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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
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BRC HOLDINGS, INC.
(Name of Subject Company)
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BRC HOLDINGS, INC.
(Name of Person(s) Filing Statement)
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COMMON STOCK, $.10 PAR VALUE
(Title of Class of Securities)
227174-10-9
(CUSIP Number of Class of Securities)
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JERROLD L. MORRISON
PRESIDENT AND CHIEF OPERATING OFFICER
BRC HOLDINGS, INC.
1111 W. MOCKINGBIRD LANE, SUITE 1400
DALLAS, TEXAS 75247-5014
(214) 688-1800
(Name, Address and Telephone Number of Person Authorized
to Receive Notice and Communications on Behalf of the Person(s) Filing
Statement)
WITH COPIES TO:
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<S> <C>
JEFFERY M. SONE, ESQ. CHARLES S. GILBERT, ESQ.
ARTER & HADDEN, LLP JACKSON WALKER L.L.P.
1717 MAIN STREET, SUITE 4100 901 MAIN STREET, SUITE 6000
DALLAS TX 75201-4605 DALLAS, TEXAS 75202
(214) 761-2100 (214) 953-6000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is BRC Holdings, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 1111 W. Mockingbird Lane, Suite 1400, Dallas, Texas
75247-5014. The title of the class of equity securities to which this
Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Statement")
relates is the Company's common stock, par value $.10 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer (the "Offer") disclosed in a
Tender Offer Statement on Schedule 14D-1, dated October 23, 1998 (the "Schedule
14D-1") of ACS Acquisition Corporation, a Delaware corporation (the "Purchaser")
and a wholly-owned subsidiary of Affiliated Computer Services, Inc., a Delaware
corporation ("Parent") for 8,704,238 Shares.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of October 19, 1998 (the "Merger Agreement"), among Parent, the Purchaser and
the Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company, with the Company surviving the merger (as such, the
"Surviving Corporation") as a wholly owned subsidiary of Parent (the "Merger").
In the Merger, each outstanding Share (other than Shares owned by (i) Parent,
the Purchaser, the Company, or any direct or indirect subsidiary of Parent or
the Company or (ii) stockholders, if any, who are entitled to and who properly
exercise dissenters' rights under Delaware law) will be converted into the right
to receive the per Share price paid in the Offer in cash, without interest (the
"Merger Consideration"). See Item 3(b). "Identity and Background--The Merger
Agreement" located at page 3 of this Statement.
In connection with the execution of the Merger Agreement, Parent and
Purchaser entered into a Stock Tender Agreement, dated as of October 19, 1998
(the "Stock Tender Agreement"), with Kathryn Ayres Esping, individually and as a
Director of the Esping Family Foundation, Inc., and as Independent Executor of
the Estate of P. E. Esping, and Paul Stoffel, individually, (collectively, the
"Stock Tender Parties"). The Stock Tender Parties collectively own 2,968,350
Shares (excluding 324,000 Shares issuable under presently exercisable stock
options) or approximately 17.4% of the outstanding Shares on a fully diluted
basis as of September 30, 1998. Pursuant to the Stock Tender Agreement, the
Stock Tender Parties have agreed, so long as Parent, the Purchaser or the
Company has not terminated the Merger Agreement, to tender validly pursuant to
the Offer, and not withdraw, all Shares which are owned of record by them prior
to the Expiration Date (as defined herein). The obligations of the Stock Tender
Parties under the Stock Tender Agreement are several and not joint. The Stock
Tender Agreement is more fully described in Item 3(b). "Identity and
Background--Potential or Actual Conflicts of Interest--Stock Tender Agreement,"
located at page 12 of this Statement.
The Merger Agreement provides that effective upon purchase and payment for
the Shares by the Purchaser, the Purchaser shall be entitled to designate the
number of directors, rounded up to the next whole number, on the Company's Board
of Directors (the "Board") that equals the product of (i) the total number of
directors on the Board (giving effect to the election of any additional
directors pursuant to this paragraph) and (ii) the percentage that the number of
Shares owned by the Purchaser (including Shares accepted for payment) bears to
the total number of Shares outstanding on a fully diluted basis, and the Company
shall take all action necessary to cause the Purchaser's designees to be elected
or appointed to the Board, including, without limitation, increasing the number
of directors, and seeking and accepting resignations of its incumbent directors.
See Item 3(b). "Identity and Background--The Merger Agreement--Board of
Directors," located at page 6 of this Statement.
The Schedule 14D-1 states that the principal executive offices of ACS and
the Purchaser are located at 2828 North Haskell, Dallas, Texas 75204.
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ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, is set forth in Item 1 above. All information contained in this
Statement or incorporated herein by reference concerning Parent, the Purchaser
or their affiliates, or actions or events with respect to any of them, was
provided by Parent, and the Company takes no responsibility for such
information.
(b) Each material contract agreement, arrangement or understanding and any
actual or potential conflict of interest between the Company or its affiliates
and (i) the Company, its executive officers, directors or affiliates or (ii)
Parent, its executive officers, directors or affiliates is set forth herein or
in the Information Statement Pursuant to Section 14(f) of the Securities
Exchange Act and Rule 14f-1 thereunder dated October 23, 1998 attached hereto as
Annex B and incorporated herein by reference in its entirety (the "Information
Statement"). Specifically, the Company has entered into (1) Transition
Compensation Agreements with each of Jerrold L. Morrison, Harvey V. Braswell,
Thomas E. Kiraly and Bernard J. Owens, which are attached as Exhibits 2, 3, 4,
and 5, respectively, hereto and are summarized below and incorporated herein by
reference in their entirety (the "Transition Agreements") and (2) an Agreement
with Paul T. Stoffel, dated as of October 18, 1998, which is attached hereto as
Exhibit 6 and summarized below and incorporated herein by reference in its
entirety. Contemporaneously with the execution of the Merger Agreement, two
stockholders of the Company entered into the Stock Tender Agreement, which is
attached hereto as Exhibit 7 and summarized below and incorporated herein by
reference in its entirety. In addition, the officers and directors of the
Company are the beneficiaries of certain provisions of the Company's Certificate
of Incorporation and bylaws, and statutory provisions under the Delaware General
Corporation Law relating to indemnification of officers and directors.
THE MERGER AGREEMENT
The following summarizes certain portions of the Merger Agreement, which
relate to arrangements among the Company, Parent, the Purchaser and the
Company's executive officers and directors. The summary of the Merger Agreement
provided below is qualified in its entirety by reference to the Merger
Agreement. A copy of the Merger Agreement has been filed as Exhibit 1 to this
Statement and is incorporated herein by reference and should be read in its
entirety for a more complete description of the terms and provisions of the
Merger Agreement. Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed thereto in the Merger Agreement.
THE OFFER. The Merger Agreement provides for the making of the Offer by the
Purchaser. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to the satisfaction of the Minimum
Condition and certain other conditions that are described in Item 3(b).
"Identity and Background--Certain Conditions to the Offer" located at page 10 of
this Statement. The Purchaser has agreed that, without the written consent of
the Company, no change in the Offer may be made which changes the form of
consideration to be paid or decreases the price per Share or the amount of
Shares sought in the Offer or which imposes conditions to the Offer in addition
to the Minimum Condition and those conditions described in Item 3(b). "Identity
and Background--Certain Conditions to the Offer" located at page 10 of this
Statement.
THE MERGER. The Merger Agreement provides that, following the purchase of
Shares pursuant to the Offer, the approval of the Merger Agreement by the
stockholders of the Company and the satisfaction or waiver of the other
conditions to the Merger, the Purchaser will be merged with and into the
Company. The Merger shall become effective at such time as a certificate of
merger or certificate of ownership and merger is filed with the Delaware
Secretary of State or at such later time as is specified in such certificate of
merger (the "Effective Time"). As a result of the Merger, all of the properties,
rights, privileges and franchises of the Company and the Purchaser shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and the Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.
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At the Effective Time, (i) each issued and outstanding Share owned or held
by Parent, the Purchaser, the Company or any direct or indirect subsidiary of
Parent or the Company shall be canceled, and no payment shall be made with
respect thereto; (ii) each share of common stock of the Purchaser then
outstanding shall be converted into and become one share of common stock of the
Surviving Corporation; and (iii) each Share outstanding immediately prior to the
Effective Time shall, except as otherwise provided in (i) above and except for
Shares held by any holder who has not voted in favor of the Merger or consented
thereto in writing and who has demanded appraisal for such Shares ("Dissenting
Shares") in accordance with Section 262 of the Delaware General Corporation Law
(the "DGCL"), be converted into the right to receive $19.00 in cash or any
higher price per Share that may be paid pursuant to the Offer, without interest,
less any required withholding taxes.
The Merger Agreement provides that the certificate of incorporation of the
Company and the bylaws of the Purchaser at the Effective Time will be the
certificate of incorporation of the Surviving Corporation. The Merger Agreement
also provides that the directors of the Purchaser at the Effective Time will be
the directors of the Surviving Corporation and the officers of the Company at
the Effective Time will be the officers of the Surviving Corporation.
RECOMMENDATION. The Merger Agreement states that the Board has (i)
determined that the Offer and the Merger, taken together, are fair to the
holders of the Shares as well as fair to and in the best interests of the
Company and its stockholders, (ii) approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger and (iii)
resolved to recommend acceptance of the Offer and approval and adoption of the
Merger Agreement and the Merger by the Company's stockholders.
INTERIM AGREEMENTS OF PARENT, THE PURCHASER AND THE COMPANY. Pursuant to
the Merger Agreement, the Company has covenanted and agreed that, during the
period from the date of the Merger Agreement to the Effective Time, the Company
and its subsidiaries will each conduct its operations according to its ordinary
and usual course of business consistent with past practice; that neither the
Company nor any of its subsidiaries will intentionally take or willfully omit to
take any actions that results in or could reasonably be expected to result in, a
Company Material Adverse Effect (as defined in the Merger Agreement); that the
Company will use its reasonable best efforts to preserve intact the business
organization of the Company and each of its subsidiaries, to keep available the
services of its and their present officers and key employees and consultants,
and to maintain satisfactory relationships with customers, agents, suppliers,
and other persons having business relationships with the Company or its
subsidiaries. Pursuant to the Merger Agreement, without limiting the generality
of the foregoing, and except as otherwise expressly provided in the Merger
Agreement, neither the Company nor any of its subsidiaries will (a) issue, sell,
or dispose of additional shares of capital stock of any class (including the
Shares) of the Company or any of its subsidiaries, or securities convertible
into or exchangeable for any such shares or securities, or any rights, warrants,
or options to acquire any such shares or securities, other than Shares issued
upon exercise of options disclosed pursuant to the Merger Agreement, in each
case in accordance with the terms so disclosed; (b) redeem, purchase, or
otherwise acquire, or propose to redeem, purchase, or otherwise acquire, any of
its outstanding capital stock, or other securities of the Company or any of its
subsidiaries; (c) split, combine, subdivide, or reclassify any of its capital
stock or declare, set aside, make, or pay any dividend or distribution on any
shares of its capital stock; (d) sell, pledge, dispose of, or encumber any of
its assets, except for sales, pledges, dispositions, or encumbrances in the
ordinary course of business consistent with past practices; (e) incur or modify
any indebtedness or issue or sell any debt securities, or assume, guarantee,
endorse, or otherwise as an accommodation become absolutely or contingently
responsible for obligations of any other person, or make any loans or advances,
other than in the ordinary course of business consistent with past practices;
(f) adopt or amend any bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred compensation,
employment or other employee benefit agreements, trusts, plans, funds, or other
arrangements for the benefit or welfare of any director, officer, or employee,
or (except for normal increases in the ordinary course of business that
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are consistent with past practices and that, in the aggregate, do not result in
a material increase in benefits or compensation expense to the Company) increase
in any manner the compensation or fringe benefits of any director, officer, or
employee or pay any benefit not required by any existing plan or arrangement
(including, without limitation, the granting or vesting of stock options or
stock appreciation rights) or take any action or grant any benefit not expressly
required under the terms of any existing agreements, trusts, plans, funds, or
other such arrangements or enter into any contract, agreement, commitment, or
arrangement to do any of the foregoing or make or agree to make any payments to
any directors, officers, agents, contractors, or employees relating to a change
or potential change in control of the Company; (g) acquire by merger,
consolidation, or acquisition of stock or assets any corporation, partnership,
or other business organization or division or make any investment either by
purchase of stock or securities, contributions to capital (other than to wholly
owned subsidiaries), property transfer, or purchase of any material amount of
property or assets, in any other person; (h) adopt any amendments to their
respective charters or bylaws or equivalent organizational documents, except as
required by the Merger Agreement; (i) take any action other than in the ordinary
course of business and consistent with past practices, to pay, discharge,
settle, or satisfy any claim, liability, or obligation (absolute or contingent,
accrued or unaccrued, asserted or unasserted, or otherwise); (j) change any
method of accounting or accounting practice used by the Company or any of its
subsidiaries, except for any change required by reason of a concurrent change in
generally accepted accounting principles; (k) revalue in any respect any of its
assets, including, without limitation, writing down the value of its portfolio
or writing off notes or accounts receivable other than in the ordinary course of
business consistent with past practices; (l) authorize any new capital
expenditure; (m) make any tax election, settle or compromise any federal, state,
or local tax liability or consent to the extension of time for the assessment or
collection of any federal, state, or local tax; (n) settle or compromise any
pending or threatened suit, action, or claim material to the Company and its
subsidiaries taken as a whole or relevant to the transactions contemplated by
this Agreement; (o) enter into any agreement, arrangement, or understanding to
do any of the foregoing actions; or (p) voluntarily take any action or willfully
omit to take any action that could make any representation or warranty of the
Company in the Merger Agreement untrue or incorrect in any material respect at
any time, including as of the date of the Merger Agreement and as of the time of
consummation of the Offer and the Effective Time, as if made as of such time.
CONFIDENTIALITY. Pursuant to the Merger Agreement, Parent and the Purchaser
will each hold and will each cause its consultants and advisors to hold in
confidence, unless compelled to disclose by judicial or administrative process
or, in the written opinion of its legal counsel, by other requirements of law,
all documents and information concerning the Company and its subsidiaries
furnished to Parent or the Purchaser in connection with the transactions
contemplated by the Merger Agreement (except to the extent that such information
can be shown to have been (i) previously known by Parent or the Purchaser from
sources other than the Company, or its directors, officers, representatives or
affiliates, (ii) in the public domain through no fault of Parent or the
Purchaser, or (iii) later lawfully acquired by Parent or the Purchaser from
other sources who are not known by Parent or the Purchaser to be bound by a
confidentiality agreement or otherwise prohibited from transmitting the
information to Parent or the Purchaser by a contractual, legal or fiduciary
obligation) and will not release or disclose such information to any other
person, except its auditors, attorneys, financial advisors and other consultants
and advisors in connection with the Merger Agreement and the transactions
contemplated thereby. Parent and the Purchaser will each be deemed to have
satisfied its obligation to hold such information confidential if it exercises
the same care as it takes to preserve confidentiality for its own similar
information.
NONSOLICITATION. The Merger Agreement provides that the Company shall not,
directly or indirectly, through any officer, director, employee, representative
or agent of the Company or any of its subsidiaries, solicit or encourage
(including by way of furnishing information) the initiation of any inquiries or
proposals (each an "Acquisition Proposal") regarding a Third Party Acquisition
(as defined below). Provided that nothing in the Merger Agreement shall prevent
the Board if it determines in good faith, after consultation with, and the
receipt of advice from, outside counsel, that it is required to do so in order
to discharge
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properly its fiduciary duties, from considering, negotiating, approving and
recommending to the stockholders of the Company an unsolicited bona fide written
Acquisition Proposal that the Board determines in good faith (after consultation
with its financial advisors and legal counsel) would result in a transaction
more favorable to the Company's stockholders than the transaction contemplated
by the Merger Agreement (any Acquisition Proposal meeting such criterion, being
referred to as a "Superior Proposal"). Provided further that nothing in the
Merger Agreement shall prohibit the Company from complying with Rules 14d-9 and
14e-2 under the Exchange Act with respect to any other tender offers. The
Company must promptly, but in no event later than 24 hours, notify Parent after
receipt of any Acquisition Proposal or any request for nonpublic information
relating to the Company or any of its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company or any subsidiary by any person or entity that informs the Board that it
is considering making, or has made, an Acquisition Proposal. Such notice to
Parent has to be made orally and in writing and must indicate in reasonable
detail the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact. If the Board receives a request for material
nonpublic information by a party who makes an unsolicited bona fide Acquisition
Proposal and the Board determines that such proposal, if consummated pursuant to
its terms would be a Superior Proposal, then the Company may, subject to the
execution of a confidentiality agreement substantially similar to that then in
effect between the Company and Parent, provide such party with access to
information regarding the Company. The Merger Agreement requires that the
Company immediately cease and cause to be terminated any existing discussions or
negotiations with any parties (other than Parent and the Purchaser) conducted
before the date of the Merger Agreement with respect to any Acquisition
Proposal, and the Company agreed not to release any third party from any
confidentiality or standstill agreement to which the Company is a party. The
Company also agreed to ensure that the officers, directors and employees of the
Company and its subsidiaries and any investment banker or other advisor or
representative retained by the Company are aware of these restrictions; and be
responsible for any breach of this restriction by such bankers, advisors and
representatives.
ACCESS TO INFORMATION. Between the date hereof and the Effective Time, the
Company will give Parent and the Purchaser and their authorized representatives
reasonable access to all employees, plants, offices, warehouses and other
facilities and to all books and records of the Company and its subsidiaries,
will permit Parent and the Purchaser to make such inspections as Parent and the
Purchaser may reasonably require and will cause the Company's officers and those
of its subsidiaries to furnish Parent and the Purchaser with such financial and
operating data and other information with respect to the business and properties
of the Company and any of its subsidiaries as Parent or the Purchaser may from
time to time reasonably request.
BOARD OF DIRECTORS. The Merger Agreement provides that effective upon
purchase and payment for any tendered Shares by the Purchaser, the Purchaser
shall be entitled to designate the number of directors, rounded up to the next
whole number, on the Board that equals the product of (i) the total number of
directors on the Board (giving effect to the election of any additional
directors pursuant to this paragraph) and (ii) the percentage that the number of
Shares owned by the Purchaser (including Shares accepted for payment) bears to
the total number of Shares outstanding on a fully diluted basis, and the Company
shall take all action necessary to cause the Purchaser's designees to be elected
or appointed to the Board, including, without limitation, increasing the number
of directors, and seeking and accepting resignations of its incumbent directors.
Notwithstanding the foregoing, the Company has the right to have at least two of
the current members of the Board remain members of the Board until the Effective
Time.
STOCKHOLDERS' MEETING. Pursuant to the Merger Agreement, the Company shall
cause a meeting of its stockholders (the "Company Stockholder Meeting") to be
duly called and held for the purposes of voting on the approval and adoption of
the Merger Agreement and the Merger. The Merger Agreement provides that the
Company and Parent will cooperate and use all reasonable efforts to prepare, and
the Company and Parent will file with the SEC, as soon as reasonably practical
after completion of the Offer, a proxy statement or information statement
relating to the Company Stockholder Meeting, if required (the "Proxy
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Statement"). The Company has agreed, subject to the fiduciary duties of its
Board of Directors, to use all reasonable efforts to obtain the necessary
approvals by its stockholders of the Merger Agreement and the transactions
contemplated thereby. Parent has agreed to vote and to cause its affiliates
(including, without limitation, the Purchaser) to vote all Shares owned by them
in favor of adoption of the Merger Agreement.
INDEMNIFICATION AND INSURANCE. Parent, the Purchaser and the Company have
each agreed that all rights to indemnification or exculpation now existing in
favor of the directors, officers, employees and agents of the Company and its
subsidiaries as provided in their respective charters or bylaws or other
contracts scheduled in the Merger Agreement shall, to the extent such rights are
in accordance with applicable law, survive the Merger and stay in effect in
accordance with their respective terms.
The Merger Agreement also provides that the Surviving Corporation shall,
until the third anniversary of the Effective Time, cause to be maintained in
effect policies of directors' and officers' liability insurance for director and
officers of the Company on terms no less favorable than the existing coverage
maintained by the Company as of the date of the Merger Agreement, in each case
including for claims arising from facts or events that occurred at or before the
consummation of the Offer; provided, however, that the Surviving Corporation
shall not be required in order to maintain or procure such coverage to pay an
annual premium in excess of 200% of the current annual premium paid by the
Company for its existing coverage (the "Cap"); and provided, further, that if
equivalent coverage cannot be obtained, or can be obtained only by paying an
annual premium in excess of the Cap, the Surviving Corporation shall only be
required to obtain as much coverage as can be obtained by paying an annual
premium equal to the Cap.
BEST EFFORTS. The Merger Agreement provides that the Company, the Purchaser
and Parent will each use all reasonable best efforts to consummate the
transactions contemplated by the Merger Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations by the Company as to corporate power and
authority to execute, deliver and consummate the Merger Agreement, undisclosed
liabilities, certain changes or events concerning its businesses, compliance
with applicable law, employee benefit plans, litigation, environmental
liabilities, intellectual property rights and material contracts.
CONDITIONS TO THE MERGER. The obligations of each of Parent, the Purchaser
and the Company to effect the Merger are subject to the satisfaction of certain
conditions, including: (a) the Merger Agreement shall have been adopted by the
affirmative vote of the stockholders of the Company by the requisite vote or
consent in accordance with the charter and bylaws of the Company and with
applicable law; (b) no statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or enforced
by any U.S. court or U.S. governmental authority which prohibits, restrains,
enjoins or restricts the consummation of the Merger or which imposes any
material limitation on the ability of Parent or the Purchaser to exercise rights
of ownership of the Shares provided that the parties will use their respective
reasonable best efforts to have any such injunction, decree or order lifted; (c)
any waiting period applicable to the Merger under the HSR Act shall have
terminated or expired and all required filings, consents, approvals, permits and
authorizations with or for governmental authorities have been made or obtained
(without what the Purchaser deems to be a materially burdensome condition); and
(d) the Purchaser shall have purchased tendered Shares pursuant to the Offer.
TERMINATION. The Merger Agreement may be terminated: (a) by mutual written
consent of Parent, the Purchaser and the Company; (b) by Parent and the
Purchaser or the Company if any court of competent jurisdiction in the United
States or other United States governmental body shall have issued a final order,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; (c) by Parent and the Purchaser if
due to an occurrence or circumstance which would result in a failure to satisfy
any of the conditions set forth in Item 3(b). "Identity and Background--Certain
Conditions to the Offer," the Purchaser shall have (i) failed to commence the
Offer within five days following the initial
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public announcement of the Offer, (ii) terminated the Offer or (iii) failed to
pay for tendered Shares pursuant to the Offer; (d) by the Company if (i) there
shall not have been a breach of any material representation, warranty, covenant
or agreement on the part of the Company and the Purchaser shall have (A) failed
to commence the Offer within five days following the initial public announcement
of the Offer, (B) terminated the Offer or (C) by January 31, 1999 (provided,
however, that any termination pursuant to this clause C must be made by
irrevocable written notice delivered to the Purchaser and Parent by noon, Dallas
time, on January 31, 1999), or (ii) prior to the purchase of tendered Shares
pursuant to the Offer, a person or group shall have made a bona fide offer that
the Board by a majority vote determines in its good faith judgment and in the
exercise of its fiduciary duties, after consultation with its financial advisors
and based as to legal matters on the written opinion of legal counsel, is
obligated by its fiduciary duties under applicable law to terminate the Merger
Agreement, provided that such termination under this clause (ii) shall not be
effective until payment of the Termination Fee (as defined below); (e) by Parent
and the Purchaser prior to the purchase of tendered Shares pursuant to the Offer
if (i) there shall have been a breach (not cured or curable within certain time
limits) of any representation or warranty on the part of the Company having a
Company Material Adverse Effect or materially adversely affecting (or materially
delaying) the consummation of the Offer, (ii) there shall have been a breach
(not cured or curable within certain time limits) of any covenant or agreement
on the part of the Company resulting in a Company Material Adverse Effect or
materially adversely affecting (or materially delaying) the consummation of the
Offer, (iii) the Company shall engage in negotiations with any entity or group
(other than Parent or the Purchaser) that has proposed a Third Party Acquisition
(with certain exceptions), (iv) the Company enters into an agreement, letter of
intent or arrangement with respect to a Third Party Acquisition, (v) the Board
shall have withdrawn or modified (including by amendment of the Schedule 14D-9)
in a manner adverse to the Purchaser its approval or recommendation of the
Offer, the Merger Agreement or the Merger or shall have recommended another
offer, or shall have adopted any resolution to effect any of the foregoing or
(vi) the Minimum Condition shall not have been satisfied by the expiration date
of the Offer and (A) on such date an entity or group (other than Parent or the
Purchaser) shall have made and not withdrawn a proposal with respect to a Third
Party Acquisition or (B) any person or group (including the Company or any of
its affiliates other than Parent or the Purchaser) has become the beneficial
owner of 19.9% (except in bona fide arbitrage transactions) or more of the
Shares; or (f) by the Company if (i) there shall have been a breach (not cured
or curable with certain time limits) of any representation or warranty on the
part of Parent or the Purchaser which materially adversely affects (or
materially delays) the consummation of the Offer or (ii) there shall have been a
material breach (not cured or curable with certain time limits) of any covenant
or agreement on the part of Parent or the Purchaser and which materially
adversely affects (or materially delays) the consummation of the Offer.
TERMINATION FEE. Pursuant to the Merger Agreement, in the event Parent and
the Purchaser terminate the Merger Agreement pursuant to clause (e)(i) through
(v) of the preceding paragraph or the Company terminates the Merger Agreement
pursuant to clause (d)(ii) or (d)(i)(C) of the preceding paragraph, then the
Company shall pay to Parent, the Purchaser and their affiliates all
out-of-pocket fees and expenses actually incurred in connection with the Offer
and Merger and the proposed consummation of all the transactions contemplated by
the Merger Agreement not in excess of $3,000,000. If, (i) Parent and the
Purchaser terminate the Merger Agreement pursuant to clause (e)(i) through (v)
of the preceding paragraph or if the Company terminates the Merger Agreement
pursuant to (d)(i)(C) of the preceding paragraph and, within four months
thereafter the Company enters into an agreement, letter of intent or arrangement
with respect to a Third Party Acquisition, or a Third Party Acquisition occurs
(or within nine months after such termination if the Third Party Acquisition
that occurs or with respect to which an agreement, letter of intent or binding
arrangement has been entered into is or is reasonably expected to be a
transaction more favorable to the Company's stockholders than the transactions
contemplated by the Merger Agreement); or (ii) the Company terminates the Merger
Agreement pursuant to clause (d)(ii) of the preceding paragraph, then the
Company shall pay to Parent and the Purchaser, within one business day
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following the execution and delivery of such agreement or letter of intent or
entering into such arrangement or such occurrence, as the case may be, or
simultaneously with such termination pursuant to clause (d)(ii) of the preceding
paragraph, a fee, in cash, of $10,000,000 plus all out-of-pocket fees and
expenses incurred by Parent and the Purchaser in connection with the Offer and
Merger and the proposed consummation of all the transactions contemplated by the
Merger Agreement, not in excess of $3,000,000.
"Third Party Acquisition" means the occurrence of any of the following
events (i) the acquisition of the Company by merger or otherwise by any person
or entity other than Parent, the Purchaser or any affiliate thereof (a "Third
Party"); (ii) the acquisition by Third Party of more than 19.9% of the total
assets of the Company and its subsidiaries, taken as a whole; (iii) the
acquisition by Third Party of 19.9% or more of the outstanding Shares that
results in a change of control of the Company; (iv) the adoption by the Company
of a plan of liquidation or the declaration or payment of an extraordinary
dividend; or (v) the acquisition by the Company or any of its subsidiaries of
more than 19.9% of the outstanding Shares.
Pursuant to the Merger Agreement, in the event of the termination and
abandonment of the Merger Agreement, the Merger Agreement will become void and
have no effect, without any liability on the part of any party or its directors,
officers or stockholders, other than certain provisions of the Merger Agreement
relating to the termination fee, expenses of the parties and confidentiality of
information, provided, that any party will not be relieved from liability for
any breach of the Merger Agreement.
COSTS AND EXPENSES. Except as discussed above, the Merger Agreement
provides that all costs and expenses incurred in connection with the
transactions contemplated by the Merger Agreement shall be paid by the party
incurring such costs and expenses.
APPRAISAL RIGHTS. Holders of Shares do not have dissenters' rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares
will have certain rights pursuant to the provisions of Section 262 of the DGCL
to dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. If the statutory procedures were complied with, such
rights could lead to a judicial determination of the fair value required to be
paid in cash to such dissenting holders for their shares. Any such judicial
determination of the fair value of Shares could be based upon considerations
other than or in addition to the Offer Price or the market value of the Shares,
including asset values and the investment value of the Shares. The value so
determined could be more or less than the Offer Price or the Merger
Consideration.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses the right to appraisal, as
provided in the DGCL, the Shares of such stockholder will be converted into the
Merger Consideration in accordance with the Merger Agreement. A stockholder may
withdraw his demand for appraisal by delivery to Parent of a written withdrawal
of his demand for appraisal and acceptance of the Merger.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
GOING PRIVATE TRANSACTIONS. The Merger will have to comply with any
applicable Federal law operative at the time of its consummation. Rule 13e-3
under the Exchange Act is applicable to certain "going private" transactions.
The Company does not believe that Rule 13e-3 will be applicable to the Merger
unless the Merger is consummated more than one year after the termination of the
Offer. If applicable, Rule 13e-3 would require, among other things, that certain
financial information concerning the Company and certain information relating to
the fairness of the Merger and the consideration offered to minority
stockholders be filed with the Commission and disclosed to minority stockholders
prior to consummation of the Merger.
DIVIDENDS AND DISTRIBUTIONS. If on or after the date of the Merger
Agreement, the Company should (i) split, combine or otherwise change the Shares
or its capitalization, (ii) issue or sell any additional
9
<PAGE>
securities of the Company or otherwise cause an increase in the number of
outstanding securities of the Company (except for Shares issuable upon the
exercise of employee stock options outstanding on the date of the Merger
Agreement) or (iii) acquire currently outstanding Shares or otherwise cause a
reduction in the number of outstanding Shares, then, without prejudice to the
Purchaser's rights described in Item 3(b). "Identity and Background--Certain
Conditions of the Offer," the Purchaser in its sole discretion, subject to the
terms of the Merger Agreement, may make such adjustments as it deems appropriate
in the purchase price and other terms of the Offer.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any dividend on the Shares or make any distribution (including, without
limitation, cash dividends, the issuance of additional Shares pursuant to a
stock dividend or stock split, the issuance of other securities or the issuance
of rights for the purchase of any securities) with respect to the Shares that is
payable or distributable to stockholders of record on a date prior to the
transfer to the name of the Purchaser or its nominee or transferee on the
Company's stock transfer records of the tendered Shares purchased pursuant to
the Offer, then, without prejudice to the Purchaser's rights described in Item
3(b). "Identity and Background--Certain Conditions of the Offer," any such
dividend, distribution or right to be received by the tendering stockholders
will be received and held by the tendering stockholder at the Depositary for the
account of the Purchaser, accompanied by appropriate documentation of transfer.
Pending such remittance and subject to applicable law, the Purchaser will be
entitled to all rights and privileges as owner of any such dividend,
distribution or right and may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Purchaser
in its sole discretion.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two preceding paragraphs and
nothing herein shall constitute a waiver by the Purchaser or Parent of any of
their rights under the Merger Agreement or a limitation of remedies available to
the Purchaser or Parent for any breach of the Merger Agreement, including
termination thereof.
