PRELIMINARY COPIES
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of
the Securities Exchange Act of 1934
Check the appropriate box:
/X/ Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
/ / Definitive Information Statement
ENTEX INFORMATION SERVICES, INC.
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(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 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.0001 per share
(2) Aggregate number of securities to which transaction applies:
32,814,724 shares of Common Stock
(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):*
$2.04
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* For purposes of calculating the filing fee only. Assumes total
consideration paid of $66,942,037, which is the maximum amount payable for
the Common Stock pursuant to Section 2.1(c)(i) of the Merger Agreement
referred to herein.
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(4) Proposed maximum aggregate value of transaction:
$66,942,037
(5) Total fee paid:**
$13,388
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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
------------------------
(4) Date Filed:
------------------------
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** The amount of the filing fee equals 1/50th of 1% of the transaction value.
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ENTEX INFORMATION SERVICES, INC.
Six International Drive
Rye Brook, New York 10573
(914) 935-3600
INFORMATION STATEMENT
To the Stockholders of ENTEX Information Services, Inc.:
This Information Statement is being furnished by the Board of Directors of
ENTEX Information Services, Inc., a Delaware corporation ("ENTEX"), to the
holders of the outstanding common stock, par value $.0001 per share, of ENTEX
(the "Common Stock") in connection with the prior approval of the corporate
actions described below. All necessary corporate approvals have been obtained in
connection with the matters referred to herein, and the enclosed Information
Statement is furnished solely for the purpose of informing ENTEX's stockholders,
in the manner required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), of these corporate actions before they take effect.
The Information Statement is being mailed on or about March [ ], 2000 to
all stockholders of record as of the close of business on March [ ], 2000.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
Pursuant to the Agreement and Plan of Merger, dated as of March 13, 2000
(the "Merger Agreement"), by and among ENTEX, Siemens Corporation, a Delaware
corporation ("Siemens"), and Emilia Acquisition Corp., a Delaware corporation
specifically organized for the purpose of effecting the Merger (as defined) and
a direct, wholly-owned subsidiary of Siemens ("Acquisition"), ENTEX has agreed
to consummate the merger (the "Merger") of Acquisition with and into ENTEX.
As a result of the Merger, ENTEX, as the surviving corporation in the
Merger (the "Surviving Corporation"), will become a wholly-owned subsidiary of
Siemens, and each issued and outstanding share of Common Stock (other than
shares owned by Siemens, Acquisition, ENTEX or any of their respective
subsidiaries and shares ("Dissenting Shares") as to which stockholders have
perfected and not withdrawn the right to appraisal under the General Corporation
Law of the State of Delaware (the "DGCL")) will be converted into the right to
receive a proportionate share in cash of the Merger Price. The "Merger Price" is
equal to $105,000,000 less the following deductions, without duplication:
o the amount by which ENTEX's current assets less total liabilities at
the "Measurement Date" referred to below are less than ENTEX's current
assets less total liabilities at September 26, 1999;
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o the expenses of ENTEX in connection with the Merger, including legal
and financial advisor fees and expenses and bonus, severance and
additional compensation costs;
o the $12,500,000 premium which will be payable in connection with the
redemption of ENTEX's 12 1/2% Senior Subordinated Notes due 2006 (the
"Notes"); and
o an amount equal to $32,200,000 less the book value of ENTEX's 5.5%
Convertible Subordinated Debentures due 2007 as of the Measurement
Date (the "Subordinated Debentures").
If the effective time of the Merger occurs prior to the date letters of
transmittal are first mailed to holders of Common Stock (which mailing is
required to be made not later than five business days after the later of the
effective time or the date the "Closing Statement" referred to below is finally
determined), an additional amount will be payable in the Merger equal to the
product of (x) the Merger Price and (y) 6.5% per year from the effective time of
the Merger until the date letters of transmittal are first mailed, calculated on
an uncompounded basis (the "Incremental Amount").
The first $20,000,000 of the Merger Price and Incremental Amount, if any,
will be deposited into an interest-bearing escrow pursuant to an Escrow
Agreement, to be entered into on the Measurement Date (the "Escrow Agreement"),
among ENTEX, Siemens, ChaseMellon Shareholder Services, L.L.C., as the escrow
agent, and Dort A. Cameron III, in his capacity as the stockholders'
representative. The Indemnity Amount (as defined) shall be held and disbursed by
the escrow agent to satisfy any indemnification claims by Siemens relating to
breaches of any representations, warranties or covenants in the Merger
Agreement. Any of these funds not utilized for such purposes (net of
escrow-related expenses) will be paid to the former stockholders of ENTEX
eighteen months following the Measurement Date, except to the extent of any
unresolved indemnification claims as of such date.
The next $20,000,000 of the Merger Price, if any, and Incremental Amount,
if any, will be deposited into an interest-bearing escrow pursuant to a Tax
Escrow Agreement, to be entered into on the Measurement Date (the "Tax Escrow
Agreement"), among ENTEX, Siemens, ChaseMellon Shareholder Services, L.L.C., as
the tax escrow agent, and Mr. Cameron, in his capacity as the stockholders'
representative. The funds deposited with the tax escrow agent pursuant to the
Tax Escrow Agreement are intended to provide Siemens with indemnification for
losses resulting from any tax liabilities and related expenses relating to
ENTEX's 1994, 1995 and 1996 fiscal years. Any of these funds not utilized for
such purposes (net of escrow-related expenses) will be paid to the former
stockholders of ENTEX upon receipt of a refund currently pending before the
Internal Revenue Service with respect to these tax years or other resolution of
such tax matters. While the timing of the refund or other definitive resolu-
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tion of these tax matters cannot be determined, it is not anticipated to occur
prior to June 30, 2000.
The remainder of the Merger Price, if any, and Incremental Price, if any
(after a $500,000 reserve that may be utilized by Mr. Cameron for expenses in
his capacity as stockholders' representative) will be released to the former
stockholders of ENTEX promptly following the later of the resolution of the
Closing Statement or the effective time of the Merger.
Pursuant to the terms of the Merger Agreement, within thirty days following
the Measurement Date, Siemens will deliver to Mr. Cameron, in his capacity as
the stockholders' representative, a closing statement (the "Closing Statement")
setting forth the calculation of the Merger Price, based on the balance sheet of
ENTEX as of the Measurement Date. Mr. Cameron will have up to fifteen days to
either approve or object to Siemens' Closing Statement. If Mr. Cameron objects
to Siemens' Closing Statement, there is a dispute resolution mechanism in the
Merger Agreement that contemplates resolution of any objections within forty
days after Mr. Cameron's objections, although actual resolution may take longer.
Each share of Common Stock will be entitled to receive its proportionate
share of the Merger Price and Incremental Amount, if any (as calculated in the
manner and at the times described above). As of March 24, 2000, there were
32,814,724 outstanding shares of Common Stock. Because the final deductions to
be used in calculating the Merger Price will not be known until the Closing
Statement is agreed to, and the total claims against the escrow amounts will not
be finally known until the end of the respective escrow periods, ENTEX cannot
determine at this time what either the Merger Price or the Merger Price per
share will be. However, ENTEX estimates that the Merger Price per share
(including amounts that will be subject to claims of Siemens under the Escrow
Agreement and the Tax Escrow Agreement) will be between $1.20 and $1.50, and may
be significantly less than such amount.
Concurrently with the execution of the Merger Agreement, pursuant to a
Stockholders Agreement, dated as of March 13, 2000 (the "Stockholders
Agreement"), by and among Siemens, Acquisition, Dort A. Cameron III, the
Chairman of the Board of Directors and controlling stockholder of ENTEX, ENTEX
Associates L.P. ("ENTEX Associates"), an affiliate of Mr. Cameron, and John A.
McKenna, Jr., the Chief Executive Officer and a Director of ENTEX (collectively,
the "Principal Stockholders"), the Principal Stockholders
o granted Acquisition an option (the "Call Option") to buy all of the
shares of Common Stock owned by the Principal Stockholders at any time
at the Merger Price per share (plus the Incremental Amount per share,
if any);
o agreed to vote their shares of Common Stock in favor of the adoption
of the Merger Agreement and against any other sale, merger,
consolidation or business combination with any third-party;
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o agreed to provide all notices and perform all actions necessary for
the consummation of the Merger; and
o received an undertaking from Acquisition to buy shares of Common Stock
owned by the Principal Stockholders, at the option of the Principal
Stockholders, under certain circumstances (the "Put Option"; and
together with the Call Option, the "Options").
In addition, Mr. Cameron agreed to exercise the rights he has (the "Drag
Along Rights") to require certain other stockholders of ENTEX to sell their
shares of Common Stock on the same terms as he does. If either Option is
exercised, certain other ENTEX stockholders holding approximately 6,461,944
shares of Common Stock in the aggregate will be required to sell such shares of
Common Stock pursuant to the Drag Along Rights. See "THE MERGER--Interests of
Certain Persons in the Merger."
The "Measurement Date" is the first to occur:
o the closing date with respect to the Merger (the "Closing Date"), and
o the date shares of Common Stock are purchased pursuant to an exercise
of either the Call Option or the Put Option.
In addition, the Merger Agreement provides that, promptly after any
purchase of Common Stock by Acquisition pursuant to the Stockholders Agreement,
Siemens shall be entitled to designate such number of directors to the ENTEX
Board of Directors as will give Siemens representation on the ENTEX Board of
Directors proportionate to its ownership of the outstanding shares of Common
Stock; provided, however, that prior to the effective time of the Merger, the
ENTEX Board of Directors shall contain at least two members who are neither
officers, directors nor designees of Siemens.
ENTEX anticipates the Merger will take place as soon as the twentieth day
following the mailing of this Information Statement.
By Order of the Board of Directors,
Philip F. Strassler
Secretary
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THIS IS AN INFORMATION STATEMENT.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE NOT REQUESTED TO SEND US A PROXY.
DO NOT SURRENDER STOCK CERTIFICATES AT THIS TIME.
ENTEX INFORMATION SERVICES, INC.
Six International Drive
Rye Brook, New York 10573
(914) 935-3600
TABLE OF CONTENTS
Page
SUMMARY OF INFORMATION STATEMENT..............................................1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................7
OTHER AVAILABLE INFORMATION...................................................7
REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING.............................8
APPRAISAL RIGHTS..............................................................8
THE MERGER....................................................................9
Background of the Merger.............................................9
Approval of the Board of Directors..................................14
Reasons for the Merger..............................................14
Opinion of Financial Advisor........................................15
Interests of Certain Persons in the Merger..........................23
Certain Federal Income Tax Consequences.............................29
Conduct of Business Following the Merger............................31
Accounting Treatment of the Merger..................................31
Regulatory Approval.................................................31
THE MERGER AGREEMENT.........................................................33
Change of Directors upon Purchase of Shares Pursuant to Options.....33
Consideration to be Received Pursuant to the Merger.................34
Timing of Receipt by Stockholders of Merger Price...................35
Escrow Agreement....................................................36
Tax Escrow Agreement................................................37
Closing Statement Procedures........................................38
Exchange of Stock Certificates for Merger Price.....................38
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Representations and Warranties......................................39
Certain Covenants...................................................40
No Solicitations....................................................42
Information Statement; Section 14(f) Materials......................43
Conditions to Consummation of the Merger............................43
Directors and Officers Indemnification..............................45
Indemnification of Siemens..........................................46
Termination; Termination Fees.......................................48
Amendment and Waiver................................................50
Fees and Expenses...................................................50
STOCKHOLDERS AGREEMENT.......................................................51
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............53
CERTAIN INFORMATION REGARDING ENTEX..........................................55
CERTAIN INFORMATION REGARDING SIEMENS AND ACQUISITION........................56
ANNEXES
A. Agreement and Plan of Merger
B. Opinion of Lazard Freres & Co. LLC
C. Escrow Agreement
D. Tax Escrow Agreement
E. Stockholders Agreement
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SUMMARY OF INFORMATION STATEMENT
The following is a summary of information contained in this Information
Statement. Reference is made to, and this summary is qualified in its entirety
by, the more detailed information contained in this Information Statement and
the attached Annexes. You are urged to read this Information Statement and the
Annexes in their entirety.
PLEASE NOTE THAT THIS IS NOT A REQUEST FOR YOUR VOTE OR A PROXY
STATEMENT, BUT RATHER AN INFORMATION STATEMENT DESIGNED TO INFORM YOU OF THE
MERGER THAT WILL OCCUR IF CERTAIN CONDITIONS ARE MET.
General
The Information Statement is first being mailed to holders of Common Stock on or
about March 24, 2000. There are currently outstanding 32,814,724 shares of
Common Stock.
ENTEX is delivering this Information Statement in connection with the
Merger. ENTEX, Siemens and Acquisition are the parties to the Merger Agreement.
The Parties
ENTEX
ENTEX is a leading provider of distributed computing management
solutions to meet the support requirements of Fortune 1,000 companies and other
large enterprises for their local-area networks, wide-area networks and
end-users. ENTEX provides a single source for service for its customers'
personal computer and server platforms, including system design, operations
support and change management. ENTEX's computing management solutions include:
o Outsourcing Services (providing managed support services for the total
distributed computer infrastructure, including network management,
help desk, deskside support and asset management);
o Field Services (providing trained technicians to perform help desk and
deskside support services on-site at customer locations); and
o Consulting Services (providing analysis, design, integration,
implementation and optimization services for distributed networks and
technology migrations).
See "CERTAIN INFORMATION REGARDING ENTEX."
Siemens
Siemens Corporation, a Delaware corporation ("Siemens") is a wholly-owned
subsidiary of Siemens Aktiengesellshaft , a corporation organized under the laws
of the Federal Republic of Germany ("Siemens AG"). Siemens AG's principal
business is the design, development, manufacture and marketing of a wide variety
of electrical and electronic systems. Siemens serves as the holding company for
the businesses of Siemens AG in the United States, and is responsible for
developing, coordinating
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and maintaining the overall business strategy of Siemens AG in the United
States. See "CERTAIN INFORMATION REGARDING SIEMENS AND ACQUISITION."
Acquisition
Acquisition is a newly incorporated Delaware corporation formed by Siemens
for the purpose of effecting the Merger and related transactions. Acquisition is
a wholly-owned subsidiary of Siemens. Other than in connection with the Merger
and related transactions, Acquisition has not engages in any activities and it
has no material assets or liabilities. See "CERTAIN INFORMATION REGARDING
SIEMENS AND ACQUISITION."
Stockholder Approval
Previously Obtained
As of March 15, 2000, Mr. Cameron and EXTEX Associates together owned
24,077,392 shares of Common Stock or 73.37% of the outstanding Common Stock. On
March 15, 2000, Mr. Cameron and such affiliates approved the Merger and adopted
the Merger Agreement. See "REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING."
Appraisal Rights
A Notice of Appraisal Rights pursuant to Section 262 of the DGCL was mailed
to holders of Common Stock on March 23, 2000. See "APPRAISAL RIGHTS."
The Merger
Approval of the Board of Directors
At a meeting on March 6, 2000, the Board of Directors of ENTEX unanimously
determined that the terms of the Merger are fair to, and in the best interests
of, ENTEX and its stockholders. The Board of Directors declared the advisability
of and approved the Merger Agreement and the Merger. See "THE MERGER -- Approval
of the Board of Directors."
Reasons for the Merger
The Board of Directors of ENTEX believes that the Merger is in the best
interests of ENTEX and its stockholders after considering many factors,
including:
o the Merger Price and Incremental Amount, if any;
o ENTEX's financial condition and prospects and the possibility of
bankruptcy if ENTEX fails to enter into a transaction such as the
Merger; and
o the financial analysis presented by Lazard Freres & Co. LLC ("Lazard
Freres") and its written opinion referred to below.
Opinion of Financial Advisor
On March 6, 2000 Lazard Freres delivered its oral opinion to the ENTEX
Board of Directors which was subsequently confirmed by a written opinion, dated
March 13, 2000, that as of the date of such opinion the proportionate share of
the Merger Price (plus the proportionate share of the Incremental Amount, if
any) to be
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received by the holders of Common Stock pursuant to the Merger Agreement was
fair, from a financial point of view.
The full text of the written opinion of Lazard Freres, which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is contained in Annex B. Lazard Freres provided its
advisory services and its opinion for the information and assistance of the
ENTEX Board of Directors in connection with its consideration of the Merger. It
is not a recommendation as to how any holder of Common Stock should vote. You
are urged to read the opinion in its entirety. See "THE MERGER -- Opinion of
Financial Advisor."
Effective Time
The Merger Agreement provides that the Merger will be effective when the
certificate of merger is filed with the Secretary of State of Delaware (or such
later time as may be specified in the certificate of merger).
Certain Federal Income Tax Consequences
It is expected that the receipt of cash for shares of Common Stock in
connection with the Merger will be treated for federal income tax purposes as a
taxable transaction. Holders of Common Stock are strongly urged to consult their
own tax advisors regarding the tax consequences of the Merger. See "THE MERGER
- -- Certain Federal Income Tax Consequences."
Conduct of Business Following Merger
Following the effective time of the Merger, Siemens will own 100% of
ENTEX's outstanding capital stock. Accordingly, Siemens will be the sole
beneficiary of any future earnings and growth of ENTEX after the effective time
and will have the ability to benefit from any corporate opportunities that may
be pursued by ENTEX. At the effective time of the Merger, current ENTEX
stockholders (other than Siemens or Acquisition, if applicable) will no longer
have any ownership interests in, or rights as stockholders of, ENTEX. Following
the effective time, the current ENTEX stockholders will not benefit from any
increase in the value of ENTEX or any payment of dividends on the Common Stock
and will not bear the risk of any decrease in the value of ENTEX.
Accounting Treatment
The Merger will be accounted for under the "purchase" method of accounting.
Regulatory Approval
The completion of the Merger is conditioned upon the expiration or
termination of all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvement Act of 1976. See "THE MERGER--Regulatory Approval."
Consideration to be Received Pursuant to the Merger
After the Merger, ENTEX, as the Surviving Corporation in the Merger, will
become a wholly-owned subsidiary of Si-
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emens. Siemens will acquire in the Merger all of the outstanding Common Stock
for an aggregate cash purchase price of $105,000,000 less the following
deductions, without duplication (the "Merger Price"):
o the amount by which ENTEX's current assets less total liabilities at
the Measurement Date are less than ENTEX's current assets less total
liabilities at September 26, 1999;
o the expenses of ENTEX in connection with the Merger, including legal
and financial advisor fees and expenses and bonus, severance and
additional compensation costs;
o the $12,500,000 premium which will be payable in connection with the
redemption of ENTEX's 12 1/2% Senior Subordinated Notes due 2006; and
o an amount equal to $32,200,000 less the book value of ENTEX's 5.5%
Subordinated Debentures due 2007 as of the Measurement Date.
If the effective time of the Merger occurs prior to the date letters of
transmittal are first mailed to holders of Common Stock (which mailing is
required to be made not later than five business days after the later of the
effective time or the date the Closing Statement is finally determined), holders
of Common Stock will also receive their proportionate share of the Incremental
Amount. The "Incremental Amount" is an amount equal to the product of:
o the Merger Price; and
o 6.5% per year from the effective time of the Merger until the date
letters of transmittal are first mailed, calculated on an uncompounded
basis.
See "The Merger Agreement-- Consideration to Be Received Pursuant to the
Merger."
Timing of Receipt by Stockholders of Merger Price
The first $20,000,000 of the Merger Price and Incremental Amount, if any,
will be deposited into an interest-bearing escrow pursuant to the Escrow
Agreement to be entered into on the Measurement Date. The Indemnity Amount shall
be held and disbursed by the escrow agent to satisfy any indemnification claims
by Siemens relating to breaches of any representations, warranties or covenants
in the Merger Agreement. Any of these funds not paid out to Siemens (net of
escrow-related expenses) will be distributed to the former stockholders of ENTEX
eighteen months following the Measurement Date, except to the extent of any
unresolved indemnification claims as of such date.
The next $20,000,000 of the Merger Price, if any, and Incremental Amount,
if any, will be deposited into an interest-bearing escrow pursuant to the Tax
Escrow Agreement to be entered into on the Measurement Date. The funds deposited
with the tax escrow agent pursuant to the Tax Escrow Agreement are intended to
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provide Siemens with indemnification for losses resulting from any tax
liabilities and related expenses relating to ENTEX's 1994, 1995 and 1996 fiscal
years. Any of these funds not paid out to Siemens (net of escrow-related
expenses) will be distributed to the former stockholders of ENTEX upon receipt
of a refund currently pending before the Internal Revenue Service with respect
to these tax years or other resolution of such tax matters. While the timing of
the refund or other final resolution of the tax matters cannot be determined, it
is not anticipated to occur prior to June 30, 2000.
The remainder of the Merger Price, if any, and Incremental Price, if any
(after a $500,000 reserve that may be used by Mr. Cameron for expenses in his
capacity as stockholders' representative), will be released to the former
stockholders of ENTEX promptly following the later of the resolution of the
Closing Statement or the effective time of the Merger.
Closing Statement Procedures
Pursuant to the terms of the Merger Agreement, within thirty days following
the Measurement Date, Siemens will deliver to Mr. Cameron, in his capacity as
the stockholders' representative, a Closing Statement setting forth the
calculation of the Merger Price, based on the balance sheet of ENTEX as of the
Measurement Date. Mr. Cameron will have up to fifteen days to either approve or
object to Siemens' Closing Statement. If Mr. Cameron objects to Siemens' Closing
Statement, there is a dispute resolution mechanism in the Merger Agreement that
contemplates resolution of any objections within forty days after Mr. Cameron's
objections, although actual resolution may take longer.
Each share of Common Stock will be entitled to receive its proportionate
share of the Merger Price and Incremental Amount, if any (as calculated in the
manner and at the times described above). As of March 24, 2000, there were
32,814,724 outstanding shares of Common Stock. Because the final deductions to
be used in calculating the Merger Price will not be known until the Closing
Statement is agreed to, and the total claims against the escrow amounts will not
be finally known until the end of the escrow periods, ENTEX cannot determine at
this time what either the Merger Price or the Merger Price per share will be.
However, ENTEX estimates that the Merger Price per share (including amounts that
will be subject to claims of Siemens under the Escrow Agreement and the Tax
Escrow Agreement) will be between $1.20 and $1.50, and may be significantly less
than such amount.
Conditions to the Merger
The obligations of Siemens, Acquisition and ENTEX to consummate the Merger
are subject to the satisfaction of certain conditions, including no material
adverse change in ENTEX's financial condition or results of operations, receipt
of the necessary approvals referred to above under "--Regulatory Approval" and
obtaining certain third-party consents. See "THE MERGER AGREEMENT -- Conditions
to Consummation of the Merger."
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Termination, Amendment and Waiver
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the effective time, if all parties sign a written document
terminating the Merger Agreement.
The Merger Agreement may be terminated at any time prior to the Measurement
Date, by either ENTEX or Siemens, if the Merger is not consummated within ninety
days following the date of the Merger Agreement or if there has been a material
breach of the Merger Agreement which is not cured within thirty days or is not
reasonably capable of being cured within thirty days.
The Merger Agreement may also be terminated at any time prior to the
Measurement Date by Siemens if ENTEX has entered into, or has publicly announced
its intention to enter into, an agreement with respect to an acquisition
transaction other than the Merger or the ENTEX Board of Directors has withdrawn
its approval or recommendation of the Merger Agreement. See "THE MERGER
AGREEMENT -- Termination; Termination Fees."
Stockholders Agreement
Mr. Cameron, EXTEX Associates and Mr. McKenna have granted to Acquisition
the Call Option to purchase a total of 24,719,596 shares of Common Stock at any
time at the Merger Price per share (plus the Incremental Amount per share, if
any), representing approximately 75% of the outstanding shares of Common Stock
as of March 24, 2000. Also, Acquisition has granted to Mr. Cameron, ENTEX
Associates and Mr. McKenna the Put Option to sell their shares of Common Stock
to Acquisition for the Merger Price per share (plus the Incremental Amount per
share, if any) if the Securities Exchange Commission (the "Commission") reviews
this Information Statement and all other conditions to the consummation of the
Merger contained in the Merger Agreement are then satisfied. If either Option is
exercised, the Measurement Date will be the date shares of Common Stock are
purchased pursuant to such exercise. If neither Option is exercised, the
Measurement Date will be the closing date with respect to the Merger, which will
occur promptly upon satisfaction of the conditions to the Merger. See
"STOCKHOLDERS AGREEMENT."
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Information Statement contains forward-looking statements which can
sometimes be identified by the use of forward-looking words such as "may,"
"will," "anticipate," "plan," "estimate," "expect" or "intend" or comparable
terminology. These statements are subject to known and unknown risks,
uncertainties and other factors, including, without limitation, ENTEX's high
degree of leverage, its dependence upon the IBM Working Capital Line of Credit
and the restrictive debt covenants therein, actual and potential competition and
its history of fluctuations in operating results. Additional information on risk
factors that could potentially affect ENTEX's financial results may be found in
ENTEX's public filings with the Commission and press releases. Certain of such
filings may be accessed through the Commission's web site, http://www.sec.gov.
OTHER AVAILABLE INFORMATION
ENTEX is subject to the informational requirements of the Exchange Act, and
in accordance with the Exchange Act, ENTEX files reports, proxy statements and
other information with the Commission. You may inspect and copy the reports,
proxy statements and other information filed by ENTEX with the Commission at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and the Commission's regional offices
located in the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies should be obtainable, by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may also call the Commission at
1-800-SEC-0330 for more information about the public reference room, how to
obtain copies of documents by mail or how to access documents electronically on
the Commission's web site. Such documents may also be requested from ENTEX at
Six International Drive, Rye Brook, New York 10573, Attention: Lynne A. Burgess,
Senior Vice President, General Counsel and Assistant Secretary.
The information contained herein regarding Siemens and Acquisition has been
supplied by Siemens and Acquisition. The information contained herein regarding
ENTEX has been supplied by ENTEX. The delivery of this Information Statement
shall not, under any circumstances, create any implication that the information
contained herein is correct as of any time after the date of this Information
Statement, or that there has been no change in the affairs of ENTEX since the
date of this Information Statement. No person is authorized to give any
information or to make any representation other than those contained in this
Information Statement and, if given or made, you must not rely upon such
information or representation.
-7-
<PAGE>
REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING
Under the DGCL and ENTEX's certificate of incorporation, the affirmative
vote of holders of a majority of the voting power of the outstanding shares of
Common Stock is required to approve and adopt the Merger Agreement and Merger.
Pursuant to Section 228 of the DGCL, any action required by the General
Corporation Law of the State of Delaware to be taken at any meeting of ENTEX
stockholders may be taken without a meeting, without prior notice and without a
vote of the ENTEX stockholders if a written consent, setting forth the action to
be taken, is signed by the holders of a majority of the votes entitled to be
cast at such meeting of stockholders.
On March 15, 2000, Mr. Cameron and ENTEX Associates owned approximately
24,077,392 shares of the 32,814,724 outstanding shares of Common Stock,
representing 73.37% of the outstanding shares of Common Stock. This gave Mr.
Cameron and such affiliates the effective power to approve or disapprove any
corporate action submitted to a vote of ENTEX's stockholders regardless of how
other ENTEX stockholders may vote. On March 15, 2000, Mr. Cameron and such
affiliates executed and delivered to ENTEX a written consent approving the
Merger and adopting the Merger Agreement.
The Merger Agreement provides that the Merger will become effective at such
time as the certificate of merger is filed with the Secretary of State of the
State of Delaware in accordance with the laws of the State of Delaware (or such
later time as may be specified in the certificate of merger). Rule 14c-2(b) of
the Exchange Act requires that this Information Statement be sent to
stockholders at least twenty calendar days prior to the earliest date on which
the Merger may be effective.
APPRAISAL RIGHTS
A notice of appraisal rights pursuant to Section 262 of the DGCL was mailed
to holders of Common Stock on March 23, 2000 in connection with the mailing of
an information statement to ENTEX stockholders pursuant to Section 14(f) of the
Exchange Act. Section 262 states that the failure of a stockholder to deliver a
written demand for appraisal within twenty days after the date of mailing of a
notice of appraisal rights results in the loss of such appraisal rights. [More
than twenty days have passed since such notice of appraisal rights was mailed to
the ENTEX stockholders.] As of the date of this Information Statement, holders
of [ ] shares of Common Stock have demanded appraisal of their shares.
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<PAGE>
THE MERGER
Background of the Merger
At the end of the first quarter of fiscal 1999, ENTEX's results of
operations began to be adversely affected by declining revenues and margins from
its product business. In part to address the declining performance of the
product business, in November 1998, ENTEX reorganized its operations by creating
two operating units: ENTEX Technology Acquisition Services Division (the "TAS
Division"), which would operate ENTEX's product business; and ENTEX Services
Division, which would operate ENTEX's services business. The reorganization was
intended to allow each division to focus on anticipating trends and capitalize
on new market opportunities within the its respective market. Despite the
reorganization, however, the TAS Division continued to suffer from increasing
competitive pressure during fiscal 1999.
On May 10, 1999, ENTEX sold substantially all of the assets of the TAS
Division (other than accounts receivable) to CompuCom Systems, Inc. for
$137,400,000. These proceeds, together with the proceeds from the unsold
accounts receivable, were used to repay debt. Despite the repayment of debt with
these proceeds, ENTEX continued to have substantial debt relative to its cash
flow. On May 10, 1999, IBMCC and ENTEX entered into an amendment to the IBMCC
Working Capital Line of Credit to permit ENTEX to borrow up to $20,000,000 in
excess of what was available to ENTEX under its collateral availability formula
(the "IBMCC Overadvance") until November 10, 1999, by which time it was expected
that cash from continuing operations, together with collection of the TAS
Division receivables, would be sufficient to repay borrowings in excess of the
borrowing base.
During May 1999, following the sale of the TAS Division, management of
ENTEX held discussions with representatives of Lazard Freres, ENTEX's financial
advisor, to discuss the strategic alternatives available to ENTEX given its high
leverage, capital requirements, financial condition and prospects. Lazard Freres
advised management that, in its judgment, public or private equity financing
would likely not be obtainable by ENTEX on commercially reasonable terms. From
June through August 1999, ENTEX management, working with Lazard Freres,
developed a list of potential parties who might be interested in a business
combination with ENTEX.
On March 1, 1999, representatives of Siemens met with representatives of
ENTEX to discuss potential business alliances or joint ventures. On April 30,
1999, representatives of Siemens met again with representatives of ENTEX to
further discuss potential business alliances or joint ventures. At this meeting,
ENTEX agreed to allow Siemens to undertake a due diligence evaluation of ENTEX's
technical capabilities.
On June 1, 1999, Siemens and ENTEX entered into a confidentiality
agreement.
-9-
<PAGE>
On June 3, 1999, John Loveland, Executive Vice President of Siemens IT
Service, and Steve Wiltsher, Vice President, Business Development of Siemens IT
Service, visited certain of ENTEX's facilities. On June 15, 1999, a technical
review team from Siemens visited certain ENTEX facilities and performed a due
diligence review of ENTEX's technical capabilities. Following this due diligence
review of technical capabilities, Siemens and ENTEX agreed to meet in Munich,
Germany to finalize a course of action, if any, with respect to a potential
business alliance or joint venture.
On July 8, 1999, Kenneth A. Ghazey, the President and a Director of ENTEX,
and David Howarth, the Director of International Business of ENTEX, met in
Munich with Mr. Loveland, Mr. Wiltsher, Rudi Lamprecht, President of Siemens'
Information and Communications Product Group, Paul A. Stodden, President and CEO
of Siemens IT Service, and other representatives of Siemens. During this
meeting, the discussions between the parties evolved from a potential joint
venture or business alliance to an outright acquisition of ENTEX by Siemens. At
this meeting, the representatives of ENTEX agreed to provide Siemens with
additional information in order to enable Siemens to prepare a preliminary
valuation of ENTEX.
On August 3, 1999, a meeting of the Board of Directors of ENTEX was held at
which the Board evaluated and discussed the strategic alternatives available to
ENTEX in light of its financial condition and prospects. In connection with this
discussion, Mr. Ghazey reported to the Board on the status of discussions with
Siemens. In addition, Mr. Ghazey discussed with the Board a list of other
potential parties who might be interested in a business combination with ENTEX.
The Board discussed the potential advantages and disadvantages of conducting an
"auction" process for the sale of ENTEX and concluded that such a process would
engender significant risks to ENTEX's business as a result of possible negative
reactions by employees, creditors and customers if they were to become aware
that ENTEX was seeking to sell the company, particularly if such process were
unsuccessful. In connection with the discussion of potential acquirors, it was
the consensus of the Board that ENTEX would likely not be an attractive
acquisition candidate for financial buyers or other buyers without a strong
strategic need to enter into the services business conducted by ENTEX.
Accordingly, it was the consensus of the Board that management focus its efforts
on soliciting interest from those potential acquirors who would be likely to
have a strong strategic interest in acquiring ENTEX. It was the consensus of the
Board that management continue to pursue an acquisition transaction with
Siemens.
As a result of the discussions between Siemens and ENTEX having evolved
towards an acquisition transaction, on August 11, 1999, Siemens and ENTEX
executed a new confidentiality agreement more appropriate for such a
transaction.
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<PAGE>
During the week of August 16, 1999, representatives of Siemens conducted a
due diligence review of ENTEX's operational capabilities and financial
information in connection with its preliminary valuation of ENTEX.
On September 13, 1999, Mr. Ghazey and Dort A. Cameron, III, ENTEX's
Chairman of the Board and controlling stockholder, met in London, England with
Mr. Stodden, Mr. Lamprecht and Karl-Heiz Seibert, each of whom is an executive
officer of affiliates of Siemens, to discuss the status and results to date of
Siemens' financial due diligence review and the progress of their valuation
process. Following this meeting, Siemens requested the opportunity to receive
management presentations prior to finalizing its preliminary valuation. On
September 24, 1999, Mr. Stodden, Ernst-Ferdinand Wachter, Chief Financial
Officer of Siemens IT Service, and Mr. Loveland, received presentations from
certain members of ENTEX management. On September 28, 1999, representatives of
Lazard Freres and representatives of Morgan Stanley Dean Witter, financial
advisor to Siemens, met to discuss and finalize Siemens' preliminary valuation
of ENTEX. By letter dated September 29, 1999, Mr. Stodden informed Mr. Ghazey of
Siemens' preliminary valuation of ENTEX. On October 1, 1999, Mr. Ghazey, after
consultation with other ENTEX Board members and its advisors, informed Mr.
Stodden that ENTEX was willing to proceed towards an acquisition transaction on
the basis of Seimens' preliminary valuation, including allowing Siemens to
undertake a comprehensive due diligence review of ENTEX.
During September 1999, Mr. Ghazey had discussions with members of senior
management of a company ("Company A") that was identified by management of ENTEX
and Lazard Freres as a party that could have a strong strategic interest in
acquiring ENTEX. On October 7, 1999, Company A and ENTEX entered into a
confidentiality agreement.
From October 18, 1999 through November 5, 1999, Siemens and its legal and
financial advisors conducted a comprehensive due diligence review of ENTEX.
On October 24, 1999, Mr. Ghazey, Mr. McKenna and certain operations
personnel of ENTEX met with representatives of Company A to further discuss
Company A's interest in acquiring ENTEX.
On November 2, 1999, a meeting of the Board of Directors of ENTEX was held
at which Mr. Ghazey reported to the Board on the status of the sales process
with Siemens and the discussions with Company A. It was the consensus of the
Board that management continue the sale process with Siemens and the discussions
with Company A.
At November 9, 1999, ENTEX had not generated sufficient cash flow to repay
debt under the IBMCC Working Capital Line of Credit such that it would be in
compliance with the borrowing base to become effective on November 10, 1999. On
November 9, 1999, IBMCC agreed to extend the IBMCC Overadvance until November
30, 1999.
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<PAGE>
On November 18, 1999, Company A conducted a due diligence review of ENTEX's
financial information in connection with its preliminary valuation of ENTEX.
On November 23, 1999, Mr. Cameron, Mr. Ghazey and Mr. McKenna met with Mr.
Lamprecht, Mr. Stodden, Mr. Seibert and John Breeman, Siemens' Director of
Corporate Development, to discuss the economic terms and structure of a proposed
acquisition transaction and issues arising out of Siemens' comprehensive due
diligence review, including Siemens' concerns regarding the IRS audits of
ENTEX's 1994, 1995 and 1996 fiscal years. At this meeting, the parties agreed to
continue to address the issues arising from Siemens' due diligence review and to
have their respective legal counsel prepare documentation with respect to an
acquisition transaction.
At November 30, 1999, ENTEX had not generated sufficient cash flow to repay
debt under the IBMCC Working Capital Line of Credit such that it would be in
compliance with the borrowing base to become effective on November 30, 1999. On
November 30, 1999, IBMCC agreed to extend the IBMCC Overadvance until December
7, 1999. On December 7, 1999 IBMCC further extended the IBMCC Overadvance until
December 17, 1999, and thereafter until December 21, 1999.
On December 10, 1999, a special meeting of the Board of Directors of ENTEX
was held at which Mr. Ghazey and Mr. McKenna reported to the Board on the status
of the negotiations with Siemens and the discussions with Company A. The Board
also discussed ENTEX's cash flow difficulties and impending expiration of the
IBMCC Overadvance.
On December 14, 1999, counsel for Siemens distributed initial drafts of a
merger agreement and related documentation to ENTEX and its counsel. During the
week of December 20, 1999, Mr. Ghazey and Mr. Breeman discussed the business
issues raised by the initial drafts of the merger agreement and related
documentation.
On December 21, 1999, ENTEX and IBMCC executed an amendment to the IBMCC
Working Capital Line of Credit to extend the termination of the IBMCC
Overadvance until March 31, 2000. As a condition to such extension, Mr. Cameron
was required to guarantee up to $20,000,000 of ENTEX's obligations to IBMCC and
agreed to purchase from IBMCC an option to purchase Common Stock. See
"--Interests of Certain Persons in the Merger -- Cameron Guarantee of IBMCC
Working Capital Line of Credit."
On January 10, 2000, ENTEX provided to Siemens detailed mark-ups of the
draft merger agreement and related documentation.
During January 2000, Mr. Ghazey held discussions with two other companies
("Company B" and "Company C") which had expressed an interest in acquiring
ENTEX. On
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<PAGE>
January 31, 2000, Company B executed a confidentiality agreement and was
provided information to enable it provide a preliminary valuation of ENTEX.
On February 1, 2000, Company A informed Mr. Ghazey that it was not
interested in acquiring ENTEX as a whole, but might be interested in acquiring
one of ENTEX's line of businesses. Mr. Ghazey discussed Company A's response
with Mr. Cameron and other members of the ENTEX Board and Lazard Freres. It was
determined that a sale of the consulting business was not a viable alternative
because it was not a stand-alone business and there was substantial doubt
concerning the ability to consummate such a sale and because of serious concerns
regarding the ability of the remainder of ENTEX to operate as a viable business,
or be sold, without the consulting business.
On February 1, 2000 and February 2, 2000, representatives of Siemens and
ENTEX, together with their legal and financial advisors, met to negotiate the
business issues raised in the initial drafts and markups of the merger agreement
and related documentation. At these meetings, Siemens reiterated its concerns
regarding any exposure for income tax payments relating to the audits of ENTEX's
1994, 1995, 1996 fiscal years, and required that final resolution of such audits
or insurance against any such payments would be a condition to the merger.
From February 3, 2000 through early March 2000, representatives of Siemens
and ENTEX, and the respective legal and financial advisors, continued to
negotiate the merger agreement and related documentation, as well as the
documentation for insurance with respect to the tax matters discussed above.
During the first week of February 2000, each of Company B and Company C
notified Mr. Ghazey that it had determined not to proceed with a transaction
involving ENTEX.
On March 3, 2000, a special meeting of the Board of Directors of ENTEX was
held at which Mr. Ghazey updated the Board as to the status of the transaction
with Siemens and the decisions of Company B and Company C not to proceed with a
transaction. At this meeting, counsel for ENTEX discussed with the Board the
terms of the Merger Agreement and related documentation (which had been
previously distributed to Board members). In addition, at the meeting, Lazard
Freres discussed with the Board the analyses it would be using in evaluating the
fairness, from a financial point of view, of the consideration to be received in
the Merger. Mr. Ghazey also updated the Board with respect to ENTEX's January
results of operations and estimated February results of operations, which
indicated a continuing decline in ENTEX's business. It was the consensus of the
Board that ENTEX reach a definitive agreement with Siemens as soon as possible.
On March 6, 2000, a special meeting of the Board of Directors of ENTEX was
held at which the Board unanimously determined that the terms of the Merger are
fair to, and in the
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<PAGE>
best interests of, ENTEX and its stockholders and unanimously approved the
Merger Agreement and the Merger.
Approval of the Board of Directors
On March 6, 2000, the ENTEX Board of Directors determined that the terms of
the Merger are fair to, and in the best interests of, ENTEX and its
stockholders, declared the advisability of the Merger Agreement, unanimously
approved the Merger and recommended that stockholders vote to approve the Merger
and adopt the Merger Agreement.
Reasons for the Merger
The ENTEX Board of Directors has unanimously recommended that the ENTEX
stockholders approve and adopt the Merger Agreement and the Merger. The ENTEX
Board of Directors, in its consideration of the Merger Agreement, received
presentations from and/or reviewed the terms and conditions of the Merger
Agreement, Escrow Agreement and Tax Escrow Agreement with members of ENTEX's
management, ENTEX's counsel and ENTEX's financial advisor, Lazard Freres. After
such review, the ENTEX Board of Directors concluded that the Merger will afford
the ENTEX stockholders the most value for their shares of Common Stock, as
compared with the possibility of another potential business combination becoming
available to ENTEX or with ENTEX continuing to operate as an independent entity,
which could result in liquidation or bankruptcy of ENTEX if it failed to enter
into a transaction such as that proposed by Siemens. In deciding that the
consideration to be received pursuant to the Merger is fair to the ENTEX
stockholders, the ENTEX Board of Directors considered the following factors:
o the terms of the Merger Agreement and the transactions contemplated
thereby, including the Merger Price and Incremental Amount (if any);
o a comparison of the proposed Merger with the alternatives available to
ENTEX, including pursuing possible alternative transactions or
remaining independent;
o ENTEX's need for additional financing in order to sustain its
operations and the likelihood of adverse financial consequences, such
as the possibility of bankruptcy or liquidation, in the event that a
transaction such as that proposed by Siemens was not promptly entered
into;
o the process followed by management in soliciting alternative
transactions and the failure of this process to result in other
proposals that would justify pursuit;
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<PAGE>
o information concerning ENTEX's historical financial performance,
current financial condition, business operations and prospects;
o the fact that the terms of the Merger Agreement were the result of
arm's length negotiations between representatives of ENTEX and
Siemens;
o the fact that Mr. Cameron, the controlling stockholder of ENTEX, was
strongly supportive of the Merger; and
o the fairness opinion of ENTEX's financial advisor, Lazard Freres.
The ENTEX Board of Directors also considered certain risks and
uncertainties relating to consummation of the Merger, principally relating to
ENTEX's ability to conduct its operations without a material adverse change
until the earlier of an exercise of the Put Option or the consummation of the
Merger. In view of the wide variety of factors considered in connection with its
evaluation of the Merger and the Merger Agreement, the ENTEX Board of Directors
did not find it practical to assign relative weights to the factors considered
in reaching its decision, and, therefore, the ENTEX Board of Directors did not
quantify or otherwise attach relative weights to the specific factors considered
by it. On the basis of the foregoing factors, the ENTEX Board of Directors
concluded that the proposed Merger with Acquisition would afford the ENTEX
stockholders greater value for their shares of Common Stock than was likely to
be realized by them through the other available alternatives and, accordingly,
was fair to, and in the best interests of, the ENTEX stockholders.
Opinion of Financial Advisor
The following is a summary of the opinion of Lazard Freres, a copy of which
is attached to this Information Statement as Annex B.
On March 6, 2000 Lazard Freres delivered its oral opinion to the ENTEX
Board of Directors which was subsequently confirmed by a written opinion, dated
March 13, 2000, that as of the date of such opinion the Merger Price Per Share
(as defined) (plus the Incremental Amount Per Share, if any) (as defined) to be
received by the holders of Common Stock pursuant to the Merger Agreement was
fair, from a financial point of view, to such holders. Lazard Freres assumed,
with the consent of the ENTEX Board of Directors, that the full amount of the
funds deposited in escrow pursuant to the Escrow Agreement and the Tax Escrow
Agreement will comprise a portion of the Merger Price Per Share.
