without any interest
thereon, upon due surrender of the Certificates held by them. Neither Parent,
the Surviving Corporation nor the Paying Agent, shall be liable to any holder of
Shares for any monies delivered from the Payment Fund or otherwise to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
SECTION 2.4 Existing Stock Options; Warrants.
(a) Except to the extent set forth in Section 2.4(a) of the
Disclosure Letter, which options shall be cancelled by the Company upon the
Effective Time, the Company shall take all reasonable actions to ensure that
each option or right to acquire Shares (the "Existing Stock Options") granted
under any stock option or similar plan of the Company or under any agreement to
which the Company or any Subsidiary is a party (the "Stock Option Plans") which
is outstanding as of the Effective Time, whether or not then exercisable or
vested, shall by virtue of the Merger and without any action on the part of the
Company or the holder thereof, be converted into and represent only the right to
receive an amount in cash, without interest, with respect to each Share subject
thereto equal to the excess, if any, of the Merger Consideration over the per
share exercise or purchase price of such Existing Stock Option. Except to the
extent set forth in Section 2.4(a) of the Disclosure Letter, on the Effective
Time, each holder of an Existing Stock Option shall be entitled to receive, in
full satisfaction of such Existing Stock Option, an amount in cash without
interest in respect thereof equal to the product of (i) the excess, if any, of
the Merger Consideration over the per share exercise or purchase price of such
Existing Stock Option and (ii) the number of Shares subject to such Existing
Stock Option (such amount being hereinafter referred to as the "Option
Consideration") and each Existing Stock Option (including those Existing Stock
Options set forth on Section 2.4(a) of the Disclosure Letter) shall be canceled
upon payment to the
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Option holder of the Option Consideration reduced by any income or employment
tax withholding required under the Code or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of such Existing Stock Option. Prior to the Effective Time, the
Company shall use its reasonable best efforts to obtain all necessary consents
or releases from holders of Existing Stock Options under the Stock Option Plans
and take all such other lawful action as may be necessary to give effect to the
transactions contemplated by this Section 2.4(a). The Company shall take all
reasonable actions to ensure (i) that the Stock Option Plans shall terminate as
of the Effective Time and (ii) that following the Effective Time no participant
in the Stock Option Plans or other plans, programs or arrangements shall have
any right thereunder to acquire any capital stock of the Company, the Surviving
Corporation or any subsidiary thereof. All administrative and other rights and
authorities granted under any Stock Option Plan to the Company, the Board of
Directors of the Company or any Committee or designee thereof, shall, following
the Effective Time, reside with the Surviving Corporation.
(b) The Company shall take all reasonable actions required to
qualify for the exemption contemplated by Rule 16b-3 under the Exchange Act for
the treatment of the Existing Stock Options contemplated hereby, including, if
necessary or appropriate, obtaining the approval of the Company's Board of
Directors, of the type described in a pertinent SEC no-action letter dated
January 12, 1999.
(c) Each warrant to acquire Shares (the "Existing Warrants")
granted under any warrant or similar agreement set forth in Section 2.4(c) of
the Disclosure Letter to which the Company or any Subsidiary is a party which is
outstanding as of the Effective Time, whether or not then exercisable or vested,
shall by virtue of the Merger and without any action on the part of the Company
or the holder thereof, be converted into and shall represent only the right to
receive an amount in cash, without interest, with respect to each Share subject
thereto equal to the excess, if any, of the Merger Consideration over the per
share exercise price of such Existing Warrant. On and after the date hereof, the
Company shall grant no additional warrants. After the Effective Time, following
delivery of a duly executed Letter of Transmittal and such other documents as
may be reasonably required by the Company or the Paying Agent, each holder of an
Existing Warrant shall be entitled to receive, in full satisfaction of such
Existing Warrant (subject to any applicable withholding tax as specified in
Section 2.7), an amount in cash without interest in respect thereof equal to the
product of (i) the excess, if any, of the Merger Consideration over the per
share exercise or purchase price of such Existing Warrant and (ii) the number of
Shares subject to such Existing Warrant (such amount being hereinafter referred
to as the "Warrant Consideration") and each Existing Warrant shall be canceled
as of the Effective Time. Such payment shall be reduced by any income or
employment tax withholding required under the Code or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of such Existing Warrant.
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SECTION 2.5 Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the
contrary, Shares that are held by any record holder who has not voted in favor
of the Merger or consented thereto in writing and who has demanded appraisal
rights in accordance with Section 262 of the Corporation Law (the "Dissenting
Shares") shall not be converted into the right to receive the Merger
Consideration, but shall become the right to receive such consideration as may
be determined to be due in respect of such Dissenting Shares pursuant to the
Corporation Law; provided, however, that any holder of Dissenting Shares who
shall have failed to perfect or shall have withdrawn or lost his rights of
appraisal with respect to such Dissenting Shares, in each case under the
Corporation Law, shall forfeit the right to appraisal of such Dissenting Shares,
and such Dissenting Shares shall be deemed to have been converted into the right
to receive, as of the Effective Time, the Merger Consideration, without
interest. Notwithstanding anything to the contrary contained in this Section
2.5(a), if the Merger is rescinded or abandoned, then the right of any
stockholder to be paid the fair value of such stockholder's Dissenting Shares
shall cease. The Surviving Corporation shall comply with all of its obligations
under the Corporation Law with respect to holders of Dissenting Shares.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal, and any withdrawals of such demands, received by the
Company and any other related instruments served pursuant to the Corporation
Law, and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
Corporation Law. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any demands for appraisal, or negotiate
or offer to settle any such demands.
SECTION 2.6 Adjustments. If during the period between the date of
this Agreement and the Effective Time, any change in the outstanding Shares
shall occur, by reason of any reclassification, recapitalization, stock
dividend, stock split or combination, exchange or readjustment of Shares, or any
stock dividend thereon with a record date during such period (but not as a
result of the exercise of (i) Existing Stock Options or (ii) Existing Warrants),
the Merger Consideration shall be appropriately adjusted.
SECTION 2.7 Withholding Taxes. Parent, Merger Sub and the Surviving
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable to a holder of Shares, Existing Stock Options or Existing
Warrants, pursuant to the Merger such amounts as are required to be withheld
under the Internal Revenue Code of 1986, together with the rules and regulations
promulgated thereunder, as amended (the "Code"), or any applicable provision of
state, local or foreign Tax Law. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Shares, Existing Stock Options or Existing
Warrants, as the case may be, in respect of which such deduction and withholding
were made.
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SECTION 2.8 Closing of the Company's Transfer Books. At the close of
business on the day of the Effective Time, the stock transfer books of the
Company shall be closed. At and after the Effective Time, there shall be no
registration of transfers of shares of capital stock which were outstanding
immediately prior to the Effective Time on the stock transfer books of the
Surviving Corporation. From and after the Effective Time, the holders of shares
of capital stock outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to such shares of capital stock, except as
otherwise provided in this Agreement or by applicable Law. All cash paid upon
the surrender of Certificates in accordance with the terms of this Article II
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of capital stock previously represented by such Certificates. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged for cash as
provided in this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as set forth in the corresponding section of the disclosure
letter (each section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent expressly specified
therein) delivered by the Company to Parent and Merger Sub prior to the
execution of this Agreement (the "Disclosure Letter"), the Company represents
and warrants to Parent and Merger Sub, as follows:
SECTION 3.1 Organization and Qualification. The Company and each of
its Subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of its jurisdiction of incorporation, with all corporate
power and authority to own its properties and conduct its business as currently
conducted on the date hereof, except where the failure to be so organized,
existing and in good standing or to have such power and authority has not had or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. Except as set forth in Section 3.1 of the Disclosure
Letter, the Company and each of its Subsidiaries is duly qualified and in good
standing as a foreign corporation authorized to do business in each of the
jurisdictions in which the character of the properties owned or held under lease
by it or the nature of the business transacted by it makes such qualification
necessary, except where the failure to be so qualified and in good standing has
not had or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Section 3.1 of the Disclosure Letter sets
forth a true and complete list of each of the Company's Subsidiaries.
SECTION 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 200,000,000 Shares and (ii) 1,200,000 shares of "blank check" preferred
stock. As of the close of business on April 9, 2004, 13,929,259 Shares were
issued and outstanding and no shares of preferred stock were issued and
outstanding. Section 3.2(a)(i) of the Disclosure Letter contains a list, as of
April 9, 2004, of the name of each Existing Stock
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Option holder, the number of outstanding Existing Stock Options held by such
holder, the number of Shares such holder is entitled to receive upon the
exercise of each Existing Stock Option and the corresponding exercise price.
Section 3.2(a)(i) of the Disclosure Letter also contains a list, as of the close
of business on the day immediately preceding the date hereof, of any Shares
issued subsequent to April 9, 2004 upon the exercise of Existing Stock Options.
Section 3.2(a)(ii) of the Disclosure Letter contains a list, as of April 9,
2004, of the name of each Existing Warrant holder, the number of outstanding
Existing Warrants held by such holder, the number of Shares such holder is
entitled to receive upon the exercise of each Existing Warrant and the
corresponding exercise price. Section 3.2(a)(ii) of the Disclosure Letter also
contains a list, as of the close of business on the day immediately preceding
the date hereof, of any Shares issued subsequent to April 9, 2004 upon the
exercise of Existing Warrants. Except as disclosed in Sections 3.2(a)(i) and
3.2(a)(ii) of the Disclosure Letter, since April 9, 2004, the Company has not
issued any Shares (other than pursuant to the exercise of any (i) Existing
Warrants or (ii) Existing Stock Options), has not granted any options, warrants
or rights or entered into other agreements or commitments to issue or purchase
Shares (under the Stock Option Plans or otherwise) and has not split, combined
or reclassified any of its shares of capital stock. All of the outstanding
shares of capital stock of the Company have been, and all Shares that may be
issued pursuant to the exercise of options or warrants will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued
and fully paid and non-assessable, and have not been (and will not be) issued in
violation of (nor are any of the authorized shares of capital stock subject to)
any preemptive or similar rights created by statute, the Certificate of
Incorporation of the Company or By-laws of the Company, or any agreement to
which the Company is a party or is bound. Except for the Rights, the Existing
Stock Options and the Existing Warrants, there are not now and as of the
Effective Time there will not be, any (i) securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities or
ownership interests in the Company, (ii) options (including stock option plans
and programs), warrants, rights or other agreements or commitments to acquire
from the Company, or obligations of the Company to issue, sell, deliver,
exchange, convert, transfer or cause to be issued, sold, delivered, exchanged,
converted or transferred from the Company, any capital stock, voting securities
or other ownership interests in (or securities convertible into or exchangeable
for capital stock or voting securities or other ownership interests in) the
Company, (iii) obligations of the Company to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other
similar agreement or commitment relating to any capital stock, voting securities
or other ownership interests in the Company, (iv) bonds, debentures, notes or
other indebtedness of the Company having the right to vote on any matters on
which stockholders of the Company may vote (the items in clauses (i), (ii),
(iii) and (iv), together with the capital stock of the Company, being referred
to collectively as "Company Securities") or (v) obligations by the Company or
any of its Subsidiaries to make any payments based on the price or value of the
Shares. There are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities,
other than by exercise of holders of Existing Stock Options or Existing
Warrants. There are no voting trusts or other agreements or understandings to
which the
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Company or any of its Subsidiaries is a party with respect to the voting of
capital stock of the Company or any of its Subsidiaries.
(b) The Company is directly or indirectly the record and
beneficial owner of all the outstanding shares of capital stock of each Company
Subsidiary, except as set forth in Section 3.2(b) of the Disclosure Letter, free
and clear of any Lien, and there are no irrevocable proxies with respect to any
such shares. There are no outstanding (i) securities of the Company or any of
its Subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary of the Company,
(ii) options (including stock option plans and programs), warrants, rights or
other agreements or commitments to acquire from the Company or any of its
Subsidiaries (or obligations of the Company or any of its Subsidiaries to issue,
sell, deliver, exchange, convert, transfer or cause to be issued, sold,
delivered, exchanged, converted or transferred) any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable for any capital stock, voting securities or ownership interests
in, any of its Subsidiaries, (iii) obligations of the Company or any of its
Subsidiaries to grant, extend or enter into any subscription, warrant, right,
convertible or exchangeable security or other similar agreement or commitment
relating to any capital stock, voting securities or other ownership interests in
any of the Company's Subsidiaries (the items in clauses (i), (ii) and (iii),
together with the capital stock of such Subsidiaries, being referred to
collectively as "Subsidiary Securities") or (iv) obligations of the Company or
any of its Subsidiaries to make any payment based on the value of any shares of
capital stock of any Subsidiary. Except as set forth in Section 3.2(b) of the
Disclosure Letter, there are no outstanding obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding
Subsidiary Securities.
(c) Except as set forth in Section 3.2(c) of the Disclosure
Letter, the Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable for
any equity or similar interest in, any Person.
SECTION 3.3 Authority for this Agreement; Binding Effect. The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and, subject to obtaining the Requisite Company Vote, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated, other than the approval of the Merger, this
Agreement and the transactions contemplated by this Agreement, by the holders of
a majority of the outstanding Shares prior to the consummation of the Merger.
This Agreement has been duly and validly executed and delivered by the Company
and constitutes a legal, valid and, assuming the due authorization, execution
and delivery of this Agreement by Merger Sub and Parent, binding agreement of
the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
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other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law).
SECTION 3.4 Consents and Approvals; No Violation.
(a) Neither the execution and delivery of this Agreement by
the Company nor the consummation of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or By-laws (or other similar governing documents)
of the Company or any of its Subsidiaries, (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any foreign,
federal, state or local government or subdivision thereof, or governmental,
judicial, legislative, executive, administrative or regulatory authority,
agency, commission, tribunal, body or instrumentality (including tribal bodies
or any official thereof or any arbitrator or panel thereof) (each a
"Governmental Entity"), other than (A) filing of appropriate merger documents in
accordance with the Corporation Law and (B) compliance with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (together with the rules and regulations thereunder, the "HSR Act"), the
Securities Act, the Exchange Act and the "blue sky" or securities laws of any
state, (iii) except as set forth in Section 3.4(a) of the Disclosure Letter,
require any consent, waiver or approval or result in a default (or give rise to
any right of termination, cancellation, modification or acceleration) under any
of the terms, conditions or provisions of any contract, agreement, lease or
sub-lease, license, franchise, loan or credit agreement, note, bond, mortgage,
indenture or other instrument, arrangement, commitment or obligation to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries or any of their respective assets may be bound, (iv) result
in the creation or imposition of any imperfection of title, mortgage, Lien or
encumbrance of any kind on any asset of the Company or any of its Subsidiaries
or (v) assuming compliance with the matters set forth in the preceding
subsection (ii), violate any order (including one issued by an arbitrator),
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its Subsidiaries or by which any of their respective assets are bound,
except in the case of clauses (ii), (iii), (iv) and (v) for any of the foregoing
that has not had or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect or a material adverse effect on the
ability of the parties to consummate the Merger.
(b) The Board of Directors of the Company (at a meeting or
meetings duly called and held prior to the date hereof) has by the unanimous
vote of the directors present (who constitute one hundred percent (100%) of the
directors in office) (A) determined that the terms of the Merger are advisable
and fair to, and in the best interests of, the stockholders of the Company, (B)
approved and adopted this Agreement and the transactions contemplated hereby
(including the Merger) and (C) resolved to recommend the approval and adoption
of this Agreement, the Merger and the transactions contemplated by this
Agreement by the stockholders of the Company and directed that this Agreement
and the Merger be submitted to the stockholders of the Company for approval.
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SECTION 3.5 Reports; Financial Statements.
(a) Except as set forth in Section 3.5(a) of the Disclosure
Letter, since April 1, 2001, the Company has duly filed all forms, reports,
schedules, proxy statements and documents required to be filed by it with the
SEC. True and correct copies of all filings made by the Company with the SEC
since such date and prior to the date hereof (the "Company SEC Report"), whether
or not required by Law and including any registration statement filed by the
Company under the Securities Act, have been either made available or are
publicly available to Parent and Merger Sub. As of their respective dates, the
Company SEC Reports (other than preliminary material) complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Reports and none of the Company SEC Reports, at the time filed,
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, in light of the circumstances under which they were made, not
misleading. No Subsidiary of the Company is subject to periodic reporting
requirements of the Exchange Act or is otherwise required to file documents with
the SEC or comparable Governmental Entity or any national securities exchange or
quotation service.
(b) The audited consolidated financial statements of the
Company for the year ended March 31, 2003 and the audited and unaudited
consolidated financial statements of the Company included (or incorporated by
reference) in the Company SEC Reports (the "Financial Statements") comply as to
form in all material respects with applicable accounting requirements and with
the rules and regulations of the SEC with respect thereto and were prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis throughout the periods involved ("GAAP") (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of their
respective dates, and the consolidated income, stockholders equity, results of
operations and changes in consolidated financial position or cash flows for the
periods presented therein, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments. The
books and records of the Company and its Subsidiaries accurately reflect in all
material respects, the transactions and accounts of the Company and its
Subsidiaries.
(c) Except (i) as reflected or reserved against or disclosed
in the Financial Statements, (ii) for liabilities that are not required to be
recorded or reflected on a balance sheet pursuant to GAAP and (iii) as incurred
in the ordinary course of business since December 31, 2003, neither the Company
nor any of its Subsidiaries has any liabilities of any nature, whether accrued,
absolute, fixed, contingent or otherwise, or whether due or to become due, other
than liabilities that have not had or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
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(d) The Company is in compliance in all material respects with
the applicable provisions of the Sarbanes-Oxley Act of 2002 and the related
rules and regulations promulgated thereunder (the "Sarbanes-Oxley Act").
SECTION 3.6 Absence of Certain Changes. Except (i) for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, (ii) as disclosed by the Company SEC Reports or (iii) as set forth in
Section 3.6 of the Disclosure Letter, since December 31, 2003, (a) the Company
and its Subsidiaries have not suffered any change, condition, event or
development that has had, or would reasonably be expected to have, a Material
Adverse Effect, (b) the Company and its Subsidiaries have conducted in all
material respects their respective businesses only in the ordinary course
consistent with past practice, except for the negotiation and execution and
delivery of this Agreement and (c) there has not been any action by the Company
or any of its Subsidiaries which would constitute a breach of clauses (a)-(z) of
Section 5.1.