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, the Purchaser will not be
required to accept for payment or (subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) relating to the obligation of
the Purchaser to pay for or return tendered Shares promptly after the
termination or withdrawal of the Offer) to pay for tendered Shares, or may
terminate or amend the Offer as provided in the Agreement, or may postpone the
acceptance for payment of, or payment for, Shares (whether or not any other
Shares have been accepted for payment or paid for pursuant to the Offer) if
prior to the expiration of the Offer (i) the Minimum Condition has not been
satisfied; (ii) the waiting period under the HSR Act has not expired or been
terminated with respect to purchase of the Shares; or (iii) if at any time on or
after the date of the Merger Agreement, and at any time before the time of
acceptance for payment of any such Shares, any of the following occurs:
(a) any of the representations or warranties of the Company contained in
the Merger Agreement is not true and correct at and as of any date prior to
the expiration date of the Offer as if made at and as of such time, except
for (i) failures (other than with regard to the Company's investment
MatriDigm) to be true and correct as are not, individually or in the
aggregate, reasonably expected to result in a Company Material Adverse
Effect; or (ii) failures to comply as are capable of being and are cured
prior to the earlier of (A) 10 days after written notice from the Purchaser
to the Company of such failure or (B) two business days prior to the
expiration date of the Offer;
(b) the Company has failed to comply with any of its obligations under
the Merger Agreement, except for (i) failures to so comply as are not,
individually or in the aggregate, reasonably expected to result in a Company
Material Adverse Effect; and (ii) failures to comply as are capable of being
and
10
<PAGE>
are cured prior to the earlier of (A) 10 days after written notice from the
Purchaser to the Company of such failure or (B) two business days prior to
the expiration date of the Offer;
(c) the Board of Directors of the Company has withdrawn or modified in
any respect adverse to Parent or the Purchaser its recommendation of the
Offer or taken any position inconsistent with such, recommendation;
(d) the Merger Agreement has been terminated in accordance with its
terms;
(e) the Company has reached an agreement with Parent or the Purchaser
that the Offer or the Merger be terminated or amended;
(f) any state, federal, or foreign government or governmental authority
has taken any action, or proposed, sought, promulgated, or enacted, or any
state, federal, or foreign government or governmental authority or court has
entered, enforced, or deemed applicable to the Offer or the Merger, any
statute, rule, regulation, judgment, order, or injunction that is reasonably
likely to (i) make the acceptance for payment of, the payment for, or the
purchase of, some or all of the Shares illegal or otherwise restrict,
materially delay, prohibit consummation of, or make materially more costly,
the Offer or the Merger, (ii) result in a material delay in or restrict the
ability of the Purchaser, or render the Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares in the Offer or the
Merger, (iii) require the divestiture by Parent, the Purchaser, or the
Company or any of their respective subsidiaries or affiliates of all or any
material portion of the business, assets, or property of any of them or any
Shares, or impose any material limitation on the ability of any of them to
conduct their business and own such assets, properties, and Shares, (iv)
impose material limitations on the ability of Parent or the Purchaser to
acquire or hold or to exercise effectively all rights of ownership of the
Shares, including the right to vote any Shares acquired by either of them on
all matters properly presented to the stockholders of the Company or (v)
impose any limitations on the ability of Parent, the Purchaser, or any of
their respective subsidiaries or affiliates effectively to control in any
material respect the business or operations of the Company, Parent, the
Purchaser, or any of their respective subsidiaries or affiliates;
(g) any change (or any condition, event or development involving a
prospective change) has occurred or been threatened in the business,
properties, assets, liabilities, capitalization, stockholders' equity,
financial condition, operations, licenses or franchises results of
operations, or prospects of the Company or any of its subsidiaries, that is
reasonably expected to result in a Company Material Adverse Effect;
(h) there has occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market or quotations for shares traded thereon as
reported by the Nasdaq or otherwise, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States other than as a participant in police
actions sponsored by international organizations, (iv) any limitation
(whether or not mandatory) by any governmental authority on the extension of
credit by banks or other financial institutions, (v) after the date of the
Merger Agreement, an aggregate decline of at least 25% in the Dow Jones
Industrial Average or Standard & Poor's 500 Index or a decline in either
such index of 12 1/2% in any 24-hour period, or (vi) in the case of any of
the occurrences referred to in clauses (i) through (iv) existing at the time
of the commencement of the Offer, in the reasonable judgment of the
Purchaser, a material acceleration or worsening thereof;
(i) any person or group other than Parent or the Purchaser and their
affiliates has entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or
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<PAGE>
exchange offer for any Shares or a merger, consolidation, or other business
combination or acquisition with or involving the Company or any of its
subsidiaries; or
(j) any material approval, permit, authorization, consent, or waiting
period of any domestic or foreign, governmental, administrative, or
regulatory entity (federal, state, local, provincial or otherwise) has not
been obtained or satisfied on terms satisfactory to the Purchaser in its
sole discretion;
that, in the good faith judgment of the Purchaser, makes it inadvisable to
proceed with the Offer or with such acceptance for payment of, or payment for,
the tendered Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by the Purchaser in whole or in part at any time
and from time to time in its sole discretion (subject to the terms of the Merger
Agreement). The failure by the Purchaser at any time to exercise any of the
foregoing rights will not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances will not be
deemed a waiver with respect to any other facts or circumstances, and each such
right will be deemed an ongoing right that may be asserted at any time and from
time to time.
POTENTIAL OR ACTUAL CONFLICTS OF INTEREST
TRANSITION COMPENSATION AGREEMENTS. Pursuant to Transition Compensation
Agreements, dated October 9, 1998, between the Company and Harvey V. Braswell,
Jerrold L. Morrison and Bernard J. Owens, respectively, the Company agreed with
each of these executives to pay transitional compensation upon a termination
(other than a voluntary termination) of such executive within 18 months of a
change in control (as defined, which would include the consummation of the
Offer) equal to such executive's average salary and cash bonuses received during
the twelve months preceding the change in control. Such agreements also require
the Company to maintain the level of indemnification provided prior to the
change in control to such executives under the Company's Certificate of
Incorporation, bylaws, and any agreement with such executives and under
applicable law.
Pursuant to a Transition Compensation Agreement, dated October 9, 1998,
between Thomas E. Kiraly and the Company, the Company agreed to pay Mr. Kiraly a
retention bonus of $150,000 in the event Mr. Kiraly continues to be employed by
the Company 6 months following a change in control (as defined, which would
include the consummation of the Offer) or in the event his employment is
involuntarily terminated during that period. In addition, in the event Mr.
Kiraly's employment is terminated (other than a voluntary termination) prior to
18 months following a change in control, Mr. Kiraly is entitled to receive
$150,000 in severance. Such agreement also requires the Company to maintain the
level of indemnification provided prior to the change in control to such
executive under the Company's Certificate of Incorporation, bylaws, and any
agreement with such executive and under applicable law.
STOCK TENDER AGREEMENT. The following is a summary of certain provisions of
the Stock Tender Agreement (the "Stock Tender Agreement"), dated as of October
19, 1998 among Purchaser and Parent on one hand and each of Kathryn Ayres Esping
, individually and as Independent Executor of the Estate of P.E. Esping and as
Director of the Esping Family Foundation, and Paul T. Stoffel, individually, on
the other (Ms. Esping and Mr. Stoffel are referred to collectively as the "Stock
Tender Parties") which is filed as Exhibit 7 hereto and is incorporated herein
by reference. Such summary is qualified in its entirety by reference to the
Stock Tender Agreement.
Pursuant to the Stock Tender Agreement, so long as Parent and Purchaser or
the Company has not terminated the Merger Agreement, the Stock Tender Parties
have agreed to validly tender (and not thereafter withdraw) the Shares owned by
them pursuant to and in accordance with the terms of the Offer. The Stock Tender
Parties collectively own a total of 2,968,350 Shares (excluding 324,000 Shares
issuable under presently exercisable stock options), representing approximately
17.4% of the outstanding shares of Common Stock on a fully diluted basis as of
September 30, 1998.
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<PAGE>
In connection with the Stock Tender Agreement, the Stock Tender Parties have
made certain customary representations, warranties and covenants, including with
respect to (i) ownership of the Shares, (ii) the Stock Tender Parties' authority
to enter into and perform their respective obligations under the Stock Tender
Agreement, (iii) the ability of the Stock Tender Parties to enter into the Stock
Tender Agreement without violating other agreements to which they are a party,
(iv) the absence of liens and encumbrances on and in respect of the Stock Tender
Parties' Shares and (v) restrictions on the transfer of the Stock Tender
Parties' Shares. The obligations of the Stock Tender Parties under the Stock
Tender Agreements are several and not joint.
STOCK OPTIONS. The vesting provisions of each stock option granted to the
Company's directors and executive officers provides for acceleration upon a
change in control of the Company. The consummation of the Offer will, for the
purposes of each of these stock options, constitute a change in control. The
following schedule sets forth the number of shares of the Company subject to
issuance under each outstanding option granted to the directors and executive
officers of the Company:
<TABLE>
<CAPTION>
DIRECTORS AND/OR EXECUTIVE OFFICERS OUTSTANDING OPTIONS
- ------------------------------------------------------------------------- -------------------
<S> <C>
L. D. Brinkman........................................................... 60,000
Robert E. Masterson...................................................... 60,000
David H. Monnich......................................................... 60,000
Paul T. Stoffel.......................................................... 60,000
Jerrold L. Morrison...................................................... 390,000
Harvey Braswell.......................................................... 150,000
William J. Fosick........................................................ 66,000
Thomas E. Kiraly......................................................... 210,000
Bernard J. Owens......................................................... 214,000
</TABLE>
STOFFEL AGREEMENT. Pursuant to an Agreement (the "Stoffel Agreement") dated
October 18, 1998, the Company agreed to pay Paul T. Stoffel, the Chairman of the
Board of the Company, an amount equal to $1,300,000 within two business days of
the consummation of any transaction occurring prior to December 31, 2000
pursuant to which (i) any person or entity unaffiliated with the Company
acquires at least a majority of the outstanding shares of Common Stock; (ii) a
merger, consolidation or other business combination of the Company with any
person or entity unaffiliated with the Company as of October 18, 1998 occurs or
(iii) any person or entity unaffiliated with the Company as of October 18, 1998
acquires not less than a majority of the assets of the Company. The Board
authorized the execution and delivery of this agreement with Mr. Stoffel by a
unanimous vote of the members of the Board, other than Mr. Stoffel, during a
portion of a meeting of the Board on October 18, 1998 at which Mr. Stoffel was
not present. In connection with its agreement with Mr. Stoffel, the Company has
also agreed to indemnify Mr. Stoffel against certain expenses and liabilities
arising in connection with such agreement, including liabilities arising under
the Federal securities laws.
ITEM 4. THE SOLICITATION AND OR RECOMMENDATION.
(a) NATURE OF THE RECOMMENDATION.
At various times over the past few years, senior executives of Parent and
senior executives of the Company have had discussions regarding Parent's
interest in exploring a possible business combination with the Company. In
addition, from time to time in the past, representatives of the Company,
including Paul Stoffel and the late P. E. Esping, the former Chairman and Chief
Executive Officer of the Company, contacted or were contacted by third parties
and engaged in general, but limited, discussions regarding the possibility of a
material business transaction involving the Company or a substantial portion of
its assets. In some of these cases the Company entered into customary
confidentiality and nondisclosure agreements with these third parties and
provided some nonpublic information regarding the Company, its assets,
13
<PAGE>
financial condition and prospects. None of these discussions led to a proposal
regarding the price, terms and structure of a transaction including the Shares.
During the period of July and August 1996, Parent and the Company discussed
the possibility of a business combination. These discussions were terminated in
September 1996, prior to any discussions regarding price or structure.
No further discussions occurred between the parties until May 1998 when Paul
Stoffel, Chairman of the Board of the Company, contacted Jeffrey A. Rich,
President and Chief Operating Officer of Parent regarding a possible meeting
between the parties. Subsequently, Messrs. Stoffel and Rich met at Parent's
offices where Messrs. Rich and Stoffel discussed the Company's business and the
possibility of entering into a business combination. At the conclusion of the
meeting, Mr. Stoffel suggested that Mr. Rich meet with Perry E. Esping, then
Chairman and Chief Executive Officer of the Company.
In late May 1998, Messrs. Esping, Stoffel and Rich met at Parent's offices.
During the meeting, Mr. Esping discussed the Company's business and operations.
Although no specific terms of a business combination were discussed during this
meeting, it was agreed that Parent and the Company would enter into a
Non-Disclosure Agreement and that the Company would provide Parent with various
financial information regarding the Company.
On June 15, 1998, Parent and the Company executed a Non-Disclosure
Agreement. On June 17, 1998, Mr. Stoffel, Thomas E. Kiraly, Chief Financial
Officer of the Company, and several representatives of Parent met at Parent's
offices to review and discuss the Company's business and financial information.
During the period of July and August 1996, Parent and the Company discussed
the possibility of a business combination. These discussions were terminated in
September 1996 prior to any discussion regarding price or structure.
Over the next few weeks, Messrs. Rich and Stoffel had various telephone
discussions regarding a possible business combination between Parent and the
Company. During these conversations. Messrs. Rich and Stoffel generally
discussed the continuing financial performance of the Company, management of the
Company and various potential structures for a transaction.
On July 6, 1998, representatives of Parent met with representatives of the
Company, including several of the Company's operating managers to initiate due
diligence. On July 9, 1998, Messrs. Rich and Stoffel held a meeting at Parent's
offices at which Mr. Rich advised Mr. Stoffel that, based upon parent's initial
due diligence review, Parent was not interested pursuing a transaction with the
Company at that particular point. Thereafter, discussions between the parties
ceased.
On September 21, 1998, Mr. Stoffel, then Chairmen of the Company, called Mr.
Rich to arrange a meeting. On September 24, 1998, Messrs. Stoffel, and Rich and
John H. Rexford, Senior Vice President of Parent met at Parent's offices. At the
meeting, Mr. Stoffel suggested to Messrs. Rich and Rexford that Parent should
reevaluate a potential acquisition of the Company. Mr. Stoffel briefly updated
Messrs. Rich and Rexford on the Company's business and affairs, and at that
meeting, Mr. Rich indicated that he would reevaluate the potential for a
transaction.
On October 1, 1998, Messrs. Rich and Rexford contacted Mr. Stoffel and
proposed a cash purchase of $16.00 per share. Mr. Stoffel immediately rejected
this proposal and indicated that the Company would not be interested in pursuing
a transaction at that price.
On October 6, 1998, at the request of the Parent, Mr. Kiraly and several
representatives of Parent met at Parent's offices to review and discuss the
financial results and business prospects of the Company. Mr. Kiraly gave
Parent's representatives an update on the financial performance of the Company,
which included a detailed discussion of the operating results of each of the
Company's divisions.
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<PAGE>
On the afternoon of October 7, 1998, Mr. Rich asked to meet with Mr.
Stoffel. At a meeting that evening, Mr. Rich proposed an offer of $18.00 per
share, and later following negotiation, that offer was increased to $19.00 per
share. Mr. Stoffel then agreed to submit the proposed $19.00 per Share proposal
to the Board. The next morning, following informal discussions with the Board,
Mr. Stoffel called Mr. Rexford and indicated that the Board would support a cash
purchase price of $19.00 per share subject to the negotiation of a definitive
merger agreement.
On October 9, 1998, Parent's counsel distributed a draft of the Merger
Agreement to the Company's counsel. On October 10 and 11, 1998, senior
management to the Company met with counsel to the Company and with Donaldson,
Lufkin & Jenrette Securities Corporation ("Donaldson, Lufkin & Jenrette") and
reviewed the principal provisions of the Merger Agreement.
On October 12, 1998, the Board met regarding the draft Merger Agreement at a
meeting attended by counsel and senior management of the Company and by a
representative of Donaldson, Lufkin & Jenrette. At that meeting, counsel and
senior management of the Company reviewed the material provisions of the Merger
Agreement and answered questions of members of the Board with regard thereto.
Thereafter, the Board discussed a variety of issues relating to the structure of
the transaction and material features of the Merger Agreement, including
conditions of the Offer, provisions relating to the ability of the Company to
terminate the Merger Agreement in the event that a third party should make a
superior acquisition proposal, matters relating to termination fees and
reimbursement of expenses, matters relating to the timing of the proposed
transaction, the nature of the representations and warranties that the Company
would be obligated to make and covenants concerning the Company's conduct of its
business. Following this discussion, the Board gave instructions to its senior
management and counsel regarding the continuation of negotiations with the
Parent and the Purchaser.
On October 12-14, 1998, meetings among the representatives of the Company
and Parent were held during which negotiations on the Merger Agreement were
conducted and additional legal and financial due diligence regarding the Company
was conducted by Parent. Negotiations with respect to the Merger Agreement
addressed, among other things, the number of Shares to be purchased in the
Offer, circumstances under which a termination fee would be payable, the amount
of the termination fee, provisions imposing restrictions on the Company's
ability to enter into a competing transaction, representations and warranties
and conditions of the Offer.
After these negotiations, Parent's counsel circulated a revised draft of the
Merger Agreement on the evening of October 14, 1998, and on October 15, 1998,
the negotiation of the Merger Agreement continued.
On October 15, 1998, Parent's board of directors held a special meeting to
discuss the proposed transaction. At the meeting, Parent's representatives
reviewed the status of the proposed transaction, the results of Parent's due
diligence review and the proposed terms of the Merger Agreement. At the
conclusion of the meeting, Parent's board of directors unanimously approved the
Offer, the Merger and the Merger Agreement and gave authority to Parent's
representatives to finalize negotiations of the Merger Agreement.
On October 15, 1998, the Board held a special meeting and discussed the
status of the negotiations, the proposed terms of the Offer, the Merger and the
Merger Agreement and received a report from counsel and senior management of the
Company regarding the resolution of the issues previously identified to the
Board and matters as to which the Board had given instructions to counsel and
senior management. In addition, the Board authorized the retention of Donaldson,
Lufkin & Jenrette to render an opinion that the consideration to be received by
the holders of the Shares in the Offer and the Merger would be fair to such
holders from a financial point of view, and Donaldson, Lufkin & Jenrette was so
engaged on October 16, 1998. Following those discussions, the Board then
directed its representatives to finalize negotiations relating to the Offer, the
Merger and the Merger Agreement.
15
<PAGE>
On October 16, 1998, the parties concluded their negotiations regarding the
Merger Agreement, and over the weekend of October 17-18, 1998, finalized the
Merger Agreement and the Stock Tender Agreement.
On October 18, 1998, the Board held a special meeting and discussed the
terms of the Offer, the Merger and the Merger Agreement. At this meeting,
Donaldson, Lufkin & Jenrette delivered to the Board its written opinion dated
October 18, 1998 to the effect that, based upon and subject to the assumptions
and limitations set forth therein, the consideration to be received by the
holders of the Shares in the Offer and the Merger was fair to such holders from
a financial point of view. The Board then unanimously approved the Offer, the
Merger and the Merger Agreement (subject to modifications by the appropriate
officers of the Company), and determined that the terms of the Offer, the Merger
and the Merger Agreement are fair to, and in the best interests of the
stockholders of the Company. In addition, determined to recommend that
stockholders of the Company to accept the proposed Offer and tender their Shares
pursuant to the Offer.
On October 19, 1998, Parent, the Purchaser, and the Company entered into the
Merger Agreement, and Parent, the Purchaser and the Stock Tender Parties entered
into the Stock Tender Parties entered into the Stock Tender Agreement. Separate
press releases announcing the transaction were issued by Parent and the Company
before the opening of the U.S. stock markets on the morning of October 19, 1998.
On October 22, 1998, Parent and the Purchaser commenced the Offer.
RECOMMENDATION OF THE BOARD. (a) The Board recommends that the Company's
stockholders accept the Offer, tender their Shares pursuant to the Offer and, if
required by applicable law, approve and adopt the Merger Agreement. In reaching
its decision to recommend acceptance of the Offer, the Board determined that the
Offer Price and the Merger Consideration are fair to the Company's stockholders
and that the Offer and the Merger are in the best interests of the Company and
its stockholders and are fair to the stockholders of the Company.
(b) REASONS FOR THE TRANSACTION.
In reaching its conclusions described above, the Board asked for and
received information, made certain judgments and considered a number of factors,
including, without limitation, the following:
(i) In reviewing the Offer and the Merger, the Board considered
presentations from, and reviewed the terms and conditions of the Offer and
the Merger with, senior executive officers of the Company, representatives
of its legal counsel and representatives of its financial advisor,
Donaldson, Lufkin and Jenrette;
(ii) In reviewing the Offer and the Merger, the Board also considered,
among other things, information with respect to the financial condition,
results of operations and business of the Company, on both a historical and
prospective basis, and current industry, economic and market conditions. The
Board also reviewed the historical market prices, price to earnings
multiples and recent trading patterns of the Common Stock and considered the
market prices and financial data related to other companies engaged in
businesses similar to some or all of the businesses of the Company and the
prices and premiums paid, and other terms, in recent acquisition
transactions;
(iii) In connection with its deliberations, the Board considered the
results of efforts by the Company's management and members of the Board to
solicit other expressions of interest or proposals from third parties with
respect to a transaction with the Company;
(iv) The Board engaged Donaldson, Lufkin & Jenrette to render a fairness
opinion in connection with the approval of the Offer and the Merger.
Donaldson, Lufkin & Jenrette reviewed various financial and other
information and delivered its written opinion to the Board to the effect
that, based upon and subject to the assumptions and limitations set forth
therein, the consideration to be received by the holders of Shares is fair
to such holders from a financial point of view. A copy of the opinion of
Donaldson, Lufkin & Jenrette is filed as Annex A hereto and is incorporated
herein by reference;
16
<PAGE>
(v) In analyzing the consideration to be received by the Company's
stockholders as a result of the Offer and the Merger, the Board noted that
$19.00 per share represents a 16.9% premium over the $16.25 per share
closing price on The Nasdaq National Market on October 16, 1998, the last
full trading day prior to public announcement of the execution of the Merger
Agreement, and an 18.8% premium to the average closing price on The Nasdaq
National Market for the 20 trading days preceding the public announcement of
the execution of the Merger Agreement; in evaluating these premiums, the
Board noted that the Company had large cash and investment balances for
which premiums are not normally obtained; and
(vi) In reviewing the Offer and the Merger, the Board noted that the
Merger Agreement is structured to accommodate certain unsolicited
third-party proposals to acquire the Company and specifically permits the
Company to provide information to and negotiate or discuss such proposals if
the Board determines, after consultation with and the advice of the
Company's financial advisor and legal counsel, that to provide such
information or to engage in such negotiations or discussions are consistent
with the fiduciary duties of the Board under applicable law; and if a
proposal is determined to be superior to the Offer, the Board would be
permitted to recommend its approval to the stockholders of the Company,
(although the Company's ability to accept competing proposals is subject in
certain cases to the obligation to pay Parent a termination fee of
$10,000,000 plus all out-of-pocket fees and expenses incurred by the
Purchaser and Parent in connection with the Offer and the Merger and the
proposed consummation of the transactions contemplated in the Merger
Agreement, not in excess of $3,000,000).
Based upon the foregoing and other factors, the Board determined that the
Offer and the Merger were in the best interests of the Company and its
stockholders, and approved, by unanimous vote, the Offer, the Merger and the
Merger Agreement, and unanimously voted to recommend that stockholders of the
Company accept the Offer, tender their shares of Common Stock pursuant to the
Offer and, if required by applicable law, approve and adopt the Merger
Agreement.
The foregoing discussion of the information and factors considered by the
Company's Board of Directors is not intended to be exhaustive but is intended to
include the material factors considered by the directors. In the view of the
wide variety of factors considered by the Company's Board of Directors, the
directors did not find it practical to, and did not, quantify or otherwise
assign relative weight to the specific factors considered and individual
directors may have ascribed differing weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to an engagement letter dated October 16, 1998, the Company
retained Donaldson, Lufkin & Jenrette for the purpose of rendering its opinion
regarding the fairness to the holders of Shares of the consideration to be
received by such holders in the Offer and the Merger from a financial point of
view, to the Company's stockholders. Contemporaneous with the execution and
delivery of this engagement letter, the Company paid Donaldson, Lufkin &
Jenrette a retainer fee of $100,000. In addition, at the time that Donaldson,
Lufkin & Jenrette notified the Board that it was prepared to deliver its opinion
regarding the fairness to the holders of Shares of the consideration to be paid
to such holders in the Offer and the Merger from a financial point of view, the
Company became obligated to pay an additional sum of $500,000. Finally, in the
event that the Company requests an update to the opinion of Donaldson, Lufkin &
Jenrette, the Company is obligated to pay an additional $100,000 with respect to
each such update. The Company will be obligated to pay these fees to Donaldson,
Lufkin & Jenrette regardless of the conclusion reached by that firm with regard
to the fairness of the consideration to be received by the holders of Shares in
the Offer and the Merger. As a part of its engagement of Donaldson, Lufkin &
Jenrette, the Company has agreed to indemnify that firm against certain expenses
and liabilities arising in connection with their engagement, including
liabilities arising under the Federal securities laws.
See Item 3(b). "Identity and Background--Potential or Actual Conflicts of
Interest--Stoffel Agreement," located at page 13 of this Statement, which
discusses obligations of the Company to pay Paul T. Stoffel a fee upon
consummation of certain transactions prior to December 31, 2000.
17
<PAGE>
Except as set forth above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any person to make
solicitations or recommendations to the Company's stockholders.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) From time to time in the past, the Company has purchased shares of its
Common Stock in open market transactions or block trades pursuant to Regulation
M as promulgated under the Securities Exchange Act of 1934, as amended, when, in
the opinion of the Company's management, conditions exist that make such
purchases advantageous to the Company. The Company has effected a number of such
repurchases during the 60 days preceding the date hereof. Set forth below is a
table listing each such transaction.
<TABLE>
<CAPTION>
NO. OF SHARES
DATE REPURCHASED PRICE
- --------- ------------- ---------
<S> <C> <C>
08/19/98 4,250 $ 17.601
08/28/98 4,750 $ 16.475
08/31/98 5,100 $ 15.850
09/01/98 20,000 $ 15.250
09/03/98 75,000 $ 14.877
<CAPTION>
NO. OF SHARES
DATE REPURCHASED PRICE
- --------- ------------- ---------
<S> <C> <C>
09/03/98 5,100 $ 14.877
09/04/98 5,100 $ 15.375
09/08/98 7,000 $ 15.375
09/09/98 6,300 $ 16.000
09/11/98 2,500 $ 15.875
<CAPTION>
NO. OF SHARES
DATE REPURCHASED PRICE
- --------- ------------- ---------
<S> <C> <C>
09/18/98 6,100 $ 17.250
09/21/98 296,900 $ 15.500
09/24/98 8,200 $ 15.625
09/25/98 5,000 $ 16.500
09/29/98 3,400 $ 16.875
<CAPTION>
NO. OF SHARES
DATE REPURCHASED PRICE
- --------- ------------- ---------
<S> <C> <C>
10/01/98 2,000 $ 16.500
10/02/98 4,700 $ 16.500
10/05/98 3,600 $ 16.500
10/06/98 3,600 $ 16.500
10/07/98 3,600 $ 16.500
</TABLE>
Except for the issuance of shares of Common Stock upon exercise of
outstanding options and such repurchases, no transactions in the Common Stock
have been effected during the past 60 days by the Company. To the best of the
Company's knowledge, no transactions in the Common stock have been effected by
an executive officer, director, subsidiary or affiliate of the Company other
than those described below.
On the indicated dates and at the indicated prices, Jerrold L. Morrison, the
President and Chief Operating Officer of the Company, purchased in open market
transactions the following shares of Common Stock: August 25, 1998: 125 shares
at $17.00; August 26, 1998: 775 shares at $17.00; August 29, 1998: 3,000 shares
at $16.50; August 31, 1998: 600 and 700 shares at $15.75 and $17.25,
respectively; September 1, 1998: 1,000 shares at $15.00; and September 2, 1998:
1,000 shares at $15.375. On August 31, 1998, Harvey V. Braswell, President of
the Government Services Division of the Company, purchased 1,200 shares of
Common Stock at a price of $16.50 per share in an open market transaction.
(b) See Item 3(b). "Identity and Background--Potential or Actual Conflicts
of Interests--Stock Tender Agreement," located at page 12 of this Statement,
which discusses the obligations of Paul T. Stoffel, individually, and Kathryn
Ayres Esping, individually and as Independent Executor of the Estate of P.E.
Esping and as a Director of the Esping Family Foundation, to tender their Shares
pursuant to the Offer. To the best of the Company's knowledge, to the extent
permitted by applicable securities laws, rules and regulations, each executive
officer, director and affiliate of the Company currently intends to tender all
shares of Common Stock over which he or she has sole dispositive power to the
Purchaser pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as indicated above in Items 3 and 4 with respect to the Offer and
the Merger, no discussions or negotiations are being undertaken or are under way
by the Company in response to the Offer or the Merger which relate to, or would
result in, (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company, (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company, (iii) a tender offer for or other acquisition of securities by, or of,
the Company, or (iv) any material change in the present capitalization or
dividend policy of the Company, other than, pursuant to the Merger Agreement,
the Company has agreed not to declare or pay any dividends on its capital stock
while the Offer is pending.
18
<PAGE>
(b) Except as indicated above in Items 3 and 4 hereto in connection with the
Offer and the Merger, there are no transactions, board resolutions, agreements
in principle or signed contracts in response to the Offer which would relate to
or would result in one or more of the matters referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Information Statement
The Information Statement attached as Annex B hereto is being furnished in
connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Company's Board other than
at a meeting of the Company's stockholders as described in Item 3(b), "Identity
and Background--The Merger Agreement--Stockholders Meeting" located at page 6 of
this Statement.
(b) Section 203 of the Delaware General Corporation Law
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the Delaware General Corporation Law. Under Section 203, certain
"business combinations" between a Delaware corporation whose stock is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that such
a stockholder became an interested stockholder, unless (i) the corporation has
elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the transaction in
which the stockholder became an interested stockholder or the business
combination was approved by the Board of Directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the Board of
Directors of the corporation and ratified by 66 2/3% of the voting stock which
the interested stockholder did not own. The term "business combination" is
defined generally to include mergers or consolidations between a Delaware
corporation and an "interested stockholder," transactions with an "interested
stockholder" involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an "interested
stockholder's" percentage ownership of stock. The term "interested stockholder"
is defined generally as a stockholder who, together with affiliates and
associates, owns (or, within three years prior, did own) 15% or more of a
Delaware corporation's voting stock.
In accordance with the Merger Agreement and Section 203, the Board approved
the Offer, the Merger and the other transactions contemplated by the Merger
Agreement and, therefore, the restrictions of Section 203 are inapplicable to
the Offer, the Merger and the related transactions.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in such states. In
Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions.
19
<PAGE>
(d) Antitrust
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and the rules that have been promulgated thereunder by the
Federal Trade Commission ("FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. The acquisition of
Shares pursuant to the Offer is subject to such requirements. There may be
similar antitrust requirements in other jurisdictions.
Parent has informed the Company that promptly following the commencement of
the Offer, it anticipates filing with the FTC and the Antitrust Division a
Premerger Notification and Report Form in connection with the purchase of Shares
pursuant to the Offer. The Company anticipates filing, with the same
authorities, shortly thereafter, a responsive Premerger Notification and Report
Form as required under the HSR Act of companies being acquired. Under the
provisions of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing by Parent, unless both the
Antitrust Division and the FTC terminate the waiting period prior thereto. If,
within such 15-calendar day waiting period, either the Antitrust Division or the
FTC requests additional information or documentary material from Parent, the
waiting period would be extended for an additional 10 calendar days following
substantial compliance by Parent with such request. Thereafter, the waiting
period could be extended only by court order. Only one extension of such waiting
period pursuant to a request for additional information is authorized by the HSR
Act and the rules promulgated thereunder, except by court order. Any such
extension of the waiting period will not give rise to any withdrawal rights not
otherwise provided for by applicable law.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase by
Purchaser of Shares pursuant to the Offer, either of the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Parent, its subsidiaries
or the Company. Private parties and state attorneys general may also bring legal
action under federal or state antitrust laws under certain circumstances.
Based upon an examination of publicly available information, and information
provided to the Company by Parent, relating to the businesses in which Parent
and its subsidiaries are engaged, the Company has determined that the Company
and Parent both provide similar services in certain geographic areas. Although
the Company believes that the Purchaser's acquisition of Shares pursuant to the
Offer would not violate the antitrust laws, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such
challenge is made, what the outcome will be. See Item 3(b). "Certain Conditions
to the Offer" located at page 10 of this Statement.
20
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated October 18, 1998, among Parent, the Company
and Purchaser** ***
Exhibit 2 Transitional Compensation Agreement, dated October 9, 1998 between the Company
and Jerrold L. Morrison**
Exhibit 3 Transitional Compensation Agreement, dated October 9, 1998 between the Company
and Harvey Braswell**
Exhibit 4 Transitional Compensation Agreement, dated October 9, 1998 between the Company
and Thomas E. Kiraly**
Exhibit 5 Transitional Compensation Agreement, dated October 9, 1998 between the Company
and Bernard J. Owens**
Exhibit 6 Agreement, dated October 18, 1998 between the Company and Paul T. Stoffel**
Exhibit 7 Stock Tender Agreement, dated October 19, 1998, by and between Parent, Purchaser
and each of Paul T. Stoffel, individually, and Kathryn Ayres Esping,
individually and as Independent Executor of the Estate of P.E. Esping and as
Director of the Esping Family Foundation**
Exhibit 8 Letter dated October 23, 1998, to the stockholders of the Company from the Chief
Operating Officer of the Company*
Exhibit 9 Opinion of Donaldson Lufkin & Jenrette dated October 18, 1998*
Exhibit Press Release by the Company, dated October 19, 1998**
10
</TABLE>
- ------------------------
* These documents are included in the materials mailed to stockholders
pursuant to the Offer.
** These documents were filed with the Securities and Exchange Commission as
exhibits to this Statement, but were not included in the mailing to
stockholders. Such documents and other information may be inspected at the
public reference facilities maintained by the Securities and Exchange
Commission (the "Commission") at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material may also be obtained at prescribed rates from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a World Wide Web site
on the Internet at http://www.sec.gov that contains reports and other
information regarding registrants that file electronically with the
Commission. Such material may also be inspected at the offices of The Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
*** Schedules to this Agreement have been omitted but description of such
schedules may be found in the Agreement where referred to. The Company
hereby undertakes to provide copies of such omitted schedules to the staff
of the Securities and Exchange Commission upon request.
21
<PAGE>
SIGNATURE
(AFTER) REASONABLE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I
CERTIFY THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND
CORRECT.
<TABLE>
<S> <C> <C>
BRC HOLDINGS, INC.
By: /s/ JERROLD L. MORRISON
-----------------------------------------
Jerrold L. Morrison
PRESIDENT AND CHIEF
OPERATING OFFICER
</TABLE>
Date: October 23, 1998
22
<PAGE>
ANNEX A
OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE>
[LOGO]
October 18, 1998
Board of Directors
BRC Holdings, Inc.