The full text of the written opinion of Lazard Freres dated March 13, 2000,
which sets forth assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is contained in Annex B.
Lazard Freres provided its advisory services and its opinion for the information
and assistance of the ENTEX
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<PAGE>
Board of Directors in connection with its consideration of the Merger. The
Lazard Freres opinion is not a recommendation as to how any holder of Common
Stock should vote at the ENTEX meeting. Stockholders of ENTEX are urged to read
such opinion in its entirety.
In connection with its opinion, Lazard Freres reviewed, among other things:
o the Merger Agreement;
o the Stockholders Agreement, dated as of March 13, 2000, by and among
Siemens, Acquisition. and the persons listed on the signature pages
thereto;
o historical business and financial information relating to ENTEX;
o a number of financial forecasts and other data relating to the
business and financial performance of ENTEX provided by its
management;
o public information with respect to a number of companies in lines of
businesses believed to be generally comparable to that of ENTEX; and
o the financial terms of a number of business combinations involving
companies in lines of business believed to be generally comparable to
that of ENTEX.
Lazard Freres held discussions with members of the senior management of
ENTEX regarding its businesses, future prospects, and strategic objectives.
Lazard Freres also reviewed other such information and conducted such other
financial studies, analyses and investigations that it considered appropriate.
Lazard Freres relied upon the accuracy and completeness of all of the
financial and other information discussed with or reviewed by it. Lazard Freres
did not assume any responsibility for (i) any independent verification of such
information, (ii) any independent valuation or appraisal of any of the
properties, assets or liabilities of ENTEX, or (iii) any opinion concerning the
solvency or fair value (within the context of solvency) of ENTEX. Lazard Freres
assumed that the financial forecasts had been reasonably prepared on bases
reflecting the best currently available estimates and judgments of ENTEX's
management as to the financial performance of ENTEX. For purposes of its
analysis, Lazard Freres, with the consent of ENTEX's Board of Directors,
considered the risks and uncertainties associated with ENTEX achieving its
management's financial forecasts in the amounts and at the times contemplated
thereby. Lazard Freres has assumed no responsibility for and expressed no view
as to such forecasts or the assumptions on which they were based.
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<PAGE>
Lazard Freres was not requested to participate in the process of soliciting
interest from any party with respect to an acquisition of the outstanding Common
Stock of ENTEX, ENTEX or its constituent businesses. Its opinion does not
address the relative merits of the Merger as compared to any alternative
business transaction that might be available to ENTEX.
Lazard Freres' opinion was necessarily based on accounting standards and
economic, monetary, market and other conditions as in effect on, and information
made available to Lazard Freres as of, the date of its opinion. In rendering its
opinion, Lazard Freres assumed, with the consent of ENTEX's Board of Directors,
that the Merger would be consummated on the terms described in the Merger
Agreement, without any waiver of any material terms or conditions by ENTEX, and
that obtaining the necessary regulatory approvals for the Merger will not have
an adverse effect on ENTEX.
The following is a summary of the material financial analyses used by
Lazard Freres in connection with providing its March 13, 2000 written opinion to
the ENTEX Board of Directors. Some of the summaries of the financial analyses
include information presented in tabular format. In order to more fully
understand the financial analyses used by Lazard Freres, the tables must be read
together with the full text of each summary. The tables alone are not a complete
description of Lazard Freres' financial analyses.
(1) Public Market Valuation of Selected Companies. Lazard Freres
reviewed and compared publicly available and projected financial, operating
and stock market information of companies in lines of businesses believed
to be comparable to those of ENTEX. Lazard Freres selected the following
traditional systems integrator companies and the following IT
services/staffing companies for comparison because they are publicly traded
companies with certain operations that for purposes of analysis may be
considered similar to certain operations of ENTEX:
The selected traditional systems integrator companies consisted of:
o American Management Systems,
o Answer Think,
o Cambridge Technology,
o Diamond Technology,
o IMRS Global,
o Keane, and
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<PAGE>
o Whitman Hart.
The selected IT Services/Staffing companies consisted of:
o Alternative Resources Corp.,
o CIBER,
o Complete Business Solutions,
o Computer Horizons,
o Computer Task Group,
o Mastech,
o Modis Professional,
o Renaissance, and
o Syntel.
Lazard Freres calculated and compared various financial multiples and
ratios for the selected companies based on Institutional Broker's Estimate
System median estimates as of February 18, 2000 for the selected companies and
using financial data for ENTEX based on management's projections. The multiples
for the selected companies were calculated using closing per share prices as of
February 18, 2000 and the multiples for ENTEX were calculated using an
enterprise value of $270,000,000, which equals the equity value of ENTEX plus
net debt consisting of $196,500,000 of net debt plus $12,500,000 for the cash
premium to redeem the Notes plus $12,000,000 for the fair value adjustment
related to other debentures. With respect to both the selected traditional
systems integrator companies and the selected IT services/staffing companies,
Lazard Freres considered enterprise value as a multiple of:
o estimated 2000 and estimated 1999 net revenues,
o estimated 2000 and estimated 1999 earnings before interest, taxes,
depreciation and amortization, sometimes referred to as EBITDA,
o estimated 2000 and estimated 1999 earnings before interest and taxes,
sometimes referred to as EBIT, and
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o estimated 2000 and estimated 1999 price to earnings per share ratio.
The results of these analyses are summarized in the following charts.
<TABLE>
<CAPTION>
Enterprise Value as a Multiple of: ENTEX Traditional System Traditional System
Integrators -- Group Integrators -- Range
Median
------------------------------------ -------------- -------------------------- ---------------------------
<S> <C> <C> <C>
Net Revenues
2000E 0.59x 1.72x 0.79x-7.27x
1999E 0.56x 1.73x 0.95x-11.07x
------------------------------------ -------------- -------------------------- ---------------------------
EBITDA
2000E 26.1x 20.6x 6.6x-37.9x
1999E 31.4x 33.0x 8.1x-58.5x
------------------------------------ -------------- -------------------------- ---------------------------
EBIT
2000E NM 25.6x 7.8x-40.5x
1999E NM 36.3x 9.9x-100.1x
------------------------------------ -------------- -------------------------- ---------------------------
Price/EPS
2000E NM 33.0x 12.8x-100.7x
1999E NM 39.3x 15.5x-137.4x
------------------------------------ -------------- -------------------------- ---------------------------
Enterprise Value as a Multiple of: ENTEX IT Services/Staffing IT Services/Staffing
Companies -- Group Median Companies -- Range
------------------------------------ -------------- -------------------------- ---------------------------
Net Revenues
2000E 0.59x 0.91x 0.30x-2.40x
1999E 0.56x 0.98x 0.32x-2.58x
------------------------------------ -------------- -------------------------- ---------------------------
EBITDA
2000E 26.1x 9.4x 4.2x-17.8x
1999E 31.4x 10.7x 5.3x-18.5x
------------------------------------ -------------- -------------------------- ---------------------------
EBIT
2000E NM 10.9x 6.1x-19.3x
1999E NM 13.3x 8.0x-20.1x
------------------------------------ -------------- -------------------------- ---------------------------
Price/EPS
2000E NM 18.3x 10.5x-27.8x
1999E NM 20.9x 13.7x-36.7x
------------------------------------ -------------- -------------------------- ---------------------------
</TABLE>
(2) Selected Precedent Transactions Analysis. This analysis was undertaken
to provide information regarding the Merger consideration based upon a
comparison of the financial terms of the Merger with the financial terms of
several other
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business combinations in the computer services industry. Lazard Freres analyzed
certain information relating to selected transactions since 1996 in the computer
services industry. Lazard Freres compared the following transactions:
o PinkRoccade NV's (Netherlands) transaction with ASZ (Gac Holding BV)
announced in January 2000;
o Lucent Technologies' transaction with International Network Services
announced in August 1999;
o CompuWare Corp.'s transaction with Data Processing Resources announced
in June 1999;
o Getronics transaction with Wang Global announced in May 1999;
o Welsh, Carson Anderson & Stowe's transaction with BancTec Inc.
announced in April 1999;
o Titan Corporation's transaction with Advanced Communication Systems
announced in December 1998;
o InaCom's transaction with Vanstar announced in October 1998; and
o Donaldson, Lufkin & Jenrette Inc.'s transaction with DecisionOne
Holdings announced in May 1997.
Lazard Freres calculated and compared for each of the selected precedent
transactions total enterprise value as a multiple of:
o latest twelve months net revenues,
o latest twelve months EBITDA, and
o latest twelve months EBIT.
Lazard Freres also calculated and compared for each of the selected
precedent transactions equity value as a multiple of:
o latest twelve months net income.
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The following tables present the results of this analysis, each as compared
to the corresponding values indicated for ENTEX as of February 18, 2000.
<TABLE>
<CAPTION>
Enterprise Value as a Multiple of: ENTEX Selected Precedent Selected Precedent
Transactions-- Range Transactions-- Group
Median
------------------------------------ -------------- ------------------------ ------------------------
<S> <C> <C> <C>
Latest Twelve Months Net Revenues
0.56x 0.35x-10.27x 1.13x
------------------------------------ -------------- ------------------------ ------------------------
Latest Twelve Months EBITDA
31.4x 7.1x-53.5x 10.2x
------------------------------------ -------------- ------------------------ ------------------------
Latest Twelve Months EBIT NM 12.3x-64.0x 13.3x
------------------------------------ -------------- ------------------------ ------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------ --------------- -------------------------- --------------------------
Equity Value as a Multiple of: ENTEX Selected Precedent Selected Precedent
Transactions-- Range Transactions-- Group
Median
------------------------------------ --------------- -------------------------- --------------------------
<S> <C> <C> <C>
Latest Twelve Months Net Income NM 13.1x-112.3x 22.0x
------------------------------------ --------------- -------------------------- --------------------------
</TABLE>
(3) Discounted Cash Flow Analysis. Lazard Freres performed a
discounted cash flow analysis to analyze the present value of ENTEX's
projected cash flow for the years 2000 through 2004, inclusive, the present
value of the projected 2004 terminal enterprise value, and the theoretical
total enterprise value of ENTEX under the following scenario:
o utilizing ENTEX's management projections for 2000 and extended
assumptions for 2001 through 2004 based upon the assumption of an 18%
growth rate in sales and constant margins as per management's
estimates for the fourth quarter in 2000. From the time that
management provided Lazard Freres with the projections, ENTEX's
performance has continued to deteriorate.
Lazard Freres applied discount rates ranging from 13.0% to 17.0% and
multiples of estimated EBITDA ranging from 9.0x to 11.0x, to derive the present
value of ENTEX's projected cash flow for the years 2000 through 2004 ranging
from:
o $23,600,000 to $26,000,000.
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Lazard Freres applied the same discount rates and multiples of estimated
EBITDA to derive the present value of the projected 2003 terminal enterprise
value ranging from:
o $159,500,000 to $232,000,000.
Lazard Freres applied the same discount rates and multiples of estimated
EBITDA to derive the theoretical total enterprise value of ENTEX ranging from:
o $183,100,000 to $258,000,000.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Lazard Freres' opinion. In arriving at its fairness determination,
Lazard Freres considered the results of each of these analyses in their
totality. No company or transaction used in the above analyses as a comparison
is directly comparable to ENTEX or the Merger. The analyses were prepared solely
for purposes of Lazard Freres' providing its opinion to ENTEX's Board of
Directors as to the fairness from a financial point of view of the Merger Price
Per Share (plus Incremental Amount Per Share, if any) to be received by the
holders of ENTEX Common Stock and do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually may be sold.
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 those analyses. Because these analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond the control of
the parties or their advisors, none of ENTEX, Lazard Freres or any other person
assumes responsibility if future results are materially different from those
forecast. As described above, Lazard Freres' opinion to ENTEX's Board of
Directors was one of many factors taken into consideration by ENTEX's Board of
Directors in making its determination to approve the Merger Agreement. This
summary is not a complete description of the analysis performed by Lazard Freres
and is qualified by reference to the written opinion of Lazard Freres set forth
in Annex B.
Lazard Freres is an internationally recognized investment banking firm and
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Lazard
Freres was selected to act as investment banker to the ENTEX Board of Directors
because of its expertise and its reputation in investment banking and its
familiarity with ENTEX. Lazard Freres is familiar with ENTEX, having provided
certain investment banking services to ENTEX in the past, including having acted
as investment banker to EN-
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TEX in connection with the sale of its products business to CompuCom Systems,
Inc. in 1999 and as managing underwriters of the Notes in 1998 and in connection
with such transactions Lazard Freres has received fees customary for such
services rendered.
Lazard Freres provides a full range of financial advisory and security
services, and in the course of its trading and market making activities, may
from time to time effect transactions and hold securities, including derivative
securities, of ENTEX or Siemens for its own account and for the accounts of its
customers. As of the date of its opinion, Lazard Freres held approximately
$8,750,000 in principal amount of the Notes, which were purchased at a
significant discount to principal amount. The Board of Directors of ENTEX, in
connection with the Merger, informed Lazard Freres that it intends to call the
Notes for redemption at the principal amount plus accrued interest and a premium
of 12 1/2%.
Pursuant to a letter agreement dated November 4, 1999, ENTEX engaged Lazard
Freres to act as its investment banker in connection with the possible sale of
ENTEX, sale of a controlling interest in ENTEX or sale of a subsidiary or
division of ENTEX to another corporation or business entity which might take the
form of a merger or sale of assets or equity securities or other interests.
Pursuant to the terms of the letter agreement, ENTEX has agreed to pay Lazard
Freres a fee of $2,000,000 upon the closing of the Merger. ENTEX has agreed to
reimburse Lazard Freres for its reasonable out-of-pocket expenses, including
attorney's fees, and to indemnify Lazard Freres against certain liabilities,
including certain liabilities under the federal securities laws.
Interests of Certain Persons in the Merger
Share Ownership
Mr. Cameron, ENTEX's Chairman of the Board of Directors and controlling
stockholder, owns 2,669,653 shares of Common Stock. In addition, ENTEX
Associates, L.P. owns 21,407,739 shares of Common Stock. Mr. Cameron is the sole
stockholder of The Putnam Group, Inc., the general partner of ENTEX Associates
(the "Putnam Group"). Two of the limited partners of ENTEX Associates, Airlie
Associates and Airlie Associates II, are general partnerships whose partners
consist of Mr. Cameron's relatives. The other limited partners of ENTEX
Associates are business associates of Mr. Cameron. Mr. Cameron has voting and
dispositive power over the shares of Common Stock held by ENTEX Associates and,
accordingly, may be deemed to have beneficial ownership with respect to these
shares of Common Stock.
Mr. McKenna owns 642,204 shares of Common Stock. R. Randolph Devening, a
member of the Board of Directors, owns 21,315 shares of Common Stock. Linwood A.
Lacy, Jr., a member of the Board of Directors, owns 39,620 shares of Common
Stock. Frank W. Miller, a member of the Board of Directors, owns 21,264 shares
of Common Stock. Ms. Lynne Burgess, ENTEX's Senior Vice President and General
Counsel, owns 96,333 shares of Common Stock.
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Stockholders' Agreements
On December 10, 1993, ENTEX Holdings, Inc., a Delaware corporation
("Holdings"), Mr. Cameron, ENTEX Associates, and certain members of Holdings
then current management (who are collectively referred to as the "Participants")
entered into the Stockholders' Agreement (as amended, the "ENTEX Stockholders'
Agreement") in connection with the sale and purchase of shares of common stock
(the "Original Shares") of Holdings by the Participants. The ENTEX Stockholders'
Agreement is binding on ENTEX as the successor corporation of Holdings, and all
obligations of the Participants and certain of Mr. Cameron's affiliates relating
to the Original Shares of Holdings now relate to the Common Stock.
Pursuant to the ENTEX Stockholders' Agreement, Mr. Cameron was granted
certain of the Drag Along Rights. If Mr. Cameron, ENTEX Associates, each
Affiliate (as defined by Rule 405 under the Exchange Act, as in effect on
December 10, 1993) of Mr. Cameron and each member of Mr. Cameron's family and
trust for the benefit of Mr. Cameron or any member of his family (collectively,
the "Cameron Affiliates") propose to sell or exchange all of their shares of
Common Stock in a bona fide arm's length transaction, Mr. Cameron, at his
option, may require that each Participant and his or her Permitted Transferees
(which includes the spouse or children of such individuals, or a trust for the
benefit of one or more of such persons) sell all of their shares of Common Stock
in the same transaction. Also, if stockholder approval of the transaction is
required, Mr. Cameron may require that each Participant and his or her Permitted
Transferees vote their shares of Common Stock in favor of such transaction. In
any such transaction, the Participants and their Permitted Transferees shall
receive for their shares the identical consideration payable per share of Common
Stock to all other holders of shares of Common Stock. In connection with the
Merger and pursuant to the Stockholders Agreement, if either the Call Option or
the Put Option is exercised, Mr. Cameron will exercise these Drag Along Rights
as required by the Stockholders Agreement.
On March 8, 2000, IBM Commercial Credit ("IBMCC") exercised a warrant to
purchase 333,350 shares of Common Stock which was issued in November 1994
pursuant to a warrant agreement, dated as of November 15, 1994 among IBMCC,
Holdings and ENTEX (the "IBMCC Warrant Agreement"). The IBMCC Warrant Agreement
grants Drag Along Rights to Mr. Cameron. If either Option is exercised, IBMCC
will be required to sell its shares of Common Stock pursuant to these Drag Along
Rights. On July 2, 1998, ENTEX, ENTEX Associates, Mr. Cameron and CIBC WG Argosy
Merchant Fund 2, L.L.C. ("CIBC") entered into a stock purchase agreement (the
"CIBC Stock Purchase Agreement") whereby ENTEX Associates and Mr. Cameron sold
1,131,222 shares of Common Stock in the aggregate to CIBC. The CIBC Stock
Purchase Agreement granted Drag Along Rights to
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Mr. Cameron with respect to these shares. If either Option is exercised, CIBC
will be required to sell its shares of Common Stock pursuant to these Drag Along
Rights.
Cameron Guarantee of IBMCC Working Capital Line of Credit
ENTEX has financed a significant portion of its working capital needs under
a working capital line of credit (the "IBMCC Working Capital Line of Credit").
The IBMCC Working Capital Line of Credit provides for borrowings of up to
$100,000,000, of which $80,900,000 was owed to IBMCC as of March 15, 2000 on an
interest-bearing basis and was classified as notes payable. On December 21,
1999, ENTEX executed an amendment to the IBMCC Working Capital Line of Credit to
extend to March 31, 2000 its existing overadvance from its previously scheduled
termination date of December 21, 1999. The overadvance permits ENTEX to borrow
up to $20,000,000 in excess of what would otherwise have been allowed under the
collateral formula in the IBMCC Working Capital Line of Credit. IBMCC also
agreed to modify the financial covenants in the IBMCC Working Capital Line of
Credit. Simultaneously with the execution of the amendment of the IBMCC Working
Capital Line of Credit, Mr. Cameron guaranteed up to $20,000,000 of ENTEX's
obligations to IBMCC, and purchased from IBMCC an option (the "IBMCC Option") to
purchase 1,851,850 shares of Common Stock held by Mr. Cameron. The purchase
price for the IBMCC Option was $3,000,000 in cash, payable not later than March
31, 2000, and an additional amount equal to the excess, if any, of 1,851,850
multiplied by the highest per share price of Common Stock obtained by Mr.
Cameron or any of his affiliates during the period ending one year after the
execution of the IBMCC Option purchase agreement over the initial $3,000,000
amount. The additional amount, if any, is payable upon the consummation of any
subsequent transaction in which more than 50% of the Common Stock is sold. If no
such sale occurs within the one-year period, the original IBMCC Option will be
reinstated with the aggregate exercise price increased by $3,000,000. In
connection with the Merger, Mr. Cameron will purchase the IBMCC Option from
IBMCC. Pursuant to the Merger Agreement, Siemens is obligated to repay in full
all amounts outstanding under the IBMCC Working Capital Line of Credit promptly
following the earlier of the purchase of Common Stock pursuant to the exercise
of either Option or the Effective Time, thereby releasing Mr. Cameron from his
guarantee.
Employment Agreements
ENTEX has entered into agreements with certain of its officers, including:
Mr. Cameron, Chairman of the Board of Directors; Mr. McKenna, ENTEX's Chief
Executive Officer; and Kenneth A. Ghazey, ENTEX's President.
Mr. McKenna's severance agreement provides that upon a Severance Event (as
defined below) he will be entitled to a payment equal to twelve times his
monthly compensation as of the date of termination (including his bonus or any
variable compensation at 100% of target).
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A "Severance Event' is defined as (i) a termination for any reason other than
cause or as a result of his death, disability or voluntary resignation or (ii) a
change of control which results in a reduction of his base compensation, a
reduction in the level of authority or scope of responsibilities or relocation.
Mr. McKenna's severance agreement terminates on August 6, 2000.
In addition, ENTEX has entered into an agreement with Mr. McKenna under
which he will receive a transition payment of $500,000 upon consummation of the
Merger or the exercise of either Option, provided that (i) he remains an active
employee of ENTEX through the consummation of the Merger or the exercise of
either Option and (ii) he executes an employment agreement with Siemens and
certain other related documents.
Mr. Ghazey's employment agreement provides that upon (i) the termination of
his employment by ENTEX for other than cause or as a result of death, disability
or voluntary resignation, (ii) a change of control (as defined below) or (iii) a
unilateral decrease in his aggregate compensation, benefits and incentive
package which is not uniformly applied to all other senior executive officers,
he will be entitled to one year's base salary at the then current rate and all
incentive compensation earned but not paid under the Management Incentive Plan
then in effect. In addition, ENTEX has entered into an agreement with Mr. Ghazey
under which he will receive a payment of $700,000 upon consummation of the
Merger or exercise of either Option, provided that in the reasonable judgment of
the Board of Directors of ENTEX, he materially participated in the change in
control transaction. The agreement also provides that Mr. Ghazey will not enter
into a competing business or solicit customers or employees of ENTEX for two
years from the date he receives such payment. Mr. Ghazey has also agreed not to
disclose confidential information of ENTEX and, for no additional charge to
ENTEX, to consult with and assist ENTEX and any acquiring company in effecting
the transition of management for a period of thirty days following the change in
control. As a condition to receipt of payments under the agreement, Mr. Ghazey
will be required to execute a release of claims he may have against ENTEX.
Mr. Cameron's employment agreement is effective until July 1, 2001. Such
agreement provides for an initial annual base salary of $400,000 and
participation in ENTEX's existing and future long-term incentive plans at a
level determined by the Board of Directors. ENTEX will provide hospitalization,
medical, dental and health coverage to Mr. Cameron and his spouse following the
termination of his employment agreement for the remainder of their lives or
until comparable coverage is obtained from another employer or until comparable
coverage can be obtained at commercially reasonable rates, up to a maximum
actual cost to ENTEX of $1,500,000. In addition, upon (i) death, (ii) disability
or (iii) termination of his employment by ENTEX without cause or termination by
Mr. Cameron for Good Reason (as defined below), Mr. Cameron will be entitled to
receive his base salary at the then current rate for the longer of (x) the
remainder of the term of his employment agreement (without regard to the
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earlier termination) and (y) one year. Mr. Cameron is subject to a covenant not
to compete until three years following the termination of his employment.
A "change of control" for purposes of Mr. McKenna's agreement is defined as
an event in which Mr. Cameron and the Cameron Affiliates no longer own voting
securities of ENTEX entitled to cast a majority of votes for election of the
ENTEX Board of Directors. The Merger or purchase of shares of Common Stock upon
the exercise of either Option will result in a change of control for purposes of
Mr. McKenna's agreement. A "change of control" for purposes of Mr. Ghazey's
agreement is defined as a transfer of ownership or control of more than 50% of
all of the assets or shares of ENTEX. The Merger or the purchase of shares of
Common Stock pursuant to the exercise of either Option will result in a change
of control for purposes of Mr. Ghazey's agreement. For purposes of Mr. Cameron's
employment agreement, for "Good Reason" means a termination of Mr. Cameron's
employment agreement by Mr. Cameron following a reduction in his annual base
salary, a material alteration in his authority or responsibilities, the failure
to elect or continue Mr. Cameron as Chairman of the Board of Directors, the
failure to maintain directors and officers liability insurance covering Mr.
Cameron or a material breach of his employment agreement by ENTEX. Pursuant to
the Merger Agreement, Mr. Cameron's employment will be terminated for "Good
Reason" for purposes of his employment agreement immediately prior to the
earlier of the date either Option is exercised or the Effective Time.
In addition to the existing employment agreements described above, ENTEX
has, at the request of Siemens, entered into agreements with certain of ENTEX's
executive officers, including: Mr. McKenna; Mr. Paul Madarasz, ENTEX's Chief
Operating Officer; and Ms. Shirley Mehta, ENTEX's Vice President and Controller
(each, an "Employee"). The effectiveness of each of these agreements is
contingent upon the occurrence of the exercise of either Option or the Effective
Time.
Mr. McKenna's agreement provides that he will receive (i) an initial annual
salary of $450,000, (ii) a target annual incentive bonus of $225,000 for fiscal
2000, (iii) a retention bonus of $450,000, provided that he remains employed
with ENTEX through one year after the effectiveness of the employment agreement
and (iv) a car allowance of $14,000 for each calendar year, prorated for this
calendar year to reflect the actual number of full months that he works for
ENTEX after the effectiveness of the employment agreement. In addition, Mr.
McKenna will retain the title of Chief Executive Officer.
Mr. Madarasz's agreement provides that he will receive (i) an initial
annual salary of $275,000, (ii) a target annual incentive bonus of $137,500 for
fiscal 2000, (iii) a retention bonus of $300,000, provided that he remains
employed with ENTEX through one year after the effectiveness of the employment
agreement and (iv) a car allowance of $7,200 for each calendar year, prorated
for this calendar year to reflect the actual number of full months that he
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works for ENTEX after the effectiveness of the employment agreement. In
addition, Mr. Madarasz will retain the title of Chief Operating Officer.
Ms. Mehta's agreement provides that she will receive (i) an initial annual
salary of $200,725, (ii) a target annual incentive bonus of $100,365 for fiscal
2000 and (iii) a retention bonus of $200,000, provided that she remains employed
with ENTEX through one year after the effectiveness of the employment agreement.
In addition, Ms. Mehta will retain the title of Vice-President-Controller.
Each of these employment agreements provides that any incentive amounts
earned during the fiscal year will be based on the business results of ENTEX and
the number of full months the Employee was employed by ENTEX during this period.
For subsequent fiscal years, the Employee's annual incentive target award will
be determined and earned based on goals, terms, conditions and formula
established by the Compensation Committee of the Board of Directors. In
addition, each of the employment agreements provides that the Employee will be
eligible to participate in ENTEX's future long-term incentive plans that may be
established after the effectiveness of the employment agreement at a level
determined by the Compensation Committee of the Board of Directors and in the
employee benefit plans that are currently available to the other executives of
ENTEX. If within one year of the effectiveness of the employment agreement the
Employee's employment with ENTEX is involuntarily terminated for reasons other
than for cause (as defined below) or the Employee voluntarily terminates his or
her employment with ENTEX for good reason (as defined below), the Employee will
be paid a prorated portion of the retention bonus based upon the number of full
calendar months he or she is employed with ENTEX after the effectiveness of the
employment agreement. If the Employee's employment with ENTEX is involuntarily
terminated for reasons other than for cause or he or she voluntarily terminates
his or her employment with ENTEX for good reason, in lieu of any other severance
payments that may otherwise be due to the Employee under ENTEX's separation
programs, the Employee will be eligible to receive his or her applicable one
year's base salary as described above plus his or her applicable annual target
incentive bonus described above. In addition, the Employee will be eligible to
receive COBRA coverage for twelve months at a cost to ENTEX of up to $12,000 and
outplacement assistance provided by a mutually acceptable outplacement service
provider at a cost to ENTEX of up to $30,000. The provisions regarding voluntary
termination of employment due to good reason shall not apply after one year from
the effectiveness of the employment agreement. In addition, the severance
provisions shall not apply and no severance payment shall be made if the
Employee's termination of employment is due to his or her death, disability or
retirement on or after age sixty-five. Further, the Employee's procurement of
his or her severance rights are contingent upon the Employee executing a
separation and general release waiving potential claims arising out of his or
her employment or cessation of employment, in a form satisfactory to ENTEX. Each
agreement is also contingent upon the Employee signing (i) a non competition and
non solicitation agreement which provides that he or
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she will not enter into a competing business or solicit customers, employees or
independent contractors of ENTEX for one year from the date that he or she shall
cease to be an employee of ENTEX and its affiliates and (ii) an employee patent
and secrecy agreement pursuant to which he or she agrees not to disclose
confidential information or the trade secrets of ENTEX and that certain
inventions, intellectual property and semiconductor designs which are conceived
by the Employee, alone or with others, shall belong to ENTEX.
For purposes of Mr. McKenna's, Mr. Madarasz's and Ms. Mehta's agreement,
for "cause" means: (a) a continued and willful failure by the Employee to
substantially perform his or her duties, which failure constitutes a gross
neglect of his or her duties; (b) the Employee's commission of an act of fraud
or embezzlement or an act which the Employee knew to be in gross violation of
his or her duties to ENTEX; (c) a felony conviction, guilty plea to a felony
change or plea of nolo contendere to a felony change by the Employee; (d) breach
of any non competition and non solicitation agreement, patent and secrecy
agreement, confidentiality agreement or business conduct guidelines which apply
to the Employee's employment with ENTEX. For purposes of Mr. McKenna's, Mr.
Madarasz's and Ms. Mehta's agreement, "good reason" shall solely mean, without
exception, the occurrence without the Employee's consent after the effectiveness
of the employment agreement and prior to the first anniversary of the
effectiveness of the employment agreement, of any of the following: (a)
requiring the Employee to be based at any location outside of (i) a fifty mile
radius, for Messrs. McKenna and Madarasz or (ii) a thirty five mile radius for
Ms. Mehta, of his or her location immediately after the effectiveness of the
employment agreement except for reasonably required travel on job-related
business; (b) a reduction in his or her base salary; (c) a reduction in his or
her target annual incentive award opportunity; or (d) exclusion from eligibility
for participation in otherwise applicable executive benefit plans of ENTEX.
In addition, ENTEX's Board of Directors has informed Mr. Madarasz and Ms.
Mehta that they will receive a payment of $137,500 and $100,363, respectively,
upon the consummation of the Merger or exercise of either Option; provided that
the Merger or exercise of either Option occurs before June 30, 2000 and that he
or she, respectively, remains an active employee of ENTEX through the
consummation of the Merger or the exercise of either Option.
Certain Federal Income Tax Consequences
The receipt of cash pursuant to the Merger will be a taxable transaction
for federal income tax purposes under the Internal Revenue Code of 1986, as
amended (the "Code"), and may also be a taxable transaction under applicable
state, local or foreign income or other tax laws. Generally, for federal income
tax purposes, each ENTEX stockholder will recognize gain or loss equal to the
difference between the amount of cash received pursuant to the Merger and the
stockholder's aggregate tax basis in the shares of Common Stock converted in
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the Merger. Gain or loss will be calculated separately for each "block" of
Common Stock (i.e., each group of shares of Common Stock having the same tax
basis and holding period) so converted.
If shares of Common Stock are held by an ENTEX stockholder as capital
assets, gain or loss recognized by the stockholder with respect to the shares
will be capital gain or loss, which, in the case of non-corporate stockholders,
generally will be long-term capital gain or loss subject to a maximum rate of
20% if the stockholder's holding period for the shares exceeds one year and will
be short-term capital gain or loss with respect to shares held one year or less.
Long-term capital gains recognized by a corporate stockholder will be taxed at a
maximum federal marginal tax rate of 35%. The utilization of capital losses
generally is limited.
Under the federal income tax backup withholding rules, unless an exemption
applies, withholding will be required of 31% of all payments to which a
stockholder is entitled pursuant to the Merger, unless the stockholder provides
or has provided a tax identification number. Each holder of Common Stock should
complete and sign any substitute Form W-9 (which may be included as part of the
letter of transmittal which will subsequently be distributed to ENTEX
stockholders), unless an applicable exception exists and is proved in a
satisfactory manner or unless ENTEX already has such information in its
possession. Stockholders that are corporations are not subject to backup
withholding. Any amounts withheld generally will be allowed as a credit against
the stockholder's federal income tax liability for the year.
THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION PURPOSES AND
MAY NOT BE APPLICABLE WITH RESPECT TO COMMON STOCK RECEIVED UPON THE EXERCISE OF
EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, OR WITH RESPECT TO
STOCKHOLDERS WHO ARE SUBJECT TO SPEICAL TAX TREATMENT UNDER THE CODE, SUCH AS
BANKS, INSURANCE COMPANIES OR OTHER FINANCIAL INSTITUTIONS, TAX-EXEMPT
ORGANIZATIONS, NON-U.S. PERSONS, DEALERS IN SECURITIES, PERSONS THAT HOLD SHARES
OF COMMON STOCK THROUGH PARTNERSHIPS OR OTHER PASS THROUGH ENTITIES, AND PERSONS
WHO HOLD THEIR SHARES AS PART OF A HEDGE AGAINST CURRENCY RISK, OR AS PART OF A
CONSTRUCTIVE SALE, STRADDLE OR CONVERSION TRANSACTION. THIS DISCUSSION DOES NOT
ADDRESS ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY APPLY TO
STOCKHOLDERS IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES. 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.
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Conduct of Business Following the Merger
Following the effective time of the Merger, Siemens will own 100% of
ENTEX's outstanding capital stock. Accordingly, Siemens will be the sole
beneficiary of any future earnings and growth of ENTEX after the effective time
of the Merger and will have the ability to benefit from any corporate
opportunities that may be pursued by ENTEX. At the effective time of the Merger,
current ENTEX stockholders (other than Siemens or Acquisition, if applicable)
will cease to have any ownership interests in, or rights as, stockholders of
ENTEX. Following the effective time of the Merger, the current ENTEX
stockholders will not benefit from any increase in the value of ENTEX or any
payment of dividends on the Common Stock and will not bear the risk of any
decrease in the value of ENTEX.
As a result of the Merger, ENTEX will be a privately held corporation and a
wholly-owned subsidiary of Siemens. In addition, registration of the Common
Stock under the Exchange Act will be terminated. This termination will make
certain provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b) and the requirement under the proxy rules of
Regulation 14A of furnishing a proxy or information statement in connection with
stockholder meetings, no longer applicable to ENTEX. After the effective time of
the Merger, ENTEX will no longer be required to file periodic reports with the
Commission in connection with the Common Stock.
Accounting Treatment of the Merger
The Merger will be accounted for using the purchase method of accounting.
Under this method of accounting, the purchase price will be allocated to the
fair value of the net assets acquired, and ENTEX's results will be included in
Siemens' consolidated financial statements from and after the effective time of
the Merger.
Regulatory Approval
Under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the "HSR
Act") and the rules of the Federal Trade Commission (the "FTC") relating to the
HSR Act, the shares of Common Stock cannot be purchased pursuant to either
Option and the Merger cannot be completed until premerger notification and
report forms have been filed and required information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC, and a specified waiting period has expired or been
terminated. ENTEX and Siemens each filed their respective premerger notification
and report forms under the HSR Act on March 17, 2000. The waiting period
specified under the HSR Act will expire or be terminated not later than April
16, 2000, unless a request for additional information and documentary materials
(the "Second Request") is made. If, within the initial thirty-day waiting
period, either the Antitrust Division or the FTC makes a Second Request
concerning the Merger, the waiting period will be extended and would expire at
11:59 p.m.,
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New York City time, on the twentieth calendar day after the date of substantial
compliance by Siemens and ENTEX with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized by
the HSR Act. Thereafter, such waiting period may be extended only by court order
or with the consent of either party. In practice, complying with a Second
Request can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and may
agree to delay consummation of the transaction with such negotiations continue.
The Merger Agreement provides that all waiting periods under the HSR Act
must have expired or been terminated in order to purchase shares of Common Stock
pursuant to either Option or complete the Merger.
At any time before or after the Effective Time, the Antitrust Division or
the FTC could, if deemed necessary or desirable to do so, act under the federal
antitrust laws and seek to enjoin completion of the Merger or seek the
divestiture of substantial assets of ENTEX or Siemens. At any time before or
after the Effective Time, and notwithstanding that the HSR Act waiting period
having expired or been terminated, any state attorney general of a state where
ENTEX or Siemens has operations also could take action under its state antitrust
laws to enjoin completion of the Merger or seek divestiture of substantial
assets. Private parties also may take legal action under federal and/or state
antitrust laws under certain circumstances.
ENTEX and Siemens believe that the Merger will comply with federal and
state antitrust laws. However, there can be no assurance that a challenge to the
Merger will not be made or that, if made, ENTEX and Siemens would prevail or
would not be required to accept conditions, including divestitures, in order to
complete the Merger.
Other than the expiration or earlier termination of the relevant waiting
periods under the HSR Act (and the filing with the Secretary of the State of
Delaware of the certificate of merger), there are no material regulatory
approvals from or any filings with any governmental entities required to
complete the Merger.
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THE MERGER AGREEMENT
The following is a summary of material provisions of the Merger Agreement,
a copy of which is attached to this Information Statement as Annex A and is
incorporated herein by reference. This summary is qualified in its entirety by
reference to the Merger Agreement. Capitalized terms used but not otherwise
defined in this Information Statement shall have the meaning set forth in the
Merger Agreement.
Change of Directors upon Purchase of Shares Pursuant to Options
If shares of the Common Stock are purchased pursuant to the exercise of
either Option, and from time to time thereafter so long as Acquisition, Siemens
and Siemens' other direct or indirect wholly-owned subsidiaries, collectively,
continue to hold shares of Common Stock in an amount at least equal to a
majority of the outstanding voting power of ENTEX's capital stock, Siemens shall
be entitled to designate such number of directors (the "Siemens Designees"),
rounded up to the next whole number, on the ENTEX Board of Directors, each
subsidiary and each standing committee thereof as is equal to the product of the
total number of directors on the ENTEX Board of Directors, such subsidiary and
such committee (determined after giving effect to the directors elected pursuant
to this sentence) multiplied by the percentage that the aggregate number of
shares of Common Stock beneficially owned by Siemens or its wholly-owned
subsidiaries bears to the total number of shares of Common Stock then
outstanding.
ENTEX shall, upon the request of Siemens, promptly take all actions
necessary to cause the Siemens Designees to be so elected, including, if
necessary, increasing the size of the ENTEX Board of Directors or such
subsidiary or using its best efforts to obtain the resignations of one or more
existing directors of ENTEX or such subsidiary; provided, however, that prior to
the effective time of the Merger (the "Effective Time"), the ENTEX Board of
Directors and each subsidiary shall contain at least two members who are neither
officers, directors nor Siemens Designees.
ENTEX's obligations to appoint Siemens Designees to the Board of Directors
shall be subject to Section 14(f) of the Exchange Act of and Rule 14f-1
promulgated thereunder. ENTEX shall promptly take all actions required pursuant
to Section 14(f) and Rule 14f-1 in order to fulfill its obligations under the
Merger Agreement and shall distribute to its stockholders promptly following the
execution and delivery of the Merger Agreement such written material as is
required under Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under the Merger Agreement (the "14(f) Material"). On March 23, 2000, the 14(f)
Material was distributed to ENTEX stockholders.
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Consideration to Be Received Pursuant to the Merger
Each issued and outstanding share of Common Stock (other than the shares
owned by ENTEX as treasury stock, Siemens, Acquisition, any direct or indirect
wholly-owned subsidiary of Siemens or Acquisition and Dissenting Shares, if any)
shall be converted into the right to receive an amount (the "Merger Price Per
Share") equal to the quotient of (x) the Adjusted Acquisition Price (as defined
below) divided by (y) the number of shares of Common Stock that are issued and
outstanding immediately prior to the Effective Time (the "Outstanding Share
Amount"); provided, however, that in no event shall the aggregate Merger Price
exceed the sum of (i) $66,942,037 plus (ii) the aggregate amount in cash
received by ENTEX after the date of the Merger Agreement and prior to the
Effective Time upon the exercise of outstanding employee stock options.
If the Effective Time occurs prior to the date letters of transmittal are
first mailed to the holders of Common Stock in accordance with the terms of the
Merger Agreement (which requires such mailing to occur within five days of the
Initial Distribution Date (as defined)), an additional cash amount per share of
Common Stock shall be received upon conversion of each share in the Merger in an
amount equal to product of (x) the Merger Price Per Share and (y) 6.5% per year
from the Effective Time until the date letters of transmittal are first mailed,
calculated on an uncompounded basis (the "Incremental Amount Per Share").
All such shares of Common Stock shall no longer be outstanding and shall be
cancelled automatically and shall cease to exist. Each holder of a certificate
representing any such shares of Common Stock shall cease to have any rights with
respect thereto, except the right to receive, subject to the terms of the Escrow
Agreement, the Tax Escrow Agreement and the Merger Agreement, the Merger Price
Per Share and, if applicable, the Incremental Amount Per Share, upon the
surrender of such stock certificates in accordance with the Merger Agreement,
without interest.
The term "Adjusted Acquisition Price" shall be (i) $105,000,000 minus (ii)
the Closing Liquid Net Worth Adjustment (as defined below) plus (iii) an
additional amount equal to the product of (x) the amount determined pursuant to
the preceding clauses (i) and (ii) times (y) 6.5% per year from the Measurement
Date to the Effective Time, calculated on an uncompounded basis.
"Closing Liquid Net Worth Adjustment" shall be the amount by which ENTEX's
Closing Liquid Net Worth is less than $(165,685,000).
"Closing Liquid Net Worth" shall be the amount, computed as of the
Measurement Date and in a manner consistent with the methods used in the
preparation of the financial statements of ENTEX at or for the period ended
September 26, 1999 and as specified in the Merger Agreement, equal to ENTEX's
current assets (net of reserves) minus all of its liabili-
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ties, including for this purpose (whether or not required by generally accepted
accounting principles or otherwise to be accrued) an accrual for the full amount
of all amounts due or to become due on the part of ENTEX or any subsidiary of
ENTEX in connection with or by reason of the transactions contemplated by the
Merger Agreement, including without limitation (i) those related to attorneys,
accountants, investment bankers, financial advisers and other professionals,
(ii) all obligations in respect of bonuses, severance or additional compensation
payable to officers, directors, employees and consultants (it being understood
that liabilities under "double trigger" change-of-control provisions shall not
be included as liabilities for purposes of calculating Closing Liquid Net Worth
unless both triggers have occurred prior to the Measurement Date), (iii) the
Notes Redemption Premium (as defined below) and (iv) if applicable, one-half of
the premium for the insurance policy purchased in connection with the
procurement of insurance policies procured as part of the Tax Insurance Election
(as defined).
"Measurement Date" shall be the first to occur of (i) the Closing Date, and
(ii) the date shares of Common Stock are purchased pursuant to the exercise of
either Option.
"Notes Redemption Premium" shall be (i) an amount in respect of the
Subordinated Debentures equal to $32,200,000 less the book value of the
Subordinated Debentures on the Measurement Date plus (ii) the excess of (x) the
amount required to be expended by Siemens or its affiliates to repurchase or
redeem all of the Notes, over (y) the aggregate outstanding principal amount of
the Notes on the Measurement Date plus (iii) the reasonable costs and expenses
(including fees and expenses of advisors and legal counsel) incurred or to be
incurred in connection with repurchasing, redeeming or otherwise repaying the
Notes and Subordinated Debentures. The Notes Redemption Premium shall not
include any amount paid by Siemens to repurchase any debt security that is in
excess of the contractual repurchase or redemption price for such security
(including any premium or penalty) that will be payable following the Merger.
Timing of Receipt by Stockholders of Merger Price
The first $20,000,000 of the aggregate Merger Price and Incremental Amount,
if any, (the "Indemnity Amount") will be deposited into an interest-bearing
escrow pursuant to the Escrow Agreement to satisfy any indemnification claims by
Siemens relating to breaches of any representations, warranties or covenants in
the Merger Agreement. Any of these funds not utilized for such purposes (net of
escrow-related expenses) will be paid to the former ENTEX stockholders eighteen
months following the Measurement Date pursuant to the terms of the Escrow
Agreement and Merger Agreement, except to the extent of any unresolved
indemnification claims as of such date. See "--Escrow Agreement."