SECTION 3.7 Proxy Statement. The Proxy Statement, and any other
schedule or document required to be filed by the Company in connection with the
Merger, will not, at the time the Proxy Statement is first mailed and at the
time of the Special Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation or warranty is made by the
Company with respect to information supplied in writing by Parent, Merger Sub or
an affiliate of Parent or Merger Sub for inclusion therein. The Proxy Statement
will comply in all material respects with the requirements of the Exchange Act
and any other applicable laws. If at any time prior to the date of the Special
Meeting any event occurs which should be described in an amendment to the Proxy
Statement, the Company will file and disseminate, as required, an amendment or
supplement which complies in all material respects with the Exchange Act and any
other applicable laws. Prior to its filing with the SEC, the amendment or
supplement shall be delivered to Parent and its outside counsel.
SECTION 3.8 Brokers. Except as set forth in Section 3.8 of the
Disclosure Letter and except for Friedman, Billings, Ramsey & Co., Inc., whose
fees will be paid by the Company pursuant to an engagement letter, a copy of
which has previously been provided to Parent, no Person is entitled to receive
any brokerage, finder's or other fee or commission in connection with this
Agreement or the transactions contemplated hereby based upon agreements made by
or on behalf of the Company or any of its Subsidiaries.
SECTION 3.9 Employee Benefit Matters.
(a) Section 3.9(a) of the Disclosure Letter lists all material
pension, retirement, savings, disability, medical, dental, health, life
(including all individual life insurance policies as to which the Company or any
of its Subsidiaries is the owner, beneficiary or both), death benefit, group
insurance, profit sharing, deferred compensation, stock option or other
equity-based compensation, bonus, incentive, vacation pay, severance pay,
"cafeteria" or "flexible benefit" plan under Section 125 of
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the Code, or other employee benefit plan, trust, arrangement, contract,
agreement, policy or commitment (including without limitation, all employee
pension benefit plans as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all material employee
welfare benefit plans as defined in Section 3(l) of ERISA), (A) under which
current or former employees of the Company or any of its Subsidiaries or their
respective ERISA Affiliates are entitled to participate by reason of their
employment with the Company or any of its Subsidiaries or their respective ERISA
Affiliates, whether or not any of the foregoing is funded, whether insured or
self-funded and whether written or oral and with respect to which the Company or
any of its Subsidiaries or their respective ERISA Affiliates are a party or a
sponsor or a fiduciary thereof or by which the Company or any of its
Subsidiaries or their respective ERISA Affiliates (or any of their rights,
properties or assets) are bound or (B) with respect to which the Company or any
of its Subsidiaries otherwise may have any material liability (collectively, the
"Employee Benefit Plans"). For each Employee Benefit Plan, the Company has made
available true and correct copies of all plan documents, all employment
agreements, summary plan descriptions, determination letters, all material
communications with any government entity or agency (including the Internal
Revenue Service and the PBGC) given or received with respect to any Employee
Benefit Plan other than non-material communications received in the ordinary
course within the past five (5) years, and the three (3) most recent Forms 5500,
including all financial or actuarial reports, if applicable, and all other
attached schedules.
(b) Except as set forth in Section 3.9(b) of the Disclosure
Letter and except as have not had or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, the Company, its
Subsidiaries and their respective ERISA Affiliates and, to their knowledge, any
"administrator(s)" (as described in Section 3(16)(A) of ERISA) of the Employee
Benefit Plans have complied in all material respects with such Plans' terms and
with the applicable requirements of ERISA, the Code and any other applicable
Law, specifically including the reporting and disclosure requirements of Part 1
of Title I, and Title IV of ERISA and the Code, in a timely and accurate manner,
such that no material penalties are reasonably expected to be imposed on the
Company or its Subsidiaries or their respective ERISA Affiliates, and no
material penalties may be imposed on Parent or Merger Sub under ERISA, the Code
or otherwise with respect to the Employee Benefit Plans or any related trusts.
(c) For purposes of this Agreement, "ERISA Affiliates" shall
mean any trade or business (whether or not incorporated) that is part of the
same controlled group, or under common control with, or part of an affiliated
service group that includes, the Company or any of its Subsidiaries within the
meaning of Section 414(b), (c), (m) or (o) of the Code.
(d) With respect to the Employee Benefit Plans:
(i) No Employee Benefit Plan is, and no "employee
benefit plan" within the meaning of Section 3(3) of ERISA which the Company or
any ERISA Affiliate has maintained or contributed to within the six (6) years
immediately preceding the date hereof was, (A) subject to Title IV of ERISA or
Section 412 of the
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Code, (B) a "multiemployer" plan within the meaning of Section 3(37) of ERISA or
(C) a "multiple employer plan" within the meaning of the Code or ERISA. Except
as set forth in Section 3.9(d)(i) of the Disclosure Letter or except as have not
had or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, each of the Employee Benefit Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination letter that the plan complies with the Code,
as amended, pursuant to a request which accurately described such plan, and has
been administered and operated in all material respects in accordance with all
Laws so as to maintain such qualification.
(ii) Except as have not had or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
all contributions or other amounts payable by the Company or any of its
Subsidiaries or their ERISA Affiliates through the date hereof with respect to
each Employee Benefit Plan in respect of current or prior plan years have been
either paid or accrued on the Financial Statements to the extent required under
the terms of such plan or in accordance with GAAP.
(iii) Except as have not had or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
there are no pending, or to the Company's knowledge, threatened or anticipated
material claims (other than routine claims for benefits) by, on behalf of or
against any of the Employee Benefit Plans or any trust related thereto or, to
the knowledge of the Company, by, on behalf of or against any fiduciary of such
plans.
(e) Except as have not had or would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect, neither
the Company nor any of its Subsidiaries has any material liability, whether
absolute or contingent, direct or indirect, including any obligations under any
Employee Benefit Plan, with respect to any misclassification of a person as an
independent contractor rather than as an employee or with respect to any
employees "leased" from another employer.
(f) The consummation of the transactions contemplated by this
Agreement will not, with respect to employees or former employees of the Company
or any of its Subsidiaries: (A) except as set forth in Section 3.9(f) of the
Disclosure Letter, entitle any individual to severance pay; or (B) except as set
forth in Section 2.4, accelerate the time of payment or vesting of, increase the
amount of, or satisfy a condition to the compensation due to any individual
under any Employee Benefit Plan. Except as set forth in Section 3.9(f) of the
Disclosure Letter, the consummation of the transactions contemplated by this
Agreement will not, with respect to employees or former employees of the Company
or any of its Subsidiaries, result in the payment of an amount that could,
individually or in combination with any other such payment, constitute an
"excess parachute payment" under Section 280G(b)(1) of the Code.
(g) Except as set forth in Section 3.9(g) of the Disclosure
Letter, (A) neither the Company nor any of its Subsidiaries has or will have any
material liability or obligation under any Employee Benefit Plan which provides
medical or death
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benefits with respect to current or former employees of the Company or any of
its Subsidiaries beyond their termination of employment (other than coverage
mandated by Law); and (B) except as have not had or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
each of the Company, its Subsidiaries and their respective ERISA Affiliates
which maintains a "group health plan," within the meaning of Section 607(l) of
ERISA has materially complied with the provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, the Health Insurance Portability
and Accountability Act of 1996, as amended, and any other applicable Law.
(h) Except as have not had or would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect, no
"prohibited transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) has occurred with respect to any Employee Benefit Plan
subject to ERISA, other than such a transaction subject to an administrative or
statutory exemption, with respect to which a material tax, penalty or other
amount may reasonably be expected to be imposed on the Company or any of its
Subsidiaries or their respective ERISA Affiliates.
(i) None of the Company or any of its Subsidiaries, or any of
their respective ERISA Affiliates, or any organization with respect to which any
such entity is a successor or parent corporation, within the meaning of Section
4069(b) of ERISA, has engaged in any transaction described in Section 4069 of
ERISA which has had or would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(j) To the Company's knowledge, there has been no "mass
layoff" or "plant closing," as each such term is defined in the Worker
Adjustment and Retraining Notification Act of 1986, as amended ("WARN"), with
respect to the employees of the Company or any of its Subsidiaries, with respect
to which there could be any future material liability to such employees under
WARN.
(k) Except as set forth in Section 3.9(k) of the Disclosure
Letter, none of the Company or any of its Subsidiaries is a party to any
collective bargaining or other labor union contract. To the Company's knowledge,
there are no union organization attempts underway with respect to any employees
of the Company or any of its Subsidiaries. There is no pending or, to the
knowledge of the Company, threatened material labor dispute, strike or work
stoppage involving such employees. To the knowledge of the Company, neither the
Company nor any of its Subsidiaries has committed any material unfair labor
practices (as defined in the National Labor Relations Acts of 1947, as amended)
in connection with the operation of its business and, except as set forth in
Section 3.9(k) of the Disclosure Letter, there is no pending or, to the
knowledge of the Company, threatened material charge or complaint against the
Company or any of its Subsidiaries by the National Labor Relations Board or any
comparable state or local agency.
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(l) Except as set forth in Section 3.9(l) of the Disclosure
Letter, the Company represents and warrants to Parent and Merger Sub that since
December 31, 2003, neither the Board of Directors of the Company nor any
committee of the Board of Directors of the Company has approved, committed or
taken any other action to approve any bonuses for the Company's employees.
SECTION 3.10 Litigation, etc. Except as set forth in Section 3.10 of
the Disclosure Letter, there is no claim, charge, action, suit, arbitration,
proceeding or investigation ("Claim") pending or, to the knowledge of the
Company, threatened (a) against the Company or any of its Subsidiaries, (b)
affecting their respective assets, rights or businesses or (c) against any of
their directors, officers or employees that if adversely determined would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect or that in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the Merger or seeks an award of damages with respect
thereto. Neither the Company nor any of its Subsidiaries is subject to any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any Subsidiary of the Company that
has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 3.11 Tax Matters.
Except as set forth in Section 3.11 of the Disclosure Letter and
except to the extent that the failure of the following has not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect:
(a) The Company and its Subsidiaries have duly filed all Tax
Returns required to be filed by Law with respect to the Company and its
Subsidiaries (or any of them) or any of their income, properties or operations
as of the date hereof in a timely manner and, to the knowledge of the Company,
there are no extensions of time within which to file any Tax Return that are
currently in effect. All such Tax Returns are accurate and complete in all
material respects. All Tax Returns required to be filed by or with respect to
the Company and its Subsidiaries (or any of them) after the date hereof and on
or before the Effective Time shall be prepared and timely filed (taking into
account applicable filing extensions). No penalties or other charges in a
material amount in excess of amounts reserved for Taxes and accrued Taxes
established on the Financial Statements of the Company are or will become due
with respect to the late filing of any Tax Return of the Company and its
Subsidiaries (or any of them) or payment of any Tax of the Company and its
Subsidiaries (or any of them), required to be filed or paid on or before the
Effective Time.
(b) With respect to all Tax Returns filed or required to be
filed by or with respect to the Company and its Subsidiaries (or any of them):
(i) the statute of limitations for the assessment of
United States federal corporate income taxes has expired for all years prior to
2000;
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(ii) no audit is in progress and neither the Company nor
any of its Subsidiaries has received written notice of any audit;
(iii) no waiver or agreement has been executed for the
extension of time for the assessment or payment of any Tax;
(iv) no deficiency has been proposed in writing or
assessed in writing by a taxing authority against the Company or any of its
Subsidiaries; and
(v) there are no Liens for Taxes on the assets of the
Company or any of its Subsidiaries, other than Liens for Taxes not yet due and
payable or being contested in good faith by appropriate proceedings for which
adequate reserves have been provided on the consolidated balance sheet of the
Company dated December 31, 2003.
(c)
(i) all amounts required to be paid on or before the
date hereof by or with respect to the Company and its Subsidiaries (or any of
them) with respect to Taxes have been timely paid; and
(ii) any amounts required to be paid by or with respect
to the Company and its Subsidiaries (or any of them) with respect to Taxes after
the date hereof and on or before the Effective Time shall be timely paid.
(d) Neither the Company nor any of its Subsidiaries has been
or is a party to any tax sharing agreement or similar arrangement.
(e) The Company and its Subsidiaries have made adequate
provisions in accordance with GAAP for each of the Company and its Subsidiaries
in the Financial Statements for the payment of all Taxes for which each of the
Company and its Subsidiaries may be liable for the periods covered thereby that
were not yet due and payable as of the dates thereof.
SECTION 3.12 Compliance with Law. Neither the Company nor any of its
Subsidiaries (a) is, in any material respect, in conflict with, in default
under, in violation of or under investigation pursuant to any Law applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected or (b) has received
notice of or, to the knowledge of the Company, been threatened to be charged
with any of the foregoing, except where the failure to so comply has not had or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. The Company and its Subsidiaries have all permits,
licenses, authorizations, consents, approvals, certificates and franchises from
Governmental Entities required to conduct their businesses as currently
conducted (the "Company Permits"), except as set forth in Section 3.12 of the
Disclosure Letter and except for such permits, licenses, authorizations,
consents,
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approvals, certificates and franchises the absence of which has not had or would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect or a material adverse effect on the ability of the parties to
consummate the Merger. The Company and its Subsidiaries are in compliance with
the terms of the Company Permits, except where the failure so to comply has not
had or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or a material adverse effect on the ability
of the parties to consummate the Merger.
SECTION 3.13 Environmental Matters. The Company and each of its
Subsidiaries have been and are in compliance with all applicable Environmental
Laws except for such instances of non-compliance that have not had or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company and each of its Subsidiaries have all material
permits, licenses, consents, approvals, certificates, waivers, variances and
other authorizations ("Authorizations") that are required with respect to the
operation of their respective businesses, properties and assets under the
Environmental Laws and are in compliance with such Authorizations and all such
Authorizations are in full force and effect except for such non-compliance or
failures to be in full force and effect that have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Except as set forth in Section 3.13 of the Disclosure Letter,
none of the Company or its Subsidiaries is subject to any material claims,
actions, suits, proceedings, investigations, decrees, judgments or orders
pursuant to Environmental Law or principles of common law relating to pollution
of the environment or health and safety which have had or would reasonably be
expected to have a Material Adverse Effect. There are no events, conditions or
circumstances which have resulted or are reasonably likely to result in
liability or costs pursuant to Environmental Laws or principles of common law
relating to pollution or protection of the environment or health and safety
which have had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 3.14 Intellectual Property.
(a) Except as set forth in Section 3.14(a) of the Disclosure
Letter, the Company and its Subsidiaries own, or otherwise have the right
pursuant to a valid license, sublicense or other agreement to, the Company
Intellectual Property, free and clear of all Liens, and have the right (subject
to any such license terms, if applicable) to use, make, have made, sell, offer
to sell, import, license, sublicense and otherwise exploit all Company
Intellectual Property in accordance with applicable Law.
(b) Section 3.14(b) of the Disclosure Letter sets forth all
registrations, issuances, filings and applications for any Intellectual Property
filed by the Company, its Subsidiaries or any predecessors, specifying as to
each item, as applicable: the nature of the item, including the title; the owner
of the item; the jurisdictions in which the item is issued or registered or in
which an application for issuance or registration has been filed; and the
issuance, registration, or application numbers and dates.
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(c) Section 3.14(c) of the Disclosure Letter sets forth all
material IP Licenses under which the Company or any Subsidiary is a (i)
licensor, except for licenses of its commercially-marketed Software in the
ordinary course of business substantially under the Company's standard terms and
conditions for such licenses, or (ii) licensee, distributor, or reseller. The
Company and its Subsidiaries have substantially performed all obligations
imposed on them pursuant to the IP Licenses. The Company and its Subsidiaries
have made all payments to date required under all material IP Licenses, and are
not, nor to the knowledge of the Company or any Subsidiary is another party
thereto, in breach of or material default thereunder in any respect, nor is
there any event that with notice or lapse of time or both would constitute a
material default thereunder. All of the material IP Licenses are valid,
enforceable, and in full force and effect in accordance with their terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law), and, with respect to the Company and its
Subsidiaries, will continue to be so on identical terms immediately following
the completion of the transactions contemplated by this Agreement. The
transactions contemplated by this Agreement will not result in the termination
of, or otherwise require the consent of any party to, any material IP License.
(d) All of the Company's and the Subsidiaries' rights in the
Company Intellectual Property are valid and enforceable with respect to all
Intellectual Property rights other than Patents and Trademarks, and to the best
of the Company's knowledge, with respect to Patents and Trademarks. The Company
and the Subsidiaries have taken commercially reasonable actions to maintain and
protect each item of Company Intellectual Property owned or purported to be
owned by the Company or any Subsidiary. The Company and the Subsidiaries have
taken commercially reasonable precautions to protect the secrecy,
confidentiality, and value of their material Trade Secrets and the proprietary
nature and value of their Intellectual Property. To the knowledge of the
Company, none of the Company's or any Subsidiary's material Trade Secrets, the
value of which is contingent upon maintenance of confidentiality thereof, has
been disclosed to any employee, representative or agent of the Company, a
Subsidiary or any other Person not obligated to maintain such material Trade
Secret in confidence under applicable law or pursuant to a confidentiality
agreement entered into with the Company or the applicable Subsidiary, except as
required by the applicable patent office pursuant to the filing of a patent
application by the Company or the applicable Subsidiary.