1111 West Mockingbird
Suite 1400
Dallas, TX 75247
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock, par value $0.10
per share (the "Shares"), of BRC Holdings, Inc. (the "Company") of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, to be dated as of October 19, 1998 (the
"Agreement"), by and among Affiliated Computer Services, Inc. ("Buyer"), ACS
Acquisition Corporation ("MergerCo"), a wholly-owned subsidiary of Buyer, and
the Company. Pursuant to the Agreement, MergerCo will commence a tender offer
(the "Tender Offer") for 51% of outstanding Shares at a price of $19.00 in cash
per Share (the "Offer Price"). The Tender Offer is to be followed by a merger
(the "Merger") of MergerCo with and into the Company in which the Shares not
tendered into the Tender Offer would be converted, subject to certain
exceptions, into the right to receive the Offer Price. The Tender Offer,
together with the Merger, is referred to herein as the "Transaction".
In arriving at our opinion, we have reviewed the draft dated October 15,
1998 of the Agreement. We also have reviewed financial and other information
that was publicly available or furnished to us by the Company including
information provided during discussions with management and directors of the
Company. Included in the information provided during discussions with management
were certain financial projections of the Company for the period beginning
January 1, 1998 and ending December 31, 2003 prepared by the management of the
Company. In addition, we have compared certain financial and securities data of
the Company with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the Shares
of the Company, reviewed prices paid in certain other business combinations and
conducted such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion. We have been engaged by the Board of
Directors of the Company and the Company solely to render an opinion as to the
fairness from a financial point of view to the holders of Shares of the
consideration to be received by such shareholders pursuant to the Transaction.
We have not been engaged to assist in negotiating the financial or other terms
of the Transaction or to provide advice as to any particular acquisition
proposal. In addition, we were not requested to, nor did we, solicit the
interest of any other party in acquiring the Company.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us by management of the Company, we have
assumed that they have been reasonably prepared on the basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future operating and financial performance of the Company. We
A-1
<PAGE>
have not assumed any responsibility for making an independent evaluation of any
assets or liabilities or for making any independent verification of any of the
information reviewed by us. We have relied as to certain legal matters on advice
of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Transaction and the other business strategies being considered by
the Company's Board of Directors, nor does it address the Board's decision to
proceed with the Transaction. This opinion is for the use and benefit of the
Board of Directors of the Company in connection with its consideration of the
Transaction. Our opinion does not constitute a recommendation to any stockholder
as to whether such stockholder should tender Shares pursuant to the Tender Offer
or how such stockholder should vote on the proposed Transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Buyer in the past, including acting as
comanager for the Buyer's convertible debt offering in March 1998, and has been
paid customary fees for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the holders of Shares
pursuant to the Transaction is fair to such shareholders from a financial point
of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Tom C. Davis
-----------------------------------
Tom C. Davis
MANAGING DIRECTOR
A-2
<PAGE>
ANNEX B
INFORMATION STATEMENT
<PAGE>
BRC HOLDINGS, INC.
1111 W. MOCKINGBIRD LANE, SUITE 1400
DALLAS, TEXAS 75247-5014
------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
---------------------
This Information Statement (the "Information Statement") is being mailed on
or about October 23, 1998, as part of the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
shares of Common Stock at the close of business on or about October 20, 1998.
You are receiving this Information Statement in connection with the possible
appointment of persons designated by Purchaser to serve on the Company's Board
of Directors (the "Board"). The Merger Agreement provides that, at the time
Purchaser shall purchase and pay for any Shares, Purchaser shall be entitled to
designate the minimum number of directors that will constitute a majority of
total number of seats on the Board (including those seats which Purchaser
designates directors to fill). This Information Statement is required by Section
14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and Rule 14f-1 thereunder. See "Change in Board of Directors Upon Consummation
of the Offer--Right to Designate Directors; Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the accompanying Schedule
14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
October 23, 1998. The Offer is scheduled to expire at 12:00 midnight on November
20, 1998, unless Purchaser extends the Offer. The Offer is conditioned on, among
other things, (i) there being validly tendered and not withdrawn prior to the
expiration of the Offer a minimum of 8,704,238 shares of Common Stock
(approximately 51% of the outstanding shares of Common Stock on a fully diluted
basis) (the "Minimum Amount"), and (ii) the expiration or termination of all
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvement Act
of 1976, as amended. The Offer is also subject to certain other terms and
conditions. Upon the expiration of the Offer, if all conditions of the Offer
have been satisfied or waived (including the tender of at least the Minimum
Amount of shares), Purchaser has agreed to purchase the Minimum Amount of shares
validly tendered pursuant to the Offer and not withdrawn. In the event that more
than the Minimum Amount of shares are validly tendered prior to the Expiration
Date and not withdrawn, the Purchaser will, upon the terms and subject to the
conditions of the Offer, accept such shares for payment on a pro rata basis,
with adjustments to avoid purchase of fractional shares, based upon the number
of shares so tendered.
The information contained in this Information Statement concerning the
Purchaser has been furnished to the Company by Parent and the Purchaser, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
B-1
<PAGE>
CHANGE IN BOARD OF DIRECTORS
UPON CONSUMMATION OF THE OFFER
GENERAL
The shares of Common Stock are the only class of voting securities of the
Company outstanding. Each share has one vote. As of October 21, 1998, the
Company had 13,720,644 shares outstanding. The number of members that
constitutes the entire Board is five members, with one position being vacant.
Each director holds office until such director's successor is duly elected and
qualified or until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES
BOARD REPRESENTATION. The Merger Agreement provides that at the time
Purchaser shall purchase and pay for the Shares, Purchaser shall be entitled to
designate the minimum number of directors that will constitute a majority of
total number of seats on the Board (including those seats which Purchaser
designates directors to fill). The Company expects the Purchaser to exercise
this right. In furtherance thereof, the Company is obligated to either increase
the size of the Board or secure the resignations of such number of incumbent
directors, or both, as is necessary to enable the appropriate number of
Purchaser's designees to be elected or appointed to the Company's Board.
Notwithstanding the foregoing, the Company has the right under the Merger
Agreement to have at least two of its current directors remain on the Board. In
the event that the Purchaser exercises its right to name a majority of the
members of the Board, the Company intends to secure the resignations of two of
its current directors, thus retaining two positions on the Board and allowing
Purchaser to designate three directors to be elected or appointed to fill the
vacancies created by such resignations. The Company's obligation to elect or
appoint such designees to the Board is subject to Section 14(f) of the Exchange
Act. The Company is required to take all action necessary to effect such
election or appointment and to include in this Information Statement the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder.
PURCHASER DESIGNEES. Information concerning the Purchaser's designees to
serve on the Board (the "Purchaser Designees") is set forth in Exhibit A hereto.
Such information was provided by the Purchaser and the Company does not assume
any responsibility for the accuracy or completeness thereof. To the best
knowledge of the Company, none of the Purchaser Designees beneficially owns any
equity securities in the Company.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS
The names of the Company's current directors, their ages as of October 21,
1998 and certain other information about them are set forth below. As indicated
above, it is anticipated that two of the directors of the Company will be
requested to resign effective as of the consummation of the Offer. No decision
has been made as of the date hereof regarding which of the Company's directors
will be asked to resign if the Purchaser exercises its rights to designate
persons to serve as members of the Board of Directors. Directors hold office
until the next annual meeting of stockholders or until their respective
successors have been duly elected and qualified.
PAUL T. STOFFEL, age 64, has been a director of the Company since March 1989
and is Chairman of the Audit Committee of the Board of Directors. Mr. Stoffel
has been Chairman of the Board of Directors of the Company since September 16,
1998. Mr. Stoffel is Chairman of Paul Stoffel Capital Corporation which engages
in various public and private investments. He is also a director of Centex
Corporation which is engaged in the residential construction and development
industry. Mr. Stoffel was Managing Director of Paine Webber, Inc., an investment
banking company, from 1979 through 1985.
B-2
<PAGE>
L. D. BRINKMAN, age 69, has been a director of the Company since January
1989. Mr. Brinkman serves on the Compensation Committee of the Board of
Directors. He has been Chairman of the Board, Chief Executive Officer and
President of LDB Corporation since 1970. LDB Corporation owns and franchises Mr.
Gatti's restaurants.
ROBERT E. MASTERSON, age 53, has been a director of the Company since May
1995. Mr. Masterson is Chairman of Service Data Corporation and has served in
such capacity since 1991. From 1986 to 1991, Mr. Masterson was owner and
President of Masterson Properties, a real estate and investment company. He
served as a division President with American Express Company in the travel,
corporate card and information services divisions from 1984 to 1986. Prior to
that time, Mr. Masterson was President and Chief Executive Officer of First Data
Resources, Inc., a subsidiary of American Express which provides data processing
services.
DAVID H. MONNICH, age 67, has been a director of the Company since January
1989, serves on the Audit Committee and is Chairman of the Compensation
Committee of the Board of Directors. Mr. Monnich is Chairman and Chief Executive
Officer of Crown Steel, Inc. and has served in such capacity since January 1996.
Mr. Monnich was President and Chief Executive Officer of DHM Corporation, a
private holding company, prior to 1996. Mr. Monnich sought protection under the
United States Bankruptcy Code on June 16, 1995 and received a discharge under
Chapter 7, thereof, on October 28, 1995.
EXECUTIVE OFFICERS
Executive officers are elected by the Board of Directors at its annual
meeting and subject to the discretion of the Board of Directors, hold office
until its next annual meeting or until their successors have been duly elected
and qualified. The names of the Company's current executive officers, their ages
as of October 21, 1998 and certain other information about them are set forth
below.
JERROLD L. MORRISON, age 43, is President and Chief Operating Officer and
has served is such capacity since January 1996. He was Executive Vice President
of the Company since February 1, 1995 and also has served as President of BRC
Health Care, Inc., a wholly owned subsidiary of the Company, from August 1995 to
June 1996. Previously he spent seven years as an executive officer of Newtrend,
L.P., a financial products and services company in Orlando, Florida serving as
President of the client server division the last two years of that period.
HARVEY V. BRASWELL, age 53, has been the President of the Government
Services Division of the Company since November 1996. Upon joining the Company
in January 1996, he served as Vice President of Information Services and Senior
Vice President of Operations for the Government Services Division. From 1976 to
September 1995, Mr. Braswell held executive management positions with Electronic
Data Systems in their Government Systems and Health Care Divisions. Mr. Braswell
currently serves on the Board of Directors of the North Carolina Electronics and
Information Technologies Association, an organization comprised of executives
from technology companies located in North Carolina, which seeks to provide its
members a forum for discussing industry trends and issues.
WILLIAM J. FOSICK, age 51, has been President of The Pace Group, Inc., a
wholly-owned subsidiary of the Company, since November 1997. Prior to that time,
Mr. Fosick served as a Senior Vice President of The Pace Group, Inc. from 1993
to November 1997. From 1989 to 1993 Mr. Fosick was the general manager of
managed care operations with Employer's Health Insurance, a national health
insurance provider. Mr. Fosick also currently serves as a member of the Board of
Directors of the Mayo Health Plan in Jacksonville, Florida, a health care
services provider.
THOMAS E. KIRALY, age 38, has been the Company's principal financial and
accounting officer since December 1988. Mr. Kiraly has held the title of Chief
Financial Officer since March 1994. Prior to that time, he served as Vice
President of Finance. He formerly was a Senior Management Consultant with
B-3
<PAGE>
Touche Ross & Co., a predecessor to Deloitte & Touche, a national accounting
firm, from May 1985 until December 1988.
BERNARD J. OWENS, age 52, has been President of the Company's Government
Records Management division since July 1996 and has been Executive Vice
President of the Company since June 1992. He was President of the Eastern Region
from May 1989 to June 1992. He was Vice President of its Northeast Region from
1984 through May 1989.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has established the Audit Committee, the Compensation
Committee, and the Nominating Committee to assist the Board of Directors in
carrying out its duties.
The Audit Committee's duties include engaging and discharging the Company's
independent auditors; reviewing and approving the engagement of the auditors for
audit and non-audit services; reviewing with the independent accountants the
fee, scope, and timing of the audit and non-audit services; reviewing the
completed audit with the independent accountants regarding their report, the
conduct of the audit, any accounting adjustments and recommendations for
improving internal controls, and any other significant findings during the
audit; meeting periodically with the Company's management, financial staff and
auditors to discuss internal accounting and auditing procedures; initiating and
supervising any special investigations it deems necessary; and reviewing
significant press releases concerning financial matters. The Audit Committee
consists of Messrs. Stoffel and Monnich and is chaired by Mr. Stoffel.
The Compensation Committee periodically reviews the Company's compensation,
employee benefit plans, and other fringe benefits paid to or provided for
officers and directors of the Company and approves the annual salaries and
bonuses of officers of the Company and executive officers of the Company's
subsidiaries. The Compensation Committee also selects the employees to whom
options may be granted under the Company's option plans and generally
administers the option plans. The Compensation Committee consists of Messrs.
Brinkman and Monnich and is chaired by Mr. Monnich.
During 1997 the Board of Directors held three meetings (excluding five
actions by unanimous consent). The Audit Committee held one meeting and the
Compensation Committee held one meeting during the year. With the exception of
Mr. Masterson with respect to his attendance at one meeting, all members of the
Board of Directors attended all of their respective board and committee meetings
during 1997.
B-4
<PAGE>
BENEFICIAL OWNERSHIP OF THE COMPANY'S STOCK
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 21, 1998, certain information
with respect to those persons known to the Company to be the beneficial owners
of 5% or more of the outstanding shares of Common Stock of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PERCENT OF
BENEFICIAL OWNER NUMBER OF SHARES(1) NATURE OF BENEFICIAL OWNERSHIP CLASS(2)
- -------------------------------------- ------------------- ---------------------------------------- -------------
<S> <C> <C> <C>
Kathryn A. Esping, ................... 2,833,032(3) Sole voting and investment power 20.2%
individually and as Independent 127,858(3) Shared voting and investment power 0.9%
Executor for the Estate of P.E.
Esping
4330 Bordeaux
Dallas, TX 75205
First Pacific Advisors, Inc. ......... 1,388,000(4) Shared voting and investment power 10.1%
11400 West Olympic Blvd., 124,000(4) Shared investment power 0.9%
Suite 1200,
Los Angeles, CA 90064
Wallace R. Weitz & Co. ............... 738,800(5) Sole voting and investment power 5.4%
1125 South 103rd Street,
Suite 600,
Omaha, NE 68124
Wanger Asset Management, L.P., . 711,600(6) Shared voting and investment power 5.2%
Wanger Asset Mgmt., Ltd.,
227 West Monroe,
Suite 3000,
Chicago, IL 60606
</TABLE>
- ------------------------
(1) All are shares of Common Stock.
(2) Based on 13,720,644 shares of Common Stock outstanding on October 21, 1998
and the number of shares, if any, as to which the named person has the right
to acquire beneficial ownership upon the exercise of such person's options.
(3) According to information provided by Mrs. Esping and contained in a
statement on Schedule 13D dated July 24, 1998 and filed with the Securities
and Exchange Commission, Mrs. Esping, in her capacity as Independent
Executor of the Estate of P.E. Esping, holds 2,528,516 shares of Common
Stock. Mrs. Esping also may be deemed to be the beneficial owner of 300,000
shares of Common Stock which are issuable upon the exercise of presently
exercisable stock options, 4,516 shares of Common Stock in the Company
401(k) plan and 127,858 shares held of record by the Esping Family
Foundation of which Mrs. Esping is a Director; such shares are included in
the figures noted in the table.
(4) Based upon information contained in the statement on Schedule 13G (and after
giving effect to the 100% stock dividend of the Company effective April 6,
1998 for record holders as of March 20, 1998 (the "April Stock Dividend"))
dated February 11, 1993 as amended through Amendment No. 6 dated February 9,
1998 filed with the Securities and Exchange Commission by First Pacific
Advisors, Inc., First Pacific Advisors, Inc. is an investment advisor acting
as record holder for institutional investors, including investment companies
and pension funds. First Pacific Advisors, Inc. has indicated that it
believes it shares voting and disposition authority with its clients by
reason of the contractual arrangements it has with those parties. First
Pacific Advisors, Inc. has advised the Company that, by
B-5
<PAGE>
virtue of a contract with a specific client, it has no voting authority with
respect to 124,000 of the aggregate shares shown in the table above.
(5) Based upon information contained in a statement on Schedule 13G (and after
giving effect to the April Stock Dividend) dated February 7, 1990 filed with
the Securities and Exchange Commission by Wallace R. Weitz & Company and
amended through Amendment No. 7 dated February 11, 1998.
(6) Based upon information contained on Schedule 13G (and after giving effect to
the April Stock Dividend) dated March 5, 1998 filed with the Securities and
Exchange Commission by Wanger Asset Management, Ltd., for itself and as
general partner for Wanger Asset Management, L.P. ("WAM"). WAM is an
investment company registered under the Investment Company Act of 1940. The
shares reported have been acquired on behalf of discretionary clients of
WAM.
BENEFICIAL OWNERSHIP BY EXECUTIVE OFFICES AND DIRECTORS
The following table sets forth, as of October 21, 1998, certain information
with respect to the Company's shares of Common Stock beneficially owned by (i)
each of the current directors, (ii) each of the executive officers of the
Company named in the Summary Compensation Table below (excluding Mr. Esping),
and (iii) all of the executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES(1) NATURE OF BENEFICIAL OWNERSHIP CLASS(2)
- ----------------------------------------- ------------------- ------------------------------------- -------------
<S> <C> <C> <C>
L.D. Brinkman............................ 54,000(3) Sole voting and investment power 0.4%
Robert E. Masterson...................... 24,200(4) Sole voting and investment power 0.2%
David H. Monnich......................... 24,000(5) Sole voting and investment power 0.2%
Paul T. Stoffel.......................... 331,460(6) Sole voting and investment power 2.4%
Jerrold L. Morrison...................... 328,699(7) Sole voting and investment power 2.3%
Bernard J. Owens......................... 151,108(8) Sole voting and investment power 1.1%
William J. Fosick........................ 47,128(9) Sole voting and investment power 0.3%
Harvey V. Braswell....................... 41,098(10) Sole voting and investment power 0.3%
All directors and officers as a group (9
persons)............................... 1,128,993(11) Sole voting and investment power 7.8%
</TABLE>
- ------------------------
(1) All are shares of Common Stock.
(2) Based on 13,720,644 shares of Common Stock outstanding on October 21, 1998
and the number of shares, if any, as to which the named person has the
right to acquire beneficial ownership upon the exercise of such person's
options.
(3) Represented by 30,000 shares of Common Stock which Mr. Brinkman is the
record holder and 24,000 shares issuable under options which are presently
exercisable. Excludes 36,000 shares subject to options that are not
currently, nor within 60 days, exercisable, but that will become
exercisable upon consummation of the Offer.
(4) Represented by 200 shares of Common Stock for which Mr. Masterson is the
record holder and 24,000 shares issuable under stock options which are
presently exercisable. Excludes 36,000 shares subject to options that are
not currently, nor within 60 days, exercisable, but that will become
exercisable upon consummation of the Offer.
(5) Represented by 24,000 shares issuable under stock options which are
presently exercisable. Excludes 36,000 shares subject to options that are
not currently, nor within 60 days, exercisable, but that will become
exercisable upon consummation of the Offer.
B-6
<PAGE>
(6) Represented by 307,460 shares of Common Stock for which Mr. Stoffel is the
record holder and 24,000 shares issuable under stock options which are
presently exercisable. Excludes 36,000 shares subject to options that are
not currently, nor within 60 days, exercisable, but that will become
exercisable upon consummation of the Offer.
(7) Represented by 9,800 shares of Common Stock for which Mr. Morrison is the
record holder, 316,667 shares issuable under stock options which are
presently exercisable and 2,232 shares which are held on Mr. Morrison's
behalf by the Company 401(k) plan. Excludes 73,333 shares that are subject
to options that are not currently, nor within 60 days, exercisable, but
that will become exercisable upon consummation of the Offer.
(8) Represented by 25,040 shares of Common Stock for which Mr. Owens is the
record holder, 124,000 shares issuable under options which are presently
exercisable and 2,068 shares which are held on Mr. Owens' behalf by the
Company 401(k) plan. Excludes 90,000 shares that are subject to options
that are not currently, nor within 60 days, exercisable, but that will
become exercisable upon consummation of the Offer.
(9) Represented by 36,728 shares of Common Stock for which Mr. Fosick is the
record holder and 10,400 shares issuable under options which are presently
exercisable. Excludes 55,600 shares that are subject to options that are
not currently, nor within 60 days, exercisable, but that will become
exercisable upon consummation of the Offer.
(10) Represented by by 2,400 shares of Common Stock for which Mr. Braswell is
the record holder, 38,335 shares issable under options which are presently
exercisable or will become exercisable within 60 days and 363 shares which
are held on Mr. Braswell's behalf by the Company 401(k) plan. Excludes
111,665 shares that are subject to options that are not currently, nor
within 60 days, exercisable, but that will become exercisable upon
consummation of the Offer.
(11) Includes 705,402 shares subject to employee stock options that are
presently exercisable, or will become exercisable within sixty days.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires the Company's directors and
executive officers and persons who own more than 10% of the Company's Common
Stock to file with the SEC initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company.
Officers, directors, and greater than 10% stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1997 all Section
16(a) filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with.
COMPENSATION OF DIRECTORS
Each director who is not an officer of the Company or a subsidiary receives
an annual fee of $8,000 plus $500 for each Board of Directors or Committee
meeting attended. In addition, Committee chairmen who are not officers of the
Company or a subsidiary receive an annual fee of $1,000.
B-7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's
former Chief Executive Officer, each of the Company's four most highly
compensated executive officers, and one individual who would have been one of
the Company's four most highly compensated officers had there not been a change
in his status as an officer of the Company. The determination of total
compensation is based on salary, bonuses, and other cash compensation earned
during fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------- PAYOUTS
---------------------------------------- SECURITIES -------
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND FISCAL COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) ($)(5) AWARD(S) (#)(11) ($) ($)(9)
- -------------------- ------ ---------- ------------ ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
P. E. Esping(2) .... 1997 257,692 -- -- -- -- -- 3,325
Chairman and Chief 1996 250,000 -- -- -- -- -- 3,150
Executive Officer 1995 265,000 -- -- -- 150,000 -- 3,150
Morrison, Jerrold 1997 250,000(7) 75,000(8) -- -- -- -- 3,325
L. ............... 1996 249,039 -- 49,610 -- 50,000 -- 1,393
President and 1995 69,308(4) 37,000 9,664 -- 125,000 -- 969
Chief Operating
Officer
Pace, Ray(3) ....... 1997 170,289 186,299 -- -- -- -- 1,425
President, The 1996 59,916(4) -- -- -- 135,000 -- --
Pace Group 1995 -- -- -- -- -- -- --
Owens, Bernard ..... 1997 200,000 96,813(8) -- -- -- -- 3,325
Executive Vice 1996 200,000 104,205(6) -- -- -- -- 3,150
President 1995 200,000 -- -- -- 25,000 -- 3,150
Fosick, 1997 133,096 146,000 -- -- -- -- 1,354
William(3) ....... 1996 49,320(4) 10,001 -- -- 13,000 -- --
President, The 1995 -- -- -- -- -- -- --
Pace Group
Braswell, Harvey ... 1997 164,942(10) 102,772(8) 257 -- -- -- 2,759
President, 1996 114,462 50,000(6) 54,607 -- 30,000 -- 2,045
Government 1995 -- -- -- -- -- -- --
Services Division
</TABLE>
- ------------------------------
(1) Unless otherwise noted, reflects bonus earned during the fiscal year but
paid during the next year.
(2) Mr. Esping died on June 30, 1998. Mr. Stoffel was elected Chairman of the
Board on September 16, 1998.
(3) Mr. Pace resigned from his position as President of The Pace Group on
November 10, 1997 and has been included in the table in that he would have
been listed as one of the Company's four most highly compensated executive
officers for fiscal year 1997 had there not been a change in his officer
status. Mr. Fosick succeeded Mr. Pace as President of The Pace Group on
November 10, 1997.
(4) Reflects compensation for only a portion of the fiscal year paid to the
listed individual as measured from the date of commencement of the
individual's employment by the Company through the end of the fiscal year.
Mr. Morrison became employed by the Company on February 1, 1995. Mr. Pace
and Mr. Fosick became employed by the Company on September 5, 1996.
(5) Reflects compensation associated with relocation expenses.
(6) With respect to Mr. Owens, of the total amount, $42,393 was paid in March
1997 for performance during 1996, the remainder was paid during the 1996
fiscal year. With respect to Mr. Braswell, of the total amount $25,000 was
paid in March 1997 for performance during 1996, the remainder was paid
during the 1996 fiscal year.
(7) Effective January 1, 1998, Mr. Morrison's base salary was increased to
$275,000 per year.
(8) With respect to Mr. Owens, of the total amount, $47,312 was paid in
February 1998 for performance during 1997, the remainder was paid during
the 1997 fiscal year. With respect to Mr. Braswell, of the total amount
$54,437 was paid in February 1998 for performance during 1997, the
remainder was paid during the 1997 fiscal year. With respect to Mr.
Morrison, of the total amount, $18,750 was paid in March 1998 for
performance during 1997, the remainder was paid during the 1997 fiscal
year.
(9) Amounts represent Company contributions to the Company's 401(k) Plan on the
behalf of the listed individuals.
B-8
<PAGE>
(10) Effective March 1, 1998, Mr. Braswell's base salary was increased to
$200,000 per year.
(11) Amounts give effect to the April Stock Dividend.
OPTION GRANTS DURING 1997 FISCAL YEAR
There were no grants of stock options or stock appreciation rights during
the fiscal year ended December 31, 1997 to the named executives.
OPTION EXERCISES DURING 1997 FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table provides information related to options and warrants
exercised by the named executive officers during the 1997 fiscal year and the
number and value of options held at fiscal year end. The Company does not have
any outstanding stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SAR'S
OPTIONS/SAR'S AT FISCAL YEAR-END
AT FISCAL YEAR-END (#)(3) ($)(2)(3)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ------------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
P. E. Esping(4).......... -- -- 200,000 100,000 150,000 75,000
Morrison, Jerrold L...... -- -- 199,998 150,002 441,664 283,336
Pace, Ray................ -- -- 90,000 180,000 585,000 1,170,000
Owens, Bernard........... -- -- 107,334 16,666 395,000 12,500
Fosick, William.......... -- -- 8,668 17,332 56,344 112,660
Braswell, Harvey......... -- -- 19,166 40,834 3,126 9,376
</TABLE>
- ------------------------
(1) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise multiplied by the number of shares to which the exercise relates.
(2) The closing price for the Company's Common Stock as reported by The Nasdaq
Stock Market as of December 31, 1997 was $19.125 (after giving effect to the
April Stock Dividend). Value is calculated on the basis of the difference
between the option exercise price and $19.125 (after giving effect to the
April Stock Dividend) multiplied by the number of shares of Common Stock
underlying the option.
(3) Amounts give effect to the April Stock Dividend.
(4) Does not reflect acceleration of exercisability on Mr. Esping's death.
CERTAIN TRANSACTIONS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
TRANSITION AGREEMENTS
See Item 3(b). "Identity and Background--Potential or Actual Conflicts of
Interest--Transition Agreements," located on page 12 of Schedule 14D-9, for a
description of the Transition Agreement.
STOCK TENDER AGREEMENT
See Item 3(b). "Identity and Background--Potential or Actual Conflicts of
Interest--Stock Tender Agreement," located on page 12 of Schedule 14D-9, for a
description of the Stock Tender Agreement.
STOFFEL AGREEMENT
See Item 5. "Persons Retained, Employed or to Be Compensated," located on
page 17 of Schedule 14D-9, for a description of an the Stoffel Agreement.
B-9
<PAGE>
EXHIBIT A
PURCHASER DESIGNEES
Set forth below are the name, current business address, present principal
occupation and employment history (covering a period of not less than five
years) of each Purchaser Designee. Unless otherwise indicated, each such
person's business address is 2828 North Haskell, Dallas, Texas 75204. All
persons listed below are citizens of the United States of America.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ------------------------ ----------------------------------------------------------------------------------------
<S> <C>
Jeffrey A. Rich Mr. Rich, age 38, has served as President and Chief Operating Officer of Parent since
April 1995 and as a director since August 1991. Mr. Rich joined Parent in 1989 as Senior
Vice President and Chief Financial Officer and was named Executive Vice President in
1991. Mr. Rich is also the President and a director of the Purchaser. Prior to joining
Parent, Mr. Rich served as a Vice President of Citibank N.A. from March 1986 through
June 1989, and also served as an Assistant Vice President of InterFirst Bank Dallas,
N.A. from 1982 until March 1986.
David W. Black Mr. Black, age 36, has served as Executive Vice President, Secretary and General Counsel
and as a director of Parent since May 1995. Mr. Black joined Parent in February 1995 as
Associate General Counsel. Mr. Black is also the Secretary and a director of the
Purchaser. Prior to joining Parent, Mr. Black was an attorney engaged in private
practice in Dallas from 1986 through January 1995.
Henry G. Hortenstine Mr. Hortenstine, age 54, has served as Executive Vice President of Parent since March
1995, as Group President of ACS Technology Solutions Group since April 1998 and as a
director since September 1996. Mr. Hortenstine is also a director of the Purchaser.
Prior to that time, he served as Senior Vice President--Business Development from July
1993 to March 1995. Mr. Hortenstine was engaged by Parent as a consultant providing
various business and corporate development services from 1990 to July 1993. Prior to
that, he was Senior Executive Vice President of Lomas Mortgage USA, a subsidiary of
Lomas Financial Corporation, from 1987 to 1989.
</TABLE>
B-10
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN
OF MERGER
AMONG
AFFILIATED COMPUTER SERVICES, INC.,
ACS ACQUISITION CORPORATION,
AND
BRC HOLDINGS, INC.
OCTOBER 19, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RECITALS
ARTICLE I The Tender Offer
1.1. The Tender Offer. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2. Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.3. Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE II The Merger
2.1. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.2. Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.3. Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . .5
2.4. Certificate of Incorporation. . . . . . . . . . . . . . . . . . . . .5
2.5. Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.6. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.7. Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.8. Conversion of the Shares. . . . . . . . . . . . . . . . . . . . . . .6
2.9. Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.10. Conversion of the Common Stock of
the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.11. Payment for Shares. . . . . . . . . . . . . . . . . . . . . . . . . .7
2.12. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
ARTICLE III Representations and Warranties
of the Company
3.1. Organization and Qualification. . . . . . . . . . . . . . . . . . . .8
3.2. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.3. Authorized Capital. . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4. Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . 10
3.5. Approvals; No Violations. . . . . . . . . . . . . . . . . . . . . . 10
3.6. SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . 11
3.7. Absence of Undisclosed Liabilities. . . . . . . . . . . . . . . . . 11
3.8. Compliance with Applicable Law. . . . . . . . . . . . . . . . . . . 12
3.9. Termination, Severance, and
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . 12
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3.10. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.12. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . 14
3.14. Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15. Finders and Investment Bankers; Transaction Expenses. . . . . . . . 16
3.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.17. Title to Properties; Entire Business. . . . . . . . . . . . . . . . 16
3.18. Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . 16
3.19 Largest Customers . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.20 Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . . . . . 17
3.21 Certain Material Contract . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IV Representations and Warranties of the Parent
and the Purchaser
4.1. Organization and Qualification. . . . . . . . . . . . . . . . . . . 17
4.2. Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . 18
4.3. Approvals; No Violations. . . . . . . . . . . . . . . . . . . . . . 18
4.4. No Prior Activities . . . . . . . . . . . . . . . . . . . . . . . . 18
4.5. Information Supplied. . . . . . . . . . . . . . . . . . . . . . . . 19
4.6. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V Covenants
5.1. Conduct of Business of the Company. . . . . . . . . . . . . . . . . 19
5.2. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3. Action of Stockholders of the Company;
Voting and Disposition of the Shares. . . . . . . . . . . . . . . . 22
5.4. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . 23
5.5. Notification of Certain Matters . . . . . . . . . . . . . . . . . . 23
5.6. Access to Information . . . . . . . . . . . . . . . . . . . . . . . 23
5.7. Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . 25
5.8. Officers' and Directors' Indemnification. . . . . . . . . . . . . . 25
5.9. Other Actions by the Company. . . . . . . . . . . . . . . . . . . . 25
5.10. Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI Conditions to Consummation of the Merger
6.1. Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . 26
6.2. No Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3. Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.4. Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . 26
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ARTICLE VII Termination; Amendment; Waiver
7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . 28
7.3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII Miscellaneous
8.1. Survival of Representations, Warranties,
and Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2. Brokerage Fees and Commissions. . . . . . . . . . . . . . . . . . . 30
8.3. Entire Agreement; Assignment. . . . . . . . . . . . . . . . . . . . 31
8.4. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.7. Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . 32
8.8. Other Potential Bidders . . . . . . . . . . . . . . . . . . . . . . 33
8.9. Descriptive Headings; References. . . . . . . . . . . . . . . . . . 34
8.10. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . 34
8.11. Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.13. Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.14. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
Annex A Certain Conditions
Annex B-1 List of Those Signing the Stock Tender Agreement
Annex B-2 Stock Tender Agreement
Schedules [Note: Schedules to this Agreement have been omitted from this
filing but descriptions of such Schedules may be found in the
Agreement where referred to.]