The next $20,000,000 of the aggregate Merger Price, if any, and Incremental
Amount, if any (the "Tax Indemnity Amount"), will be deposited into an
interest-bearing escrow to
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satisfy any tax liabilities and related expenses relating to ENTEX's 1994, 1995
and 1996 fiscal years pursuant to the Tax Escrow Agreement. Any of these funds
not utilized for such purposes (net of escrow-related expenses) will be paid to
the former ENTEX stockholders upon receipt of a refund currently pending before
the Internal Revenue Service with respect to these tax years or other resolution
of such tax matters. While the timing of the refund or other definitive
resolution of these tax matters cannot be determined, it is not anticipated to
occur prior to June 30, 2000. See "-- Tax Escrow Agreement."
The remainder of the aggregate Merger Price, if any, and Incremental
Amount, if any (after a $500,000 reserve that may be utilized by Mr. Cameron for
expenses in his capacity as Stockholders' Representative), will be released to
the former stockholders of ENTEX promptly following the later of the resolution
of the Closing Statement or the Effective Time.
Escrow Agreement
Pursuant to the Merger Agreement, ENTEX, Siemens, ChaseMellon Shareholder
Services, LLC (in such capacity, the "Escrow Agent") and Mr. Cameron, as the
Stockholders' Representative, will enter into the Escrow Agreement on the
Measurement Date. On the date (the "Initial Distribution Date") which is the
later to occur of (i) the date which the Closing Statement is finalized or (ii)
the Effective Time, Siemens shall deposit the Indemnity Amount with the Escrow
Agent. The Indemnity Amount will be held and disbursed in accordance with the
terms of the Escrow Agreement and the terms of the Merger Agreement to satisfy
any indemnification claims by Siemens, its employees, agents, directors,
officers, subsidiaries and its affiliates, and the employees, agents, directors,
officers and subsidiaries of its affiliates, for losses incurred as a result of
a breach of any representation, warranty or covenant in the Merger Agreement.
Unless otherwise directed in writing by Siemens and the Stockholders'
Representative, the Escrow Agent shall invest and reinvest all cash funds held
from time to time as part of the escrow fund, in bonds or other fixed-income
securities, the interest on which is not subject to U.S. federal income tax
(including alternative minimum tax) or to New York City or New York State income
tax; or if such securities are not available for purchase, in obligations of, or
guaranteed by, the government of the United States of America or any State
thereof or the District of Columbia, or agencies of any of the foregoing, having
maturities of not greater than ninety days (or, if earlier, the date any
remaining amount of the escrow fund is released to the holders of Common Stock);
provided that such bonds or other obligations are rated at least A by Moody's
Investors Service, Inc. ("Moody's") and A by Standard & Poor's Corporation
("S&P").
Eighteen months after the Measurement Date, the Escrow Agent will release
the remaining portion of the escrow fund not distributed to Siemens in
satisfaction of an indemni-
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fied claim minus (i) any incremental income taxes paid by Siemens in respect of
earnings on the escrow fund, (ii) any amount still subject to an indemnity claim
by Siemens, and (iii) fees and expenses of the Escrow Agent, to the former
holders of Common Stock as of the Effective Time pursuant to the Merger
Agreement.
A copy of the Escrow Agreement is attached hereto as Annex D and is
incorporated herein by reference.
Tax Escrow Agreement
Pursuant to the Merger Agreement, ENTEX, Siemens, ChaseMellon Shareholder
Services, L.L.C. (in such capacity, the "Tax Escrow Agent") and Mr. Cameron, as
the Stockholders' Representative, will enter into the Tax Escrow Agreement on
the Measurement Date, if ENTEX elects to procure an insurance policy paid in
full covering the Tax Matters (as defined below) (the "Tax Insurance Election").
As of the date of the Information Statement, ENTEX intends to make the Tax
Insurance Election. On the Initial Distribution Date, Siemens shall deposit with
Tax Escrow Agent the Tax Indemnity Amount, to be held and disbursed in
accordance with the provisions of the Tax Escrow Agreement. The funds deposited
with the Tax Escrow Agent pursuant to the Tax Escrow Agreement are intended to
provide Siemens with indemnification for losses resulting from the outcome of
the matters described in a revenue agent report that was submitted to the U.S.
Congressional Joint Committee on Taxation on January 5, 2000, and certain state
and local tax matters related thereto (collectively, the "Tax Matters"),
following the audit of ENTEX with respect to the fiscal 1994, 1995 and 1996 tax
years conducted by the Internal Revenue Service.
Unless otherwise directed in writing by Siemens and the Stockholders'
Representative, the Tax Escrow Agent shall invest and reinvest the tax escrow
fund in bonds or other fixed-income securities, the interest on which is not
subject to U.S. federal income tax (including alternative minimum tax) or to New
York City or New York State income tax; or if such securities are not available
for purchase, in obligations of, or guaranteed by, the government of the United
States of America or any State thereof or the District of Columbia, or agencies
of any of the foregoing, having maturities of not greater than ninety days (or,
if earlier, the date any remaining amount of the tax escrow fund is released to
the holders of Common Stock as a result of resolution of the Tax Matters or the
final expiration of all limitation periods); provided that such bonds or other
obligations are rated at least A by Moody's and A by S&P.
Within five days of final resolution of the Tax Matters, the Tax Escrow
Agent shall transfer to Siemens the amount of the assessment, if any, by the
Internal Revenue Service. At that time the Tax Escrow Agent also will release
any remaining portion of the Tax Indemnity Amount minus (i) any incremental
income taxes paid by Siemens in respect of earnings on the Tax Indemnity Amount,
(ii) any costs and expenses incurred by Siemens or the Stockholders'
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Representative in connection with any action, proceeding or claim relating
solely to the Tax Matters if funds covering such expenses were not previously
transferred to such party by the Tax Escrow Agent, and (iii) fees and expenses
of the Tax Escrow Agent. The remaining portion of the Tax Indemnity Amount will
be released (i) first, to the Stockholders' Representative for costs and
expenses of up to $500,000 incurred as a result of Mr. Cameron serving as
Stockholders' Representative and which have not been previously reimbursed, and
(ii) second, to the former holders of Common Stock as of the Effective Time.
The Tax Escrow Agreement is attached hereto as Annex C and is incorporated
herein by reference.
Closing Statement Procedures
No later than thirty days after the Measurement Date, Siemens is required
to deliver to Mr. Cameron, as the Stockholders' Representative, the Closing
Statement setting forth the balance sheet of ENTEX as of the Measurement Date
and Siemens' calculation of the Adjusted Acquisition Price. If Mr. Cameron, in
his capacity as Stockholders' Representative, agrees with the Closing Statement,
the Adjusted Acquisition Price shall be deemed final and the applicable portions
of the Adjusted Acquisition Price are to be deposited with the institution
selected as payment agent (the "Payment Agent"). If, however, Mr. Cameron, in
good faith, disagrees with the calculation of the Adjusted Acquisition Price set
forth in the Closing Statement, the parties shall attempt to negotiate a
resolution. If the parties are unable to resolve the disagreement within ten
days, a mutually acceptable, nationally recognized independent accounting firm
may then be appointed to resolve the disputed items and make a determination
with respect thereto. The determination by the independent accounting firm will
be made within thirty days after such selection. Within five days of receipt of
the independent accounting firm's determination by Siemens and ENTEX, the
applicable portions of the Adjusted Acquisition Price are to be delivered to the
Payment Agent, the Escrow Agent, the Stockholders' Representative and/or the Tax
Escrow Agent, as the case may be. Accordingly, the Merger Agreement contemplates
resolution of any dispute over the Closing Statement within forty days of Mr.
Cameron's objections, although actual resolution may take longer.
Exchange of Stock Certificates for Merger Price
Within five business days after the Initial Distribution Date, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Common Stock, (i) 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 delivery of the certificates to the
Payment Agent and shall be in such form and have such other provisions as the
Surviving Corporation may reasonably specify) and (ii) instructions for use in
effecting the surrender of the certificates in
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exchange for the Merger Price Per Share, if any, and Incremental Amount Per
Share, if any, deposited with the Payment Agent on the Initial Distribution
Date. Upon surrender of a certificate to the Payment Agent, together with such
letter of transmittal, duly executed and completed in accordance with its terms,
the holder of such certificate shall be entitled to receive in exchange therefor
a check representing such portion, if any, of the Merger Price Per Share and
Incremental Amount Per Share, if any, per share of Common Stock represented
thereby, and the certificate so surrendered shall be cancelled. Except as
otherwise provided in the Merger Agreement, the Tax Escrow Agreement or the
Escrow Agreement, in no event shall the holder of any certificate be entitled to
receive interest on any funds to be received pursuant to the Merger. Until
surrendered, each certificate shall be deemed at all times after the Effective
Time to represent only the right to receive the Merger Price Per Share and the
Incremental Amount Per Share, if any.
DETAILED INSTRUCTIONS WITH REGARD TO THE SURRENDER OF CERTIFICATES,
TOGETHER WITH A LETTER OF TRANSMITTAL, WILL BE FORWARDED TO FORMER HOLDERS OF
COMMON STOCK BY THE PAYMENT AGENT PROMPTLY FOLLOWING THE INITIAL DISTRIBUTION
DATE. HOLDERS OF COMMON STOCK SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES TO THE
PAYMENT AGENT UNTIL THEY HAVE RECEIVED SUCH MATERIALS. PAYMENT FOR SHARES OF
COMMON STOCK WILL BE MADE TO FORMER HOLDERS OF SHARES OF COMMON STOCK AS
PROMPTLY AS PRACTICABLE FOLLOWING RECEIPT BY THE PAYMENT AGENT OF THEIR STOCK
CERTIFICATES AND OTHER REQUIRED DOCUMENTS.
Representations and Warranties
In the Merger Agreement, ENTEX has made to Siemens and Acquisition various
representations and warranties, subject to identified exceptions, with respect
to, among other things: (i) due organization, valid existence and good standing
of ENTEX and its subsidiaries; (ii) capital structure of ENTEX and its
subsidiaries; (iii) authorization, execution, delivery and enforceability of the
Merger Agreement; (iv) absence of conflicts under ENTEX's certificate of
incorporation or by-laws, required consents or approvals and violations of
instruments or law; (v) filing of all documents and financial statements with
the Commission and the accuracy of information contained therein; (vi) books and
records containing a true and complete record, in all material respects, of all
actions taken at meetings and by written consent in lieu of meetings of
stockholders; (vii) financial statements of ENTEX included in documents filed
with the Commission complying as to form in all material respects with
applicable accounting requirements and were prepared in accordance with
generally accepted accounting principles; (viii) absence of undisclosed
liabilities; (ix) existence of valid leaseholds on real property leased or
subleased by ENTEX or a subsidiary; (x) material contracts; (xi) litigation;
(xii) violations of applicable law; (xiii) intellectual property; (xiv) tax
matters; (xv) employee
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benefit plans; (xvi) environmental matters; (xvii) insurance policies; (xviii)
absence of material adverse events or changes; (xix) accuracy of the
information, other than information supplied by Siemens and Acquisition,
included in this Information Statement and 14f Material; and (xx) the absence of
broker and other similar fees except for those of Lazard Freres.
In the Merger Agreement, Siemens and Acquisition have made to ENTEX various
customary representations and warranties, subject to identified exceptions, with
respect to, among other things, (i) due organization, valid existence and good
standing; (ii) authorization, execution, delivery and enforceability of the
Merger Agreement; (iii) conflicts under certificate of incorporation or by-laws,
required consents or approvals and violations of instruments or law; (iv)
litigation; (v) absence of broker and other similar fees except for those of
Morgan Stanley Dean Witter; (vi) accuracy of the information supplied by Siemens
and Acquisition included in this Information Statement and the 14f Material; and
(vii) financing arrangements.
Certain Covenants
Pursuant to the Merger Agreement, ENTEX has agreed that, during the period
from the date of the Merger Agreement to the Measurement Date (except as
expressly contemplated or permitted by the Merger Agreement or to the extent
that Siemens otherwise consented to in writing), each of ENTEX and its
subsidiaries shall (i) carry on its respective operations according to its
ordinary and usual course of business and consistent with past practice in all
material respects and (ii) use all commercially reasonable efforts to preserve
intact in all material respects present business organizations and reputation;
keep available the services of key officers and employees; maintain assets and
properties in good working order and condition, ordinary wear and tear excepted;
maintain insurance on tangible assets and businesses in such amounts and against
such risks and losses as are currently in effect; preserve relationships with
customers and suppliers and others having significant business dealings with
them; and comply in all material respects with all laws and orders of all
applicable governmental or regulatory authorities.
In addition, (except as expressly contemplated or permitted by the Merger
Agreement or to the extent that Siemens otherwise consented in writing) from the
date of the Merger Agreement to the Measurement Date, neither ENTEX nor its
subsidiaries will, without the prior written consent of Siemens: (i) amend or
propose to amend its certificate of incorporation or by-laws except for
amendments required by the Merger Agreement or which do not or will not
adversely affect Siemens or Acquisition; (ii) declare or pay any dividend or
distribution on any shares of its capital stock; (iii) issue, deliver or sell or
authorize or propose the issuance, delivery or sale of any shares of capital
stock or any warrants, options or similar rights with respect thereto other than
the issuance of shares pursuant to the exercise of options or warrants
outstanding on the date of the Merger Agreement; (iv) acquire any business or
any corporation, partnership, association or other business organization or
division thereof or oth-
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erwise acquire or agree to acquire any assets other than in the acquisition of
assets in the ordinary course of business consistent with past practice; (v)
other than dispositions in the ordinary course of business consistent with past
practice, sell, lease, grant any security interest in or otherwise dispose of or
encumber any of its assets or properties; (vi) except to the extent required by
applicable law, (a) permit any material change in (1) any pricing, marketing,
purchasing, investment, accounting, financial reporting, inventory, credit,
allowance or tax practice or policy or (2) any method of calculating any bad
debt, contingency or other reserve for accounting, financial reporting or tax
purposes or (b) make any material tax election or settle or compromise any
material income tax liability with any governmental or regulatory authority;
(vii) except to the extent such incurrence would not be in violation of or
require disclosure pursuant to the terms of the Merger Agreement, incur (which
shall not be deemed to include entering into credit agreements, lines of credit
or similar arrangements until borrowing are made under such arrangements) any
indebtedness for borrowed money or guarantee any such indebtedness or
voluntarily purchase, cancel, prepay or otherwise provide for a complete or
partial discharge in advance of a scheduled repayment date with respect to, or
waive any right under, any indebtedness for borrowed money; (viii) enter into,
adopt, amend in any material respect (except as may be required by applicable
law) or terminate (other than in accordance with its terms) any Benefit Plans
(as defined in the Merger Agreement) or other agreement, arrangement, plan or
policy between ENTEX and one or more of its directors, officers, employees or
consultants, or increase in any manner the compensation or fringe benefits of
any director, officer, employee or consultant or pay any benefit not required by
any plan or arrangement in effect as of the date of the Merger Agreement; (ix)
enter into any contract or amend or modify any existing contract, or engage in
any new transaction outside the ordinary course of business consistent with past
practice or not on an arm's length basis, with any affiliate of ENTEX; (x) make
any capital expenditures or commitments for additions to plant, property or
equipment constituting capital assets in excess of $50,000 with respect to each
such capital expenditure or commitment and not more than $1,000,000 in the
aggregate; (xi) waive or agree to any extension of any limitations period in
respect of Taxes (as defined in the Merger Agreement); (xii) make any change in
the lines of business in which it participates or is engaged; (xiii) enter into
any material contract or agreement which would require the consent of the other
party thereto to consummate the transactions contemplated by the Merger
Agreement; (xiv) enter into any contract, agreement, commitment or arrangement
to do or engage in any of the foregoing actions; or (xv) take any action or omit
to take any action which would result in a material breach, violation or
inaccuracy of any representation, warranty, covenant or agreement of ENTEX made
in the Merger Agreement.
Also, until the Measurement Date, ENTEX is to confer on a regular and
frequent basis with Siemens and/or its affiliates with respect to its business
and operations and other matters relevant to the Merger, and shall promptly
advise Siemens, orally and in writing, of any change or event, including,
without limitation, any complaint, investigation or hearing by any governmental
or regulatory authority (or communication indicating the same may be
contem-
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plated) or the institution or threat of litigation, having, or which, insofar as
can be reasonably foreseen, could have a materially adverse affect on the
ability of ENTEX to consummate the Merger.
Pursuant to the Merger Agreement, Siemens has agreed to provide funds, on
or promptly following the Measurement Date, to repay or cause to be repaid the
Notes and all amounts due and owing to IBMCC under the IBMCC Working Capital
Line of Credit.
No Solicitations
Until the Measurement Date, ENTEX shall not authorize or permit any
officer, director, employee, investment banker, financial advisor, attorney,
accountant or other agent or representative (each, a "Representative") retained
by or acting for or on behalf of ENTEX to, directly or indirectly, initiate,
solicit, encourage, or, unless the Board of Directors believes, after
consultation with outside legal counsel, that the failure to take such actions
would constitute a breach of the fiduciary duties of the Board of Directors,
participate in any negotiations regarding, furnish any confidential information
in connection with, endorse or otherwise cooperate with, assist, participate in
or facilitate the making of any proposal or offer for, or which may reasonably
be expected to lead to, an Acquisition Transaction (as defined below), by any
person, or group (a "Potential Acquiror"); provided, however, that (i) ENTEX may
furnish or cause to be furnished information concerning ENTEX and its
businesses, properties or assets to a Potential Acquiror, (ii) ENTEX may engage
in discussions or negotiations with a Potential Acquiror, (iii) following
receipt of a proposal or offer for an Acquisition Transaction, ENTEX may make
disclosure to holders of Common Stock and may recommend such proposal or offer
to holders of Common Stocks and (iv) following receipt of a proposal or offer
for an Acquisition Transaction, the Board of Directors may enter into an
agreement in principle or a definitive agreement with respect to such
Acquisition Transaction, but in each case referred to in the foregoing clauses
(i) through (iv) only to the extent that the Board of Directors shall have first
concluded in good faith after consultation with outside legal counsel that such
action is necessary or appropriate because failure to take such action would
constitute a breach of the fiduciary duties owed by the Board of Directors to
the holders of Common Stock under applicable law; and provided, further, that
the Board of Directors shall not take or permit ENTEX to take any of the
foregoing actions referred to in clauses (i) through (iv) without prior written
notice to Siemens with respect to such action.
ENTEX shall promptly inform Siemens, orally and in writing, of the material
terms and conditions of any proposal or offer for, or which may reasonably be
expected to lead to, an Acquisition Transaction that it receives and the
identity of the Potential Acquiror. ENTEX will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted on or prior to the date of the Merger Agreement with respect to any
Acquisition Transaction. An "Acquisition Transaction" means any merger,
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consolidation or other business combination involving ENTEX, or any acquisition
in any manner of all or a substantial portion of, the equity of, or all or a
substantial portion of the assets of, ENTEX, whether for cash, securities or any
other consideration or combination thereof, other than pursuant to the
transactions contemplated by the Merger Agreement.
Information Statement; Section 14(f) Materials
The Merger Agreement requires ENTEX to prepare an Information Statement
relating to the Merger and its approval by ENTEX's stockholders satisfying the
requirements of Regulation 14C promulgated under the Exchange Act. From and
after the date of the Merger Agreement, ENTEX is required to (i) prepare and
file the preliminary Information Statement in a form reasonably acceptable to
Siemens with the Commission, (ii) use its best efforts to respond to and resolve
any comments made by the Commission with respect to the preliminary Information
Statement and (iii) cause the definitive Information Statement to be mailed to
its stockholders at the earliest practicable time.
The Merger Agreement also requires ENTEX to prepare the 14(f) Material.
From and after the date of the Merger Agreement, ENTEX is required to (i)
prepare, furnish to the ENTEX stockholders and file with the Commission in a
form reasonably acceptable to Siemens the 14(f) Material and (ii) use its best
efforts to respond to and resolve any comments of the Commission with the
respect to the 14(f) Material.
Conditions to Consummation of the Merger
The obligations of Siemens and Acquisition to effect a purchase of Common
Stock pursuant to the exercise of either Option or, if such a purchase does not
occur, the Merger, is subject to the fulfillment on or prior to the Measurement
Date of each of the following conditions:
(i) performance by ENTEX and compliance in all material respects with
all covenants and agreements contained in the Merger Agreement required to
be performed or complied with by it prior to or at the Measurement Date;
(ii) each of the representations and warranties of ENTEX contained in
the Merger Agreement shall be true and correct, in all material respects
(if not qualified by materiality) and in all respects (if qualified by
materiality) as of the Measurement Date as though made on and as of the
Measurement Date or, in the case of representations and warranties made as
of a specified date earlier than the Measurement Date, shall have been true
and correct in all material respects (if not qualified by materiality) and
in all respects (if qualified by materiality) on and as of such date and
ENTEX shall have delivered to Siemens a certificate, dated the Measurement
Date executed on behalf of ENTEX by its Chairman, President or a Vice
President, to such effect;
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<PAGE>
(iii) receipt of favorable written opinions of the General Counsel of
ENTEX and outside counsel to ENTEX;
(iv) receipt of the written resignation of employment and/or offices
held of certain individuals and the resignation of all trustees of all
employee benefit plans;
(v) receipt of or the making of consents, approvals, authorizations,
permissions, notices and filings required by the Merger Agreement in form
and substance satisfactory to Siemens and Acquisition;
(vi) the requisite number of ENTEX stockholders required by ENTEX's
certificate of incorporation and the DGCL shall have adopted the Merger
Agreement;
(vii) execution and delivery of the Escrow Agreement and, if the Tax
Insurance Election has been made, the Tax Escrow Agreement, by the parties
thereto;
(viii) expiration or termination of any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the
HSR Act;
(ix) delivery by ENTEX to Siemens of the invoices reflecting the
unpaid fees and expenses of all brokers, investments bankers, financial
advisors, attorneys and accountants engaged in connection with the
preparation and negotiation of the Merger Agreement or the Merger and whose
compensation is payable by ENTEX;
(x) resolution of the Tax Matters in a manner satisfactory to Siemens
that results in no liability on the part of ENTEX, any subsidiary or the
Surviving Corporation to federal or state tax authorities or, in the
alternative if ENTEX has made the Tax Insurance Election, ENTEX shall have
procured, paid in full its share of premiums and surplus lines premium tax
charged thereon, and delivered to Siemens, insurance policies in
substantially the form required by the Merger Agreement, with only such
changes as shall be reasonably acceptable to Siemens; and
(xi) expiration of the applicable twenty-day period in Section 262(d)
of the General Corporation Law of the State of Delaware for stockholders to
demand or perfect appraisal rights and such rights shall not have been
exercised with respect to more than 5% of the outstanding shares of any
class of capital stock.
All of the above conditions may be waived by Siemens in its sole discretion
except for the conditions set forth in (vi) and (viii) above.
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<PAGE>
The obligation of ENTEX to effect the Merger is subject to the fulfillment
or waiver, at ENTEX's sole discretion, at or prior to the Measurement Date of
each of the following conditions:
(i) performance by Siemens and Acquisition and compliance in all
material respects with all covenants and agreements contained in the Merger
Agreement required to be performed or complied with by them prior to or at
the Measurement Date;
(ii) each of the representations and warranties of Siemens and
Acquisition contained in the Merger Agreement shall be true and correct, in
all material respects (if not qualified by materiality) and in all respects
(if qualified by materiality) as of the Measurement Date as though made on
and as of the Measurement Date or, in the case of representations and
warranties made as of a specified date earlier than the Measurement Date,
shall have been true and correct in all material respects (if not qualified
by materiality) and in all respects (if qualified by materiality) on and as
of such date and each of Siemens and Acquisition shall have delivered to
ENTEX a certificate, dated the Measurement Date executed on behalf of each
of them by an authorized signatory, to such effect;
(iii) receipt of the favorable written opinion of internal counsel to
Siemens and Acquisition;
(iv) execution and delivery of the Escrow Agreement and, if the Tax
Insurance Election has been made, the Tax Escrow Agreement, by the parties
thereto;
(v) the requisite number of ENTEX stockholders required by ENTEX's
certificate of incorporation and the DGCL adopted the Merger Agreement; and
(vi) expiration or termination of any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the
HSR Act.
Directors and Officers Indemnification
All rights to indemnification existing as of the date of the Merger
Agreement in favor of any current or former member of the Board of Directors or
officer of ENTEX as provided in ENTEX's certificate of incorporation or by-laws
or in a written agreement between any such person and ENTEX in effect on the
date of the Merger Agreement shall survive the Merger and shall continue in full
force and effect until the expiration of all applicable statutes of limitation.
Siemens also agrees to indemnify all current and former members of the Board of
Directors and officers of ENTEX to the fullest extent ENTEX would be permitted
by the DGCL to indemnify them with respect to all acts and omissions arising out
of such individuals' service as members of the Board of Directors or officers of
ENTEX or any of its subsidi-
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<PAGE>
aries or as trustees or fiduciaries of any plan for the benefit of employees
occurring prior to the Effective Time.
ENTEX and, from and after the Effective Time, the Surviving Corporation
shall cause to be maintained in effect for not less than six years from the
Effective Time the current policies of directors' and officers' liability
insurance maintained by ENTEX; provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous to such persons; and provided,
further, that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
provided, further, that the Surviving Corporation shall not be required to pay
an annual premium in excess of 200% of the last annual premium paid by ENTEX
prior to the date of the Merger Agreement; and if the Surviving Corporation is
unable to obtain the insurance required, it shall obtain as much comparable
insurance as possible for an annual premium equal to such maximum amount.
Indemnification of Siemens
Siemens, its employees, agents, directors, officers, subsidiaries and its
affiliates and the employees, agents, directors, officers and subsidiaries of
its affiliates (the "Indemnified Parties") shall be indemnified and held
harmless from and against any and all damages, claims, losses (including loss of
value), expenses, costs, obligations and liabilities, including without
limitation liabilities for all reasonable attorneys', accountants', and experts'
fees and expenses, including those incurred to enforce the terms of the Merger
Agreement or any certificate or schedule delivered by a person pursuant to the
Merger Agreement (collectively, "Losses") (provided, however, that to avoid
double-counting, Losses shall be determined after giving effect to any reserves
or liabilities reflected on the final Closing Statement, if and to the extent
those reserves reduced the Closing Liquid Net Worth), asserted against, or paid,
suffered or incurred by, any Indemnified Party which, directly or indirectly,
arise out of, result from, are based upon or relate to:
o the inaccuracy, untruth or incompleteness, as of the date of the
Merger Agreement or the Measurement Date (or, in the case of
representations and warranties made as of a specified date earlier
than the Measurement Date, on and as of such earlier date), of any
representation or warranty made or deemed to have been made by ENTEX
in the Merger Agreement or any failure by ENTEX to perform or fulfill
any of its covenants or agreements set forth in the Merger Agreement;
provided, however, that if any such representation or warranty (other
than those representations and warranties which are expressly excepted
from this proviso in the Merger Agreement) is qualified in any respect
by materiality or a material adverse effect, for purposes of this
paragraph such
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<PAGE>
materiality or material adverse effect qualification will be in all
respects ignored;
o subject to the Merger Agreement, obligations for federal income taxes
and all state, local and municipal taxes imposed on or measured by net
income, or income, franchise or similar taxes based on gross receipt
owed by ENTEX (or the Surviving Corporation as its successor in the
Merger) and its subsidiaries for any period ending on or prior to the
Measurement Date which are actually paid by ENTEX (or the Surviving
Corporation as its successor in the Merger) (the "Pre-Measurement Date
Tax Liabilities");
o the Asset Purchase Agreement, dated as of May 10, 1999, by and between
CompuCom Systems, Inc. and ENTEX or any of the transactions
contemplated thereby;
o any action, suit or proceeding commenced prior to the Measurement Date
before any court or arbitral or other tribunal;
o an amount, if any, by which the amounts actually paid to dispose of
the Tax Matters and to discharge any liability for taxes (federal,
state or other) arising out of or in connection with those
proceedings, including without limitation, all legal, accounting and
other professional fees and expenses incurred with respect thereto,
exceed the sum of (i) all amounts available under the Tax Escrow
Agreement to pay such amounts plus (ii) all funds received by Siemens
under the insurance policies procured pursuant to the Tax Insurance
Election to pay such amounts (the "Tax Matters Settlement Shortfall
Amount"); or
o any failure of ENTEX or any of its subsidiaries to be Year 2000
compliant.
After the Closing, the Indemnified Parties' rights to indemnification shall
be subject to the following limitations:
o in no event shall the aggregate amount to be paid to the Indemnified
Parties pursuant to the Merger Agreement exceed the Indemnity Amount;
o the Indemnified Parties shall be entitled to recover any Loss
otherwise recoverable pursuant to the Merger Agreement (except any
Loss incurred as a result of Pre-Measurement Date Tax Liabilities or a
Tax Matters Settlement Shortfall Amount) only to the extent the
aggregate of such Losses exceed $1,000,000 in the aggregate; provided,
that if all such Losses exceed $1,000,000, the Indemnified Parties
shall be entitled to recover for all such Losses; and
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<PAGE>
o if the inaccuracy, untruth or incompleteness of a representation
regarding tax matters results in an increase in the taxable income of
ENTEX or any of its subsidiaries with respect to any taxable period
ending after the Measurement Date, such increase in taxable income
shall not give rise to an indemnified Loss to the extent such increase
in taxable income is properly offset by available net operating loss
carryovers of ENTEX or any of its subsidiaries (as the case may be)
from taxable periods beginning prior to the Measurement Date.
All the representations, warranties covenants and agreements of ENTEX
contained in or made pursuant to the Merger Agreement shall survive the closing
of the Merger and shall remain operative and in full force and effect for a
period of eighteen months after the Measurement Date (such period being referred
to as the "Escrow Indemnity Period"), regardless of any investigation or
statement as to the results thereof made by or on behalf of any person before or
after the closing. No claim for indemnification may be asserted after the
expiration of the Escrow Indemnity Period. Notwithstanding anything in the
Merger Agreement to the contrary, any representation, warranty, covenant and
agreement which is the subject of a claim which is asserted in writing prior to
the expiration of the Escrow Indemnity Period shall survive with respect to such
claim or any dispute with respect thereto until the final resolution thereof.
Termination; Termination Fees
The Merger Agreement may be terminated and the Merger contemplated thereby
may be abandoned whether prior to or after the adoption of the Merger Agreement
by the ENTEX stockholders:
(i) at any time prior to the Effective Time, by mutual written
agreement of ENTEX, Siemens and Acquisition; provided, however, that if
such termination is to occur after the date shares of Common Stock are
purchased pursuant to the exercise of either Option, such termination must
be in approved by a majority of the Board of Directors who are neither
officers, directors nor designees of Siemens;
(ii) at any time prior to the purchase of shares of Common Stock
pursuant to the exercise of either Option, by either ENTEX or Siemens upon
notification to the non-terminating party by the terminating party:
(a) at any time ninety days following the date of the Merger
Agreement if the Merger shall not have been consummated on or prior to
such date and such failure to consummate the Merger is not caused by a
breach of the Merger Agreement by the terminating party; or
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<PAGE>
(b) if there has been a material breach of the Merger Agreement
on the part of the non-terminating party and either (x) the
non-terminating party fails to cure such breach within thirty days
following notification thereof by the terminating party or (y) the
breach is not reasonably capable of being cured within thirty days
after notice thereof; or
(iii) at any time prior to the purchase of shares of Common Stock
pursuant to the exercise of either Option, by Siemens if:
(a) ENTEX has entered into, or has publicly announced its
intentions to entered into, a definitive agreement or agreement in
principle with respect any Acquisition Transaction other than the
Merger;
(b) the ENTEX Board of Directors or any committee thereof has
withdrawn its approval or recommendation of the Merger Agreement in a
manner adverse to Siemens or Acquisition;
(c) the ENTEX Board of Directors or any committee thereof shall
have made any recommendation with respect to an Acquisition
Transaction by any person (other than Siemens or Acquisition) other
than a recommendation rejecting or against such Acquisition
Transaction; or
(d) ENTEX receives a proposal with respect to an Acquisition
Transaction by any person (other than Siemens or Acquisition), and the
ENTEX Board of Directors takes a neutral position or makes no
recommendation with respect to such Acquisition Transaction after a
reasonable amount of time (and in no event more than five business
days) has elapsed for the ENTEX Board of Directors to review and make
a recommendation with respect to such proposal consistent with the
ENTEX Board of Directors' fiduciary duties.
In the event of termination of the Merger Agreement by ENTEX or Siemens as
provided in the Merger Agreement, the Merger Agreement shall forthwith become
null and void, except as otherwise provided in the Merger Agreement, provided
that no party thereto shall be relived from liability for any breach of the
Merger Agreement.
If (i) the Merger Agreement is terminated by Siemens pursuant to (A)
section (ii)(b) above or (B) section (iii) above, (ii) after the date of the
Merger Agreement and prior to such termination, a person, other than Siemens or
its affiliates, has made or announced an intention to make a proposal for an
Acquisition Transaction and (iii) ENTEX consummates an Acquisition Transaction
within twelve months following such termination, then ENTEX shall pay to Siemens
a termination fee of $5,000,000 upon the closing of such Acquisition
Transaction.
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<PAGE>
Amendment and Waiver
The Merger Agreement provides that it shall not be amended, modified,
revised, supplemented or terminated orally and no waiver of compliance with any
provision thereof and no consent provided for therein shall be effective other
than by a written instrument executed by all parties to the Merger Agreement.
The Merger Agreement further provides it may be amended upon the taking of
requisite corporate action by all of the parties to the Merger Agreement.
Fees and Expenses
Each party to the Merger Agreement will pay its own expenses incidental to
the preparation of the Merger Agreement, the carrying out of the provisions of
the Merger Agreement and the consummation of the transactions contemplated
thereby. In addition, (a) the unpaid fees and expenses of all brokers,
investment bankers, financial advisors, attorneys and accountants engaged in
connection with the preparation and negotiation of the Merger Agreement or the
transactions contemplated thereby and whose compensation is payable by ENTEX
shall be reflected on invoices (the "Invoices") submitted to Siemens on or prior
to the Measurement Date, which Invoices shall include confirmation that no
further compensation beyond the amount reflected in the Invoice is or will be
payable by ENTEX (or the Surviving Corporation, as successor to ENTEX) and (b)
Siemens and ENTEX shall each pay one-half of the aggregate premiums and surplus
lines premium tax charged thereon for the insurance policies described in the
Merger Agreement. In no event shall Siemens, Acquisition or ENTEX be liable
(before or after the Closing) for any fees and expenses of the holders of Common
Stock relating to the transactions contemplated by the Merger Agreement,
including, without limitation, legal, accounting and financial advisory fees.
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<PAGE>
STOCKHOLDERS AGREEMENT
The following is a summary of material provisions of the Stockholders
Agreement, a copy of which is attached to this Information Statement as Annex E
and which is incorporated herein by reference. This summary is qualified in its
entirety by reference to the Stockholders Agreement.
Concurrently, with the execution of the Merger Agreement, the Principal
Stockholders entered into the Stockholders Agreement. Pursuant to the
Stockholders Agreement, the Principal Stockholders: (i) granted Acquisition the
Call Option, exercisable at any time, to acquire their shares of Common Stock at
the Merger Price Per Share (plus the Incremental Amount Per Share, if any) (ii)
agreed to vote their shares of Common Stock (x) in favor of the adoption of the
Merger Agreement and (y) against any Acquisition Transaction with any
third-party; (iii) agreed to provide all notices and perform all actions
necessary for the consummation of the Merger; and (iv) received the Put Option
from Acquisition to purchase their shares of Common Stock under certain
circumstances described below. In addition, Mr. Cameron agreed to exercise the
Drag Along Rights to require various stockholders of ENTEX to sell their shares
of Common Stock on the same terms as he does.
The Principal Stockholders may exercise the Put Option if (i) the
Information Statement has been filed with the Commission in preliminary form in
accordance with the Merger Agreement, (ii) a period of twelve days has elapsed
following such filing, (iii) ENTEX has been advised by the staff of the
Commission that it is in the process of reviewing the Information Statement and,
notwithstanding ENTEX's reasonable efforts, that review has not been completed
during this twelve-day period, and (iv) all conditions (other than the condition
requiring the requisite vote of the current ENTEX stockholders) to the
consummation of the Merger contained in the Merger Agreement have been
satisfied. Under these circumstances, the Principal Stockholders may exercise
the Put Option and require Acquisition to purchase from the Principal
Stockholders, all, but not less than all of the shares of Common Stock held by
them at the Merger Price Per Share (plus the Incremental Amount Per Share, if
any).
From the date of the Stockholders Agreement until the earlier of (i) the
termination of the Stockholders Agreement or (ii) the Measurement Date, none of
the Principal Stockholders shall, and none of the Principal Stockholders shall
authorize or permit any advisor or representative retained by or acting for or
on behalf of any such Principal Stockholder to, directly or indirectly, (i) take
any action to knowingly solicit, initiate, continue, facilitate or encourage
(including by way of furnishing or disclosing non-public information) any offer
or proposal for an Acquisition Transaction, other than the transactions
contemplated by the Merger Agreement or by the Stockholder Agreement or (ii)
knowingly engage in negotiations, discussions or communications regarding, or
disclose any information relating to, ENTEX or afford
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<PAGE>
access to the properties, books or records of ENTEX to any person that
may be considering making or has made, a proposal for an Acquisition
Transaction.
The Stockholders Agreement terminates immediately upon the earlier of (i)
the acquisition by Siemens, through Acquisition or otherwise, of all of the
shares of Common Stock of ENTEX; (ii) if neither Option had been exercised, the
termination of the Merger Agreement in accordance with its terms; or (iii) the
Effective Time.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership as of March 15, 2000 of the Common Stock by: (i) each
person or entity who is known by ENTEX to beneficially own five percent or more
of the outstanding Common Stock; (ii) each of ENTEX's directors; (iii) Mr.
McKenna, ENTEX's Chief Executive Officer, and each of ENTEX's four other most
highly compensated executive officers who were serving as executive officers at
the end of the last completed fiscal year and who are currently employed by
ENTEX and (iv) all directors and executive officers of ENTEX as a group. As of
the date of this Information Statement, there were a total of 32,814,724 shares
of Common Stock outstanding. ENTEX has been informed by Siemens that none of the
Siemens Designees owns any securities of ENTEX.
<TABLE>
<CAPTION>
Shares Beneficially Owned (1)
Name of Group or Beneficial Owners Number Percent
---------------------------------- ------ -------
<S> <C> <C>
Siemens Aktiengesellshaft 24,719,596 75.3
Wittelsbacherplatz 2, D-80333
Munich, Federal Republic of Germany(2)
Siemens(2) 24,719,596 75.3
153 East 53rd Street
New York, NY 10022
Acquisition(2) 24,719,596 75.3
153 East 53rd Street
New York, NY 10022
Dort A. Cameron III (3) 24,227,392 73.5
c/o ENTEX Information Services, Inc.
6 International Drive
Rye Brook, NY 10573
John A. McKenna, Jr. (4)(5) 2,367,324 6.9
c/o ENTEX Information Services, Inc.
6 International Drive
Rye Brook, NY 10573
Kenneth Ghazey (6) 576,000 1.7
R. Randolph Devening (7) 83,815 *
Linwood A. Lacy, Jr. (8) 102,120 *
Frank W. Miller (9) 46,264 *
All directors and executive officers as a group (10 persons) 27,733,648 77.8
(10)
</TABLE>
- ----------------------
* Less than 1%
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<PAGE>
(1) In computing the number of shares of Common Stock beneficially owned by a
person and the percentage ownership of that person, shares subject to
options held by that person that are currently exercisable or exercisable
within sixty days of March 15, 2000, are deemed outstanding. Such shares,
however, are not deemed outstanding for the purposes of computing the
percentage ownership of each other person. Except as indicated in the
footnotes to this table, pursuant to the ENTEX Stockholders' Agreement and
pursuant to applicable community property laws, each stockholder named in
the table has sole voting and investment power with respect to the shares
set forth opposite such stockholder's name. However, the Merger Price per
share will be less than the exercise price for each such outstanding
option.
(2) Includes 24,719,596 currently outstanding shares of Common Stock subject to
the Call Option granted to Acquisition. Excludes 6,461,944 currently
outstanding shares of Common Stock that may be purchased by Acquisition by
the requirement under the Stockholders Agreement that Mr. Cameron exercise
the Drag Along Rights in the event the Call Option is exercised and similar
rights under the IBMCC Warrant Agreement and a stock purchase agreement,
dated as of July 2, 1998.
(3) Includes 21,407,739 shares of Common Stock registered in the name of ENTEX
Associates. Mr. Cameron is the sole stockholder of the Putnam Group, the
general partner of ENTEX Associates. Includes 150,000 shares of Common
Stock owned by Mr. Cameron which are subject to options exercisable within
sixty days of March 15, 2000.
(4) Includes 1,725,120 shares of Common Stock owned by Mr. McKenna which are
subject to options exercisable within sixty days of March 15, 2000.
(5) Pursuant to the ENTEX Stockholders' Agreement, in the event that Mr.
McKenna's employment is terminated for any reason, ENTEX shall have the
right to purchase all shares of Common Stock owned by him. If ENTEX is
unable to purchase such shares in cash, the Cameron Affiliates will have a
right to purchase such shares.
(6) Includes 576,000 shares of Common Stock owned by Mr. Ghazey which are
subject to options exercisable within sixty days of March 15, 2000.
(7) Includes 62,500 shares of Common Stock owned by Mr. Devening which are
subject to options exercisable within sixty days of March 15, 2000.
(8) Includes 62,500 shares of Common Stock owned by Mr. Lacy which are subject
to options exercisable within sixty days of March 15, 2000.
(9) Includes 25,000 shares of Common Stock owned by Mr. Miller which are
subject to options exercisable within sixty days of March 15, 2000.
(10) Includes 2,835,520 shares of Common Stock which are subject to options
exercisable within sixty days of March 15, 2000.
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CERTAIN INFORMATION REGARDING ENTEX
ENTEX is a leading provider of distributed computing management solutions
to meet the support requirements of Fortune 1,000 companies and other large
enterprises for their local-area networks, wide-area networks and end-users.
ENTEX's computing management solutions include Outsourcing Services (managed
support services for the total distributed computer infrastructure including
network management, help desk, deskside support and asset management); Field
Services (providing trained technicians to perform help desk and deskside
support services on-site at customer locations); and Consulting Services
(analysis, design, integration, implementation and optimization services for
distributed networks and technology migrations). ENTEX provides a single source
for service for its customers' personal computer ("PC") and server platforms,
including system design, operations support and change management.
The proliferation of complex PC/server network systems and support
infrastructures coupled with rapidly changing technology lifecycles has
significantly increased the management requirements and cost of distributed
information technology systems. As a result, many organizations are outsourcing
the management and support of their PC and network infrastructure needs. ENTEX
believes that key criteria which businesses consider when evaluating PC and
network integration service providers include the provider's ability: (i) to
provide cost-effective solutions spanning the PC and network lifecycle; (ii) to
support multi-vendor PC and network products; and (iii) to provide consistent
services on a national basis. ENTEX believes its size and scope of operations,
its existing base of PC outsourcing contracts and its experience in managing
various technology platforms enable it to offer distributed computing management
services which are more effective than in-house solutions and services that
could be developed by its customers acting on their own.
ENTEX's principal executive office is located at Six International Drive,
Rye Brook, New York 10573 and its telephone number is (914) 935-3600.
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CERTAIN INFORMATION REGARDING SIEMENS AND ACQUISITION
Siemens
Siemens is a wholly-owned subsidiary of Siemens AG, a corporation organized
under the laws of the Federal Republic of Germany. Siemens AG's principal
business is the design, development, manufacture and marketing of a wide variety
of electrical and electronic systems. Siemens serves as the holding company for
the businesses of Siemens AG in the United States, and is responsible for
developing, coordinating and maintaining the overall business strategy of
Siemens AG in the United States. Siemens AG's principal executive offices are
located at Wittelsbacherplatz 2, D-80333 Munich, Federal Republic of Germany.
Siemens' principal executive officers are located at 153rd Street, New York, New
York 10022 and the telephone number is (212) 258-4945.