(e) Substantially all present employees involved with Software
development and each officer, consultant or any other Person not employed by the
Company or any of its Subsidiaries who developed any part of any Company or
Subsidiary product or any Intellectual Property that is or will be made, had
made, used, imported, or sold, offered for sale, licensed, sublicensed or
otherwise exploited by the Company or a Subsidiary within the past five (5)
years have executed a valid and enforceable agreement with the Company or the
applicable Subsidiary that (i) conveys any and all right, title and interest in
and to all Intellectual Property developed within the scope of such Person's
employment or engagement by such Person to the Company or
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the applicable Subsidiary, (ii) establishes that to the extent such Person is an
author of a copyrighted work created in connection with such Person's employment
or contract, such work is a "work made for hire," and (iii) obligates the
employee or contractor to keep any confidential information of the Company or
any Subsidiary confidential both during and for a period of time after the term
of employment or contract. No such employee, consultant or other Person has
excluded works or inventions related to any business of the Company or the
Company Intellectual Property made prior to his employment with or work for the
Company or applicable Subsidiary from his/her assignment of inventions pursuant
to such proprietary invention agreements.
(f) To the knowledge of the Company, no former employer or
client of any employee of the Company or any Subsidiary, and no current or
former client of any consultant of the Company or any Subsidiary, has made a
material Claim against such employee, consultant or any other Person, that such
employee or such consultant is utilizing or infringing upon Intellectual
Property of such former employer or client.
(g) Except as set forth in Section 3.14(g) of the Disclosure
Letter, it is not necessary for the Company's or any Subsidiary's business to
use any Intellectual Property owned by any present or past director, officer,
employee or consultant of the Company or any Subsidiary (or Persons the Company
presently intends to hire).
(h) None of the Intellectual Property, products or services
owned, used, developed, provided, sold, licensed or imported by the Company or
any Subsidiary, or made for, used or sold by or licensed to the Company or any
Subsidiary by any Person (i) infringes upon or otherwise violates any
Intellectual Property rights (other than Patents and Trademarks) of any Person,
or (ii) to the knowledge of the Company, infringes upon or otherwise violates
any Patent or Trademark rights of any Person. To the knowledge of the Company,
other than as set forth in Section 3.14(h) of the Disclosure Letter, no Person
is infringing upon or otherwise violating the Intellectual Property rights of
the Company or any Subsidiary.
(i) Except as set forth in Section 3.14(i) of the Disclosure
Letter, there are no Claims pending, or to the knowledge of any of the Company,
threatened, and the Company knows of no basis for any Claim, (i) contesting the
right of the Company or any Subsidiary to use, make, have made, sell, offer to
sell, import, license, or otherwise exploit any of the Company's or any
Subsidiary's products or services currently or previously made, had made, sold,
offered for sale, licensed, imported or made available to any person or used by
the Company or any Subsidiary or (ii) opposing or attempting to cancel any of
the Company's or any Subsidiary's rights in or to any Company Intellectual
Property.
(j) Except as set forth in Section 3.14(j) of the Disclosure
Letter, neither the Company nor any Subsidiary is party to or bound by any
license or other agreement requiring the payment by the Company or any
Subsidiary of any material royalty or license payment, excluding such agreements
relating to Off-the-Shelf Software.
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(k) Except as set forth in Section 3.14(k) of the Disclosure
Letter, neither the Company nor any Subsidiary is bound by any non-competition
or similar agreement that would be binding upon Parent or Merger Sub after
completion of the transactions contemplated by this Agreement.
(l) All Software currently sold or licensed by the Company or
any Subsidiary for use by the Company's customers is identified in Section
3.14(l) of the Disclosure Letter. The Software performs in substantial
conformance with its documentation and, except as set forth in Section 3.14(l)
of the Disclosure Letter, is fully and freely transferable to Parent or Merger
Sub without any third party consents, is free from any material software defect
and, except as set forth in Section 3.14(l) of the Disclosure Letter, does not
contain any Self-Help Mechanism or Unauthorized Code.
(m) Neither the Company nor the Subsidiary is, nor, as a
result of the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby or thereby, will be, in
violation of any agreement relating to any Company Intellectual Property. Upon
Closing, Merger Sub will own all right, title, and interest in and to or have a
valid written license to use all Company Intellectual Property on identical
terms and conditions as the Company or the applicable Subsidiary enjoyed
immediately prior to such transactions.
SECTION 3.15 Real Property.
(a) The Company and its Subsidiaries have good and marketable
title to, or have a valid and enforceable right to use or a valid and
enforceable leasehold interest in, all real property (including all buildings,
fixtures and other improvements thereto) owned by them and material to the
conduct of their respective businesses as such businesses are now being
conducted. Neither the Company's nor any of its Subsidiaries' ownership of or
leasehold interest in any such property is subject to any mortgage, pledge,
Lien, option, conditional sale agreement, encumbrance, security interest, title,
exception or restriction or claim or charge of any kind ("Encumbrances"), except
for such Encumbrances as are set forth in Section 3.15(a) of the Disclosure
Letter or that have not had or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. All such property
is in good condition and repair, normal wear and tear excepted, and adequate in
all material respects for the continued conduct of the business of the Company
and its Subsidiaries in the manner in which it is currently conducted, except to
the extent that the condition of any property is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Section 3.15(b) of the Disclosure Letter sets forth a list
of all material leases, subleases and other agreements under which the Company
or any of its Subsidiaries uses or occupies or has the right to use or occupy,
now or in the future, any material real property (the "Real Property Leases").
Each Real Property Lease is valid, binding and in full force and effect, and to
the knowledge of the Company, no termination event or condition or uncured
default of a material nature on the part of the Company or any such Subsidiary
exists under any Real Property Lease. Each of the Company and its Subsidiaries
has a good and valid leasehold interest in each parcel of
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real property leased by it free and clear of all Liens, except (i) those
reflected or reserved against in the balance sheet of the Company dated as of
December 31, 2003, (ii) Taxes and general and special assessments not in default
and payable without penalty and interest and (iii) other Liens that do not
materially interfere with the Company's use and enjoyment of such real property
or materially detract from or diminish the value thereof or that have not had or
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
SECTION 3.16 Material Contracts.
(a) Section 3.16(a) of the Disclosure Letter sets forth a list
of (i) all customers that have current maintenance contracts with the Company or
one of its Subsidiaries, (ii) the top 16 of all Value Added Reseller contracts
or Original Equipment Manufacturer contracts that the Company or one of its
Subsidiaries is a party to, as determined by revenue for the last two (2) years
ended December 31, 2003, and (iii) all other contracts, agreements, commitments,
arrangements, leases (including with respect to personal property) and other
instruments which have not been fully performed and for which the Company or any
of its Subsidiaries has any continuing obligations or liabilities thereunder (to
which the Company or any of its Subsidiaries is a party or by which the Company,
any of its Subsidiaries or any of their respective assets is bound) that
involves or could involve aggregate payments of more than $250,000 that (A) are
not described in clauses (i) or (ii) or otherwise not set forth in any of
Sections 3.9, 3.14 or 3.15 of the Disclosure Letter, (B) are not liabilities and
obligations for fees and expenses incurred in connection with this transaction
and (C) do not relate to routine overhead and administrative costs or expenses
with respect to the facilities of the Company or its Subsidiaries that are
incurred in the ordinary course of business, consistent with past practices (the
contracts, agreements, commitments, arrangements, leases (including with respect
to personal property) and other instruments set forth in clauses (i) through
(iii) above, together with any contract, agreement or understanding required to
be set forth in Section 3.16(c) of the Disclosure Letter, each, a "Scheduled
Contract" and collectively, the "Scheduled Contracts"). Copies of all Scheduled
Contracts have been previously delivered to or made available by the Company for
inspection by Parent and Merger Sub, and such copies are true, complete and
correct.
(b) Each of the material Scheduled Contracts set forth in
clauses (ii) and (iii) of Section 3.16(a) are valid and binding and are in full
force and effect and enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law) and except for such failures to be in full
force and effect or enforceable that has not had or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
The Company is not, in any material respect, in violation or breach of or
default under any Scheduled Contract nor, to the Company's knowledge, is any
other party to any such Scheduled Contract.
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(c) Except as set forth in Section 3.16(c) of the Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to or bound
by any (x) contract, agreement or arrangement (including any lease of real
property) in the case of clauses (i-ii) and (iv-vi) or (y) any material
contract, agreement or arrangement (including any lease of real property), in
either case, entered into subsequent to January 1, 1990, (i) restricting the
ability of the Company or any of its Subsidiaries (or after the Merger, Parent
or any or its Subsidiaries) to compete in any material respect in or conduct any
line of business or to engage in business in any geographic area or to hire any
individual or group of individuals, (ii) containing covenants of any other
Person not to compete in any material respect with the Company or any of its
Subsidiaries, (iii) containing any so-called "most favored nation" provisions or
any similar provision requiring the Company or any Subsidiary (or after the
Merger, Parent or any of its Subsidiaries) to offer a third party terms or
concessions at least as favorable as offered to one or more other parties, (iv)
providing for "earn-outs," "performance guarantees" or contingent payments by
the Company or any of its Subsidiaries involving more than $100,000 over the
term of the contract, agreement or arrangement, (v) relating to indebtedness for
borrowed money, letters of credit, the deferred purchase price of property,
conditional sale arrangements, capital lease obligations, obligations secured by
a Lien, or interest rate or currency hedging activities (including guarantees
(other than the Company's guarantee of its Subsidiaries warranty obligations) or
other contingent liabilities in respect of any of the foregoing but in any event
excluding trade payables arising in the ordinary course of business consistent
with past practice, intercompany indebtedness and immaterial leases for
telephones, copy machines, facsimile machines and other office equipment) and
(vi) relating to any material joint venture, partnership, strategic alliance or
similar arrangement (including, without limitation, any franchising agreement).
SECTION 3.17 Opinion of Financial Advisor. The Board of Directors of
the Company has received the opinion of Friedman, Billings, Ramsey & Co., Inc.,
a copy of which has been provided to Parent, to the effect that, as of the date
of this Agreement, the consideration to be received in the Merger, by the
holders of Shares (other than Parent or its affiliates) is fair to such holders
from a financial point of view.
SECTION 3.18 Anti-takeover Plan; State Takeover Statutes. Except for
the Company Rights Plan, neither the Company nor any Subsidiary has in effect
any stockholder rights plan or similar device or arrangement, commonly or
colloquially known as a "poison pill" or "anti-takeover" plan or any similar
plan, device or arrangement and the Board of Directors of the Company has not
adopted or authorized the adoption of such a plan, device or arrangement. The
Board of Directors of the Company has taken all necessary actions to exempt the
Merger, this Agreement and the transactions contemplated by this Agreement from
Section 203 of the Corporation Law. No other "fair price," "moratorium,"
"control share acquisition," "business combination" or other similar state
takeover statute or similar statute or regulation of any jurisdiction applies or
purports to apply to the Merger, this Agreement, or any of the transactions
contemplated by this Agreement.
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SECTION 3.19 Insurance. Except as set forth in Section 3.19 of the
Disclosure Letter or except as has not had or would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect, (i) the
Company and each of its Subsidiaries maintain, and have maintained, without
interruption, during its existence, policies or binders of insurance covering
such risk, and events, including personal injury, property damage and general
liability in amounts the Company reasonably believes adequate for its business
and operations, (ii) the Company has not received notice of termination or
cancellation of any such policy and such policies shall not terminate as a
result of the consummation of the transactions contemplated hereby, (iii) the
Company or its Subsidiaries are named insureds under such policies, (iv) all
premiums required to be paid with respect thereto covering all periods up to and
including the Effective Time have been paid and (v) there has been no lapse in
coverage under such policies during any period for which the Company and its
Subsidiaries have conducted their respective operations. None of the Company or
its Subsidiaries has any obligation for retrospective premiums for any period
prior to the Effective Time which has had or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. All such
policies are in full force and effect and will remain in full force and effect
to and including the Effective Time, unless replaced with comparable insurance
policies having comparable terms and conditions. Except as set forth in Section
3.19 of the Disclosure Letter, no insurer has put the Company or any of its
Subsidiaries on notice that coverage may be denied with respect to any claim
submitted to such insurer by the Company or any such Subsidiary.
SECTION 3.20 Trade Relations. There exists no actual or, to the
knowledge of the Company, threatened termination, cancellation or limitation of,
or any adverse modification or change in, the business relationship of the
Company or any of its Subsidiaries with any distribution partner, customer or
supplier or any group of customers or suppliers whose purchases or inventories
provided to the Company's or any of its Subsidiaries' business are, in the
aggregate, material to the Company and its Subsidiaries, and there exists no
present condition or state of facts or circumstances that has had or would
reasonably be expected to prevent the Company or any of its Subsidiaries from
continuing such business relationships or such business with any such
distribution partner, customer, supplier or group of customers or suppliers in
the same manner as heretofore conducted by the Company or any of its
Subsidiaries, as the case may be.
SECTION 3.21 Warranties; Product Claims.
(a) Except as set forth in Section 3.21(a) of the Disclosure
Letter, the products manufactured by the Company and its Subsidiaries and sold
to end user customers and, to the Company's knowledge, the products manufactured
by the Company and its Subsidiaries and sold for use by original equipment
manufacturer customers or the products sold by the Company or its Subsidiaries
but manufactured by third parties, conform to design in all material respects
and comply in all material respects with all applicable Laws. To the Company's
knowledge, there is no pending federal or state legislation, not otherwise
applicable to the Company's industry, which if
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adopted or enacted would reasonably be expected to result in a Material Adverse
Effect as a result of the products sold by the Company and its Subsidiaries.
(b) Section 3.21(b) of the Disclosure Letter sets forth a
summary of each material recall (voluntary or involuntary) of products
manufactured by the Company or its Subsidiaries (or products containing products
manufactured by the Company or any of its Subsidiaries) during the three (3)
year period prior to the date hereof, describing in each case the nature of the
problem giving rise to such recall, the approximate number of products recalled
and the aggregate costs incurred by the Company or any of its Subsidiaries for
each such recall. Except as set forth in Section 3.21(b) of the Disclosure
Letter, during the three (3) year period prior to the date hereof, neither the
Company nor any of its Subsidiaries has experienced any material return or
Warranty Claims which in the aggregate in each of the last three (3) years, has
exceeded $250,000, with respect to products sold or services performed by the
Company and its Subsidiaries, nor are there any pending or, to the Company's
knowledge, threatened material return or Warranty Claims with respect to
products sold or services performed by the Company and its Subsidiaries for
which the Company or its Subsidiaries may have continuing liability or
obligations as of the date hereof.
SECTION 3.22 Potential Conflicts of Interest. Except as set forth in
Section 3.22 of the Disclosure Letter, no director, officer, employee or the
beneficial owner of one percent (1%) or more of the Shares nor any relative of
any such individual, (a) owns, directly or indirectly, any interest in, or is an
officer, director, employee or consultant of, any Person which is, or is engaged
in business as, a competitor, lessor, lessee, supplier, distributor, sales agent
or customer of, or lender to or borrower from, the Company or any of its
Subsidiaries, (b) owns, directly or indirectly, in whole or in part, any
tangible or intangible property that the Company or any of its Subsidiaries has
used, or that the Company or any of its Subsidiaries intends to use within the
next twelve months, in the conduct of their business or (c) receives any payment
or other benefit from the Company or any of its Subsidiaries, has any cause of
action or other claim whatsoever against, or owes or has advanced any amount to,
the Company or any of its Subsidiaries, except for claims in the ordinary course
of business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing as of the date
hereof. Except as disclosed in the Company SEC Reports, there are no
transactions, arrangements or contracts between the Company and its
Subsidiaries, on the one hand, and the Company's affiliates (other than
Subsidiaries of the Company) or other Persons, on the other hand, that would be
required to be disclosed under Item 404 of Regulation S-K under the Securities
Act.
SECTION 3.23 Amendment to the Company Rights Plan. The Board of
Directors of the Company has taken all necessary action (including any amendment
thereof) under the Company Rights Plan (without redeeming the Rights) so that
none of the execution or delivery of this Agreement, the consummation of the
Merger or any other transaction contemplated by this Agreement will cause (i)
the Rights to become exercisable under the Company Rights Plan or to separate
from the stock certificates to which they are attached, (ii) a Flip-in Date or
Stock Acquisition Date (each as defined in
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the Company Rights Plan) to occur or (iii) Parent, Merger Sub or any of their
Affiliates to be deemed an Acquiring Person (as defined in the Company Rights
Plan). The Company has furnished Parent with complete and correct copies of all
such actions of the Board of Directors of the Company. The Company has delivered
to Parent a true, complete and correct copy of the Company Rights Plan and the
Company Rights Plan has not been further modified or amended.
SECTION 3.24 Voting Requirements. The affirmative vote at the
Special Meeting or any adjournment or postponement thereof of the holders of a
majority of the outstanding Shares in favor of adopting this Agreement (the
"Requisite Company Vote") is the only vote of the holders of any class or series
of the Company's capital stock necessary to approve or adopt this Agreement and
the consummation of the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB
-----------------------------------
Parent and Merger Sub represent and warrant to the Company as
follows:
SECTION 4.1 Organization and Qualification. Each of Parent and
Merger Sub is a duly organized and validly existing corporation in good standing
under the laws of the jurisdiction of its organization. All of the issued and
outstanding capital stock of Merger Sub is owned directly or indirectly by
Parent.
SECTION 4.2 Authority for this Agreement. Each of Parent and Merger
Sub has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Parent and Merger Sub and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate proceedings on the part of Parent and Merger Sub. This
Agreement has been duly and validly executed and delivered by Parent and Merger
Sub and assuming the due authorization, execution and delivery of this Agreement
by the Company, constitutes a legal, valid and binding agreement of each of
Parent and Merger Sub, enforceable against each of Parent and Merger Sub in
accordance with its terms.