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") dated as of October 19,
1998, by and among AFFILIATED COMPUTER SERVICES, INC., a Delaware corporation
(the "PARENT"), ACS ACQUISITION CORPORATION, a Delaware corporation and a
wholly-owned subsidiary of the Parent (the "PURCHASER"), and BRC HOLDINGS,
INC., a Delaware corporation (the "COMPANY").
RECITALS
The Boards of Directors of the Parent and the Company have unanimously
determined that it is in the best interests of the stockholders of their
respective corporations for the Purchaser to acquire all the outstanding
common stock, par value $.10 per share, of the Company (the "SHARES").
The parties intend to effect such acquisition through a tender offer on
the terms described below, followed by a merger of the Company with the
Purchaser on the terms described below (the "MERGER").
THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which all parties hereby acknowledge, the parties
agree as follows:
ARTICLE I
THE TENDER OFFER
1.1 THE TENDER OFFER. (a) Provided that this Agreement has not been
terminated in accordance with ARTICLE VII and none of the events referred to
in ANNEX A (other than the events referred to in CLAUSES (i) and (ii) of the
second paragraph of ANNEX A and CLAUSE (j) of ANNEX A) has occurred or is
existing, within five business days of the date of this Agreement, the
Purchaser will commence a tender offer (the "OFFER"), subject to the Minimum
Condition described below, to purchase a total of at least 8,704,238 Shares
(which will represent not less than 51% of the outstanding Shares on a fully
diluted basis) at a price of $19.00 per Share (as such amount may be
increased in accordance with the terms of this Agreement, the "PER SHARE
AMOUNT") net to the seller in cash. The Purchaser agrees to accept for
payment a total of at least 8,704,238 Shares validly tendered pursuant to the
Offer as soon as legally permissible, and to pay for all such Shares as
promptly as practicable, upon the terms and subject to the conditions of the
Offer, as it may be revised as permitted by this Agreement. The obligation
of Purchaser to commence the Offer will be subject only to conditions set
forth in ANNEX A, and the obligation of Purchaser to accept for payment,
purchase, and pay for the Shares tendered pursuant to the Offer will be
subject to such conditions and to the further condition that 8,704,238 Shares
have been validly tendered and not withdrawn prior to the expiration date of
the offer (the "MINIMUM CONDITION"). If the Minimum Condition is not
satisfied on any Expiration Date of the Offer, the Purchaser may, in
Purchaser's discretion, extend the Offer for a period or periods not to
exceed, in the aggregate, ten business days. The Purchaser specifically
reserves the right to increase the price per share payable in the
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Offer, to extend the expiration date of the Offer (unless, after January 31,
1999, all conditions to the Offer listed on ANNEX A are fulfilled), and to
make any other changes in the terms and conditions of the Offer (provided
that, unless previously approved by the Company in writing, no change may be
made that decreases the price per Share payable in the Offer, that changes
the form of consideration to be paid in the Offer, that reduces the minimum
number of Shares to be purchased in the Offer, that imposes conditions to the
Offer in addition to those set forth in ANNEX A, or that broadens the scope
of such conditions). Notwithstanding the foregoing, Purchaser (i) shall
extend the Offer for any period required by any rule, regulation or
interpretation of the Securities and Exchange Commission (the "SEC") or the
staff thereof applicable to the Offer, and (ii) may, without the consent of
the Company, extend the Offer for an aggregate period of not more than 10
business days beyond the latest applicable date that would otherwise be
permitted under clause (i) of this sentence if, as of such date, all of the
offer conditions are satisfied or waived by Purchaser, but the number of
Shares validly tendered and not withdrawn pursuant to the Offer is less than
90% of the then outstanding Shares on a fully diluted basis. The parties
agree that the conditions set forth in ANNEX A are for the sole benefit of
the Purchaser and may be asserted by the Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by the Purchaser or the Parent, if such action or inaction by the
Purchaser or the Parent is not taken knowingly or intentionally for the
purpose of breaking the Minimum Condition or one or more of the conditions
contained in ANNEX A) or may be waived by the Purchaser, in whole or in part,
at any time and from time to time, in its sole discretion. The failure by
the Purchaser at any time to exercise any of the foregoing rights will not be
deemed a waiver of any such right, the waiver of any such right with respect
to particular facts and circumstances will not be deemed a waiver with
respect to other facts or circumstances, and each such right will be deemed
an ongoing right that may be asserted at any time and from time to time. Any
good faith determination by the Purchaser with respect to any of the
foregoing conditions (including, without limitation, the satisfaction of such
conditions) will be final and binding on all parties. The Per Share Amount
will be paid net to the seller in cash, less any required withholding taxes,
on the terms and subject to the conditions of the Offer. If at the time of
the Expiration Date (or at the expiration of a proper extension), the Company
is purchasing Shares pursuant to the Offer and if at such time a greater
number of Shares than 8,704,238 Shares has been tendered into the Offer and
not withdrawn, then 8,704,238 Shares will be purchased on a pro rata basis.
The Company agrees that no Shares held by the Company or any of its
subsidiaries will be tendered in the Offer. The Company hereby consents to
the Offer and represents that (a) its Board of Directors, at a meeting duly
called and held (i) determined at such time that the Offer and the Merger,
taken together, are fair to the Company and its stockholders and in the best
interests of the holders of the Shares; (ii) resolved at such time to
recommend acceptance of the Offer and approval and adoption of this
Agreement, the Merger, and the transactions contemplated by this Agreement by
the stockholders of the Company prior to such purchase; and (iii) irrevocably
approved the Offer, the Merger, this Agreement, and the transactions
contemplated by this Agreement for the purposes of Section 203 of the
Delaware General Corporation Law (the "DGCL") and any other state or federal
statute, regulation, or rule that the Purchaser has identified, or that is
known after reasonable inquiry, to the Company requiring prior approval by
the Board of Directors of the Company of this Agreement, the Merger, the
Offer, or the other transactions contemplated by this Agreement and (b)
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), the Company's
financial advisor (the "ADVISOR"), has delivered to the
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Board of Directors of the Company its opinion that, subject to the
limitations and qualifications set forth in such opinion, the Per Share
Amount is fair from a financial point of view to the holders of the Shares.
(b) As promptly as practicable on the date of the commencement of the
Offer, the Parent and the Purchaser will file with the SEC a Tender Offer
Statement on Schedule 14D-1 with respect to the Offer under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), which will (i) reflect
the execution and delivery of this Agreement; (ii) set forth the Offer as
provided for in this Agreement; and (iii) contain or incorporate by reference
a form of letter of transmittal and summary advertisement.
(c) The Purchaser will promptly disseminate the offer to purchase
referred to in SECTION 1.1(b) (as amended pursuant to this Agreement, the
"OFFER TO PURCHASE" and, collectively with all other schedules and exhibits
required to be filed with the SEC, the "OFFER DOCUMENTS") to the holders of
the Shares, reflecting the terms set forth in this Agreement. The Offer
Documents will contain the recommendation of the Board of Directors of the
Company that the holders of the Shares accept the Offer as described in
SECTION 1.1(a) and may make reference to the opinion of the Advisor referred
to in SECTION 1.1(a) and include or incorporate such opinion. The Purchaser
and the Company, with respect to written information supplied by the Company
specifically for use in the Offer Documents or based upon information
pertaining to the Company in the Company Reports (as defined in SECTION 3.6),
agree promptly to correct any information in the Offer Documents that becomes
false or misleading in any material respect. Subject to SECTION 1.2(b), the
Purchaser further agrees to take all steps to cause the Offer Documents to be
disseminated to the holders of Shares, as and to the extent required by
applicable law. The Company and its counsel will be given an opportunity to
review and comment on the Offer Documents prior to their being filed with the
SEC. The Parent and the Purchaser will promptly provide to the Company any
written comments they receive from the SEC with respect to the Offer
Documents.
1.2 COMPANY ACTIONS. (a) The Company hereby agrees to file with the
SEC as soon as practicable on or after the date of commencement of the Offer,
and promptly mail to its stockholders, a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all schedules, amendments, and
supplements, the "SCHEDULE 14D-9") containing the recommendations of the
Board of Directors of the Company referred to in SECTION 1.1 (subject to the
right of the Board of Directors of the Company to withdraw such
recommendations if it is obligated to do so by its fiduciary obligations
under applicable law) and the opinion of the Advisor referred to in SECTION
1.1(a). The Purchaser and its counsel will be given an opportunity to review
and comment on the Schedule 14D-9 prior to its being filed with the SEC. The
Company will promptly provide to the Parent and the Purchaser any written
comments it receives from the SEC with respect to the Schedule 14D-9.
(b) The Company has been advised that the persons named on ANNEX B-1
have entered into the Stock Tender Agreement in the form of ANNEX B-2 (the
"STOCK TENDER AGREEMENT"). The Schedule 14D-9, at the time it is first
published, disseminated, or mailed to the stockholders of the Company, will
not contain any untrue statement of a material fact or omit
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to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. The Company agrees
promptly to take all steps necessary to cause the Schedule 14D-9 to be
corrected to the extent requested by the Parent to reflect any change in
information concerning the Parent, the Purchaser, or the Offer, and, as
corrected, to be filed with the SEC and disseminated to the stockholders of
the Company, as and to the extent required by applicable law.
(c) In connection with the Offer, the Company will promptly furnish the
Purchaser with mailing labels, security position listings, and any available
listing or computer files containing the names and addresses of the record
holders of Shares as of the most recent practicable date and will furnish the
Purchaser with such information and assistance (including updated lists of
security position listings and listing or computer files) as the Purchaser or
its agents may reasonably request in order to communicate the Offer to the
record and beneficial holders of Shares. Subject to applicable law and
except for such steps as are necessary to disseminate the Offer Documents,
the Purchaser and its affiliates will hold in confidence the information
contained in any such labels, listings, and files, will use such information
only in connection with the Offer and the Merger, and, if this Agreement is
terminated, will deliver to the Company all copies of such information in its
possession.
1.3 BOARD OF DIRECTORS. (a) Effective upon the payment by the
Purchaser for Shares pursuant to the Offer, the Purchaser will be entitled to
designate that number of directors of the Company, rounded up to the next
whole number, that equals the product of (x) the total number of directors on
the Board of Directors (giving effect to the election or appointment of any
additional directors pursuant to this SECTION 1.3) and (y) the percentage
that the number of Shares on a fully diluted basis owned by the Parent and
the Purchaser (including Shares accepted for payment) bears to the total
number of outstanding Shares. The Board of Directors of the Company will at
all relevant times be composed of a sufficient number of directors so that
the right of the Purchaser under this SECTION 1.3(a) and the right of the
Company under SECTION 1.3(b) to have at least 2 Continuing Directors (as
defined in SECTION 1.3(b)) will not be impaired. The Company will at such
time cause the designees of the Purchaser to be elected to or appointed by
the Board of Directors, including, without limitation, increasing the number
of directors, amending its bylaws, using its reasonable best efforts to
obtain resignations of incumbent directors, and, to the extent necessary,
filing with the SEC and mailing to its stockholders the information required
by Section 14(f) of the Exchange Act and the rules promulgated thereunder, as
promptly as possible. The Parent and the Purchaser will supply any
information with respect to themselves and their respective nominees,
officers, directors, and affiliates required by Section 14(f) of the Exchange
Act and such rules to the Company. Upon written request by the Purchaser,
the Company will use its reasonable best efforts to cause the designees of
the Purchaser to constitute the same percentage of representation as is on
the Board of Directors after giving effect to this SECTION 1.3 on (i) each
committee of the Board of Directors; (ii) the board of directors of each
subsidiary of the Company; and (iii) each committee of such subsidiaries'
boards of directors.
(b) Following the election or appointment of the designees of the
Purchaser pursuant to this SECTION 1.3 and prior to the Effective Time, any
amendment or termination of this Agreement, extension for the performance of
the obligations or other acts of the Parent and the
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Purchaser, or waiver of the rights of the Company under this Agreement, will
(if and to the extent that there are any then serving directors of the type
specified below) require the approval of a majority of the then serving
directors of the Company who are directors on the date of this Agreement (the
"CONTINUING DIRECTORS"). Prior to the Effective Time, there will be no fewer
than 2 Continuing Directors. If, prior to the Effective Time, the number of
Continuing Directors is one, such remaining Continuing Director will be
entitled to appoint directors to fill the vacancies created and such
appointees will be Continuing Directors for the purposes of this Agreement.
The Continuing Directors may not be removed prior to the Effective Time.
ARTICLE II
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement and in accordance with the DGCL, the Purchaser will be merged with
and into the Company as soon as practicable following the satisfaction or
waiver of the conditions set forth in ARTICLE VI. Following the Merger, the
Company will continue as the surviving corporation (the "SURVIVING
CORPORATION") and the separate corporate existence of the Purchaser will
cease. At the election of the Parent or the Purchaser, any one or more
direct or indirect wholly-owned subsidiaries of the Parent incorporated under
the laws of the State of Delaware may be substituted for the Purchaser as a
constituent corporation in the Merger. As used in this Agreement, the term
"Purchaser" refers to any such substituted corporation.
2.2 EFFECTIVE TIME. The Merger will be consummated by filing with the
Delaware Secretary of State a certificate of merger or certificate of
ownership and merger in accordance with the DGCL (the "CERTIFICATE OF
MERGER") in such form as is required by, and executed in accordance with, the
relevant provisions of the DGCL, and such other documents as may be required
by the provisions of the DGCL. The Merger will be effective at the time of
such filing or at such later time as is specified in the Certificate of
Merger in accordance with the provisions of the DGCL. Such time of
effectiveness is referred to as the "EFFECTIVE TIME."
2.3 EFFECTS OF THE MERGER. The Merger will have the effects set forth
in Section 259 of the DGCL. As of the Effective Time, the Company will be a
wholly-owned direct or indirect subsidiary of the Parent. Without limiting
the foregoing, at the Effective Time, all properties, rights, privileges,
powers, and franchises of the Company and the Purchaser will vest in the
Surviving Corporation and all debts, liabilities, obligations, and duties of
the Company and the Purchaser will become the debts, liabilities,
obligations, and duties of the Surviving Corporation.
2.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
the Company as in effect at the Effective Time will be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law, except that at the election of the Purchaser, the Company
will amend its Certificate of Incorporation immediately prior to the
Effective Time to conform as nearly as possible to the Certificate of
Incorporation of the Purchaser.
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2.5 BYLAWS. The Bylaws of the Purchaser as in effect immediately prior
to the Effective Time will be the Bylaws of the Surviving Corporation until
amended in accordance with applicable law.
2.6 DIRECTORS. The directors of the Purchaser at the Effective Time
will be the initial directors of the Surviving Corporation and will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified.
2.7 OFFICERS. The officers of the Company at the Effective Time will
be the initial officers of the Surviving Corporation and will hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualified.
2.8 CONVERSION OF THE SHARES. At the Effective Time:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than (i) Shares held by the Parent, the Purchaser, the
Company, or any direct or indirect subsidiary of the Parent or the Company
and (ii) any Dissenting Shares (as defined in SECTION 2.9)) will, without
further action by the Parent, the Purchaser, or the Company, automatically be
canceled and extinguished and converted into the right to receive in cash the
Per Share Amount (the "MERGER CONSIDERATION") without interest, less any
required withholding taxes, upon surrender of the certificate formerly
representing such Share in accordance with SECTION 2.11.
(b) Each Share issued and outstanding immediately prior to the
Effective Time that is owned or held by the Parent, the Purchaser, the
Company, or any direct or indirect subsidiary of Parent or the Company will
be canceled and retired and cease to exist, without any conversion, and no
payment will be made with respect to any such Share.
2.9 DISSENTING SHARES. (a) Notwithstanding anything in this Agreement
to the contrary, Shares that are issued and outstanding immediately prior to
the Effective Time and that are held by stockholders that have complied in
all respects with the requirements of the DGCL concerning the right of a
stockholder of the Company to dissent from the Merger and to require an
appraisal of such Shares in the manner provided in the DGCL, if applicable,
and that, as of the Effective Time, have not effectively withdrawn or lost
such right to appraisal (the "DISSENTING SHARES") will not be converted into
or represent a right to receive the Merger Consideration pursuant to SECTION
2.8, but the holders of such Dissenting Shares will be entitled only to such
rights as are granted under Section 262 of the DGCL. Each holder of
Dissenting Shares that becomes entitled to payment for such Shares pursuant
to such section of the DGCL will receive payment for such Dissenting Shares
from the Surviving Corporation in accordance with the DGCL; PROVIDED,
HOWEVER, that to the extent that any holder or holders of Shares have failed
to establish the entitlement to appraisal rights as provided in Section 262
of the DGCL, such holder or holders (as the case may be) will forfeit the
right to appraisal of such Shares and each such Share will thereupon be
deemed to have been converted, as of the Effective Time, into and represent
the right to receive payment from the Surviving Corporation of the Merger
Consideration, without interest, as provided in SECTION 2.8.
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(b) The Company will give the Parent and the Purchaser (i) prompt
notice of any written demands for appraisal, withdrawals of demands for
appraisal, and any other instrument served pursuant to Section 262 of the
DGCL received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under
Section 262 of the DGCL. The Company will not, except with the express
written consent of the Parent, voluntarily make any payment with respect to
any demands for appraisal or settle or offer to settle any such demands.
2.10 CONVERSION OF THE COMMON STOCK OF THE PURCHASER. Each share of the
common stock of the Purchaser issued and outstanding immediately prior to the
Effective Time will, by virtue of the Merger and without any action on the
part of the holder of such stock, be converted into and represent one validly
issued, fully paid, and nonassessable share of common stock, par value $.10
per share, of the Surviving Corporation.
2.11 PAYMENT FOR SHARES. (a) Prior to the Effective Time, the Purchaser
will appoint a bank or trust company reasonably acceptable to the Company as
agent for the holders of Shares (the "PAYING AGENT") to receive and disburse
the cash to which holders of Shares become entitled pursuant to SECTION 2.8.
At the Effective Time, the Purchaser or the Parent will provide the Paying
Agent with sufficient cash to allow the Merger Consideration to be paid by
the Paying Agent for each Share then entitled to receive the Merger
Consideration (the "PAYMENT FUND").
(b) Promptly after the Effective Time, the Purchaser or the Parent will
cause the Paying Agent to mail to each record holder immediately prior to the
Effective Time of an outstanding certificate or certificates representing
Shares that as of the Effective Time represent the right to receive the
Merger Consideration (the "CERTIFICATES"), a form of letter of transmittal
(which will specify that delivery will be effected, and risk of loss and
title to the Certificates will pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates for payment. Upon surrender to the Paying
Agent of a Certificate, together with such letter of transmittal duly
executed and completed in accordance with its instructions and such other
documents as may be requested, the holder of such Certificate will be
entitled to receive in exchange for such Certificate, subject to any required
withholding of taxes, the Merger Consideration and such Certificate will
forthwith be canceled. No interest will be paid or accrued on the Merger
Consideration upon the surrender of the Certificates. If payment or delivery
is to be made to a person other than the person in whose name the Certificate
surrendered is registered, it will be a condition of payment or delivery
that the Certificate so surrendered be properly endorsed, with signature
properly guaranteed, or otherwise be in proper form for transfer and that the
person requesting such payment or delivery pay any transfer or other taxes
required by reason of the payment or delivery to a person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered in accordance with the provisions of this
SECTION 2.11, each Certificate (other than Certificates held by persons
referred to in SECTION 2.8(a)(i) and (ii)) will represent for all purposes
only the right to receive the Merger Consideration, without interest and
subject to any required withholding of taxes. Notwithstanding the foregoing,
neither the Paying Agent nor any party to this Agreement will be
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liable to a holder of Shares for any Merger Consideration delivered to a
public official pursuant to applicable abandoned property, escheat, or
similar laws.
(c) Promptly following the date that is six months after the Effective
Time, the Paying Agent will return to the Surviving Corporation all cash,
certificates, and other property in its possession that constitute any
portion of the Payment Fund, and the duties of the Paying Agent will
terminate. Thereafter, each holder of a Certificate formerly representing a
Share may surrender such Certificate to the Surviving Corporation and
(subject to applicable abandoned property, escheat, and similar laws) receive
in exchange therefor the Merger Consideration without any interest. Neither
the Parent, the Purchaser, nor the Surviving Corporation will be liable to
any holder of Shares for any amount paid to a public official pursuant to
applicable abandoned property, escheat, or similar laws. If Certificates are
not surrendered prior to midnight on the fourth anniversary of the Effective
Time, unclaimed amounts of the Payment Fund will, to the extent permitted
under applicable law, become the property of the Surviving Corporation.
Notwithstanding the foregoing, the Surviving Corporation will be entitled to
receive from time to time all interest or other amounts earned with respect
to the Payment Fund as such amounts accrue or become available.
(d) Any portion of the Payment Fund for which rights to dissent have
been perfected will be returned to the Surviving Corporation upon demand.
(e) After the Effective Time there will be no registration of transfers
on the stock transfer books of the Surviving Corporation of the Shares that
were outstanding immediately prior to the Effective Time.
2.12 CLOSING. Upon the terms and subject to the conditions of this
Agreement, as soon as practicable after all the conditions to the obligations
of the parties to effect the Merger under ARTICLE VI have been satisfied or
waived, the Company and the Purchaser will (a) file with the Secretary of
State of Delaware the Certificate of Merger and (b) take all such other and
further actions as may be required by law to make the Merger effective.
Contemporaneous with the filing referred to in this SECTION 2.12, a closing
(the "CLOSING") will be held at the offices of Hughes & Luce, L.L.P., 1717
Main Street, Suite 2800, Dallas, Texas or at such other location as the
parties to this Agreement may establish for the purpose of confirming all the
foregoing. The date and the time of such Closing are referred to as the
"CLOSING DATE."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and the Purchaser that:
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware and has the requisite corporate power and authority and any
necessary governmental authority to own, operate, and lease its properties
and assets and to carry on its business as it is now being conducted, except
for failures to have such power and authority as is not reasonably expected
to
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result in a Company Material Adverse Effect (as defined below). The Company
is duly qualified or licensed to do business and is in good standing in each
jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification or licensing necessary,
except for failures to be so qualified or licensed and in good standing as is
not, individually or in the aggregate, reasonably expected to result in a
Company Material Adverse Effect. Copies of the Certificate of Incorporation
and Bylaws of the Company, including all amendments, have been delivered to
the Parent and the Purchaser and such copies are accurate and complete. The
Certificate of Incorporation and Bylaws of the Company are in full force and
effect and the Company is not in default of the performance, observation, or
fulfillment of any provision of its Certificate of Incorporation or Bylaws.
For the purposes of this Agreement, "COMPANY MATERIAL ADVERSE EFFECT" means
any change or effect, other than a change or effect involving MatriDigm
Corporation, that, individually or when taken together with all such other
changes or effects, is reasonably expected to be materially adverse to the
condition (financial or other), business, operations, properties, assets,
liabilities, prospects, or results of operations of the Company and its
subsidiaries, taken as a whole.
3.2 SUBSIDIARIES. The Company is, directly or indirectly, the record
and beneficial owner of all the outstanding shares of capital stock of each
of its subsidiaries (other than directors' qualifying shares), there are no
proxies or voting agreements with respect to any such shares, and no equity
security of any of its subsidiaries is or may become required to be issued by
reason of any options, warrants, scrip, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any capital stock of any
subsidiary, and there are no contracts, commitments, understandings, or
arrangements by which any subsidiary is bound to issue additional shares of
its capital stock or securities convertible into or exchangeable for such
shares. All such shares directly or indirectly owned by the Company are
owned by the Company or a wholly owned subsidiary, free and clear of any
claim, lien, encumbrance, or agreement. Each subsidiary of the Company is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation and has the requisite corporate
power and authority and any necessary governmental authority to own, operate,
or lease its properties and assets and to carry on its business as it is now
being conducted, except for failures as are not, individually or in the
aggregate, reasonably expected to result in a Company Material Adverse
Effect. Each subsidiary of the Company is duly qualified or licensed to do
business and is in good standing in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes such
qualification or licensing necessary, except for failures to be so qualified,
licensed, or in good standing as are not, individually or in the aggregate,
reasonably expected to result in a Company Material Adverse Effect. Copies
of the charter documents, bylaws, or equivalent organizational documents of
each subsidiary of the Company have been delivered to the Parent and are
accurate and complete. Neither the Company nor any subsidiary of the Company
(a) beneficially owns any material equity interests in any entities that are
not subsidiaries of the Company or (b) is party to any material joint
venture, partnership, or similar arrangement other than its joint venture
with Logan Systems, Inc. and its interest in the United Records joint venture.
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3.3 AUTHORIZED CAPITAL. The authorized capital stock of the Company
consists solely of 30,000,000 shares of common stock, $.10 par value per
share, of which 13,738,144 shares were outstanding as of September 30, 1998,
and 2,000,000 shares of preferred stock, $10.00 par value per share, of which
no shares are outstanding. All of the outstanding Shares have been duly
authorized and are validly issued, fully paid, nonassessable, and free of
preemptive rights. There are outstanding options to purchase up to 3,328,989
Shares. Except as set forth above or on SCHEDULE 3.3 and there are no
preemptive rights nor any outstanding subscriptions, options, warrants,
rights, convertible securities, or other agreements or commitments of any
character relating to the issued or unissued capital stock or other
securities of the Company or any of its subsidiaries. There are no voting
trusts or other understandings to which the Company or any of its
subsidiaries is a party with respect to the voting capital stock of the
Company or any of its subsidiaries.
3.4 CORPORATE AUTHORIZATION. The Company has the full corporate power
and authority to execute and deliver this Agreement and, subject to any
necessary stockholder approval of the Merger, to consummate the transactions
contemplated by this Agreement. The execution, delivery, and performance by
the Company of this Agreement and the consummation by the Company of the
Merger and of the other transactions contemplated by this Agreement have been
duly and validly authorized by all necessary corporate action and, except for
any required approval of the Merger and any adoption of this Agreement by the
stockholders of the Company in connection with the consummation of the
Merger, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
3.5 APPROVALS; NO VIOLATIONS. Except for applicable requirements of
the Exchange Act and the Hart-Scott-Rodino Anti-trust Improvements Act of
1976 (the "HSR ACT") and the filing of the Certificate of Merger as required
by the DGCL, no filing with, and no permit, authorization, consent, or
approval of, any foreign or domestic public body or authority is necessary
for the consummation by the Company of the transactions contemplated by this
Agreement. Except as set forth on SCHEDULE 3.5, the execution and delivery
of this Agreement by the Company, the consummation by the Company of the
transactions contemplated by this Agreement and the compliance by the Company
with any of the provisions of this Agreement will not (a) conflict with or
result in any breach of any provision of the charters of bylaws or equivalent
organizational documents of the Company or any of its subsidiaries; (b)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, or acceleration) under, any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, license, lease, contract,
agreement, or other instrument or obligation to which the Company or any of
its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound; or (c) violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to the Company,
any of its subsidiaries or any of their properties or assets; except such
violations, conflicts, breaches, defaults, terminations, or accelerations
referred to in this SECTION 3.5 as are not, individually or in
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the aggregate, reasonably expected to result in a Company Material Adverse
Effect or materially adversely affect the ability of any party to perform its
obligations under this Agreement.
3.6 SEC FILINGS; FINANCIAL STATEMENTS. At least since December 31,
1993, the Company has timely filed with the SEC all forms, reports,
statements, and documents required to be filed by it pursuant to the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "SECURITIES ACT"), and the Exchange Act, and the rules and
regulations promulgated thereunder, together with all amendments thereto
(collectively, and including, when filed, the Schedule 14d-9, the "COMPANY
REPORTS") and has otherwise complied in all material respects with the
requirements of the Securities Act and the Exchange Act. The Company will
promptly deliver to the Purchaser any Company Report filed by the Company
after the date of this Agreement. As of their respective dates, the Company
Reports did not and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under
which they were or will be made, not misleading. Each of the historical
consolidated balance sheets included in or incorporated by reference into the
Company Reports as of its date and each of the historical consolidated
statements of income and earnings, stockholders' equity, and cash flows
included in or incorporated by reference into the Company Reports (including
any related notes and schedules) fairly presents or will fairly present the
consolidated financial condition, results of operations, stockholders'
equity, and cash flows, as the case may be, of the Company and its
subsidiaries for the periods set forth (subject, in the case of unaudited
statements, to normal year-end audit adjustments), in each case in accordance
with generally accepted accounting principles consistently applied during the
periods involved. The Company maintains a system of internal accounting
controls sufficient to provide that transactions are executed in accordance
with management's general or specific authorization, transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets, access to assets is permitted only in accordance
with management's general or specific authorization, and the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the
consolidated balance sheet of the Company as of September 30, 1998, and
except as set forth in the Company Reports, neither the Company nor any of
its subsidiaries has any liabilities or obligations of any nature, whether or
not accrued, contingent, or otherwise, that would be required to be included
on a consolidated balance sheet of the Company and its subsidiaries as of
September 30, 1998 prepared in accordance with generally accepted accounting
principles, and that are, individually or in the aggregate, reasonably
expected to result in a Company Material Adverse Effect. Since September 30,
1998, the Company and its subsidiaries have conducted their respective
businesses in a manner consistent with past practices, and neither the
Company nor any of its subsidiaries has become subject to any liabilities or
obligations that would be required to be included on a consolidated balance
sheet of the Company and its subsidiaries prepared in accordance with
generally accepted accounting principles and that are, individually or in the
aggregate, reasonably expected to result in a Company Material Adverse
Effect, other than liabilities or obligations incurred in the ordinary course
of business consistent with past practices or incurred in connection
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with the Offer, this Agreement, or the Merger and disclosed in the Company
Reports or consisting of reasonable legal, printing, accounting, and other
customary fees incurred in connection with the Offer, this Agreement, or the
Merger.
3.8 COMPLIANCE WITH APPLICABLE LAW. The Company and each of its
subsidiaries currently hold and are in compliance with the terms of all
licenses, permits, and authorizations necessary for the lawful conduct of
their respective businesses, and have complied with, and neither the Company
nor any of its subsidiaries is in violation of, or in default under, the
applicable statutes, ordinances, rules, regulations, orders, or decrees of
any federal, state, local, or foreign governmental bodies, agencies, or
authorities having, asserting, or claiming jurisdiction over it or over any
part of its operations or assets, except for violations that would not,
individually or in the aggregate, result in a Company Material Adverse
Effect. The businesses of the Company and its subsidiaries are not being and
have not been conducted in violation of any law, ordinance, or regulation of
any governmental authorities and regulatory agencies except for violations as
are not, individually or in the aggregate, reasonably expected to result in a
Company Material Adverse Effect. No investigation or review by any
governmental authorities and regulatory agencies with respect to the Company
or any of its subsidiaries is pending or, to the best knowledge of the
Company, threatened, nor, to the best knowledge of the Company, have any
governmental authorities and regulatory agencies indicated an intention to
conduct such an investigation or review, and no fine has been levied against,
or order entered with respect to, the Company or any subsidiary by any
regulatory authority.
3.9 TERMINATION, SEVERANCE, AND EMPLOYMENT AGREEMENTS. Set forth on
SCHEDULE 3.9 is a complete and accurate list of each (a) employment,
severance, or collective bargaining agreement not terminable without
liability or obligation on 60 days' or less notice; (b) agreement with any
director, executive officer, or other key employee, agent, or contractor of
the Company or any subsidiary of the Company (i) the benefits of which are
contingent, or the terms of which are materially altered, on the occurrence
of a transaction involving the Company or any subsidiary of the Company of
the nature of any of the transactions contemplated by this Agreement or
relating to an actual or potential change in control of the Company or any of
its subsidiaries or (ii) providing any term of employment or other
compensation guarantee or extending severance benefits or other benefits
after termination not comparable to benefits available to employees, agents,
or contractors generally; (c) agreement, plan, or arrangement under which any
person may receive payments that may be subject to the tax imposed by Section
4999 of the Internal Revenue Code of 1986 (the "CODE") or included in the
determination of such person's "parachute payment" under Section 280G of the
Code; and (d) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan, or stock purchase plan, any
of the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement; provided that no matter need be described in SCHEDULE 3.9
which is otherwise specifically described or referenced herein or which
involves payments in the aggregate of less than $100,000 by the Company.
Except as disclosed on SCHEDULE 3.9, since December 31, 1995, neither the
Company nor any of its subsidiaries has entered into or amended any
employment or severance agreement with any director, officer, or key
employee, agent, or contractor, or, granted any
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severance or termination pay to any officer, director, or key employee,
agent, or contractor of the Company or any of its subsidiaries.