Acquisition
Acquisition is a newly incorporated Delaware corporation formed by Siemens
for the purpose of effecting the Merger and related transactions. Acquisition is
a wholly-owned subsidiary of Siemens. Other than in connection with the Merger
and related transactions, Acquisition has not engages in any activities and it
has no material assets or liabilities. Acquisition's principal executive
officers are located at 153rd Street, New York, New York 10022 and the telephone
number is (212) 258-4945.
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ANNEX INDEX
Annex A Agreement and Plan of Merger
Annex B Opinion of Lazard Freres & Co. LLC
Annex C Escrow Agreement
Annex D Tax Escrow Agreement
Annex E Stockholders Agreement
<PAGE>
ANNEX A
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SIEMENS CORPORATION,
EMILIA ACQUISITION CORP.
AND
ENTEX INFORMATION SERVICES, INC.
Dated as of March 13, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. The Merger; Additional Actions......................................2
1.1 The Merger..............................................2
1.2 Effective Time..........................................2
1.3 Closing.................................................2
1.4 Effects of the Merger...................................3
1.5 Certificate of Incorporation, By-Laws and Officers
and Directors of the Surviving Corporation ...........3
1.6 Directors...............................................3
1.7 Further Assurances......................................4
2. Conversion of Shares................................................4
2.1 Conversion of Capital Stock.............................4
2.2 Closing Statement Procedures............................7
2.3 Deposits of Funds at and following the Closing..........9
2.4 Payment for Certificates................................9
3. Representations and Warranties of the Company......................11
3.1 Organization...........................................11
3.2 Capitalization.........................................11
3.3 Authority..............................................13
3.4 No Conflicts; Governmental Requirements;
SEC Documents........................................13
3.5 Subsidiaries...........................................15
3.6 Books and Records......................................15
3.7 Financial Statements...................................15
3.8 Absence of Undisclosed Liabilities.....................16
3.9 Operations and Obligations.............................16
3.10 Properties.............................................17
3.11 Accounts Receivable; Accounts Payable; Inventory.......18
3.12 Contracts..............................................18
3.13 [INTENTIONALLY OMITTED]................................20
3.14 Litigation.............................................20
3.15 Compliance with Law; Authorizations....................21
3.16 Intellectual Property..................................21
3.17 Tax Matters............................................23
3.18 Employee Benefit Plans.................................25
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Page
3.19 Employee Compensation..................................27
3.20 Employees..............................................27
3.21 Environmental Laws.....................................28
3.22 Insurance..............................................29
3.23 Bank Accounts, Letters of Credit and Powers
of Attorney..........................................29
3.24 No Adverse Development.................................29
3.25 Transactions with Affiliates...........................29
3.26 Information Statement; Merger Materials................30
3.27 Brokers................................................30
4. Representations and Warranties of Siemens and Acquisition..........30
4.1 Organization...........................................30
4.2 Corporate Authority....................................30
4.3 No Breach..............................................31
4.4 Litigation.............................................31
4.5 Brokers................................................31
4.6 Information............................................32
4.7 Financing..............................................32
5. Covenants and Additional Agreements................................32
5.1 Conduct of Business....................................32
5.2 No Solicitations.......................................35
5.3 Access to Information; Confidentiality.................36
5.4 Preparation of Information Statement;
Approval of Stockholders; Siemens Approval...........37
5.5 Regulatory and Other Approvals.........................38
5.6 Notice and Cure........................................38
5.7 Company Stock Plans; Warrants..........................39
5.8 Termination of Contracts...............................39
5.9 Fulfillment of Conditions..............................39
5.10 Cooperation............................................39
5.11 Director and Officer Indemnification...................40
5.12 Additional Covenants...................................41
6. Conditions to Closing..............................................41
6.1 Conditions to the Obligations of Siemens
and Acquisition......................................41
6.2 Conditions to the Obligations of the Company...........43
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Page
7. Survival; Indemnification; Tax Matters.............................44
7.1 Survival...............................................44
7.2 Indemnification........................................44
7.3 Limitation of Liability; Disposition of Escrow Fund....45
7.4 Stockholders' Representative...........................45
7.5 Notice of Claims.......................................46
7.6 Defense of Third Party Claims..........................46
7.7 Dispute Resolution: Negotiation, Mediation
and Arbitration......................................47
7.8 Exclusive Remedy.......................................48
7.9 Tax Matters............................................48
8. Termination; Effect of Termination.................................50
8.1 Termination............................................50
8.2 Effect of Termination..................................50
9. Fees and Expenses..................................................51
9.1 Expenses...............................................51
9.2 Stockholders of the Company............................51
10. Definitions........................................................52
11. Miscellaneous......................................................62
11.1 Press Releases.........................................62
11.2 Integration............................................62
11.3 Assignment and Binding Effect..........................62
11.4 Waiver.................................................63
11.5 Notices................................................63
11.6 Amendment..............................................64
11.7 Governing Law..........................................64
11.8 Third Party Beneficiaries..............................64
11.9 Performance............................................65
11.10 Severability...........................................65
11.11 Extensions.............................................65
11.12 Section Headings.......................................65
11.13 Exhibits; Disclosure Schedule..........................65
11.14 Counterparts...........................................65
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EXHIBITS
Exhibit A Certificate of Incorporation of Surviving Corporation
Exhibit B By-Laws of Surviving Corporation
Exhibit C Form of Closing Statement and Measurement Date
Balance Sheet Methodologies
Exhibit D Form of Confidentiality/Non-Solicit Agreement
Exhibit E Matters to be opined to by counsel to the Company
Exhibit F-1 List of Individual Resignations
(Employment and Offices)
Exhibit F-2 List of Individual Resignations (Offices)
Exhibit G Form of Tax-Related Insurance Policies
Exhibit H Form of Opinion of Siemens Internal Counsel
Exhibit I Escrow Agreement
Exhibit J Tax Escrow Agreement
Exhibit K Directors and Officers of Surviving Corporation
Exhibit L Form of Dort A. Cameron, III Side Letter
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 13,
2000, by and among SIEMENS CORPORATION, a Delaware corporation ("Siemens"),
EMILIA ACQUISITION CORP., a Delaware corporation ("Acquisition"), and ENTEX
INFORMATION SERVICES, INC., a Delaware corporation (the "Company"). Capitalized
terms used in this Agreement and not otherwise defined have the meanings
ascribed to them in Section 10.
RECITALS
A. The Company is a Delaware corporation, with its principal executive
office located at Six International Drive, Rye Brook, New York 10573.
B. Siemens is a Delaware corporation with its principal offices located at
153 East 53rd Street, New York, New York 10022. Acquisition is a wholly owned
subsidiary of Siemens and was formed to merge with and into the Company so that,
as a result of the merger, the Company will survive and become a wholly owned
subsidiary of Siemens.
C. The respective Boards of Directors of Siemens, Acquisition and the
Company have determined that this Agreement and the consummation of the merger
of Acquisition with and into the Company (the "Merger") in accordance with the
laws of the State of Delaware and subject to the terms and conditions of this
Agreement, is advisable and in the best interests of Siemens, Acquisition and
the Company, respectively, and their respective stockholders and have approved
this Agreement.
D. The principal stockholder of the Company and certain of his affiliates
have simultaneously herewith entered into an agreement with Siemens and
Acquisition (the "Stockholders Agreement") in which those Persons have (i)
granted Acquisition an option to acquire their shares (the "Call Option"); (ii)
agreed to vote their shares (x) in favor of the adoption of this Agreement and
(y) against any Acquisition Transaction with any third party; (iii) agreed to
provide all notices and perform all actions necessary for the consummation of
the transactions contemplated herein; (iv) received an undertaking from
Acquisition to purchase their shares, at their option, under certain
circumstances (the "Put Option"); and (v) agreed to exercise certain rights (the
"Drag-Along Rights") to require various stockholders of the Company to sell
their shares on the same terms.
E. The parties intend that Siemens' acquisition of the Company will be
accomplished in a single step pursuant to the Merger, but that under certain
conditions the acquisition will instead be accomplished in two phases - namely,
a purchase by Acquisition of the shares covered by the Stockholders Agreement,
followed by completion of the Merger. In this Agreement, the term "Initial
Purchase" refers to Acquisition's acquisition of the shares covered by the
Stockholders Agreement, either as a result of the exercise of the Call Option or
the
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Put Option, if that acquisition is prior to the Effective Time, and the term
"Initial Purchase Date" refers to the date on which title to those shares passes
to Acquisition.
F. Certain officers and employees of the Company have executed and
delivered to Siemens employment agreements, termination and severance agreements
and/or non-competition/non-solicitation agreements that by their terms will take
effect as of the earlier of (i) the Effective Time or (ii) the Initial Purchase
Date.
G. Siemens, Acquisition and the Company desire to make certain
representations and warranties, covenants and agreements in connection with the
Merger and/or the Initial Purchase and also to set forth the terms and
conditions of the Merger and the Initial Purchase, all as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound do hereby agree
as follows:
1. The Merger; Additional Actions.
1.1 The Merger. At the Effective Time, upon the terms and subject to the
conditions of this Agreement, Acquisition shall be merged with and into the
Company in accordance with the provisions of the General Corporation Law of the
State of Delaware (the "DGCL"). The Company shall be the surviving corporation
in the Merger (the "Surviving Corporation"). As a result of the Merger, all of
the respective outstanding shares of capital stock of the Company and
Acquisition shall be converted or cancelled in the manner provided in Section 2.
1.2 Effective Time. At the Closing, a certificate of merger (the
"Certificate of Merger") shall be duly prepared and executed by the Surviving
Corporation and thereafter delivered to the Secretary of State of the State of
Delaware (the "Secretary of State") for filing, as provided in Section 251 of
the DGCL, on, or as soon as practicable after, the Closing Date. The Merger
shall become effective at the time of the filing of the Certificate of Merger
with the Secretary of State, or at such later time as may be agreed by Siemens
and the Company and stated in the Certificate of Merger (the date and time of
such filing (or stated later time, if any) being referred to herein as the
"Effective Time").
1.3 Closing. The closing of the Merger (the "Closing") shall take place at
the offices of Clifford Chance Rogers & Wells LLP, 200 Park Avenue, New York,
New York 10166, on a date and at a time to be specified by the parties, which
shall in no event be later than 10:00 a.m., local time, on the second business
day following satisfaction of the conditions set forth in Section 6.1(e), (g)
and (i), provided that the other closing conditions set forth in Section 6
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shall have been satisfied or, if permissible, waived in accordance with this
Agreement, or on such other date, time and place as the parties may mutually
agree (the "Closing Date"). At the Closing there shall be delivered to Siemens,
Acquisition and the Company the certificates and other documents and instruments
required to be delivered under Section 6.
1.4 Effects of the Merger. At the Effective Time, the effects of the Merger
shall be as provided in the applicable provisions of the DGCL.
1.5 Certificate of Incorporation, By-Laws and Officers and Directors of the
Surviving Corporation. (a) The certificate of incorporation of the Company, as
in effect immediately prior to the Effective Time, shall be amended in the
Merger so as to read in its entirety as set forth in Exhibit A and, as so
amended, shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended as provided by law and such certificate of
incorporation.
(b) The by-laws in the form set forth in Exhibit B shall be the by-laws of
the Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such by-laws.
(c) From and after the Effective Time, the directors and officers of the
Surviving Corporation shall be as set forth on Exhibit K hereto, until their
respective successors are duly elected and qualified or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-Laws.
1.6 Directors.
If the Initial Purchase occurs:
(a) Upon the Initial Purchase Date and from time to time thereafter so long
as Acquisition, Siemens and Siemens' other direct or indirect wholly-owned
Subsidiaries collectively continue to hold shares of Company Common Stock in an
amount at least equal to a majority of the outstanding voting power of the
Company's capital stock, Siemens shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors of the
Company, each Subsidiary and each standing committee thereof as is equal to the
product of the total number of directors on the Board of Directors of the
Company, such Subsidiary and such committee (determined after giving effect to
the directors elected pursuant to this sentence), as the case may be, multiplied
by the percentage that the aggregate number of shares of Company Common Stock
beneficially owned by Siemens or its wholly owned Subsidiaries bears to the
total number of shares of Company Common Stock then outstanding, and the Company
shall, upon request of Siemens, promptly take all actions necessary to cause
Siemens' designees to be so elected, including, if necessary, increasing the
size of the Board of
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Directors of the Company or such Subsidiary or using its best efforts to obtain
the resignations of one or more existing directors of the Company or such
Subsidiary; provided, however, that prior to the Effective Time, the Board of
Directors of the Company and each Subsidiary shall contain at least two members
who are neither officers, directors nor designees of Siemens (the "Company
Designees").
(b) The Company's obligations to appoint Siemens' designees to the Board
shall be subject to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14f-1 promulgated thereunder. The Company
shall promptly take all actions required pursuant to Section 14(f) and Rule
14f-1 in order to fulfill its obligations under this Section 1.6 and shall
distribute to its stockholders promptly following the execution and delivery of
this Agreement such written material as is required under such Section and Rule
in order to fulfill its obligations under this Section 1.6 (the "14(f)
Material"). Siemens will supply any information with respect to itself and its
officers, directors and Affiliates required by such Section and Rule to the
Company to be included in the 14(f) Material distributed by the Company.
(c) From and after the election or appointment of Siemens' designees
pursuant to this Section 1.6, if any, and prior to the Effective Time, any
amendment or termination of this Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of Siemens or Acquisition or waiver of any of the Company's rights hereunder, or
any other action taken by the Board of Directors of the Company in connection
with this Agreement, will require the concurrence of a majority of the directors
of the Company then in office who are Company Designees.
1.7 Further Assurances. Each party hereto shall execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, rights,
approvals, immunities and franchises of Acquisition and the Company or to
otherwise effect the purposes of this Agreement.
2. Conversion of Shares.
2.1 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any further action on the part of any holder of capital stock
of the Company:
(a) Capital Stock of Acquisition. Each issued and outstanding share of the
common stock, par value $.0001 per share, of Acquisition ("Acquisition Common
Stock") shall be converted into and become one fully paid and nonassessable
share of common stock, par value $.0001 per share, of the Surviving Corporation
("Surviving Corporation Common Stock"). Each certificate representing
outstanding shares of Acquisition Common Stock shall
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at the Effective Time represent an equal number of shares of Surviving
Corporation Common Stock.
(b) Cancellation of Treasury Stock and Stock Owned by Siemens and
Acquisition. All shares of capital stock of the Company that are owned by the
Company as treasury stock and any shares of Company Common Stock owned by
Siemens or Acquisition or by any direct or indirect wholly-owned Subsidiary of
Siemens or Acquisition automatically shall be cancelled and shall cease to exist
and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Capital Stock.
(i) Each issued and outstanding share of the common stock, par value
$.0001 per share, of the Company ("Company Common Stock") (other than
shares to be cancelled in accordance with Section 2.1(b) and other than
shares that are Dissenting Shares (as defined in Section 2.1(d)(i)) shall
be converted into the right to receive an amount per share in cash (the
"Merger Price") equal to the quotient of (x) the Adjusted Acquisition Price
divided by (y) the number of shares of Company Common Stock that are issued
and outstanding immediately prior to the Effective Time (the "Outstanding
Share Amount"); provided, however, that in no event shall the aggregate
Merger Price exceed the sum of (i) 66,942,037 plus (ii) the aggregate
amount in cash received by the Company after the date of this Agreement and
prior to the Effective Time upon exercise of Options.
All such shares of Company Common Stock shall no longer be outstanding and
shall be cancelled automatically and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive, subject to
the terms of the Escrow Agreement and the Tax Escrow Agreement and Sections
2.1(c)(ii), (iii) and (iv), the Merger Price and, if applicable, the Incremental
Amount per share, upon the surrender of such certificate in accordance with
Section 2.3, without interest. For purposes of this Agreement, the term
"Adjusted Acquisition Price" shall be (i) $105,000,000 (the "Acquisition Price")
minus (ii) the Closing Liquid Net Worth Adjustment plus (iii) an additional
amount equal to the product of (x) the amount determined pursuant to the
preceding clauses (i) and (ii) times (y) 6.5% per year from the Measurement Date
to the Effective Time, calculated on an uncompounded basis.
(ii) The first $20,000,000 of the aggregate Merger Price and, if
applicable, Incremental Amount (the "Indemnity Amount") shall be deposited
into escrow pursuant to the terms of the Escrow Agreement. In accordance
with the terms of the Escrow Agreement, following completion of the Escrow
period, the Remaining Escrow Balance shall be deposited with the Payment
Agent in accordance with Section 2.3 for
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distribution to the holders of shares of the Company Common Stock as of the
Effective Time in proportion to their respective share ownership.
(iii) If the Tax Insurance Election is made, to the extent the
aggregate Merger Price and, if applicable, Incremental Amount exceeds
$20,000,000, the next $20,000,000 of the aggregate Merger Price and, if
applicable, Incremental Amount (the "Tax Escrow Amount") shall be deposited
into escrow pursuant to the terms of the Tax Escrow Agreement. In
accordance with the terms of the Tax Escrow Agreement, following completion
of the Tax Matters Escrow Period, the Tax Escrow Balance shall be deposited
with the Payment Agent in accordance with Section 2.3 for distribution to
the holders of shares of Company Common Stock as of the Effective Time in
proportion to their respective share ownership.
(iv) To the extent the aggregate Merger Price and, if applicable,
Incremental Amount exceeds $20,000,000 or, if the Tax Insurance Election is
made, $40,000,000, the next $500,000 of the aggregate Merger Price and, if
applicable, Incremental Amount (the "Stockholder Representative Expense
Amount") shall be paid to the Stockholders' Representative for the purpose
of funding expenses in connection with his performance of the duties of
Stockholders' Representative; provided that the Stockholders'
Representative shall deliver an undertaking to the Company pursuant to
which he will agree to deliver to the Payment Agent any portion of such
amount not utilized for such purpose, which portion shall be distributed to
the holders of shares of Company Common Stock as of the Effective Time in
proportion to the respective share ownership.
(v) If the Effective Time occurs prior to the date letters of
transmittal are first mailed pursuant to Section 2.4(b), an additional
amount per share of Company Common Stock shall be received upon conversion
of each share in the Merger in an amount equal to product of (x) the Merger
Price and (y) 6.5% per year from the Effective Time until the date letters
of transmittal are first mailed pursuant to Section 2.4(b), calculated on
an uncompounded basis (the "Incremental Amount").
(d) Dissenting Shares. Notwithstanding any provision of this Agreement to
the contrary, each outstanding share of Company Common Stock the holder of which
has not voted in favor of the Merger, has perfected such holder's right to an
appraisal of such holder's shares in accordance with the applicable provisions
of the DGCL and has not effectively withdrawn or lost such right to appraisal
(in each case a "Dissenting Share"), shall not be converted into or represent a
right to receive the Merger Price and, if applicable, the Incremental Amount
pursuant to Section 2.1(c), but rather the holder thereof shall be entitled only
to such rights as are granted by the applicable provisions of the DGCL;
provided, however, that any Dissenting Share held by a Person at the Effective
Time who shall, after the Effective Time, withdraw the
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demand for appraisal or lose the right of appraisal, in either case pursuant to
the DGCL, shall be deemed to be converted into, as of the Effective Time, the
right to receive, subject to the terms of the Escrow Agreement and the Tax
Escrow Agreement and Sections 2.1(c)(ii), (iii) and (iv), the Merger Price and,
if applicable, the Incremental Amount pursuant to Section 2.1(c).
The Company shall give Siemens (x) prompt notice of any written demands for
appraisal, withdrawals of demands for appraisal and any other instruments served
pursuant to the applicable provisions of the DGCL relating to the appraisal
process received by the Company and (y) the exclusive right to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company will not, except with the prior written consent of Siemens,
voluntarily make any payment with respect to any demands for appraisal or settle
or offer to settle any such demands.
(e) Treatment of Options. As of the date of this Agreement, each option to
purchase Company Common Stock that is then outstanding (each an "Option")
pursuant to a compensation plan or arrangement of the Company (the "Company
Stock Plans"), whether or not then vested or exercisable, will become vested and
exercisable. Each Option (other than Options issued pursuant to the Company's
1996 Performance Incentive Plan) that has not been exercised as of the Effective
Time shall be cancelled without consideration. Each Option issued pursuant to
the Company's 1996 Performance Incentive Plan that has not been exercised as of
the Effective Time shall be exercisable solely for cash in an amount not to
exceed the Merger Price. Prior to the Effective Time, the Company will obtain
all consents and make all amendments, if any, to the terms of Options and the
Company Stock Plans, if any, pursuant to which the Options were issued that are
necessary to give effect to the provisions of this Section 2.1(e).
(f) Warrants. At the Effective Time, each warrant to purchase Company
Common Stock that is outstanding as of the Effective Time (each a "Warrant")
pursuant to any of the Warrant Agreements or otherwise shall be exercisable
solely for cash in an amount not to exceed the Merger Price. Prior to the
Effective Time, the Company will obtain all consents and make all amendments, if
any, to the terms of the Warrants and the Warrant Agreements that are necessary
to give effect to the provisions of this Section 2.1(f).
2.2 Closing Statement Procedures. (a) As promptly as practicable, but in
any event not later than 30 days after the date (the "Measurement Date") that is
the first to occur of (i) the Closing Date and (ii) the Initial Purchase Date,
Siemens shall cause to be prepared and delivered to Dort A. Cameron, III (the
"Stockholders' Representative") a draft Closing Statement substantially in the
form of Exhibit C setting forth (x) the balance sheet of the Company at the
close of business on the Measurement Date, which shall be prepared using the
proce-
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dures and methodologies set forth in Exhibit C, and (y) Siemens' calculation
(based on the amounts set forth on the balance sheet) of the Closing Liquid Net
Worth Adjustment.
(b) Subject to the provisions of paragraph (c) below, the Stockholders'
Representative shall have 15 days from the date of delivery of the Closing
Statement to review and approve the Closing Statement. If the Stockholders'
Representative agrees with Siemens' calculation of the Closing Liquid Net Worth
Adjustment contained in the Closing Statement, the Stockholders' Representative
shall promptly so advise Siemens in writing, in which event the Closing Liquid
Net Worth Adjustment shall be deemed final and the Adjusted Acquisition Price
shall be calculated and deposited with the Payment Agent in accordance with
Section 2.3.
(c) If the Stockholders' Representative in good faith disagrees with the
calculation of the Closing Liquid Net Worth Adjustment set forth in the Closing
Statement, the Stockholders' Representative shall notify Siemens in writing (the
"Notice of Disagreement") of such disagreement within 15 days after delivery of
the Closing Statement. The Notice of Disagreement shall set forth in reasonable
detail the basis for the disagreement. Thereafter, Siemens and the Stockholders'
Representative shall attempt in good faith to resolve and finally determine the
Closing Liquid Net Worth Adjustment. If Siemens and the Stockholders'
Representative are unable to resolve the disagreement within 10 days after the
delivery of the Notice of Disagreement, Siemens and the Stockholders'
Representative shall appoint PriceWaterhouse Coopers (the "Independent
Accountant") to resolve the disputed items and make a determination with respect
thereto. Such determination will be made, and written notice thereof given to
Siemens and the Stockholders' Representative, within 30 days after such
selection. The determination by the Independent Accountant shall be final,
binding and conclusive upon the parties hereto. The scope of the Independent
Accountant's engagement (which shall not be an audit) shall be limited to the
resolution of the items contained in the Notice of Disagreement, and the
recalculation, if any, of the Closing Liquid Net Worth Adjustment in light of
such resolution and such firm shall be deemed to be acting as experts and not as
arbitrators. In their review of the Closing Statement and recalculation of the
Closing Liquid Net Worth Adjustment, the Independent Accountant will be limited
to using the procedures and methodologies set forth in Exhibit C. The fees,
costs and expenses of the Independent Accountant, if any, will be borne equally
by Siemens and the Stockholders' Representative (it being understood that the
Stockholders' Representative's portion thereof shall be one of the expenses for
which he is entitled to receive reimbursement in accordance with the terms of
the Escrow Agreement). Within five days of delivery of a notice of determination
by the Independent Accountant as described above, the applicable portions of the
Adjusted Acquisition Price (calculated using the Closing Liquid Net Worth
Adjustment so determined by the Independent Accountant) shall be delivered or
made available to the Payment Agent, the Escrow Agent, the Stockholders'
Representative and/or the Tax Escrow Agent, as the case may be, in accordance
with Section 2.3.
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2.3 Deposits of Funds at and following the Closing. (a) On the date (the
"Initial Distribution Date") which is the later to occur of (i) the date on
which the Adjusted Acquisition Price is determined pursuant to the provisions of
Section 2.2 or (ii) the Effective Time, (x) Siemens shall deposit with the
Escrow Agent funds in an amount equal to the Indemnity Amount, (y) if the Tax
Insurance Election is not made, Siemens shall deposit with the Stockholders'
Representative, the Stockholders' Representative Expense Amount, if any, and
shall deposit with the Payment Agent the balance, if any, of the aggregate
Merger Price and the aggregate Incremental Amount, if any, and (z) if the Tax
Insurance Election is made, Siemens: shall deposit with the Tax Escrow Agent the
Tax Escrow Amount, if any; shall deposit with the Stockholders' Representative,
the Stockholders' Representative Expense Amount, if any; and shall deposit with
the Payment Agent the balance, if any, of the aggregate Merger Price and the
aggregate Incremental Amount, if any.
2.4 Payment for Certificates.
(a) Exchange Fund. Siemens shall appoint the Payment Agent no later than
the Closing Date. The Payment Agent shall agree to hold the funds deposited with
it pursuant to Section 2.3 and, in its capacity as the Escrow Agent pursuant to
the Escrow Agreement and as the Tax Escrow Agent pursuant to the Tax Escrow
Agreement (such funds, together with earnings thereon, being referred to herein
as the "Exchange Fund"), for disbursement as provided in this Section 2.4.
(b) Payment Procedures. As soon as reasonably practicable (and in any event
not later than five business days) after the Initial Distribution Date, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates")
whose shares are converted pursuant to Section 2.1(c) into the right to receive
the merger consideration described in Section 2.1(c), (i) 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 delivery of the
Certificates to the Payment Agent and shall be in such form and have such other
provisions as the Surviving Corporation may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the portions, if any, of the Merger Price and Incremental Amount, if any,
deposited with the Payment Agent on the Initial Distribution Date. Upon
surrender of a Certificate to the Payment Agent, together with such letter of
transmittal, duly executed and completed in accordance with its terms, the
holder of such Certificate shall be entitled to receive in exchange therefor a
check representing such portion, if any, of the Merger Price and Incremental
Amount, if any, per share of Company Common Stock represented thereby which such
holder has the right to receive pursuant to the provisions of Section 2.1(c),
and the Certificate so surrendered shall forthwith be cancelled. Except as
otherwise provided in this Agreement, the Tax Escrow
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Agreement or the Escrow Agreement, in no event shall the holder of any
Certificate be entitled to receive interest on any funds to be received in the
Merger. Until surrendered as contemplated by this Section 2.4(b), each
Certificate shall be deemed at all times after the Effective Time to represent
only the right to receive the merger consideration provided for in this
Agreement.
(c) Tax Escrow Balance. As soon as reasonably practicable (and in any event
not later than five business days) following the end of the Tax Matters Escrow
Period, Siemens shall cause to be mailed to each Person entitled to a portion of
the Tax Escrow Balance pursuant to Section 2.1(c) a notice setting forth (i) the
amount of the Tax Escrow Balance and (ii) instructions for obtaining the amount
thereof to which each such Person is entitled pursuant to Section 2.1(c) from
the Payment Agent. Upon compliance by each such Person with those instructions,
such Person shall be entitled to be paid the applicable amount due under Section
2.1(c). Except as expressly provided in the Tax Escrow Agreement, in no event
shall interest be paid on any such amount.
(d) Remaining Escrow Balance. As soon as reasonably practicable (and in any
event not later than five business days) following the end of the Escrow Period,
Siemens shall cause to be mailed to each Person entitled to a portion of the
Remaining Escrow Balance pursuant to Section 2.1(c) a notice setting forth (i)
the amount of the Remaining Escrow Balance and (ii) instructions for obtaining
the amount thereof to which each such Person is entitled pursuant to Section
2.1(c) from the Payment Agent. Upon compliance by each such Person with those
instructions, such Person shall be entitled to be paid the applicable amount due
under Section 2.1(c). Except as expressly provided in the Escrow Agreement, in
no event shall interest be paid on any such amount.
(e) No Further Ownership Rights in Company Common Stock. From and after the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Section 2.4.
(f) Termination of Exchange Fund. Any monies furnished to the Payment Agent
which remain undistributed to the stockholders of the Company for six months
after the date they are first furnished shall be delivered to Siemens, upon
demand, and any stockholders of the Company who have not theretofore complied
with this Section 2 shall thereafter look only to Siemens (subject to abandoned
property, escheat and other similar laws) as general creditors for payment of
their claim for the merger consideration. Neither Siemens nor the Surviving
Corporation shall be liable to any holder of shares of capital stock of the
Company for
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cash representing the merger consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
3. Representations and Warranties of the Company. Except as set forth in
the relevant Section (determined in accordance with Section 11.13) of the
disclosure schedule (the "Disclosure Schedule") delivered by the Company to
Siemens concurrently with the execution of this Agreement, the Company
represents and warrants to Acquisition and to Siemens as follows:
3.1 Organization. (a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to carry on its business as it has been and is
now being conducted and to own, use and lease its assets and properties. The
Company is duly qualified or licensed as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of its business or
the ownership, leasing or operation of its assets and properties makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not have a Material Adverse
Effect.
(b) Except for the Subsidiaries of the Company set forth in Section 3.5 of
the Disclosure Schedule and as set forth in Section 3.1(b) of the Disclosure
Schedule, the Company does not, directly or indirectly, own any equity or
similar interest in or have any other ownership right in any other Person, nor
does it have any obligation to purchase any shares of stock, other securities or
other form of investment in any other Person.
3.2 Capitalization. (a) As of the close of business on the business day
immediately preceding the date of this Agreement, the total authorized shares of
capital stock of the Company consisted solely of (i) 100,000,000 shares of
Company Common Stock, of which 32,814,724 shares were issued and outstanding,
and (ii) 2,000,000 shares of Preferred Stock, of which no shares were issued and
outstanding. The Preferred Stock and the Company Common Stock are sometimes
collectively referred to herein as the "Company Capital Stock." At the close of
business on the business day immediately preceding the date of this Agreement,
82,500 shares of Company Common Stock were held in treasury. No shares of
Company Capital Stock were issued after the close of business on the business
day immediately preceding the date of this Agreement, other than pursuant to the
exercise of Options outstanding as of the close of business on the business day
immediately preceding the date of this Agreement. As of the close of business on
the business day immediately preceding the date of this Agreement, 9,916,681
shares of Company Common Stock were reserved for issuance of which (i) 250,855
shares were reserved for issuance upon the exercise of a warrant issued pursuant
to a Warrant Agreement, dated July 15, 1997 between the Company and IBMCC (the
"1997 IBM Warrant"); (ii) 715,230 shares were reserved for issuance upon the
exercise of a warrant issued pursuant to a Warrant Purchase Agreement, dated
November 12, 1997 between
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the Company and Microsoft Corp. (the "Microsoft Warrant") (all of the Warrant
Agreements referred to herein collectively being the "Warrant Agreements");
(iii) 8,926,915 shares were reserved for issuance upon the exercise of
outstanding stock options under the Company Stock Plans; and (iv) 23,681 shares
were reserved for issuance pursuant to the 1996 Non-Employee Director Stock Plan
(the "NED Plan"). All the outstanding shares of Company Common Stock have been
duly and validly authorized and issued and are fully paid and nonassessable. No
shares of capital stock have been issued by the Company at any time in violation
of the preemptive rights of any stockholder of the Company. All shares of
capital stock previously issued by the Company were offered, issued and sold in
compliance with all applicable Federal and state securities laws and
regulations.
(b) Section 3.2 of the Disclosure Schedule sets forth a complete and
accurate listing of all options, warrants, restricted stock grants and other
rights to acquire shares of Company Common Stock outstanding as of the date of
execution and delivery of this Agreement. There are no existing agreements,
subscriptions, options, warrants, calls, commitments, trusts (voting or
otherwise), or rights of any kind whatsoever between the Company and any Person,
and none of the foregoing exist granting any interest in or the right to
purchase or otherwise acquire from the Company or granting to the Company any
interest in or the right to purchase or otherwise acquire from any Person, at
any time, or upon the occurrence of any stated event, any securities of the
Company, whether or not presently issued or outstanding. There are no other
outstanding securities of the Company or any other entity which are convertible
into or exchangeable for other securities of the Company. There are no proxies,
agreements or understandings with respect to the voting of the shares of Company
Capital Stock to which the Company is a party or, to the knowledge of the
Company, to which any other Person is a party or any agreements, subscriptions,
options, warrants, calls, commitments or rights of any kind granting to any
Person the right to purchase or otherwise acquire from the Company any
securities so convertible or exchangeable. No Option or Warrant has an exercise
or strike price of less than $2.04 per share and each Option issued pursuant to
the Company's 1996 Performance Incentive Plan that has not been exercised as of
the Effective Time shall be exercisable solely for cash in an amount not in
excess of the Merger Price.
(c) The Company has not:
(i) since June 27, 1999, declared, set aside, made or paid any
dividend or other distribution, payable in cash, stock, property or
otherwise with respect to any of its capital stock;
(ii) since June 27, 1999, reclassified, combined, split, subdivided or
redeemed, purchased (other than pursuant to the terms of any restricted
stock award) or otherwise acquired, directly or indirectly, any of its
capital stock;
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(iii) since the date of the latest balance sheet included in the
December Financial Statements, incurred any indebtedness for borrowed money
or issued any debt securities or assumed, guaranteed or endorsed, or
otherwise as an accommodation become responsible for, the obligations of
any Person, or made any loans or advances except pursuant to existing lines
of credit or other existing credit facilities in the ordinary course of
business; or
(iv) since June 27, 1999, entered into or amended any contract,
agreement, commitment or arrangement with respect to any matter set forth
in this Section 3.2(c)(iii).
(d) All amounts of outstanding indebtedness owed by the Company are
repayable at any time without requiring the payment of any premium on the part
of the Company or resulting in any penalty to the Company.
3.3 Authority. The Company has full corporate power and authority to enter
into this Agreement and, subject to obtaining the approval by its stockholders
of the adoption of this Agreement ("Stockholder Approval"), if and to the extent
required by the DGCL, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized and approved by the
Company's Board of Directors and, subject to obtaining Stockholder Approval (if
and to the extent required by the DGCL) and except for the filing of the
Certificate of Merger pursuant to the DGCL, no other corporate proceedings on
the part of the Company or its stockholders are necessary to authorize the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Company and, subject to obtaining Stockholder
Approval, is the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors rights generally and by the
effect of general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
3.4 No Conflicts; Governmental Requirements; SEC Documents. (a) The
execution, delivery and performance by the Company of this Agreement and the
consummation of the Merger do not, and will not, subject to obtaining the
Stockholder Approval, (i) violate or conflict with any provision of the
Certificate of Incorporation or By-Laws of the Company, (ii) violate any law,
rule, regulation, order, writ, injunction, judgment or decree of any court,
governmental authority or regulatory agency, or (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration), or require any consent, approval or notice under,
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xany note, bond, indenture, license, lien, franchise, mortgage, contract, lease,
permit, guaranty or other agreement, instrument or obligation listed on Section
3.12 of the Disclosure Schedule to which the Company is a party or by which any
of its assets or properties may be bound.
(b) Except for (i) the filing with the Securities and Exchange Commission
(the "SEC") of an Information Statement pursuant to Regulation 14C under the
Exchange Act in respect of the Stockholder Approval (as amended or supplemented
from time to time, the "Information Statement"), if required, the 14(f) Material
and such reports under Section 13 of the Exchange Act, as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (ii) the filing of a premerger notification report by the Company
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations thereunder (the "HSR Act"), (iii) the filing of the
Certificate of Merger pursuant to the DGCL and (iv) any other consents,
approvals, authorizations, permissions, notices or filings which if not obtained
or made would not (individually or in the aggregate) have a Material Adverse
Effect or materially delay or hinder or render unlawful the consummation of the
Merger or the other transactions contemplated by this Agreement, the execution
and delivery of this Agreement by the Company do not and the performance by the
Company of this Agreement will not, require any consent, approval, authorization
or permission of, or filing with or notification to, any governmental or
regulatory authority, domestic or foreign.
(c) The Company has filed all required reports, schedules, forms,
statements and other documents with the SEC since December 3, 1997 (the "Company
SEC Documents"). All of the Company SEC Documents (other than preliminary
materials or materials that were subsequently amended), as of their respective
filing dates, complied in all material respects with all applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act") and the
Exchange Act and, in each case, the rules and regulations promulgated thereunder
applicable to such Company SEC Documents. None of the Company SEC Documents at
the time of filing contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except to the extent such statements have been
amended, modified or superseded by later filed Company SEC Documents. None of
the Company SEC Documents is the subject of any confidential treatment request
by the Company. Section 3.4(c) of the Disclosure Schedule lists all of the
Company SEC Documents filed with the SEC since June 27, 1999.
(d) The Company has furnished to Siemens and Acquisition copies of all
notices, documents, requests, court papers, or other materials given to or
received from any governmental agency or any other third party with respect to
the transactions contemplated by this Agreement.
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3.5 Subsidiaries. Section 3.5 of the Disclosure Schedule lists the name of
each Subsidiary and all lines of business in which each Subsidiary is
participating or engaged. Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation identified in Section 3.5 of the Disclosure Schedule, and has all
requisite power and authority to carry on its business as it has been and is now
being conducted and to own, use and lease its assets and properties. Each
Subsidiary is duly qualified or licensed as a foreign corporation to do business
and is in good standing in each jurisdiction specified in Section 3.5 of the
Disclosure Schedule, which are the only jurisdictions in which nature of its
business or the ownership, leasing or operation of such Subsidiary's assets and
properties makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed and in good standing, would not have a
Material Adverse Effect. Section 3.5 of the Disclosure Schedule lists for each
Subsidiary the amount of its authorized capital stock, the amount of its
outstanding capital stock and the record owners of such outstanding capital
stock. All of the outstanding shares of capital stock of each Subsidiary have
been duly authorized and validly issued, are fully paid and nonassessable, and
are owned, beneficially and of record, by the Company or Subsidiaries wholly
owned by the Company free and clear of all Liens. There are no existing
agreements, subscriptions, options, warrants, calls, commitments, trusts (voting
or otherwise), or rights of any kind whatsoever between the Company or any
Subsidiary on the one hand and any Person on the other hand with respect to the
capital stock of any Subsidiary. The name of each director and officer of each
Subsidiary on the date hereof, and the position with such Subsidiary held by
each, are listed in Section 3.5 of the Disclosure Schedule.
3.6 Books and Records. The minute books and other similar records of the
Company and the Subsidiaries as made available to Siemens prior to the execution
of this Agreement contain a true and complete record, in all material respects,
of all actions taken at all meetings and by all written consents in lieu of
meetings of the stockholders, the boards of directors and committees of the
boards of directors of the Company and the Subsidiaries. The stock transfer
ledgers and other similar records of the Company and the Subsidiaries as made
available to Siemens prior to the execution of this Agreement contain true and
complete records, in all material respects, of all stock transfers related to
the Company's or any Subsidiary's capital stock. The Company has previously
furnished to Siemens true, complete and correct copies of the Certificate of
Incorporation and the By-Laws of the Company and each Subsidiary as in effect on
the date hereof.
3.7 Financial Statements. The consolidated financial statements of the
Company included in the Company SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") (except, in
the case of interim financial statements, as permitted by the applicable
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<PAGE>
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented in all material respects, the consolidated financial position of the
Company and the Subsidiaries taken as a whole, as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended
(subject, in the case of interim financial statements, to normal year-end
adjustments).
3.8 Absence of Undisclosed Liabilities. Except as reflected in the
financial statements included in the Company's Quarterly Report on Form 10-Q for
the period ended December 26, 1999 (the "December Financial Statements") or as
set forth in the Company SEC Documents filed with the SEC prior to the date of
this Agreement, neither the Company nor any of its Subsidiaries has or has
incurred any liability or obligation of any nature (whether absolute, accrued,
contingent or otherwise) other than liabilities or obligations (other than
obligations for borrowed money or in respect of capitalized leases) reasonably
incurred after December 26, 1999 in the ordinary course of business.
3.9 Operations and Obligations. Except as disclosed in the Company SEC
Documents filed with the SEC since June 27, 1999 and prior to the date of this
Agreement, since June 27, 1999:
(a) there has been no impairment, damage, destruction, loss or claim,
whether or not covered by insurance, or condemnation or other taking adversely
affecting in any respect any of the Company's or any Subsidiary's material
assets;
(b) the Company has not made any material wage or salary increase or other
compensation payable or to become payable or bonus, or material increase in any
other direct or indirect compensation, for or to any of its officers, directors,
employees, independent contractors, consultants, agents or other
representatives, or any accrual for or commitment or agreement to
make or pay the same, other than the increases made in the ordinary course
consistent with past practice;
(c) prior to the date of this Agreement, the Company has not received any
notice from any customer or group of customers with whom the Company has a
contract or agreement disclosed on Section 3.12 of the Disclosure Schedule
stating that such customer or group of customers has ceased, or will cease, to
use the products, equipment, goods or services of the Company, or has
substantially reduced or will substantially reduce, the use of such products,
equipment, goods or services at any time.
(d) the Company has not failed to pay or perform, or delayed its payment or
performance of, any obligation in a manner materially inconsistent with its past
practice; and
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(e) the Company and each of its Subsidiaries have conducted its business
only in the ordinary course.
3.10 Properties. (a) Section 3.10 of the Disclosure Schedule contains a
true, complete and correct list (designating the relevant owners, lessors and
lessees) of (i) all real property owned, leased or subleased by the Company or
any Subsidiary and (ii) all equipment, fixtures and other personal property
owned, leased, subleased or managed by the Company or any Subsidiary which, in
the case of clause (ii) only, has a net book value or commitment in excess of
$50,000. Copies of all real and personal property leases and deeds of the
Company and each Subsidiary relating to the property identified on Section 3.10
of the Disclosure Schedule have been delivered or made available to Siemens by
the Company.
(b) With respect to real property leased or subleased by the Company or any
Subsidiary, the Company or such Subsidiary has a valid leasehold interest in
such real property, and the leasehold or other interest of the Company or such
Subsidiary in such real property is not subject or subordinate to any Lien.
Neither the Company nor any applicable Subsidiary is in default in any material
respect under any such lease, or sublease and, to the Company's knowledge, the
other party or parties thereto are not in default of its or their obligations
thereunder nor does any such party have the right to terminate prior to its
scheduled expiration the term of any such lease or sublease as a result of the
transactions contemplated by this Agreement.
(c) Neither the Company nor any Subsidiary has received any written notice
that the whole nor any part of any real property owned, leased, subleased, used
or occupied by the Company or any Subsidiary is subject to any pending suit for
condemnation or other taking by any public authority, and, to the Company's
knowledge, no such condemnation or other taking is currently threatened or
contemplated. The properties owned, leased or subleased by the Company and its
Subsidiaries are sufficient to conduct the operations of the Company and its
Subsidiaries as currently conducted, and the foregoing personal properties are
in good operating condition and repair, normal wear and tear excepted.
(d) Except as disclosed in the December Financial Statements, the Company
or a Subsidiary owns outright or has good and marketable fee title to or a valid
leasehold or license interest in all of its respective assets and properties
(including, without limitation, those reflected as assets on the balance sheet
included in the December Financial Statements), in each case free and clear of
any Lien. The Company, together with its Subsidiaries, has all necessary assets,
equipment and properties to engage in the business as currently conducted and
proposed to be conducted by the Company.
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3.11 Accounts Receivable; Accounts Payable; Inventory. (a) All accounts
receivable of the Company and the Subsidiaries have arisen from bona fide
transactions by the Company and the Subsidiaries in the ordinary course of their
business.
(b) Section 3.11 of the Disclosure Schedule sets forth a true and correct
list of each account payable of the Company and each Subsidiary, in each case in
excess of $10,000 (and the age of such payable), as of the second business day
immediately preceding the date of this Agreement.
(c) The inventories (and any reserves with respect thereto that have been
established by the Company or a Subsidiary) of the Company and the Subsidiaries
as of the date of the latest balance sheet included in the December Financial
Statements are described in Section 3.11 of the Disclosure Schedule. All such
inventories (net of any such reserves) are (i) of such quality as to be useable
in the ordinary course of business (subject in the case of work-in-process
inventory to completion in the ordinary course of business), and (ii) are
reflected in the latest balance sheet included in the December Financial
Statements and in the books and records of the Company at the moving weighted
average based on latest purchases.