SECTION 4.3 Proxy Statement. None of the information supplied by
Parent, Merger Sub or any affiliate of Parent or Merger Sub for inclusion in the
Proxy Statement will, at the date of filing with the SEC, and at the time the
Proxy Statement is mailed and at the time of the Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
SECTION 4.4 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by Parent or Merger Sub nor the
consummation
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of the transactions contemplated hereby will (a) conflict with or result in any
breach of any provision of the respective Certificate of Incorporation or
By-laws (or other similar governing documents) of Parent or Merger Sub, (b)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) as may be required under
the HSR Act, the Securities Act, the Exchange Act, the Corporation Law and the
"takeover," "blue sky" or securities laws of any state or (ii) where the failure
to obtain such consent, approval, authorization or permit, or to make such
filing or notification, could not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the ability of the parties
hereto to consummate the transactions contemplated hereby, (c) require any
consent, waiver or approval or result in a default (or give rise to any right of
termination, cancellation, modification or acceleration) under any of the terms,
conditions or provisions of any note, license, agreement, contract, indenture or
other instrument or obligation to which Parent or Merger Sub or any of their
respective Subsidiaries is a party or by which Parent or any of its Subsidiaries
or any of their respective assets may be bound, except for such defaults (or
rights of termination, cancellation, modification or acceleration) as to which
requisite waivers or consents have been obtained or which could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the parties hereto to consummate the
transactions contemplated hereby or (d) violate any order (including one issued
by an arbitrator), writ, injunction, decree, statute, rule or regulation
applicable to Parent, Merger Sub or any of their respective Subsidiaries or by
which any of their respective assets are bound, except for violations which
could not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of the parties hereto to consummate the
transactions contemplated hereby.
SECTION 4.5 Operations of Merger Sub. Merger Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted and will conduct its
operations only as contemplated hereby.
SECTION 4.6 Funds. Parent or Merger Sub has or will have the funds
necessary to consummate the Merger.
SECTION 4.7 Brokers. Except as disclosed in a letter delivered by
Parent to the Company as of the date hereof, no Person is entitled to receive
any brokerage, finder's or other fee or commission in connection with this
Agreement or the transactions contemplated hereby based upon agreements made by
or on behalf of the Company or any of its Subsidiaries.
ARTICLE V
COVENANTS
---------
SECTION 5.1 Conduct of Business of the Company. Except (i) as set
forth in Section 5.1 of the Disclosure Letter, (ii) as expressly contemplated by
this Agreement or (iii) as consented to in writing by Parent from time to time,
during the period from the date of this Agreement to the earlier of the
Effective Time or until the
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earlier termination of this Agreement, the Company will conduct and will cause
each of its Subsidiaries to:
(a) act and carry on their respective businesses in the
ordinary course of business substantially consistent with past practice and use
their respective commercially reasonable efforts (i) to preserve substantially
intact their current material business organizations, (ii) to keep available the
services of their current officers and employees (except for terminations of
employees in the ordinary course of business), (iii) to preserve their material
relationships with others having significant business dealings with them and
(iv) to ensure continued compliance in all material respects with the
Sarbanes-Oxley Act;
(b) not issue, sell, grant options or rights to purchase,
pledge, or authorize or propose the issuance, sale, grant of options or rights
to purchase or pledge of (i) any Company Securities (including any Existing
Stock Option and Existing Warrants) or Subsidiary Securities, or grant or
accelerate any right to convert or exchange any Company Securities or Subsidiary
Securities, other than Shares issuable upon exercise of the Existing Stock
Options and exercise of the Existing Warrants or (ii) any other securities in
respect of, in lieu of or in substitution for Shares outstanding on the date
hereof;
(c) not acquire or redeem, directly or indirectly, or amend
any Company Securities or Subsidiary Securities (other than Existing Stock
Options or Existing Warrants as contemplated by Section 2.4);
(d) not split, combine or reclassify its capital stock or
declare, set aside, make or pay any dividend or distribution (whether in cash,
stock or property) on any shares of its capital stock (other than cash dividends
paid to the Company by its wholly-owned Subsidiaries with regard to their
capital stock);
(e) not propose or adopt any amendment to their Certificate of
Incorporation or By-laws (or similar documents);
(f) except as contemplated by Section 3.23 and Section 5.13,
(i) not amend or modify the Company Rights Plan or (ii) not take any action with
respect to, or make any determination under, the Company Rights Agreement
(including a redemption of the Rights or any action to facilitate an Alternative
Proposal);
(g) not grant any stock related performance or similar awards
to any employees of the Company;
(h) except as contemplated by this Agreement, not enter into
any new, or amend any existing, employment, severance, consulting or salary
continuation agreements with or for the benefit of any officers, directors or
employees (including, without limitation, amendment of, but not the entering
into of, the employment and consulting agreements being entered into on the date
hereof listed on Section 5.1(h) of the Disclosure Schedule), or grant any
increases in the compensation,
A-29
bonuses or benefits to officers, directors and employees (other than normal
compensation increases to persons who are not officers or directors in the
ordinary course of business consistent with past practices and that, in the
aggregate, do not result in a material increase in benefits or compensation
expense of the Company);
(i) not (i) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or (ii)
acquire or agree to acquire, lease or manage any assets, other than in the
ordinary course of business consistent with past practice acquire assets that
are immaterial to the Company and its Subsidiaries taken as a whole;
(j) other than in the ordinary course of business consistent
with past practice, not sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets,
including, without limitation, the Company Intellectual Property, or stock or
other ownership interest in any of its properties or subsidiaries other than (i)
any Liens for taxes not yet due and payable or being contested in good faith by
appropriate proceedings for which adequate reserves have been provided on the
consolidated balance sheet of the Company at December 31, 2003 and (ii) such
mechanics and similar liens, if any, as do not materially detract from the value
of any of such properties, assets, stock or ownership interests or materially
interfere with the present use of any of such properties or assets;
(k) not make any commitment or enter into, or amend, modify,
or terminate, or waive any rights under, any material contract, agreement or
understanding, without the prior written consent of Parent (which consent shall
not be unreasonably withheld), other than in the ordinary course of business
consistent with past practice;
(l) not (i) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
Company or any of its Subsidiaries, guarantee any debt securities of another
Person, enter into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing, except for borrowings under its line of
credit for working capital purposes and the endorsement of checks in the normal
course of business or (ii) make any loans, advances or capital contributions to,
or investments in, any other Person, other than to the Company or any direct or
indirect wholly owned Subsidiary of the Company and other than (A) sales
commissions draws and (B) travel and entertainment advances to employees in the
ordinary course of business consistent with past practice;
(m) not establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation stock option, restricted
stock, pension, retirement, deferred compensation, employment termination,
severance or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any current or
A-30
former director, officer and employee (except (i) as required by Law, (ii) for
bonus arrangements with new hires that are entered into in the ordinary course
of business consistent with past practice and that are no more favorable than
arrangements for similarly positioned employees of the Company or (iii) for
reasonable employment termination or severance agreements entered into in the
ordinary course of business consistent with past practice);
(n) except as disclosed in the Company's SEC Reports and
except as may be required as a result of a change in Law or in GAAP or a change
in order to comply with SEC requirements, not change any of their accounting
policies or procedures (including, without limitation, procedures with respect
to the payment of accounts payable and collection of accounts receivable);
(o) ensure that it and each of its Subsidiaries shall use its
commercially reasonable efforts to keep or cause to be kept its material
existing insurance policies (or substantial equivalents) in such amounts in
force until the Effective Time and shall give Parent notice of any material
change in its insurance policies;
(p) not make any material election with regard to Taxes or
settle or compromise any material federal, state, local or foreign income tax
liability without the prior written consent of Parent, which consent shall not
be unreasonably withheld. All Tax Returns required to be filed by or with
respect to the Company and its Subsidiaries (or any of them) after the date
hereof and on or before the Effective Time shall be prepared in a manner
consistent with prior years, unless otherwise required pursuant to a final
determination (which shall include the execution of an IRS Form 870-AD or
successor form);
(q) not, without the prior written consent of Parent (which
consent shall not be unreasonably withheld or delayed), (x) pay, discharge or
satisfy any material claims (including claims of stockholders), liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), except for the payment, discharge or satisfaction of (i) liabilities
or obligations in the ordinary course of business consistent with past practice
or in accordance with their terms as in effect as of the date hereof, (ii)
liability or obligations not to exceed $100,000 individually or $500,000 in the
aggregate or (iii) claims settled or compromised to the extent permitted by
Section 5.1(s), or (y) waive, release, grant, or transfer any rights of material
value pursuant to any material contract, agreement or understanding other than
in the ordinary course of business consistent with past practice;
(r) not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(s) not settle or compromise any litigation (whether or not
commenced prior to the date of this Agreement) other than settlements or
compromises of litigation where the settlement is limited solely to monetary
payment and the release of claims and the amount paid by the Company in all such
settlements or compromises does not exceed $250,000 in the aggregate or $50,000
for any individual settlement or
A-31
compromise (net of any insurance contribution or coverage that has not been
objected to or disclaimed);
(t) not engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
the Company's or its Subsidiaries' affiliates, including, without limitation,
any transactions, agreements, arrangements or understandings with any affiliate
or other Person covered under Item 404 of SEC Regulation S-K that would be
required to be disclosed under such Item 404 other than transactions between the
Company and its wholly-owned Subsidiaries or between the Company's wholly-owned
Subsidiaries;
(u) not effectuate a "plant closing" or "mass layoff," as
those terms are defined in WARN, affecting in whole or in part any site of
employment, facility, operating unit or employee of the Company or any of its
Subsidiaries;
(v) take commercially reasonable actions to protect and
maintain the Company Intellectual Property, including without limitation,
prosecuting all pending applications for Patents or registration of Trademarks
and Copyrights used in the Company's business and maintaining, to the extent
permitted by law, each Patent or registration owned by the Company or any
Subsidiary;
(w) not do any act or knowingly omit to do any act whereby any
Company Intellectual Property may become invalidated, abandoned or dedicated to
the public domain, and will use commercially reasonable efforts to prevent any
licensee or sublicensee thereof from doing the same;
(x) notify Parent or Merger Sub promptly (i) if it knows, or
has reason to know, that any Company Intellectual Property may become abandoned
or dedicated to the public domain, (ii) it has received notice of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the U.S. Patent
and Trademark Office (the "PTO") or the U.S. Copyright Office (the "Copyright
Office") or equivalent office in any foreign jurisdiction, any court or tribunal
in the United States or any political sub-division thereof, or any court or
tribunal in any foreign jurisdiction), other than non-final determinations of
the PTO or the Copyright Office, regarding its ownership of any Intellectual
Property or its right to register the same or to keep, maintain and use the
same;
(y) shall promptly notify Parent or Merger Sub of any material
infringement of any Company Intellectual Property of which it becomes aware; and
(z) not agree in writing or otherwise to take any of the
foregoing actions to the extent it would constitute a default under Section 5.1.
SECTION 5.2 No Solicitation.
(a) The Company shall not, and shall cause its Subsidiaries
and affiliates and each of their respective officers, directors, employees,
representatives
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(including, without limitation, investment bankers, attorneys and accountants)
or other agents (collectively, the "Representatives") not to, directly or
indirectly, (i) encourage, solicit or initiate any proposal or offer with
respect to an Acquisition Proposal or (ii) participate in any discussions or
negotiations (that are reasonably intended to facilitate the making of an
Acquisition Proposal) with, or provide, furnish or disclose any information to,
or afford any access to the properties, books or records of the Company or any
of its Subsidiaries, or otherwise take any other action to assist or facilitate
(including granting any waiver or release under any standstill or similar
agreement with respect to any securities of the Company), any "person" or
"group" (as such terms are used for purposes of Section 13(d)(3) of the Exchange
Act) (other than Parent or Merger Sub or any affiliate or associate of Parent or
Merger Sub) (each, a "Potential Acquiror") concerning any Acquisition Proposal.
In the event the Company receives any Acquisition Proposal, the Company shall as
promptly as practicable notify Parent of such receipt and provide Parent with
the identity of the Potential Acquiror and a copy of such Acquisition Proposal
or a reasonably detailed written summary setting forth the material terms and
conditions thereof. Without limiting the foregoing, the Company agrees that any
breach of the restrictions set forth in this Section 5.2(a) by any Subsidiary or
affiliate of the Company or any Representative shall be deemed to be a breach by
the Company of this Section 5.2(a).
(b) Notwithstanding the provisions of Section 5.2(a), the
Company may take any of the actions referred to in Section 5.2(a)(ii) with
respect to a Potential Acquiror that has made an unsolicited written Acquisition
Proposal provided that all of the following conditions are satisfied: (i) the
Board of Directors of the Company (acting by a majority of the entire board)
determines in good faith, (A) after consultation with its independent financial
advisor, that such Acquisition Proposal is reasonably likely to result in the
making of a Superior Proposal, and (B) after consultation with its outside legal
counsel, that the failure to take such action in their reasonable judgment may
result in a breach of its fiduciary duties pursuant to applicable Law; (ii) the
Company in its reasonable judgment keeps Parent advised on a current basis of
any material developments with respect to such Acquisition Proposal, (iii) the
Company receives from such Potential Acquiror an executed confidentiality
agreement customary for a transaction of this type; provided, that if the
Company modifies or waives any standstill provision in such agreement for the
benefit of any such Potential Acquiror, the Company shall in the same manner
simultaneously modify or waive the standstill provision in the confidentiality
agreement that the Parent is a party to with the Company for the benefit of
Parent, and (iv) the Company furnishes or makes available to Parent the same
information provided to such Person (to the extent not previously furnished or
made available).
(c) The Company shall, and shall cause its Subsidiaries and
affiliates and their respective Representatives to, immediately cease and cause
to be terminated any existing solicitation, activity, discussions or
negotiations with any Person (other than Parent, Merger Sub or any of their
respective affiliates or associates) conducted prior to the date hereof with
respect to any Acquisition Proposal.
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(d) The Company shall not (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent or Merger Sub, the
approval or recommendation of the Merger and this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition
Proposal, including, without limitation, for purposes of Section 203 of the
Corporation Law or (iii) enter into any letter of intent, agreement in principle
or acquisition agreement related to any Acquisition Proposal.
(e) Nothing contained in this Section 5.2(e) shall prohibit
the Company or its Board of Directors from taking and disclosing to the
Company's stockholders a position with respect to an Acquisition Proposal by a
third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange
Act or otherwise communicating with the Company's stockholders to the extent
required by Law.
SECTION 5.3 Access to Information.
(a) From and after the date of this Agreement, the Company
shall (i) give Parent and Merger Sub and their appropriate Representatives
reasonable access (during regular business hours upon reasonable notice) to the
facilities and books and records of the Company and its Subsidiaries and (ii)
cause its officers and those of its Subsidiaries to furnish Parent and Merger
Sub with such reasonable financial and operating data and other information with
respect to the business, properties and personnel of the Company and its
Subsidiaries as Parent or Merger Sub may from time to time reasonably request;
provided, however, that the Company may restrict the foregoing access to the
extent that it reasonably concludes (A) it would interfere with the operation of
the Company's business in the ordinary course of business, (B) in the reasonable
judgment of the Company, after consultation with Company's outside counsel, any
law, treaty, rule or regulation of any Governmental Entity applicable to the
Company requires the Company or its Subsidiaries to restrict or prohibit access
to any such properties or information, (C) in the reasonable judgment of the
Company, after consultation with Company's outside counsel, the information is
subject to confidentiality obligations to a third party, or (D) disclosure of
any such information or document would, after consultation with Company's
outside counsel, result in the loss of attorney-client privilege.
(b) Information obtained by Parent or Merger Sub pursuant to
Section 5.3(a) shall be subject to the provisions of the Confidentiality
Agreement (as amended or supplemented from time to time in accordance with the
terms thereof), the terms of which are incorporated herein by reference.
SECTION 5.4 Reasonable Efforts; Further Actions.
(a) Subject to the terms and conditions herein provided for
(including, without limitation, Section 5.11), each of the parties hereto agrees
to use its commercially reasonable efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Laws to consummate and make effective, in the most
expeditious manner practicable, the
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transactions contemplated by this Agreement. Without limiting the foregoing, (i)
each of the Company, Parent and Merger Sub shall use its commercially reasonable
efforts to make promptly any required submissions under any applicable Law that
the Company or Parent determines should be made, in each case, with respect to
the Merger and the transactions contemplated hereby and to respond as promptly
as practicable to all inquiries received from any Governmental Entity with
respect to such submissions for additional information or documentation, and
(ii) Parent, Merger Sub and the Company shall cooperate with one another (A) in
promptly determining, in connection with the consummation of the transactions
contemplated by this Agreement, whether any filings are required to be or should
be made or consents, approvals, permits or authorizations are required to be or
should be obtained under any applicable Law or whether any consents, approvals
or waivers are required to be or should be obtained from other parties to any
material contract, agreement or understanding (including, without limitation,
under any contract, agreement or understanding set forth in Section 3.4 of the
Disclosure Letter) and (B) in promptly making any such filings, furnishing
information required in connection therewith and seeking to obtain timely any
such consents, permits, authorizations, approvals or waivers.
(b) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
Parent shall cause the proper officers and directors of each party to this
Agreement to take all such necessary action.
(c) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated hereby is
commenced, the parties hereto agree to cooperate and use all commercially
reasonable to defend vigorously against it and respond thereto.
SECTION 5.5 Indemnification and Insurance.
(a) Parent and Merger Sub agree that all rights to
indemnification existing in favor of the present or former directors, officers
and employees (or any individual who served at the Company's or any of its
Subsidiaries' request as an officer, director, or agent) of the Company or any
of its Subsidiaries (or any other entity or enterprise, such as a partnership,
joint venture, trust or employee benefit plan) as provided in (i) the Company's
Certificate of Incorporation or By-laws, (ii) or the articles of organization,
by-laws or similar organizational documents of any of the Company's Subsidiaries
or other entity or enterprise or (iii) under any indemnification agreements of
the Company set forth in Section 5.5(a) of the Disclosure Letter as in effect as
of the date hereof, with respect to matters occurring prior to the Effective
Time, shall be assumed by the Surviving Corporation and Parent in the Merger,
without further action, and shall continue in full force and effect without
modification (other than modifications that would enlarge the indemnification
rights) for a period of not less than the statutes of limitations applicable to
such matters, and Parent shall, and shall cause the Surviving Corporation to
comply fully with its obligations hereunder and thereunder.
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(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person
(other than another direct or indirect Subsidiary of Parent) and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any Person (other than any direct or indirect Subsidiary of Parent), or
otherwise dissolves the Surviving Corporation, then, and in each such case,
Parent shall cause proper provision to be made so that the successors and
assigns of the Surviving Corporation assume the obligations set forth in this
Section 5.5(b) by operation of law or otherwise.