3.10 EMPLOYEE BENEFITS. No "employee pension benefit plan" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) ("PENSION PLAN") is a "multiemployer plan" (within the
meaning of ERISA), nor has the Company, or any of its subsidiaries or any
other person that, together with the Company, is or has been treated as a
single employer under Section 414(b), (c), (m), or (o) of the Code (each a
"COMMONLY CONTROLLED ENTITY") ever contributed or been required to contribute
to any multiemployer plan. Each Pension Plan intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service that it is so qualified and nothing has occurred
since the date of such letter that is reasonably expected to affect the
qualified status of such Pension Plan. None of the "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA), or other plans, arrangements,
or policies relating to stock options, stock purchases, compensation,
deferred compensation, severance, fringe benefits, and other employee
benefits, in each case maintained, or contributed to, or required to be
maintained or contributed to, by the Company or any Commonly Controlled
Entity for the benefit of any current or former employees, officers, agents,
or directors (or any beneficiaries of such persons) of the Company or any of
its subsidiaries (collectively, "BENEFIT PLANS") promises or provides medical
benefits to any person after termination of employment with the Company or
any agency of the Company, except as otherwise required by law in the
applicable jurisdiction. Each individual who is paid for services in any
form by the Company or any Commonly Controlled Entity and who is treated by
the Company or a Commonly Controlled Entity as an independent contractor for
federal income tax purposes (including, without limitation, Code provisions
applicable or relating to employee benefit plans), state unemployment tax
purposes, or any other purpose, is an independent contractor for such
purpose. Except where it is not reasonably expected to result in a Company
Material Adverse Effect: (a) each Benefit Plan has been administered in
accordance with its terms; (b) the Company and all the Benefit Plans are all
in compliance with applicable provisions of ERISA, the Code, and all other
applicable laws; (c) each Benefit Plan could be amended or terminated without
liability to the Company, any Commonly Controlled Entity, the Purchaser, or
the Parent on or at any time after the Effective Time; (d) neither the
Company nor any Commonly Controlled Entity has incurred any liability, and no
event has occurred that would result in any liability, to a Pension Plan
(other than for contributions not yet due) or to the Pension Benefit Guaranty
Corporation (other than for payment of premiums not yet due) that has not
been fully paid; (e) neither the Company nor any Commonly Controlled Entity
has incurred any direct or indirect liability under, arising out of, or by
operation of Title IV of ERISA, in connection with the termination of, or
withdrawal from, any Pension Plan or other requirement plan or arrangement,
and no fact or event exists that is reasonably expected to give rise to any
such liability; and (f) the aggregate accumulated benefit obligations of each
Pension Plan subject to Title IV of ERISA do not exceed the fair market value
of the assets of such Pension Plan.
3.11 TAXES. The Company and its subsidiaries have timely filed all
federal income tax returns and reports and other material returns and reports
relating to federal, state, local, and foreign taxes required to be filed.
Such reports and returns are true, correct and complete, except for such
failures to be true, correct and complete as are not, individually or in the
aggregate,
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reasonably expected to result in a Company Material Adverse Effect. The
Company and its subsidiaries have paid or made adequate provision for all
taxes owed except taxes that if not so paid or provided for is not reasonably
expected to result in a Company Material Adverse Effect, and, except as
disclosed in SCHEDULE 3.11, no unpaid deficiencies in taxes or other
governmental charges for any period have been proposed or assessed by any
government taxing authority and, to the knowledge of the Company, no
government tax authority is threatening to propose or assess against the
Company or any of its subsidiaries any such deficiency or charge that is,
individually or in the aggregate, reasonably expected to result in a Company
Material Adverse Effect. The Company and its subsidiaries have withheld or
collected and paid over to the appropriate governmental authorities or are
properly holding for such payment all taxes required by law to be withheld or
collected, except for such failures to have so withheld or collected and paid
over, or to be so holding for payment as are not, individually or in the
aggregate, reasonably expected to result in a Company Material Adverse
Effect. There are no material liens for taxes upon the assets of the Company
or its subsidiaries, other than liens for current taxes not yet due and
payable and liens for taxes that are being contested in good faith by
appropriate proceedings diligently prosecuted. Neither the Company nor any
of its subsidiaries has agreed to or is required to make any adjustment under
Section 481(a) of the Code. Neither the Company nor any of its subsidiaries
has made any election under Section 341(f) of the Code.
3.12 LITIGATION. There is no suit, claim, action, proceeding, or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties
or assets before any court, regulatory agency, or tribunal as to which an
adverse determination is reasonably considered probable that, individually or
in the aggregate, is reasonably expected to result in a Company Material
Adverse Effect. Neither the Company nor any of its subsidiaries is subject
to any outstanding order, writ, injunction, or decree that, individually or
in the aggregate, is reasonably expected to result in a Company Material
Adverse Effect or would prevent or delay the consummation of the transactions
contemplated by this Agreement.
3.13 ENVIRONMENTAL MATTERS. Except for matters disclosed in SCHEDULE
3.13 and except for matters that are not reasonably expected to result,
individually or in the aggregate with all other such matters, in liability to
the Company or any of its subsidiaries in excess of $200,000, (i) the
properties, operations and activities of the Company and its subsidiaries are
in compliance with all applicable Environmental Laws; (ii) the Company and
its subsidiaries and the properties and operations of the Company and its
subsidiaries are not subject to any existing, pending or, to the knowledge of
the Company, threatened action, suit, claim, investigation, inquiry or
proceeding by or before any governmental authority under any Environmental
Laws; (iii) all notices, permits, licenses, or similar authorizations, if
any, required to be obtained or filed by the Company or any of its
subsidiaries under any Environmental Laws in connection with any aspect of
the business of the Company or its subsidiaries, including without limitation
those relating to the treatment, storage, disposal or release of a hazardous
or otherwise regulated substance, have been duly obtained or filed and will
remain valid and in effect after the Merger, and the Company and its
subsidiaries are in compliance with the terms and conditions of all such
notices, permits, licenses and similar authorizations; (iv) the Company and
its subsidiaries have satisfied and are currently in compliance with all
financial responsibility requirements applicable to their operations and
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imposed by any governmental authority under any Environmental Laws, and the
Company and its subsidiaries have not received any notice of noncompliance
with any such financial responsibility requirements; (v) to the Company's
knowledge, there are no physical or environmental conditions existing on any
property of the Company or its subsidiaries or resulting from the Company's
or such subsidiaries' operations or activities, past or present, at any
location, that would give rise to any on-site or off-site remedial
obligations imposed on the Company or any of its subsidiaries under any
Environmental Laws or that would impact the soil, groundwater or surface
water or human health (to the extent of exposure to hazardous substances);
(vi) to the Company's knowledge, since the effective date of the relevant
requirements of applicable Environmental Laws and to the extent required by
such applicable Environmental Laws, all hazardous or otherwise regulated
substances generated by the Company and its subsidiaries have been
transported only by carriers authorized under Environmental Laws to transport
such substances and wastes, and disposed of only at treatment, storage, and
disposal facilities authorized under Environmental Laws to treat, store or
dispose of such substances and wastes; (vii) there has been no exposure of
any person or property to hazardous substances or any pollutant or
contaminant, nor has there been any release of hazardous substances, or any
pollutant or contaminant into the environment by the Company or its
subsidiaries or in connection with their properties or operations that is
reasonably expected to give rise to any claim against the Company or any of
its subsidiaries for damages or compensation; and (viii) subject to
restrictions necessary to preserve any attorney client privilege, the Company
and its subsidiaries have made available to Parent all internal and external
environmental audits and studies and all correspondence on substantial
environmental matters in the possession of the Company or its subsidiaries
relating to any of the current or former properties or operations of the
Company and its subsidiaries.
For purposes of this Agreement, the term "ENVIRONMENTAL LAWS" shall mean
any and all laws, statutes, ordinances, rules, regulations, or orders of any
Governmental Entity pertaining to health (to the extent of exposure to
hazardous substances) the environment currently in effect in any and all
jurisdictions in which the Company and its subsidiaries own property or
conduct business, including without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984,
as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, the Oil
Pollution Act of 1990 ("OPA"), any state laws implementing the foregoing
federal laws, and all other environmental conservation or protection laws.
For purposes of this Agreement, the terms "hazardous substance" and "release"
have the meanings specified in CERCLA and RCRA and shall include petroleum
and petroleum products, radon and PCB's, and the term "disposal" has the
meaning specified in RCRA; PROVIDED, HOWEVER, that to the extent the laws of
the state in which the property is located establish a meaning for "hazardous
substance," "release," or "disposal" that is broader than that specified in
either CERCLA or RCRA, such broader meaning shall apply.
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3.14. VOTING REQUIREMENTS. The Board of Directors of the Company
has approved the Offer, the Merger and this Agreement, and such approval is
sufficient to render inapplicable to the Offer, the Merger and the Agreement
the provisions of Section 203 of the DGCL. The affirmative vote of the
holders of a majority of the outstanding shares of Common Stock in favor of
adoption of this Agreement and the Merger is the only vote of the holders of
any class or series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated hereby under any applicable law,
rule or regulations or pursuant to the requirements of the Company's
certificate of incorporation or bylaws.
3.15. FINDERS AND INVESTMENT BANKERS; TRANSACTION EXPENSES. Neither
the Company nor any of its officers or directors has employed any investment
banker, business consultant, financial advisor, broker or finder in
connection with the transactions contemplated by this Agreement, except for
DLJ and Paul Stoffel, or incurred any liability for any investment banking,
business consultancy, financial advisory, brokerage or finders' fees or
commissions in connection with the transactions contemplated hereby, except
for fees payable to DLJ (as reflected in agreements between such firms and
the Company, copies of which have been delivered to Parent).
3.16. INSURANCE. The Company and each of its subsidiaries are
currently insured, and during each of the past five calendar years have been
insured, for reasonable amounts against such risks as companies engaged in a
similar business and similarly situated would, in accordance with good
business practice, customarily be insured.
3.17. TITLE TO PROPERTIES; ENTIRE BUSINESS. The Company and its
subsidiaries have good title or a valid and subsisting leasehold interest in
and to or a valid and enforceable license to use all material assets,
properties and rights owned, used or held of use by them in the conduct of
their respective businesses, in each case, free and clear of any Liens other
than Permitted Liens. The Company and its subsidiaries own or have
sufficient right to use all assets and properties necessary to conduct their
businesses in the manner in which they are currently conducted. As used
herein, "PERMITTED LIENS" mean: (i) a lien of a landlord, carrier,
warehouseman, mechanic, materialman, or any other statutory lien arising in
the ordinary course of business; (ii) a lien for taxes not yet due or being
contested in good faith; (iii) with respect to the right of the Company or
its subsidiaries to use any property leased to the Company or its
subsidiaries, arises by the terms of the applicable lease; (iv) a purchase
money security interest arising in the ordinary course of business; or (v)
does not materially detract from the value of the encumbered property or
assets or materially detract from or interfere with the use of the encumbered
property or assets in the ordinary course of business.
3.18. INTELLECTUAL PROPERTY RIGHTS. Except as set forth in SCHEDULE
3.18, the Company and its subsidiaries have the right to use all of the
material trademarks and trade names utilized by it in the conduct of its
business and any other computer software and software licenses, intellectual
property, proprietary information, trade secrets, trademarks, trade names,
copyrights, material and manufacturing specifications, drawings and designs
used by the Company or any of its subsidiaries and material to the operation
of the business of the Company or any of its subsidiaries (collectively,
"Intellectual Property"), without infringing on or otherwise acting adversely
to the rights or claimed rights of any person, except to the extent such
infringement or
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actions adverse to another's rights or claimed rights is not reasonably
expected to have a Company Material Adverse Effect. Except as set forth on
such SCHEDULE 3.18, neither the Company nor any of its subsidiaries is
obligated to pay any royalty or other consideration material to the Company
and its subsidiaries taken as a whole to any person in connection with the
use of any Intellectual Property. Except as set forth in such SCHEDULE 3.18
and as is not reasonably expected to have a Company Material Adverse Effect,
to the Company's knowledge, no other person is infringing on the rights of
the Company and its subsidiaries in any of their Intellectual Property.
3.19 LARGEST CUSTOMERS. The Company has made available to Parent a list
of the 10 largest customers by dollar volume of the Company and its
subsidiaries (the "LARGEST CUSTOMERS"), with the amount of revenues
attributable to each such customer, for each fiscal years ending December 31,
1996 and 1997. Except as previously disclosed, none of the Largest Customers
has terminated or materially altered its relationship with the Company since
January 1, 1996 or, to the Company's knowledge, threatened to do so or
otherwise notified the Company of its intention to do so, and there has been
no material dispute with any of the Largest Customers since January 1, 1996.
3.20 YEAR 2000 COMPLIANCE. The disclosures in the Company's Annual
Report on Form 10-K for the year ending December 31, 1997 and in its
Quarterly Report on Form 10-Q for the quarter ending June 30, 1998 regarding
the "status of Year 2000 Compliance" met the applicable standards (as
generally understood by legal practitioners) required with regard thereto as
of the dated filed, and such disclosures continue to be correct, in light of
the circumstances made and when measured against the disclosure standards
sought to be satisfied, in all material respects as if made on the date of
this Agreement.
3.21 CERTAIN MATERIAL CONTRACTS. The Company has disclosed to the
Purchaser and the Parent all agreements and arrangements (whether written or
oral and including all amendments thereto) to which the Company or any of its
Subsidiaries is a party or a beneficiary or by which the Company or any of
its Subsidiaries is bound that are material, directly or indirectly, to the
business of the Company and any of its Subsidiaries, taken as a whole
(collectively, the "MATERIAL CONTRACTS"). The Company and its Subsidiaries
have performed all of its obligations under each Material Contract, and there
exist no breach or default, or event that with notice or lapse of time would
constitute a breach or default under any Material Contract except as is not
reasonably expected to have a Company Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PURCHASER
Each of the Parent and the Purchaser represents and warrants to the
Company as follows:
4.1 ORGANIZATION AND QUALIFICATION. Each of the Parent and the
Purchaser is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority and any necessary governmental
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authority to carry on its business as now conducted. Each of the Parent and
the Purchaser is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
leased or the nature of its activities makes such qualification or licensing
necessary, except for failures to be so duly qualified or licensed and in
good standing as are not, individually or in the aggregate, reasonably
expected to result in a Parent Material Adverse Effect. For the purposes of
this Agreement, "PARENT MATERIAL ADVERSE EFFECT" means any change or effect
that, individually or when taken together with all such other changes or
effects, are reasonably expected to be materially adverse to the condition
(financial or other), business, operations, properties, assets, liabilities,
prospects, or results of operations of the Parent and its subsidiaries, taken
as a whole.
4.2 CORPORATE AUTHORIZATION. Each of the Parent and the Purchaser has
the full corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated by this Agreement. The
execution, delivery, and performance by each of the Parent and the Purchaser
of this Agreement and the consummation by the Parent and the Purchaser of the
Merger and of the other transactions necessary for such consummation have
been duly and validly authorized by the Parent as sole stockholder of the
Purchaser and by the Board of Directors of each of the Parent and the
Purchaser and no other corporate proceedings on the part of the Parent or the
Purchaser are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement. This Agreement has been duly
and validly executed and delivered by each of the Parent and the Purchaser
and constitutes a valid and binding obligation of each of the Parent and the
Purchaser, enforceable in accordance with its terms.
4.3 APPROVALS; NO VIOLATIONS. Except for applicable requirements of
the Exchange Act and the HSR Act and the filing and recordation of the
Certificate of Merger as required by the DGCL, no filing with, and no permit,
authorization, consent, or approval of any foreign or domestic public body or
authority is necessary for the consummation by the Parent and the Purchaser
of the transactions contemplated by this Agreement. Neither the execution
and delivery of this Agreement by the Parent and the Purchaser nor the
consummation by the Parent and the Purchaser of the transactions contemplated
by this Agreement nor compliance by them with any of the provisions of this
Agreement will (a) conflict with or result in any breach of any provision of
the organizational documents or bylaws of the Parent or the Purchaser; (b)
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 under), any of the terms,
conditions, or provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement, or other instrument or obligation to which the
Parent or the Purchaser is a party or by which either of them or any of their
respective properties or assets may be bound; or (c) violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to the Parent or
the Purchaser or any of their respective properties or assets; except such
violations, conflicts, breaches, defaults, terminations, or accelerations
referred to in this SECTION 4.3 as are not, individually or in the aggregate,
reasonably expected to result in a Parent Material Adverse Effect.
4.4 NO PRIOR ACTIVITIES. Except for obligations or liabilities
incurred in connection with its incorporation or organization, the Offer, or
the negotiation and consummation of this
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Agreement and the transactions contemplated by this Agreement, the Purchaser
has not incurred any obligations or liabilities, nor has it engaged in any
business or activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
4.5 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Parent or the Purchaser for inclusion or incorporation by
reference in the Offer Documents, the Schedule 14D-9, the information
statement under Section 14(f) of the Exchange Act, or the Proxy Statement
will, in the case of the Offer Documents and the Schedule 14D-9, at the
respective times the Offer Documents and the Schedule 14D-9 are filed with
the SEC or first published, sent, or given to the stockholders of the
Company, or, in the case of the Proxy Statement, at the date the Proxy
Statement is first mailed to the stockholders of the Company or at the time
of the meeting of the stockholders of the Company held to vote on approval
and adoption of this Agreement and the Merger, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Offer
Documents will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation or warranty is made by the Parent
or the Purchaser with respect to statements made or incorporated by reference
in the Offer Documents based on information supplied by the Company for
inclusion or incorporation by reference in the Offer Documents.
4.6 FINANCING. Parent or Purchaser will have available to it at the
time required the funds necessary to consummate the Offer, the Merger and the
transactions contemplated hereby.
ARTICLE V
COVENANTS
5.1 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as expressly contemplated by this Agreement and except
in cases where, at or after such time as the designees of the Parent
constitute a majority of the members of the Board of Directors of the Company
and the failure to comply with the covenants set forth in this SECTION 5.1
results from actions, or omissions to act, taken or authorized by such
designees, during the period from the date of this Agreement to the Effective
Time:
(i) Each of the Company and its subsidiaries will conduct
its business solely in the ordinary course consistent with past practices,
except as is reasonably expected to facilitate the consummation of the Offer,
the Merger or the transactions contemplated hereby.
(ii) Neither the Company nor any of its subsidiaries will
intentionally take or willfully omit to take any actions that results in or
are reasonably expected to result in, a Company Material Adverse Effect.
(iii) The Company will use its reasonable best efforts to
preserve intact the business organization of the Company and each of its
subsidiaries, to keep available the
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services of its and their present officers and key employees and consultants,
and to maintain satisfactory relationships with customers, agents,
reinsurers, suppliers, and other persons having business relationships with
the Company or its subsidiaries.
(b) Without limiting the provisions of SECTION 5.1(a), except as
expressly contemplated by this Agreement and except in cases where, at or
after such time as the designees of the Parent constitute a majority of the
members of the Board of Directors of the Company and the failure to comply
with the covenants set forth in this SECTION 5.1 results from actions, or
omissions to act, taken or authorized by such designees, during the period
from the date of this Agreement to the Effective Time, neither the Company
nor any of its subsidiaries will:
(i) issue, sell, or dispose of additional shares of capital
stock of any class (including the Shares) of the Company or any of its
subsidiaries, or securities convertible into or exchangeable for any such
shares or securities, or any rights, warrants, or options to acquire any
such shares or securities, other than Shares issued upon exercise of options
disclosed in SECTION 3.3, which options cover a total of no more than
3,328,989 Shares;
(ii) redeem, purchase, or otherwise acquire, or propose to
redeem, purchase, or otherwise acquire, any of its outstanding capital stock,
or other securities of the Company or any of its subsidiaries;
(iii) split, combine, subdivide, or reclassify any of its
capital stock or declare, set aside, make, or pay any dividend or
distribution on any shares of its capital stock except for dividends or
distributions to the Company and its subsidiaries from their respective
subsidiaries;
(iv) sell, pledge, dispose of, or encumber any of its
assets, except for sales, pledges, dispositions, or encumbrances in the
ordinary course of business consistent with past practices or between the
Company and its subsidiaries, except as reasonably may be expected to
facilitate the consummation of the Offer, the Merger or the transactions
contemplated hereby;
(v) incur or modify any indebtedness or issue any debt
securities, or assume, guarantee, endorse, or otherwise as an accommodation
become absolutely or contingently responsible for obligations of any other
person, or make any loans or advances, other than in the ordinary course of
business consistent with past practices;
(vi) adopt or amend any bonus, profit sharing, compensation,
severance, termination, stock option, pension, retirement, deferred
compensation, employment or other employee benefit agreements, trusts, plans,
funds, or other arrangements for the benefit or welfare of any director,
officer, or employee, or (except for normal increases in the ordinary course
of business that are consistent with past practices and that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company) increase in any manner the compensation or fringe
benefits of any director, officer, or employee or pay any benefit not
required by any existing plan or arrangement (including, without limitation,
the granting or vesting of stock options or stock appreciation rights) or
take any action or grant any benefit not expressly
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required under the terms of any existing agreements, trusts, plans, funds, or
other such arrangements or enter into any contract, agreement, commitment, or
arrangement to do any of the foregoing; or make or agree to make any payments
to any directors, officers, agents, contractors, or employees relating to a
change or potential change in control of the Company;
(vii) acquire by merger, consolidation, or acquisition of
stock or assets any corporation, partnership, or other business organization
or division or make any investment either by purchase of stock or securities,
contributions to capital (other than to wholly-owned subsidiaries), property
transfer, or purchase of any material amount of property or assets, in any
other person;
(viii) except as required by this Agreement, adopt any
amendments to their respective charters or bylaws or equivalent
organizational documents;
(ix) take any action other than in the ordinary course of
business and consistent with past practices, to pay, discharge, settle, or
satisfy any claim, liability, or obligation (absolute or contingent, accrued
or unaccrued, asserted or unasserted, or otherwise);
(x) change any method of accounting or accounting practice
used by the Company or any of its subsidiaries, except for any change
required by reason of a concurrent change in generally accepted accounting
principles;
(xi) revalue in any respect any of its assets, including,
without limitation, writing down the value of its portfolio or writing off
notes or accounts receivable other than in the ordinary course of business
consistent with past practices (other than with respect to MatriDigm
Corporation);
(xii) except in the ordinary course of business consistent
with past practice, authorize any new capital expenditures;
(xiii) make any tax election, settle or compromise any
federal, state, or local tax liability or consent to the extension of time
for the assessment or collection of any federal, state, or local tax, the
effect of which would be material;
(xiv) settle or compromise any pending or threatened suit,
action, or claim material to the Company and its subsidiaries taken as a
whole or relevant to the transactions contemplated by this Agreement;
(xv) except as permitted by this Agreement, enter into any
agreement, arrangement, or understanding to do any of the foregoing actions
in this SECTION 5.1, including any agreement, arrangement, or understanding
resulting in or providing for a sale of any assets of the Company (other than
a sale of assets in the ordinary course of business and consistent with past
practices) or a merger or other liquidation, sale, or disposition of the
Company; or
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(xvi) voluntarily take any action or willfully omit to take
any action that is reasonably expected to make any representation or warranty
in ARTICLE III untrue or incorrect in any material respect at any time,
including as of the date of this Agreement and as of the time of consummation
of the Offer and the Effective Time, as if made as of such time.
5.2 PROXY STATEMENT. Promptly after the execution of this Agreement,
the Company and the Parent will cooperate with each other and use all
reasonable efforts to prepare, and the Company and the Parent will file with
the SEC, as soon as is reasonably practicable after completion of the Offer,
a proxy statement, together with a form of proxy, or information statement,
with respect to the Special Meeting (as defined in SECTION 5.3), if such
Special Meeting is required to be held pursuant to SECTION 5.3. For the
purposes of this Agreement, the term "PROXY STATEMENT" means such proxy or
information statement filed in final form with the SEC at the time it
initially is mailed to the stockholders of the Company and all amendments or
supplements thereto, if any, similarly filed and mailed. The parties will
use all reasonable efforts to have the Proxy Statement cleared by the SEC as
promptly as practicable after filing and, as promptly as practicable after
the Proxy Statement has been so cleared, will mail the Proxy Statement to the
stockholders of the Company as of the record date for the Special Meeting.
The Company represents that none of the information provided or to be
provided by it, and the Parent and the Purchaser represent that none of the
information provided or to be provided by them, for use in the Proxy
Statement will, on the date the Proxy Statement is first mailed to the
stockholders of the Company and on the date of the Special Meeting, be false
or misleading with respect to any material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading, and the Parent, the Company, and the Purchaser each agrees to
correct any information provided by it for use in the Proxy Statement that
has become false or misleading in any material respect and file such
amendments and supplements as are necessary. The Proxy Statement will comply
as to form in all material respects with all applicable requirements of
federal securities laws and applicable state laws.
5.3 ACTION OF STOCKHOLDERS OF THE COMPANY; VOTING AND DISPOSITION OF
THE SHARES.
(a) Promptly after completion of the Offer and if required by
applicable law in order to consummate the Merger, the Company will take all
action necessary in accordance with the DGCL and the Certificate of
Incorporation and Bylaws of the Company, to call a meeting of its
stockholders (the "SPECIAL MEETING") with a record date as of which the
Parent is the record owner of the Shares purchased pursuant to the Offer at
which the stockholders of the Company will consider and vote upon the Merger
and this Agreement. Unless the fiduciary duties of the Board of Directors or
any Director under applicable law require otherwise, the Proxy Statement will
contain the unanimous recommendation of the Board of Directors of the Company
that the stockholders of the Company vote to adopt and approve the Merger and
this Agreement. The Company will, at the request of the Parent, use all
reasonable efforts to obtain from its stockholders proxies in favor of such
adoption and approval and to take all other action necessary, or, in the
reasonable judgment of the Company and the Parent, helpful to secure the vote
or consent of stockholders required by the DGCL to effect the Merger.
Notwithstanding the foregoing, in the event that the Parent determines to
effect the Merger without a meeting of the
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stockholders of the Company pursuant to Section 228 or Section 253 of the
DGCL, the parties will take all necessary or appropriate action to cause the
Merger to become effective as soon as practicable after expiration of the
Offer without a meeting of stockholders, in accordance with either such
section of the DGCL.
(b) At the Special Meeting, the Parent, the Purchaser, and their
subsidiaries will vote, or cause to be voted, all of the Shares then owned by
any of them in favor of the Merger.
5.4 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of this
Agreement and to the fiduciary obligations of the Board of Directors of the
Company under applicable law, each of the parties agrees to use their
respective reasonable best efforts to take, or cause to be taken, all actions
to do, or cause to be done, all things necessary, proper, or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement (including consummation of the Offer, the
Merger, and the Financing (as defined in SECTION 5.11)) and to cooperate with
each other in connection with the foregoing, including, without limitation,
using their respective reasonable best efforts (a) to obtain all necessary
waivers, consents, and approvals from other parties to loan agreements,
leases, and other contracts, (b) to obtain all necessary consents, approvals,
and authorizations as are required to be obtained under any federal, state,
or foreign law or regulations, (c) to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated by this Agreement, (d) to
prepare and effect all necessary registrations and filings, and (e) to
fulfill all conditions to and covenants contained in this Agreement. If,
after the Effective Time, any action is necessary to effect the purposes of
this Agreement, the proper officers and directors of each party will take all
such necessary action.
5.5 NOTIFICATION OF CERTAIN MATTERS. The Company will give prompt
notice to the Parent and the Purchaser, and the Parent and the Purchaser will
give prompt notice to the Company, of (a) the occurrence, or failure to
occur, of any event, which occurrence or failure is reasonably expected to
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate in any material respect at any time, (b) any material failure
of the Company, the Parent, or the Purchaser, as the case may be, or of any
officer, director, employee, or agent of the Company, the Parent, or the
Purchaser, to comply with or satisfy any covenant, condition, or agreement to
be complied with or satisfied by it under this Agreement, (c) any act,
omission to act, event, or occurrence that, with notice, the passage of time,
or otherwise, is reasonably expected to result in a Company Material Adverse
Effect or a Parent Material Adverse Effect, as the case may be, and (d) any
contingent liability of the Company for which it reasonably believes it will,
with the passage of time or otherwise, become liable. No such notification
will affect the representations or warranties of the parties or the
conditions to the obligations of the parties under this Agreement.
5.6 ACCESS TO INFORMATION.
(a) From the date of this Agreement to the Effective Time, the
Company will, and will cause its subsidiaries, officers, directors,
employees, and agents upon reasonable notice
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to, afford to officers, employees, and agents of the Parent, the Purchaser
and their affiliates and, subject to the execution and delivery of a
customary confidentiality agreement, the banks, other financial institutions,
and investment bankers working with the Parent or the Purchaser, and their
respective officers, employees, and agents, complete access at all reasonable
times to its officers, employees, agents, properties, books, records, and
contracts, and will furnish the Parent, the Purchaser and their affiliates
and, subject to the execution and delivery of a customary confidentiality
agreement, the banks, other financial institutions, and investments bankers
working with the Parent or the Purchaser, all financial, operating, and other
data and information as they reasonably request.
(b) Each of the Parent and the Purchaser will hold and will cause
its directors, officers, agents, employees, consultants, and advisors to hold
in confidence, unless compelled to disclose by judicial or administrative
process or, in the written opinion of its legal counsel, by other
requirements of law, all documents and information concerning the Company and
its subsidiaries furnished to such persons in connection with the
transactions contemplated by this Agreement (except to the extent that such
information can be shown to have been (i) previously known by such persons
from sources other than the Company, or its directors, officers,
representatives, or affiliates, (ii) in the public domain through no fault of
such persons, or (iii) later lawfully acquired by such persons on a
non-confidential basis from other sources who are not known by the Parent or
the Purchaser to be bound by a confidentiality agreement or otherwise
prohibited from transmitting the information to the Parent or the Purchaser
by a contractual, legal, or fiduciary obligation) and will not release or
disclose such information to any other person, except its directors,
officers, agents, employees, consultants, and advisors, in connection with
this Agreement who need to know such information. If the transactions
contemplated by this Agreement are not consummated, such confidence shall be
maintained and, if requested by or on behalf of the Company, the Parent and
the Purchaser will, and will use all reasonable efforts to cause their
auditors, attorneys, financial advisors, and other consultants, agents, and
representatives to, return to the Company or destroy all copies of written
information furnished by the Company to the Parent and the Purchaser or their
agents, representatives, or advisors. It is understood that the Parent and
the Purchaser will be deemed to have satisfied their obligation to hold such
information confidential if they exercise the same care as they take to
preserve confidentiality for their own similar information.
(c) Within ten (10) days following the date hereof, the Company
will deliver or cause to be delivered to Purchaser and Parent copies of and
any relevant information relating to, and SCHEDULE 5.6(c) setting forth, the
following: (i) registered patents, trademarks, service marks, trade names or
copyrights, or applications for or licenses (to or from the Company or any of
its subsidiaries) with respect to any of the foregoing that are material to
the Company and its subsidiaries taken as a whole, that (A) are owned by the
Company or any of its subsidiaries, or with respect to which the Company or
any of its subsidiaries has any rights, or (B) are used, whether directly or
indirectly, by the Company or any of its subsidiaries, and (ii) all Pension
Plans and Benefit Plans.
(d) If the Parent and the Purchaser obtain actual knowledge that
the Company is in breach of any representation or warranty contained in this
Agreement, the Parent and the
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Purchase will promptly inform the Company of such breach. However, no
investigation pursuant to this SECTION 5.6 will affect any representations or
warranties of the parties in this Agreement or the conditions to the
obligations of the parties to this Agreement.
5.7 PUBLIC ANNOUNCEMENTS. The Parent and the Purchaser on the one hand
and the Company on the other hand will consult with each other before issuing
any press release or otherwise making any public statements with respect to
this Agreement, the Offer, or the other transactions contemplated by this
Agreement, and will not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or the
listing requirements of any securities exchange.
5.8 OFFICERS' AND DIRECTORS' INDEMNIFICATION.
(a) The Parent and the Purchaser agree that all rights to
indemnification now existing in favor of the directors or officers of the
Company and its subsidiaries as provided in their respective certificates of
incorporation or bylaws and pursuant to the contracts listed on SCHEDULE 5.8
will, to the extent such rights are in accordance with applicable law,
survive the Merger and stay in effect in accordance with their respective
terms. Parent hereby guarantees the full and faithful performance by Parent,
Purchaser and the Surviving Corporation of their respective obligations set
forth in this SECTION 5.8(a).
(b) In the event any action, suit, proceeding, or investigation
relating to this Agreement or to the transactions contemplated by this
Agreement is commenced by a third party, whether before or after the
Effective Time, the parties to this Agreement agree, subject to the fiduciary
duties of the respective Directors of the Company and Parent, to cooperate
and use all reasonable efforts to defend against and respond to such action,
suit, proceeding, or investigation.
(c) For a period of three (3) years after the Effective Time,
Parent shall cause the Surviving Corporation to maintain officers' and
directors' liability insurance for all persons currently covered under the
Company's officers' and directors' liability insurance policies, in their
capacities as officers and directors, on terms no less favorable to the
covered persons than such existing insurance; provided, however, that Parent
shall not be required in order to maintain or procure such coverage to pay an
annual premium in excess of 200% of the current annual premium paid by the
Company for its existing coverage (the "Cap"); and provided, further, that if
equivalent coverage cannot be obtained, or can be obtained only by paying an
annual premium in excess of the Cap, Parent shall only be required to obtain
as much coverage as can be obtained by paying an annual premium equal to the
Cap. This SECTION 5.8(c) is intended to be for the benefit of, and shall be
enforceable by, the persons referred to above, their heirs and personal
representatives, and shall be binding on Parent and its successors and
assigns.
(d) The covenants contained in this SECTION 5.8 will survive the
Merger and the Termination of this Agreement as a result thereof,
indefinitely.
5.9 OTHER ACTIONS BY THE COMPANY. If any "fair price," "moratorium,"
"control share acquisition," or other form of antitakeover statute,
regulation, charter provision, or contract is or
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becomes applicable to the transactions contemplated by this Agreement, the
Company and the members of the Board of Directors of the Company will use
their reasonable efforts to grant such approvals and take such actions as are
necessary under such laws, provisions, or contracts so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable
on the terms contemplated by this Agreement and otherwise act to eliminate or
minimize the effects of such statute, regulation, provision or contract on
the transactions contemplated by this Agreement.