3.12 Contracts. (a) Neither the Company nor any Subsidiary nor, in the case
of (xiii) below, any Affiliate of the Company, is a party to or is bound by:
(i) any contract or commitment (other than those with respect to which
the Company has not yet received an invoice as of the close of business on
the second business day immediately preceding the date of this Agreement)
which creates an obligation on the part of the Company or any Subsidiary in
excess of $200,000;
(ii) any contract or commitment which obligates the Company or any
Subsidiary to deliver any hardware, software, technology or services or
rights related thereto and which has generated, within the twelve months
preceding the date of this Agreement, or is forecasted to generate, within
the twelve month period after the date of this Agreement, revenue
(excluding revenue from discontinued operations) in excess of $1,000,000;
(iii) any waiver or release of the Company's or any Subsidiary's
rights (other than those related to discontinued operations) against a
third party (other than immaterial rights) within the past six months;
(iv) any debt instrument, including, without limitation, any loan
agreement, line of credit, promissory note, security agreement or other
evidence of indebtedness, where the Company or any Subsidiary is a lender,
borrower or guarantor, in a principal amount in excess of $50,000;
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(v) any contract or commitment restricting the Company, any Subsidiary
or, to the knowledge of the Company, any of their respective employees of
the title of Senior Vice President or higher from engaging in any activity
or line of business or competing with any Person or limiting the ability of
any Person to compete with the Company or any Subsidiary;
(vi) any alliance, cooperation, joint venture, stockholders',
partnership or similar agreement;
(vii) any research, development, distributorship, sales agency, sales
representative, marketing or reseller agreement related to the business or
technology of the Company;
(viii) any agreement, option or commitment or right with, or held by,
any third party to acquire, use or have access to any assets or properties,
or any interest therein, of the Company or any Subsidiary;
(ix) any employment, severance or consulting contract which is
material to the business of the Company or its Subsidiaries;
(x) any agreement which, if terminated, would reasonably be expected
to result in a Material Adverse Effect;
(xi) any material license, sublicense, development, support or
maintenance agreement;
(xii) any agreement relating to common or preferred stock issued by
the Company or any Subsidiary;
(xiii) any agreement which provides rights to parties other than the
Company or any Subsidiary which are contingent upon a merger, consolidation
or other "change-in-control" of the Company;
(xiv) any agreement containing confidentiality and non-disclosure
obligations from the Company which, if violated, could reasonably be
expected to result in a Material Adverse Effect; or
(xv) any other agreement that (A) involves the payment or potential
payment, pursuant to the terms of any such agreement, by or to the Company
or any Subsidiary of more than $200,000 and (B) cannot be terminated within
60 calendar days after giving notice of termination without resulting in
any material cost or penalty to the Company or any Subsidiary.
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(b) The agreements listed in Section 3.12 of the Disclosure Schedule are
all the material agreements relating to the ownership or operation of the
currently conducted and contemplated business of the Company or to the property
presently held or used by the Company or any Subsidiary or to which the Company
or any Subsidiary is a party or to which it or any of its properties and assets
is subject or bound. The Company has previously delivered (or made available)
true, complete and correct copies of all such agreements (including all
amendments) to Siemens (or, in the case of oral agreements only, true, complete
and correct descriptions thereof have been set forth in Section 3.12 of the
Disclosure Schedule). Neither the Company nor any Subsidiary is or, to the
knowledge of the Company, is alleged to be, and, to the knowledge of the Company
and its Subsidiaries, no other party to any such agreement is, in default in any
material respect under any such agreement and, except as contemplated by this
Agreement, after the Merger all of such agreements will remain in full force and
effect, except for agreements which, by their terms, terminate prior to the
consummation of the Merger. No additional consideration shall be due under such
contracts as a result of the Merger and neither the Company nor any Subsidiary
is currently renegotiating any such agreement or paying liquidated damages in
lieu thereof.
3.13 [INTENTIONALLY OMITTED].
3.14 Litigation. (a) As of the date hereof: (i) there are no actions,
suits, arbitrations, legal or administrative proceedings pending or, to the
Company's knowledge, threatened against the Company or any Subsidiary which,
individually or in the aggregate, could have a Material Adverse Effect;
(i) neither the Company nor any Subsidiary is the subject of any
pending or, to the knowledge of the Company, threatened investigation by
any Governmental Entity; and
(ii) neither the Company nor any Subsidiary nor the assets, properties
or business of the Company or any Subsidiary is subject to any judgment,
order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal. Neither the Company nor any Subsidiary is the
plaintiff in any such proceeding and neither the Company nor any Subsidiary
is contemplating commencing legal action against any other Person.
(b) There are no actions, suits, arbitrations, legal or administrative
proceedings pending or, to the Company's knowledge, threatened against any of
the officers or directors of the Company or any Subsidiary for which the Company
or any Subsidiary may have an obligation to provide indemnification.
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3.15 Compliance with Law; Authorizations. (a) The Company and each
Subsidiary have complied in all material respects with, and is not in violation
of, in any material respect, any law, ordinance or governmental rule or
regulation (collectively, "Laws") to which it or its business is subject.
(b) The Company and each Subsidiary has obtained and currently holds all
material licenses, permits, certificates or other governmental authorizations
(collectively "Authorizations") necessary for the ownership or use of its assets
and properties and the conduct of its business.
(c) The Company and each Subsidiary has complied in all material respects
with, and is not in violation in any material respect of, any Authorization
necessary for the ownership or use of its assets and properties or the conduct
of its business.
3.16 Intellectual Property. (a) Section 3.16(a) of the Disclosure Schedule
contains a true and complete list of substantially all material Intellectual
Property owned and used in the business of the Company and its Subsidiaries
(other than the trademarks disclosed in Section 3.16(b) of the Disclosure
Schedule and the licensed software and license agreements disclosed in Section
3.12 of the Disclosure Schedule) and all known infringements by third parties of
such Intellectual Property. The Company and its Subsidiaries owns, and the
Surviving Corporation will, pursuant to the Merger, own, all right, title and
interest in and to all Intellectual Property, including that which is disclosed
in Section 3.16(a) of the Disclosure Schedule, free and clear of all Liens,
together with the right to sue and assert claims for and recover damages and
obtain any and all other remedies available at law and in equity for any past,
present and future infringement, misappropriation or the violation of any such
Intellectual Property (and settle all such suits, actions and proceedings).
Other than the trademarks disclosed in Section 3.16(b) of the Disclosure
Schedule and the licensed software and other licensed Intellectual Property and
rights disclosed in Section 3.12 of the Disclosure Schedule, (i) the Company or
its Subsidiaries have received and hold all necessary assignments for and to
such Intellectual Property, and there is nothing which would prevent the Company
and its Subsidiaries from assigning and transferring all such Intellectual
Property to Siemens and its Affiliates or to the Surviving Corporation pursuant
to the Merger, free and clear of all Liens; (ii) the Company and its
Subsidiaries claim and own all right, title and interest in and to all copyright
rights related to all works of authorship created by its respective employees or
hires including all works made for hire; (iii) all registrations with and
applications to Governmental Entities in respect of such Intellectual Property
are valid and in full force and effect and are not subject to the payment of any
Taxes or maintenance fees or the taking of any other actions by the Company or
its Subsidiaries to maintain their validity or effectiveness or rights of
Company and its Subsidiaries therein; (iv) there are no restrictions on the
direct or indirect assignment or transfer of any contract, license, or any
interest therein, held by the Company or its Subsidiaries in
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respect of any Intellectual Property or rights therein including pursuant to the
Merger; (v) the Company has delivered to Siemens prior to the date of this
Agreement documentation with respect to any invention, process, design, computer
program or other know-how or trade secret included in such Intellectual
Property, which documentation is accurate in all material respects and
reasonably sufficient in detail and content to identify and explain such
invention, process, design, computer program or other know-how or trade secret
and to facilitate its full and proper use without reliance on the special
knowledge or memory of any Person, and to allow Siemens or the Surviving
Corporation, to seek statutory protection for the same including patent or
copyright protection for the same and Siemens, Acquisition or its nominee, shall
own and have pursuant to the Merger all rights to seek protection for and so
register such Intellectual Property if such protection is available; (vi) the
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of their trade secrets; (vii) none of the
Company or its Subsidiaries is, or has received any notice that it is, in
default (or with the giving of notice or lapse of time or both, would be in
default) under any contract relating to such Intellectual Property; and (viii)
to the knowledge of the Company and its Subsidiaries, no such Intellectual
Property has been or is being infringed or has been misappropriated by any other
Person. Neither the Company nor its Subsidiaries has received notice that it is
infringing or has misappropriated any Intellectual Property of any other Person.
To the knowledge of the Company and its Subsidiaries, no claim is pending,
anticipated or has been made, to such effect that has not been resolved and none
of the Company or its Subsidiaries is infringing or has misappropriated any
Intellectual Property of any other Person.
(b) Section 3.16(b) of the Disclosure Schedule contains a true and complete
list of all trademarks owned or used by the Company and its Subsidiaries (the
"Trademarks"); while it may be possible, to the best knowledge of the Company,
there are no other trademarks which may have been adopted by any Subsidiary of
Company for use in such Subsidiary's business. The Company owns all right, title
and interest in the Trademarks free and clear of all Liens, including all rights
to sue and assert claims for and recover damages and obtain any and all other
remedies available at law and equity for any past, present, and future
infringement, misappropriation or other violation of any such Trademarks (and
settle all such suits, actions and proceedings). In addition, (i) the Company
and its Subsidiaries have exclusive rights to use such Trademarks in the
territories wherein they are registered or where an application for registration
is pending with respect to the goods described, and have received and hold all
necessary assignments for and to such Trademarks, and to the knowledge of the
Company, there is nothing which would prevent the Company and its Subsidiaries
from assigning and transferring all right, title and interest in and to such
Trademarks, and to the knowledge of the Company, there is nothing which would
prevent the Company and its Subsidiaries from assigning and transferring all
right, title and interest in and to such Trademarks and the goodwill of the
business associated therewith, to Siemens, Acquisition or its nominee, free and
clear of all
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Liens and encumbrances; (ii) all registrations with and applications to
Governmental Entities are disclosed in Section 3.16(b) of the Disclosure
Schedule, including expiration and renewal dates and dates when any affidavits
or fees may be due to maintain such registrations; (iii) there are no
restrictions on the use or direct or indirect transfer of any interest therein,
and (iv) the Company has made available to Siemens prior to the date of this
Agreement documentation with respect to such Trademarks, which documentation is
sufficient and complete in all material respects and reasonably sufficient in
detail and content to identify and disclose the condition and rights of the
Company or any Persons (including material Trademark search or watch reports) in
and to such Trademarks. The Company repeats its representations and warranties
as per clauses (vi), (vii) and (viii) of paragraph (a) above with respect to the
Trademarks. Any trademark rights licensed to or by the Company are disclosed in
Section 3.12 of the Disclosure Schedule; the Company has previously provided
Siemens with copies of the written terms under which limited permission has been
given by the Company and its Subsidiaries to third parties to use a trademark of
the Company to publicize that such respective third party is actively engaged
with or by the Company to distribute, service, support and maintain the products
of the Company.
3.17 Tax Matters. (i) The Company and each Subsidiary have timely filed all
material Tax Returns required to be filed; (ii) all such Tax Returns are true,
complete and accurate in all material respects and all material Taxes shown to
be due on such Tax Returns or otherwise due have been timely paid, have been
fully reserved on the latest balance sheet included in the December Financial
Statements or will be fully reserved by the Measurement Date; (iii) neither the
Company nor any Subsidiary has waived or has been requested in writing to waive
(or agreed to any extension of) any limitations period in respect of Taxes; (iv)
no adjustment relating to such Tax Returns has been proposed in writing by any
Tax authority (insofar as it relates to the activities or income of the Company
or any Subsidiary); (v) there are no pending or, to the knowledge of the
Company, threatened actions or proceedings for the assessment or collection of
Taxes against the Company or any Subsidiary; (vi) the Company is not a party to
any Tax sharing or Tax allocation agreement, and has no obligation under any Tax
indemnity arrangement; (vii) there are no liens for Taxes upon the assets of the
Company or any Subsidiary (other than liens for property taxes not yet due and
payable); (viii) all material Taxes which the Company or any Subsidiary is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or accrued, or reserved against and entered on
the books of the Company or such Subsidiary in accordance with GAAP; (ix)
neither the Company nor any Subsidiary is a party to any agreement or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code;
(x) no acceleration of the vesting schedule for any property that is
substantially unvested within the meaning of the regulations under Section 83 of
the Code will occur in connection with the transactions contemplated by this
Agreement; (xi) the Company has not been a United States real property holding
corporation
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within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code; and (xii) neither the Company
nor any Subsidiary has been liable for any accumulated earnings tax penalty or
personal holding company tax.
(a) The Company (i) has not agreed to and is not required to make any
adjustment pursuant to Section 481(a) of the Code; (ii) has no knowledge that
the Internal Revenue Service ("IRS") has proposed any such adjustment or change
in accounting method with respect to the Company; and (iii) does not have any
application pending with the IRS or any other tax authority requesting
permission for any change in accounting method.
(b) Neither the Company nor any Subsidiary has income reportable for a
period beginning after the Measurement Date but attributable to a transaction
which resulted in the reporting of such income for financial accounting purposes
in a period ending on or prior to the Measurement Date.
(c) (i) There are no written requests for information from any Tax
authority currently outstanding that could affect the Taxes of the Company or
any Subsidiary; (ii) there are no proposed reassessments in writing of any
property owned by the Company or any Subsidiary that could increase the amount
of any Tax to which the Company or any Subsidiary would be subject and (iii) no
power of attorney that is currently in force has been granted by the Company or
any Subsidiary with respect to any matter relating to Taxes.
(d) (i) Section 3.17 of the Disclosure Schedule contains a complete and
accurate list of the jurisdictions in which Tax Returns have been filed on the
basis of a unitary group, indicates the most recent Tax Return for each relevant
jurisdiction for which an audit has been completed and indicates all Tax Returns
that currently are the subject of audit; and (ii) the Company has delivered or
made available to Siemens correct and complete copies of all Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by the Company and any Subsidiary for the past three taxable years.
(e) Except in respect of the affiliated, consolidated, combined, unitary or
similar group of which the Company or any Subsidiary currently is a member,
neither the Company nor any Subsidiary (i) is or has been a member of an
affiliated group (within the meaning of Section 1504(a)(1) of the Code) or (ii)
has filed or been required to file or been included on or required to be
included on a consolidated federal income tax return or any state Tax Return on
a consolidated, combined or unitary basis.
(f) The provisions for Taxes reflected on the balance sheet included in the
December Financial Statements are sufficient to cover all liabilities in respect
of Taxes for all periods through December 31, 1999 (without regard to the
materiality thereof).
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(g) Neither the Company nor any Subsidiary (i) owns an interest in any
domestic international sales corporation, foreign sales corporation, controlled
foreign corporation, or passive foreign investment company; (ii) has or is
currently projected to have an amount includable in its income for the current
taxable year under Section 951 or Section 551 of the Code, (iii) has an
unrecaptured overall foreign loss within the meaning of Section 904(f) of the
Code or (iv) has participated in or cooperated with an international boycott
within the meaning of Section 999 of the Code.
(h) Neither the Company nor any Subsidiary is a party (other than as an
investor) to any industrial development bond.
Notwithstanding anything to the contrary in this Section 3.17, the Company
makes no representation regarding the validity of any of the net operating
losses of the Company or any of its Subsidiaries or the ability of the Company
or any of its Subsidiaries to utilize such net operating losses in any pre or
post Measurement Date period.
3.18 Employee Benefit Plans. (a) Section 3.18 of the Disclosure Schedule
contains a complete and accurate list and description of all "employee pension
benefit plans" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (sometimes referred to as "Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA)
(sometimes referred to as "Welfare Plans") and all other Benefit Plans (together
with the Pension Plans and Welfare Plans, the "Plans") maintained, or
contributed to, during the past two years by the Company or any Person that,
together with the Company, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code (the Company and each such other Person, a "Commonly
Controlled Entity") for the benefit of any current or any former employees,
officers, consultants or directors of the Company. The Company has made
available to Siemens true, complete and correct copies of (i) each Plan, (ii)
the most recent annual report on Form 5500 filed with the Internal Revenue
Service with respect to each Plan (if any such report was required), (iii) the
most recent summary plan description for each Plan for which a summary plan
description is required, (iv) each trust agreement and group annuity contract
relating to any Plan and (v) all material correspondence with the IRS or the
United States Department of Labor relating to any outstanding controversy or
audit. Except as would not have a Material Adverse Effect, each Plan has been
administered in accordance with its terms. Except as would not have a Material
Adverse Effect, the Company and all Plans are in compliance with applicable
provisions of ERISA and, with respect to the Plans, the Code.
(b) Except as would not have a Material Adverse Effect, all Pension Plans
that are intended to be qualified under Section 401(a) of the Code have been the
subject of determination, opinion, notification or advisory letters from the IRS
to the effect that such Pension Plans are so qualified and are exempt from
Federal income taxes under Section 501(a) of the Code,
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and no such determination letter has been revoked nor has any event occurred
since the date of such Plan's most recent determination letter that would
reasonably be expected to adversely affect its qualification.
(c) Neither the Company nor any Commonly Controlled Entity has within the
previous five years, maintained, contributed to or been obligated to contribute
to any Plan that is subject to Title IV of ERISA including, without limitation
any multi-employer plan (as defined in Section 3 (37) of ERISA).
(d) Except as would not have a Material Adverse Effect, neither the Company
nor any Subsidiary has any liability or obligation under any Welfare Plan to
provide life insurance or medical or health benefits after termination of
employment to any employee or dependent other than as required by Part 6 of
Title I of ERISA. Except as set forth on Section 3.18(d) of the Disclosure
Schedule, no Plan that provides health or medical benefits are self-insured, and
no claims for such benefits could result in an uninsured liability to the
Company, any Subsidiary, the Surviving Corporation or Siemens.
(e) Except as provided by this Agreement, no employee of the Company or any
Subsidiary will be entitled to any additional compensation or benefits or any
acceleration of the time of payment or vesting of any compensation or benefits
under any Plan as a result of the transactions contemplated by this Agreement.
(f) Except as would not have a Material Adverse Effect, neither the Company
nor any Subsidiary has engaged in any non-exempt prohibited transactions under
ERISA and there are no violations or claims relating to the Plans except in the
ordinary course of business.
(g) There is no investigation by any governmental or regulatory authority
or any proceeding or other claim, action (other than claims for benefits in the
normal operations of the Benefit Plans), suit or proceeding against or involving
any Benefit Plan or asserting any right or claim to benefits which is likely to
be adversely determined and which, if so determined, would reasonably be
expected to have a Material Adverse Effect.
(h) All contributions, premiums and other payments required by law or any
Plan or applicable collective bargaining agreement to have been made under any
such Plan or agreement to any fund, trust or account established thereunder or
in connection therewith have been made by the due date thereof.
(i) Without limiting any other provision of this Section 3.18, except as
would not have a Material Adverse Effect, no event has occurred and no condition
exists, with respect to any Plan (whether or not maintained by the Company or
the Surviving Corporation), that has subjected or could subject the Company, any
Subsidiary, the Surviving Corporation or Siemens,
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or any Plan or any successor thereto, to any material tax, fine, penalty or
other liability (other than, in the case of the Company, the Subsidiaries and
the Plans, a liability arising in the normal course to make contributions or
payments, as applicable, when ordinarily due under a Plan with respect to
employees or former employees of the Company or any Subsidiary). Except as would
not have a Material Adverse Effect, no event has occurred and no condition
exists, with respect to any Plan that could subject Siemens or any of its
Affiliates, or any plan maintained by Siemens or any Affiliate thereof, to any
material tax, fine, penalty or other liability, that would not have been
incurred by Siemens or any of its Affiliates, or any such Plan, but for the
transactions contemplated hereby. No employee benefit plan other than a Plan is
or will be directly or indirectly binding on the Surviving Corporation solely by
virtue of the transactions contemplated hereby. Siemens, and its Affiliates,
including on and after the Closing, the Surviving Corporation, shall have no
material liability for, under, with respect to or otherwise in connection with
any employee plan, which liability arises under ERISA or the Code, by virtue of
the Company or any Subsidiary being aggregated in a controlled group or
affiliated service group with any Commonly Controlled Entity for purposes of
ERISA or the Code at any relevant time prior to the Closing. Each Plan may be
amended and terminated in accordance with its terms. As of the Effective Time,
no Plan will have any participants who are not employees of the Company or its
Subsidiaries.
3.19 Employee Compensation. Section 3.19 of the Disclosure Schedule
contains a complete and accurate list (organized by individual for persons whose
annual rate of compensation exceeds $75,000 and by category for all other
persons) of the titles and current annual salary rates of and bonuses paid or
payable to all present officers, employees, consultants, contractors and other
individuals who perform services for the Company or any Subsidiary
("Employees").
3.20 Employees.
(a) Except as would not have a Material Adverse Effect, (i) the Company and
each of its Subsidiaries has complied with all applicable laws, rules and
regulations respecting employment and employment practices, terms and conditions
of employment, wages and hours, and neither the Company nor any Subsidiary is
liable for any arrears of wages or any taxes or penalties for failure to comply
with any such laws, rules or regulations; (ii) the Company believes that its
relations with each of its employees is satisfactory; (iii) there are no
controversies pending or, to the knowledge of the Company, threatened between
the Company or any of its Subsidiaries and any of their respective employees;
(iv) neither the Company nor any Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or such Subsidiary, nor, to the knowledge of the
Company, are there any activities or proceedings of any labor union to organize
any such employees; (v) there are no unfair labor practice complaints pending
or, to the knowledge of the
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Company, threatened against the Company or any Subsidiary before the National
Labor Relations Board or any current union representation questions involving
employees of the Company or any Subsidiary; (vi) there is no strike, slowdown,
work stoppage or lockout existing, or, to the knowledge of the Company,
threatened, by or with respect to any employees of the Company or any
Subsidiary; (vii) no charges are pending or to the knowledge of the Company
threatened before the Equal Employment Opportunity Commission or any state,
local or foreign agency responsible for the prevention of unlawful employment
practices with respect to the Company or any Subsidiary; (viii) there are no
claims pending against the Company or any Subsidiary before any workers'
compensation board; and (ix) neither the Company nor any Subsidiary has received
notice that any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws intends to conduct an investigation of
or relating to the Company or any Subsidiary and, to the knowledge of the
Company, no such investigation is in progress.
(b) Except as would not have a Material Adverse Effect, the Company and
each Subsidiary has properly classified for all purposes (including, without
limitation, for all Tax purposes and for purposes of determining eligibility to
participate in any employee benefit plan) all employees, leased employees,
consultants and independent contractors, and has withheld and paid all
applicable Taxes and made all appropriate filings in connection with services
provided by such persons to the Company and each Subsidiary.
(c) Except as set forth on Section 3.20(c) of the Disclosure Schedule,
every Employee (with the title of Senior Vice President and more senior) has
executed a Confidentiality/Non-Solicit Agreement in substantially the form
attached as Exhibit D hereto.
(d) From September 26, 1999 through the date of this Agreement, the
annualized rate of employee resignations has not exceeded 35%.
(e) The Company has inquired of each of its employees to determine whether
they are bound by any contract or commitment which restricts them from engaging
in any activity or competing with any Person and based on that inquiry has no
reason to believe that any such employee is so bound.
3.21 Environmental Laws. Neither the Company nor any Subsidiary is in
material violation of, or materially delinquent with respect to any reporting or
other requirements under, any Environmental Law to which it or its assets,
properties, personnel or business are subject. Neither the Company nor any
Subsidiary has knowledge of any circumstances or conditions existing that may
prevent or interfere with such compliance in the future. The Company and each
Subsidiary have obtained all material permits, licenses and other authorizations
required under Environmental Laws and such permits, licenses and authorizations
are in full force and effect. There is no material Environmental Claim pending
or, to the knowl-
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edge of the Company, threatened against the Company or any Subsidiary. There are
no past or present actions, activities, circumstances, conditions, events or
incidents taken or caused by the Company or any of its Subsidiaries, including,
without limitation, the release, emission, discharge, storage, transportation,
generation, presence or disposal, or, to the knowledge of the Company, any other
Person, of any Hazardous Substance that could reasonably be expected to result
in any material Environmental Claim against the Company or any Subsidiary. The
Company has made available to Siemens all material surveys, reports,
assessments, audits, evaluations or other documents relating to the presence,
migration or disposal of any Hazardous Substance, prepared for or at the request
of the Company or any Subsidiary and relating to the Company, any Subsidiary or
any of their respective assets, properties or businesses.
3.22 Insurance. The Company previously has delivered or made available to
Siemens a complete and accurate list of all liability, property, workers'
compensation, directors' and officers' liability, "key man" life and other
insurance policies in effect that are owned by the Company or any Subsidiary, or
under which the Company or any Subsidiary is a named insured. Those policies and
the coverage thereunder are in full force and effect. The businesses of the
Company and its Subsidiaries are adequately insured against loss or damage in
kind and in an amount customarily obtained by similar businesses.
3.23 Bank Accounts, Letters of Credit and Powers of Attorney. Section 3.23
of the Disclosure Schedule contains a complete and accurate list of (a) all bank
accounts, lock boxes and safe deposit boxes relating to the business and
operations of each of the Company and its Subsidiaries (including the name of
the bank or other institution where such account or box is located and the name
of each authorized signatory thereto), (b) all outstanding letters of credit
issued by financial institutions for the account of the Company and each
Subsidiary (setting forth, in each case, the financial institution issuing such
letter of credit, the maximum amount available under such letter of credit, the
terms (including the expiration date) of such letter of credit and the party or
parties in whose favor such letter of credit was issued), and (c) the name and
address of each Person who has a power of attorney to act on behalf of the
Company or any Subsidiary. The Company has heretofore delivered or made
available to Siemens true, correct and complete copies of each letter of credit
and each power of attorney described on Section 3.23 of the Disclosure Schedule.
3.24 No Adverse Development. Since June 27, 1999 there has been no event,
circumstance, state of affairs, condition or development which the Company has
not disclosed to Siemens in writing which has had or could reasonably be
expected to have a Material Adverse Effect.
3.25 Transactions with Affiliates. Except for transactions for compensation
of employees or as disclosed in the Company SEC Documents, every transaction
between the Company and any of its "affiliates" or their "associates" (as such
terms are defined in the rules and
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regulations of the SEC), which is currently in effect and which involves the
payment, or receipt, in the aggregate, of more than $60,000 is set forth on
Section 3.25 of the Disclosure Schedule.
3.26 Information Statement; Merger Materials. None of the information
supplied or to be supplied by the Company in writing specifically for inclusion
in (i) the 14(f) Material or (ii) the Information Statement will, at the
respective times filed with the SEC and/or published, sent or given to holders
of Company Common Stock, as the case may be, and, in addition, in the case of
the Information Statement, at the date it or any amendment or supplement is
mailed to holders of Company Common Stock and at the Effective Time, 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 made therein,
in light of the circumstances under which they were made, not misleading.
3.27 Brokers. Except for Lazard Freres LLP, whose fees, commission and
expenses are the sole responsibility of the Company, all negotiations relative
to this Agreement and the transactions contemplated hereby have been carried out
by the Company directly with Siemens and Acquisition without the intervention of
any Person on behalf of the Company in such manner as to give rise to any valid
claim by any Person against Siemens, Acquisition, the Company or any Subsidiary
for a finder's fee, brokerage commission or similar payment.
4. Representations and Warranties of Siemens and Acquisition. Siemens and
Acquisition each represent and warrant to the Company as follows:
4.1 Organization. Each of Siemens and Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power and
authority to enter into and perform this Agreement and the transactions
contemplated hereby to be performed by it.
4.2 Corporate Authority. Each of Siemens and Acquisition has full power and
authority to execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement by it has been duly authorized and
approved on the part of Siemens and Acquisition by all necessary corporate
action and, except for the filing of appropriate merger documents as required by
the DGCL, no other corporate proceedings on the part of either Siemens or
Acquisition is necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by each of Siemens and Acquisition and is the legal, valid and binding
obligation of each of Siemens and Acquisition enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors rights generally and by the effect of general principles
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of equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
4.3 No Breach. (a) The execution, delivery and performance by each of
Siemens and Acquisition of this Agreement and the consummation of the Merger do
not, and will not, (i) violate or conflict with any provision of the Certificate
of Incorporation or By-Laws of either Siemens or Acquisition; (ii) violate any
law, rule, regulation, order, writ, injunction, judgement or decree of any
court, governmental authority, or regulatory agency, except for violations
which, individually or in the aggregate, will not have a material adverse effect
on Siemens and Acquisition taken as a whole; or (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of cancellation or acceleration), under, any
material note, bond, indenture, Lien, mortgage, contract, lease permit, guaranty
or other agreement, instrument or obligation to which Siemens or Acquisition is
a party or by which any of the properties of Siemens or Acquisition may be bound
except for violations which, individually or in the aggregate, will not have a
material adverse effect on Siemens and Acquisition taken as a whole.
(b) Except for (i) the filing of a premerger notification report by Siemens
under the HSR Act, (ii) the filing of the Merger Certificate pursuant to the
DGCL and (iii) any other consents, approvals, authorizations, permissions,
notices or filings which if not obtained or made would not (individually or in
the aggregate) materially impair Siemens' ability to perform its obligations
under this Agreement or have a material adverse effect on the Surviving
Corporation, the execution and delivery of this Agreement by each of Siemens and
Acquisition does not and the performance by it of this Agreement will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign.
4.4 Litigation. (a) Neither Siemens nor Acquisition is a party to any suit,
action, arbitration or legal, administrative, governmental or other proceeding
or investigation pending or to the knowledge of Siemens and Acquisition
threatened, which could adversely affect or restrict its ability to consummate
the transactions contemplated by this Agreement or to perform its obligations
hereunder.
(b) There is no judgment, order, writ, injunction or decree of any court,
governmental agency or arbitration tribunal to which Siemens or Acquisition is
subject which might adversely affect or restrict its ability to consummate the
transactions contemplated by this Agreement or to perform its obligations
hereunder.
4.5 Brokers. Except for Morgan Stanley Dean Witter, whose fees, commission
and expenses are the sole responsibility of Siemens, all negotiations relative
to this Agreement and the transactions contemplated hereby have been carried out
by Siemens directly with the
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Company without the intervention of any Person on behalf of Siemens in such
manner as to give rise to any valid claim by any Person against Siemens,
Acquisition, the Company or any Subsidiary for a finder's fee, brokerage
commission or similar payment.
4.6 Information. None of the information supplied or to be supplied by
Siemens or Acquisition in writing specifically for inclusion in (i) the 14(f)
Material or (ii) the Information Statement will, at the respective times filed
with the SEC and/or published, sent or given to holders of Company Common Stock,
as the case may be, and, in addition, in the case of the Information Statement,
at the date it or any amendment or supplement is mailed to holders of Company
Common Stock and at the Effective Time, 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 made therein, in light of the
circumstances under which they were made, not misleading.
4.7 Financing. Siemens has available sufficient cash in immediately
available funds to make the payments required by Section 2 of this Agreement.
5. Covenants and Additional Agreements.
5.1 Conduct of Business. The Company covenants and agrees that at all times
from and after the date of this Agreement until the Measurement Date (except as
expressly contemplated or permitted by this Agreement, or to the extent that
Siemens otherwise shall consent in writing):
(a) The Company and the Subsidiaries shall conduct their respective
businesses only in, and shall not take any action except in, the ordinary course
of business consistent with past practice.
(b) Without limiting the generality of paragraph (a) of this Section 5.1,
(i) the Company and its Subsidiaries shall use all commercially reasonable
efforts to preserve intact in all material respects their present business
organizations and reputation, to keep available the services of their key
officers and employees, to maintain their assets and properties in good working
order and condition, ordinary wear and tear excepted, to maintain insurance on
their tangible assets and businesses in such amounts and against such risks and
losses as are currently in effect, to preserve their relationship with customers
and suppliers and others having significant business dealings with them and to
comply in all material respects with all Laws and orders of all governmental or
regulatory authorities applicable to any of them, and (ii) neither the Company
nor any of its Subsidiaries shall:
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(A) amend or propose to amend its Certificate of Incorporation or
By-Laws except for amendments required by this Agreement or which do not
and will not adversely affect Siemens or Acquisition;
(B) (w) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock, (x) split, combine,
reclassify or take similar action with respect to any of its capital stock
or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
(y) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such liquidation or a merger, consolidation,
restructuring, recapitalization or other reorganization or (z) directly or
indirectly redeem, repurchase or otherwise acquire any shares of its
capital stock or any option with respect thereto (except for repurchases
pursuant to outstanding stock restriction agreements);
(C) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any option, warrant
or similar right with respect thereto other than upon exercise of an Option
or Warrant outstanding on the date of this Agreement;
(D) acquire (by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of,
or by any other manner) any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets other than the acquisition of assets
in the ordinary course of business consistent with past practice;
(E) other than dispositions in the ordinary course of its business
consistent with past practice, sell, lease, grant any security interest in
or otherwise dispose of or encumber any of its assets or properties;
(F) except to the extent required by applicable law, (x) permit any
material change in (A) any pricing, marketing, purchasing, investment,
accounting, financial reporting, inventory, credit, allowance or tax
practice or policy or (B) any method of calculating any bad debt,
contingency or other reserve for accounting, financial reporting or tax
purposes or (y) make any material tax election or settle or compromise any
material income tax liability with any governmental or regulatory
authority;
(G) except as otherwise provided in this Agreement, (x) except to the
extent such incurrence would not be in violation of or require disclosure
pursuant to the terms of this Agreement, incur (which shall not be deemed
to include entering into credit agreements, lines of credit or similar
arrangements until borrowings are made under
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such arrangements) any indebtedness for borrowed money or guarantee any
such indebtedness or (y) voluntarily purchase, cancel, prepay or otherwise
provide for a complete or partial discharge in advance of a scheduled
repayment date with respect to, or waive any right under, any indebtedness
for borrowed money;
(H) except for the actions with respect to stock options, restricted
stock awards and the Company Stock Plans expressly provided for in this
Agreement, enter into, adopt, amend in any material respect (except as may
be required by applicable law) or terminate (other than in accordance with
its terms) any Benefit Plans or other agreement, arrangement, plan or
policy between the Company and one or more of its directors, officers,
employees or consultants, or increase in any manner the compensation or
fringe benefits of any director, officer, employee or consultant or pay any
benefit not required by any plan or arrangement in effect as of the date
hereof;
(I) except for the amendments to the Options, the Company Stock Plans,
the Warrants and the Warrant Agreements expressly provided for in this
Agreement, enter into any contract or amend or modify any existing
contract, or engage in any new transaction outside the ordinary course of
business consistent with past practice or not on an arm's length basis,
with any affiliate of the Company;
(J) except as set forth in Section 5.1 of the Disclosure Schedule,
make any capital expenditures or commitments for additions to plant,
property or equipment constituting capital assets in excess of $50,000 with
respect to each such capital expenditure or commitment and not more than
$1,000,000 in the aggregate;
(K) waive or agree to any extension of any limitations period in
respect of Taxes;
(L) make any change in the lines of business in which it participates
or is engaged;
(M) take any action or omit to take any action which would result in a
material breach, violation or inaccuracy of any representation, warranty,
covenant or agreement of the Company made in this Agreement;
(N) enter into any material contract or agreement which would require
the consent of the other party thereto to consummate the transactions
contemplated hereby; or
(O) enter into any contract, agreement, commitment or arrangement to
do or engage in any of the foregoing.
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(c) Until the Measurement Date, the Company shall confer on a regular and
frequent basis with Siemens and/or its Affiliates with respect to its business
and operations and other matters relevant to the Merger, and shall promptly
advise Siemens, orally and in writing, of any change or event, including,
without limitation, any complaint, investigation or hearing by any governmental
or regulatory authority (or communication indicating the same may be
contemplated) or the institution or threat of litigation, having, or which,
insofar as can be reasonably foreseen, could have, a Material Adverse Effect or
materially and adversely affect the ability of the Company to consummate the
transactions contemplated hereby.
5.2 No Solicitations. Until the Measurement Date, neither the Company nor
any of its Subsidiaries shall authorize or permit any officer, director,
employee, investment banker, financial advisor, attorney, accountant or other
agent or representative (each, a "Representative") retained by or acting for or
on behalf of the Company or any of its Subsidiaries to, directly or indirectly,
initiate, solicit, encourage, or, unless the Board of Directors of the Company
believes, after consultation with outside legal counsel, that the failure to
take such actions would constitute a breach of the fiduciary duties of the Board
of Directors, participate in any negotiations regarding, furnish any
confidential information in connection with, endorse or otherwise cooperate
with, assist, participate in or facilitate the making of any proposal or offer
for, or which may reasonably be expected to lead to, an Acquisition Transaction,
by any Person, or group (a "Potential Acquiror"); provided, however, that (i)
the Company may furnish or cause to be furnished information concerning the
Company and its businesses, properties or assets to a Potential Acquiror, (ii)
the Company may engage in discussions or negotiations with a Potential Acquiror,
(iii) following receipt of a proposal or offer for an Acquisition Transaction,
the Company may make disclosure to the Company's stockholders and may recommend
such proposal or offer to the Company's stockholders and (iv) following receipt
of a proposal or offer for an Acquisition Transaction, the Board of Directors
may enter into an agreement in principle or a definitive agreement with respect
to such Acquisition Transaction, but in each case referred to in the foregoing
clauses (i) through (iv) only to the extent that the Board of Directors of the
Company shall have first concluded in good faith after consultation with outside
legal counsel that such action is necessary or appropriate because failure to
take such action would constitute a breach of the fiduciary duties owed by the
Board of Directors of the Company to the Company's stockholders under applicable
law; and provided, further, that the Board of Directors of the Company shall not
take or permit the Company to take any of the foregoing actions referred to in
clauses (i) through (iv) without prior written notice to Siemens with respect to
such action. The Company shall promptly inform Siemens, orally and in writing,
of the material terms and conditions of any proposal or offer for, or which may
reasonably be expected to lead to, an Acquisition Transaction that it receives
and the identity of the Potential Acquiror. The Company will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted on or prior to the date of this Agreement heretofore
with respect to any Acquisition
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Transaction. As used in this Agreement, "Acquisition Transaction" means any
merger, consolidation or other business combination involving the Company, or
any acquisition in any manner of all or a substantial portion of the equity of,
or all or a substantial portion of the assets of, the Company, whether for cash,
securities or any other consideration or combination thereof, other than
pursuant to the transactions contemplated by this Agreement.
5.3 Access to Information; Confidentiality. (a) The Company shall,
throughout the period from the date hereof to the Measurement Date, (i) provide
Siemens and its Affiliates and their respective Representatives with full
access, upon reasonable prior notice, during normal business hours to all
officers, employees, agents, accountants and customers of the Company and its
Subsidiaries, and their respective assets, properties, books and records and
(ii) furnish promptly to such persons (x) a copy of each report, statement,
schedule and other document filed or received by the Company or any Subsidiary
pursuant to the requirements of federal or state securities laws or filed with
any other governmental or regulatory authority, and (y) all other information
and data (including, without limitation, copies of contracts, Benefit Plans and
other books and records) concerning the business, employees and operations of
the Company (including product development) and its Subsidiaries as Siemens or
any of such other persons reasonably may request. No investigation pursuant to
this paragraph or otherwise shall affect any representation or warranty
contained in this Agreement or any condition to the obligations of the parties
hereto.
(b) Until the Measurement Date, Siemens will hold, and will use its best
efforts to cause its Affiliates and their respective Representatives to hold, in
strict confidence, unless (i) compelled to disclose by judicial or
administrative process or by other requirements of applicable laws of
governmental or regulatory authorities (including, without limitation, in
connection with obtaining the necessary approvals of this Agreement or the
transactions contemplated hereby of governmental or regulatory authorities);
provided that to the extent reasonably practicable Siemens shall provide the
Company with reasonable notice of such compelled disclosure, or (ii) disclosed
in an action or proceeding brought by a party hereto in pursuit of its rights or
in the exercise of its remedies hereunder, all documents and information
concerning the Company and its Subsidiaries furnished to it by the Company or
its Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (w) known by Siemens, any of its Affiliates or any of
their respective Representatives prior to disclosure by the Company or its
Representatives, (x) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of
Siemens and its Representatives, (y) later acquired by Siemens, any of its
Affiliates or any of their respective Representatives from another source if
Siemens, such Affiliate or such Representative is not aware that such source is
under an obligation to the Company to keep such documents and information
confidential or (z) independently developed by Siemens or any of its Affiliates.
In the event
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that this Agreement is terminated without the transactions contemplated hereby
having been consummated, upon the request of the Company, Siemens will, and will
cause its Representatives to, promptly redeliver or cause to be redelivered all
copies of documents and information furnished by the Company or its
Representatives to Siemens, its Affiliates and their Representatives in
connection with this Agreement or the transactions contemplated hereby and
destroy or cause to be destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon prepared by
Siemens or its Representatives.
5.4 Preparation of Information Statement; Approval of Stockholders; Siemens
Approval. As soon as practicable following the date of this Agreement, the
Company shall (i) prepare and file with the SEC a preliminary Information
Statement, in form and substance satisfactory to Siemens and (ii) prepare,
furnish to its stockholders and file with the SEC the 14(f) Material. The
Company shall use its best efforts to respond to and resolve any comments of the
staff of the SEC with respect to the Information Statement or the 14(f) Material
as promptly as practicable after such filing. The Company will notify Siemens
promptly of the receipt of any comments from the SEC and of any request by the
SEC for amendments or supplements to the Information Statement or the 14(f)
Material or for additional information, will supply Siemens with copies of all
correspondence between it or any of its Representatives and the SEC with respect
to the Information Statement or the 14(f) Material and will provide Siemens and
its representatives with a reasonable opportunity to review, comment on and
discuss all documents filed with the SEC or furnished to the Company's
stockholders pursuant to this Section 5.4, to participate in all conversations
with the SEC relating to those filings or any of the subject matter of this
Agreement and to comment on all proposed responses to or other communications
with the SEC. The form and content of the Information Statement and the 14(f)
Material shall be reasonably acceptable to Siemens. The Information Statement
and the 14(f) Material shall comply in all material respects with all applicable
requirements under all applicable laws. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Information
Statement or the 14(f) Material, the Company or Siemens, as the case may be,
shall promptly inform the other of such occurrence and cooperate in filing with
the SEC and/or mailing to the stockholders of the Company such amendment or
supplement in a form reasonably acceptable to Siemens.
(a) The Company shall, if required by applicable law and if requested by
Siemens, duly call, give notice of, convene and hold a meeting of or solicit
proxies or written consents from its stockholders for the purpose of voting on
(i) the adoption of this Agreement and (ii) the taking of such additional
corporate actions as Siemens reasonably may request or as may be necessary or
appropriate for the consummation of the Merger and the other transactions
contemplated by this Agreement, whether or not the Board of Directors of the
Company modifies or withdraws its approval of this Agreement, its declaration of
its advisability or its rec-
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ommendation that the stockholders adopt it. The Company shall take these actions
and distribute the Information Statement as soon as reasonably practicable after
the date hereof.
(b) Notwithstanding the foregoing, if Acquisition acquires at least 90% of
the issued and outstanding shares of Company Common Stock, the parties hereto
shall take all necessary and appropriate actions to cause the Merger to become
effective in accordance with Section 253 of the DGCL, as soon as reasonably
practicable, without a meeting of the stockholders of the Company and without
action by written consent of stockholders of the Company.