(c) Parent shall or shall cause the Surviving Corporation to
maintain in effect for a period of six (6) years after the Effective Time, in
respect of acts or omissions occurring prior to the Effective Time, policies of
directors' and officers' liability insurance and fiduciary liability insurance
and fiduciary insurance covering the individuals described in Section 5.5(a)
(which may include naming such individuals under Parent's existing policies);
and such policies provided by Parent shall provide substantially similar
coverage as is provided for the individuals who are covered by the Company's
existing policies; provided, however, that Parent shall not be required in order
to maintain such policies to pay an annual premium in excess of two hundred
percent (200%) of the price set forth on Section 5.5(c) of the Disclosure
Letter; provided, further, that, if equivalent coverage cannot be obtained, or
can be obtained only by paying an annual premium in excess of two hundred
percent (200%) of such amount, the Surviving Corporation shall only be required
to obtain as much coverage as can be obtained by paying an annual premium equal
to two hundred percent (200%) of such amount.
(d) The provisions of this Section 5.5(d) are (i) intended to
be for the benefit of, and will be enforceable by, each indemnified party, his
or her heirs and his or her representatives and (ii) in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.6 Proxy Statement. As promptly as reasonably practicable
after the execution and delivery of this Agreement, the Company shall:
(a) prepare and, after consultation with and review by Parent,
file with the SEC a preliminary proxy statement relating to the special meeting
of the stockholders of the Company (the "Special Meeting") to be held to
consider approval and adoption of this Agreement and the Merger and use its
commercially reasonable efforts (i) to obtain and furnish the information
required to be included by the SEC in the Proxy Statement and, after
consultation with and review by Parent, to respond promptly to any comments made
by the SEC with respect to the preliminary Proxy Statement and promptly cause a
definitive Proxy Statement to be mailed to its stockholders and, if necessary,
after the definitive Proxy Statement shall have been so mailed, promptly
circulate amended or supplemental proxy material and, if required in connection
therewith, resolicit proxies; provided, that no such amended or supplemental
proxy material will be mailed by the Company without consultation with and
review by Parent
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and (ii) to obtain the necessary approvals of the Merger and this Agreement by
its stockholders;
(b) promptly notify Parent of the receipt of the comments of
the SEC and of any request from the SEC for amendments or supplements to the
preliminary Proxy Statement or the definitive Proxy Statement or for additional
information, and will promptly supply Parent with copies of all written
correspondence between the Company or its representatives, on the one hand, and
the SEC or members of its staff, on the other hand, with respect to the
preliminary Proxy Statement, the definitive Proxy Statement or the Merger; and
(c) promptly inform Parent if at any time prior to the Special
Meeting any event should occur that is required by applicable law to be set
forth in an amendment of, or a supplement to, the Proxy Statement, in which
case, the Company, with the cooperation of and in consultation with Parent,
will, upon learning of such event, promptly prepare and mail such amendment or
supplement.
(d) Parent and Merger Sub each agree that none of the
information supplied in writing by it to be included or incorporated by
reference in the Proxy Statement or any amendment thereof or supplement thereto,
will, on the date of the mailing of the Proxy Statement or any amendment or
supplement thereto, and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. It is expressly
understood and agreed that (i) Parent, Merger Sub and the Company will cooperate
with each other in connection with all aspects of the preparation, filing and
clearance by the SEC of the Proxy Statement (including the preliminary proxy and
any and all amendments or supplements thereto), (ii) the Company shall give
Parent and its outside counsel the opportunity to review the Proxy Statement
prior to it being filed with the SEC and shall give Parent and its outside
counsel the opportunity to review all amendments and supplements to the Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the SEC and each of the
Company and Parent agrees to use its commercially reasonable efforts, after
consultation with the other, to respond promptly to all such comments of and
requests by the SEC, (iii) to the extent practicable, the Company and its
outside counsel shall permit Parent and its outside counsel to participate in
all communications with the SEC and its staff (including, without limitation,
all meetings and telephone conferences) relating to the Proxy Statement, this
Agreement or any of the transactions contemplated thereby and (iv) the Company
will not file with, or send to, the SEC the Proxy Statement (including the
preliminary Proxy Statement and any and all amendments or supplements thereto
and any and all responses to requests for additional information and replies to
comments relating thereto) or mail any Proxy Statement (including the
preliminary Proxy Statement and any and all amendments or supplements thereto)
or use any proxy material in connection with the Special Meeting, in each case
without Parent's prior approval (not to be unreasonably withheld).
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(e) The Proxy Statement shall include the unanimous and
unconditional recommendation of the Board of Directors of the Company to the
stockholders of the Company that they vote in favor of the adoption of this
Agreement and the Merger; provided, however, that the Board of Directors of the
Company may, at any time prior to the Effective Time, withdraw, modify or change
any such recommendation solely in accordance with the provisions of Section 5.2
hereof. In addition, the Proxy Statement and the Proxy Materials will include a
copy of the written opinion of the Financial Advisor referred to in Section
3.17.
SECTION 5.7 Special Meeting. The Company shall call and hold the
Special Meeting as promptly as reasonably practicable after the mailing of the
Proxy Statement to the stockholders of the Company for the purpose of voting
upon the approval of this Agreement and Parent and the Company will cooperate
with each other to cause the Special Meeting to be held as soon as reasonably
practicable following the mailing of the Proxy Materials to the stockholders of
the Company. The Company shall use its commercially reasonable efforts (through
its agents or otherwise) to solicit from its stockholders proxies in favor of
the approval of this Agreement, and shall take all other action necessary or
advisable to secure the Requisite Company Vote, except to the extent that the
Board of Directors of the Company withdraws, modifies or changes its
recommendation in favor of the Merger as provided in Section 5.2(d) hereof.
SECTION 5.8 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Merger Sub, and Parent or Merger Sub, as the case
may be, shall give prompt notice to the Company, of the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which is
likely (a) to cause any representation or warranty of such party contained in
this Agreement to be untrue or inaccurate in any material respect if made as of
any time at or prior to the Effective Time and (b) to result in any material
failure of such party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied hereunder; provided, however, that
the delivery of any notice pursuant to this Section 5.8 shall not limit or
otherwise affect the remedies available hereunder to any of the parties sending
or receiving such notice.
SECTION 5.9 Press Releases and Communications.
(a) Parent, Merger Sub and the Company will consult with each
other before issuing any press release or otherwise making any public statements
with respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation (and
affording the other party or parties an opportunity to comment thereon), except
as may be required by applicable Law or by the rules of any stock exchange on
which such party is listed.
(b) The Company, Parent and Merger Sub shall, and shall cause
each of their respective Subsidiaries and Representatives, not to communicate
with respect to this Agreement and the transactions contemplated hereby except
in compliance with applicable Law.
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SECTION 5.10 Employee Benefits Matters.
(a) Other than as specifically provided in this Agreement,
from and after the Effective Time, Parent will, and will cause the Company to,
honor in accordance with their terms all existing employment, severance and
consulting agreements of any current or former officer, director, employee or
consultant of the Company or any of its Subsidiaries that were disclosed on
Section 3.9(a) of the Disclosure Letter; provided, however, that nothing herein
shall preclude Parent or any of its Affiliates from having the right to
terminate the employment of any employee, with or without cause, or to amend or
terminate in accordance with its terms and applicable law any (i) Employee
Benefit Plan or (ii) employee benefit plan of Parent established, maintained or
contributed to by Parent or any of its Affiliates ("Parent Benefit Plan") after
the Effective Time.
(b) Except as specifically provided herein, from and after the
Effective Time, Parent will, and will cause the Company to, cause service
rendered by employees of the Company and its Subsidiaries prior to the Effective
Time to be taken into account for vesting and eligibility purposes under all
employee benefit plans, programs, policies and arrangements of Parent, the
Company and its Subsidiaries in which such employees participate or are offered
participation (other than any retiree medical plans or defined benefit pension
plans sponsored or maintained by the Parent), to the same extent as such service
was taken into account under the corresponding plans of the Company and its
Subsidiaries for those purposes prior to the Effective Time, provided that
nothing herein shall result in the duplication of any benefits. Employees of the
Company and its Subsidiaries will not be subject to any pre-existing condition
limitation under any health plan of Parent, the Company or its Subsidiaries for
any condition for which they would have been entitled to coverage under the
corresponding plan of the Company or its Subsidiaries in which they participated
prior to the Effective Time. Parent will and will cause the Company and its
Subsidiaries to give employees credit under such plans for co-payments made and
deductibles satisfied prior to the Effective Time.
(c) From and after the Effective Time until the first
anniversary thereof, Parent shall provide, or cause the Company to provide,
benefits to employees of the Company or its Subsidiaries that are no less
favorable, in the aggregate than the benefits provided under the Employee
Benefit Plans (but excluding any such Employee Benefit Plan providing for
options or other stock-based awards); provided, however, that nothing herein
shall preclude Parent or any of its Affiliates from having the right to amend or
terminate in accordance with its terms and applicable law any Employee Benefit
Plan or Parent Benefit Plan.
SECTION 5.11 HSR Act Filings.
(a) Each of Parent and the Company shall (A) make or cause to
be made the filings required of such party hereto or any of its subsidiaries or
affiliates under the HSR Act and any similar foreign competition or Antitrust
Laws with respect to the transactions contemplated by this Agreement as promptly
as practicable and, with
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respect to the HSR Act, in any event within ten (10) Business Days after the
date of this Agreement, (B) comply at the earliest practicable date with any
request under the HSR Act or any similar foreign competition or Antitrust Laws
for additional information, documents, or other materials received by such party
hereto or any of its subsidiaries from the United States Federal Trade
Commission or the United States Department of Justice or any other Governmental
Entity in respect of such filings or such transactions, and (C) cooperate with
the other party in connection with any such filing (including, with respect to
the party hereto making a filing, providing copies of all such documents to the
non-filing party and its advisors prior to filing and, if requested, to accept
all reasonable additions, deletions or changes suggested in connection
therewith) and in connection with resolving any investigation or other inquiry
of any such agency or other Governmental Entity under any Antitrust Laws with
respect to any such filing or any such transaction. Each of Parent and the
Company shall promptly inform the other parties hereto of any communication
with, and any proposed understanding, undertaking, or agreement with, any
Governmental Entity regarding any such filing. No party hereto shall
independently participate in any meeting, or engage in any substantive
conversation, with any Governmental Entity in respect of any such filings,
investigation, or other inquiry without giving the other party hereto prior
notice of the meeting and, to the extent permitted by such Governmental Entity,
the opportunity to attend and/or participate. The parties hereto will consult
and cooperate with one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or other foreign competition or Antitrust Laws.
Each of the parties hereto will use all commercially reasonable efforts to
secure termination of any waiting periods under the HSR Act and any similar
foreign competition or Antitrust Laws and obtain the approval of any other
Governmental Entity for the transactions contemplated by this Agreement. Each of
Parent and the Company may, as each deems advisable and necessary, reasonably
designate any competitively sensitive material provided to the other under this
Section 5.11 "outside counsel only." Such materials and the information
contained therein shall be given only to the outside legal counsel of the
recipient and will not be disclosed by such outside counsel to employees,
officers or directors of the recipient unless express permission is obtained in
advance from the source of the materials (Parent or the Company, as the case may
be) or its legal counsel; provided, however, that materials concerning the
valuation of the Company may be redacted.
(b) Notwithstanding anything to the contrary in this
Agreement, (i) neither Parent nor any of its Subsidiaries shall be required to
hold separate (including by trust or otherwise) or to divest any of their
respective businesses or assets, or to take or agree to take any action or agree
to any limitation with respect to the ownership or holding of any of their
respective businesses or assets, (ii) neither the Company nor any of its
Subsidiaries shall be required to hold separate (including by trust or
otherwise) or to divest any of their respective businesses or assets, or to take
or agree to take any other action or agree to any limitation with respect to the
ownership or holding of any of their respective businesses or assets, (iii)
neither any party hereto nor their respective Subsidiaries shall be required to
take any action that could reasonably be expected to substantially impair the
benefits expected to be realized by Parent from
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consummation of the Merger or (iv) Parent shall not be required after
consummation of the Merger to Company to hold separate (including by trust or
otherwise) or to divest any of the respective businesses or assets of the
Company or any of its Subsidiaries, or to take or agree to take any other action
or agree to any limitation with respect to the ownership or holding of any of
the respective businesses or assets of the Company or any of its Subsidiaries.
SECTION 5.12 Stockholder Litigation. To the extent consistent with
the fiduciary duties of the Board of Directors, the Company shall consult with
Parent in connection with any stockholder litigation against the Company and/or
its directors relating to the transactions contemplated by this Agreement or the
Voting Agreements, and no settlement shall be agreed with respect to such
stockholder litigation without Parent's prior written consent (which consent
shall not be unreasonably withheld).
SECTION 5.13 Rights Agreement. The Board of Directors of the Company
shall take all further action (in addition to that referred to in Section 3.23)
reasonably requested in writing by Parent in order to render the Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement.
SECTION 5.14 Resignations of Directors and Officers. The Company
shall take all actions necessary to cause (i) each of the directors of the
Company and each of its Subsidiaries to have tendered to Merger Sub their
written resignations from the Board of Directors of the Company or such
Subsidiary, as the case may be, in each case effective as of the Effective Time,
and (ii) each of the officers of the Company and each of its Subsidiaries set
forth in Section 5.14 of the Company Disclosure Schedule, to have tendered to
Merger Sub their written resignations from such offices of the Company or such
Subsidiary, as the case may be, effective as of the Effective Time.
SECTION 5.15 FIRPTA Affidavit. Prior to the Effective Time, the
Company shall provide to Parent a certificate stating that the Company is not a
"United States Real Property Holding Corporation" as defined in section 897 of
the Code in accordance with Treasury Regulations promulgated under sections 897
and 1445 of the Code; provided, however, that if the Company does not provide
such certificate, Parent may withhold Taxes as provided in Section 2.7 of this
Agreement.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
----------------------------------------
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger and
consummate the other transactions contemplated hereby to be consummated on the
Closing Date is subject to the satisfaction or waiver at or prior to the
Effective Time of each of the following conditions:
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(a) Stockholder Approval. This Agreement (including the Plan
of Merger) and consummation of the Merger shall have been duly approved by the
Requisite Company Vote.
(b) Governmental Consents. The waiting period applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated and other than the filing provided for in Section 1.3, all notices,
reports and other filings required to be made prior to the Effective Time by the
Company or Parent or any of their respective subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by the Company or Parent or any of their
respective subsidiaries from any Governmental Entity in connection with the
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby shall have been made or obtained (as
the case may be) upon terms and conditions that would not reasonably be expected
to result in Material Adverse Effect.
(c) Orders, Injunctions. No Law, order, injunction or decree
that prohibits, restrains, enjoins or otherwise prohibits (whether temporarily,
preliminarily or permanently) consummation of the Merger shall have been
enacted, issued, promulgated, enforced or entered by any court or Governmental
Entity of competent jurisdiction and there shall not be pending any suit, action
or proceeding by any Governmental Entity which seeks to restrain, enjoin or
otherwise prohibit (whether temporarily, preliminarily or permanently)
consummation of the Merger.
SECTION 6.2 Conditions to Obligations of Parent and Merger Sub. The
obligations of each of Parent and Merger Sub to effect the Merger and consummate
the other transactions contemplated hereby to be consummated on the Closing Date
are also subject to the satisfaction or waiver by Parent at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. (i) The representations
and warranties of the Company set forth in Section 3.2(a) shall be true and
correct in all material respects (A) on the date of this Agreement and (B) on
the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except to the extent
that such representation and warranty expressly speaks as of an earlier date, in
which case such representation and warranty shall be true and correct as of such
earlier date); and (ii) the other representations and warranties of the Company
set forth in this Agreement shall be true and correct (A) on the date of this
Agreement and (B) on the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date
(except to the extent that such representation and warranty expressly speaks as
of an earlier date, in which case such representation and warranty shall be true
and correct as of such earlier date); provided, however, that notwithstanding
anything herein to the contrary, the condition set forth in this Section
6.2(a)(ii) shall be deemed to have been satisfied even if any representations
and warranties of the Company are not true and correct unless the failure of
such representations and warranties of the Company to be true and correct (read
for purposes of this Section 6.2(a)(ii) without any "materiality" or Material
Adverse
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Effect qualification) has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all other obligations required to
be performed by it under this Agreement at or prior to the Closing Date, and
Parent shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(c) Material Adverse Effect. Since the date of this Agreement,
there shall have been no Material Adverse Effect, and Parent shall have received
a certificate of an executive officer of the Company to such effect.
(d) Consents Under Agreements. The Company shall have obtained
the consent, approval or waiver of each person whose consent, approval or waiver
shall be required in order to consummate the transactions contemplated by this
Agreement, except those for which the failure to obtain such consent, approval
or waiver, individually or in the aggregate, would not reasonably be expected to
result in a Material Adverse Effect.
(e) Governmental Actions. There shall not have been
instituted, pending or threatened any action or proceeding by any Governmental
Entity (i) challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the consummation of the
Merger, (ii) seeking to obtain material damages or otherwise directly or
indirectly relating to the transactions contemplated by the Merger, (iii)
seeking to restrain or prohibit Parent's ownership or operation (or that of its
respective Subsidiaries or affiliates) of all or any portion of the business or
assets of the Company or its Subsidiaries or of Parent and its Subsidiaries or
to compel Parent or any of its Subsidiaries or affiliates to dispose of or hold
separate all or any portion of the business or assets of the Company and its
Subsidiaries or of Parent and its Subsidiaries, (iv) seeking to impose or
confirm material limitations on the ability of Parent, Merger Sub or any of
Parent's other Subsidiaries or affiliates effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote any
Shares acquired or owned by Parent, Merger Sub or any of Parent's other
Subsidiaries or affiliates on all matters properly presented to the Company's
stockholders, (v) seeking to require divestiture by Parent, Merger Sub or any of
Parent's other Subsidiaries or affiliates of any Shares or (vi) that otherwise,
has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(f) Rights Plan. No Distribution Date (as defined in the
Company Rights Agreement) shall have occurred.