5.10 AVAILABLE FUNDS. The Parent will at the times required have
financing that, together with internally generated or otherwise available
funds and Parent's current revolving credit agreement will be sufficient to
permit the Purchaser to consummate the Offer and the Merger (the
"FINANCING"). The Parent and the Purchaser will use their reasonable best
efforts to pursue and obtain the Financing as soon as practicable.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of each party to effect the Merger are
subject to the satisfaction prior to the Effective Time of the following
conditions:
6.1 STOCKHOLDER APPROVAL. This Agreement will have been adopted and
approved by the affirmative vote of the stockholders of the Company in
accordance with the Certificate of Incorporation and Bylaws of the Company
and with applicable law, unless no stockholder vote is required by law.
6.2 NO INJUNCTION. No federal or state statute, rule, regulation,
injunction, decree, or order will be enacted, promulgated, entered, or
enforced that would (i) prohibit consummation of the Merger or of the other
transactions contemplated by this Agreement or (ii) impose any material
limitation on the ability of the Parent or the Purchaser to exercise all
rights of ownership with respect to the Shares; provided that the parties to
this Agreement agree to use their respective reasonable best efforts to have
any such injunction, decree, or order lifted.
6.3 OFFER. The Purchaser will have purchased Shares pursuant to the
Offer (except that the Purchaser or the Parent in their sole discretion may
waive conditions to the Offer).
6.4 GOVERNMENTAL CONSENTS. The waiting period applicable to the
consummation of the Merger under the HSR Act will have expired or been
terminated and all filings required to be made prior to the Effective Time
with, and all consents, approvals, permits, and authorizations required to be
obtained prior to the Effective Time from, governmental and regulatory
authorities in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated by this Agreement will
have been made or obtained (as the case may be).
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ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.1 TERMINATION. This Agreement may be terminated and the Offer and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any Stockholder approval of the Merger):
(a) by mutual written consent of the Parent, the Purchaser, and
the Company (subject to the provisions of SECTION 1.3(b));
(b) by the Parent and the Purchaser or the Company if any court of
competent jurisdiction or other governmental body has issued a final order,
decree, or ruling or taken any other final action restraining, enjoining, or
otherwise prohibiting the Merger and such order, decree, ruling, or other
action is or has become nonappealable;
(c) by the Parent and the Purchaser if due to an occurrence or
circumstance that has resulted or is reasonably expected to result in a
failure to satisfy any of the conditions set forth in ANNEX A, the Purchaser
has (i) failed to commence the Offer within five business days following the
date of the initial public announcement of the Offer, (ii) terminated the
Offer, or (iii) failed to pay for the Shares pursuant to the Offer by January
31, 1999;
(d) by the Company if (i) there has not been a breach of any
material representation, warranty, covenant, or agreement on the part of the
Company, and the Purchaser has (A) failed to commence the Offer within five
business days following the date of the initial public announcement of the
Offer, (B) terminated the Offer, or (C) failed to pay for the Shares pursuant
to the Offer by January 31, 1999; provided, that any termination pursuant to
this CLAUSE (C) must be made by written notice irrevocably stating the intent
of the Company to terminate this Agreement under this SECTION 7.1(d)(i)(C)
delivered to the Purchaser and the Parent by 12:00 noon, Dallas time, on
January 31, 1999, or (ii) prior to the purchase of Shares pursuant to the
Offer, a person or group has made a bona fide offer that the Board of
Directors of the Company by a majority vote determines in its good faith
judgment and in the exercise of its fiduciary duties, after consultation with
its financial and legal advisors, is obligated by its fiduciary duties under
applicable law to terminate this Agreement, provided that such termination
under this CLAUSE (ii) will not be effective until payment of the fee
required by SECTION 7.3(b);
(e) by the Parent and the Purchaser prior to the purchase of
Shares pursuant to the Offer, if:
(i) there has been a breach (which breach is not cured or
not capable of being cured prior to the earlier of (A) 10 days following
notice to the Company by the Purchaser of such breach or (B) two business
days prior to the expiration date of the Offer, as extended from time to time
pursuant to the terms of this Agreement) of any representation or warranty on
the part of the Company (a) having a Company Material Adverse Effect or (b)
such that closing would put the Purchaser or the Parent in conflict with the
federal securities law;
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(ii) there has been a breach (which breach is not cured or
not capable of being cured prior to the earlier of (A) 10 days following
notice to the Company by the Purchaser of such breach or (B) two business
days prior to the expiration date of the Offer, as extended from time to time
pursuant to the terms of this Agreement) of any covenant or agreement on the
part of the Company (a) resulting in a Company Material Adverse Effect or (b)
such that closing would put the Purchaser or the Parent in conflict with the
federal securities law;
(iii) the Company engages in negotiations with any person or
group (other than the Parent or the Purchaser) that has proposed a Third
Party Acquisition (as defined in SECTION 7.3) except to the extent permitted
by SECTION 8.8;
(iv) the Company enters into an agreement, letter of intent,
or arrangement with respect to a Third Party Acquisition;
(v) the Board has withdrawn or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to the Purchaser its
approval or recommendation of the Offer, this Agreement, or the Merger or has
recommended another offer, or has adopted any resolution to effect any of the
foregoing; or
(vi) the Minimum Conditions have not been satisfied by the
expiration date of the Offer and on or prior to such date (A) any person or
group (other than the Parent or the Purchaser) has made and not withdrawn a
public announcement with respect to a Third Party Acquisition or (B) any
person or group (including the Company or any of its affiliates) other than
the Parent or the Purchaser has become the beneficial owner of 19.9% (except
in bona fide arbitrage transactions) or more of the Shares; or
(f) by the Company if (i) there has been a breach (which breach is
not cured or not capable of being cured prior to the earlier of (A) 10 days
following notice to Parent of such breach or (B) two business days prior to
the expiration date of the Offer, as extended from time to time pursuant to
the terms of this Agreement) of any representation or warranty on the part of
the Parent or the Purchaser that materially adversely affects (or materially
delays) the consummation of the Offer or (ii) there has been a material
breach (which breach is not cured or not capable of being cured prior to the
earlier of (A) 10 days following notice to Parent of such breach or (B) two
business days prior to the expiration date of the Offer, as extended from
time to time pursuant to the terms of this Agreement) of any covenant or
agreement on the part of the Parent or the Purchaser that materially
adversely affects (or materially delays) the consummation of the Offer.
7.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to SECTION 7.1, this Agreement will
become void and have no effect, without any liability on the part of any
party to this Agreement or its affiliates, directors, officers, or
stockholders, other than the provisions of this SECTION 7.2 and SECTIONS
5.6(b), 5.8, and 7.3. Nothing contained in this SECTION 7.2 will relieve any
party from liability for any breach of this Agreement.
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7.3 FEES AND EXPENSES. (a) In the event the Parent and the Purchaser
terminate this Agreement pursuant to SECTIONS 7.1(e)(i) through (v) or the
Company terminates this Agreement pursuant to SECTION 7.1(d)(ii) or SECTION
7.1(d)(i)(C), the Company will reimburse the Parent, the Purchaser, and their
affiliates (not later than one business day after submission of statements
together with reasonable documentation therefor) for all out-of-pocket fees
and expenses actually incurred by any of them or on their behalf in
connection with the Offer and the Merger and the proposed consummation of all
transactions contemplated by this Agreement (including, without limitation,
costs of advertising, filing fees and fees payable to legal counsel,
financial printers, financing sources, investment bankers, counsel to any of
the foregoing, and accountants) not in excess of $3,000,000.
(b) If (i) (A) the Parent and the Purchaser terminate this
Agreement pursuant to SECTIONS 7.1(e)(i) through (v) or in circumstances that
would permit the Parent and the Purchaser to terminate this Agreement
pursuant to SECTIONS 7.1(e)(i) through (v) had a notice of termination
specified such SECTIONS 7.1(e)(i) through (v) or (B) if the Company
terminates this Agreement pursuant to SECTION 7.1(d)(i)(C) and, within four
months after such termination pursuant to clause (A) or clause (B) the
Company enters into an agreement, letter of intent, or binding arrangement
with respect to a Third Party Acquisition, or a Third Party Acquisition
occurs (or within 9 months after such termination if the Third Party
Acquisition that occurs or with respect to which an agreement, letter of
intent or binding arrangement has been entered into is or is reasonably
expected to be a transaction more favorable to the Company's stockholders
than the transactions contemplated by this Agreement) or (ii) the Company
terminates this Agreement pursuant to SECTION 7.1(d)(ii), then in either case
the Company will pay to the Parent and the Purchaser, within one business day
following the execution and delivery of such agreement or letter of intent or
the entering into of such an arrangement or the occurrence of such Third
Party Acquisition, as the case may be, or simultaneously with such
termination pursuant to SECTION 7.1(d)(ii), a fee, in cash, of $10,000,000
and reimburse Parent for all out-of-pocket fees and expenses actually
incurred by or on behalf of Parent or Purchaser in connection with the Offer
and the Merger and the proposed consummation of all the transactions
contemplated by this Agreement (including, without limitation, costs of
advertising, filing fees and fees payable to legal counsel, financial
printers, financing sources, investment bankers, counsel to any of the
foregoing, and accountants) not in excess of $3,000,000 (with a credit for
amounts, if any, paid under SECTION 7.3(a)).
For the purposes of this Agreement, "THIRD PARTY ACQUISITION" means the
occurrence of any of the following events (i) the acquisition of the Company
by merger or otherwise by any person or group other than the Parent, the
Purchaser, or any affiliate of the Parent or the Purchaser (a "THIRD PARTY");
(ii) the acquisition by a Third Party of more than 19.9% of the total assets
of the Company and its subsidiaries, taken as a whole; (iii) the acquisition
by a Third Party of 19.9% or more of the outstanding Shares from the Company
or in a transaction or series of related transactions that results in a
change of control of the Company; (iv) the adoption by the Company of a plan
of liquidation or the declaration or payment of an extraordinary dividend; or
(v) the acquisition by the Company or any of its subsidiaries of more than
19.9% of the outstanding Shares.
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(c) Except as specifically provided in this SECTION 7.3 each party
will bear its own expenses in connection with this Agreement and the
transactions contemplated by this Agreement.
7.4 AMENDMENT. This Agreement may not be amended except in an
instrument in writing signed on behalf of all of the parties to this
Agreement; PROVIDED, HOWEVER, that after approval of the Merger by the
stockholders of the Company, no amendment that would either decrease the
Merger Consideration or change any other term or condition of this Agreement,
if any such change, alone or in the aggregate, would materially and adversely
affect the stockholders of the Company, may be made without the further
approval of the stockholders of the Company; PROVIDED, FURTHER, that, after
purchase of the Shares pursuant to the Offer, no amendment may be made to
SECTION 5.8 without the consent of the indemnified persons.
7.5 WAIVER. At any time prior to the Effective Time, whether before or
after the Special Meeting, any party to this Agreement may (i) subject to the
second proviso in SECTION 7.4, extend the time for the performance of any of
the obligations or other acts of any other party or parties to this
Agreement, (ii) subject to the provisos contained in SECTION 7.4 of this
Agreement, waive any inaccuracies in the representations and warranties
contained in this Agreement by any other applicable party or in any
documents, certificate, or writing delivered pursuant to this Agreement by
any other applicable party, or (iii) subject to the provisos contained in
SECTION 7.4 of this Agreement, waive compliance with any of the agreements of
any other party or with any conditions to its own obligations. Any agreement
on the part of a party to this Agreement to any such extension or waiver will
be valid only if set forth in an instrument in writing signed on behalf of
such party by a duly authorized officer.
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. The
representations and warranties made in this Agreement will not survive beyond
the Effective Time or the termination of this Agreement, as the case may be.
No investigation made, or information received by, any party to this
Agreement will affect any representation or warranty made by any other party
to this Agreement. The covenants and agreements of the parties to this
Agreement will survive in accordance with their terms.
8.2 BROKERAGE FEES AND COMMISSIONS. The Company hereby represents and
warrants to the Parent with respect to the Company and any of its
subsidiaries that, except for fees payable to Paul Stoffel (not to exceed
$1.3 million) and fees payable to DLJ pursuant to an agreement described in
the Offer, and except as disclosed in the Offer, the Parent and the Purchaser
hereby represent and warrant to the Company with respect to Parent or any of
its subsidiaries that, no person is entitled to receive from the Company, the
Parent, the Purchaser or any of their subsidiaries, respectively, any
investment banking, brokerage, or finder's fee or fees in connection with
this Agreement or any of the transactions contemplated by this Agreement.
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8.3 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, together with the
Stock Tender Agreements and all the Schedules and Annexes, (a) constitutes
the entire agreement between the parties with respect to the subject matter
of this Agreement and supersedes all other prior written agreements and
understandings and all prior and contemporaneous oral agreements and
understandings between the parties to this Agreement or any of them with
respect to the subject matter of this Agreement and (b) will not be assigned
by operation of law or otherwise, provided that the Parent may assign its
rights and obligations under this Agreement, or those of the Purchaser,
including, without limitation, the right to substitute in place of the
Purchaser a subsidiary as one of the constituent corporations to the Merger
as provided in SECTION 2.1 to any direct or indirect subsidiary of the
Parent, but no such assignment will relieve the assigning party of its
obligations under this Agreement. Any purported assignment of this Agreement
not made in accordance with this SECTION 8.3 will be null, void, and of no
effect. No party to this Agreement has relied upon any representation or
warranty, oral or written, of any other party to this Agreement or any of
their officers, directors, or stockholders except for the representations and
warranties contained in this Agreement and the Stock Tender Agreements.
8.4 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect. Upon any final judicial determination that
any term or other provision is invalid, illegal, or incapable of being
enforced, the parties to this Agreement will negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated by this Agreement be consummated to the extent possible.
8.5 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed to
have been duly given when delivered in person, by cable, telegram or telex,
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
(a) if to the Parent or the Purchaser, to:
Affiliated Computer Services, Inc.
2828 N. Haskell, 10th Floor
Dallas, Texas 75204
Attention: Jeff A. Rich
Fax: (214) 821-1014
and
Affiliated Computer Services, Inc.
2828 N. Haskell, 10th Floor
Dallas, Texas 75204
Attention: David Black
Fax: (214) 823-5746
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with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attn: David G. Luther, Jr.
Fax: (214) 939-6100
(b) if to the Company, to:
BRC Holdings, Inc.
1111 W. Mockingbird Lane
Suite 1400
Dallas, Texas 75247
Attention: Thomas A. Kiraly
Fax: (214) 689-0317
with a copy to:
Arter & Hadden LLP
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attn: Jeffrey M. Sone
Fax: (214) 741-7139
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address will be effective only upon
receipt).
8.6 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS.
8.7 SPECIFIC PERFORMANCE. Each of the parties to this Agreement
acknowledges and agrees that the other parties to this Agreement would be
irreparably damaged in the event any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. Accordingly, each of the parties to this Agreement agrees that
each of them will be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions of this Agreement in any action
instituted in any court of the United States or any state having subject
matter jurisdiction, in addition to any other remedy to which such party may
be entitled, at law or in equity.
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8.8 OTHER POTENTIAL BIDDERS.
(a) Subject to the next sentence, the Company shall not, directly
or indirectly, through any officer, director, employee, representative or
agent of the Company or any of its subsidiaries, solicit or encourage
(including by way of furnishing information) the initiation of any inquires
or proposals regarding a Third Party Acquisition (any of the foregoing
inquiries or proposals being referred to herein as an "Acquisition
Proposal"). Notwithstanding the foregoing, nothing contained in this SECTION
8.8(a) or any other provision of this Agreement shall prevent the Board if it
determines in good faith, after consultation with, and the receipt of advice
from, outside counsel, that it is required to do so in order to discharge
properly its fiduciary duties, from considering, negotiating, approving and
recommending to the stockholders of the Company an unsolicited bona fide
written Acquisition Proposal, or providing information to any third party in
connection therewith, which the Board of Directors of the Company determines
in good faith (after consultation with its financial advisors and legal
counsel) may reasonably result in a transaction more favorable to the
Company's stockholders than the transaction contemplated by this Agreement
(any Acquisition Proposal meeting such criterion, including those specified
in the immediately preceding parenthetical proviso, being referred to herein
as a "SUPERIOR PROPOSAL"). Nothing therein shall prohibit the Company from
complying with Rules 14d-9 and 14e-2 under the Exchange Act with respect to
any other tender offers.
(b) The Company shall promptly, but in no event later than 24
hours, notify Parent after receipt of any Acquisition Proposal or any request
for nonpublic information relating to the Company or any of its subsidiaries
in connection with an Acquisition Proposal or for access to the properties,
books or records of the Company or any subsidiary by any person or entity
that informs the Board that it is considering making, or has made, an
Acquisition Proposal. Such notice to Parent shall be made orally and in
writing and shall indicate in reasonable detail the identity of the offeror
and the terms and conditions of such proposal, inquiry or contact.
(c) If the Board receives a request for material nonpublic
information by a party who makes an unsolicited bona fide Acquisition
Proposal and the Board determines that such proposal, if consummated pursuant
to its terms would be a Superior Proposal, then, and only in such case, the
Company may, subject to the execution of a confidentiality agreement
substantially similar to that then in effect between the Company and Parent,
provide such party with access to information regarding the Company.
(d) The Company shall immediately cease and cause to be terminated
any existing discussions or negotiations with any parties (other than the
Parent and the Purchaser) conducted heretofore with respect to any of the
foregoing. The Company agrees not to release any third party from any
confidentiality or standstill agreement to which the Company is a party.
(e) The Company shall ensure that the officers, directors and
employees of the Company and its subsidiaries and any investment banker or
other advisor or representative retained by the Company are aware of the
restrictions described in this Section; and shall be responsible for any
breach of this SECTION 8.8 by such bankers, advisors and representatives.
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8.9 DESCRIPTIVE HEADINGS; REFERENCES. The descriptive headings in this
Agreement are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
References in this Agreement to Sections, Annexes, and Schedules are
references to the Sections, Annexes, and Schedules of this Agreement unless
the context indicates otherwise.
8.10 PARTIES IN INTEREST. This Agreement will be binding upon and inure
solely to the benefit of each party to this Agreement, and, except as
provided in SECTIONS 5.9 and 8.11, nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
8.11 BENEFICIARIES. The Parent hereby acknowledges that SECTION 5.8 is
intended to benefit the indemnified parties referred to in SECTION 5.8, any
of whom will be entitled to enforce SECTION 5.8 against the Surviving
Corporation, the Parent or the Company, as the case may be.
8.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, but all of
which will constitute one and the same agreement.
8.13 OBLIGATIONS. The Parent will perform or cause the Purchaser to
perform all of the obligations of the Purchaser under this Agreement,
including consummation of the Merger, in accordance with the terms of this
Agreement.
8.14 CERTAIN DEFINITIONS. For the purposes of this Agreement: (a) the
term "SUBSIDIARY" means each person in which a person owns or controls,
directly or through one or more subsidiaries, 50 percent or more of the stock
or other interests having general voting power in the election of directors
or persons performing similar functions or more than 50% of the equity
interests; (b) the term "PERSON" will be broadly construed to include any
individual, corporation, company, partnership, trust, joint stock company,
association, or other private or governmental entity; (c) the term "GROUP"
has the meaning given in Section 13(d)(3) of the Exchange Act; (d) the term
"AFFILIATE" has the meaning given in Rule 144(a)(1) under the Securities Act;
and (e) the term "BUSINESS DAY" has the meaning given in Rule 14d-1(c)(6)
under the Exchange Act.
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IN WITNESS WHEREOF, each of the parties to this Agreement has caused
this Agreement to be executed on its behalf by its duly authorized officers,
all as of the day and year first above written.
AFFILIATED COMPUTER SERVICES, INC.
By: /s/ Mark A. King
----------------------------------
Name: Mark A. King
Title: Executive Vice President,
Chief Financial Officer
ACS ACQUISITION CORPORATION
By: /s/ Mark A. King
----------------------------------
Name: Mark A. King
Title: Vice President
BRC HOLDINGS, INC.
By: /s/ Jerrold L. Morrison
----------------------------------
Name: Jerrold L. Morrison
Title: President and Chief Operating
Officer
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ANNEX A
Terms used in this Annex A have the meanings ascribed to them in the
Agreement and Plan of Merger dated as of October 19, 1998 (the "MERGER
AGREEMENT").
Notwithstanding any other provisions of the Offer, the Purchaser will
not be required to accept for payment or (subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) relating to the obligation of
the Purchaser to pay for or return tendered Shares promptly after the
termination or withdrawal of the Offer) to pay for tendered Shares, or may
terminate or amend the Offer as provided in the Agreement, or may postpone
the acceptance for payment of, or payment for, Shares (whether or not any
other Shares have been accepted for payment or paid for pursuant to the
Offer) if prior to the expiration of the Offer (i) the Minimum Condition has
not been satisfied; (ii) the waiting period under the HSR Act has not expired
or been terminated with respect to purchase of the Shares; or (iii) if at any
time on or after the date of the Merger Agreement, and at any time before the
time of acceptance for payment of any such Shares, any of the following
occurs:
(a) any of the representations or warranties of the Company contained
in the Merger Agreement is not true and correct at and as of any date prior
to the expiration date of the Offer as if made at and as of such time,
except for (i) failures (other than with respect to the Company's
investment in MatriDigm) to be true and correct as are not, individually or
in the aggregate, reasonably expected to result in a Company Material
Adverse Effect; or (ii) failures to comply as are capable of being and are
cured prior to the earlier of (A) 10 days after written notice from the
Purchaser to the Company of such failure or (B) two business days prior to
the expiration date of the Offer;
(b) the Company has failed to comply with any of its obligations
under the Merger Agreement, except for(i) failures to so comply as are not,
individually or in the aggregate, reasonably expected to result in a
Company Material Adverse Effect; and (ii) failures to comply as are capable
of being and are cured prior to the earlier of (A) 10 days after written
notice from the Purchaser to the Company of such failure or (B) two
business days prior to the expiration date of the Offer;
(c) the Board of Directors of the Company has withdrawn or modified
in any respect adverse to the Purchaser or the Parent its recommendation of
the Offer or taken any position inconsistent with such, recommendation;
(d) the Merger Agreement has been terminated in accordance with its
terms;
(e) the Company has reached an agreement with the Parent or the
Purchaser that the Offer or the Merger be terminated or amended;
(f) any state, federal, or foreign government, or governmental
authority has taken any action, or proposed, sought, promulgated, or
enacted, or any state, federal, or
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foreign government or governmental authority or court has entered,
enforced, or deemed applicable to the Offer or the Merger, any statute,
rule, regulation, judgment, order, or injunction that is reasonably likely
to (i) make the acceptance for payment of, the payment for, or the
purchase of, some or all of the Shares illegal or otherwise restrict,
materially delay, prohibit consummation of, or make materially more
costly, the Offer or the Merger, (ii) result in a material delay in or
restrict the ability of the Purchaser, or render the Purchaser unable,
to accept for payment, pay for or purchase some or all of the Shares in
the Offer or the Merger, (iii) require the divestiture by the Parent, the
Purchaser, or the Company or any of their respective subsidiaries or
affiliates of all or any material portion of the business, assets, or
property of any of them or any Shares, or impose any material limitation
on the ability of any of them to conduct their business and own such
assets, properties, and Shares, (iv) impose material limitations on the
ability of the Parent or the Purchaser to acquire or hold or to exercise
effectively all rights of ownership of the Shares, including the right to
vote any Shares acquired by either of them on all matters properly
presented to the Stockholders of the Company,(v) impose any limitations on
the ability of the Parent, the Purchaser, or any of their respective
subsidiaries or affiliates effectively to control in any material respect
the business or operations of the Company, the Parent, the Purchaser, or
any of their respective subsidiaries or affiliates;
(g) any change (or any condition, event or development involving a
prospective change) has occurred or been threatened in the business,
properties, assets, liabilities, capitalization, stockholders' equity,
financial condition, operations, licenses or franchises results of
operations, or prospects of the Company or any of its subsidiaries, that is
reasonably expected to result in a Company Material Adverse Effect;
(h) there has occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market or quotations for shares traded thereon as
reported by the NASDAQ or otherwise, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States or (whether or not mandatory), (iii) a commencement of a war or
armed hostilities or other national or international calamity directly or
indirectly involving the United States other than as a participant in
police actions sponsored by international organizations, (iv) any
limitation (whether or not mandatory) by any governmental authority on the
extension of credit by banks or other financial institutions, (v) after the
date of the Merger Agreement, an aggregate decline of at least 25% in the
Dow Jones Industrial Average or Standard & Poor's 500 Index or a decline in
either such index of 12-1/2% in any 24-hour period, or (vi) in the case of
any of the occurrences referred to in clauses (i) through (iv) existing at
the time of the commencement of the Offer, in the reasonable judgment of
the Purchaser, a material acceleration or worsening thereof;
(i) any person or group other than the Parent or the Purchaser and
their affiliates has entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer
for any Shares or a merger, consolidation, or other business combination or
acquisition with or involving the Company or any of its subsidiaries; or
A-2
<PAGE>
(j) any material approval, permit, authorization, consent, or waiting
period of any domestic or foreign, governmental, administrative, or
regulatory entity.(federal, state, local, provincial or otherwise) has not
been obtained or satisfied on terms satisfactory to the Purchaser in its
sole discretion
that, in the good faith judgment of the Purchaser, makes it inadvisable to
proceed with the Offer or with such acceptance for payment of, or payment
for, Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving rise
to any such condition or may be waived by the Purchaser in whole or in part
at any time and from time to time in its sole discretion (subject to the
terms of the Agreement). The failure by the Purchaser at any time to
exercise any of the foregoing rights will not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances will not be deemed to waiver with respect to any other facts or
circumstances, and each such right will be deemed an ongoing right that may
be asserted at any time and from time to time.
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ANNEX B-1
Kathy Ayres Esping, individually and as Independent Executor of the
Estate of P.E. Esping and as Director of the Esping Family Foundation,
Inc.
Paul Stoffel
B1-1
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ANNEX B-2
STOCK TENDER AGREEMENT
STOCK TENDER AGREEMENT (this "Agreement"), dated October 19, 1998, by
and among AFFILIATED COMPUTER SERVICES, INC., a Delaware corporation
("Parent"), ACS ACQUISITION CORPORATION, a Delaware corporation and
wholly-owned subsidiary of the Parent ("Purchaser") and each of the parties
listed on the signature pages hereto (each a "Stockholder", and collectively,
the "Stockholders").
WHEREAS, each of the Stockholders is, as of the date hereof, the record
and beneficial owner of the shares of common stock, par value $.01 per share
(the "Common Stock"), of BRC HOLDINGS, INC., a Delaware corporation (the
"Company"), set forth opposite its name on Annex I hereto;
WHEREAS, Parent, Purchaser and the Company concurrently herewith are
entering into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), which provides, among other things, for the
acquisition of the Company by Parent by means of a cash tender offer (the
"Offer") by Purchaser for all of the outstanding shares of Common Stock and
for the subsequent merger (the "Merger") of Purchaser with and into the
Company upon the terms and subject to the conditions set forth in the Merger
Agreement; and
WHEREAS, as a condition to the willingness of Parent and Purchaser to
enter into the Merger Agreement, and in order to induce Parent and Purchaser
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 Parent
and Purchaser of the Merger Agreement 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:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. Each of
the Stockholders hereby represents and warrants to Parent and Purchaser,
severally and not jointly, as follows:
(a) Such Stockholder is the beneficial owner of the shares of
Common Stock (as may be adjusted from time to time pursuant to Section 6
hereof, the "Shares") set forth opposite its name on Annex I to this
Agreement. Such Shares are held of record, in each case, by the custodian of
such Stockholder. On the date hereof, the Shares opposite such Stockholder's
name constitute all of the Shares owned by such Stockholder. Such
Stockholder has the exclusive right to vote or dispose of (or exercise the
voting or disposition of) such Shares.
(b) Such Stockholder has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby and has taken all action necessary to authorize the execution,
delivery and performance of this Agreement.
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(c) This Agreement has been duly authorized, 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 may be 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 its
obligations hereunder will not, require any filing by such Stockholder with,
or any permit, authorization, consent or approval of, any Governmental or
Regulatory Authority or any third party other than an amendment to Schedule
13D and Form 4 and/or Form 5. There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which such Stockholder is
a trustee whose consent is required for the execution and delivery of this
Agreement or the consummation by such Stockholder of the transactions
contemplated hereby.
(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, proxies, voting
trusts or agreements or understandings or arrangements whatsoever, except for
any such liens or proxies arising hereunder, and not subject to any
preemptive rights.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER.
Each of Parent and Purchaser hereby represents and warrants to the
Stockholders as follows:
(a) Parent and Purchaser are corporations duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, and each of Parent and Purchaser has full
corporate power and authority to enter into this Agreement and to consummate
the transactions 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 Parent and Purchaser and constitutes the legal, valid
and binding obligation of each of Parent and Purchaser, enforceable against
each of them in accordance with its terms, except as may be 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 Parent and
Purchaser do not, and the performance by Parent and Purchaser 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 Parent or Purchaser under,
any of the terms, conditions or provisions of (A) the certificates or
2
<PAGE>
articles of incorporation or bylaws of Parent or Purchaser or (B) (x) any
Law or Order of any Governmental or Regulatory Authority applicable to Parent
or Purchaser or any of their respective assets or properties, or (y) any
Contract to which Parent or Purchaser is a party or by which Parent or
Purchaser 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
Parent and Purchaser to consummate the transactions contemplated by this
Agreement, or (ii) require any filing by Parent or Purchaser with, or any
permit, authorization, consent or approval of, any Governmental or Regulatory
Authority.
SECTION 3. PURCHASE AND SALE OF THE SHARES. Each of the Stockholders
hereby agrees to tender the Shares set forth opposite its name on Annex I to
this Agreement into the Offer promptly, and in any event no later than the
fifth business day following the commencement of the Offer pursuant to
Section 1.1 of the Merger Agreement and not to withdraw any Shares so
tendered unless the Offer is terminated or has expired; provided that if such
Stockholder shall thereafter acquire shares of Common Stock, then any such
Shares shall be tendered on the next succeeding business day after such
acquisition. Purchaser hereby agrees to purchase all the Shares so tendered
at a price per Share equal to $19.00 per Share or any higher price that may
be paid in the Offer; provided, however, that Purchaser's obligation to
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex
A thereto.
SECTION 4. TRANSFER OF THE SHARES; PROXIES AND NON-INTERFERENCE. Prior
to the termination of this Agreement, except as otherwise provided herein,
none of the Stockholders shall, directly or indirectly, (i) offer for sale,
sell, transfer, tender, pledge, encumber, assign, or otherwise dispose of,
any or all of the Shares; (ii) enter into any Contract, option or
understanding with respect to any transfer of any or all of the Shares or any
interest therein; (iii) except as provided herein, 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.
SECTION 5. STOCKHOLDER CAPACITY. No person executing this Agreement
who is or becomes during the term hereof a director of the Company makes any
agreement or understanding herein in his or her capacity as such director.
Each Shareholder signs solely in his or her capacity as the owner of, or the
trustee of a trust whose beneficiaries are the owners of, such Shareholder
Shares.
SECTION 6. 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 Common Stock or the
acquisition of additional shares of Common 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
3
<PAGE>
of Common Stock or other securities or rights of the Company issued to or
acquired by any such Stockholder.
SECTION 7. CERTAIN OTHER AGREEMENTS. From the date of this Agreement
until the earlier of the termination of this Agreement or the Effective Time,
none of the Stockholders shall, and none of the Stockholders shall permit or
authorize 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 initiate, solicit, continue, encourage or facilitate (including by
way of furnishing or disclosing non-public information) any inquiries or the
making of any offer or proposal with respect to a merger, reorganization,
share exchange, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any
of its subsidiaries or any proposal or offer to acquire in any manner,
directly or indirectly, 15% or more of the shares of any class of voting
securities of the Company or any of its subsidiaries or a substantial portion
of the assets of the Company or any of its subsidiaries, other than the
transactions contemplated by the Merger Agreement or by this Agreement (any
of the foregoing being referred to as an "Acquisition Proposal"), or (ii)
engage in negotiations, discussions or communications regarding or disclose
any information relating to the Company or any of its subsidiaries or afford
access to the properties, books or records of the Company or any of its
subsidiaries to any person, corporation, partnership or other entity or group
(a "Potential Acquiror") that may be considering making, or has made, an
Acquisition Proposal or knowingly facilitate any effort or attempt to make or
implement an Acquisition Proposal or accept an Acquisition Proposal. The
obligations of each of the Stockholders pursuant to this Section are several
and not joint.
SECTION 8. FURTHER ASSURANCES. Each of the Stockholders shall, upon
request of Parent or Purchaser, take such further actions as may reasonably
be necessary or desirable to carry out the provisions hereof, provided that
the Stockholders shall not be required to incur any additional costs or
expenses or receive less-than the agreed price without their consent.
SECTION 9. 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
consummation of the Offer, (ii) the termination of the Merger Agreement in
accordance with its terms or (iii) the Effective Time; provided, however,
that Sections 7 and 10 shall survive any termination of this Agreement.
SECTION 10. EXPENSES. All fees and expenses incurred by any one party
hereto shall be borne by the party incurring such fees and expenses.