5.5 Regulatory and Other Approvals. Subject to the terms and conditions of
this Agreement, each of the Company and Siemens will proceed diligently and in
good faith and will use all commercially reasonable efforts to do, or cause to
be done, all things necessary, proper or advisable to, as promptly as
practicable, (i) obtain all consents, approvals or actions of, make all filings
with and give all notices to governmental or regulatory authorities or any
other public or private third parties required of Siemens or any of its
Subsidiaries or the Company to consummate the Initial Purchase and the Merger
and the other matters contemplated hereby, and (ii) provide such other
information and communications to such governmental or regulatory authorities as
the other party or such governmental or regulatory authorities may reasonably
request. In addition to and not in limitation of the foregoing, each of the
parties will (x) take promptly all actions necessary to make the filings
required of Siemens and the Company or their Affiliates under the HSR Act and
under any similar or comparable European antitrust statute or regulation
(collectively, the "European Statutes"), (y) comply at the earliest practicable
date with any request for additional information received by such party or its
Affiliates from the Federal Trade Commission (the "FTC") or the Antitrust
Division of the Department of Justice (the "Antitrust Division") pursuant to the
HSR Act or from similar or comparable European governmental authorities (the
"European Authorities") pursuant to the European Statutes, and (z) cooperate
with the other party in connection with such party's filings under the HSR Act
and the European Statutes and in connection with resolving any investigation or
other inquiry concerning the Merger or the other matters contemplated by this
Agreement commenced by the FTC, the Antitrust Division, state attorneys general
or the European Authorities.
5.6 Notice and Cure. Each of Siemens and the Company will notify the other
promptly in writing of, and contemporaneously will provide the other with true
and complete copies of any and all information or documents relating to, and
will use commercially reasonable efforts to cure before the Measurement Date,
any event, transaction or circumstance occurring after the date of this
Agreement that causes or will cause any covenant or agreement of Siemens or the
Company, as the case may be, under this Agreement to be breached or that renders
or will render untrue any representation or warranty of Siemens or the Company,
as the case may be, contained in this Agreement as if the same were made on or
as of the date of
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such event, transaction or circumstance. Each of Siemens and the Company also
will notify the other promptly in writing of, and will use commercially
reasonable efforts to cure, before the Measurement Date, any violation or breach
of any representation, warranty, covenant or agreement made by Siemens or the
Company, as the case may be, in this Agreement, whether occurring or arising
prior to, on or after the date of this Agreement. No notice given pursuant to
this Section 5.6 shall have any effect on (i) the representations, warranties,
covenants or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein or (ii) any right to indemnity
hereunder.
5.7 Company Stock Plans; Warrants. The Company shall take or cause to be
taken, including as appropriate by its Board of Directors or the appropriate
committee thereof, by all steps necessary, if any, to cause (i) give effect to
the provisions of Section 2.1(e) and (ii) pursuant to the Warrant Agreements or
other granting instruments, each Warrant granted to be exercisable solely for
cash in an amount not to exceed the Merger Price.
5.8 Termination of Contracts. Prior to the Measurement Date, the Company
will take all action and obtain all consents required to terminate the
agreements listed on Schedule 5.8 without liability to the Company following the
Effective Time.
5.9 Fulfillment of Conditions. Subject to the terms and conditions of this
Agreement, each of Siemens and the Company will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to the other's obligations contained in
this Agreement and to consummate and make effective the transactions
contemplated by this Agreement, and neither the Company nor Siemens will, nor
will it permit any of its Subsidiaries to, take or fail to take any action that
could be reasonably expected to result in the nonfulfillment of any such
condition.
5.10 Cooperation. (a) The Company hereby acknowledges and agrees that, in
the event Siemens or any of its Affiliates undertakes to redeem, repurchase or
repay all or any portion of the outstanding Notes, Debentures and/or Promissory
Note, the Company will provide full and complete access to all books, records,
files and information relating to such Notes, Debentures and Promissory Note,
including through providing access to the applicable trustee, if any, and will
assist in any manner as may reasonably be requested by Siemens and its
Affiliates and their respective Representatives with respect to any such
redemption, repurchase or repayment.
(b) Siemens hereby acknowledges and agrees that the Company may, with the
consent of Siemens (which consent shall not unreasonably be withheld), redeem,
repurchase or repay all or any portion of the outstanding Notes, Debentures
and/or Promissory Notes prior to the Measurement Date; provided, however, that
Siemens shall be reasonably satisfied that such
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purchases shall not result in any liability to the Surviving Corporation or to
Siemens or any of its Affiliates.
5.11 Director and Officer Indemnification. (a) Siemens agrees that all
rights to indemnification now existing in favor of any current or former
director or officer of the Company as provided in the Company's Certificate of
Incorporation or by-laws or in a written agreement between any such person and
the Company in effect on the date hereof shall survive the Merger and shall
continue in full force and effect until the expiration of all applicable
statutes of limitation. Siemens also agrees to indemnify all current and former
directors and officers of the Company to the fullest extent the Company would be
permitted by the DGCL to indemnify them with respect to all acts and omissions
arising out of such individuals' service as officers or directors of the Company
or any of the Subsidiaries or as trustees or fiduciaries of any plan for the
benefit of employees occurring prior to the Effective Time. Without limitation
of the foregoing, in the event any such person is or becomes involved in any
capacity in any action, proceeding or investigation in connection with any
matter, including, without limitation, the transactions contemplated by this
Agreement, occurring prior to, and including, the Effective Time, Siemens will
pay such person's reasonable legal and other expenses of counsel selected by
such person and reasonably acceptable to Siemens (including the cost of any
investigation, preparation and settlement) incurred in connection therewith
after statements therefor are received by Siemens; provided, however, that
Siemens shall not, in connection with any one such action or proceeding or
separate but substantially similar actions or proceedings arising out of the
same general allegations, be liable for reasonable fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel) at any
time for all indemnified persons. Siemens shall be entitled to participate in
the defense of any such action or proceeding, and counsel selected by the
indemnified person shall, to the extent consistent with their professional
responsibilities, cooperate with Siemens and any counsel designated by Siemens.
Siemens shall pay all reasonable expenses, including attorneys' fees, that may
be incurred by any indemnified person in enforcing the indemnity and other
obligations provided for in this Section 5.11.
(b) Siemens agrees that the Company and, from and after the Effective Time,
the Surviving Corporation shall cause to be maintained in effect for not less
than six years from the Effective Time the current policies of directors' and
officers' liability insurance maintained by the Company; provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous to such
persons; and provided, further, that such substitution shall not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time; and provided, further, that the Surviving Corporation shall not
be required to pay an annual premium in excess of 200% of the last annual
premium paid by the Company prior to the date hereof; and if the Surviving
Corporation is unable to obtain the insurance required by this Section 5.11(b),
it
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shall obtain as much comparable insurance as possible for an annual premium
equal to such maximum amount.
5.12 Additional Covenants. (a) On or prior to the Measurement Date, the
Company, Siemens and Dort A. Cameron, III shall execute a letter, substantially
in the form of Exhibit L, terminating Mr. Cameron's employment with the Company
under his employment agreement.
(b) Subject to the other terms and provisions of this Agreement, on or
promptly following the Measurement Date, Siemens will provide funds necessary to
repay and cause to be repaid to IBM Credit Corporation all amounts owing under
that certain Fourth Amended and Restated Agreement for Wholesale Financing,
dated September 15, 1995, as amended and cause such facility to be terminated.
(c) Subject to the other terms and provisions of this Agreement, on or
promptly following the Measurement Date, Siemens will provide funds necessary to
repay and cause to be repaid the Notes.
6. Conditions to Closing.
6.1 Conditions to the Obligations of Siemens and Acquisition. The
obligation of Siemens and Acquisition to effect the Initial Purchase or, if the
Initial Purchase does not occur, the Merger, is subject to the fulfillment on or
prior to the Measurement Date of each of the following conditions (all or any of
which, other than Sections 6.1(e) and (g), may be waived by Siemens in its sole
discretion):
(a) Performance of Obligations; Representations and Warranties. The Company
shall have performed and complied in all material respects with all covenants
and agreements contained in this Agreement that are required to be performed or
complied with by it prior to or at the Measurement Date, and, each of the
Company's representations and warranties contained in Section 3 of this
Agreement shall be true and correct in all material respects (if not qualified
by materiality) and in all respects (if qualified by materiality) as of the
Measurement Date as though made on and as of the Measurement Date or in the case
of representations and warranties made as of a specified date earlier than the
Measurement Date, shall have been true and correct in all material respects (if
not qualified by materiality) and in all respects (if qualified by materiality)
on and as of such date and the Company shall have delivered to Siemens a
certificate, dated the Measurement Date executed on behalf of the Company by its
Chairman, President or a Vice President, to such effect.
(b) Opinions of Counsel. Siemens and Acquisition shall have received the
favorable written opinions, each dated the Measurement Date, of Lynne A.
Burgess,
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Senior Vice President and General Counsel of the Company, and Cahill Gordon &
Reindel, counsel to the Company, as to the matters set forth on Exhibit E and in
form reasonably satisfactory to Siemens and Acquisition.
(c) Resignations. Siemens shall have received the written resignation (i)
of employment and from all offices listed of the individuals set forth on
Exhibit F-1 and (ii) from all offices listed of the individuals set forth on
Exhibit F-2 and the written resignation of all trustees of all the Benefit Plans
of the Company and its Subsidiaries, each effective at the Measurement Date.
(d) Consents. The Company shall have received or made the consents,
approvals, authorizations, permissions, notices and filings listed on Schedule
6.1(d) and all of them shall be in form and substance satisfactory to Siemens
and Acquisition.
(e) Stockholder Approval. This Agreement shall have been adopted by the
requisite vote of the stockholders of the Company (if any) required by the
Company's Certificate of Incorporation and the DGCL; provided, however, that
this condition shall not apply in respect of the Initial Purchase.
(f) Escrow Agreement. The Escrow Agreement and, if the Tax Insurance
Election has been made, the Tax Escrow Agreement, shall have been duly executed
and delivered by the parties thereto.
(g) Antitrust Waiting Periods. Any waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
(h) Invoices. The Company shall have delivered to Siemens the Invoices (as
defined in Section 9.1).
(i) IRS Matter Resolution. The tax matter described on Schedule 6.1(i)
shall have been resolved in a manner satisfactory to Siemens in its sole
discretion in a manner that will result in no liability on the part of the
Company, any Subsidiary or the Surviving Corporation to federal or state Tax
authorities or, in the alternative if so elected by the Company (the "Tax
Insurance Election"), the Company shall have procured, paid in full (subject to
Section 9.1) and delivered to Siemens, insurance policies in substantially the
forms contained in Exhibit G, with only such changes as shall be reasonably
acceptable to Siemens and in the amounts set forth in Exhibit G.
(j) Dissenting Shares. The applicable 20-day period in Section 262(d) of
the DGCL for stockholders to demand or perfect dissenters rights pursuant to
Section 262
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of the DGCL shall have expired and such rights shall not have been exercised
with respect to more than 5% of the outstanding shares of any class of capital
stock of the Company.
6.2 Conditions to the Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the fulfillment at or prior to the
Measurement Date of each of the following conditions (all of which may be waived
by the Company in its sole discretion).
(a) Performance of Obligations; Representations and Warranties. Siemens and
Acquisition shall have performed and complied in all material respects with all
covenants and agreements contained in this Agreement that are required to be
performed or complied with by them prior to or at the Measurement Date and each
of the representations and warranties of Acquisition and Siemens contained in
Section 4 of this Agreement shall be true and correct, in all material respects
(if not qualified by materiality) and in all respects (if qualified by
materiality) as of the Measurement Date as though made on and as of the
Measurement Date or, in the case of representations and warranties made as of a
specified date earlier than the Measurement Date, shall have been true and
correct in all material respects (if not qualified by materiality) and in all
respects (if qualified by materiality) on and as of such date and each of
Siemens and Acquisition shall have delivered to the Company a certificate dated
the Measurement Date executed on behalf of each of them by an authorized
signatory to such effect.
(b) Opinion of Counsel. The Company shall have received the favorable
written opinion dated the Measurement Date of internal counsel to Siemens and
Acquisition, as to the matters set forth in Exhibit H and in form reasonably
satisfactory to the Company.
(c) Escrow Agreement. The Escrow Agreement and, if the Tax Insurance
Election has been made, the Tax Escrow Agreement, shall have been duly executed
and delivered by the parties thereto.
(d) Stockholder Approval. This Agreement shall have been adopted by the
requisite vote of the stockholders of the Company (if any) required by the
Company's Certificate of Incorporation and the DGCL.
(e) Antitrust Waiting Periods. Any waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
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7. Survival; Indemnification; Tax Matters.
7.1 Survival. Except as otherwise provided herein, all the representations,
warranties covenants and agreements of the Company contained in or made pursuant
to this Agreement shall survive the Closing and shall remain operative and in
full force and effect for a period of 18 months after the Measurement Date (such
period being referred to as the "Escrow Indemnity Period"), regardless of any
investigation or statement as to the results thereof made by or on behalf of any
Person before or after the Closing. No claim for indemnification may be asserted
after the expiration of the Escrow Indemnity Period. Notwithstanding anything
herein to the contrary, any representation, warranty, covenant and agreement
which is the subject of a claim which is asserted in writing prior to the
expiration of the Escrow Indemnity Period shall survive with respect to such
claim or any dispute with respect thereto until the final resolution thereof.
7.2 Indemnification. Siemens, its employees, agents, directors, officers,
subsidiaries and its affiliates and the employees, agents, directors, officers
and subsidiaries of its affiliates (the "Indemnified Parties") shall be
indemnified and held harmless from and against any and all damages, claims,
losses (including loss of value), expenses, costs, obligations and liabilities,
including without limitation liabilities for all reasonable attorneys',
accountants', and experts' fees and expenses including those incurred to enforce
the terms of this Agreement or any Collateral Document (collectively, "Losses")
(provided, however, that to avoid double-counting, Losses shall be determined
after giving effect to any reserves or liabilities reflected on the final
Closing Statement, if and to the extent those reserves reduced the Closing
Liquid Net Worth), asserted against, or paid, suffered or incurred by any
Indemnified Party which, directly or indirectly, arise out of, result from, are
based upon or relate to: (i) the inaccuracy, untruth or incompleteness, as of
the date of this Agreement or the Measurement Date (or, in the case of
representations and warranties made as of a specified date earlier than the
Measurement Date, on and as of such earlier date), of any representation or
warranty made or deemed to have been made by the Company in this Agreement or
any failure by the Company to perform or fulfill any of its covenants or
agreements set forth in this Agreement; provided, however that if any such
representation or warranty (other than those representations and warranties
contained in Section 3.7, Section 3.9(a) and Section 3.24) is qualified in any
respect by materiality or Material Adverse Effect, for purposes of this
paragraph such materiality or Material Adverse Effect qualification will be in
all respects ignored; (ii) subject to Section 7.9(b), Pre-Measurement Date Tax
Liabilities; (iii) the Asset Purchase Agreement, dated as of May 10, 1999, by
and between CompuCom Systems, Inc. and the Company or any of the transactions
contemplated thereby; (iv) any action, suit or proceeding commenced prior to the
Measurement Date before any court or arbitral or other tribunal; (v) the Tax
Matters Settlement Shortfall Amount; or (vi) any failure of the Company or any
of its Subsidiaries to be Year 2000 Compliant.
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7.3 Limitation of Liability; Disposition of Escrow Fund. After the Closing,
the Indemnified Parties' rights to indemnification under Section 7.2 shall be
subject to the following limitations: (i) in no event shall the aggregate amount
to be paid to the Indemnified Parties under Section 7.2 exceed the Indemnity
Amount; (ii) the Indemnified Parties shall be entitled to recover any Loss
otherwise recoverable pursuant to clauses (i), (iii), (iv) and (vi) of Section
7.2 only to the extent the aggregate of Losses otherwise recoverable pursuant
such Section exceeds $1,000,000 in the aggregate; provided, that if all such
Losses exceed $1,000,000, the Indemnified Parties shall be entitled to recover
for all such Losses; and (iii) if the inaccuracy, untruth or incompleteness of a
representation in Section 3.17 results in an increase in the taxable income of
the Company or any Subsidiary with respect to any taxable period ending after
the Measurement Date, such increase in taxable income shall not give rise to an
indemnifiable Loss to the extent such increase in taxable income is properly
offset by available net operating loss carryovers of the Company or any
Subsidiary (as the case may be) from taxable periods beginning prior to the
Measurement Date.
7.4 Stockholders' Representative. (a) The Company hereby appoints, and the
Company's stockholders shall be deemed to appoint, the Stockholders'
Representative, with full and unqualified power to delegate to one or more
Persons the authority granted to him hereunder, to act as each of their agent
and attorney-in-fact, with full power of substitution, to take all actions
called for by this Section 7 and the Escrow Agreement and, if applicable, the
Tax Escrow Agreement, on their individual and collective behalf, in accordance
with the terms of this Section 7 and the Escrow Agreement and, if applicable,
the Tax Escrow Agreement.
(b) The Stockholders' Representative shall have no liability whatsoever to
any existing or former stockholder of the Company or to any other Person arising
out of the matters contemplated by this Section 7 or the Escrow Agreement or, if
applicable, the Tax Escrow Agreement, except only to the extent of any Loss
caused exclusively by the Stockholders' Representative's willful misconduct or
bad faith. In any event, any such liability shall be limited to direct damages
resulting from such conduct and in no event shall the Stockholders'
Representative be liable for special, incidental or consequential damages
incurred or suffered by any Person. The Stockholders' Representative shall incur
no liability to any existing or former stockholder of the Company or to any
other Person with respect to any action taken or suffered by him in reliance
upon any note, direction, instruction, consent, statement or other documents
believed by him to be genuine and duly authorized. The Stockholders'
Representative may, in all questions arising under the Escrow Agreement and, if
applicable, the Tax Escrow Agreement, rely on the advice of counsel and for
anything done, omitted or suffered in good faith by the Stockholders'
Representative based on such advice, the Stockholders' Representative shall not
be liable to any existing or former stockholder of the Company or to any other
Person.
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(c) In the event of the death or permanent disability of the Stockholders'
Representative, or his resignation, a successor Stockholders' Representative
shall be appointed by a majority vote of the holders (other than Siemens and its
subsidiaries) of outstanding capital stock of the Company immediately prior to
the Effective Time, with each such stockholder (or his or her successors or
assigns) to be given a vote equal to the number of votes represented by the
shares of capital stock of the Company held by such stockholder immediately
prior to the Effective Time.
7.5 Notice of Claims. If any of the Indemnified Parties believes that it
has suffered or incurred any Loss, it shall notify the Escrow Agent and the
Stockholders' Representative promptly in writing (at their respective addresses
set forth in the Escrow Agreement), and in any event within the applicable time
period specified in Section 7.1, describing such Loss, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such Loss shall have occurred (a "Claim Notice"). If any legal
action is instituted by a third party with respect to which any of the
Indemnified Parties intend to claim indemnity under this Section, such
Indemnified Party shall promptly give a Claim Notice to notify the Escrow Agent
and the Stockholders' Representative with respect to such legal action. In any
event, a failure or delay in notifying the Escrow Agent and the Stockholders'
Representative shall not affect the Indemnified Party's right to indemnity,
except only to the extent such failure or delay materially and adversely
prejudices the ability to defend against any legal action.
7.6 Defense of Third Party Claims. Because the right to indemnity is
limited as provided herein, except as otherwise provided in the Tax Escrow
Agreement relating solely to the Tax Matters (as defined in the Tax Matters
Escrow Agreement), the Indemnified Parties shall have the right to conduct and
control, through counsel of their own choosing, reasonably acceptable to the
Stockholders' Representative, any third party legal action or other claim, but
the Stockholders' Representative may, at its election, participate in the
defense thereof at its sole cost and expense; provided, however, that if the
Indemnified Parties shall fail to defend any such legal action or other claim,
then the Stockholders' Representative may defend, through counsel of its own
choosing, such legal action or other claim, and so long as it gives Siemens at
least 15 days' notice of the terms of the proposed settlement thereof and
permits Siemens to then undertake the defense thereof, except as set forth
below, settle such legal action or other claim and recover out of the Indemnity
Amount the amount of such settlement or of any judgment and the costs and
expenses of such defense. Neither Siemens nor the Stockholders' Representative
shall compromise or settle any such legal action or other claim without the
prior written consent of the other, which consent shall not be unreasonably
withheld, except that under no circumstances shall Siemens be required to
consent to the entry of an order for injunctive or other non-monetary relief.
All costs and expenses reasonably incurred in
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defending any such third party legal action or other claim, including the amount
of any settlement or of any judgment, shall be paid out of the Indemnity Amount.
7.7 Dispute Resolution: Negotiation, Mediation and Arbitration. (a) The
Parties shall attempt to resolve any dispute arising out of or relating to this
Agreement promptly by negotiation in good faith between executives who have
authority to settle the dispute. Any Party shall give any other Party written
notice of any dispute not resolved in the ordinary course of business. Within 7
days after delivery of such notice, the Party receiving notice shall submit to
the other a written response thereto. The notice and the response shall include:
(i) a statement of each Party's position(s) regarding the matter(s) in dispute
and a summary of arguments in support thereof, and (ii) the name and title of
the executive who will represent that Party and any other Person who will
accompany that executive.
(b) Within 14 days after delivery of the notice, the designated executives
shall meet at a mutually acceptable time and place, and thereafter, as often as
they reasonably deem necessary, to attempt to resolve the dispute. All
reasonable requests for information made by one Party to any other shall be
honored in a timely fashion. All negotiations conducted pursuant to this Section
7.7 (and any of the Parties' submissions in contemplation hereof) shall be kept
confidential by the Parties and shall be treated by the Parties and their
representatives as compromise and settlement negotiations under the Federal
Rules of Evidence and any similar state rules.
(c) If the matter in dispute has not been resolved within 30 days after
delivery of the notice, the dispute shall be submitted to non-binding mediation
in accordance with the then-current Model Procedure for Mediation of Business
Disputes of the CPR Institute for Dispute Resolution. The mediation shall be
conducted within 30 days of the time the mediator is selected. Unless otherwise
agreed, the parties will select a mediator from the CPR Panels of Distinguished
Neutrals; provided, however, that if no mediator from that list can be mutually
agreed upon, each Party will submit to the CPR its own list of acceptable
mediators from the CPR Panels of Distinguished Neutrals and the CPR shall
appoint one of those listed as the mediator for the Parties. The costs of the
mediation, including the mediator's fees, shall be borne equally by the Parties
to the dispute.
(d) If the matter in dispute has not been resolved within 30 days after the
selection of the mediator, either Party (the "claimant") may submit the dispute
to binding arbitration to the New York, New York office of the American
Arbitration Association ("AAA") in accordance with the procedures set forth in
the Commercial Arbitration Rules of the AAA, revised and effective July 1, 1996.
(e) The Commercial Arbitration Rules of the AAA, revised and effective July
1, 1996, as modified or revised by the provisions of this Section 7.7, shall
govern any arbitration pro-
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ceeding hereunder. The arbitration shall be conducted by three arbitrators
selected pursuant to Rule 13 of the Commercial Arbitration Rules, and prehearing
discovery shall be permitted if and only to the extent determined by the
arbitrator to be necessary in order to effectuate resolution of the matter in
dispute. The arbitrator's decision shall be rendered within 30 days of the
conclusion of any hearing hereunder and the arbitrator's judgment and award may
be entered and enforced in any court of competent jurisdiction.
(f) Resolution of disputes under the procedures of this Section 7.7 shall
be the sole and exclusive means of resolving disputes arising out of or relating
to this Agreement; provided, however, that nothing herein shall preclude the
Parties from seeking in any court of competent jurisdiction temporary or interim
injunctive relief to the extent necessary to preserve the subject matter of the
dispute pending resolution under this Section 7.7.
7.8 Exclusive Remedy. The indemnification provided in this Section 7 shall
be the sole and exclusive remedy available following the Closing to the
Indemnified Parties for the subject matter covered by such indemnification and
any claim arising under this Agreement.
7.9 Tax Matters. Prior to the filing of any Income Tax Return solely with
respect to the Company and/or any of its Subsidiaries due after the Measurement
Date (with regard to extensions) with respect to any taxable year or other
taxable period beginning prior to the Measurement Date, and no later than thirty
(30) days prior to the due date for filing such Tax Return, Siemens shall
provide the Stockholders' Representative with a draft of such Tax Return, and
any related work papers, for review. No later than ten (10) days prior to the
due date for filing such Tax Return, the Stockholders' Representative shall
notify Siemens with any proposed modifications to such Tax Return. Such
modifications to the Tax Return shall be made by Siemens in its reasonable
discretion prior to filing as long as there is a reasonable basis for the filing
position requested. In any event, Siemens shall file all Tax Returns due after
the Measurement Date with respect to taxable years beginning prior to the
Measurement Date consistent with the Company's past practices to the extent
permitted by applicable law. Notwithstanding the foregoing, nothing contained in
this Agreement shall permit the Stockholders' Representative to receive nor
obligate Siemens to deliver to the Stockholders' Representative any consolidated
or other Tax Return or Income Tax Return of Siemens or any other Subsidiary or
Affiliate of Siemens (other than a Tax Return relating solely to the Company
and/or any of its Subsidiaries).
(i) Siemens shall not amend, or cause or permit the Company or any
Subsidiary to amend, any Income Tax Return filed with respect to any
taxable year or other taxable period beginning prior to the Measurement
Date without the prior written consent of the Stockholders' Representative,
which consent shall not be unreasonably withheld. Siemens and the
Stockholders' Representative agree to consult and resolve in good faith any
disagreement regarding the withholding of consent by the Stockhold-
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ers' Representative, it being understood and agreed that in the absence of
any such resolution, any and all such disagreements shall be resolved in a
manner consistent with the procedures described in Section 7.7.
(ii) Any overpayment in respect of Taxes relating to any taxable year
or other taxable period (or portion thereof, as determined below in clause
(c)) ending on or before the Measurement Date shall be for the benefit of
the Stockholders; provided that, any overpayment of Taxes attributable to
the fiscal 1994 through 1996 taxable years of the Company or its
Subsidiaries shall be for the benefit of Siemens to the extent that such
overpayments are reflected as an asset on the balance sheet (as of the
close of business on the Measurement Date) prepared pursuant to Section
2.2. Upon written notification to Siemens, the Stockholders'
Representative, at its own expense, will be permitted to pursue any
overpayment to which it is entitled; provided that any action on the part
of the Stockholders' Representative shall not increase any Tax Liability of
Siemens, the Company or any of their respective Subsidiaries in any period
ending after the Measurement Date (in which event, such action shall
require the prior written consent of Siemens, which shall not be
unreasonably withheld).
(a) Notwithstanding Section 7.2, no claim for indemnification shall be
permitted for any Losses resulting solely from the failure of Siemens or the
Company or any Subsidiary to timely file any Tax Return required to be filed
(with extensions) after the Measurement Date or timely pay any Taxes required to
be paid after the Measurement Date.
(b) Siemens and the Company (and/or the Company's Subsidiaries) will, to
the extent permitted by applicable law, elect with the relevant Tax authority to
close the taxable year of the Company and its Subsidiaries on the Measurement
Date. For purposes of this Agreement, in the case of any Taxes in respect of a
taxable period that begins on or before the Measurement Date and ends after the
Measurement Date, the portion of such Tax attributable to the pre-Measurement
Date period shall (i) in the case of real property or other similar Taxes that
are fixed and periodic in nature, be the amount of such Taxes for the entire
period multiplied by a fraction, the numerator of which is the number of days in
the period ending on the Measurement Date, and the denominator of which is the
number of days in the entire period; and (ii) in the case of all other Taxes, be
determined on the basis of an interim closing of the books at the end of the
Measurement Date. For purposes of clause (i) of the preceding sentence, any
credits against Tax shall be prorated based upon the fraction employed in such
clause (i).
(c) Siemens shall not make an election pursuant to Section 338 of the Code
with respect to the Company or any Subsidiary without the prior written consent
of the Stockholders' Representative.
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8. Termination; Effect of Termination.
8.1 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned whether prior to or after the adoption of
this Agreement by the Company's stockholders if:
(a) at any time prior to the Effective Time, by mutual written agreement of
the parties hereto; provided, however, that if such termination is to occur
after the Initial Purchase Date, such termination must be approved in accordance
with Section 1.6(c);
(b) at any time prior to the Initial Purchase Date, by either the Company
or Siemens upon notification to the non-terminating party by the terminating
party:
(i) at any time 90 days following the date of this Agreement if the
Merger shall not have been consummated on or prior to such date and such
failure to consummate the Merger is not caused by a breach of this
Agreement by the terminating party;
(ii) there has been a material breach of this Agreement on the part of
the non-terminating party and either (x) the non-terminating party fails to
cure such breach within 30 days following notification thereof by the
terminating party or (y) the breach is not reasonably capable of being
cured within 30 days after notice thereof; or
(c) at any time prior to the Initial Purchase Date, by Siemens upon the
occurrence of a Trigger Event (as defined in Section 8.2).
8.2 Effect of Termination. (a) If this Agreement is validly terminated by
either the Company or Siemens pursuant to Section 8.1, this Agreement will
forthwith become null and void and there will be no liability or obligation on
the part of either the Company, Siemens or Acquisition (or any of their
respective Representatives or affiliates), except (i) that the provisions of
Sections 5.3(b) and 9 will continue to apply following any such termination and
(ii) as provided in this Section 8.2.
(b) If (i) Siemens terminates this Agreement pursuant to (A) Section
8.1(b)(ii) or (B) Section 8.1(c), (ii) after the date hereof and prior to such
termination, a Person other than Siemens or its Affiliates shall have made or
announced an intention to make a proposal for an Acquisition Transaction and
(iii) the Company consummates an Acquisition Transaction or enters into a
definitive agreement with respect to an Acquisition Transaction within 12 months
following such termination, then the Company shall pay to Siemens a termination
fee in the amount of $5 million upon the closing of such Acquisition Transition.
The termination fee shall be payable not later than two business days after the
closing of such Acquisition
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Transaction, by wire transfer of immediately available funds to an account
designated by Siemens. If the termination fee is not paid within two business
days after the due date as provided above, (i) the termination fee will bear
interest at the rate of 12% per year (or if less, the highest legally
permissible rate) from such date until paid and (ii) the Company will pay for
all attorneys' fees and expenses incurred by Siemens in connection with
collecting such overdue amounts.
(c) For purposes of this Agreement, a "Trigger Event" means any of the
following events: (i) the Company shall have entered into, or shall have
publicly announced its intention to enter into, a definitive agreement or
agreement in principle with respect to any Acquisition Transaction other than
the transactions contemplated by this Agreement; (ii) the Board of Directors of
the Company or any committee thereof shall have withdrawn its approval or
recommendation of this Agreement or the Merger, or modified its approval or
recommendation of this Agreement or the Merger in a manner adverse to Siemens or
Acquisition; (iii) the Board of Directors of the Company or any committee
thereof shall have made any recommendation with respect to an Acquisition
Transaction by any Person (other than Siemens or Acquisition) other than a
recommendation rejecting or against such Acquisition Transaction; or (iv) the
Company receives a proposal with respect to an Acquisition Transaction by any
Person (other than Siemens or Acquisition), and the Company's Board of Directors
takes a neutral position or makes no recommendation with respect to such
Acquisition Transaction after a reasonable amount of time (and in no event more
than five business days) has elapsed for the Company's Board of Directors to
review and make a recommendation with respect to such proposal consistent with
the Board's fiduciary duties.
9. Fees and Expenses.
9.1 Expenses. Subject to Section 9.2, each party hereto shall pay its own
expenses incidental to the preparation of this Agreement, the carrying out of
the provisions of this Agreement and the consummation of the transactions
contemplated hereby. In addition, (a) the unpaid fees and expenses of all
brokers, investment bankers, financial advisors, attorneys and accountants
engaged in connection with the preparation and negotiation of this Agreement or
the transactions contemplated hereby and whose compensation is payable by the
Company shall be reflected on invoices (the "Invoices") submitted to Siemens on
or prior to the Measurement Date, which Invoices shall include confirmation that
no further compensation beyond the amount reflected in the Invoice is or will be
payable by the Company (or the Surviving Corporation, as successor to the
Company) and (b) Siemens and the Company shall each pay one-half of the
aggregate premiums and surplus lines premium tax charged thereon for the
insurance policies described in Section 6.1(i).
9.2 Stockholders of the Company. In no event shall Siemens, Acquisition or
the Company be liable (before or after the Closing) for any fees and expenses of
the stockholders
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of the Company relating to the transactions contemplated by this Agreement,
including, without limitation, legal, accounting and financial advisory fees.
10. Definitions. As used in this Agreement the terms set forth below shall
have the following meanings:
"AAA" shall have the meaning ascribed to such term in Section 7.7(d).
"Acquisition" shall have the meaning ascribed to such term in the first
paragraph hereof.
"Acquisition Price" shall have the meaning ascribed to such term in Section
2.1(c).
"Acquisition Common Stock" shall have the meaning ascribed to such term in
Section 2.1(a).
"Adjusted Acquisition Price" shall have the meaning ascribed to such term
in Section 2.1(c).
"Acquisition Transaction" shall have the meaning ascribed to such term in
Section 5.2.
"Affiliate" of a Person shall mean any other Person who directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with, such first Person.
"Agreement" shall have the meaning ascribed to such term in the first
paragraph hereof.
"Antitrust Division" shall have the meaning ascribed to such term in
Section 5.5.
"Authorizations" shall have the meaning ascribed to such term in Section
3.15(b).
"Benefit Plan" shall mean any bonus, pension, profit sharing, deferred
compensation, written incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan or arrangement providing
benefits to any current or former employee, officer, consultant or director of
the Company or any Subsidiary.
"Call Option" shall have the meaning ascribed to such term in the Recitals
to this Agreement.
"Certificates" shall have the meaning ascribed to such term in Section
2.4(b).
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"Certificate of Merger" shall have the meaning ascribed to such term in
Section 1.2.
"Claim Notice" shall have the meaning ascribed to such term in Section 7.5.
"claimant" shall have the meaning ascribed to such term in Section 7.7(d).
"Closing" shall have the meaning ascribed to such term in Section 1.3.
"Closing Date" shall have the meaning ascribed to such term in Section 1.3.
"Closing Liquid Net Worth" shall mean the amount, computed as of the
Measurement Date and in a manner consistent with the methods used in the
preparation of the financial statements of the Company at or for the period
ended September 26, 1999 and as specified in Exhibit C, equal to the Company's
current assets (net of reserves) minus all of its liabilities, including for
this purpose (whether or not required by GAAP or otherwise to be accrued) an
accrual for the full amount of all amounts due or to become due on the part of
the Company or any Subsidiary of the Company in connection with or by reason of
the transactions contemplated by this Agreement, including without limitation or
duplication (i) those related to attorneys, accountants, investment bankers,
financial advisers and other professionals, (ii) all obligations in respect of
bonuses, severance or additional compensation payable to officers, directors,
employees and consultants (it being understood that liabilities under "double
trigger" change-of-control provisions shall not be included as liabilities for
purposes of calculating Closing Liquid Net Worth unless both triggers have
occurred prior to the Measurement Date), (iii) the Notes Redemption Premium and
(iv) one-half of the aggregate premiums and the related surplus lines premium
tax payable to the insurers for the insurance policies described in Section
6.1(i).
"Closing Liquid Net Worth Adjustment" shall mean the amount by which the
Company's Closing Liquid Net Worth is less than $(165,685,000).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral Document" shall mean any certificate or schedule delivered by a
Person or any of its respective directors, officers, employees or trustees
pursuant to this Agreement.
"Commonly Controlled Entity" shall have the meaning ascribed to such term
in Section 3.18(a).
"Company" shall have the meaning ascribed to such term in the first
paragraph hereof.
"Company Capital Stock" shall have the meaning ascribed to such term in
Section 3.2(a).
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"Company Common Stock" shall have the meaning ascribed to such term in
Section 2.1(c).
"Company Designees" shall have the meaning ascribed to such term in Section
1.6(a).
"Company SEC Documents" shall have the meaning ascribed to such terms in
Section 3.4(c).
"Company Stock Plans" shall have the meaning ascribed to such term in
Section 2.1(e).
"Control" shall mean the possession of the power, directly or indirectly,
to direct or cause the direction of the management and policies of a Person
whether through the ownership of voting securities, by contract or otherwise.
"Debentures" shall mean the 5.5% Convertible Subordinated Debentures due
2007 issued and outstanding pursuant to the Indenture dated March 18, 1987, as
supplemented, between Businessland, Inc. and Security Pacific National Bank.
"December Financial Statements" shall have the meaning ascribed to such
term in Section 3.8.
"DGCL" shall have the meaning ascribed to such term in Section 1.1.
"Disclosure Schedule" shall have the meaning ascribed to such term in
Section 3.
"Dissenting Shares" shall have the meaning ascribed to such term in Section
2.1(d).
"Drag-Along Rights" shall have the meaning ascribed to such term in the
Recitals to this Agreement.
"Effective Time" shall have the meaning ascribed to such term in Section
1.2.
"Employees" shall have the meaning ascribed to such term in Section 3.19.
"Environmental Claim" shall mean any written claim, action, investigation
or notice by any Person alleging potential liability arising out of, based on,
or resulting from (a) the presence or release into the environment, including,
without limitation, the indoor environment, of any Hazardous Substance at any
location, whether or not owned by the Company or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
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"Environmental Laws" shall mean all applicable federal, state, local or
foreign laws, statutes, rules and regulations, orders, decrees, judgments,
arbitration awards, agreements and permits relating to protection and clean-up
of the environment and protection of human health (excluding those relating
solely to occupational health and safety), including those relating to the
generation, handling, disposal, transportation or release of Hazardous
Substances.
"Escrow Agent" shall mean ChaseMellon Shareholder Services LLC.
"Escrow Agreement" shall mean an agreement substantially in the form of
Exhibit I, executed and delivered at the Closing or, if earlier, on the Initial
Purchase Date.
"Escrow Indemnity Period" shall have the meaning ascribed to such term in
Section 7.1.
"Escrow Period" shall mean the period beginning on the Initial Distribution
Date and ending on the first date on which funds held in the escrow created
pursuant to the Escrow Agreement are permitted to be released to the Payment
Agent under the terms of the Escrow Agreement.
"ERISA" shall have the meaning ascribed to such term in Section 3.18(a).
"European Authorities" shall have the meaning ascribed to such term in
Section 5.5.
"European Statutes" shall have the meaning ascribed to such term in Section
5.5.
"Exchange Act" shall have the meaning ascribed to such term in Section
1.6(b).
"Exchange Fund" shall have the meaning ascribed to such term in Section
2.4(a).
"14(f) Material" shall have the meaning ascribed to such term in Section
1.6(b).
"FTC" shall have the meaning ascribed to such term in Section 5.5.
"GAAP" shall have the meaning ascribed to such term in Section 3.7.
"Governmental Entity" shall mean any: (i) federal, state, local, foreign or
international government; (ii) court, arbitral or other tribunal or governmental
or quasi-governmental authority of any nature (including any governmental
agency, political subdivisions, instrumentalities, branch, department, official,
or entity); or (iii) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature pertaining to government.
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"HSR Act" shall have the meaning ascribed to such term in Section 3.4(b).
"Hazardous Substances" shall mean any and all hazardous and toxic
substances, wastes or materials, any pollutants, contaminants, or dangerous
materials (including, but not limited to, polychlorinated biphenyls, friable
asbestos, volatile and semi-volatile organic compounds, oil, petroleum products
and fractions, and any materials which include hazardous constituents or become
hazardous, toxic, or dangerous when their composition or state is changed), or
any other similar substances or materials regulated under Environmental Laws.
"IRS" shall have the meaning ascribed to such term in Section 3.17(b).
"Income Taxes" shall mean Federal income taxes and all state, local and
municipal Taxes imposed on or measured by net income, or income, franchise or
similar taxes based on gross receipts.
"Income Tax Return" shall mean any Tax Return filed in respect of Income
Taxes.
"Incremental Amount" shall have the meaning ascribed to such term in
Section 2.1(c).
"Indemnified Parties" shall have the meaning ascribed to such term in
Section 7.2.
"Indemnity Amount" shall have the meaning ascribed to such term in Section
2.1(c).
"Independent Accountant" shall have the meaning ascribed to such term in
Section 2.2(c).
"Information Statement" shall have the meaning ascribed to such term in
Section 3.4(b).
"Initial Distribution Date" shall have the meaning ascribed to such term in
Section 2.3(a).
"Initial Purchase" shall have the meaning ascribed to such term in the
Recitals to this Agreement.
"Initial Purchase Date" shall have the meaning ascribed to such term in the
Recitals to this Agreement.
"Intellectual Property" shall mean all United States and foreign
intellectual property rights arising under statutory or common law, and whether
or not perfected, including, without limitation (a) all patents, patent
applications, patent disclosures and inventions and discoveries which may be
patentable and improvements thereto owned or licensable by the Company or
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its Subsidiaries, (b) registered and unregistered trademarks, service marks,
trade dress, logos, trade names and corporate names, and registrations and
applications for registration thereof, including all marks registered in the
United States Patent and Trademark Office and any foreign trademark offices, (c)
rights associated with works of authorship including copyrights and moral rights
in both published and unpublished works and registrations and applications for
registration thereof, (d) computer software, data and documentation (including
all source codes and object codes), (e) rights relating to trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
charts, diagrams, proposals, technical data, data bases, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information), (f) any
rights analogous to those set forth in this paragraph and any other proprietary
rights relating to intangible property and (g) copies and tangible embodiments
of any of the foregoing (in whatever form or medium) in which the Company or its
Subsidiaries has any rights, and divisions, continuations, renewals, reissues
and extensions of the foregoing (as and to the extent applicable) now existing,
or hereafter filed, issued or acquired.
"Invoices" shall have the meaning ascribed to such term in Section 9.1.
"Laws" shall have the meaning ascribed to such term in Section 3.15(a).
"Lien" shall mean any mortgage, pledge, lien, security interest,
conditional or installment sale agreement, encumbrance, charge or other claims
of third parties of any kind, except for (a) liens for Taxes or governmental
charges or claims (i) not yet due and payable or (ii) being contested in good
faith, if a reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made therefor on the December Financial Statements; (b)
statutory liens of landlords, lien of carriers, warehousemen's, mechanics and
materialmen's and other liens imposed by law incurred in the ordinary course of
business for sums (i) not yet due and payable and (ii) being contested in good
faith, if a reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made therefor on the December Financial Statements; (c)
liens incurred or deposits made in connection with workers' compensation,
unemployment insurance and other similar types of social security programs in
each case in the ordinary course of business consistent with past practice; (d)
purchase money security interests incurred in the ordinary course of business,
consistent with past practice; (e) easements, rights-of-way, restrictions and
other similar charges or encumbrances, in each case, which do not interfere with
the ordinary conduct of the Company's operations and do not or would not
materially detract from the value of the property to which such encumbrance
relates; and (f) liens arising out of acts done or suffered to be done by, and
judgments against,
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Siemens or Acquisition, and those claiming by, through or under Siemens or
Acquisition; and (g) liens, security interests or encumbrances that have been
placed by any developer, landlord or other third party on property with respect
to which the Company and the applicable Subsidiary has easement rights or
leasehold interests and subordination or similar agreements relating thereto.
"Losses" shall have the meaning ascribed to such term in Section 7.2.
"Material Adverse Effect" shall mean a material adverse effect on the
assets, business, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries taken as a whole.
"Measurement Date" shall have the meaning ascribed to such term in Section
2.2(a).
"Merger" shall have the meaning ascribed to such term in the Recitals to
this Agreement.
"Merger Price" shall have the meaning ascribed to such term in Section
2.1(c).
"Microsoft Warrant" shall have the meaning ascribed to such term in Section
3.2(a)
"1997 IBM Warrant" shall have the meaning ascribed to such term in Section
3.2(a).
"NED Plan" shall have the meaning ascribed to such term in Section 3.2(a).
"Notes" shall mean the 12.5% Senior Subordinated Notes due 2006 issued and
outstanding pursuant to the Indenture dated July 29, 1998 among the Company, the
Subsidiary Guarantors (as defined therein) and Marine Midland Bank, N.A., as
trustee
"Notes Redemption Premium" shall mean (i) an amount in respect of the
Debentures equal to $32.2 million less the book value of the Debentures on the
Measurement Date plus (ii) the excess of (x) the amount required to be expended
by Siemens or its Affiliates to repurchase or redeem all of the outstanding
Notes, over (y) the aggregate outstanding principal balances of the Notes on the
Measurement Date plus (iii) the reasonable costs and expenses (including fees
and expenses of advisors and legal counsel) incurred or to be incurred in
connection with repurchasing, redeeming or otherwise repaying the Notes and
Debentures. The Notes Redemption Premium shall not include any amount paid by
Siemens to repurchase any debt security that is in excess of the contractual
repurchase or redemption price for such security (including any premium or
penalty) that will be payable following the Merger.