SECTION 6.3 Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger and consummate the other transactions
contemplated hereby to be consummated on the Closing Date is also subject to the
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satisfaction or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of each of Parent and Merger Sub set forth in this Agreement shall be
true and correct (A) on the date of this Agreement and (B) on the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the Closing Date (except to the extent that such representation and
warranty expressly speaks as of an earlier date, in which case such
representation and warranty shall be true and correct as of such earlier date);
provided, however, that notwithstanding anything herein to the contrary, the
condition set forth in this Section and 6.3(a) shall be deemed to have been
satisfied even if any representations and warranties of the Parent and Merger
Sub are not true and correct unless the failure of such representations and
warranties of the Parent and Merger Sub to be true and correct (read for
purposes of this Section 6.3(a) without any "materiality" qualification) has had
or would reasonably be expected to have, individually or in the aggregate, a
material and adverse effect on the financial condition, business, properties,
assets, liabilities, results of operations or prospects of the Parent, Merger
Sub and its other Subsidiaries taken as a whole; and the Company shall have
received a certificate signed on behalf of each of Parent and Merger Sub to such
effect.
(b) Performance of Obligations of Parent and Merger Sub. Each
of Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
------------------------------
SECTION 7.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time (notwithstanding approval thereof by the
stockholders of the Company) prior to the Effective Time (with any termination
by Parent also being an effective termination by Merger Sub):
(a) by mutual written consent of the Company and Parent;
(b) by written notice by either the Company or Parent, if the
Merger has not been consummated on or before September 30, 2004 (provided, that
the right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any of its obligations under
this Agreement has been the cause of or resulted in the failure to consummate
the Merger by such date);
(c) by written notice by either the Company or Parent, if
there shall be any applicable law, rule or regulation that makes consummation of
the Merger illegal or otherwise prohibited or if any judgment, injunction, order
or decree of a Governmental Entity of competent jurisdiction shall restrain or
prohibit the
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consummation of the Merger, and such judgment, injunction, order or decree shall
become final and nonappealable;
(d) by written notice by either the Company or Parent, if (i)
there has been a breach by the other party of any representation or warranty
contained in this Agreement which has had or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect or (ii) there
has been a material breach of any of the material covenants or agreements set
forth in this Agreement on the part of the other party, which breach is, in
either case, not curable or, if curable, is not cured within thirty (30) days
after written notice of such breach is given by the terminating party to the
other party;
(e) by written notice by Parent, if, prior to Requisite
Company Vote being obtained, (i) the Board of Directors of the Company shall
have failed to recommend, or shall have withdrawn or modified in a manner
adverse to Parent, its approval or recommendation of this Agreement or the
Merger or shall have recommended, or entered into, or publicly announced its
intention to enter into, an agreement or an agreement in principle with respect
to a Superior Proposal (or shall have resolved to do any of the foregoing), (ii)
the Company shall have breached any of its obligations under Section 5.2 (other
than any inadvertent and immaterial breaches of such section), (iii) the Board
of Directors of the Company shall have refused to affirm its approval or
recommendation of this Agreement or the Merger within ten (10) Business Days of
any written request from Parent, (iv) the Board of Directors of the Company
shall exempt any other Person from the provisions of Section 203 of the
Corporation Law or (v) the Board of Directors shall exempt any other Person
under the Company Rights Plan;
(f) by written notice by Parent, if any Person or "group" (as
defined in Section 13(d)(3) of the Exchange Act), other than Parent or any of
its affiliates, shall have acquired beneficial ownership of more than
twenty-five percent (25%) of the Shares or more than twenty-five percent (25%)
of the book value or fair market value of the assets of the Company and its
Subsidiaries taken as whole, or the right to acquire ownership of such Shares or
assets;
(g) by written notice by the Company, if the Board of
Directors of the Company shall approve and the Company shall enter into, a
definitive agreement providing for the implementation of a Superior Proposal;
provided, however, that (i) the Company is not and has not been in breach of
Section 5.2, (ii) the Board of Directors of the Company authorizes the Company,
subject to complying with the terms of this Agreement, to enter into a binding
written agreement concerning a transaction that constitutes a Superior Proposal
and the Company notifies Parent in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement to such notice
(including any subsequent amendments or modifications) or otherwise providing a
reasonably detailed written summary of the Superior Proposal, (iii) during the
five (5) Business Day period after the Company's notice, (x) the Company shall
have offered to negotiate with (and, if accepted, negotiate with), and shall
have caused its respective financial and legal advisors to have offered to
negotiate with (and if accepted,
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negotiate with), Parent to attempt to make such commercially reasonable
adjustments in the terms and conditions of this Agreement as will enable the
Company to proceed with this Agreement, as amended and (y) the Board of
Directors of the Company shall have concluded, after considering the results of
such negotiations and the revised proposal made by Parent, if any, that any
Superior Proposal giving rise to the Company's notice continues to be a Superior
Proposal, (iv) such termination is within five (5) Business Days following the
five (5) Business Day period referred to above and (v) no termination pursuant
to this Section 7.1(g) shall be effective unless the Company shall
simultaneously make the payment required by Section 7.3(b); or
(h) by written notice by Parent or the Company, if the
Requisite Company Vote shall not have been obtained at the Special Meeting or at
any adjournment or postponement hereof.
SECTION 7.2 Effect of Termination. If this Agreement is terminated
and the Merger is abandoned pursuant to Section 7.1 hereof, this Agreement,
except for the provisions of Sections 5.3(b), 7.2, 7.3 and Article VIII hereof,
shall forthwith become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders. Nothing in this
Section 7.2 shall relieve any party to this Agreement of liability for any
willful breach of this Agreement.
SECTION 7.3 Fees and Expenses.
(a) All fees, costs and expenses incurred in connection with
the Merger, this Agreement and the transactions contemplated by this Agreement
(including, without limitation, legal, accounting and investment banking fees
and expenses) (collectively, "Expenses") shall be paid by the party incurring
such Expenses, whether or not the Merger is consummated.
(b) Notwithstanding the foregoing, in the event that this
Agreement is terminated (i) pursuant to Section 7.1(e), (f) or (g) or (ii)
pursuant to Section 7.1(d) or (h) and, with respect to this clause (ii) only,
(x) at the time of termination pursuant to Section 7.1(d) or (h) the conditions
set forth in Section 6.3 have been satisfied and an Acquisition Proposal existed
or has been previously announced and (y) within twelve (12) months after
termination pursuant to Section 7.1(d) or (h) an Acquisition Proposal shall have
been consummated, then the Company shall pay Parent a termination fee of
Fourteen Million United States Dollars ($14,000,000) (the "Termination Fee").
(c) Any amounts payable pursuant to Section 7.3(b) shall be
payable as promptly as practicable following termination of this Agreement (and
in any event no later than two (2) Business Days thereafter) (or, in the case of
7.3(b)(ii), no later than two (2) Business Days after the date on which an
Acquisition Proposal shall have been consummated) by wire transfer of
immediately available funds to an account designated by Parent and, if the
Company is the party seeking to terminate this Agreement, prior to such
termination as a condition to the effectiveness thereof.
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(d) The Company acknowledges that the agreements contained in
Section 7.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent and Merger Sub would not
have entered into this Agreement. Accordingly, if the Company fails to pay
promptly any amounts due pursuant to Section 7.3, and, in order to obtain such
payment, Parent commences a suit which results in a judgment against the Company
for the fee or expense reimbursement set forth in this Section 7.3, the Company
shall pay to Parent its costs and expenses (including reasonable attorneys' fees
and expenses) in connection with such suit, together with interest from the date
of termination of this Agreement on the amounts so owed at the prime rate of
Chase Manhattan Bank in effect from time to time during such period plus two
percent (2%).
(e) The prevailing party in any legal action undertaken to
enforce this Agreement or any provision hereof shall be entitled to recover from
the other party the costs and expenses (including reasonable attorneys' and
expert witness fees) incurred in connection with such action.
SECTION 7.4 Amendment. To the extent permitted by applicable Law,
this Agreement may be amended by action taken by or on behalf of the Boards of
Directors of the Company, Parent and Merger Sub, at any time before or after
approval of this Agreement by the stockholders of the Company but, after any
such stockholder approval, no amendment shall be made which decreases the Merger
Consideration or which adversely affects the rights of the Company's
stockholders hereunder without the approval of the stockholders of the Company.
This Agreement may not be amended, changed, supplemented or otherwise modified
except by an instrument in writing signed on behalf of all of the parties.
SECTION 7.5 Extension; Waiver; Remedies.
(a) At any time prior to the Effective Time, the parties
hereto, by action taken by or on behalf of the respective Boards of Directors of
the Company, Parent and Merger Sub, may (i) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained herein by any
other applicable party or in any document, certificate or writing delivered
pursuant hereto by any other applicable party or (iii) waive compliance with any
of the agreements or conditions contained herein. Any agreement on the part of
any party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
(b) All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by any party
shall not preclude the simultaneous or later exercise of any other such right,
power or remedy by such party. The failure of any party hereto to exercise any
rights, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a
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waiver by such party of its right to exercise any such or other right, power or
remedy or to demand such compliance.
ARTICLE VIII
MISCELLANEOUS
-------------
SECTION 8.1 Definitions.
(a) Definitions shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. All
references herein to Articles, Sections and Exhibits shall be deemed to be
references to Articles and Sections of, and Exhibits to, this Agreement unless
the context shall otherwise require. All Exhibits attached hereto shall be
deemed incorporated herein as if set forth in full herein and, unless otherwise
defined therein, all terms used in any Exhibit shall have the meaning ascribed
to such term in this Agreement. The words "include," "includes" and "including"
shall be deemed to be followed by the phrase "without limitation." The words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise expressly provided herein, any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein. For
the purposes of this Agreement, the following terms shall have the following
meanings:
"Acquisition Proposal" shall mean (a) any offer or proposal,
or any indication of interest in making an offer or proposal, made to the
Company, any Subsidiary, affiliate or Representative by a Person or group at any
time which is structured to permit such Person or group to acquire, directly or
indirectly, beneficial ownership of at least twenty percent (20%) of the assets
of the Company and its Subsidiaries taken as a whole, or at least twenty percent
(20%) of the outstanding shares of capital stock of the Company pursuant to a
merger, consolidation or other business combination, joint venture, dissolution,
liquidation, sale of shares of capital stock, sale of assets, tender offer or
exchange offer or similar transaction, including any single or multi-step
transaction or series of related transactions, in each case other than the
Merger and (b) any offer or proposal made in the context of a proxy contest with
respect to any of the foregoing.
"Antitrust Laws" means the HSR Act, the Sherman Act, as
amended, the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other United States federal or state or foreign statutes,
rules, regulations, orders, decrees, administrative or judicial doctrines or
other laws that are designed to prohibit,
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restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade.
"affiliate" and "associate" shall have the meanings given to
such terms in Rule 12b-2 under the Exchange Act.
"beneficial ownership" shall have the meaning given to such
term in Rule 13d-3 under the Exchange Act.
"Business Day" shall have the meaning given to such term in
Rule 14d-1(g)(3) under the Exchange Act.
"Company Rights Plan" means Stockholder Protection Rights
Agreement, dated as of August 12, 1999, between the Company and American Stock
Transfer & Trust Company, as Rights Agent.
"Company Intellectual Property" shall mean all Intellectual
Property owned by the Company and/or used in connection with the business of the
Company as presently conducted or contemplated.
"Copyrights" means, as they exist in any country in the world
in which the Company has any licensee or sublicensee of its Software products,
copyrights and mask works, including all renewals and extensions thereof,
copyright registrations and applications for registration thereof, and
non-registered copyrights.
"Environmental Law" shall mean any statute, law, ordinance,
rule, regulation, order, judgment or decree applicable to the Company or any of
its Subsidiaries relating to (i) pollution or the protection or preservation of
the environment or natural resources, (ii) Releases or threatened Releases, and
(iii) the management (including use, treatment, handling, storage, disposal,
transportation, recycling or remediation) of any hazardous, toxic, dangerous or
industrial substance, chemical or other material or (iv) employee health and
safety.
"Exchange Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, as amended.
"Hazardous Substance" shall mean any substance, pollutant,
contaminant, chemical or other material (including petroleum or any fraction
thereof, asbestos or asbestos-containing material, polychlorinated biphenyls,
urea formaldehyde foam insulation) or waste that is identified or regulated
under any Environmental Law.
"Intellectual Property" means all Copyrights, Internet
Assets, Patents, Software, Trade Secrets and Trademarks.
"Internet Assets" means, as they exist in any country in the
world in which the Company has any licensee or sublicensee of its Software
products, domain names, Internet addresses and other computer identifiers, web
sites, web pages and similar rights and items.
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"IP Licenses" means all licenses, sublicenses, distributor
agreements or permissions, including without limitation, the right to receive
royalties or any other consideration relating to Copyrights, Internet Assets,
Patents, Software, Trade Secrets and Trademarks.
"Law" shall mean any federal, state, local or foreign law,
statute, rule, regulation, order, judgment, writ, injunction, ordinance,
administrative order, decree or arbitration award in effect as of the date
hereof or as of the Effective Time.
"Lien" means any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, license, charge, option, right of first
refusal, easement, servitude, transfer restriction, encumbrance or any other
restriction or limitation whatsoever, including, without limitation, the
necessity of obtaining any waiver, consent or permission of any third party.
"Material Adverse Effect" shall mean any material and adverse
effect on the financial condition, business, properties, assets, liabilities,
results of operations or prospects of the Company and its Subsidiaries taken as
a whole or the ability of the Company to consummate the transactions
contemplated by this Agreement in any material respect, other than any change,
effect, event, occurrence, state of facts or development (i) relating to the
U.S. economy in general, (ii) relating to the industry in which the Company
operates that do not affect the Company disproportionately to other Persons in
such industry, (iii) arising out of or resulting from actions taken by the
Company after the date hereof which are consented to by the Parent in accordance
with Section 5.1 of this Agreement, (iv) relating to any regulatory or
legislative change affecting companies in general, or (v) that arises primarily
from changes in the Company's stock price that do not relate to the financial
condition, business properties, assets, liabilities, results of operations or
prospects of the Company and its Subsidiaries taken as a whole.
"Off-the-Shelf Software" means off-the-shelf software as such
term is commonly understood, that is commercially available on a retail basis
for less than $2,000 per CPU and $50,000 in the aggregate, and used solely on
the computers of the Company and the Subsidiaries.
"Patents" means, as they exist in any country in the world in
which the Company has any licensee or sublicensee of its Software products,
patents, patent applications and inventions, designs and improvements described
and claimed therein, patentable inventions and other patent rights (including
any divisions, continuations, continuations-in-part, reissues, reexaminations,
or interferences thereof, whether or not patents are issued on any such
applications and whether or not any such applications are modified, withdrawn,
or resubmitted).
"Person" shall mean any natural person, firm, corporation,
limited liability company, partnership, association, joint venture, Governmental
Entity, labor union, trust, estate or other entity or organization.
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"Proxy Statement" shall mean the letter to stockholders,
notice of meeting, proxy statement and form of proxy, or the information
statement, as the case may be, that may be provided to stockholders of the
Company in connection with the Merger (including any amendments or supplements),
and any schedules required to be filed with the SEC in connection therewith, as
from time to time amended or supplemented.
"Release" shall mean any spill, discharge, leak, emission,
disposal, injection, escape, dumping, leaching, dispersal, emanation, migration
or release of any kind whatsoever of any Hazardous Substance in, on, into,
through or onto the environment.
"SEC" shall mean the United States Securities and Exchange
Commission or any similar agency then having jurisdiction to enforce the
Securities Act.
"Securities Act" shall mean the Securities Act of 1933 and the
rules and regulations promulgated thereunder, as amended.
"Self-Help Mechanism" means any back door, time bomb, drop
dead device, or other software routine designed to disable a computer program
automatically with the passage of time or under the positive control of a Person
other than an authorized licensee or owner of a copy of the program or the right
and title in and to the program.
"Software" means, as they exist anywhere in the world,
computer software programs, including, without limitation, all source code,
object code, specifications, designs and documentation related thereto.
"Subsidiary" shall mean, when used with reference to an
entity, any other entity of which securities or other ownership interests having
ordinary voting power, directly or indirectly, to elect a majority of the board
of directors or other persons performing similar functions, or a majority of the
outstanding voting securities of which, are owned directly or indirectly by such
entity.
"Superior Proposal" shall mean any unsolicited, bona fide
written Acquisition Proposal which would result in a Person (or in the case of a
direct merger between a Person and the Company, the stockholders of such Person)
acquiring, directly or indirectly, more than fifty percent (50%) of the voting
power of the Shares or all or substantially all the assets of the Company and
its Subsidiaries, taken as a whole, which the Board of Directors of the Company
(acting by a majority of the entire board) determines in its good faith judgment
(after consultation with its independent financial advisors and independent
legal counsel) taking into account all relevant aspects of the Acquisition
Proposal, that (i) such Acquisition Proposal is more favorable from a financial
point of view to the Company's stockholders than this Agreement and (ii) the
conditions to the consummation of such Acquisition Proposal are reasonably
capable of being satisfied promptly and (iii) financing for such transaction, to
the extent required, is then committed or for which the Board of Directors after
consultation with its outside
A-51
financial advisor concludes in good faith is reasonably likely to be available
on commercially reasonable terms.
"Tax" shall mean all taxes, charges, fees, levies, imposts,
duties, and other assessments, including without limitation any income,
alternative minimum or add-on tax, estimated, gross income, gross receipts,
sales, use, transfer, transactions, intangibles, ad valorem, value-added,
franchise, registration, title, license, capital, paid-up capital, profits,
withholding, employee withholding, payroll, worker's compensation, unemployment
insurance, social security, employment, excise (including the federal
communications excise tax under Section 4251 of the Code), severance, stamp,
transfer occupation, premium, recording, real property, personal property,
federal highway use, commercial rent, environmental (including taxes under
Section 59A of the Code) or windfall profit tax, custom, duty or other tax, fee
or other like assessment or charge of any kind whatsoever, together with any
interest, penalties, related liabilities, fines or additions to tax that may
become payable in respect thereof imposed by any country, any state, county,
provincial or local government or subdivision or agency thereof.