SECTION 11. PUBLIC ANNOUNCEMENTS. Each of the Stockholders, Parent and
Purchaser 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 party, which
consent 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. The obligations of each of the
Stockholders pursuant to this Section are several and not joint.
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<PAGE>
SECTION 12. DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings indicated below:
"CONTRACT" means any agreement, lease, evidence of indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"LAW" means any law, statute, rule, regulation, ordinance and other
pronouncement having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"LIENS" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality
of the United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision.
"ORDER" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
SECTION 13. 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:
(A) if to any or all the Stockholders, to:
Paul Stoffel
Capital Corp.
5949 Sherry Lane
Suite 1465
Dallas, Texas 75225
Facsimile: (214) 750-7754
and
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<PAGE>
(B) if to Parent or Purchaser, to:
Affiliated Computer Services, Inc.
2828 N. Haskell, 10th Floor
Dallas, Texas 75204
David Black
Facsimile: (214) 823-5746
with a copy to:
David G. Luther, Jr.
Hughes & Luce LLP
1717 Main Street
Suite 2800
Dallas, Texas 75201
Facsimile: (214) 939-6100
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 Texas without giving effect to the
principles of conflicts of laws thereof; provided, however, that the
consummation and effectiveness of the Merger will be governed and construed
in accordance with the laws of the State of Delaware.
(f) Each party hereby irrevocably submits to the exclusive
jurisdiction of the courts in the State of Texas or the United States
District Court for the Northern District of Texas
6
<PAGE>
in any action, suit or proceeding arising in connection with this Agreement,
and agrees that any such action, suit or proceeding shall be brought only in
such court (and waives any objection based on forum non conveniens or any
other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (f) and
shall not be deemed to be a general submission to the jurisdiction of said
Courts or in the State of Texas other than for such purposes. Each party
hereto hereby waives any right to a trial by jury in connection with any such
action, suit or proceeding.
(g) 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, Purchaser or Parent 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.
(h) 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.
(i) Each of the parties hereto acknowledge 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.
(j) 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; provided that Annex I hereto may be supplemented by Parent by
adding the name and other relevant information concerning any stockholder of
the Company who agrees to be bound by the terms of this Agreement without the
agreement of any other party hereto, and thereafter such added stockholder
shall be treated as a "Stockholder" for all purposes of this Agreement.
[THE REMAINDER OF PAGE IS INTENTIONALLY OMITTED]
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IN WITNESS WHEREOF, each of Parent, the Purchaser and the Stockholders
have caused this Agreement to be duly executed and delivered as of the date
first written above.
AFFILIATED COMPUTER SERVICES, INC.
By:
-----------------------------------------
Name: Mark A. King
Title: Executive Vice President
ACS ACQUISITION CORPORATION
By:
-----------------------------------------
Name: Mark A. King
Title: Vice President
[STOCKHOLDERS]
--------------------------------------------
Paul T. Stoffel
--------------------------------------------
Kathryn Ayres Esping, individually and as
Independent Executor of the Estate of
P.E. Esping and as Director of the
Esping Family Foundation, Inc.
--------------------------------------------
--------------------------------------------
8
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ANNEX I
Ownership of Company Common Stock
<TABLE>
<CAPTION>
STOCKHOLDER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
Kathryn Ayres Esping, individually and 2,960,890
as Independent Executor of the Estate of
P.E. Esping and as Director of the
Esping Family Foundation, Inc.
Paul Stoffel 344,246
</TABLE>
9
<PAGE>
TRANSITIONAL COMPENSATION AGREEMENT
THIS AGREEMENT, made this 9th day of October, 1998, by and between JERROLD
L. MORRISON (the "Executive") and BRC HOLDINGS, INC., a Delaware corporation
(the "Company").
WITNESSETH:
WHEREAS, the Executive is presently employed as an executive of the
Company; and
WHEREAS, the Company considers the retention of a sound management team to
be essential to protecting and enhancing the interest of the Company and its
Stockholders; and
WHEREAS, the Company wishes to have the benefit of the Executive's full
time and attention to the affairs of the Company, particularly during any period
in which the Company is considering material corporate transactions involving
its equity securities, mergers with other companies which may result in a change
of control, or other circumstances that might cause a diversion of the
Executive's attention;
WHEREAS, the Company has proposed this Agreement as a means of reducing any
uncertainty that Executive may be subject to; and
WHEREAS, the Executive wishes to obtain the benefits offered by this
Agreement and to be subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
convenants hereinafter set forth, the parties do hereby agree as follows:
1. ELIGIBILITY FOR TRANSITIONAL COMPENSATION. The Executive shall be
eligible to receive transitional compensation, in the amounts and at the times
described in Paragraph 3, in the event that:
(a) his employment with the Company is terminated within 18 months of
a "change in control," as such term is hereinafter defined; and
(b) the Executive's termination of employment is not on account of:
(i) retirement on or after reaching age 65;
(ii) the Executive's death;
(iii) termination by the Company following a conviction of the
Executive of a felony involving moral turpitude or a determination by
the Board of Directors that the Executive has continued to engage,
following notice from the Board, in misconduct or dereliction of duty
which is detrimental in a material way to the business of the Company
or its subsidiaries; or
<PAGE>
(iv) the Executive's voluntary resignation following a change
of control; PROVIDED that a resignation shall not be considered to be
voluntary for the purposes of this Agreement if it occurs if the
Executive terminates his employment more than sixty days following a
change of control and following: (A) a substantial diminution in
Executive's duties with the Company from the duties existing
immediately prior to any change of control; (B) a reduction by the
Company in the Executive's annual base salary in effect on the date of
a change of control or as in effect thereafter if such annual base
salary has been increased and such increase was approved prior to the
change of control; (C) a substantial reduction by the Company in the
overall value of employee-related benefits provided to the Executive
from those in effect on the date of a change in control or as in
effect thereafter if such benefits have been increased and that
increase was approved prior to the change of control; (D) a failure to
continue in effect any incentive compensation plan in effect
immediately prior to the change in control, or a reduction in
Executive's participation or entitlement with regard thereto, unless
the Executive is afforded an opportunity of reasonably equivalent
value; (E) a significant reduction in the Executive's perquisites and
other benefits enjoyed immediately prior to a change of control; (F)
relocation of Executive's principle place of employment to a place
more than fifty miles from the Executive's principle place of
employment as of the change of control; (G) any material breach by the
Company of any provision of this Agreement or of any incentive
compensation, stock option or similar benefit plan of the Company in
which Executive then participates or is eligible to participate; or
(H) conduct by the Company, against Executive's volition, which could
cause the Executive to commit, on his own behalf or as an officer of
the Company, a fraudulent act or which could expose the Executive to
civil or criminal liability or to sanction by any professional
licensing body or self-regulatory organization.
2. CHANGE IN CONTROL. For the purposes of this Agreement, a "change in
control" shall be deemed to have occurred if prior to May 1, 1999:
(a) any "person" (as that term is used in Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) (the "Exchange Act"), other than
the Company, becomes the beneficial owner, within the meaning of Rule 13d-3
under the Exchange Act of securities of the Company representing more than
fifty percent of the voting power of all of the then outstanding voting
securities of the Company;
(b) persons who, at the beginning of any twelve consecutive month
period, constitute the Board of Directors of the Company cease, at the end
of such period, to constitute at least a majority thereof, unless the
nomination of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period;
(c) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares
of the Common Stock
2.
<PAGE>
of the Company would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the Common Stock
of the Company immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after
such merger or which would result in voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving
entity immediately following the consolidation or merger in question;
(d) any sale, lease, exchange or other transfer (in one transaction
or a series of transactions) of all, or substantially all, of the assets of
the Company;
(e) approval by the Company's stockholders of any plan or proposal
for the liquidation or dissolution of the Company or the sale, lease,
exchange or other transfer (in one transaction or a series of transactions)
of assets of the Company in a transaction approved by stockholders of the
Company;
(f) any change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof, promulgated under the
Exchange Act.
3. AMOUNT AND PAYMENT OF TRANSITIONAL COMPENSATION. In the event the
Executive is eligible for transitional compensation pursuant to the provisions
of Paragraph 1 hereof, he shall be entitled to receive the following:
(a) a lump sum cash payment, payable within 10 days after the date of
Executive's termination, in an amount equal to the Executive's Annual
Compensation (as hereinafter defined). For the purposes hereof, the
Executive's Annual Compensation, as of any point in time, shall be equal to
the sum of (i) an amount equal to the average of the Executive's salary for
the twelve months preceding the change of control in question, plus (ii)
an amount equal to the cash bonuses received by the Executive during the
twelve calendar months preceding such change of control. The Executive's
average monthly base salary, for the purposes of the preceding sentence,
shall be the amount to which Executive is entitled, prior to reduction for
deferred compensation or salary reduction arrangements, including plans and
arrangements contemplated under Section 401(k) and Section 125 of the Code.
(b) outplacement services at a qualified agency selected by the
Executive (not to exceed $25,000);
(c) continuation of coverage under the Company's group medical, group
life, and group long-term disability plans, if any, and under any policy or
policies of "split dollar" life insurance maintained by the Company, until
the earliest to occur of:
3.
<PAGE>
(i) the expiration of 24 months from the date on which his
employment terminates; or
(ii) the date on which he obtains comparable coverage provided
by a new employer.
4. NO FUNDING OF TRANSITIONAL COMPENSATION. Nothing herein contained
shall require or be deemed to require the Company to segregate, earmark, or
otherwise set aside any funds or assets to provide for any payments required to
be made hereunder, and the Executive's right to transitional compensation
hereunder shall be solely that of a general, unsecured creditor of the Company.
5. NO AMENDMENT OF OTHER AGREEMENTS. This Agreement is not intended to
amend or modify the provisions of any other agreement or arrangement between the
Company and the Executive. Without limiting the generality of the foregoing,
notwithstanding any change of control or other transaction, the terms and
conditions of the Company's various stock option plans and any applicable award
agreements thereunder shall control with respect to the vesting of any options
or other awards thereunder then held by the Executive. No provision of this
Agreement shall restrict the Company's ability to amend any agreement to which
it is a party, any stock option or benefit plan established by it or any of the
provisions of its Certificate of Incorporation or By-laws.
6. DEDUCTION AND WITHHOLDING. All benefits payable to or on behalf of
the Executive pursuant to this Agreement shall be subject to such deductions and
withholding as may be agreed to by the Executive or required by applicable law.
7. DEATH. In the event of the Executive's death, any amount or benefit
payable or distribute to him pursuant to paragraphs 3 or 9 shall be paid to the
beneficiary designated by such Executive for such purpose in the last written
instrument received by the party prior to the Executive's death, if any, and
otherwise to the Executive's estate.
8. SETOFF. The right of Executive to receive benefits under this
Agreement shall be absolute and, except as specifically provided herein, shall
not be subject to any setoff, counterclaim, recoupment, defense, duty to
mitigate or other rights the Company may have. Notwithstanding anything herein
to the contrary, benefits to Executive accruing under this Agreement shall be
offset by the amount of any severance benefits otherwise payable to Executive
under any Company plan or policy applicable to employees of the Company
generally.
9. EXECUTIVE'S INDEMNITY. It shall be a continuing obligation of the
Company to provide the Executive the benefits of the indemnities provided by the
Company's Certificate of Incorporation, by-laws, any agreements between the
Company and the Executive providing for indemnity, and Executive's rights under
applicable law (collectively, the "Indemnity Rights"), as such Indemnity Rights
exist prior to any change of control. To the extent that the Executive's
Indemnity Rights under the Company's Certificate of Incorporation or By-laws or
under any agreement between the Company and the Executive shall be reduced
following a change of control (including any reduction resulting from the
termination of Executive's employment with
4.
<PAGE>
the Company), the Indemnity Rights existing prior to such change or modification
shall be deemed contractual in nature and due and owing to the Executive
pursuant to this Section 9 and shall survive any change of control or
termination of Executive's employment with the Company indefinitely. The
provisions of this Section 9 shall inure to the benefit of the Executive's
personal or legal representatives, executives, administrators, successors,
heirs, distributees, divisees and legatees.
10. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall have no
obligation to seek other employment or take any other action in an effort to
mitigate damages.
11. OTHER BENEFITS. Except to the extent otherwise specifically provided
herein, the benefits provided under this Agreement shall be in addition to, and
not in derogation or diminution of, any benefits that the Executive may be
entitled to receive under any other plan or program now or hereafter maintained
by the Company or by any of its subsidiaries.
12. CONTINUED EMPLOYMENT. This Agreement is not a contract of employment.
Nothing expressed or implied herein shall create any right or duty of continued
employment of the Executive by the Company. The Company reserves all rights to
terminate the Executive's employment at any time with or without cause.
13. SUCCESSORS.
(a) The Company will require any successor or successors (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to
all or any substantially part of the business and/or assets of the Company
and its subsidiaries, taken as a whole, to expressly assume and agree to
perform the Company's obligations under this Agreement in the same manner
and to the same extent that the Company would be required to perform them
if no such succession had taken place unless, in the opinion of legal
counsel to the Executive, such obligations have been assumed by the
successor as a matter of law. No assumption of the Company's obligations
shall relieve the Company of such obligations. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession
(unless the foregoing opinion is rendered to the Executive) shall entitle
the Executive to terminate his employment and to receive the payments
provided for in Paragraphs 3 and 9 above. As used in the Agreement, the
"Company" shall mean the Company, as presently constituted, and any
successor to its business and/or assets which executes and delivers the
agreement provide for in this Paragraph 16 or which otherwise becomes bound
by all the terms and provisions of this Agreement as a matter of law.
(b) If the Executive dies while any amounts are payable to him
pursuant to Paragraphs 3 or 9 of the Agreement, this Agreement shall inure
to the benefit of, and shall be enforceable by the Executive's legal
representative or other successors in interest, but shall not otherwise
be assignable or transferable.
5.
<PAGE>
14. GENERAL PROVISIONS.
(a) NOTICES. Any notices referred to herein shall be in writing and
shall be sufficient if delivered in person or sent by U.S. registered or
certified mail to the Executive at his address on file with the Company, or
to the Company at 1111 West Mockingbird, Suite 1400, Dallas, Texas 75247,
Attn: President.
(b) MODIFICATION, AMENDMENT, WAIVER. No modification or amendment of
any provision of this Agreement shall be effective unless approved in
writing by both parties. Either party's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of
such provision or any other provision hereof.
(c) ENFORCEABILITY. The validity, interpretation, construction and
enforceability of this Agreement shall be governed by the laws of the State
of Texas. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(d) HEADINGS. The headings and paragraph designations of this
Agreement are included solely for convenience of reference and shall in no
event by construed to affect or modify any provisions of this Agreement.
(e) GENDER AND NUMBER. In this Agreement where the context admits,
words in any gender shall include the other genders, words in the plural
shall include the singular, and words in the singular shall include the
plural.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same documents.
15. TERMINATION OF EMPLOYMENT PRIOR TO CHANGE IN CONTROL. This Agreement
shall terminate if the Executive's employment with the Company is terminated,
either voluntarily or involuntarily, for any reason prior to a change in control
of the Company.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to
execute this Agreement and the Executive has executed this Agreement as of the
date set forth above.
BRC HOLDINGS, INC.
By: /s/ Paul T. Stoffel
--------------------------------
Its: Chairman
-------------------------------
/s/ Jerrold L. Morrison
-----------------------------------
(Executive)
6.
<PAGE>
TRANSITIONAL COMPENSATION AGREEMENT
THIS AGREEMENT, made this 9th day of October, 1998, by and between HARVEY
V. BRASWELL (the "Executive") and BRC HOLDINGS, INC., a Delaware corporation
(the "Company").
WITNESSETH:
WHEREAS, the Executive is presently employed as an executive of the
Company; and
WHEREAS, the Company considers the retention of a sound management team to
be essential to protecting and enhancing the interest of the Company and its
Stockholders; and
WHEREAS, the Company wishes to have the benefit of the Executive's full
time and attention to the affairs of the Company, particularly during any period
in which the Company is considering material corporate transactions involving
its equity securities, mergers with other companies which may result in a change
of control, or other circumstances that might cause a diversion of the
Executive's attention;
WHEREAS, the Company has proposed this Agreement as a means of reducing any
uncertainty that Executive may be subject to; and
WHEREAS, the Executive wishes to obtain the benefits offered by this
Agreement and to be subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
convenants hereinafter set forth, the parties do hereby agree as follows:
1. ELIGIBILITY FOR TRANSITIONAL COMPENSATION. The Executive shall be
eligible to receive transitional compensation, in the amounts and at the times
described in Paragraph 3, in the event that:
(a) his employment with the Company is terminated within 18 months of
a "change in control," as such term is hereinafter defined; and
(b) the Executive's termination of employment is not on account of:
(i) retirement on or after reaching age 65;
(ii) the Executive's death;
(iii) termination by the Company following a conviction of the
Executive of a felony involving moral turpitude or a determination by
the Board of Directors that the Executive has continued to engage,
following notice from the Board, in misconduct or dereliction of duty
which is detrimental in a material way to the business of the Company
or its subsidiaries; or
<PAGE>
(iv) the Executive's voluntary resignation following a change
of control; PROVIDED that a resignation shall not be considered to be
voluntary for the purposes of this Agreement if it occurs if the
Executive terminates his employment more than sixty days following a
change of control and following: (A) a substantial diminution in
Executive's duties with the Company from the duties existing
immediately prior to any change of control; (B) a reduction by the
Company in the Executive's annual base salary in effect on the date of
a change of control or as in effect thereafter if such annual base
salary has been increased and such increase was approved prior to the
change of control; (C) a substantial reduction by the Company in the
overall value of employee-related benefits provided to the Executive
from those in effect on the date of a change in control or as in
effect thereafter if such benefits have been increased and that
increase was approved prior to the change of control; (D) a failure to
continue in effect any incentive compensation plan in effect
immediately prior to the change in control, or a reduction in
Executive's participation or entitlement with regard thereto, unless
the Executive is afforded an opportunity of reasonably equivalent
value; (E) a significant reduction in the Executive's perquisites and
other benefits enjoyed immediately prior to a change of control; (F)
relocation of Executive's principle place of employment to a place
more than fifty miles from the Executive's principle place of
employment as of the change of control; (G) any material breach by the
Company of any provision of this Agreement or of any incentive
compensation, stock option or similar benefit plan of the Company in
which Executive then participates or is eligible to participate; or
(H) conduct by the Company, against Executive's volition, which could
cause the Executive to commit, on his own behalf or as an officer of
the Company, a fraudulent act or which could expose the Executive to
civil or criminal liability or to sanction by any professional
licensing body or self-regulatory organization.
2. CHANGE IN CONTROL. For the purposes of this Agreement, a "change in
control" shall be deemed to have occurred if prior to May 1, 1999:
(a) any "person" (as that term is used in Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) (the "Exchange Act"), other than
the Company, becomes the beneficial owner, within the meaning of Rule 13d-3
under the Exchange Act of securities of the Company representing more than
fifty percent of the voting power of all of the then outstanding voting
securities of the Company;
(b) persons who, at the beginning of any twelve consecutive month
period, constitute the Board of Directors of the Company cease, at the end
of such period, to constitute at least a majority thereof, unless the
nomination of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period;
(c) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares
of the Common Stock
2.
<PAGE>
of the Company would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the Common Stock
of the Company immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after
such merger or which would result in voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving
entity immediately following the consolidation or merger in question;
(d) any sale, lease, exchange or other transfer (in one transaction
or a series of transactions) of all, or substantially all, of the assets of
the Company;
(e) approval by the Company's stockholders of any plan or proposal
for the liquidation or dissolution of the Company or the sale, lease,
exchange or other transfer (in one transaction or a series of transactions)
of assets of the Company in a transaction approved by stockholders of the
Company;
(f) any change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof, promulgated under the
Exchange Act.
3. AMOUNT AND PAYMENT OF TRANSITIONAL COMPENSATION. In the event the
Executive is eligible for transitional compensation pursuant to the provisions
of Paragraph 1 hereof, he shall be entitled to receive the following:
(a) a lump sum cash payment, payable within 10 days after the date of
Executive's termination, in an amount equal to the Executive's Annual
Compensation (as hereinafter defined). For the purposes hereof, the
Executive's Annual Compensation, as of any point in time, shall be equal to
the sum of (i) an amount equal to the average of the Executive's salary for
the twelve months preceding the change of control in question, plus (ii)
an amount equal to the cash bonuses received by the Executive during the
twelve calendar months preceding such change of control. The Executive's
average monthly base salary, for the purposes of the preceding sentence,
shall be the amount to which Executive is entitled, prior to reduction for
deferred compensation or salary reduction arrangements, including plans and
arrangements contemplated under Section 401(k) and Section 125 of the Code.
(b) outplacement services at a qualified agency selected by the
Executive (not to exceed $25,000);
(c) continuation of coverage under the Company's group medical, group
life, and group long-term disability plans, if any, and under any policy or
policies of "split dollar" life insurance maintained by the Company, until
the earliest to occur of:
3.
<PAGE>
(i) the expiration of 24 months from the date on which his
employment terminates; or
(ii) the date on which he obtains comparable coverage provided
by a new employer.
4. NO FUNDING OF TRANSITIONAL COMPENSATION. Nothing herein contained
shall require or be deemed to require the Company to segregate, earmark, or
otherwise set aside any funds or assets to provide for any payments required to
be made hereunder, and the Executive's right to transitional compensation
hereunder shall be solely that of a general, unsecured creditor of the Company.
5. NO AMENDMENT OF OTHER AGREEMENTS. This Agreement is not intended to
amend or modify the provisions of any other agreement or arrangement between the
Company and the Executive. Without limiting the generality of the foregoing,
notwithstanding any change of control or other transaction, the terms and
conditions of the Company's various stock option plans and any applicable award
agreements thereunder shall control with respect to the vesting of any options
or other awards thereunder then held by the Executive. No provision of this
Agreement shall restrict the Company's ability to amend any agreement to which
it is a party, any stock option or benefit plan established by it or any of the
provisions of its Certificate of Incorporation or By-laws.
6. DEDUCTION AND WITHHOLDING. All benefits payable to or on behalf of
the Executive pursuant to this Agreement shall be subject to such deductions and
withholding as may be agreed to by the Executive or required by applicable law.
7. DEATH. In the event of the Executive's death, any amount or benefit
payable or distribute to him pursuant to paragraphs 3 or 9 shall be paid to the
beneficiary designated by such Executive for such purpose in the last written
instrument received by the party prior to the Executive's death, if any, and
otherwise to the Executive's estate.
8. SETOFF. The right of Executive to receive benefits under this
Agreement shall be absolute and, except as specifically provided herein, shall
not be subject to any setoff, counterclaim, recoupment, defense, duty to
mitigate or other rights the Company may have. Notwithstanding anything herein
to the contrary, benefits to Executive accruing under this Agreement shall be
offset by the amount of any severance benefits otherwise payable to Executive
under any Company plan or policy applicable to employees of the Company
generally.
9. EXECUTIVE'S INDEMNITY. It shall be a continuing obligation of the
Company to provide the Executive the benefits of the indemnities provided by the
Company's Certificate of Incorporation, by-laws, any agreements between the
Company and the Executive providing for indemnity, and Executive's rights under
applicable law (collectively, the "Indemnity Rights"), as such Indemnity Rights
exist prior to any change of control. To the extent that the Executive's
Indemnity Rights under the Company's Certificate of Incorporation or By-laws or
under any agreement between the Company and the Executive shall be reduced
following a change of control (including any reduction resulting from the
termination of Executive's employment with
4.
<PAGE>
the Company), the Indemnity Rights existing prior to such change or modification
shall be deemed contractual in nature and due and owing to the Executive
pursuant to this Section 9 and shall survive any change of control or
termination of Executive's employment with the Company indefinitely. The
provisions of this Section 9 shall inure to the benefit of the Executive's
personal or legal representatives, executives, administrators, successors,
heirs, distributees, divisees and legatees.
10. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall have no
obligation to seek other employment or take any other action in an effort to
mitigate damages.
11. OTHER BENEFITS. Except to the extent otherwise specifically provided
herein, the benefits provided under this Agreement shall be in addition to, and
not in derogation or diminution of, any benefits that the Executive may be
entitled to receive under any other plan or program now or hereafter maintained
by the Company or by any of its subsidiaries.
12. CONTINUED EMPLOYMENT. This Agreement is not a contract of employment.
Nothing expressed or implied herein shall create any right or duty of continued
employment of the Executive by the Company. The Company reserves all rights to
terminate the Executive's employment at any time with or without cause.
13. SUCCESSORS.
(a) The Company will require any successor or successors (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to
all or any substantially part of the business and/or assets of the Company
and its subsidiaries, taken as a whole, to expressly assume and agree to
perform the Company's obligations under this Agreement in the same manner
and to the same extent that the Company would be required to perform them
if no such succession had taken place unless, in the opinion of legal
counsel to the Executive, such obligations have been assumed by the
successor as a matter of law. No assumption of the Company's obligations
shall relieve the Company of such obligations. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession
(unless the foregoing opinion is rendered to the Executive) shall entitle
the Executive to terminate his employment and to receive the payments
provided for in Paragraphs 3 and 9 above. As used in the Agreement, the
"Company" shall mean the Company, as presently constituted, and any
successor to its business and/or assets which executes and delivers the
agreement provide for in this Paragraph 16 or which otherwise becomes bound
by all the terms and provisions of this Agreement as a matter of law.
(b) If the Executive dies while any amounts are payable to him
pursuant to Paragraphs 3 or 9 of the Agreement, this Agreement shall inure
to the benefit of, and shall be enforceable by the Executive's legal
representative or other successors in interest, but shall not otherwise
be assignable or transferable.
5.
<PAGE>
14. GENERAL PROVISIONS.
(a) NOTICES. Any notices referred to herein shall be in writing and
shall be sufficient if delivered in person or sent by U.S. registered or
certified mail to the Executive at his address on file with the Company, or
to the Company at 1111 West Mockingbird, Suite 1400, Dallas, Texas 75247,
Attn: President.
(b) MODIFICATION, AMENDMENT, WAIVER. No modification or amendment of
any provision of this Agreement shall be effective unless approved in
writing by both parties. Either party's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of
such provision or any other provision hereof.
(c) ENFORCEABILITY. The validity, interpretation, construction and
enforceability of this Agreement shall be governed by the laws of the State
of Texas. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(d) HEADINGS. The headings and paragraph designations of this
Agreement are included solely for convenience of reference and shall in no
event by construed to affect or modify any provisions of this Agreement.
(e) GENDER AND NUMBER. In this Agreement where the context admits,
words in any gender shall include the other genders, words in the plural
shall include the singular, and words in the singular shall include the
plural.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same documents.
15. TERMINATION OF EMPLOYMENT PRIOR TO CHANGE IN CONTROL. This Agreement
shall terminate if the Executive's employment with the Company is terminated,
either voluntarily or involuntarily, for any reason prior to a change in control
of the Company.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to
execute this Agreement and the Executive has executed this Agreement as of the
date set forth above.
BRC HOLDINGS, INC.
By: /s/ Paul T. Stoffel
--------------------------------
Its: Chairman
-------------------------------
/s/ Harvey V. Braswell
-----------------------------------
(Executive)
6.
<PAGE>
TRANSITIONAL COMPENSATION AGREEMENT
THIS AGREEMENT, made this 9th day of October, 1998, by and between THOMAS
E. KIRALY (the "Executive") and BRC HOLDINGS, INC., a Delaware corporation
(the "Company").
WITNESSETH:
WHEREAS, the Executive is presently employed as an executive of the
Company; and
WHEREAS, the Company considers the retention of a sound management team to
be essential to protecting and enhancing the interest of the Company and its
Stockholders; and
WHEREAS, the Company wishes to have the benefit of the Executive's full
time and attention to the affairs of the Company, particularly during any period
in which the Company is considering material corporate transactions involving
its equity securities, mergers with other companies which may result in a change
of control, or other circumstances that might cause a diversion of the
Executive's attention;
WHEREAS, the Company has proposed this Agreement as a means of reducing any
uncertainty that Executive may be subject to; and
WHEREAS, the Executive wishes to obtain the benefits offered by this
Agreement and to be subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
convenants hereinafter set forth, the parties do hereby agree as follows:
1. STAY BONUS AND TRANSITIONAL COMPENSATION. In the event that
Executive shall continue to be employed by the Company on the last day of the
sixth calendar month following a "change of control," as such term is
hereinafter defined, he shall be entitled to receive as a "stay bonus" a lump
sum cash payment equal to $150,000 not later than the tenth day thereafter.
In addition, the Executive shall be eligible to receive "transitional
compensation," in the amounts and at the times described in Paragraph 3, in
the event that:
(a) his employment with the Company is terminated within 18 months of
a "change in control," as such term is hereinafter defined; and
(b) the Executive's termination of employment is not on account of:
(i) retirement on or after reaching age 65;
(ii) the Executive's death;
(iii) termination by the Company following a conviction of the
Executive of a felony involving moral turpitude or a determination by
the Board of Directors that the Executive has continued to engage,
following notice from the
<PAGE>
Board, in misconduct or dereliction of duty which is detrimental in
a material way to the business of the Company or its subsidiaries; or
(iv) the Executive's voluntary resignation following a change
of control; PROVIDED that a resignation shall not be considered to be
voluntary for the purposes of this Agreement if it occurs if the
Executive terminates his employment more than sixty days following a
change of control and following: (A) a substantial diminution in
Executive's duties with the Company from the duties existing
immediately prior to any change of control; (B) a reduction by the
Company in the Executive's annual base salary in effect on the date of
a change of control or as in effect thereafter if such annual base
salary has been increased and such increase was approved prior to the
change of control; (C) a substantial reduction by the Company in the
overall value of employee-related benefits provided to the Executive
from those in effect on the date of a change in control or as in
effect thereafter if such benefits have been increased and that
increase was approved prior to the change of control; (D) a failure to
continue in effect any incentive compensation plan in effect
immediately prior to the change in control, or a reduction in
Executive's participation or entitlement with regard thereto, unless
the Executive is afforded an opportunity of reasonably equivalent
value; (E) a significant reduction in the Executive's perquisites and
other benefits enjoyed immediately prior to a change of control; (F)
relocation of Executive's principle place of employment to a place
more than fifty miles from the Executive's principle place of
employment as of the change of control; (G) any material breach by the
Company of any provision of this Agreement or of any incentive
compensation, stock option or similar benefit plan of the Company in
which Executive then participates or is eligible to participate; or
(H) conduct by the Company, against Executive's volition, which could
cause the Executive to commit, on his own behalf or as an officer of
the Company, a fraudulent act or which could expose the Executive to
civil or criminal liability or to sanction by any professional
licensing body or self-regulatory organization.
2. CHANGE IN CONTROL. For the purposes of this Agreement, a "change in
control" shall be deemed to have occurred if prior to May 1, 1999:
(a) any "person" (as that term is used in Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) (the "Exchange Act"), other than
the Company, becomes the beneficial owner, within the meaning of Rule 13d-3
under the Exchange Act of securities of the Company representing more than
fifty percent of the voting power of all of the then outstanding voting
securities of the Company;
(b) persons who, at the beginning of any twelve consecutive month
period, constitute the Board of Directors of the Company cease, at the end
of such period, to constitute at least a majority thereof, unless the
nomination of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period;
2.
<PAGE>
(c) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares
of the Common Stock of the Company would be converted into cash, securities
or other property, other than a merger of the Company in which the holders
of the Common Stock of the Company immediately prior to the merger have
the same proportionate ownership of common stock of the surviving
corporation immediately after such merger or which would result in voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least fifty percent (50%)
of the total voting power represented by the voting securities of the
Company or such surviving entity immediately following the consolidation
or merger in question;
(d) any sale, lease, exchange or other transfer (in one transaction
or a series of transactions) of all, or substantially all, of the assets of
the Company;
(e) approval by the Company's stockholders of any plan or proposal
for the liquidation or dissolution of the Company or the sale, lease,
exchange or other transfer (in one transaction or a series of transactions)
of assets of the Company in a transaction approved by stockholders of the
Company;
(f) any change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof, promulgated under the
Exchange Act.
3. AMOUNT AND PAYMENT OF TRANSITIONAL COMPENSATION. In the event the
Executive is eligible for transitional compensation pursuant to the provisions
of Paragraph 1 hereof, he shall be entitled to receive the following:
(a) a lump sum cash payment, payable within 10 days after the date of
Executive's termination, in an amount equal to $300,000 if the
termination is effective prior to the passage of six calendar months
following a Change of Control for any reason other than a voluntary
termination by Executive described in paragraph 1(b)(iv)(A) and $150,000
in any other termination giving rise to transitional compensation.
(b) outplacement services at a qualified agency selected by the
Executive (not to exceed $25,000);
(c) continuation of coverage under the Company's group medical, group
life, and group long-term disability plans, if any, and under any policy or
policies of "split dollar" life insurance maintained by the Company, until
the earliest to occur of:
(i) the expiration of 24 months from the date on which his
employment terminates; or
(ii) the date on which he obtains comparable coverage provided
by a new employer.
3.
<PAGE>
4. NO FUNDING OF TRANSITIONAL COMPENSATION. Nothing herein contained
shall require or be deemed to require the Company to segregate, earmark, or
otherwise set aside any funds or assets to provide for any payments required to
be made hereunder, and the Executive's right to transitional compensation
hereunder shall be solely that of a general, unsecured creditor of the Company.
5. NO AMENDMENT OF OTHER AGREEMENTS. This Agreement is not intended to
amend or modify the provisions of any other agreement or arrangement between the
Company and the Executive. Without limiting the generality of the foregoing,
notwithstanding any change of control or other transaction, the terms and
conditions of the Company's various stock option plans and any applicable award
agreements thereunder shall control with respect to the vesting of any options
or other awards thereunder then held by the Executive. No provision of this
Agreement shall restrict the Company's ability to amend any agreement to which
it is a party, any stock option or benefit plan established by it or any of the
provisions of its Certificate of Incorporation or By-laws.
6. DEDUCTION AND WITHHOLDING. All benefits payable to or on behalf of
the Executive pursuant to this Agreement shall be subject to such deductions and
withholding as may be agreed to by the Executive or required by applicable law.
7. DEATH. In the event of the Executive's death, any amount or benefit
payable or distribute to him pursuant to paragraphs 3 or 9 shall be paid to the
beneficiary designated by such Executive for such purpose in the last written
instrument received by the party prior to the Executive's death, if any, and
otherwise to the Executive's estate.
8. SETOFF. The right of Executive to receive benefits under this
Agreement shall be absolute and, except as specifically provided herein, shall
not be subject to any setoff, counterclaim, recoupment, defense, duty to
mitigate or other rights the Company may have. Notwithstanding anything herein
to the contrary, benefits to Executive accruing under this Agreement shall be
offset by the amount of any severance benefits otherwise payable to Executive
under any Company plan or policy applicable to employees of the Company
generally.
9. EXECUTIVE'S INDEMNITY. It shall be a continuing obligation of the
Company to provide the Executive the benefits of the indemnities provided by the
Company's Certificate of Incorporation, by-laws, any agreements between the
Company and the Executive providing for indemnity, and Executive's rights under
applicable law (collectively, the "Indemnity Rights"), as such Indemnity Rights
exist prior to any change of control. To the extent that the Executive's
Indemnity Rights under the Company's Certificate of Incorporation or By-laws
or under any agreement between the Company and the Executive shall be reduced
following a change of control (including any reduction resulting from the
termination of Executive's employment with the Company), the Indemnity Rights
existing prior to such change or modification shall be deemed contractual in
nature and due and owing to the Executive pursuant to this Section 9 and
shall survive any change of control or termination of Executive's employment
with the Company indefinitely. The provisions of this Section 9 shall inure
to the benefit of the Executive's personal or legal representatives,
executives, administrators, successors, heirs, distributees, divisees and
legatees.
4.
<PAGE>
10. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall have no
obligation to seek other employment or take any other action in an effort to
mitigate damages.
11. OTHER BENEFITS. Except to the extent otherwise specifically provided
herein, the benefits provided under this Agreement shall be in addition to, and
not in derogation or diminution of, any benefits that the Executive may be
entitled to receive under any other plan or program now or hereafter maintained
by the Company or by any of its subsidiaries.
12. CONTINUED EMPLOYMENT. This Agreement is not a contract of employment.
Nothing expressed or implied herein shall create any right or duty of continued
employment of the Executive by the Company. The Company reserves all rights to
terminate the Executive's employment at any time with or without cause.
13. SUCCESSORS.
(a) The Company will require any successor or successors (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to
all or any substantially part of the business and/or assets of the Company
and its subsidiaries, taken as a whole, to expressly assume and agree to
perform the Company's obligations under this Agreement in the same manner
and to the same extent that the Company would be required to perform them
if no such succession had taken place unless, in the opinion of legal
counsel to the Executive, such obligations have been assumed by the
successor as a matter of law. No assumption of the Company's obligations
shall relieve the Company of such obligations. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession
(unless the foregoing opinion is rendered to the Executive) shall entitle
the Executive to terminate his employment and to receive the payments
provided for in Paragraphs 3 and 9 above. As used in the Agreement, the
"Company" shall mean the Company, as presently constituted, and any
successor to its business and/or assets which executes and delivers the
agreement provide for in this Paragraph 16 or which otherwise becomes bound
by all the terms and provisions of this Agreement as a matter of law.
(b) If the Executive dies while any amounts are payable to him
pursuant to Paragraphs 3 or 9 of the Agreement, this Agreement shall inure
to the benefit of, and shall be enforceable by the Executive's legal
representative or other successors in interest, but shall not otherwise
be assignable or transferable.
14. GENERAL PROVISIONS.
(a) NOTICES. Any notices referred to herein shall be in writing and
shall be sufficient if delivered in person or sent by U.S. registered or
certified mail to the Executive at his address on file with the Company, or
to the Company at 1111 West Mockingbird, Suite 1400, Dallas, Texas 75247,
Attn: President.
(b) MODIFICATION, AMENDMENT, WAIVER. No modification or amendment of
any provision of this Agreement shall be effective unless approved in
writing by both
5.
<PAGE>
parties. Either party's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or
any other provision hereof.
(c) ENFORCEABILITY. The validity, interpretation, construction and
enforceability of this Agreement shall be governed by the laws of the State
of Texas. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(d) HEADINGS. The headings and paragraph designations of this
Agreement are included solely for convenience of reference and shall in no
event by construed to affect or modify any provisions of this Agreement.
(e) GENDER AND NUMBER. In this Agreement where the context admits,
words in any gender shall include the other genders, words in the plural
shall include the singular, and words in the singular shall include the
plural.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same documents.
15. TERMINATION OF EMPLOYMENT PRIOR TO CHANGE IN CONTROL. This Agreement
shall terminate if the Executive's employment with the Company is terminated,
either voluntarily or involuntarily, for any reason prior to a change in control
of the Company.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to
execute this Agreement and the Executive has executed this Agreement as of the
date set forth above.
BRC HOLDINGS, INC.
By: /s/ Paul T. Stoffel
--------------------------------
Its: Chairman
-------------------------------
/s/ Thomas E. Kiraly
-----------------------------------
(Executive)
6.
<PAGE>
TRANSITIONAL COMPENSATION AGREEMENT
THIS AGREEMENT, made this 9th day of October, 1998, by and between BERNARD
J. OWENS (the "Executive") and BRC HOLDINGS, INC., a Delaware corporation
(the "Company").
WITNESSETH:
WHEREAS, the Executive is presently employed as an executive of the
Company; and
WHEREAS, the Company considers the retention of a sound management team to
be essential to protecting and enhancing the interest of the Company and its
Stockholders; and
WHEREAS, the Company wishes to have the benefit of the Executive's full
time and attention to the affairs of the Company, particularly during any period
in which the Company is considering material corporate transactions involving
its equity securities, mergers with other companies which may result in a change
of control, or other circumstances that might cause a diversion of the
Executive's attention;
WHEREAS, the Company has proposed this Agreement as a means of reducing any
uncertainty that Executive may be subject to; and
WHEREAS, the Executive wishes to obtain the benefits offered by this
Agreement and to be subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
convenants hereinafter set forth, the parties do hereby agree as follows:
1. ELIGIBILITY FOR TRANSITIONAL COMPENSATION. The Executive shall be
eligible to receive transitional compensation, in the amounts and at the times
described in Paragraph 3, in the event that:
(a) his employment with the Company is terminated within 18 months of
a "change in control," as such term is hereinafter defined; and
(b) the Executive's termination of employment is not on account of:
(i) retirement on or after reaching age 65;
(ii) the Executive's death;
(iii) termination by the Company following a conviction of the
Executive of a felony involving moral turpitude or a determination by
the Board of Directors that the Executive has continued to engage,
following notice from the Board, in misconduct or dereliction of duty
which is detrimental in a material way to the business of the Company
or its subsidiaries; or
<PAGE>
(iv) the Executive's voluntary resignation following a change
of control; PROVIDED that a resignation shall not be considered to be
voluntary for the purposes of this Agreement if it occurs if the
Executive terminates his employment more than sixty days following a
change of control and following: (A) a substantial diminution in
Executive's duties with the Company from the duties existing
immediately prior to any change of control; (B) a reduction by the
Company in the Executive's annual base salary in effect on the date of
a change of control or as in effect thereafter if such annual base
salary has been increased and such increase was approved prior to the
change of control; (C) a substantial reduction by the Company in the
overall value of employee-related benefits provided to the Executive
from those in effect on the date of a change in control or as in
effect thereafter if such benefits have been increased and that
increase was approved prior to the change of control; (D) a failure to
continue in effect any incentive compensation plan in effect
immediately prior to the change in control, or a reduction in
Executive's participation or entitlement with regard thereto, unless
the Executive is afforded an opportunity of reasonably equivalent
value; (E) a significant reduction in the Executive's perquisites and
other benefits enjoyed immediately prior to a change of control; (F)
relocation of Executive's principle place of employment to a place
more than fifty miles from the Executive's principle place of
employment as of the change of control; (G) any material breach by the
Company of any provision of this Agreement or of any incentive
compensation, stock option or similar benefit plan of the Company in
which Executive then participates or is eligible to participate; or
(H) conduct by the Company, against Executive's volition, which could
cause the Executive to commit, on his own behalf or as an officer of
the Company, a fraudulent act or which could expose the Executive to
civil or criminal liability or to sanction by any professional
licensing body or self-regulatory organization.
2. CHANGE IN CONTROL. For the purposes of this Agreement, a "change in
control" shall be deemed to have occurred if prior to May 1, 1999:
(a) any "person" (as that term is used in Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) (the "Exchange Act"), other than
the Company, becomes the beneficial owner, within the meaning of Rule 13d-3
under the Exchange Act of securities of the Company representing more than
fifty percent of the voting power of all of the then outstanding voting
securities of the Company;
(b) persons who, at the beginning of any twelve consecutive month
period, constitute the Board of Directors of the Company cease, at the end
of such period, to constitute at least a majority thereof, unless the
nomination of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period;
(c) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares
of the Common Stock
2.
<PAGE>
of the Company would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the Common Stock
of the Company immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after
such merger or which would result in voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving
entity immediately following the consolidation or merger in question;
(d) any sale, lease, exchange or other transfer (in one transaction
or a series of transactions) of all, or substantially all, of the assets of
the Company;
(e) approval by the Company's stockholders of any plan or proposal
for the liquidation or dissolution of the Company or the sale, lease,
exchange or other transfer (in one transaction or a series of transactions)
of assets of the Company in a transaction approved by stockholders of the
Company;
(f) any change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof, promulgated under the
Exchange Act.
3. AMOUNT AND PAYMENT OF TRANSITIONAL COMPENSATION. In the event the
Executive is eligible for transitional compensation pursuant to the provisions
of Paragraph 1 hereof, he shall be entitled to receive the following:
(a) a lump sum cash payment, payable within 10 days after the date of
Executive's termination, in an amount equal to the Executive's Annual
Compensation (as hereinafter defined). For the purposes hereof, the
Executive's Annual Compensation, as of any point in time, shall be equal to
the sum of (i) an amount equal to the average of the Executive's salary for
the twelve months preceding the change of control in question, plus (ii)
an amount equal to the cash bonuses received by the Executive during the
twelve calendar months preceding such change of control. The Executive's
average monthly base salary, for the purposes of the preceding sentence,
shall be the amount to which Executive is entitled, prior to reduction for
deferred compensation or salary reduction arrangements, including plans and
arrangements contemplated under Section 401(k) and Section 125 of the Code.
(b) outplacement services at a qualified agency selected by the
Executive (not to exceed $25,000);
(c) continuation of coverage under the Company's group medical, group
life, and group long-term disability plans, if any, and under any policy or
policies of "split dollar" life insurance maintained by the Company, until
the earliest to occur of:
3.
<PAGE>
(i) the expiration of 24 months from the date on which his
employment terminates; or
(ii) the date on which he obtains comparable coverage provided
by a new employer.
4. NO FUNDING OF TRANSITIONAL COMPENSATION. Nothing herein contained
shall require or be deemed to require the Company to segregate, earmark, or
otherwise set aside any funds or assets to provide for any payments required to
be made hereunder, and the Executive's right to transitional compensation
hereunder shall be solely that of a general, unsecured creditor of the Company.
5. NO AMENDMENT OF OTHER AGREEMENTS. This Agreement is not intended to
amend or modify the provisions of any other agreement or arrangement between the
Company and the Executive. Without limiting the generality of the foregoing,
notwithstanding any change of control or other transaction, the terms and
conditions of the Company's various stock option plans and any applicable award
agreements thereunder shall control with respect to the vesting of any options
or other awards thereunder then held by the Executive. No provision of this
Agreement shall restrict the Company's ability to amend any agreement to which
it is a party, any stock option or benefit plan established by it or any of the
provisions of its Certificate of Incorporation or By-laws.
6. DEDUCTION AND WITHHOLDING. All benefits payable to or on behalf of
the Executive pursuant to this Agreement shall be subject to such deductions and
withholding as may be agreed to by the Executive or required by applicable law.
7. DEATH. In the event of the Executive's death, any amount or benefit
payable or distribute to him pursuant to paragraphs 3 or 9 shall be paid to the
beneficiary designated by such Executive for such purpose in the last written
instrument received by the party prior to the Executive's death, if any, and
otherwise to the Executive's estate.
8. SETOFF. The right of Executive to receive benefits under this
Agreement shall be absolute and, except as specifically provided herein, shall
not be subject to any setoff, counterclaim, recoupment, defense, duty to
mitigate or other rights the Company may have. Notwithstanding anything herein
to the contrary, benefits to Executive accruing under this Agreement shall be
offset by the amount of any severance benefits otherwise payable to Executive
under any Company plan or policy applicable to employees of the Company
generally.
9. EXECUTIVE'S INDEMNITY. It shall be a continuing obligation of the
Company to provide the Executive the benefits of the indemnities provided by the
Company's Certificate of Incorporation, by-laws, any agreements between the
Company and the Executive providing for indemnity, and Executive's rights under
applicable law (collectively, the "Indemnity Rights"), as such Indemnity Rights
exist prior to any change of control. To the extent that the Executive's
Indemnity Rights under the Company's Certificate of Incorporation or By-laws or
under any agreement between the Company and the Executive shall be reduced
following a change of control (including any reduction resulting from the
termination of Executive's employment with
4.
<PAGE>
the Company), the Indemnity Rights existing prior to such change or modification
shall be deemed contractual in nature and due and owing to the Executive
pursuant to this Section 9 and shall survive any change of control or
termination of Executive's employment with the Company indefinitely. The
provisions of this Section 9 shall inure to the benefit of the Executive's
personal or legal representatives, executives, administrators, successors,
heirs, distributees, divisees and legatees.
10. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall have no
obligation to seek other employment or take any other action in an effort to
mitigate damages.
11. OTHER BENEFITS. Except to the extent otherwise specifically provided
herein, the benefits provided under this Agreement shall be in addition to, and
not in derogation or diminution of, any benefits that the Executive may be
entitled to receive under any other plan or program now or hereafter maintained
by the Company or by any of its subsidiaries.
12. CONTINUED EMPLOYMENT. This Agreement is not a contract of employment.
Nothing expressed or implied herein shall create any right or duty of continued
employment of the Executive by the Company. The Company reserves all rights to
terminate the Executive's employment at any time with or without cause.
13. SUCCESSORS.
(a) The Company will require any successor or successors (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to
all or any substantially part of the business and/or assets of the Company
and its subsidiaries, taken as a whole, to expressly assume and agree to
perform the Company's obligations under this Agreement in the same manner
and to the same extent that the Company would be required to perform them
if no such succession had taken place unless, in the opinion of legal
counsel to the Executive, such obligations have been assumed by the
successor as a matter of law. No assumption of the Company's obligations
shall relieve the Company of such obligations. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession
(unless the foregoing opinion is rendered to the Executive) shall entitle
the Executive to terminate his employment and to receive the payments
provided for in Paragraphs 3 and 9 above. As used in the Agreement, the
"Company" shall mean the Company, as presently constituted, and any
successor to its business and/or assets which executes and delivers the
agreement provide for in this Paragraph 16 or which otherwise becomes bound
by all the terms and provisions of this Agreement as a matter of law.
(b) If the Executive dies while any amounts are payable to him
pursuant to Paragraphs 3 or 9 of the Agreement, this Agreement shall inure
to the benefit of, and shall be enforceable by the Executive's legal
representative or other successors in interest, but shall not otherwise
be assignable or transferable.
5.
<PAGE>
14. GENERAL PROVISIONS.
(a) NOTICES. Any notices referred to herein shall be in writing and
shall be sufficient if delivered in person or sent by U.S. registered or
certified mail to the Executive at his address on file with the Company, or
to the Company at 1111 West Mockingbird, Suite 1400, Dallas, Texas 75247,
Attn: President.
(b) MODIFICATION, AMENDMENT, WAIVER. No modification or amendment of
any provision of this Agreement shall be effective unless approved in
writing by both parties. Either party's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of
such provision or any other provision hereof.
(c) ENFORCEABILITY. The validity, interpretation, construction and
enforceability of this Agreement shall be governed by the laws of the State
of Texas. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(d) HEADINGS. The headings and paragraph designations of this
Agreement are included solely for convenience of reference and shall in no
event by construed to affect or modify any provisions of this Agreement.
(e) GENDER AND NUMBER. In this Agreement where the context admits,
words in any gender shall include the other genders, words in the plural
shall include the singular, and words in the singular shall include the
plural.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same documents.
15. TERMINATION OF EMPLOYMENT PRIOR TO CHANGE IN CONTROL. This Agreement
shall terminate if the Executive's employment with the Company is terminated,
either voluntarily or involuntarily, for any reason prior to a change in control
of the Company.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to
execute this Agreement and the Executive has executed this Agreement as of the
date set forth above.
BRC HOLDINGS, INC.
By: /s/ Paul T. Stoffel
--------------------------------
Its: Chairman
-------------------------------
/s/ Bernard J. Owens
-----------------------------------
(Executive)
6.
<PAGE>
AGREEMENT
This Agreement made and entered into this 18th day of October, 1998 by and
between BRC Holdings, Inc. a Delaware corporation (the "Company") and Paul
Stoffel ("Stoffel").
WITNESSETH:
WHEREAS, with the knowledge of the Board of Directors of the Company (the
"Board"), Stoffel has from time to time in the past sought expressions of
interest from one or more third parties regarding acquisition by such parties of
all of the issued and outstanding equity securities of the Company; and
WHEREAS, Stoffel has provided certain additional services to the Company in
connection with the activities contemplated in the foregoing resolution,
including making himself personally available for discussions with third parties
regarding the Company, its businesses, assets and affairs and coordinating
efforts of the Company's management in providing information to third parties;
and
WHEREAS, as a result of Stoffel's services, the Company expects to receive
a proposal from a third party relating to the acquisition by that third party of
all of the Company's issued and outstanding equity securities; and
WHEREAS, a disinterested majority of the Board, after full and fair
discussion of all matters relating thereto, has unanimously determined that
Stoffel is entitled to receive, as compensation for his efforts in obtaining
proposals on behalf of certain consideration described below, under the
circumstances set forth.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, the Company and Stoffel
agree as follows:
1. As payment for services rendered to the Company in connection with
soliciting the interest of third parties in entering into a transaction with the
Company, including obtaining and sustaining the interest of certain third
parties in making such an acquisition and assisting in the negotiation of the
agreement relating thereto, the Company agrees to pay to Stoffel a cash fee of
$1,300,000 as provided in paragraph 2 below.
2. The case fee referred to in paragraph 1 above shall be paid to Stoffel
within two business days after the consummation of a Transaction that occurs
prior to December 31, 2000. For purposes of this agreement, a "Transaction"
shall be deemed to have been consummated upon the earliest of the following
events to occur: (a) the acquisition of at least a majority of the
outstanding common stock of the Company by any person or entity unaffiliated
with the Company as of the date hereof, (b) a merger, consolidation or other
business combination of the Company with by any person or entity unaffiliated
with the Company as of the date hereof or (c) the acquisition by any person or
entity unaffiliated with the Company as of the date hereof of not less than a
majority of the assets of the Company.
<PAGE>
3. As Stoffel has been acting on behalf of the Company, the Company
agrees to the indemnification and other obligations set forth in Schedule I
attached hereto, which schedule is an integral part hereof.
4. This agreement shall be binding upon and inure to the benefit of the
Company and Stoffel and their respective successors and assigns.
IN WITNESS WHEREOF, this Agreement is entered into the day and year first
above written.
BRC HOLDINGS, INC.
By: /s/ Jerrold L. Morrison
--------------------------------------
Its: President and Chief Operating Officer
--------------------------------------
/s/ Paul Stoffel
--------------------------------------
Paul Stoffel
2.
<PAGE>
SCHEDULE I
This Schedule I is a part of and is incorporated into that certain
agreement (together, the "Agreement"), dated October 18, 1998, by and between
BRC Holdings, Inc. (the "Company") and Paul Stoffel ("Stoffel").
The Company agrees to indemnify and hold harmless Stoffel and his
affiliates, (each such entity or person an "Indemnified Person") from and
against any losses, claims, damages, judgements, assessments, costs and other
liabilities (collectively, "Liabilities"), and will reimburse each
Indemnified Person for all fees and expenses (including the reasonable fees
and expenses of counsel) (collectively, "Expenses") as they are incurred in
investigating, preparing, pursuing or defending any claim, action, proceeding
or investigation, whether or not in connection with pending or threatened
litigation or arbitration and whether or not any Indemnified Person is a
party (collectively, "Actions"), arising out of or in connection with advice
or services heretofore tendered or to be rendered by any Indemnified Person
in connection with this Agreement, the transactions contemplated hereby or
any Indemnified Person's actions or inactions in connection with any such
advice, services or transactions; provided that the Company will not be
responsible for any Liabilities or Expenses of any Indemnified Person that
are determined by a judgement of a court of competent jurisdiction which is
no longer subject to appeal or further review to have resulted solely from
such Indemnified Person's gross negligence or willful misconduct in
connection with any of the advice, actions, inactions or services referred to
above. The Company also agrees to reimburse each Indemnified Person for all
Expenses as they are incurred in connection with enforcing such Indemnified
Person's rights under this Agreement (including, without limitation, its
rights under this Schedule I).
Upon receipt by an Indemnified Person of actual notice of an Action against
such Indemnified Person with respect to which indemnity may be sought under
this Agreement, such Indemnified Person shall promptly notify the Company in
writing; provided that failure so to notify the Company shall not relieve the
Company from any liability which the Company may have on account of this
indemnity or otherwise, except to the extent the Company shall have been
materially prejudiced by such failure. The Company shall, if requested by
Stoffel, assume the defense of any such Action including the employment of
counsel reasonably satisfactory to Stoffel. Any Indemnified Person shall
have the right to employ separate counsel in any such Action and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person, unless: (i) the Company has failed
promptly to assume the defense and employ counsel or (ii) the named parties
to any such Action (including any impleaded parties) include such Indemnified
Person and the Company, and such Indemnified Person shall have been advised
by counsel that there may be one or more legal defenses available to it which
are different from or in addition to those available to the Company; provided
that the Company shall not in such event be responsible hereunder for the
fees and expenses of more than one firm of separate counsel in connection
with any Action in the same jurisdiction, in addition to any local counsel.
The Company shall not be liable for any settlement of any Action effected
without its written consent. In addition, the Company will not, without prior
written consent of Stoffel, settle, compromise or
<PAGE>
consent to the entry of any judgement in or otherwise seek to terminate any
pending or threatened Action in respect of which indemnification or contribution
may be sought hereunder (whether or not any Indemnified Person is a party
thereto) unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified person from all Liabilities arising
out of such Action.
In the event that the foregoing indemnity is unavailable to an Indemnified
Person other than in accordance with this Agreement, the Company shall
contribute to the Liabilities and Expenses paid or payable by such
Indemnified Person in such proportion as is appropriate to reflect (i) the
relative benefits to the Company and its shareholders, on the one hand, and
to Stoffel, on the other hand, of the matters contemplated by this Agreement
or (ii) if the allocation provided by the immediately preceding clause is not
permitted by the applicable law, not only such relative benefits but also the
relative fault of the Company, on the one hand, and Stoffel, on the other
hand, in connection with the matters as to which such Liabilities and
Expenses relate, as well as any other relevant equitable considerations;
provided that in no event shall the Company contribute less than the amount
necessary to ensure that all Indemnified Persons, in the aggregate, are not
liable for any Liabilities and Expenses in excess of the amount of fees
actually received by Stoffel pursuant to this Agreement. For purposes of
this paragraph, the relative benefits to the Company and its shareholders, on
the one hand, and to Stoffel, on the other hand, of the matters contemplated
by this Agreement shall be deemed to be in the same proportion as (a) the
total value paid or contemplated to be paid or received or contemplated to be
received by the Company or the Company's shareholders, as the case may be, in
the transaction or transactions that are within the scope of this Agreement,
whether or not any such transaction is consummated, bears to (b) the fees
paid to Stoffel under this Agreement.
The Company also agrees that no Indemnified Person shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to the Company
for or in connection with advice or services rendered or to be rendered by any
Indemnified Person pursuant to this Agreement, the transactions contemplated
hereby or any Indemnified Person's actions or inactions in connection with any
such advice, services or transactions except for Liabilities (and related
Expenses) of the Company that are determined by a judgement of a court of
competent jurisdiction which is no longer subject to appeal or further review to
have resulted solely from such Indemnified Person's gross negligence or willful
misconduct in connection with any such advice, actions, inactions or services.
The reimbursement, indemnity and contribution obligations of the Company
set forth herein shall apply to any modification of this Agreement and shall
remain in full force and effect regardless of any termination of, or the
completion of any Indemnified Person's services under or in connection with,
this Agreement.
-2-
<PAGE>
EXHIBIT 8
BRC HOLDINGS, INC.
1111 W. MOCKINGBIRD LANE, SUITE 1400
DALLAS, TEXAS 75247-5014
October 23, 1998
Dear Fellow Stockholders:
We are pleased to inform you that on October 19, 1998, BRC Holdings, Inc.
(the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Affiliated Computer Services, Inc. ("Parent") and ACS
Acquisition Corporation, a wholly owned subsidiary of Parent ("Purchaser"),
pursuant to which Purchaser has commenced a tender offer (the "Offer") to
purchase 8,704,238 shares (the "Shares") of the Company's common stock, par
value $0.10 per share (the "Common Stock"), which is approximately 51% of the
outstanding shares on a fully diluted basis of Common Stock, for a cash price of
$19.00 per Share, net to the seller in cash without interest. The Offer is
conditioned upon, among other things, there being validly tendered prior to the
expiration of the Offer and not properly withdrawn 8,704,238 Shares. The Offer
is also subject to certain other terms and conditions as set forth in the
accompanying Offer to Purchase. The Merger Agreement provides that following
consummation of the Offer and upon the terms and subject to the conditions in
the Merger Agreement and in accordance with Delaware law, Purchaser will be
merged (the "Merger") with and into the Company and the shares of the Common
Stock that are not acquired in the Offer will be converted into the right to
receive $19.00 per share in cash.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE OFFER AND ADOPTED THE
MERGER AGREEMENT AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER (AS
DEFINED IN THE ENCLOSED SCHEDULE 14D-9) ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE COMPANY AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
In arriving at its recommendation, the Board of Directors considered the
factors described in the accompanying Schedule 14D-9, including the opinion of
the Company's financial advisor, Donaldson Lufkin & Jenrette Securities
Corporation ("Donaldson Lufkin & Jenrette"), to the effect that the
consideration to be received by the stockholders of the Company pursuant to the
Offer and the Merger is fair to the stockholders from a financial point of view.
A copy of Donaldson Lufkin & Jenrette's written opinion is set forth in full as
Annex A to the attached Schedule 14D-9.
The accompanying Offer to Purchase sets forth all of the terms of the Offer.
Additionally, the enclosed Schedule 14D-9 sets forth additional information
regarding the Offer and the Merger relevant to making an informed decision. We
urge you to read these materials carefully and in their entirety.
Very truly yours,
/s/ Paul Stoffel
Paul Stoffel
CHAIRMAN OF THE BOARD
<PAGE>
EXHIBIT 9
[LOGO]
October 18, 1998
Board of Directors
BRC Holdings, Inc.
1111 West Mockingbird
Suite 1400
Dallas, TX 75247
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock, par value $0.10
per share (the "Shares"), of BRC Holdings, Inc. (the "Company") of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, to be dated as of October 19, 1998 (the
"Agreement"), by and among Affiliated Computer Services, Inc. ("Buyer"), ACS
Acquisition Corporation ("MergerCo"), a wholly-owned subsidiary of Buyer, and
the Company. Pursuant to the Agreement, MergerCo will commence a tender offer
(the "Tender Offer") for 51% of outstanding Shares at a price of $19.00 in cash
per Share (the "Offer Price"). The Tender Offer is to be followed by a merger
(the "Merger") of MergerCo with and into the Company in which the Shares not
tendered into the Tender Offer would be converted, subject to certain
exceptions, into the right to receive the Offer Price. The Tender Offer,
together with the Merger, is referred to herein as the "Transaction".
In arriving at our opinion, we have reviewed the draft dated October 15,
1998 of the Agreement. We also have reviewed financial and other information
that was publicly available or furnished to us by the Company including
information provided during discussions with management and directors of the
Company. Included in the information provided during discussions with management
were certain financial projections of the Company for the period beginning
January 1, 1998 and ending December 31, 2003 prepared by the management of the
Company. In addition, we have compared certain financial and securities data of
the Company with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the Shares
of the Company, reviewed prices paid in certain other business combinations and
conducted such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion. We have been engaged by the Board of
Directors of the Company and the Company solely to render an opinion as to the
fairness from a financial point of view to the holders of Shares of the
consideration to be received by such shareholders pursuant to the Transaction.
We have not been engaged to assist in negotiating the financial or other terms
of the Transaction or to provide advice as to any particular acquisition
proposal. In addition, we were not requested to, nor did we, solicit the
interest of any other party in acquiring the Company.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us by management of the Company, we have
assumed that they have been reasonably prepared on the basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future operating and financial performance of the Company. We have not
assumed any responsibility for making an independent evaluation of any assets or
liabilities or for
<PAGE>
making any independent verification of any of the information reviewed by us. We
have relied as to certain legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Transaction and the other business strategies being considered by
the Company's Board of Directors, nor does it address the Board's decision to
proceed with the Transaction. This opinion is for the use and benefit of the
Board of Directors of the Company in connection with its consideration of the
Transaction. Our opinion does not constitute a recommendation to any stockholder
as to whether such stockholder should tender Shares pursuant to the Tender Offer
or how such stockholder should vote on the proposed Transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Buyer in the past, including acting as
comanager for the Buyer's convertible debt offering in March 1998, and has been
paid customary fees for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the holders of Shares
pursuant to the Transaction is fair to such shareholders from a financial point
of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Tom C. Davis
-----------------------------------
Tom C. Davis
MANAGING DIRECTOR
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FOR IMMEDIATE RELEASE
Contacts: Paul Stoffel
Chairman
(214) 750-7778
Thomas Kiraly
Chief Financial Officer
(214) 905-2370
BRC SIGNS MERGER AGREEMENT WITH ACS
Dallas, Texas - October 19, 1998 BRC Holdings, Inc. (BRC)(NASDAQ-BRCP)
announced today that it has signed a definitive agreement with Affiliated
Computer Services, Inc. (ACS) under which BRC will be acquired by and merged
into a subsidiary of ACS. ACS intends to commence a cash tender offer for
approximately 51% of the fully-diluted shares of BRC within five business
days at a price of $19.00 per share. The merger agreement is subject to
certain conditions, including regulatory approvals and approval of the merger
by the shareholders of BRC. Upon satisfaction of these conditions, ACS will
acquire all of the remaining shares of common stock of BRC at a price of
$19.00 per share in cash.
Based on BRC's approximately 13.7 million outstanding common shares, the gross
transaction value for all shares is approximately $261 million. In addition, BRC
currently has cash and readily marketable securities of approximately $100
million.
BRC Holdings, Inc., based in Dallas, Texas, is an information technology
services firm with 30 years experience in providing consulting, project
management, technical support and systems services that enable its clients to
achieve their strategic and operational objectives. BRC specializes in
information technology outsourcing, consulting, information systems and document
management. BRC is ITAA*2000 certified. For more information about BRC, visit
the Company's web site at www.brcp.com.
ACS is based in Dallas, Texas, and has operations primarily in North America, as
well as Central America, South America, Europe and the Middle East. ACS provides
a full range of business
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services including technology outsourcing, business process outsourcing,
electronic commerce, professional services and systems integration. The
Company's Class A common stock trades on the New York Stock Exchange under the
symbol AFA. Visit ACS on the Internet at www.acsinc.com.
Statements about the Company's outlook and all other statements in this release
other than historical facts are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements rely on a number of assumptions concerning future events and are
subject to a number of uncertainties and factors, many of which are outside
BRC's control, that could cause actual results to differ materially from such
statements. While the Company believes that the assumptions concerning future
events are reasonable, it cautions that there are inherent difficulties in
predicting certain important factors, especially the timing and magnitude of
technological advances; market responses to the Company's product and service
offerings, pricing pressures, results from litigation, the timely development
and acceptance of new products and services, changes in customer preferences,
inventory risks due to shifts in market demand and the successful consummation
of the transactions contemplated in the merger agreement. Consequently, the
actual results realized by the Company could differ materially from the
statements made herein. Shareholders of the Company are cautioned not to place
an undue reliance on the forward-looking statements made herein.