"Notice of Disagreement" shall have the meaning ascribed to such term in
Section 2.2(c).
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"Option" shall have the meaning ascribed to such term in Section 2.1(e).
"Outstanding Share Amount" shall have the meaning ascribed to such term in
Section 2.1(c).
"Party" shall mean Siemens, Acquisition, the Company and its Subsidiaries
and the Stockholders' Representative.
"Payment Agent" shall mean a bank or trust company designated as the
exchange and paying agent by Siemens and reasonably satisfactory to the Company.
"Pension Plans" shall have the meaning ascribed to such term in Section
3.18(a).
"Person" shall mean any individual, corporation, partnership, limited
partnership, limited liability company, other business organization, trust,
association or entity or government agency or authority.
"Plans" shall have the meaning ascribed to such term in Section 3.18(a).
"Potential Acquiror" shall have the meaning ascribed to such term in
Section 5.2.
"Pre-Measurement Date Tax Liabilities" shall mean all obligations for
Income Taxes owed by the Company (or the Surviving Corporation as its successor
in the Merger) and its Subsidiaries for any period ending on or prior to the
Measurement Date which are actually paid by the Company (or the Surviving
Corporation as its successor in the Merger), other than (i) any Income Taxes
directly resulting from any action taken by Siemens, the Company, their
affiliates or agents of any of the foregoing on the Measurement Date or treated
as occurring on the Measurement Date (including, for example, any Income Taxes
resulting from a Section 338 election made with respect to the Company or any of
its Subsidiaries) other than any action taken by the Company or its Subsidiaries
in the ordinary course of business, and (ii) Income Taxes that are covered by
proper accruals or reserves on the books of the Company or its Subsidiaries on
the Measurement Date.
"Put Option" shall have the meaning ascribed to such term in the Recitals
to this Agreement.
"Remaining Escrow Balance" shall mean the amount of funds available
pursuant to the Escrow Agreement to be released after payment of all sums due
Siemens, the Stockholders' Representative and the Escrow Agent, at the end of
the Escrow Period.
"Representative" shall have the meaning ascribed to such term in Section
5.2.
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"SEC" shall have the meaning ascribed to such term in Section 3.4(b).
"Secretary of State" shall have the meaning ascribed to such term in
Section 1.2.
"Securities Act" shall have the meaning ascribed to such term in Section
3.4(c).
"Siemens" shall have the meaning ascribed to such term in the first
paragraph hereof.
"Stockholder Approval" shall have the meaning ascribed to such term in
Section 3.3.
"Stockholders' Representative" shall have the meaning ascribed to such term
in Section 2.2 (a), and also includes any replacement appointed pursuant to
Section 7.4(c).
"Stockholder Representative Expense Amount" shall have the meaning ascribed
to such term in Section 2.1(c).
"Stockholders Agreement" shall have the meaning ascribed to such term in
the Recitals to this Agreement.
"Subsidiary" shall mean any corporation, partnership, joint venture or
other entity in which the Company (a) owns, directly or indirectly, 50% or more
of the outstanding voting securities or equity interests or (b) is a general
partner.
"Surviving Corporation" shall have the meaning ascribed to such term in
Section 1.1.
"Surviving Corporation Common Stock" shall have the meaning ascribed to
such term in Section 2.1(a).
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") shall mean any
and all taxes, fees, levies, duties, tariffs, imposts, and other charges in the
nature thereof (together with any and all interest, penalties, additions to tax
and additional amounts imposed with respect thereto) imposed by any government
or taxing authority, including, without limitation: taxes or other charges on or
with respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, or gains taxes; license, registration and documentation fees; and customs
duties, tariffs, and similar charges.
"Tax Escrow Agent" shall mean ChaseMellon Shareholder Services LLC.
"Tax Escrow Agreement" shall mean an agreement substantially in the form of
Exhibit J, executed and delivered at the Closing or, if earlier, on the Initial
Purchase Date.
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"Tax Escrow Amount" shall have the meaning ascribed to such term in Section
2.1(c).
"Tax Escrow Balance" shall mean the amount of funds available pursuant to
the Tax Escrow Agreement to be distributed after payment of all sums due to
Siemens and the Tax Escrow Agent at the end of the Tax Matters Escrow Period.
"Tax Insurance Election" shall have the meaning ascribed to such term in
Section 6.1(i).
"Tax Matters Escrow Period" shall mean the period beginning on the Initial
Distribution Date and ending on the business day following the first date on
which funds held in escrow pursuant to the Tax Escrow Agreement are permitted to
be delivered to the Payment Agent pursuant to the terms of the Tax Escrow
Agreement.
"Tax Matters Settlement Shortfall Amount" shall mean the amount, if any, by
which the amounts actually paid to dispose of the tax matters disclosed in
Schedule 6.1(i) and to discharge any Liability for Taxes (federal, state or
other) arising out of or in connection with those proceedings, including without
limitation, all legal, accounting and other professional fees and expenses
incurred with respect thereto, exceed the sum of (i) all amounts available under
the Tax Escrow Agreement to pay such amounts plus (ii) all funds received by
Siemens under the insurance policies described in Section 6.1(i) to pay such
amounts.
"Tax Return" shall mean any return, report or similar statement required to
be filed with respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax and all federal, state, local and foreign returns,
reports and similar statements.
"Trademarks" shall have the meaning ascribed to such term in Section
3.16(b).
"Trigger Event" shall have the meaning ascribed to such term in Section
8.2(c).
"Warrant" shall have the meaning ascribed to such term in Section 2.1(f).
"Warrant Agreements" shall have the meaning ascribed to such term in
Section 3.2(a).
"Welfare Plans" shall have the meaning ascribed to such term in Section
3.18(a).
"Year 2000 Compliant" shall mean:
(a) that (i) all of the equipment and systems used by the Company and its
Subsidiaries (other than any third party software or systems included therein);
and (ii) all of the products designed, developed, under design or development,
licensed, manufactured, supported, sold,
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distributed and/or maintained by the Company and its Subsidiaries (other than
any third party software or systems included therein) do not and will not
experience any premature cancellation or expiration of contractual rights or
deletion of data, or any malfunctions or other problems in connection with the
year 2000 (and all subsequent years) as distinct from 1900's years;
(b) that no value for any current date will cause any interruption in
operation of any of the equipment, systems and/or products described in clause
(a) above;
(c) that all date-based functionality of the equipment, systems and/or
products described in clause (a) above will behave consistently for dates prior
to, during and after year 2000; and
(d) that in all interfaces and data storage of the Company and its
Subsidiaries, the century in any date must be specified either explicitly or by
unambiguous algorithms or inferencing rules.
11. Miscellaneous.
11.1 Press Releases. Except as required by law, none of Siemens,
Acquisition or the Company shall issue any press release or otherwise make
public any information with respect to the subject matter of this Agreement nor
the transactions contemplated hereby, without the prior written consent of each
of the other parties to this Agreement.
11.2 Integration. This Agreement and the agreements expressly referred to
or contemplated herein set forth the entire understanding of the parties hereto
with respect to the transactions contemplated hereby, and, except as set forth
in this Agreement, such other agreements, and the Exhibits hereto, there are no
representations or warranties, express or implied, made by any party to this
Agreement (or any of their Affiliates) with respect to the subject matter of
this Agreement. Any and all previous agreements and understandings between or
among the parties regarding the subject matter hereof, whether written or oral,
are superseded by this Agreement and the agreements referred to or contemplated
herein.
11.3 Assignment and Binding Effect. This Agreement may not be assigned by
either party hereto without the prior written consent of the other party;
provided, however, that Acquisition may assign its rights and obligations under
this Agreement to any directly or indirectly wholly owned subsidiary of Siemens'
ultimate parent company, Siemens Aktiengesellschaft, that is a corporation of
Delaware, any other State of the United States or the District of Columbia (and
the law of such State or the District of Columbia permits such corporation to
merge with the Company) upon written notice to the Company if the assignee shall
assume the obligations hereunder. All the terms and provisions of this Agreement
shall be binding
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upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto.
11.4 Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof only by a written instrument
duly executed by such party. In the event such waiver is requested or to be made
on behalf of the Company after the Initial Purchase Date, such waiver must be
approved by the Company Designees.
11.5 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by facsimile transmission (promptly
followed by a hard-copy delivered in accordance with this Section 11.5), by
reputable overnight courier service or by registered or certified mail (return
receipt requested), with postage and registration or certification fees thereon
prepaid, addressed to the party at its address set forth below:
If to Siemens or Acquisition:
Siemens Corporation
153 East 53rd Street
New York, New York 10022
Facsimile: (212) 258-4945
Attention: General Counsel
with a copy to:
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Facsimile: (212) 878-8375
Attention: John A. Healy
If to the Company:
Entex Information Services, Inc.
Six International Drive
Rye Brook, New York 10573
Facsimile: (914) 935-3880
Attention: Lynne A. Burgess
with a copy to:
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Cahill Gordon & Reindel
80 Pine Street
New York, New York 10085
Facsimile: (212) 269-5420
Attention: Gerald S. Tanenbaum
If to the Stockholders' Representative:
Dort A. Cameron, III
The Airlie Group
115 East Putnam Avenue
Greenwich, Connecticut 06830
Facsimile: (203) 661-0479
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10085
Facsimile: (212) 269-5420
Attention: Gerald S. Tanenbaum
or to such other address or Person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered.
11.6 Amendment. This Agreement shall not be amended, modified, revised,
supplemented or terminated orally and no waiver of compliance with any provision
hereof and no consent provided for herein shall be effective other than by a
written instrument executed by all of the parties hereto. This Agreement may be
amended upon the taking of requisite corporate action by all of the parties
hereto and, if such amendment is requested or to be made after the Initial
Purchase Date, such amendment must be approved in accordance with Section
1.6(c).
11.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO ANY DELAWARE CHOICE OF LAW PRINCIPLES.
11.8 Third Party Beneficiaries. Except as provided in Section 5.11, the
representations, warranties, covenants and agreements contained in this
Agreement are for the sole bene-
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fit of the parties hereto, and their respective successors and assigns, and they
shall not be construed as conferring, and are not intended to confer, any rights
on any other Person.
11.9 Performance. In the event that any Party shall fail or refuse to
consummate the transactions contemplated by this Agreement or any default under,
or breach of, any representation, warranty or covenant of this Agreement on the
part of any Party shall have occurred that results in the failure to consummate
the transactions contemplated hereby, then in addition to the other remedies
provided in this Agreement, any other Party may seek to obtain an order of
specific performance thereof against the breaching Party from a court of
competent jurisdiction. In addition, any Party shall be entitled to obtain from
the breaching Party court costs and reasonable attorneys' fees incurred by it in
enforcing its rights hereunder.
11.10 Severability. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other terms and provisions of the Agreement shall
remain in full force and effect. Upon such determination, the parties hereto
shall negotiate in good faith to modify this Agreement so as to give effect to
the original intent of the parties to the fullest extent permitted by applicable
law.
11.11 Extensions. At any time prior to the Measurement Date, either party
may by appropriate action, extend the time for compliance by or waive
performance of any representation, warranty, agreement, condition or obligation
of the other party.
11.12 Section Headings. All section headings are for convenience only and
shall in no way modify or restrict any of the terms or provisions hereof.
11.13 Exhibits; Disclosure Schedule. All Exhibits referred to herein and
the Disclosure Schedule are intended to be and hereby are specifically made a
part of this Agreement. Each exception to a representation or warranty of the
Company that is set forth in the Disclosure Schedule or is identified by
appropriate cross-referencing to, or has been grouped under a heading referring
to, a specific individual Section of this Agreement and, except as otherwise
specifically stated with respect to such exception in the Disclosure Schedule,
relates only to such Section.
11.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and the Company,
Siemens, and Acquisition may become a party hereto by executing a counterpart
thereof. This Agreement and any counterpart so executed shall be deemed to be
one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
duly executed this Agreement on the date first above written.
SIEMENS CORPORATION
By:/s/ Gerald Wright
---------------------------------------------
Name: Gerald Wright
Title: Executive Vice President and
Chief Financial Officer
By: /s/ Michael Schiefen
---------------------------------------------
Name: Michael Schiefen
Title: Vice President, Corporate Development
EMILIA ACQUISITION CORP.
By: /s/ Michael Schiefen
---------------------------------------------
Name: Michael Schiefen
Title: Vice President
ENTEX INFORMATION SERVICES, INC.
By: /s/ Kenneth A. Ghazey
---------------------------------------------
Name: Kenneth A. Ghazey
Title: President
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ANNEX B
March 13, 2000
The Board of Directors
Entex Information Services, Inc.
6 International Drive
Rye Brook, NY 10573-1058
Dear Members of the Board:
We understand that Entex Information Services Inc. (the "Company"), Siemens
Corporation ("Buyer") and Emilia Acquisition Corp., a wholly-owned subsidiary of
Buyer ("Acquisition Corp."), have entered into an Agreement and Plan of Merger,
dated as of March 13, 2000 (the "Merger Agreement"), pursuant to which
Acquisition Corp. will merge with and into the Company (the "Merger").
Pursuant to the Merger, each issued and outstanding share (other than
shares held in treasury by the Company or owned by Buyer or any of its
subsidiaries and shares in respect of which holders have perfected appraisal
rights) of common stock, par value $.0001 per share ("Shares"), of the Company
will be converted into the right to receive an amount in cash (the "Merger
Price") equal to: (i) a quotient derived from a fraction the numerator of which
is (x) the Adjusted Acquisition Price (as defined below) and the denominator of
which is (y) the Outstanding Share Amount (as defined in the Merger Agreement).
Pursuant to the Agreement, the "Adjusted Acquisition Price" will be equal to (i)
$105,000,000 minus (ii) the Closing Liquid Net Worth Adjustment (as defined
below) plus (iii) an additional amount equal to the product of (x) the amount
determined pursuant to the preceding clauses (i) and (ii) times (y) 6.5% per
year from the Measurement Date to the Effective Time (as defined in the Merger
Agreement), calculated on an uncompounded basis; and the "Closing Liquid Net
Worth Adjustment" will equal the amount by which the Company's Closing Liquid
Net Worth (as defined in the Merger Agreement) is less than $(165,685,000). We
have assumed, with your consent, that the full amount of the funds deposited in
escrow pursuant to the Escrow Agreement and the Tax Escrow Agreement will
comprise a portion of the Merger Price. The term "Merger Price" also includes
the proportionate share of the Incremental Amounts, if any, to be received by
the holders of Common Stock. The Incremental Amount equals the product of (x)
the Merger Price and (y) 6.5% per year from the Effective Time of the Merger
until the date letters of transmittal are first mailed, calculated on an
uncompounded basis.
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You have requested our opinion as to the fairness, from a financial point
of view, to the holders of Shares of the Merger Price to be received by such
holders pursuant to the Agreement. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of (a) the Merger
Agreement, which includes as exhibits thereto a form of the
Escrow Agreement among Buyer, the Company and ChaseMellon
Shareholder Services, L.L.C., as escrow agent (the "Escrow
Agreement"), and a form of the Tax Escrow Agreement among Buyer,
the Company and ChaseMellon Shareholder Services, L.L.C., as
escrow agent (the "Tax Escrow Agreement"), and (b) the
Stockholders Agreement, dated as of March 13, 2000, by and among
Buyer, Acquisition Corp. and the persons listed on the signature
pages thereto;
(ii) Analyzed certain historical business and financial information
relating to the Company;
(iii) Reviewed various financial forecasts and other data provided to
us by the Company relating to its businesses and financial
performance;
(iv) Held discussions with members of the senior management of the
Company with respect to the businesses and prospects of the
Company and its strategic objectives;
(v) Reviewed public information with respect to certain other
companies in lines of businesses we believe to be generally
comparable to the business of the Company;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of business we believe to be
generally comparable to that of the Company; and
(vii) Reviewed such other information, conducted such other financial
studies, analyses and investigations, as we deemed appropriate.
In conducting our analysis and in arriving at our opinion expressed herein,
we have relied upon the accuracy and completeness of the foregoing information,
and have not
<PAGE>
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assumed any responsibility for (i) any independent verification of such
information, (ii) any independent valuation or appraisal of any of the
properties, assets or liabilities of the Company, or (iii) any opinion
concerning the solvency or fair value (within the context of solvency) of the
Company. With respect to financial forecasts, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of management of the Company as to the financial
performance of the Company. However, for purposes of our analysis, and with your
consent, we have considered the risks and uncertainties associated with the
Company achieving management's financial forecasts in the amounts and at the
times contemplated thereby. We assume no responsibility for and express no view
as to such forecasts or the assumptions on which they are based. We were not
requested to participate in the process of soliciting interest from any party
with respect to an acquisition of the outstanding Shares, the Company or its
constituent businesses. Our opinion does not address the relative merits of the
Merger as compared to any alternative business transaction that might be
available to the Company.
Further, our opinion is necessarily based on accounting standards and
economic, monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
In rendering our opinion, we have assumed, with your consent, that the
Merger will be consummated on the terms described in the Merger Agreement,
without any waiver of any material terms or conditions by the Company and that
obtaining the necessary regulatory approvals for the Merger will not have an
adverse effect on the Company.
Lazard Freres & Co. LLC will receive a fee for our services upon rendering
this opinion. We have in the past provided investment banking services to the
Company, including having acted as investment banker to the Company in
connection with the sale of its Products Business in 1999 and as an initial
purchaser of the Company's 12-1/2% Senior Subordinated Notes due 2006 (the
"Notes") in 1998. Lazard Freres & Co. LLC provides a full range of financial
advisory and security services and, in the course of our trading and market
making activities, may from time to time effect transactions and hold
securities, including derivative securities of the Company or Buyer for our own
account and for the accounts of customers. As of the date hereof, Lazard Freres
& Co. LLC holds approximately $8.75 million in principal amount of the Notes,
which were purchased at a significant discount to the principal amount. You have
informed us that the Company, in connection with the Merger, intends to call the
Notes for redemption at principal amount plus accrued interest and a premium of
12-1/2%.
Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors and our opinion is rendered in connection with its
consideration of the Merger. The opinion is not intended to and does not
constitute a recommendation
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to any stockholder of the Company as to whether such holder should vote to
approve the Merger. It is understood that this letter may not be disclosed or
otherwise referred to without our prior consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that as of
the date hereof, the Merger Price to be received by the holders of Shares
pursuant to the Merger Agreement is fair, from a financial point of view, to
such holders.
Very truly yours,
Thomas R. Haack
Managing Director
<PAGE>
ANNEX C
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of ________, 2000, among Siemens Corporation, a
Delaware corporation ("Siemens"), Entex Information Services, Inc., a Delaware
corporation (the "Company"), ChaseMellon Shareholder Services, L.L.C., a New
Jersey limited liability company, as escrow agent (the "Escrow Agent"), and Dort
A. Cameron, III (or such successor person selected as Stockholders'
Representative pursuant to the Merger Agreement (as defined below) the
"Stockholders' Representative").
RECITALS
This Agreement is being entered into pursuant to an Agreement and Plan of Merger
dated as of March 13, 2000 (the "Merger Agreement"; capitalized terms not
defined herein shall have the meanings ascribed to them in the Merger Agreement)
among Siemens, Emilia Acquisition Corp., a Delaware corporation ("Acquisition"),
and the Company in order to provide for the deposit with the Escrow Agent of
funds that will be held and disbursed, as hereinafter provided and as provided
in the Merger Agreement, to make indemnity payments to the Indemnified Parties
and (to the extent of any remaining funds) to make payments to certain holders
of Company Common Stock.NOW, THEREFORE, the parties hereby agree as follows:
1. Appointment of the Escrow Agent; Deposit of Escrow Amount. Siemens, the
Company and the Stockholders' Representative hereby constitute and appoint the
Escrow Agent as, and the Escrow Agent hereby agrees to assume and perform the
duties of, escrow agent under and pursuant to this Agreement. The Escrow Agent
acknowledges receipt of an executed copy of the Merger Agreement. Pursuant to
the Merger Agreement, funds in the amount of Twenty Million Dollars
($20,000,000) (the "Escrow Amount") have been or are to be deposited with the
Escrow Agent by Siemens.
2. The Escrow Fund. The Escrow Amount and all earnings thereon (the Escrow
Amount and all such earnings being referred to herein together as the "Escrow
Fund") shall be held by the Escrow Agent as a trust fund in a separate account
maintained for the purpose, on the terms and subject to the conditions of this
Agreement. The Escrow Fund shall not be subject to lien or attachment by any
creditor of any party hereto and shall be used solely for the purpose set forth
in this Agreement. Except as set forth in Section 8 hereof, amounts held in the
Escrow Fund shall not be available to, and shall not be used by, the Escrow
Agent to set off any obligations of Siemens, the Company, the Stockholders'
Representative or any former holder of Company Common Stock owing to the Escrow
Agent in any capacity.
3. Investment of the Escrow Fund; Taxes.
(a) Unless otherwise directed in writing by Siemens and the Stockholders'
Representative, the Escrow Agent shall invest and reinvest all cash funds held
from time to time as
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part of the Escrow Fund, in bonds or other fixed-income securities, the interest
on which is not subject to U.S. federal income tax (including alternative
minimum tax) or to New York City or New York State income tax; or if such
securities are not available for purchase, in obligations of, or guaranteed by,
the government of the United States of America or any State thereof or the
District of Columbia, or agencies of any of the foregoing, having maturities of
not greater than 90 days (or, if earlier, the Termination Date (as hereinafter
defined)); provided that such bonds or other obligations are rated at least A by
Moody's Investors Service, Inc. ("Moody's") and A by Standard & Poor's
Corporation ("S&P").
(b) It is not anticipated that Taxes will be payable in respect of earnings
on the Escrow Fund; however, to the extent that such Taxes are payable, they
shall be the obligation of and shall be paid when due by Siemens but Siemens
shall be entitled to be reimbursed the amount of any and all such Tax payments
from the Escrow Fund in accordance with Section 5(a). The Escrow Agent shall
have no duty or obligation with respect to notifying any party of any taxes due
or monitoring the payment of any taxes. Siemens hereby agrees to indemnify and
hold harmless the Escrow Agent from and against any liability arising from such
taxes, including any failure to pay such taxes.
4. Claims Against the Escrow Fund.
(a) Concurrently with the delivery of a Claim Notice to the Escrow Agent
and the Stockholders' Representative pursuant to Section 7.5 of the Merger
Agreement, Siemens will deliver to the Escrow Agent a certificate in
substantially the form of Annex I attached hereto (a "Certificate of
Instruction"). No Certificate of Instruction may be delivered by Siemens after
5:00 p.m. New York time on the business day immediately preceding the
Termination Date. The Escrow Agent shall give written notice to the Company and
the Stockholders' Representative of its receipt of a Certificate of Instruction
not later than the second business day next following receipt thereof, together
with a copy of such Certificate of Instruction.
(b) If the Escrow Agent (i) shall not, within 30 calendar days following
its receipt of a Certificate of Instruction (the "Objection Period"), have
received from the Stockholders' Representative a certificate in substantially
the form of Annex II attached hereto (an "Objection Certificate") disputing the
right of the applicable Indemnified Party to the Owed Amount (as defined in the
Certificate of Instruction) referred to in such Certificate of Instruction, or
(ii) shall have received such an Objection Certificate within the Objection
Period and shall thereafter (whether before or after the end of the Objection
Period) have received ether (x) a certificate from Siemens and the Stockholders'
Representative substantially in the form of Annex III attached hereto (a
"Resolution Certificate") stating that Siemens and the Stockholders'
Representative have agreed that the Owed Amount referred to in such Certificate
of Instruction (or a specified portion thereof) is payable to one or more of the
Indemnified Parties or (y) a copy of a final order of the arbitration panel
appointed pursuant to Section 7.7 of the Merger Agreement (accompanied by a
certificate of Siemens or the Stockholders' Representative substantially in the
form of Annex IV attached hereto (an "Arbitration Certificate")) stating that
the Owed Amount referred to in such Certificate of Instruction (or a specified
portion
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thereof) is payable to one or more of the Indemnified Parties, then the Escrow
Agent shall, on the second business day next following (x) the expiration of the
Objection Period or (y) the Escrow Agent's receipt of a Resolution Certificate
or an Arbitration Certificate, as the case may be, pay over to Siemens from the
Escrow Fund, by wire transfer of immediately available funds to a bank account
of Siemens' designation, the amount set forth in said Certificate of Instruction
or, if such Resolution Certificate or Arbitration Certificate specifies that an
amount other than such Owed Amount is payable, such other amount.
(c) The Escrow Agent shall give written notice to the Stockholders'
Representative and Siemens of its receipt of an Objection Certificate not later
than the second business day next following receipt thereof, together with a
copy of such Objection Certificate. The Escrow Agent shall give written notice
to Siemens and the Stockholders' Representative of its receipt of an Arbitration
Certificate or Resolution Certificate not later than the second business day
next following receipt thereof, together with a copy of such Arbitration
Certificate or Resolution Certificate, as the case may be.
(d) Upon the payment by the Escrow Agent of the Owed Amount referred to in
a Certificate of Instruction, such Certificate of Instruction shall be deemed
cancelled. Upon the receipt by the Escrow Agent of a Resolution Certificate or
an Arbitration Certificate and the payment by the Escrow Agent of the Owed
Amount (or if such Resolution Certificate or Arbitration Certificate specifies
that an amount other than such Owed Amount is payable, such other amount), the
related Certificate of Instruction shall be deemed cancelled.
(e) Upon Siemens' determination that it has no claim or has released its
claim with respect to an Owed Amount referred to in a Certificate of Instruction
(or a specified portion thereof), Siemens will promptly deliver to the Escrow
Agent a certificate substantially in the form of Annex V attached hereto (a
"Siemens Cancellation Certificate") canceling such Certificate of Instruction
(or such specified portion thereof, as the case may be), and such Certificate of
Instruction (or portion thereof) shall thereupon be deemed cancelled. The Escrow
Agent shall give written notice to Siemens and the Stockholders' Representative
of its receipt of a Siemens Cancellation Certificate not later than the second
business day next following receipt thereof, together with a copy of such
Siemens Cancellation Certificate.
(f) Upon receipt of a final order of the arbitration panel appointed
pursuant to Section 7.7 of the Merger Agreement stating that it is a final order
and that none of the Owed Amount referred to in a Certificate of Instruction as
to which the Stockholders' Representative delivered an Objection Certificate
within the Objection Period is payable to any Indemnified Party pursuant to the
Merger Agreement or this Agreement, Siemens and the Stockholders' Representative
will promptly deliver to the Escrow Agent a copy of such order (accompanied by a
certificate substantially in the form of Annex VI attached hereto (a
"Representative Cancellation Certificate")) cancelling such Certificate of
Instruction, and such Certificate of Instruction shall thereupon be deemed
cancelled. The Escrow Agent shall give written notice to the Stockholders'
Representative and Siemens of its receipt of a Representative Cancellation
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<PAGE>
Certificate not later than the second business day next following receipt
thereof, together with a copy of such Representative Cancellation Certificate.
5. Release of Escrow Fund.
(a) Earnings Tax Release. To the extent that taxes in respect of earnings
on the Escrow Fund become due and payable by Siemens prior to the Termination
Date (as hereinafter defined), Siemens shall notify the Stockholders'
Representative and the Escrow Agent and upon receipt of such written notice
executed by Siemens and the Stockholders' Representative, the Escrow Agent shall
pay over to Siemens from the Escrow Fund, by wire transfer of immediately
available funds to a bank account of Siemens' designation, a percentage of the
taxable earnings sufficient to pay any incremental income Taxes imposed on
Siemens as a result of such taxable earnings, as determined by Siemens, subject
to the consent of the Stockholders' Representative, which consent shall not be
unreasonably withheld.
(b) Stockholders' Representative Expense Release. To the extent that the
Stockholders' Representative incurs any costs or expenses in connection with the
performance of his duties and obligations under the Merger Agreement and this
Agreement in his capacity as the Stockholders' Representative that exceed the
Stockholders' Representative Expense Amount actually paid to the Stockholders'
Representative pursuant to the Merger Agreement, the Stockholders'
Representative shall notify Siemens and the Escrow Agent and upon receipt of
such written notice executed by the Stockholders' Representative, the Escrow
Agent shall pay over to the Stockholders' Representative from the Escrow Fund,
by wire transfer of immediately available funds to a bank account of the
Stockholders' Representative's designation, the amount set forth in such notice.
(c) Termination Date. The Escrow Agent shall on the date that is eighteen
months after the Measurement Date (the "Termination Date") transfer from the
Escrow Fund to a separate sub-account (the "Release Account") an amount equal to
(x) the remaining balance of the Escrow Fund less (y) (A) the sum of any amounts
designated in Certificates of Instruction received by the Escrow Agent prior to
5:00 p.m. New York time on the business day immediately preceding the
Termination Date that have not been cancelled in accordance with paragraph (d),
(e) or (f) of Section 4; (B) the sum of the amounts released or to be released
pursuant to paragraphs (a) and (b) above; and (C) the fees and expenses of the
Escrow Agent to be deducted from the Escrow Fund as set forth in Section 8. If
at any time after the Termination Date the entire balance of the Escrow Fund
exceeds the sum at that time of the amounts designated in Certificates of
Instruction received by the Escrow Agent prior to the Termination Date that have
not been cancelled in accordance with paragraph (d), (e) or (f) of Section 4,
the Escrow Agent shall promptly transfer to the Release Account the amount of
such excess. At such time on or following the Termination Date as all
Certificates of Instruction received by the Escrow Agent prior to the
Termination Date have been cancelled in accordance with paragraph (d), (e) or
(f) of Section 4, the Escrow Agent shall promptly transfer to the Release
Account the balance in the Escrow Fund. Funds (if any) deposited and held from
time to time pursuant to this Agreement in the Release Account, shall be
released to the former holders of
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<PAGE>
Company Common Stock entitled thereto in accordance with the provisions of the
Merger Agreement, as instructed in writing by the Stockholders' Representative.
After all funds have been disbursed from the Escrow Account and the Release
Account, this Agreement (other than Sections 6, 7 and 8) shall automatically
terminate.
6. Duties and Obligations of the Escrow Agent. The duties and obligations
of the Escrow Agent shall be limited to and determined solely by the provisions
of this Agreement and the certificates delivered in accordance herewith, and the
Escrow Agent is not charged with knowledge of or any duties or responsibilities
in respect of any other agreement or document (including the Merger Agreement).
In furtherance and not in limitation of the foregoing:
(a) the Escrow Agent shall not be liable for any loss of interest or any
penalty sustained or imposed as a result of investments, reinvestments, sales or
liquidations made hereunder in accordance with the terms hereof, including any
liquidation of any investment of the Escrow Fund prior to its maturity effected
in order to make a payment (including any payment of taxes) required by the
terms of this Agreement;
(b) the Escrow Agent shall be fully protected and shall incur no liability
in relying in good faith upon any written certification, notice, direction,
request, waiver, consent, receipt or other document that the Escrow Agent
reasonably believes to be genuine and duly authorized, executed and delivered
(including, but not limited to, any documentation from the arbitration panel
appointed pursuant to Section 7.7 of the Merger Agreement);
(c) the Escrow Agent shall not be liable for any error of judgment, or for
any action taken, suffered or omitted by it, or for any mistake in fact or law,
or for anything that it may do or refrain from doing in connection herewith;
provided, however, that notwithstanding any other provision in this Agreement,
(a) the Escrow Agent shall be liable for its willful misconduct or gross
negligence or breach of this Agreement; and (b) in no event shall the Escrow
Agent be liable for special, punitive, indirect, consequential or incidental
loss or damage of any kind whatsoever (including, but not limited to, lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage;
(d) the Escrow Agent may seek the advice of legal counsel selected with
reasonable care in the event of any dispute or question as to the construction
of any of the provisions of this Agreement or its duties hereunder, and it shall
incur no liability and shall be fully protected in respect of any action taken,
omitted or suffered by it in good faith in accordance with the opinion of such
counsel;
(e) in the event that the Escrow Agent shall in any instance, after seeking
the advice of legal counsel pursuant to the immediately preceding clause, in
good faith be uncertain as to its duties or rights hereunder, it shall be
entitled to refrain from taking any action in that instance and its sole
obligation, in addition to those of its duties hereunder as to which there is no
such uncertainty and which are not impacted by such uncertainty, shall be to
keep safely all
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<PAGE>
property held in the Escrow Fund until it shall be directed otherwise in writing
by each of the parties hereto or by a final, nonappealable order of a court of
competent jurisdiction; provided, however, in the event that the Escrow Agent
has not received such written direction or court order within 180 calendar days
after requesting the same, it shall have the right to interplead Siemens and the
Stockholders' Representative in any court of competent jurisdiction and request
that such court determine its rights and duties hereunder;
(f) the Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder either directly or by or through
agents or attorneys selected with reasonable care; and
(g) nothing in this Agreement shall be deemed to impose upon the Escrow
Agent any duty to qualify to do business in any jurisdiction other than the
State of New York or to act as fiduciary or otherwise and the Escrow Agent shall
not be responsible for and shall not be under a duty to examine into or pass
upon the validity, binding effect, execution or sufficiency of this Agreement or
of any agreement amendatory or supplemental hereto.
7. Cooperation. Siemens and the Stockholders' Representative shall provide
to the Escrow Agent all instruments and documents within their respective powers
to provide that are necessary for the Escrow Agent to perform its duties and
responsibilities hereunder.
8. Fees and Expenses; Indemnity. The fees, costs and expenses of the Escrow
Agent for its services hereunder, including the preparation and delivery of all
Form 1099s and other documentation required to be delivered by the Internal
Revenue Service, shall be deducted by the Escrow Agent directly from the Escrow
Fund prior to any payments or releases pursuant to Section 5; provided that in
no event shall such fees exceed [$5,000] per year. Each of Siemens and the
Stockholders' Representative, on behalf of the holders of Company Common Stock,
shall reimburse and indemnify the Escrow Agent for, and hold it harmless
against, any loss, damages, judgment, fine, penalty, claim, demand, settlement,
cost or expense, including but not limited to reasonable attorneys' fees,
reasonably incurred by the Escrow Agent in connection with the Escrow Agent's
acceptance and administration of this Agreement and its performance of its
duties and obligations under this Agreement, as well as the reasonable costs and
expenses of defending against any claim or liability relating to this Agreement;
provided that notwithstanding the foregoing, neither Siemens nor the
Stockholders' Representative shall be required to indemnify the Escrow Agent for
any such loss, liability, cost or expense arising as a result of the Escrow
Agent's willful misconduct or gross negligence or breach of this Agreement and
provided, further that in no event shall the Stockholders' Representative, on
behalf of the holders of the Company Common Stock, be responsible to reimburse,
indemnify or hold the Escrow Agent harmless against any liabilities with respect
to income Taxes which, for purposes of this Agreement, are the sole
responsibility of Siemens as provided in Section 3(b).
-6-
<PAGE>
9. Resignation and Removal of the Escrow Agent.
(a) The Escrow Agent may resign as such 30 calendar days following the
giving of prior written notice thereof to Siemens and the Stockholders'
Representative. In addition, the Escrow Agent may be removed and replaced on a
date designated in a written instrument signed by Siemens and the Stockholders'
Representative and delivered to the Escrow Agent. Notwithstanding the foregoing,
no such resignation or removal shall be effective until a successor escrow agent
has acknowledged its appointment as such as provided in paragraph (c) below. In
either event, upon the effective date of such resignation or removal and upon
receipt by the Escrow Agent of any fees, costs and expenses owed or due to it,
if any, hereunder the Escrow Agent shall deliver the property comprising the
Escrow Fund to such successor escrow agent, together with such records
maintained by the Escrow Agent in connection with its duties hereunder and other
information with respect to the Escrow Fund as such successor may reasonably
request.
(b) If a successor escrow agent shall not have acknowledged its appointment
as such as provided in paragraph (c) below, in the case of a resignation, prior
to the expiration of 30 calendar days following the date of a notice of
resignation or, in the case of a removal, on the date designated for the Escrow
Agent's removal, as the case may be, because Siemens and the Stockholders'
Representative are unable to agree on a successor escrow agent, or for any other
reason, the Escrow Agent may petition a court of competent jurisdiction to
select a successor and any such resulting appointment shall be binding upon all
of the parties to this Agreement.
(c) Upon written acknowledgment by a successor escrow agent appointed in
accordance with the foregoing provisions of this Section 9 of its agreement to
serve as escrow agent hereunder and the receipt of the property then comprising
the Escrow Fund, the Escrow Agent shall be fully released and relieved of all
duties, responsibilities and obligations under this Agreement, subject to the
proviso contained in clause (iii) of Section 6, and such successor escrow agent
shall for all purposes hereof be the Escrow Agent.
10. Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given if delivered personally
or by facsimile transmission (promptly followed by a hard-copy delivered in
accordance with this Section 10) or mailed (first class postage prepaid) to the
parties at the following addresses or facsimile numbers:
If to Siemens or the Company, to:
Siemens Corporation
153 East 53rd Street
New York, New York 10021
Facsimile No.: (212) 258-4945
Attn: Legal Department
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<PAGE>
If to the Stockholders' Representative, to:
Dort A. Cameron, III
The Airlie Group
115 East Putnam Avenue
Greewich, Connecticut 06830
Facsimile No.: (203) 661-0479
If to the Escrow Agent, to:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, New Jersey 07660
Facsimile No.: (201) 329-8931
Attention: Terence Kivlehan
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
11. Certain Tax Matters. In accordance with Rev. Rul 73-451, 1973-2 C.B.
158, Rev. Rul 77-294, 1977-2 C.B. 173 (as amplified by Rev. Rul 79-91, 1979-1
C.B. 179), and Private Letter Ruling 8629038 (April 18, 1986) as supplemented by
Private Letter Ruling 8640021 (July 1, 1986), Siemens and the Stockholders'
Representative agree that the establishment of this Escrow Fund amounts to a
substantial restriction on the selling stockholders' rights to receive a portion
of the purchase price under the Merger Agreement and neither party shall take an
inconsistent position on any Tax Return or for any other Tax purpose unless
required by applicable law.
12. Amendments, etc. This Agreement may be amended or modified, and any of
the terms hereof may be waived, only by a written instrument duly executed by or
on behalf of Siemens and the Stockholders' Representative and, with respect to
any amendment that would adversely affect the Escrow Agent, the Escrow Agent. No
waiver by any party of any term or condition contained of this Agreement, in any
one or more instances, shall be deemed to be or construed as a waiver of the
same or any other term or condition of this Agreement on any future occasion.
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<PAGE>
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof; provided, however, that all provisions regarding the
rights, duties and obligations of the Escrow Agent shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such State.
14. Business Day. For all purposes of this Agreement, the term "business
day" shall mean a day other than Saturday, Sunday or any day on which banks
located in the State of New York are authorized or obligated to close.
15. Miscellaneous. This Agreement is binding upon and will inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof. This
Agreement may be executed in any number of counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument.
16. Dispute Resolution: Negotiation and Arbitration.
(a) The parties hereto shall resolve any dispute arising out of or relating
to this Agreement pursuant to the procedures set forth in Section 7.7 of the
Merger Agreement.
(b) Resolution of disputes under this Section 16 pursuant to the procedures
set forth in Section 7.7 of the Merger Agreement shall be the sole and exclusive
means of resolving disputes arising out of or relating to this Agreement;
provided, however, that nothing herein shall preclude the parties from seeking
in any court of competent jurisdiction temporary or interim injunctive relief to
the extent necessary to preserve the subject matter of the dispute pending
resolution under this Section 16 pursuant to Section 7.7 of the Merger
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
SIEMENS CORPORATION
By:
---------------------------------------
Name: Gerald Wright
Title: Executive Vice President and
Chief Financial Officer
By:
---------------------------------------
Name: Michael Schiefen
Title: Vice President,
Corporate Development
ENTEX INFORMATION SERVICES, INC.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Dort A. Cameron, III
Stockholders' Representative
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By:
---------------------------------------
Name:
Title:
-10-
<PAGE>
ANNEX I
CERTIFICATE OF INSTRUCTION
to
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Escrow Agent
The undersigned, Siemens Corporation, a Delaware corporation ("Siemens"),
pursuant to Section 4(a) of the Escrow Agreement dated as of _______, 2000 among
Siemens, Entex Information Services, Inc., a Delaware corporation, Dort A.
Cameron, III (the "Stockholders' Representative") and you (terms defined in the
Escrow Agreement have the same meanings when used herein), hereby:
(a) certifies that (i) Siemens or another Indemnified Party has sent to the
Escrow Agent and the Stockholders' Representative a Claim Notice (as such term
is defined in the Merger Agreement), a copy of which is attached hereto, and
(ii) the amount of $___________ (the "Owed Amount") is payable to the
Indemnified Parties pursuant to Section 8 of the Merger Agreement by reason of
the matter described in such Claim Notice; and
(b) instructs you to pay to Siemens from the Escrow Fund the Owed Amount,
by wire transfer of immediately available funds to Siemens' account at
_________________, __________________, _________, _________ (Account
No.:_________), unless you receive an Objection Certificate from the
Stockholders' Representative prior to the expiration of the Objection Period. If
you receive an Objection Certificate within the Objection Period, within two
business days following your receipt of a Resolution Certificate or an
Arbitration Certificate, you are to pay to Siemens the amount specified in such
Resolution Certificate or Arbitration Certificate.
SIEMENS CORPORATION
By:
-------------------------------------
Name:
Title:
Dated: ____________, ____
<PAGE>
ANNEX II
OBJECTION CERTIFICATE
To
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
As Escrow Agent
The undersigned, Dort A. Cameron, III (the "Stockholders' Representative"),
pursuant to Section 4(b) of the Escrow Agreement dated as of ________, 2000
among Siemens Corporation, a Delaware corporation ("Siemens"), Entex Information
Services, Inc., a Delaware corporation, the Stockholders' Representative and you
(terms defined in the Escrow Agreement have the same meanings when used herein),
hereby:
(a) disputes that the Owed Amount referred to in the Certificate of
Instruction dated _________, ____ is payable to the Indemnified Parties pursuant
to Section 8 of the Merger Agreement;
(b) certifies that the undersigned has sent to Siemens a written statement
dated ___________, ____ of the undersigned, a copy of which is attached hereto,
disputing its liability to the Indemnified Parties for the Owed Amount; and
(c) objects to your making payment to Siemens as provided in such
Certificate of Instruction.
By:
---------------------------------------
Dort A. Cameron, III
Stockholders' Representative
Dated: _____________, ____
<PAGE>
ANNEX III
RESOLUTION CERTIFICATE
to
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Escrow Agent
The undersigned, Siemens Corporation, a Delaware corporation ("Siemens"),
and Dort A. Cameron, III (the "Stockholders' Representative"), pursuant to
Section 4(b) of the Escrow Agreement dated as of ________, 2000 among Siemens,
Entex Information Services, Inc., a Delaware corporation, the Stockholders'
Representative and you (terms defined in the Escrow Agreement have the same
meanings when used herein), hereby:
(a) certify that (i) Siemens and the Stockholders' Representative have
resolved their dispute as to the matter described in the Certificate of
Instruction dated __________, ____ and the related Objection Certificate dated
___________, ____ and (ii) the final Owed Amount with respect to the matter
described in such Certificates is $______________;
(b) instruct you to pay to Siemens from the Escrow Fund the final Owed
Amount referred to in clause (ii) of paragraph (a) above, by wire transfer of
immediately available funds to Siemens' account at ____________________,
_________________, ________, ________ (Account No.: ___________), within two
business days of your receipt of this Certificate; and
(c) agree that the Owed Amount designated in such Certificate of
Instruction, to the extent, if any, it exceeds the Owed Amount referred to in
clause (ii) of paragraph (a) above, shall be deemed not payable to the
Indemnified Parties and such Certificate of Instruction is hereby cancelled.