"Tax Returns" shall mean all returns and reports required to
be filed by the Company and its Subsidiaries (or any of them) with respect to
Taxes.
"threatened" when used with respect to a claim, proceeding,
investigation, dispute action, or other matter, shall mean, if any demand or
statement has been made (orally or in writing) or any notice has been given
(orally or in writing) or if any other event has occurred or any other
circumstance exists, that could reasonably be expected to lead a director or
officer of a company comparable to the Company to conclude that such a claim,
proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken or otherwise pursued in the future.
"Trade Secrets" means, as they exist anywhere in the world,
trade secrets, know-how, inventions, processes, procedures, databases,
confidential business information, concepts, ideas, designs, research or
development information, techniques, technical information, specifications,
operating and maintenance manuals, engineering drawings, methods, technical
data, discoveries, modifications, extensions, improvements, and other
proprietary information and rights (whether or not patentable or subject to
copyright, mask work, or trade secret protection.
"Trademarks" means, as they exist in any country in the world
in which the Company has any licensee or sublicensee of its Software products,
trademarks, service marks, trade dress, trade names, brand names, designs,
logos, or corporate names, whether registered or unregistered, and all
registrations and applications for registration thereof, and all goodwill
related thereto.
"Unauthorized Code" means any virus, trojan horse, worm, or
other software routines or hardware components designed to permit unauthorized
access; or to disable, erase, or otherwise harm any computer, systems or
Software.
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"Warranty Claim" shall mean any claim arising out of any
injury to individuals or property as a result of the ownership, possession or
use of any product manufactured, sold or delivered by the Company or its
Subsidiaries (or products containing products manufactured by the Company or its
Subsidiaries).
(b) As used herein, the following terms shall have the
meanings ascribed to them in the Section of this Agreement opposite each such
term:
Term Section
---- -------
Agreement Preamble
Authorizations 3.13
Certificate of Merger 1.3
Certificates 2.3(b)
Claim 3.10
Closing 1.2
Closing Date 1.2
Code 2.7
Common Stock 2.1(a)
Company Preamble
Company Permits 3.12
Company SEC Report 3.5(a)
Company Securities 3.2(a)
Constituent Corporations 1.1
Copyright Office 5.1(x)
Corporation Law 1.1
Disclosure Letter Preamble to Article III
Dissenting Shares 2.5(a)
Effective Time 1.3
Employee Benefit Plans 3.9(a)
Encumbrances 3.15(a)
ERISA 3.9(a)
ERISA Affiliates 3.9(c)
Excluded Shares 2.1(b)
Expenses 7.3(a)
Existing Stock Options 2.4(a)
Existing Warrants 2.4(c)
Financial Statements 3.5(b)
GAAP 3.5(b)
Governmental Entity 3.4(a)
HSR Act 3.4(a)
Letter of Transmittal 2.3(b)
Merger 1.1
Merger Consideration 2.1(a)
Merger Sub Preamble
Option Consideration 2.4(a)
Parent Preamble
Parent Benefit Plan 5.10(a)
Paying Agent 2.3(a)
Payment Fund 2.3(a)
Potential Acquirer 5.2(a)
PTO 5.1(x)
Real Property Leases 3.15(b)
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Term Section
---- -------
Representatives 5.2(a)
Requisite Company Vote 3.24
Rights 2.1(a)
Scheduled Contract 3.16(a)
Shares 2.1(a)
Special Meeting 5.6(a)
Stock Option Plans 2.4(a)
Subsidiary Securities 3.2(b)
Surviving Corporation 1.1
Termination Fee 7.3(b)
Voting Agreement Recitals
WARN 3.9(j)
Warrant Consideration 2.4(c)
SECTION 8.2 Survival of Representations and Warranties. The
representations and warranties made in Articles III and IV shall not survive
beyond the Effective Time. This Section 8.2 shall not limit any covenant or
agreement of the parties hereto that by its terms contemplates performance after
the Effective Time.
SECTION 8.3 Entire Agreement; Assignment. This Agreement, the
Disclosure Letter and the Confidentiality Agreement constitute the entire
agreement between the parties with respect to subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties with respect to subject matter hereof. The Agreement shall
not be assigned by any party by operation of law or otherwise without the prior
written consent of the other parties; provided, however, that Parent or Merger
Sub may assign any of their respective rights and obligations to any direct or
indirect Subsidiary of Parent, in which event all references herein to Merger
Sub shall be deemed references to such other Subsidiary except that all
representations and warranties herein with respect to Merger Sub as of the date
of this Agreement shall be deemed representations and warranties made with
respect to such other Subsidiary as of the date of such designation.
SECTION 8.4 Validity. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable Law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable Law or rule in any jurisdiction such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
SECTION 8.5 Notices. All notices, requests, claims, demands and
other communications hereunder shall be given (and shall be deemed to have been
duly received if given) by hand delivery or overnight courier in writing or by
facsimile transmission with confirmation of receipt of a legible copy, as
follows:
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(a) if to Parent or Merger Sub:
Pitney Bowes Inc.
One Elmcroft Road, MSC 65-15
Stamford, CT 06926-0700
Facsimile: (203) 351-6970
Attention: Matthew S. Kissner
with a copy to:
Pitney Bowes Inc.
One Elmcroft Road, MSC 65-24
Stamford, CT 06926-0700
Facsimile: (203) 351-7984
Attention: Senior Vice President & General Counsel
and a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019-6064
Facsimile: (212) 757-3990
Attention: Douglas A. Cifu, Esq.
(b) if to the Company:
Group 1 Software, Inc.
4200 Parliament Place
Suite 600
Lanham, MD 20706-1860
Facsimile: (301) 918-0430
Attention: President and Chief Executive Officer
with a copy to:
Cadwalader, Wickersham & Taft LLP
100 Maiden Lane
New York, New York 10038
Facsimile: (212) 504-6666
Attention: Louis J. Bevilacqua, Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the mariner set forth above.
SECTION 8.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE
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LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF.
SECTION 8.7 Jurisdiction. All actions brought, arising out of, or
related to the transactions contemplated hereby shall be brought in the federal
or state courts of the State of Delaware. Each party hereby irrevocably submits
to the exclusive jurisdiction of the federal or state courts of the State of
Delaware in respect of any claim relating to the interpretation and enforcement
of the provisions of this Agreement, and hereby waives, and agrees not to
assert, as a defense in any action, suit or proceeding in which any such claim
is made that it is not subject thereto or that such action, suit or proceeding
may not be brought or is not maintainable in such courts or that the venue
thereof may not be appropriate or that this Agreement may not be enforced in or
by such courts. The parties hereby consent to and grant any such court
jurisdiction over such parties and over the subject matter of any such claim and
agree that mailing of process or other papers in connection with any such
action, suit or proceeding in the manner provided in Section 8.5, or in such
other manner as may be permitted by Law, shall be valid and sufficient thereof.
SECTION 8.8 Waiver of Jury Trial. Each party acknowledges and agrees
that any controversy which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore each party hereby irrevocably
and unconditionally waives any right such party may have to a trial by jury.
Each party certifies and acknowledges that (i) no Representative of any other
party has represented, expressly or otherwise, that such other party would not,
in the event of litigation, seek to enforce the foregoing waiver, (ii) such
party understands and has considered the implications of this waiver, (iii) such
party makes this waiver voluntarily, and (iv) such party has been induced to
enter into this Agreement by, among other things, the mutual waivers, agreements
and certifications in this Section 8.8.
SECTION 8.9 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 8.10 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement, except for Section 5.5 (which are intended to be for the benefit of
the individuals referred to therein, and may be enforced by any such
individuals).
SECTION 8.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same agreement.
SECTION 8.12 Further Assurances. Each of the parties shall execute
such documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or
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making any filings with, any Governmental Entity or any other Person) as may be
reasonably required or desirable to carry out or to perform the provisions of
this Agreement.
SECTION 8.13 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof in
addition to any other remedies at law or in equity.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all at or
on the day and year first above written.
PITNEY BOWES INC.
By: /s/ Matthew S. Kissner
---------------------------------------
Name: Matthew S. Kissner
Title: Executive VP & Group
President--Enterprise Solutions
GERMANIUM ACQUISITION CORPORATION
By: /s/ Leslie Abi-Karam
---------------------------------------
Name: Leslie Abi-Karam
Title: President
GROUP 1 SOFTWARE, INC.
By: /s/ Robert S. Bowen
---------------------------------------
Name: Robert S. Bowen
Title: Chief Executive Officer
A-58
Annex B
VOTING AGREEMENT
----------------
VOTING AGREEMENT, dated as of April 12, 2004 (this "Agreement"), by
and among Pitney Bowes Inc., a Delaware corporation ("Parent"), Germanium
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and Robert S. Bowen (the "Stockholder").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement,
Parent, Merger Sub and Group 1 Software, Inc., a Delaware corporation (the
"Company"), have entered into that certain Agreement and Plan of Merger (the
"Merger Agreement"), pursuant to which Merger Sub shall be merged with and into
the Company (the "Merger"), upon the terms and subject to the conditions set
forth in the Merger Agreement;
WHEREAS, as of the date hereof, the Stockholder is the record and
beneficial owner of the number of shares of Common Stock, par value $0.50 per
share, of the Company (the "Common Stock"), the other options and rights to
purchase shares of Common Stock and any other shares of voting capital stock of
the Company, listed opposite the Stockholder's name on Schedule 1 (the "Existing
Shares"); and
WHEREAS, as a condition to the willingness of Parent and Merger Sub
to enter into the Merger Agreement, each of Parent and Merger Sub has required
that the Stockholder agree, and in order to induce Parent and Merger Sub to
enter into the Merger Agreement, the Stockholder has agreed, to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements contained herein
and in the Merger Agreement, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement. In addition, for purposes of this Agreement:
"Affiliate" means, when used with respect to any Person, any other
Person directly or indirectly through one or more intermediaries controlling,
controlled by, or under common control with such Person. As used in the
definition of "Affiliate," the term "control" (including the terms "controlled
by" and "under common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Beneficially Own" or "Beneficial Ownership" with respect to any
securities means having "beneficial ownership" of such securities (as determined
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pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all Affiliates of such Person and all other Persons with whom such Person would
constitute a "group" within the meaning of Section 13(d) of the Exchange Act and
the rules promulgated thereunder.
"Business Day" shall have the meaning given to such term in Rule
14d-1(g)(3) under the Exchange Act.
"Exchange Act" means the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, as amended.
"Governmental Entity" means any foreign, federal, state, municipal
or other court, administrative agency, commission or other governmental or
regulatory body or authority or instrumentality or political subdivision,
including tribal bodies, or any official thereof.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or otherwise) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever, other than Liens created by this Agreement.
"Owned Shares" means, with respect to the Stockholder, the Existing
Shares, whether Beneficially Owned or held of record, by the Stockholder on the
date hereof or any shares of Common Stock or other voting capital stock of the
Company which may hereafter be acquired by the Stockholder, whether upon the
exercise of warrants, Options, conversion of convertible securities or
otherwise.
"Options" means, with respect to the Stockholder, the options to
acquire shares of Common Stock now owned or which may hereafter be acquired by
the Stockholder.
"Person" or "person" means any natural person, firm, corporation,
business trust, joint venture, joint stock company, incorporated or
unincorporated association, company, partnership, limited liability company or
other entity, or any Governmental Entity, or any agency or political subdivision
thereof, and shall include any successor (by merger or otherwise) of such
entity.
"Representative" means, with respect to any Person, such Person's
officers, directors, employees, agents and representatives (including any
investment banker, financial advisor, accountant, attorney, agent, consultant,
representative or expert retained by or acting on behalf of such Person or its
subsidiaries).
"Transfer" means, with respect to a security, the sale, transfer,
pledge, hypothecation, encumbrance, assignment or disposition of such security
or the Beneficial Ownership thereof, the offer to make such a sale, transfer or
other disposition, and each
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option, agreement, arrangement or understanding, whether or not in writing, to
effect any of the foregoing. As a verb, "Transfer" shall have a correlative
meaning.
2. Voting of Owned Shares. During the period commencing on the date
hereof and continuing until the termination of this Agreement in accordance with
Section 9 hereof, the Stockholder hereby agrees as follows:
(a) Attendance at Meetings. At any annual or special meeting
of the stockholders of the Company (including any adjournment or postponement
thereof), however called, or in connection with any written consent of the
stockholders of the Company, at which or in which matters relating to the
Merger, the Merger Agreement or any transaction contemplated thereby are
considered, the Stockholder shall appear, or cause the holder of record on any
applicable record date with respect to any Owned Shares of the Stockholder (the
"Record Holder") to appear, at each such meeting, in person or by proxy, or
otherwise cause the Owned Shares to be counted as present thereat for the
purposes of establishing a quorum.
(b) Voting. At any meeting of the stockholders of the Company
(including any adjournment or postponement thereof), however called, and in any
action by consent of the stockholders of the Company, the Stockholder shall
vote, or cause the Record Holder to vote, the Owned Shares (to the extent such
Person also has the right to vote such Owned Shares) of the Stockholder: (i) in
favor of the Merger, the Merger Agreement (as amended from time to time) and the
transactions contemplated by the Merger Agreement and (ii) against any proposal
for any extraordinary corporate transaction, such as a recapitalization,
dissolution, liquidation, or sale of assets of the Company or any merger,
consolidation or other business combination (other than the Merger) between the
Company and any Person (other than Parent or a Subsidiary of Parent) or any
other action or agreement that is intended or which reasonably could be expected
to impede, interfere with, delay, postpone or materially adversely affect the
Merger and the transactions contemplated by the Merger Agreement.
(c) No Ownership Interest. Nothing contained in this Agreement
shall be deemed to vest in Parent or Merger Sub any direct or indirect ownership
or incidence of ownership of, or with respect to, any Owned Shares. All rights,
ownership and economic benefits of and relating to the Owned Shares shall remain
vested in and belong to the Stockholder, and Parent and Merger Sub shall have no
authority to manage, direct, superintend, restrict, regulate, govern, or
administer any of the policies or operations of the Company or exercise any
power or authority to direct the Stockholder in the voting of any of the Owned
Shares, except as otherwise provided herein, or in the performance of the
Stockholder's duties or responsibilities as a stockholder of the Company.
3. Acknowledgment. The Stockholder hereby acknowledges the receipt
and his review of a copy of the Merger Agreement.
4. Representations and Warranties of the Stockholder. The
Stockholder hereby represents and warrants to Parent and Merger Sub, as follows:
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(a) Authorization; Validity of Agreement; Necessary Action.
The Stockholder has the legal capacity to execute and deliver this Agreement and
to perform the Stockholder's obligations hereunder. This Agreement has been duly
executed and delivered by the Stockholder and, assuming this Agreement
constitutes a legal, valid and binding obligation of Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Stockholder,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other laws relating to or affecting the
rights and remedies of creditors generally and to general principles of equity
(regardless of whether considered in a proceeding in equity or at law).
(b) No Conflict. Neither of the execution and delivery of this
Agreement by the Stockholder nor compliance by the Stockholder with any of the
provisions hereof shall (i) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, license, contract, commitment, lease,
permit, franchise, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of his properties or assets (including the Owned Shares) may
be bound, or (ii) violate any order, writ, injunction, decree, judgment, law,
statute, rule, regulation or administrative or arbitral order applicable to the
Stockholder or any of his properties or assets, excluding from the foregoing
such violations, breaches or defaults which has not had or would not reasonably
be expected to have, individually or in the aggregate, a material adverse effect
on the Stockholder or which would not materially impair or delay the performance
by the Stockholder of his obligations under this Agreement.
(c) No Consents or Approvals. The execution and delivery of
this Agreement by the Stockholder does not, and the performance of this
Agreement by the Stockholder shall not, require any consent, approval,
authorization or permit of, or filing with or notification to, any arbitrator or
any Governmental Entity, governmental agency or official, except for applicable
requirements, if any, of the Exchange Act, and except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications has not had or would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
Stockholder or which would not materially impair or delay the performance by the
Stockholder of his obligations under this Agreement.
(d) Title to the Owned Shares. The Stockholder's Existing
Shares are, and all of his Owned Shares from the date hereof through and on the
Closing Date will be, owned beneficially or held of record by the Stockholder
(subject to any dispositions of Owned Shares permitted by Section 5(b) hereof).
As of the date hereof, such Stockholder's Existing Shares constitute all of the
shares of Common Stock owned of record or beneficially by the Stockholder. All
of the Stockholder's Existing Shares are issued and outstanding, and, except as
set forth on the signature pages hereto, the Stockholder does not own, of record
or beneficially, any warrants, options or other rights to acquire any shares of
Common Stock or any other capital stock of the Company. The
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Stockholder has sole voting power, sole power of disposition, sole power to
issue instructions with respect to the matters set forth in Section 1 hereof,
and sole power to agree to all of the matters set forth in this Agreement, in
each case with respect to all of the Stockholder's Existing Shares and will have
sole voting power, sole power of disposition, sole power to issue instructions
with respect to the matters set forth in Section 1 hereof, and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of such Stockholder's Owned Shares on the Closing Date (subject
to any dispositions of Shares permitted by Section 5(b) hereof), with no
limitations, qualifications or restrictions on such rights, subject to
applicable federal securities laws and the terms of this Agreement. The
Stockholder owns the Owned Shares (with the exception of the Owned Shares which
are not owned by the Stockholder, but for which the Stockholder exercises
relevant voting power), free and clear of all Liens.
5. Covenants.
(a) No Inconsistent Agreements. The Stockholder hereby
covenants and agrees that, except as contemplated by this Agreement, it shall
not enter into any agreement, arrangement or understanding with, or grant a
proxy or power of attorney to, any Person (other than Parent or Merger Sub) with
respect to the Owned Shares which would prevent the Stockholder from complying
with his obligations under this Agreement.