SIEMENS CORPORATION
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Dort A. Cameron, III
Stockholders' Representative
Dated: _____________, ____
<PAGE>
ANNEX IV
ARBITRATION CERTIFICATE
to
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Escrow Agent
The undersigned, [Siemens Corporation, a Delaware corporation ("Siemens")
or Dort A. Cameron, III (the "Stockholders' Representative")], pursuant to
Section 4(b) of the Escrow Agreement dated as of ________, 2000 among Siemens,
Entex Information Services, Inc., a Delaware corporation, the Stockholders'
Representative and you (terms defined in the Escrow Agreement have the same
meanings when used herein), hereby:
(a) certify that (i) attached hereto is a final order of the arbitration
panel appointed pursuant to Section 7.7 of the Merger Agreement resolving the
dispute between Siemens and the Stockholders' Representative as to the matter
described in the Certificate of Instruction dated ____________, ____ and the
related Objection Certificate dated ____________, ____ and (ii) the final Owed
Amount with respect to the matter described in such Certificates, as provided in
such order, is $______________;
(b) instruct you to pay to Siemens from the Escrow Fund the Owed Amount
referred to in clause (ii) of paragraph (a) above, by wire transfer of
immediately available funds to Siemens' account at _____________________,
________________, _______, _______ (Account No.: ____________), within two
business days of your receipt of this Certificate; and
(c) agree that the Owed Amount designated in such Certificate of
Instruction, to the extent, if any, it exceeds the Owed Amount referred to in
clause (ii) of paragraph (a) above, shall be deemed not payable to the
Indemnified Parties and such Certificate of Instruction is hereby cancelled.
SIEMENS CORPORATION
By:
---------------------------------------
Name:
Title:
---------------------------------------
Dort A. Cameron, III
Stockholders' Representative
Dated: ____________, ____
<PAGE>
ANNEX V
SIEMENS CANCELLATION CERTIFICATE
to
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Escrow Agent
The undersigned, Siemens Corporation, a Delaware corporation ("Siemens"),
pursuant to Section 4(e) of the Escrow Agreement dated as of _______, 2000 among
Siemens, Entex Information Services, Inc., a Delaware corporation, Dort A.
Cameron, III (the "Stockholders' Representative") and you (terms defined in the
Escrow Agreement have the same meanings when used herein), hereby:
(a) certifies that (i) it hereby releases its claim with respect to [all]
[specify portion] of the Owed Amount designated in the Certificate of
Instruction dated _____________, ____ and (ii) as a result, the Owed Amount with
respect to such Certificate of Instruction is $__________; and
(b) agrees that such Certificate of Instruction is, to the extent of the
claim released as provided in clause (i) of paragraph (a) above, cancelled.
SIEMENS CORPORATION
By:
----------------------------------------
Name:
Title:
Dated: ____________, ____
<PAGE>
ANNEX VI
REPRESENTATIVE CANCELLATION CERTIFICATE
to
CHASEMELLON SHAREHOLDER SERVICES, L.L.C
as Escrow Agent
The undersigned, Dort A. Cameron, III (the "Stockholders' Representative")
and Siemens Corporation, a Delaware corporation ("Siemens"), pursuant to Section
4(f) of the Escrow Agreement dated as of ______, 2000 among Siemens, Entex
Information Services, Inc., a Delaware corporation, the Stockholders'
Representative and you (terms defined in the Escrow Agreement have the same
meanings when used herein), hereby certify that (i) attached hereto is a final
order of the AAA resolving the dispute between Siemens and the Stockholders'
Representative as to the matter described in the Certificate of Instruction
dated ____________, ____ and the related Objection Certificate dated
____________, ____ and (ii) as provided in such order, there is no Owed Amount
with respect to the matter described in such Certificates.
By:
----------------------------------------
Dort A. Cameron, III
Stockholders' Representative
SIEMENS CORPORATION
By:
----------------------------------------
Name:
Title:
Dated: ____________, ____
<PAGE>
ANNEX D
TAX ESCROW AGREEMENT
TAX ESCROW AGREEMENT, dated as of ________, 2000, among Siemens
Corporation, a Delaware corporation ("Siemens"), Entex Information Services,
Inc., a Delaware corporation (the "Company"), ChaseMellon Shareholder Services,
L.L.C., a New Jersey limited liability company, as escrow agent (the "Tax Escrow
Agent"), and Dort A. Cameron, III (or such successor person selected as
Stockholders' Representative pursuant to the Merger Agreement (as defined below)
the "Stockholders' Representative").
RECITALS
A. This Agreement is being entered into pursuant to an Agreement and Plan
of Merger dated as of March 13, 2000 (the "Merger Agreement"; capitalized terms
not defined herein shall have the meanings ascribed to them in the Merger
Agreement) among Siemens, Emilia Acquisition Corp., a Delaware corporation
("Acquisition"), and the Company in order to provide for the deposit with the
Tax Escrow Agent of funds that will be held and disbursed, as hereinafter
provided and as provided in the Merger Agreement, to make payments to Siemens
and (to the extent of any remaining funds) to make payments to certain former
holders of Company Common Stock.
B. For purposes of clarification, the funds deposited with the Tax Escrow
Agent pursuant to this Agreement are intended to provide Siemens with
indemnification from and protection against potential Losses resulting from the
outcome of the matters described in that certain revenue agent report (the
"RAR") that was submitted to the U.S. Congressional Joint Committee on Taxation
(the "Joint Committee") on January 5, 2000, a copy of which is attached hereto
as Exhibit A, and certain state and local tax matters related thereto
(collectively, the "Tax Matters"), following the audit of the Company with
respect to its fiscal 1994, 1995 and 1996 tax years (collectively, the "Audited
Tax Years"), conducted by the Internal Revenue Service (the "IRS").
C. The parties have procured and paid for certain insurance policies,
copies of which are attached hereto as Exhibit B (collectively, the "Insurance
Policies"), to provide indemnification and protection against potential Losses
resulting from the Tax Matters in excess of, and in certain circumstances in
place of, the funds deposited hereunder, and intend to clarify their rights with
respect to participation in and control of all actions, proceedings and claims
relating to the Tax Matters.
NOW, THEREFORE, the parties hereby agree as follows:
1. Appointment of the Tax Escrow Agent; Deposit of Tax Escrow Amount.
Siemens, the Company and the Stockholders' Representative hereby constitute and
appoint the
<PAGE>
Tax Escrow Agent as, and the Tax Escrow Agent hereby agrees to assume and
perform the duties of, escrow agent under and pursuant to this Agreement. The
Tax Escrow Agent acknowledges receipt of an executed copy of the Merger
Agreement and copies of the RAR and the Insurance Policies. Pursuant to the
Merger Agreement, funds in the amount of _________________ ($__________) (the
"Tax Escrow Amount") have been or are to be deposited with the Tax Escrow Agent
by Siemens.
2. The Tax Escrow Fund. The Tax Escrow Amount and all earnings thereon (the
Tax Escrow Amount and all such earnings being referred to herein together as the
"Tax Escrow Fund") shall be held by the Tax Escrow Agent as a trust fund in a
separate account maintained for the purpose, on the terms and subject to the
conditions of this Agreement. The Tax Escrow Fund shall not be subject to lien
or attachment by any creditor of any party hereto and shall be used solely for
the purpose set forth in this Agreement. Except as set forth in Section 8
hereof, amounts held in the Tax Escrow Fund shall not be available to, and shall
not be used by, the Tax Escrow Agent to set off any obligations of Siemens, the
Company, the Stockholders' Representative or any former holder of Company Common
Stock owing to the Tax Escrow Agent in any capacity.
3. Investment of the Tax Escrow Fund; Taxes.
(a) Unless otherwise directed in writing by Siemens and the Stockholders'
Representative, the Tax Escrow Agent shall invest and reinvest all cash funds
held from time to time as part of the Tax Escrow Fund, in bonds or other
fixed-income securities, the interest on which is not subject to U.S. federal
income tax (including alternative minimum tax) or to New York City or New York
State income tax; or if such securities are not available for purchase, in
obligations of, or guaranteed by, the government of the United States of America
or any State thereof or the District of Columbia, or agencies of any of the
foregoing, having maturities of not greater than 90 days (or, if earlier, the
Termination Date (as hereinafter defined)); provided that such bonds or other
obligations are rated at least A by Moody's Investors Service, Inc. ("Moody's")
and A by Standard & Poor's Corporation ("S&P").
(b) It is not anticipated that Taxes will be payable in respect of earnings
on the Tax Escrow Fund; however, to the extent that such Taxes are payable, they
shall be the obligation of and shall be paid when due by Siemens but Siemens
shall be entitled to be reimbursed the amount of any and all such Tax payments
from the Tax Escrow Fund in accordance with Section 5(a). The Tax Escrow Agent
shall have no duty or obligation with respect to notifying any party of any
taxes due or monitoring the payment of any taxes. Siemens hereby agrees to
indemnify and hold harmless the Tax Escrow Agent from and against any liability
arising from such taxes, including any failure to pay such taxes.
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4. Claims Against the Tax Escrow Fund. On the Release Date (as hereinafter
defined), Siemens will deliver to the Tax Escrow Agent a certificate in
substantially the form of Annex I attached hereto (a "Resolution Certificate").
The Tax Escrow Agent shall give written notice to the Company and the
Stockholders' Representative of its receipt of the Resolution Certificate not
later than the second business day next following receipt thereof, together with
a copy of such Resolution Certificate.
For purposes of this Agreement, the term "Release Date" shall mean the
first to occur of (i) the date the Company receives a refund of all or any
portion of the amounts claimed in the RAR; provided such refund has been
approved by the Joint Committee; (ii) the date the Company and the IRS reach a
settlement or compromise of all open issues between the Company and the IRS with
respect to the Audited Tax Years that is fully effective and requires no further
governmental authorization, whether or not such settlement or compromise closes
the applicable statute of limitations with respect to the Audited Tax Years, and
any agreed upon refunds are received by the Company and/or any agreed upon
assessments by the IRS, along with any assessments relating to Other Income Tax
(as defined in the Insurance Policies) resulting solely from the settlement or
compromise with the IRS have been paid; and (iii) the date that is 15 business
days after the final expiration of all limitation periods (as extended or
tolled) applicable under the Code with respect to the Audited Tax Years.
5. Release of Tax Escrow Fund.
(a) Earnings Tax Release. To the extent that Taxes in respect of earnings
on the Tax Escrow Fund become due and payable by Siemens prior to the
Termination Date (as hereinafter defined), Siemens shall notify the
Stockholders' Representative and the Tax Escrow Agent and upon receipt of such
written notice executed by Siemens and the Stockholders' Representative, the Tax
Escrow Agent shall pay over to Siemens from the Tax Escrow Fund, by wire
transfer of immediately available funds to a bank account of Siemens'
designation, a percentage of the taxable earnings sufficient to pay any
incremental income Taxes imposed on Siemens as a result of such taxable
earnings, as determined by Siemens, subject to the consent of the Stockholders'
Representative, which consent shall not be unreasonably withheld.
(b) Expense Release. To the extent that (i) Siemens incurs any costs or
expenses in connection with any action, proceeding or claim relating solely to
the Tax Matters, Siemens shall notify the Stockholders' Representative and the
Tax Escrow Agent and upon receipt of such written notice executed by Siemens,
the Tax Escrow Agent shall pay over to Siemens from the Tax Escrow Fund, by wire
transfer of immediately available funds to a bank account of Siemens'
designation, the amount set forth in such notice or (ii) the Stockholders'
Representative incurs any costs or expenses in connection with any action,
proceeding or claim relating solely to the Tax Matters that, together with all
other costs and expenses incurred by the
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<PAGE>
Stockholders' Representative in his capacity as such in connection with the
transactions contemplated by the Merger Agreement and the Escrow Agreement,
exceed the Stockholders' Representative Expense Amount actually paid to the
Stockholders' Representative pursuant to the Merger Agreement, the Stockholders'
Representative shall notify Siemens and the Tax Escrow Agent and upon receipt of
such written notice executed by the Stockholders' Representative, the Tax Escrow
Agent shall pay over to the Stockholders' Representative from the Tax Escrow
Fund, by wire transfer of immediately available funds to a bank account of the
Stockholders' Representative's designation, the amount set forth in such notice;
provided, however, that prior to the Release Date, no amounts shall be released
from the Tax Escrow Fund for the reimbursement of the costs or expenses of
Siemens or the Stockholders' Representative unless such costs and expenses are
characterized as Specified Losses (as such term is defined in the Insurance
Policies).
(c) Termination Date. The Tax Escrow Agent shall on the date that is no
later than five business days following its receipt of a Resolution Certificate
(the "Termination Date"), transfer from the Tax Escrow Fund to (i) Siemens, the
amount of the assessment by the IRS for Federal Specified Losses (as defined in
the Insurance Policies), together with any Other Income Tax assessments
resulting solely from a settlement or compromise with the IRS or other
Governmental Entity of the Tax Matters as set forth in the Resolution
Certificate and (ii) to a separate sub-account (the "Release Account") an amount
equal to (x) the remaining balance of the Tax Escrow Fund less (y) (A) the sum
of the amounts released or to be released pursuant to paragraphs (a) and (b)
above and (B) the fees and expenses of the Tax Escrow Agent to be deducted from
the Tax Escrow Fund as set forth in Section 8. Funds (if any) deposited and held
from time to time pursuant to this Agreement in the Release Account shall be
released (i) first, to the extent the sum of (x) the Stockholders'
Representative Expense Amount actually paid to the Stockholders' Representative
pursuant to the Merger Agreement and (y) amounts released to the Stockholders'
Representative pursuant to paragraph (b) above is less than $500,000, to the
Stockholders' Representative in an amount equal to the amount by which such
amount referred to in the immediately preceding classes (x) and (y) is less than
$500,000 and (ii) second, to the extent of all remaining funds, to the former
holders of Company Common Stock entitled thereto in accordance with the
provisions of the Merger Agreement, as instructed in writing by the
Stockholders' Representative. After all funds have been disbursed from the
Escrow Account and the Release Account, this Agreement (other than Sections 6, 7
and 8) shall automatically terminate.
6. Duties and Obligations of the Tax Escrow Agent. The duties and
obligations of the Tax Escrow Agent shall be limited to and determined solely by
the provisions of this Agreement and the certificates delivered in accordance
herewith, and the Tax Escrow Agent is not charged with knowledge of or any
duties or responsibilities in respect of any other agreement or document
(including the Merger Agreement, the RAR and the Insurance Policies). In
furtherance and not in limitation of the foregoing:
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<PAGE>
(a) the Tax Escrow Agent shall not be liable for any loss of interest or
any penalty sustained or imposed as a result of investments, reinvestments,
sales or liquidations made hereunder in accordance with the terms hereof,
including any liquidation of any investment of the Tax Escrow Fund prior to its
maturity effected in order to make a payment (including any payment of taxes)
required by the terms of this Agreement;
(b) the Tax Escrow Agent shall be fully protected and shall incur no
liability in relying in good faith upon any written certification, notice,
direction, request, waiver, consent, receipt or other document that the Tax
Escrow Agent reasonably believes to be genuine and duly authorized, executed and
delivered (including, but not limited to, any documentation from the arbitration
panel appointed pursuant to Section 7.7 of the Merger Agreement);
(c) the Tax Escrow Agent shall not be liable for any error of judgment, or
for any action taken, suffered or omitted by it, or for any mistake in fact or
law, or for anything that it may do or refrain from doing in connection
herewith; provided, however, that notwithstanding any other provision in this
Agreement, (a) the Tax Escrow Agent shall be liable for its willful misconduct
or gross negligence or breach of this Agreement; and (b) in no event shall the
Tax Escrow Agent be liable for special, punitive, indirect, consequential or
incidental loss or damage of any kind whatsoever (including, but not limited to,
lost profits), even if the Tax Escrow Agent has been advised of the likelihood
of such loss or damage;
(d) the Tax Escrow Agent may seek the advice of legal counsel selected with
reasonable care in the event of any dispute or question as to the construction
of any of the provisions of this Agreement or its duties hereunder, and it shall
incur no liability and shall be fully protected in respect of any action taken,
omitted or suffered by it in good faith in accordance with the opinion of such
counsel;
(e) in the event that the Tax Escrow Agent shall in any instance, after
seeking the advice of legal counsel pursuant to the immediately preceding
clause, in good faith be uncertain as to its duties or rights hereunder, it
shall be entitled to refrain from taking any action in that instance and its
sole obligation, in addition to those of its duties hereunder as to which there
is no such uncertainty and which are not impacted by such uncertainty, shall be
to keep safely all property held in the Tax Escrow Fund until it shall be
directed otherwise in writing by each of the parties hereto or by a final,
nonappealable order of a court of competent jurisdiction; provided, however, in
the event that the Tax Escrow Agent has not received such written direction or
court order within 180 calendar days after requesting the same, it shall have
the right to interplead Siemens and the Stockholders' Representative in any
court of competent jurisdiction and request that such court determine its rights
and duties hereunder;
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<PAGE>
(f) the Tax Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder either directly or by or through
agents or attorneys selected with reasonable care; and
(g) nothing in this Agreement shall be deemed to impose upon the Tax Escrow
Agent any duty to qualify to do business in any jurisdiction other than the
State of New York or to act as fiduciary or otherwise and the Tax Escrow Agent
shall not be responsible for and shall not be under a duty to examine into or
pass upon the validity, binding effect, execution or sufficiency of this
Agreement or of any agreement amendatory or supplemental hereto.
7. Cooperation. Siemens and the Stockholders' Representative shall provide
to the Tax Escrow Agent all instruments and documents within their respective
powers to provide that are necessary for the Tax Escrow Agent to perform its
duties and responsibilities hereunder.
8. Fees and Expenses; Indemnity. The fees, costs and expenses of the Tax
Escrow Agent for its services hereunder, including the preparation and delivery
of all Form 1099s and other documentation required to be delivered by the IRS,
shall be deducted by the Tax Escrow Agent directly from the Tax Escrow Fund
prior to any payments or releases pursuant to Section 5; provided that in no
event shall such fees exceed [$5,000] per year. Each of Siemens and the
Stockholders' Representative, on behalf of the holders of Company Common Stock,
shall reimburse and indemnify the Tax Escrow Agent for, and hold it harmless
against, any loss, damages, judgment, fine, penalty, claim, demand, settlement,
cost or expense, including but not limited to reasonable attorneys' fees,
reasonably incurred by the Tax Escrow Agent in connection with the Tax Escrow
Agent's acceptance and administration of this Agreement and its performance of
its duties and obligations under this Agreement, as well as the reasonable costs
and expenses of defending against any claim or liability relating to this
Agreement; provided that notwithstanding the foregoing, neither Siemens nor the
Stockholders' Representative shall be required to indemnify the Tax Escrow Agent
for any such loss, liability, cost or expense arising as a result of the Tax
Escrow Agent's willful misconduct or gross negligence or breach of this
Agreement and provided, further that in no event shall the Stockholders'
Representative, on behalf of the holders of the Company Common Stock, be
responsible to reimburse, indemnify or hold the Tax Escrow Agent harmless
against any liabilities with respect to income Taxes which, for purposes of this
Agreement, are the sole responsibility of Siemens as provided in Section 3(b).
9. Proceeding Relating to Tax Matters. Notwithstanding anything to the
contrary contained in the Merger Agreement, Siemens and the Stockholders'
Representative hereby agree that the following shall apply with respect to all
actions, proceedings and other claims relating solely to
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<PAGE>
(or in the case of actions, proceedings and other claims not relating solely to
but including Tax Matters, that portion of the action, proceeding or claim
relating solely to) the Tax Matters:
(a) Until such time as the dollar amount of any dispute or claim with the
IRS and any other Governmental Entity with respect to the Tax Matters is greater
than the amounts then available in the Tax Escrow Fund (such amount being the
"Indemnity Cushion"), the Stockholders' Representative shall have the right to
conduct and control, through counsel of its own choosing, reasonably acceptable
to Siemens, any action, proceeding or other claim relating solely to (or in the
case of actions, proceedings and other claims not relating solely to but
including Tax Matters, that portion of the action, proceeding or claim relating
solely to) the Tax Matters, but Siemens may, at its election, participate in any
such action, proceeding or claim at its sole cost and expense; provided,
however, that if the Stockholders' Representative shall fail to promptly assume
and thereafter diligently prosecute any such action, proceeding or claim, then
Siemens may assume, through counsel of its own choosing, the control and conduct
of such action, proceeding or claim, subject to the right of the Stockholders'
Representative to participate therein as provided in Section 9(b). If the
Stockholders' Representative has control of the action, proceeding or claim on
the date of proposed settlement, the Stockholders' Representative may settle any
action, proceeding or claim, the control and conduct of which it is entitled to
hereunder, but only with the written consent of Siemens, such consent not to be
unreasonably withheld or delayed.
(b) Subject to the limitations and procedures contained in the Insurance
Policies, from and after the first time the dollar amount of any dispute or
claim with the IRS and any other Governmental Entity with respect to the Tax
Matters is greater than the Indemnity Cushion, Siemens shall have the right to
assume control and conduct, through counsel of its own choosing, reasonably
acceptable to the Stockholders' Representative, of all pending actions,
proceedings or other claims with respect to the Tax Matters (including actions,
proceedings and claims whose defense hitherto has been controlled by the
Stockholders' Representative) and thereafter to conduct and control, through
counsel of its own choosing, reasonably acceptable to the Stockholders'
Representative, any and all actions, proceedings and claims relating to the Tax
Matters that may thereafter arise; provided, that the Stockholders'
Representative may, at its election, continue to participate or participate, as
the case may be, in any such action, proceedings or claim, at its sole cost and
expense. Subject to the limitations and procedures contained in the Insurance
Policies, Siemens may settle or otherwise compromise any action, proceeding or
claim which they are entitled to control hereunder, but only with the prior
written consent of the Stockholders' Representative, such consent not to be
unreasonably withheld or delayed.
For purposes of clarification, Siemens and the Stockholders' Representative
agree that in all actions, proceedings and claims not related solely to (and, in
the case of actions, proceedings and other claims not relating solely to, but
including Tax Matters, that portion of the
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<PAGE>
action, proceeding or claim not relating solely to) the Tax Matters, the
provisions of Section 7.6 of the Merger Agreement shall apply.
10. Resignation and Removal of the Tax Escrow Agent.
(a) The Tax Escrow Agent may resign as such 30 calendar days following the
giving of prior written notice thereof to Siemens and the Stockholders'
Representative. In addition, the Tax Escrow Agent may be removed and replaced on
a date designated in a written instrument signed by Siemens and the
Stockholders' Representative and delivered to the Tax Escrow Agent.
Notwithstanding the foregoing, no such resignation or removal shall be effective
until a successor escrow agent has acknowledged its appointment as such as
provided in paragraph (c) below. In either event, upon the effective date of
such resignation or removal and upon receipt by the Tax Escrow Agent of any
fees, costs and expenses owed or due to it, if any, hereunder the Tax Escrow
Agent shall deliver the property comprising the Tax Escrow Fund to such
successor escrow agent, together with such records maintained by the Tax Escrow
Agent in connection with its duties hereunder and other information with respect
to the Tax Escrow Fund as such successor may reasonably request.
(b) If a successor escrow agent shall not have acknowledged its appointment
as such as provided in paragraph (c) below, in the case of a resignation, prior
to the expiration of 30 calendar days following the date of a notice of
resignation or, in the case of a removal, on the date designated for the Tax
Escrow Agent's removal, as the case may be, because Siemens and the
Stockholders' Representative are unable to agree on a successor escrow agent, or
for any other reason, the Tax Escrow Agent may petition a court of competent
jurisdiction to select a successor and any such resulting appointment shall be
binding upon all of the parties to this Agreement.
(c) Upon written acknowledgment by a successor escrow agent appointed in
accordance with the foregoing provisions of this Section 10 of its agreement to
serve as escrow agent hereunder and the receipt of the property then comprising
the Tax Escrow Fund, the Tax Escrow Agent shall be fully released and relieved
of all duties, responsibilities and obligations under this Agreement, subject to
the proviso contained in clause (iii) of Section 6, and such successor escrow
agent shall for all purposes hereof be the Tax Escrow Agent.
11. Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given if delivered personally
or by facsimile transmission (promptly followed by a hard-copy delivered in
accordance with this Section 11) or mailed (first class postage prepaid) to the
parties at the following addresses or facsimile numbers:
If to Siemens or the Company, to:
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<PAGE>
Siemens Corporation
153 East 53rd Street
New York, New York 10021
Facsimile No.: (212) 258-4945
Attn: Legal Department
If to the Stockholders' Representative, to:
Dort A. Cameron, III
The Airlie Group
115 East Putnam Avenue
Greenwich, Connecticut 06830
Facsimile No.: (203) 661-0479
If to the Tax Escrow Agent, to:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, New Jersey 07660
Facsimile No.: (201) 329-8931
Attention: Terence Kivlehan
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
12. Certain Tax Matters. In accordance with Rev. Rul 73-451, 1973-2 C.B.
158, Rev. Rul 77-294, 1977-2 C.B. 173 (as amplified by Rev. Rul 79-91, 1979-1
C.B. 179), and Private Letter Ruling 8629038 (April 18, 1986) as supplemented by
Private Letter Ruling 8640021 (July 1, 1986), Siemens and the Stockholders'
Representative agree that the establishment of this Tax Escrow Fund amounts to a
substantial restriction on the selling stockholders' rights to receive a portion
of the purchase price under the Merger Agreement and neither party shall take an
inconsistent position on any Tax Return or for any other Tax purpose unless
required by applicable law.
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<PAGE>
13. Amendments, etc. This Agreement may be amended or modified, and any of
the terms hereof may be waived, only by a written instrument duly executed by or
on behalf of Siemens and the Stockholders' Representative and, with respect to
any amendment that would adversely affect the Tax Escrow Agent, the Tax Escrow
Agent. No waiver by any party of any term or condition contained of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof; provided, however, that all provisions regarding the
rights, duties and obligations of the Tax Escrow Agent shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such State.
15. Business Day. For all purposes of this Agreement, the term "business
day" shall mean a day other than Saturday, Sunday or any day on which banks
located in the State of New York are authorized or obligated to close.
16. Miscellaneous. This Agreement is binding upon and will inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof. This
Agreement may be executed in any number of counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument.
17. Dispute Resolution: Negotiation and Arbitration.
(a) The parties hereto shall resolve any dispute arising out of or relating
to this Agreement pursuant to the procedures set forth in Section 7.7 of the
Merger Agreement.
(b) Resolution of disputes under this Section 17 pursuant to the procedures
set forth in Section 7.7 of the Merger Agreement shall be the sole and exclusive
means of resolving disputes arising out of or relating to this Agreement;
provided, however, that nothing herein shall preclude the parties from seeking
in any court of competent jurisdiction temporary or interim injunctive relief to
the extent necessary to preserve the subject matter of the dispute pending
resolution under this Section 17 pursuant to Section 7.7 of the Merger
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
SIEMENS CORPORATION
By:
------------------------------------------
Name: Gerald Wright
Title: Executive Vice President and
Chief Financial Officer
By:
------------------------------------------
Name: Michael Schiefen
Title: Vice President, Corporate Development
ENTEX INFORMATION SERVICES, INC.
By:
------------------------------------------
Name:
Title:
By:
------------------------------------------
Name: Dort A. Cameron, III
Title: Stockholders' Representative
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By:
------------------------------------------
Name:
Title:
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<PAGE>
ANNEX I
RESOLUTION CERTIFICATE
to
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Tax Escrow Agent
The undersigned, Siemens Corporation, a Delaware corporation ("Siemens")
and Dort A. Cameron, III (the "Stockholders' Representative"), pursuant to
Section 4(a) of the Escrow Agreement dated as of _______, 2000 among Siemens,
Entex Information Services, Inc., a Delaware corporation, the Stockholders'
Representative and you (terms defined in the Escrow Agreement have the same
meanings when used herein), hereby:
(a) certifies that (i) [the amount of $___________ is payable to Siemens]
[no amount is owed to Siemens] pursuant to Section 4(a) of the Escrow Agreement
by reason of the resolution of the Tax Matters and (ii) [the amount of $________
is to be released to the Release Account and is to be released to the former
holders of Company Common Stock as set forth in Section 5(c) of the Escrow
Agreement] [ no amount is to be released to the Release Account] [; and
(c) instructs you to pay to Siemens from the Tax Escrow Fund the amount
specified above, by wire transfer of immediately available funds to Siemens'
account at _________________, __________________, _________, _________ (Account
No.:_________).]
SIEMENS CORPORATION
By:
------------------------------------------
Name:
Title:
Dated: ____________, ____
<PAGE>
ANNEX E
EXECUTION COPY
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of March 13, 2000, by
and among SIEMENS CORPORATION, a Delaware corporation ("Siemens"), EMILIA
ACQUISITION CORP., a Delaware corporation ("Acquisition") and a wholly owned
subsidiary of Siemens, and the Persons listed on the signature pages hereto
(each in such Person's individual capacity, a "Stockholder", and collectively,
the "Stockholders").
RECITALS
A. Each of the Stockholders is, as of the date hereof, the record and
beneficial owner of the number of shares of capital stock, of Entex Information
Services, Inc., a Delaware corporation (the "Company"), set forth on Annex I
hereto.
B. Siemens, Acquisition and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"; capitalized terms used but not defined in this Agreement have the
same meanings ascribed to those terms in the Merger Agreement), which provides,
among other things, for the merger (the "Merger") of Acquisition with and into
the Company upon the terms and subject to the conditions set forth in the Merger
Agreement.
C. As a condition to the willingness of Siemens and Acquisition to enter
into the Merger Agreement, and in order to induce Siemens and Acquisition to
enter into the Merger Agreement, the Stockholders have agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by Siemens
and Acquisition of the Merger Agreement and the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein and
therein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Representations and Warranties of the Stockholders. Each of the
Stockholders hereby represents and warrants to Siemens and Acquisition,
severally and not jointly, as follows:
(a) Such Stockholder is the record and beneficial owner of the shares of
capital stock of the Company (as may be adjusted from time to time pursuant to
Section 7 hereof, the "Shares") set forth opposite the Stockholder's name on
Annex I to this Agreement.
<PAGE>
(b) Such Stockholder has the legal capacity to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been duly authorized by all requisite action
(corporate, partnership or other) on the part of such Stockholder, has been
validly executed and delivered by such Stockholder and constitutes the legal,
valid and binding obligation of such Stockholder, enforceable against such
Stockholder in accordance with its terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(d) The execution and delivery of this Agreement by such Stockholder do
not, and the performance by such Stockholder of the Stockholder's obligations
under this Agreement will not, (i) conflict with, result in a violation or
breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give to any person any right of termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of the assets or properties of such Stockholder
under, any of the terms, conditions or provisions of (A) the certificate or
article of incorporation or bylaws or other comparable organizational documents
of the Stockholder if applicable or (B) (x) any law or order of any governmental
or regulatory authority applicable to such Stockholder or any of the
Stockholder's assets or properties, or (y) any contract to which the Stockholder
is a party or by which the Stockholder or any of the Stockholder's assets or
properties is bound, excluding from the foregoing clauses (x) and (y) conflicts,
violations, breaches, defaults, terminations, modifications, accelerations and
creations and impositions of Liens which, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on the
ability of the Stockholder to consummate the transactions contemplated by this
Agreement, or (ii) require any filing by the Stockholder with, or any permit,
authorization, consent or approval of, any governmental or regulatory authority
or any third party.
(e) The Shares and the certificates representing the Shares owned by such
Stockholder are now and at all times during the term hereof will be held by such
Stockholder, or by a nominee or custodian for the benefit of such Stockholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising hereunder, and
not subject to any preemptive rights.
2. Representations and Warranties of Siemens and Acquisition. Each of
Siemens and Acquisition hereby represents and warrants to the Stockholders as
follows:
(a) Each of Siemens and Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and each of them has full corporate power and authority to enter into this
Agreement and to consummate the transac-
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<PAGE>
tions contemplated hereby and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement.
(b) This Agreement has been duly authorized, executed and delivered by each
of Siemens and Acquisition and constitutes the legal, valid and binding
obligation of each of Siemens and Acquisition, enforceable against each of them
in accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(c) The execution and delivery of this Agreement by Siemens and Acquisition
do not, and the performance by Siemens and Acquisition of their obligations
hereunder and the consummation of the transactions contemplated hereby will not,
(i) conflict with, result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, result in or give to
any person any right of termination, cancellation, modification or acceleration
of, or result in the creation or imposition of any Lien upon any of the assets
or properties of Siemens or Acquisition under, any of the terms, conditions or
provisions of (A) the certificates or articles of incorporation or bylaws of
Siemens or Acquisition or (B) (x) any law or order of any governmental or
regulatory authority applicable to Siemens or Acquisition or any of their
respective assets or properties, or (y) any contract to which Siemens or
Acquisition is a party or by which Siemens or Acquisition or any of their
respective assets or properties is bound, excluding from the foregoing clauses
(x) and (y) conflicts, violations, breaches, defaults, terminations,
modifications, accelerations and creations and impositions of Liens which,
individually or in the aggregate, could not be reasonably expected to have a
material adverse effect on the ability of Siemens or Acquisition to consummate
the transactions contemplated by this Agreement, or (ii) require any filing by
Siemens or Acquisition with, or any permit, authorization, consent or approval
of, any governmental or regulatory authority.
3. Grant of Options.
(a) Each Stockholder hereby irrevocably grants to Acquisition an exclusive
option (the "Call Option") to purchase all Shares of such Stockholder at the
Merger Price per Share specified in Section 2.1(c) of the Merger Agreement (the
"Option Price"), which Option shall be exercisable by Acquisition at any time
after the date hereof and prior to the termination of this Agreement.
(b) If (i) the Information Statement has been filed with the SEC in
preliminary form in accordance with Section 5.4 of the Merger Agreement; (ii) a
period of twelve days has elapsed following such filing; (iii) the Company has
been advised by the staff of the SEC that it is in the process of reviewing the
Information Statement and notwithstanding the Company's reasonable efforts that
review has not been completed; and (iv) all of the conditions described in
Section 6.1 of the Merger Agreement (other than Section 6.1(e)) have been
satisfied, then the Stockholders shall have the option (the "Put Option", and
together with the Call Option,
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the "Options") to require Acquisition to purchase from the Stockholders all, but
not less than all, of the Shares of each Stockholder at the Option Price. The
Put Option may be exercised by the Stockholders at any time beginning on the
date on which the conditions specified in clauses (i) through (iv) of the
preceding sentence are satisfied until this Agreement is terminated.
(c) To exercise an Option, the exercising party shall send a written notice
("Exercise Notice") to each other party specifying the place and the time (which
shall be not less than two business days and not more than four business days
after the date of the Exercise Notice) for the closing of the purchase and sale
of the Shares in accordance with the exercise of the Option. The closing of the
purchase and sale of the Shares (the "Option Closing") pursuant to the exercise
of the Option shall take place at the place and at the time designated by the
exercising party in the Exercise Notice. The obligation of Siemens or its
designee to purchase the Shares at the Option Closing shall be subject to the
conditions that (i) all of the conditions described in Section 6.1 of the Merger
Agreement (other than Section 6.1(e)) shall have been satisfied and (ii) proper
arrangements shall have been made to give effect to the provisions of Section
1.6 of the Merger Agreement, and the securities law requirements described in
Section 1.6(b) shall have been satisfied.
(d) At the Option Closing, each Stockholder shall sell, assign, convey and
transfer to Acquisition, each such Stockholder's Shares, free and clear of any
and all liens, claims, security interests, encumbrances, options or adverse
claims whatsoever, and each Stockholder shall deliver or cause to be delivered
to Acquisition a certificate or certificates representing the number of Shares
to be delivered by such Stockholder at the Option Closing, duly endorsed, or
accompanied by stock powers duly executed in blank, with all required transfer
tax stamps affixed thereto. Siemens shall procure that the applicable portions
of the Option Price are paid not later than the dates the corresponding portions
of the Merger Price per Share first are payable under the Merger Agreement.
Payment of each amount will be by wire transfer or certified or bank cashier's
check or checks.
(e) In the event of any change in the Company's capital stock by reason of
any stock dividend, stock split, merger, consolidation, recapitalization,
combination, conversion, exchange of shares or dividend or other change in the
corporate or capital structure of the Company, which would have the effect of
diluting or changing Acquisition's rights hereunder, the number and kind of
shares or securities subject to the Options and the Option Price shall be
appropriately and equitably adjusted so that (i) Acquisition shall receive, at
the Option Closing, the number and class of shares or other securities or
property that Acquisition would have received and (ii) the Stockholders shall
receive, at the Option Closing, the consideration they would have received in
respect of the Shares purchasable upon exercise of the Options if the Options
had been exercised immediately prior to such event.
4. Voting. Each of the Stockholders hereby agrees that such Stockholder:
(i) will vote all Shares owned by the Stockholder in favor of the Merger and the
Merger Agreement,
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at any meeting of the Company's stockholders, or, if requested by Siemens or
Acquisition, execute and deliver written consents to the same effect; (ii) will
provide all notices and perform all actions necessary for the consummation of
the transactions contemplated by the Merger Agreement; and (iii) will vote
against, and will not vote or grant any consent in favor of, or that would
facilitate, any Acquisition Transaction other than the Merger and the other
transactions contemplated by the Merger Agreement.
5. Transfer of the Shares. Prior to the termination of this Agreement,
except as otherwise provided in this Agreement, none of the Stockholders shall:
(i) transfer (which term shall include, without limitation, for the purposes of
this Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares; or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Stockholder's
obligations hereunder or the transactions contemplated hereby. Acquisition
hereby agrees not to transfer any Shares purchased upon exercise of an Option
until this Agreement has terminated.
6. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Each of the Stockholders hereby irrevocably grants to, and appoints,
Siemens and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place, and stead of such Stockholder, to
vote such Stockholder's Shares, or grant a consent, waiver or approval in
respect of such Stockholder's Shares, in connection with any meeting of the
Stockholders of the Company or otherwise, (i) in favor of the Merger and the
other transactions and actions contemplated by the Merger Agreement, and (ii)
against any action or agreement which would impede, interfere with or prevent
the Merger, including any Acquisition Transaction other than the Merger.
(b) Each of the Stockholders represents that any proxies heretofore given
in respect of the Shares are not irrevocable, and that such proxies are hereby
revoked.
(c) Each of the Stockholders hereby affirms that the proxy set forth in
this Section 6 is irrevocable and is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performances of the duties of such Stockholder under this Agreement. Each
Stockholder hereby further affirms that the irrevocable proxy granted hereby is
coupled with an interest in the Shares and, except as set forth in Section 11 of
this Agreement, is intended to be irrevocable in accordance with the provisions
of Section 212(e) of the Delaware General Corporation Law.
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7. Certain Events. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of the
Company affecting the Shares or the acquisition of additional shares of capital
stock or other securities or rights of the Company by any Stockholder, the
number of Shares shall be adjusted appropriately, and this Agreement and the
rights and obligations hereunder shall attach to any additional shares of
Company Common Stock or other securities or rights of the Company issued to or
acquired by any such Stockholder.
(a) Drag-Along Notices. To the extent applicable to such Stockholder, each
Stockholder hereby agrees that such Stockholder (i) shall deliver all notices
required to be delivered by that certain Stockholders Agreement, dated December
10, 1993, between Dort A. Cameron, III, Entex Associates, L.P. and other
signatories thereto, in order to exercise the drag-along rights granted under
that agreement to require the stockholders of the Company party thereto to sell
their shares to Acquisition at the Option Price per share and (ii) thereafter
shall use its reasonable best efforts to enforce (and shall not grant or enter
into any waiver or modification with respect to) such drag-along rights;
provided, however, that no Stockholder shall be required to incur any material
expense or liability or commence any legal proceeding.
8. Certain Other Agreements. From the date of this Agreement until the
earlier of (i) the termination of this Agreement, or (ii) the Measurement Date,
none of the Stockholders shall, and none of the Stockholders shall authorize or
permit any advisor or representative retained by or acting for or on behalf of
any such Stockholder to, directly or indirectly, (i) take any action to
knowingly solicit, initiate, continue, facilitate or encourage (including by way
of furnishing or disclosing non-public information) any offer or proposal for an
Acquisition Transaction, other than the transactions contemplated by the Merger
Agreement or by this Agreement or (ii) knowingly engage in negotiations,
discussions or communications regarding or disclose any information relating to
the Company or afford access to the properties, books or records of the Company
to any person, corporation, partnership or other entity or group that may be
considering making or has made, a proposal for an Acquisition Transaction.
9. Further Assurances. Each of the Stockholders shall, upon request of
Siemens or Acquisition, execute and deliver any additional documents and take
such further actions as may reasonably be deemed by Siemens or Acquisition to be
necessary or desirable to carry out the provisions hereof and to vest in Siemens
the power to vote, grant consents and grant waivers with respect to the Shares
as contemplated by Section 6 of this Agreement.
10. Termination. Except as otherwise provided in this Agreement, this
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (i) the acquisition by Siemens,
through Acquisition or otherwise, of all the Shares; (ii) if the Options havenot
been exercised, the termination of the Merger Agreement in accordance with its
terms; or (iii) the Effective Time; provided, however, that Section 9 shall
survive any termination of this Agreement pursuant to clause (i) of this
sentence.
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<PAGE>
11. Public Announcements. Each of the Stockholders, Siemens and Acquisition
agrees that it will not issue any press release or otherwise make any public
statement with respect to this Agreement or the transactions contemplated hereby
without the prior consent of the other parties, which consents shall not be
unreasonably withheld or delayed; provided, however, that such disclosure can be
made without obtaining such prior consent if (i) the disclosure is required by
law, and (ii) the party making such disclosure has first used its best efforts
to consult with the other party about the form and substance of such disclosure.
12. Miscellaneous.
(a) All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
or by facsimile transmission or mailed (first class postage prepaid) to the
parties at the following addresses or facsimile numbers:
(1) if to any or all of the Stockholders, to them in care of:
Dort A. Cameron, III
The Airlie Group
115 East Putnam Avenue
Greenwich, Connecticut 06830
Facsimile: (203) 661-0479
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile (212) 269-5420
Attention: Gerald S. Tanenbaum
and
(2) if to Siemens or Acquisition, to:
Siemens Corporation
153 East 53rd Street
New York, New York 10022
Facsimile: (212) 258-4945
Attention: General Counsel
with a copy to:
Clifford Chance Rogers & Wells LLP
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<PAGE>
200 Park Avenue
New York, New York 10166
Facsimile: (212) 878-8375
Attention: John A. Healy
(3) if to the Company, to:
Entex Information Services, Inc.
Six International Drive
Rye Brook, New York 10573
Facsimile: (914) 935-3880
Attention: Lynne A. Burgess
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile (212) 269-5420
Attention: Gerald S. Tanenbaum
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
(b) The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(c) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall be considered one and
the same agreement.
(d) This Agreement constitutes the entire agreement, and supersedes all
prior agreements and understandings, whether written and oral, among the parties
hereto with respect to the subject matter hereof.
(e) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware without giving effect to the principles of
conflicts of laws thereof.
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<PAGE>
(f) Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties, and
any such purported assignment shall be null and void; provided, however, that
either of Siemens or Acquisition may, without the prior written consent of any
Stockholder, assign its rights and obligations to any of its direct or indirect
wholly owned subsidiaries. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by, the parties
and their respective successors and assigns, and the provisions of this
Agreement are not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
(g) If any term, provision, covenant or restriction herein is held by a
court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(h) 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 (i) will waive, in any action for
specific performance, the defense of adequacy of a remedy at law and (ii) 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.
(i) No amendment, modification or waiver in respect to this Agreement shall
be effective unless it shall be in writing and signed by each party hereto.
(j) No person who is or becomes (during the term hereof) a director or
officer of the Company makes any agreement or understanding herein in his or her
capacity as such director or officer, and nothing herein shall limit or affect
any action taken by any Stockholder in his or her capacity as an officer or
director of the Company in connection with the Company's rights under the Merger
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of Siemens, Acquisition and the Stockholders have
caused this Agreement to be duly executed and delivered as of the date first
written above.
SIEMENS CORPORATION
By: /s/ Gerald Wright
--------------------------------------
Name: Gerald Wright
Title: Executive Vice President and
Chief Financial Officer
By: /s/ Michael Schiefen
--------------------------------------
Name: Michael Schiefen
Title: Vice President, Corporate Development
EMILIA ACQUISITION CORP.
By: /s/ Michael Schiefen
--------------------------------------
Name: Michael Schiefen
Title: Vice President
/s/ Dort A. Cameron III
-----------------------
DORT A. CAMERON III
ENTEX ASSOCIATES L.P.
By its General Partner, the Putnam Group, Inc.
By: /s/ Dort A. Cameron III
-----------------------
Name: Dort A. Cameron III
Title:
/s/ John A. McKenna, Jr.
------------------------
JOHN A. MCKENNA, JR.
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ANNEX I
Ownership of Shares
Holder Number of Shares
- ----------------------------------------- --------------------------------------
Dort A. Cameron, III 2,669,653
Entex Associates L.P. 21,407,739
John A. McKenna, Jr. 642,204