(b) Restriction on Transfer; Proxies. Except as otherwise
agreed to by Parent in writing, the Stockholder hereby covenants and agrees that
from the date hereof through and including the date of approval of the Merger
Agreement and the transactions contemplated by the Merger Agreement by the
Company's stockholders, or until this Agreement is terminated earlier in
accordance with Section 8 hereof, the Stockholder shall not, directly or
indirectly: (i) Transfer (whether by operation of law, by agreement or
otherwise) to any Person all or any portion of the Owned Shares; or (ii) grant
any proxies or powers of attorney (other than to Parent or Merger Sub) with
respect to the Owned Shares or deposit any Owned Shares into a voting trust or
enter into a voting agreement, understanding or arrangement with respect to such
Owned Shares. Notwithstanding the foregoing, the Stockholder may Transfer any or
all of his Owned Shares to one or more Persons; provided, that prior to
effecting such Transfer, each such Person shall agree in writing to be bound by
the terms and conditions of this Agreement pursuant to an instrument, in form
and substance reasonably satisfactory to Parent and Merger Sub.
(c) No Solicitation. From the date hereof until termination of
this Agreement in accordance with its terms, the Stockholder shall not, directly
or indirectly, (A) encourage, solicit or initiate any proposal or offer with
respect to an Acquisition Proposal or (B) participate in any discussions or
negotiations with, or provide any information to, or otherwise take any other
action to assist or facilitate any Person or group (other than Parent or Merger
Sub or any Affiliate, associate or Representative of Parent or Merger Sub)
concerning any Acquisition Proposal. Notwithstanding the foregoing, the
Stockholder or any of his Representatives may take any such actions in the
B-5
Stockholder's or any of his Representatives' capacity as a director or officer
of the Company to the extent permitted pursuant to and in accordance with the
terms of the Merger Agreement.
(d) Notification. The Stockholder hereby agrees to notify
Parent promptly of the number of any additional shares of Common Stock and the
number and type of any other shares of capital stock acquired by it, if any,
after the date hereof.
6. Stop Transfer. The Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Owned Shares, unless such
transfer is made in compliance with this Agreement.
7. Further Assurances. From time to time, at Merger Sub's or
Parent's reasonable request and without further consideration, the Stockholder
agrees that he shall use his reasonable best efforts to execute and deliver such
additional documents and take all such further lawful action as Parent may
reasonably request in connection with the performance of the Stockholder's
obligations under this Agreement.
8. Termination. This Agreement, and all rights and obligations of
the parties hereunder, shall terminate upon the earlier to occur of (i) the date
upon which the Merger Agreement is terminated in accordance with its terms or
(ii) the consummation of the Merger.
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
(b) Costs and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
(c) Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors, personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either party (whether by operation of law or
otherwise) without the prior written consent of the other party; provided, that
Parent and Merger Sub may assign their respective rights and obligations
hereunder to any direct or indirect Subsidiary of Parent which is an assignee of
such parties' rights and obligations under the Merger Agreement, but no such
assignment shall relieve Parent or Merger Sub, as the case may be, of its
obligations hereunder. Nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
B-6
(d) Amendments; Waiver. This Agreement may not be amended,
changed, supplemented or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by each of the parties
hereto. The parties may waive compliance by the other parties hereto with any
representation, agreement or condition otherwise required to be complied with by
such other party hereunder, but any such waiver shall be effective only if in
writing executed by the waiving party.
(e) Notice. All notices and other communications hereunder
shall be in writing and shall be deemed given upon (i) transmitter's
confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery
by a standard overnight carrier or when delivered by hand or (iii) the
expiration of five (5) Business Days after the day when mailed by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
If to Parent or Merger Sub: Pitney Bowes Inc.
One Elmcroft Road MSC 65-15
Stamford, Connecticut 06926-0700
Attention: Matthew S. Kissner
Facsimile: (203) 351-6970
Copy to: Pitney Bowes, Inc.
One Elmcroft Road MSC 65-24
Stamford, CT 06926-0700
Attention: Senior Vice President
and General Counsel
Facsimile: (203) 351-7984
and a copy to: Paul, Weiss, Rifkind, Wharton &
Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Douglas A. Cifu, Esq.
Facsimile: (212) 757-3990
If to the Robert S. Bowen
Stockholder: Group 1 Software, Inc.
4200 Parliament Place, Suite 600
Lanham, MD 20706-1860
Copy to: Cadwalader, Wickersham & Taft LLP
100 Maiden Lane
New York, New York 10038
Attention: Louis J. Bevilacqua, Esq.
Facsimile: (212) 504-6666
or to such other address or facsimile number as the Person to whom notice is
given shall have previously furnished to the others in writing in the manner set
forth above.
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(f) Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
affecting the validity or enforceability of the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. If any provision
of this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
(g) Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties hereto
(a) will waive, in any action for specific performance, the defense of adequacy
of a remedy at law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement.
(h) Remedies. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other party hereto with his or its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of his or its right to exercise any such or other right,
power or remedy or to demand such compliance.
(i) Directors' Fiduciary Duties. The Stockholder makes no
agreement or undertaking as a director or officer of the Company. The
Stockholder signs solely in his capacity as a record and beneficial owner of the
Owned Shares and nothing herein shall limit or affect in any way any actions
taken in his capacity as an officer or director. Notwithstanding anything herein
to the contrary, nothing set forth herein shall in any way restrict any
director, officer or employee in the exercise of his fiduciary or other duties
as a director, officer or employee of the Company.
(j) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
(k) JURISDICTION. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF DELAWARE OR THE UNITED STATES OF
AMERICA FOR THE DISTRICT OF DELAWARE AND HEREBY EXPRESSLY SUBMITS TO THE
PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND
EXPRESSLY
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WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN
INCONVENIENT FORUM.
(l) WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
(m) Headings; Interpretation. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. "Include," "includes," and "including" shall be
deemed to be followed by "without limitation" whether or not they are in fact
followed by such words or words of like import.
(n) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
PITNEY BOWES INC.
By: /s/ Matthew S. Kissner
--------------------------------------
Name: Matthew S. Kissner
Title: Executive VP & Group
President--Global Enterprise Solutions
GERMANIUM ACQUISITION CORPORATION
By: /s/ Leslie Abi-Karam
--------------------------------------
Name: Leslie Abi-Karam
Title: President
/s/ Robert S. Bowen
------------------------------------------
Robert S. Bowen
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Schedule 1
----------
Number of
Existing Number of
Name of Stockholder Shares Options owned
- ----------------------- ------------------- ----------------------------
Robert S. Bowen 599,703 1,188,433
B-11
Annex C
April 12, 2004
Board of Directors
Group 1 Software, Inc.
4200 Parliament Place
Suite 600
Lanham, Maryland 20706
Board of Directors:
You have requested our opinion as to the fairness, from a financial point
of view of the holders of the outstanding shares of the common stock, par value
$0.50 per share (the "Common Stock") and the holders of rights to acquire the
Common Stock (together the "Group 1 Stockholders") of Group 1 Software, Inc.
(the "Company" or "Group 1"), of the consideration receivable by the Group 1
Stockholders from Pitney Bowes Incorporated ("Pitney Bowes" or the "Buyer") in
connection with the proposed acquisition (the "Transaction") of all of the
outstanding Common Stock, on a fully diluted basis, in exchange for cash. The
Transaction will be made pursuant and subject to the Agreement and Plan of
Merger, dated as of April 12, 2004 by and between Pitney Bowes and Group 1 (the
"Agreement"). The consideration offered by Pitney Bowes in the Transaction will
be (i) $23.00 per share in cash (the "Merger Consideration") and (ii) an amount
in cash equal to the excess, if any, of the per share Merger Consideration over
the per share exercise or purchase price of all existing stock options ((i) and
(ii) together, the "Consideration"). For purposes of this opinion, we have
assumed that the Transaction will be accounted for as a purchase.
In connection with our review of the Transaction for purposes of, and in
arriving at, our opinion, we have among other things:
1. reviewed the latest draft of the Agreement provided to FBR on April
10, 2004 and the financial terms and conditions set forth therein;
2. reviewed Group 1's annual report on Form 10-K for the year ended
March 31, 2003, quarterly reports on Form 10-Q for the periods ended
June 30, 2003, September 30, 2003 and December 31, 2003 and current
reports on Form 8-K filed with the Securities and Exchange
Commission ("SEC") since January 1, 2003;
3. reviewed Pitney Bowes annual report on Form 10-K for the year
ended December 31, 2003, quarterly reports on Form 10-Q for the
periods ended March 31, 2003, June 30, 2003 and September 30, 2003
and current reports on Form 8-K filed with the SEC since January 1,
2003;
4. reviewed certain other publicly available business and financial
information of Group 1 and Pitney Bowes;
5. reviewed certain internal financial statements and other financial
and operating data of Group 1, including certain financial forecasts
and other forward-looking financial information, prepared and
furnished to us by the management team of Group 1;
6. reviewed certain publicly available research estimates of research
analysts regarding Group 1 and Pitney Bowes;
C-1
7. held discussions with the senior management team, advisors and legal
counsel of Group 1 regarding the Transaction as well as the
business, past and current operations, financial condition and
future prospects of Group 1;
8. compared the financial performance of Group 1 with that of certain
other public companies we deemed comparable to Group 1 and whose
securities are traded in public markets;
9. compared the financial terms of the Transaction with the financial
terms, to the extent publicly available, of other announced and
completed transactions that we deemed relevant;
10. prepared a discounted cash flow analysis of Group 1;
11. reviewed general industry information for the software and
technology industries in which Group 1 operates;
12. participated in discussions among representatives of Group 1 and
their advisors or consultants during negotiations with Pitney Bowes
since the execution of our engagement letter dated March 19, 2003
(amended and extended on March 10, 2004);
13. held discussions with the management of Group 1 regarding the
business lines, customers and operations of Group 1; and,
14. made such other studies and inquiries, and reviewed such other data,
as we deemed relevant.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
Group 1 and all publicly available financial and other information regarding
Group 1 and Pitney Bowes. We have not independently verified such information.
With regard to the information provided to us by Group 1, we have assumed (and
we have been assured by senior management of Group 1) that all such information
is complete and accurate in all material respects and we have assumed there are
no (and we have been assured by the senior management of Group 1, that they are
unaware of any) facts or circumstances that would make such information
incomplete, inaccurate or misleading.
We have further assumed that the draft Agreement furnished to us is
identical in all material respects to the definitive Agreement to be executed in
connection with the Transaction and that the Transaction will be consummated in
accordance with the terms thereof including that in all respects material to our
analysis, the representations and warranties made by the parties thereto are
true and accurate.
We have not made an independent evaluation or appraisal of the assets or
liabilities of Group 1, and we have not been furnished with any such evaluation
or appraisal. In addition, we have not made an independent evaluation or
appraisal of Group 1 and Pitney Bowes after the Transaction and accordingly we
express no opinion as to the future prospects, plans or viability of Group 1 and
Pitney Bowes after the Transaction.
With respect to the financial projections provided to us by Group 1, we
have assumed that such projections were prepared in good faith on reasonable
bases reflecting management's current best estimates and judgments of Group 1's
future financial performance. Without limiting the foregoing, we have assumed,
without independent verification, that the historical and
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projected financial information provided to us by Group 1 accurately reflects
the historical and projected operations of Group 1. This opinion is based
substantially upon the financial projections and estimates described above. In
addition, our opinion is based on market, economic, financial and other
circumstances and conditions as they exist and can only be evaluated as of the
date of this letter, and any material change in such circumstances and
conditions would require a reevaluation of this opinion, which we are under no
obligation to undertake.
We have made no independent investigation of any legal matters involving
Group 1 or Pitney Bowes and we have assumed the correctness of all legal advice
given to you and us by your or Pitney Bowes's counsel.
We express no opinion as to the underlying business decision of Group 1 to
effect the Transaction, the structure, or accounting treatment or tax
consequences of the Agreement or the availability or the advisability of any
alternatives to the Transaction. FBR did not structure the Transaction or
negotiate the terms of the Transaction. Further, we express no opinion as to the
value of Group 1 Common Stock upon the consummation of the Transaction or the
price at which Group 1 Common Stock will trade at any time. Our opinion is
limited to the fairness, from a financial point of view of the Group 1
Stockholders, of the Consideration to be paid to the Group 1 Stockholders for
the Common Stock of Group 1 and the rights to acquire Group 1 Common Stock in
the Transaction. We express no opinion with respect to any other reasons, legal,
business, or otherwise, that may support the decision of the Board of Directors
of Group 1 to approve or consummate the Transaction, nor does this opinion
purport to provide any advice or guidance to the Group 1 Stockholders, or any
other party to the Transaction, as to how to vote upon the Transaction or any
matters related thereto.
Upon delivery of our opinion to the Company's Board of Directors, FBR will
be entitled to receive a fee, which, for this Transaction, will be credited
against any fee for acting as a financial advisor if the Transaction closes.
Upon close of the Transaction, Group 1 will pay to FBR a fee for acting as Group
1's financial advisor in connection with the Transaction. The Company has also
agreed to reimburse FBR for its reasonable out-of-pocket expenses incurred in
connection with FBR's services related to this Transaction, including the
reasonable fees and disbursements of FBR's legal counsel incurred in connection
with the Transaction, and has agreed to indemnify FBR against certain
liabilities arising out of FBR's engagement.
It is understood that this letter is solely for the information of Group
1's Board of Directors in evaluating the Transaction and does not confer rights
or remedies upon Group 1 or Pitney Bowes or the Group 1 Stockholders, the
stockholders of Pitney Bowes, or any other party to the Transaction or any third
party. Furthermore, this letter should not be construed as creating any
fiduciary duty on the part of FBR to any such party. This opinion is not to be
quoted or referred to, in whole or in part, without our prior written consent,
which will not be unreasonably withheld.
FBR, as part of its investment banking services, is regularly engaged in
the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
In the ordinary course of business, we may trade in Group 1's or Pitney Bowes's
securities for our own account and the accounts of our customers and,
accordingly, may at any time hold a long or short position in the securities of
Group 1 or Pitney Bowes. Furthermore, FBR may have a beneficial ownership
interest in investment funds that invest in the securities of Group 1 or Pitney
Bowes. FBR is currently providing financial advisory services to Group 1, has in
the past provided investment banking services to Group 1 and may in the future
provide financial advisory and/or investment banking services to Group 1 or
Pitney Bowes for which we would receive customary fees.
C-3
Based on and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Consideration to be paid to the Group 1 Stockholders for
the Common Stock of Group 1 in the Transaction is fair, from a financial point
of view of the Group 1 Stockholders.
Very truly yours,
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
C-4
Annex D
Delaware General Corporations Law
8 Del. C.ss. 262 (2004).
ss. 262. Appraisal Rights
(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to ss. 228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be effected
pursuant to ss. 251 (other than a merger effected pursuant to ss. 251(g) of this
title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to ss.ss. 251, 252, 254, 257,
258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in respect
thereof, which shares of stock (or depository receipts in respect thereof) or
depository receipts at the effective date of the merger or consolidation will be
either listed on a national securities exchange or
D-1
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts described
in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in lieu
of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party to
a merger effected under ss. 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to ss. 228 or ss. 253
of this title, then either a constituent corporation before the effective date
of the merger or consolidation or the surviving or resulting corporation within
10 days thereafter shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights of
the approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such
D-2
notice a copy of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the
D-3
surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element of
value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
D-4
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to the
merger or consolidation shall have the status of authorized and unissued shares
of the surviving or resulting corporation.
D-5
FORM OF PROXY CARD
GROUP 1 SOFTWARE, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE UNDERSIGNED HEREBY APPOINTS EDWARD WEISS AND MARK D. FUNSTON AND EACH
OF THEM, AS PROXIES, EACH WITH THE POWER TO APPOINT THEIR SUBSTITUTE, AND HEREBY
AUTHORIZES THEM TO REPRESENT AND TO VOTE AS DESIGNATED BELOW ALL THE SHARES OF
COMMON STOCK OF GROUP 1 SOFTWARE, INC., HELD OF RECORD BY THE UNDERSIGNED ON
[ ] [ ], 2004 AT THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD AT the
offices of Cadwalader, Wickersham & Taft LLP, 100 Maiden Lane, New York, NY
10038, ON [ ] [ ], 2004 AT 10:00 a.m., AND AT ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
Change of Address
___________________
___________________
___________________
PROXY VOTING INSTRUCTIONS
MAIL - Date, sign and mail your proxy
card in the envelope provided as soon as
possible.
- OR - COMPANY NUMBER: [ ]
TELEPHONE - Call toll-free 1-800-[ ] ACCOUNT NUMBER: [ ]
from any touch-tone telephone and follow
the instructions. Have your control CONTROL NUMBER: [ ]
number and proxy card available when you
call.
- OR -
INTERNET - Access
"www.[ ]" and follow
the on-screen instructions. Have your
control number available when you access
the web page.
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE [X]
PLEASE VOTE BY RETURNING THE ATTACHED PROXY CARD
1. Proposal to approve and adopt the Agreement and Plan of Merger, dated as of
April 12, 2004, among Pitney Bowes Inc., Germanium Acquisition Corporation
and Group 1 Software, Inc., and approve the merger contemplated by that
agreement.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To adjourn the special meeting (if an insufficient number of proxies has
been received at the time of the special meeting to approve proposal 1) so
as to permit further solicitation of proxies.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
[ ] CHECK IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON.
Vote, sign and date this Proxy and return it promptly in the enclosed envelope.
No postage is required if mailed in the United States.
[ ] CHANGE OF ADDRESS ON REVERSE SIDE
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR IF NO CONTRARY
DIRECTION IS INDICATED WILL BE VOTED AS MANAGEMENT RECOMMENDS ON THESE AND ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) OR
POSTPONEMENT(S) THEREOF. PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED.
Signature __________________________________ Dated _______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
If time warrants, improperly signed cards will be returned for correction.
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE