<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
BRC HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
BRC HOLDINGS, INC.
2828 NORTH HASKELL
DALLAS, TEXAS 75204
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 11, 1999
------------------------
To the Stockholders of
BRC HOLDINGS, INC.:
NOTICE IS HEREBY given that a Special Meeting of Stockholders (the
"Meeting") of BRC Holdings, Inc. (the "Company") will be held at 9:00 a.m. on
February 11, 1999 at the offices of Affiliated Computer Services, Inc. located
at 2828 North Haskell, Dallas, Texas 75204, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of October 19, 1998 (the "Merger Agreement")
among the Company, ACS Acquisition Corporation (the "Purchaser") and
Affiliated Computer Services, Inc., a Delaware corporation (the
"Parent"), and the merger of Purchaser with and into the Company as
contemplated in the Merger Agreement. The full text of the Merger
Agreement is attached as EXHIBIT A to the accompanying proxy statement;
and
2. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on December 23, 1998
as the record date for the determination of Stockholders entitled to notice of
and to vote at the Meeting or any adjournments thereof.
A list of Stockholders of the Company entitled to notice of and to vote at
the meeting will be available for examination at the Meeting and during ordinary
business hours from December 23, 1998 to the date of the Meeting at the
principal offices of the Company at the address set forth above.
Approval of the Merger requires the affirmative vote of the holders of a
majority of the outstanding Common Stock of the Company.
You are cordially invited to attend the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE MEETING IN PERSON,
BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. IF YOU DO ATTEND THE MEETING,
YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By order of the Board of Directors,
/s/ DAVID W. BLACK
David W. Black
SECRETARY
January 8, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION............................................................................................... 1
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS................................................. 1
THE SPECIAL MEETING........................................................................................ 2
General.................................................................................................. 2
Record Date.............................................................................................. 2
Purpose of the Special Meeting; Recommendation of the Board of Directors................................. 2
Proxies; Vote Required................................................................................... 2
Principal Stockholders of the Company.................................................................... 3
Appraisal Rights......................................................................................... 4
"Going Private" Transactions............................................................................. 7
Proxy Solicitation and Expenses.......................................................................... 7
THE MERGER................................................................................................. 8
General.................................................................................................. 8
Background of the Merger................................................................................. 8
Recommendation of the Board; Reasons for the Merger...................................................... 13
Opinion of Donaldson, Lufkin & Jenrette.................................................................. 15
Certain Information Concerning the Company, the Purchaser and Parent..................................... 20
The Surviving Corporation Following the Merger........................................................... 20
Government Approvals..................................................................................... 21
Interests of Certain Persons in the Merger............................................................... 23
Source of Funds.......................................................................................... 24
Stockholder Litigation................................................................................... 25
THE MERGER AGREEMENT....................................................................................... 26
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES............................................................... 31
MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..................................... 33
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY........................................................ 34
SELECTED CONSOLIDATED FINANCIAL DATA OF PARENT............................................................. 35
AVAILABLE INFORMATION...................................................................................... 36
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................................................... 36
STOCKHOLDER PROPOSALS...................................................................................... 36
OTHER MATTERS.............................................................................................. 37
EXHIBITS:
A Merger Agreement
B Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
C Delaware General Corporation Law Section 262
</TABLE>
i
<PAGE>
PROXY STATEMENT
---------------------
BRC HOLDINGS, INC.
2828 NORTH HASKELL
DALLAS, TEXAS 75204
---------------------
SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 11, 1999
---------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of BRC Holdings, Inc., a Delaware
corporation (the "Company" or "BRC"), for use at the Special Meeting of
Stockholders (the "Meeting") to be held at 9:00 a.m. on February 11, 1999, at
the offices of Affiliated Computer Services, Inc. located at 2828 North Haskell,
Dallas, Texas 75204, and at any adjournments thereof.
This Proxy Statement and the accompanying proxy card are first being mailed
on or about January 8, 1999 to all Stockholders of the Company.
At the Meeting, the Company's Stockholders will consider and vote upon a
proposal to adopt and approve the Agreement and Plan of Merger, dated as of
October 19, 1998 (the "Merger Agreement"), among the Company, ACS Acquisition
Corporation (the "Purchaser") and Affiliated Computer Services, Inc., a Delaware
corporation (the "Parent"), and the merger of Purchaser with and into the
Company (the "Merger") as contemplated by the Merger Agreement. The full text of
the Merger Agreement is attached as EXHIBIT A hereto.
The Board of Directors of the Company has approved the Merger and recommends
that holders of the Company's Common Stock, par value $0.10 per share (the
"Common Stock") vote FOR the approval of the Merger.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements including
statements containing the words "believes," "anticipates," "expects" and words
of similar import. These statements involve known and unknown risks and
uncertainties that may cause the Company's actual results or outcomes to be
materially different from those anticipated and discussed herein. Important
factors that the Company believes might cause such differences are discussed in
the cautionary statements accompanying the forward-looking statements in this
Proxy Statement. In assessing forward-looking statements contained herein,
readers are urged to read carefully all cautionary statements contained in this
Proxy Statement.
<PAGE>
THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of the Company for use at the Meeting of
Stockholders to be held at 9:00 a.m. on February 11, 1999 at 2828 North Haskell,
Dallas, Texas 75204.
RECORD DATE
The Board of Directors of the Company has fixed the close of business on
December 23, 1998 as the record date (the "Record Date") for the determination
of Stockholders entitled to notice of, and to vote at, the Meeting or any
adjournment thereof. Accordingly, only holders of record of the Common Stock at
the close of business on the Record Date will be entitled to vote at the
Meeting, either by proxy or in person. As of the Record Date, there were
13,788,562 shares of Common Stock of the Company outstanding. Each share of
Common Stock entitles the holder to one vote. There is no cumulative voting and
there are no other voting securities of the Company outstanding.
PURPOSE OF THE SPECIAL MEETING; RECOMMENDATION OF THE BOARD OF DIRECTORS
At the Meeting, holders of the Company's Common Stock will be asked to
consider and vote upon the Merger of the Purchaser with and into the Company
pursuant to the terms of the Merger Agreement. See "The Merger." A copy of the
executed Merger Agreement (without exhibits and schedules) is included in this
Proxy Statement as EXHIBIT A.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE MERGER.
PROXIES; VOTE REQUIRED
As a result of the Purchaser's tender offer (the "Offer") to purchase
8,704,238 shares of Common Stock and the purchase of shares validly tendered in
the Offer and not withdrawn, the Purchaser currently owns 8,704,238 shares of
Common Stock (approximately 63% of the issued and outstanding shares of Common
Stock, or no less than 51% of all the Common Stock that could be outstanding if
all options were exercised). The Purchaser has informed the Company that it
intends to vote "FOR" the Merger. Pursuant to the Delaware General Corporation
Law (the "DGCL") and the Company's Bylaws, the vote of a majority of the issued
and outstanding shares of Common Stock is required for the Merger to be
approved. Based on the Purchaser's percentage ownership of the Common Stock as a
result of its purchase of shares in the Offer and the Purchaser's stated
intention to vote for the Merger, the stockholder vote at the Special Meeting
will result in approval of the Merger.
All properly executed proxies received by the Company prior to the Meeting
and not revoked will be voted in accordance with the instructions marked
thereon. Unless instructions to the contrary are marked thereon, proxies will be
voted "FOR" the Merger. The Board of Directors of the Company knows of no
business other than that mentioned herein, which will be presented for
consideration at the Meeting. If any other matter is properly presented, it is
the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment. Any stockholder may revoke his or her proxy at any
time prior to the exercise thereof by giving written notice to the secretary of
the Company at the Company's address indicated above, by submitting a duly
executed proxy bearing a later date, or by attending the Meeting and expressing
a desire to vote in person. Attendance at the Meeting will not, in itself,
constitute revocation of a proxy.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Meeting. In deciding all questions, a holder of Common Stock is entitled to one
vote, in person or by proxy, for each share held in such holders name on
2
<PAGE>
the Record Date. The holders of the Common Stock have no cumulative voting
rights. Abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum for the transaction of business. Abstentions
are counted in tabulations of the votes cast on proposals presented to
stockholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth information concerning the Common Stock
holdings of the directors and executive officers of the Company and the only
persons known to the Company to be the beneficial owners of 5% or more of Common
Stock or other voting stock of the Company at December 23, 1998:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OUTSTANDING SHARES
- -------------------------------------------------------------------------------- --------- ------------------
<S> <C> <C>
ACS Acquisition Corporation..................................................... 8,704,238 63.1%
Matador Capital Management Corporation (1)...................................... 963,850 7.0%
Robert E. Masterson............................................................. 60,019(2) *%
Paul T. Stoffel................................................................. 90,696(3) *%
Jeffrey A. Rich................................................................. 8,704,238(4) 63.1%
Henry G. Hortenstine............................................................ 8,704,238(4) 63.1%
David W. Black.................................................................. 8,704,238(4) 63.1%
Jerrold L. Morrison (5)......................................................... 393,210(6) 2.8%
Bernard J. Owens................................................................ 241,108(7) 1.7%
William J. Fosick............................................................... 83,824(8) *%
Harvey V. Braswell.............................................................. 152,763(9) 1.1%
All directors and officers as a group (9 persons)............................... 1,021,620(10) 6.9%
</TABLE>
- ------------------------
* Less than 1%.
(1) The address of Matador Capital Management Corporation is 200 First Avenue
North, Suite 206, St. Petersburg, Florida 33701.
(2) Includes 60,000 shares that are beneficially owned pursuant to options to
purchase Common Stock which fully vested upon the consummation of the Offer.
(3) Includes 60,000 shares that are beneficially owned pursuant to options to
purchase Common Stock which fully vested upon the consummation of the Offer.
(4) All of the shares of Common Stock listed are owned by the Purchaser. Each of
Messrs. Rich, Hortenstine and Black is an executive officer of the Purchaser
and disclaims beneficial ownership of all such shares of Common Stock.
(5) No longer in the employment of the Company.
(6) Includes 390,000 shares that are beneficially owned pursuant to options to
purchase Common Stock which fully vested upon the consummation of the Offer,
and 2,232 shares which are held on Mr. Morrison's behalf by the Company
401(k) plan.
(7) Includes 214,000 shares that are beneficially owned pursuant to options to
purchase Common Stock which fully vested upon the consummation of the Offer,
and 2,068 shares which are held on Mr. Owens' behalf by the Company 401(k)
plan.
3
<PAGE>
(8) Includes 66,000 shares that are beneficially owned pursuant to options to
purchase Common Stock which fully vested upon the consummation of the Offer.
(9) Includes 150,000 shares that are beneficially owned pursuant to options to
purchase Common Stock which fully vested upon the consummation of the Offer,
and 363 shares which are held on Mr. Braswell's behalf by the Company 401(k)
plan.
(10) Includes a total of 940,000 shares that are beneficially owned pursuant to
options to purchase Common Stock which fully vested upon the consummation of
the Offer, includes a total of 4,663 shares which are held by the Company
401(k) plan, and excludes the shares described in (4) above.
APPRAISAL RIGHTS
Holders of shares of Common Stock are entitled to appraisal rights under
Section 262 of the Delaware General Corporation Law ("Section 262"), provided
that they comply with the conditions established by Section 262.
Section 262 is reprinted in its entirety as Exhibit C to this Proxy
Statement. The following discussion is not a complete statement of the law
relating to appraisal rights and is qualified in its entirety by reference to
Exhibit C. This discussion and Exhibit C should be reviewed carefully by any
holder who wishes to exercise statutory appraisal rights or who wishes to
preserve the right to do so, as failure to comply with the procedures set forth
herein or therein will result in the loss of appraisal rights.
A record holder of shares of Common Stock who makes the demand described
below with respect to such shares, who continuously is the record holder of such
shares through the effective time of the Merger (the "Effective Time"), who
otherwise complies with the statutory requirements of Section 262 and who
neither votes in favor of the Merger nor consents thereto in writing will be
entitled to an appraisal by the Delaware Court of Chancery (the "Delaware
Court") of the fair value of his or her shares of Common Stock. All references
in this summary of appraisal rights to a "stockholder" or "holders of shares of
Common Stock" are to the record holder or holders of shares of Common Stock.
Except as set forth herein, stockholders of the Company will not be entitled to
appraisal rights in connection with the Merger.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, such as the Meeting, not less than 20 days prior to the
meeting a constituent corporation must notify each of the holders of its stock
for whom appraisal rights are available that such appraisal rights are available
and include in each such notice a copy of Section 262. This Proxy Statement
shall constitute such notice to the record holders of Common Stock.
Holders of shares of Common Stock who desire to exercise their appraisal
rights must not vote in favor the Merger and must deliver a separate written
demand for appraisal to the Company prior to the vote by the stockholders of the
Company on the Merger. A demand for appraisal must be executed by or on behalf
of the stockholder of record and must reasonably inform the Company of the
identity of the stockholder of record and that such stockholder intends thereby
to demand appraisal of the Common Stock. A proxy or vote against the Merger will
not by itself constitute such a demand. Within ten days after the Effective
Time, the Company must provide notice of the Effective Time to all stockholders
who have complied with Section 262.
A stockholder who elects to exercise appraisal rights should mail or deliver
his or her written demand to:
BRC Holdings, Inc.
2828 North Haskell
Dallas, Texas 75204
Attn: David W. Black
4
<PAGE>
A person having a beneficial interest in shares of Common Stock that are
held of record in the name of another person, such as a broker, fiduciary,
depositary or other nominee, must act promptly to cause the record holder to
follow the steps summarized herein properly and in a timely manner to perfect
appraisal rights. If the shares of Common Stock are owned of record by a person
other than the beneficial owner, including a broker, fiduciary (such as a
trustee, guardian or custodian), depositary or other nominee, such demand must
be executed by or for the record owner. If the shares of Common Stock are owned
of record by more than one person, as in a joint tenancy or tenancy in common,
such demand must be executed by or for all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand,
such person is acting as agent for the record owner. If a stockholder holds
shares of Common Stock through a broker who in turn holds the shares through a
central securities depository nominee such as Cede & Co., a demand for appraisal
of such shares must be made by or on behalf of the depository nominee and must
identify the depository nominee as record holder.
A record holder, such as a broker, fiduciary, depositary or other nominee,
who holds shares of Common Stock as a nominee for others, may exercise appraisal
rights with respect to the shares held for all or less than all beneficial
owners of shares as to which such person is the record owner. In such case, the
written demand must set forth the number of shares covered by such demand. Where
the number of shares is not expressly stated, the demand will be presumed to
cover all shares of Common Stock outstanding in the name of such record owner.
Within 120 days after the Effective Time, either the Company or any
stockholder who has complied with the required conditions of Section 262 may
file a petition in the Delaware Court, with a copy served on the Company in the
case of a petition filed by a stockholder, demanding a determination of the fair
value of the shares of all dissenting stockholders. There is no present intent
on the part of the Company to file an appraisal petition and stockholders
seeking to exercise appraisal rights should not assume that the Company will
file such a petition or that the Company will initiate any negotiations with
respect to the fair value of such shares. Accordingly, holders of Common Stock
who desire to have their shares appraised should initiate any petitions
necessary for the perfection of their appraisal rights within the time periods
and in the manner prescribed in Section 262. Within 120 days after the Effective
Time, any stockholder who has theretofore complied with the applicable
provisions of Section 262 will be entitled, upon written request, to receive
from the Company a statement setting forth the aggregate number of shares of
Common Stock not voting in favor of the Merger and with respect to which demands
for appraisal were received by the Company and the number of holders of such
shares. Such statement must be mailed within 10 days after the written request
therefor has been received by the Company.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which stockholders are entitled to
appraisal rights. The Delaware Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Delaware Court may dismiss
the proceedings as to such stockholder. Where proceedings are not dismissed, the
Delaware Court will appraise the shares of Common Stock owned by such
stockholders, determining the fair value of such shares exclusive of any element
of value arising from the accomplishment or expectation of the Merger, together
with a fair rate of interest, if any, to be paid upon the amount determined to
be the fair value.
Although the Company believes that the Merger Consideration is fair, no
representation is made as to the outcome of the appraisal of fair value as
determined by the Court and stockholders should recognize that such an appraisal
could result in a determination of a value higher or lower than, or the same as,
the Merger Consideration (as defined in "The Merger--General"). Moreover, the
Company does not anticipate offering more than the Merger Consideration to any
stockholder exercising appraisal rights and
5
<PAGE>
reserves the right to assert, in any appraisal proceeding, that, for purposes of
Section 262, the "fair value" of a share of Common Stock is less than the Merger
Consideration. In determining "fair value", the Delaware Court is required to
take into account all relevant factors. In WEINBERGER V. UOP, INC., the Delaware
Supreme Court discussed the factors that could be considered in determining fair
value in an appraisal proceeding, stating that "proof of value by any techniques
or methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered and that "[f]air price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court has stated that in making this
determination of fair value the court must consider market value, asset value,
dividends, earnings prospects, the nature of the enterprise and any other facts
which could be ascertained as of the date of the merger which throw any light on
future prospects of the merged corporation. Section 262 provides that fair value
is to be "exclusive of any element of value arising from the accomplishment or
expectation of the merger." In CEDE & CO. V. TECHNICOLOR, INC., the Delaware
Supreme Court stated that such exclusion is a "narrow exclusion [that] does not
encompass known elements of value," but which rather applies only to the
speculative elements of value arising from such accomplishment or expectation.
In WEINBERGER, the Delaware Supreme Court construed Section 262 to mean that
"elements of future value, including the nature of the enterprise, which are
known or susceptible of proof as of the date of the merger and not the product
of speculation, may be considered." In addition, Delaware courts have decided
that the statutory appraisal remedy, depending on the factual circumstances, may
or may not be a stockholder's exclusive remedy in connection with transactions
such as the merger.
The cost of the appraisal proceeding may be determined by the Delaware Court
and taxed against the parties as the Delaware Court deems equitable in the
circumstances. However, costs do not include attorneys' and expert witness fees.
Each dissenting stockholder is responsible for his or her attorneys' and expert
witness expenses, although, upon application of a dissenting stockholder of the
Company, the Delaware Court may order that all or a portion of the expenses
incurred by any dissenting stockholder in connection with the appraisal
proceeding, including without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all
shares of stock entitled to appraisal.
Any holder of shares of Common Stock who has duly demanded appraisal in
compliance with Section 262 will not, after the Effective Time, be entitled to
vote for any purpose any shares subject to such demand or to receive payment of
dividends or other distributions on such shares, except for dividends or
distributions payable to stockholders of record at a date prior to the Effective
Time.
At any time within 60 days after the Effective Time, any stockholder will
have the right to withdraw such demand for appraisal and to accept the terms
offered in the Merger; after this period, the stockholder may withdraw such
demand for appraisal only with the consent of the Company. If no petition for
appraisal is filed with the Delaware Court within 120 days after the Effective
Time, stockholders' rights to appraisal shall cease, and all holders of shares
of Common Stock will be entitled to receive the consideration offered pursuant
to the Merger Agreement. Inasmuch as the Company has no obligation to file such
a petition, and the Company has no present intention to do so, any holder of
shares of Common Stock who desires such a petition to be filed is advised to
file it on a timely basis. Any stockholder may withdraw such stockholder's
demand for appraisal by delivering to the Company a written withdrawal of his or
her demand for appraisal and acceptance of the Merger Consideration, except (i)
that any such attempt to withdraw made more than 60 days after the Effective
Time will require written approval of the Company and (ii) that no appraisal
proceeding in the Delaware Court shall be dismissed as to any stockholder
without the approval of the Delaware Court, and such approval may be conditioned
upon such terms as the Delaware Court deems just.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
6
<PAGE>
"GOING PRIVATE" TRANSACTIONS
The Securities and Exchange Commission (the "Commission") has adopted Rule
13e-3 under the Exchange Act of 1934, as amended (the "Exchange Act") which is
applicable to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger. The Purchaser seeks, through the
Merger, to acquire the remaining shares of the Common Stock not held by it
pursuant to the consummation of the Offer. The Purchaser and the Company
believe, however, that Rule 13e-3 will not be applicable to the Merger. Rule
13e-3 requires, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
proposed transaction and the consideration offered to minority stockholders in
such transaction, be filed with the Commission and disclosed to stockholders
prior to consummation of the transaction.
PROXY SOLICITATION AND EXPENSES
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. All expenses of this solicitation, including the cost
of preparing, assembling, and mailing this proxy soliciting material and Notice
of Meeting of Stockholders, will be paid by the Company. Solicitation of holders
of Common Stock by mail, telephone, facsimile or by personal solicitation may be
done by directors, officers and regular employees of the Company, for which they
will receive no additional compensation. Brokerage houses and other nominees,
fiduciaries and custodians nominally holding shares of Common Stock as of the
Record Date will be requested to forward proxy soliciting material to the
beneficial owners of such shares, and will be reimbursed by the Company for
their reasonable out-of-pocket expenses.
7
<PAGE>
THE MERGER
THE TERMS AND CONDITIONS OF THE MERGER ARE CONTAINED IN THE MERGER
AGREEMENT, A COPY OF WHICH IS ATTACHED TO THIS PROXY STATEMENT AS EXHIBIT A AND
IS INCORPORATED HEREIN BY REFERENCE. The description in this Proxy Statement of
the terms and conditions of the Merger is qualified in its entirety by, and made
subject to, the more complete information set forth in the Merger Agreement.
Capitalized terms used in this Proxy Statement but not defined herein shall have
the meaning ascribed to such terms in the Merger Agreement. STOCKHOLDERS OF THE
COMPANY ARE URGED TO CAREFULLY READ THE MERGER AGREEMENT IN ITS ENTIRETY.
GENERAL
The Merger Agreement, which was executed and delivered by the Company, the
Purchaser and Parent on October 19, 1998, provides for the Merger of the
Purchaser (or any one or more direct or indirect wholly-owned subsidiaries of
Parent incorporated under the laws of the state of Delaware) with and into the
Company, with the Company surviving the Merger (as such, the "Surviving
Corporation") as a wholly owned subsidiary of Parent. In the Merger, each
outstanding share of Common Stock (other than shares of Common Stock 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, which price
is $19.00 per share, without interest (the "Merger Consideration"). See "The
Merger Agreement."
The purpose of the Merger is for Parent to acquire the remaining equity
interest in the Company it did not acquire in the Offer. Upon consummation of
the Merger, the Company will become a wholly owned subsidiary of Parent.
Accordingly, the Company's Common Stock will cease to be publicly traded and
will no longer be quoted on the Nasdaq National Market.
BACKGROUND OF THE MERGER
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. These contacts involved approximately 23 companies (other than
Parent) during the last three years. 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, financial condition and prospects. None of these discussions led to a
proposal regarding the price, terms and structure of a transaction including the
Common Stock. Of these companies, approximately half made contacts with or were
contacted by, the Company during the period between January and September of
1998. Of these companies, most were provided non-public information concerning
the Company.
Of the companies with whom the Company had contact during 1998 (other than
Parent), four, International Sourcing, Ltd. ("ISL"), Tyler Corporation, Condor
Technology Solutions ("Condor") and FYI, Inc. ("FYI"), expressed interest in
discussing a business combination with the Company. Discussions between
representatives of these interested companies and one or more members of senior
management of the Company then took place. Following discussions with senior
management of the Company, one of these four companies, ISL, requested and
conducted extensive due diligence concerning the Company, its assets and
operations. In addition, at the request of Tyler Corporation, representatives of
that company made a presentation to the Board on May 14, 1998 regarding Tyler
Corporation and its businesses. In that
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presentation, representatives of Tyler Corporation discussed a number of
possible transactions involving the Company, but made no specific proposals. No
substantive discussions between Tyler Corporation and the Company followed this
presentation.
ISL had initially approached the Company in October 1997 regarding
sponsoring a possible management led buyout. ISL is owned and controlled by
Charles M. Young, a co-founder and former director and officer of Parent.
Discussions between ISL and the Company continued until July 1998 with ISL
expressing interest in leading a management buyout of the Company. In an
affidavit filed by Richard Kneipper of ISL in connection the Matador litigation
(as described in "--Stockholder Litigation"), Mr. Kneipper stated that ISL
proposed to Mr. Esping in March 1998 a cash offer between $20-22.50 per Share.
On July 6, 1998, in a letter to the Company's Board of Directors, ISL expressed
its continued interest in leading a management buyout consisting of an all cash
price of $21-22.50 per share, subject to the completion of additional due
diligence, meetings with management and financing. In this letter, ISL also
alleged that it had not been accorded the same access and treatment that other
potential bidders for the Company were receiving. In a letter dated July 9, 1998
to ISL, the Company's counsel indicated that the Company's Board of Directors
had significant concerns about the structure and financing of ISL's management
buyout proposal, but stated that the Company would allow ISL to engage in
additional financial due diligence. However, in a letter dated July 10, 1998 to
ISL, the Company's counsel informed ISL that after further consideration the
Company had determined that further discussions with ISL regarding the
sponsorship by ISL of a management buyout or other corporate transaction were
not in the best interests of the Company or its stockholders. By a letter dated
July 29, 1998 from Mr. Kneipper, the Company was informed that ISL was
continuing its efforts to finalize financing and its intent, once such financing
is in place, was to submit a new offer. To date, the Company has not received
any such offer, but in the affidavit filed in connection with the Matador
litigation, Mr. Kneipper stated that ISL remains interested in pursuing
negotiations with the Company regarding a transaction at a possible cash price
higher than $19.00 per share of Common Stock. See "--Stockholder Litigation."
At various meetings during August and September 1998, Condor expressed
preliminary interest in acquiring the Company at a price of $21.00 per share,
but has failed to respond since October 1, 1998 to contacts by the Company.
FYI met with Jerrold L. Morrison, at the time the President and Chief
Operating Officer of the Company, beginning in April 1998 to discuss a possible
acquisition of the Company. During one of such meetings in 1998, FYI discussed a
cash price between $20.00 to $21.00 per share. However, FYI deferred its
interest shortly thereafter due to other activities and indicated that it would
probably approach the Company again around the first to the middle of November
1998 regarding a possible transaction. To date, there have been no further
substantive contacts between the Company and FYI.
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.
Mr. Stoffel undertook these activities with the expectation of receiving
compensation should his efforts result in a transaction, although no written
contract regarding these matters was entered into between Mr. Stoffel and the
Company until October 18, 1998. See "Interests of Certain Persons in the
Merger--Stoffel Agreement." During May of 1998, Mr. Esping suggested that the
Company's Board consider retaining a nationally recognized investment banking
concern for the purpose of soliciting
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acquisition proposals for the Company. The Board authorized Mr. Esping to
interview investment banking firms and to report to the Board his recommendation
regarding whether or not to retain such a firm. In the event that the Company
were to have retained an investment banking concern, it was the Board's
expectation that Mr. Stoffel would continue to be authorized to seek potential
bidders for the Company and receive compensation should his efforts result in a
transaction. It was the Board's expectation, however, that Mr. Stoffel would not
receive compensation in the event that the Company engaged in a transaction with
a third party attracted solely as a result of the efforts of investment bankers
retained by the Company. Mr. Stoffel also believed that he was unlikely to
receive any compensation for a transaction arising solely form the efforts of
any third party investment banking firm.
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.
Prior to his death on June 30, 1998, Mr. Esping conducted an interview with
at least one, and possibly as many as three, nationally recognized investment
banking firms, but did not transmit any recommendation to the Board of the
Company regarding this matter before he died. Following Mr. Esping's death, the
Board continued to believe that interviewing investment bankers to assist with a
possible sale of the Company was appropriate. However, no further steps were
taken by or on behalf of the Company to retain investment bankers to solicit
interest from third parties regarding a transaction with the Company.
Prior to his death, Mr. Esping was the Company's principal representative in
conducting discussions with third parties regarding a potential business
transaction with the Company, including discussions with Parent. Following Mr.
Esping's death, Mr. Stoffel became responsible for supervising the Company's
contacts with all third parties regarding possible transactions, including
contacts with third parties not initially identified by Mr. Stoffel. In that
role, Mr. Stoffel was the Company's principal representative in the negotiations
between the Company and Parent.
During late June and early July, there were substantive but preliminary
discussions among Messrs. Stoffel, Rich and John H. Rexford, Senior Vice
President of Parent, regarding potential price per share and the potential
structure of the transaction. On June 22, 1998, Mr. Rich called Mr. Stoffel and
proposed a cash purchase of the Company's Common Stock of $18.00 per share,
subject to satisfactory due diligence, negotiation of a definitive merger
agreement and approval of the respective boards of directors of Parent and the
Company. Mr. Stoffel rejected this proposal, suggesting that Parent should
consider a higher proposal price. On June 29, 1998, Messrs. Rich and Rexford
called Mr. Stoffel and proposed a $20.00 per share cash purchase price, subject
to the same conditions.
On July 1, 1998, Mr. Stoffel called Mr. Rexford and made a counter proposal
of $21.00 per share, subject to satisfactory due diligence, negotiation of a
definitive merger agreement and approval of the respective boards of directors
of Parent and the Company. Later that day, Messrs. Rich, Stoffel and Rexford
tentatively agreed to proceed towards a potential transaction whereby Parent
would pay $21.00 per share.
In anticipation of an offer from Parent, on or about July 2, 1998, Mr.
Stoffel first contacted Donaldson, Lufkin & Jenrette Securities Corporation
("Donaldson, Lufkin & Jenrette") to discuss engaging that firm to render an
opinion regarding the fairness, from a financial point of view, to the
stockholders of the Company of the consideration to be received in a business
combination between Parent and the Company. Donaldson, Lufkin & Jenrette
indicated that it would begin work in anticipation of a
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meeting of the Company's Board to occur the following week. In connection with
its efforts, Donaldson, Lufkin & Jenrette discussed with Mr. Stoffel his efforts
to attract the interest of potential bidders for the Company. In addition to the
companies previously contacted by Mr. Stoffel on behalf of the Company,
Donaldson, Lufkin & Jenrette suggested that the Company consider contacting a
major information technology provider about any interest it might have in
acquiring the Company. Mr. Stoffel contacted the company identified by
Donaldson, Lufkin & Jenrette, and following an initial expression of interest,
provided it with nonpublic information concerning the Company. The company
identified by Donaldson, Lufkin & Jenrette has not responded to further contacts
from the Company.
On July 6, 1998, representatives of Parent met with representatives of the
Company, including, for the first time several of the Company's operating
managers, to continue due diligence. On July 8, 1998, representatives of
Donaldson, Lufkin & Jenrette met with the Company's Board and stated that
Donaldson, Lufkin & Jenrette was proceeding with its work in connection with the
preparation of the opinion requested by the Company's Board of Directors.
Furthermore, representatives of Donaldson, Lufkin & Jenrette indicated on a
preliminary basis that, if Donaldson, Lufkin & Jenrette were formally engaged by
the Company and assuming that the consideration to be received by the
stockholders of the Company in a business combination with Parent would be
$21.00 per share in cash, Donaldson, Lufkin & Jenrette expected to be in a
position to render an opinion that such consideration was fair to the
stockholders of the Company from a financial point of view, subject to (i)
satisfactory completion by Donaldson, Lufkin & Jenrette of its financial and
business due diligence review, (ii) review and consideration by Donaldson,
Lufkin & Jenrette of the structure and terms of the transaction as set forth in
a merger agreement or other definitive agreements between the Company and Parent
and (iii) completion of Donaldson, Lufkin & Jenrette's internal committee
procedures, including approval of the opinion to be rendered by Donaldson,
Lufkin & Jenrette by its fairness opinion committee. At the time Donaldson,
Lufkin & Jenrette gave such preliminary indication to the Company's Board of
Directors, the Company had not yet received from Parent a draft of the merger
agreement or any other definitive agreements and, accordingly, Donaldson, Lufkin
& Jenrette had not been provided with any information regarding the structure or
terms of the transaction other than the proposed $21.00 per share price.
Following this meeting with the Company's Board, however, 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 the results of Parent's financial and
business due diligence, including its discussions with the Company's operating
managers, Parent was no longer interested in pursuing a transaction with the
Company at the proposed cash purchase price of $21.00 per share or otherwise. At
that point, discussions between the parties ceased until September 21, 1998 and,
as a result of the termination of discussions with Parent, the Board did not
formally engage Donaldson, Lufkin & Jenrette in July of 1998.
On September 21, 1998, Mr. Stoffel, then Chairmen of the Company, called Mr.
Rich to arrange a meeting. On September 24, 1998, Messrs. Stoffel, Rich and
Rexford 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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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.
Mr. Stoffel contacted Donaldson, Lufkin & Jenrette again in October 1998 to
discuss engaging Donaldson, Lufkin & Jenrette to render an opinion regarding the
fairness, from a financial point of view, of the consideration to be received by
holders of shares of Common Stock in a business combination between Parent and
the Company.
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 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 of Common Stock 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
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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.
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 shares of Common Stock 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 of Common Stock 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 23, 1998, Parent and the Purchaser commenced the Offer.
On October 30, 1998, a putative class action complaint was filed in the
Court of Chancery of the State of Delaware against the Company, its directors,
the Purchaser and Parent. See "Stockholder Litigation." On November 16, 1998,
Parent and the Purchaser extended the expiration date of the Offer to 12:00
midnight, New York City time, on Monday, November 30, 1998.
On November 30, 1998, Parent and the Purchaser further extended the
expiration date of the Offer to 12:00 midnight, New York City time, on Monday,
December 14, 1998.
At the expiration of the Offer on December 14, 1998, a sufficient number of
shares of Common Stock were tendered in the Offer and the Purchaser accepted for
payment a total of 8,704,238 shares of Common Stock validly tendered in the
Offer and not withdrawn.
RECOMMENDATION OF THE BOARD; REASONS FOR THE MERGER
RECOMMENDATION OF THE BOARD. In accordance with the special meeting of the
Board on October 18, 1998, the Board recommends that the Company's stockholders
approve and adopt the Merger Agreement. In reaching its decision to recommend
acceptance of the Merger, the Board determined that the Merger Consideration is
fair to the Company's stockholders and that the Merger is in the best interests
of the Company and its stockholders and is fair to the stockholders of the
Company.
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 Merger, the Board considered presentations from,
and reviewed the terms and conditions of the Merger with, senior executive
officers of the Company, representatives of its legal counsel and
representatives of its financial advisor, Donaldson, Lufkin and Jenrette;
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(ii) In reviewing 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 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 of Common Stock is fair to such holders
from a financial point of view. See "Opinion of Donaldson, Lufkin &
Jenrette." A copy of the opinion of Donaldson, Lufkin & Jenrette is attached
as Exhibit B hereto and is incorporated herein by reference;
(v) In analyzing the consideration to be received by the Company's
stockholders as a result of 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;
(vi) In reviewing 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 Merger, 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).
(vii) Following the death of Mr. Esping, certain significant stockholders
of the Company, including Kathryn Ayers Esping, Mr. Esping's widow and the
Independent Executor of his estate, indicated to members of the Board of
Directors, including Mr. Stoffel and Mr. Masterson, that as a result of Mr.
Esping's death, they were interested in liquefying their respective
investments in the Company. Although none of these stockholders proposed a
specific transaction to the Company or the Board, in reviewing the Offer and
the Merger, the Board discussed its understanding that Mrs. Esping and other
stockholders of the Company were interested in obtaining liquidity for their
investments in the Company. In addition, the Board also considered the fact
that as a result of Mr. Esping's death, the Company had lost its Chief
Executive Officer and that it would be necessary, if the Company were to
continue as an independent business, to locate a suitable replacement for
Mr. Esping. The interest of certain of the Company's stockholders in
obtaining liquidity for their investment in the Company and
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the need to replace Mr. Esping as Chief Executive Officer of the Company, if
the Company were to remain independent, were factors considered by the Board
in reaching its decision to approve the Offer and the Merger Agreement.
Based upon the foregoing and other factors, the Board determined that the
Merger is in the best interests of the Company and its stockholders, and
approved, by unanimous vote, the Merger and the Merger Agreement, and
unanimously voted to recommend that stockholders of the Company 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.
OPINION OF DONALDSON, LUFKIN & JENRETTE
Donaldson, Lufkin & Jenrette was engaged by the Company to render a written
opinion to the Board as to the fairness to the stockholders of the Company, from
a financial point of view, of the consideration to be received by the holders of
shares of Common Stock pursuant to the Merger Agreement. On October 18, 1998,
Donaldson, Lufkin & Jenrette delivered to the Board a written opinion (the
"Opinion") to the effect that, as of such date and subject to the assumptions,
limitations and other matters set forth therein, the consideration to be
received by the holders of shares of Common Stock in the Offer and the Merger
was fair to such holders from a financial point of view.
THE FULL TEXT OF THE WRITTEN OPINION OF DONALDSON, LUFKIN & JENRETTE, WHICH
SETS FORTH THE ASSUMPTIONS MADE, LIMITATIONS ON THE REVIEW UNDERTAKEN AND
MATTERS CONSIDERED BY DONALDSON, LUFKIN & JENRETTE IN CONNECTION WITH THE
OPINION, IS ATTACHED HERETO AS EXHIBIT B. THE COMPANY'S STOCKHOLDERS ARE URGED
TO, AND SHOULD, READ THE OPINION IN ITS ENTIRETY.
The Opinion was prepared for the use and benefit of the Board in connection
with its consideration of the Offer and the Merger and does not constitute a
recommendation to any stockholder of the Company as to whether such stockholder
should tender shares of Common Stock in the Offer or how such stockholder should
vote on the Merger.
Donaldson, Lufkin & Jenrette's engagement was limited to rendering an
opinion with respect to the fairness from a financial point of view of the
consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement. Donaldson, Lufkin & Jenrette was advised by the Company
that the consideration to be received by the holders of shares of Common Stock
was determined through arm's-length negotiations between the Company and the
Parent. Donaldson, Lufkin & Jenrette was not requested to, nor did Donaldson,
Lufkin & Jenrette, solicit the interest of any other party in acquiring the
Company.
In arriving at its Opinion, Donaldson, Lufkin & Jenrette reviewed certain
drafts of the Merger Agreement. Donaldson, Lufkin & Jenrette also reviewed
financial and other information that was publicly available or furnished to
Donaldson, Lufkin & Jenrette by the Company, including information provided
during discussions with the Company's management. Donaldson, Lufkin & Jenrette
was also provided with certain financial projections of the Company for the
period beginning January 1, 1998 and ending December 31, 2003. In addition,
Donaldson, Lufkin & Jenrette 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 Common Stock, reviewed prices paid in certain other business combinations and
conducted other financial studies, analyses and investigations deemed
appropriate for purposes of the Opinion.
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In rendering the Opinion, Donaldson, Lufkin & Jenrette relied upon and
assumed the accuracy and completeness of all of the financial and other
information that was available to it from public sources and that was provided
to Donaldson, Lufkin & Jenrette by the Company or its representatives, or that
was otherwise reviewed by Donaldson, Lufkin & Jenrette. With respect to the
financial projections supplied to Donaldson, Lufkin & Jenrette, Donaldson,
Lufkin & Jenrette assumed that such projections were 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. Donaldson, Lufkin & Jenrette did not make an independent
evaluation or appraisal of the assets or liabilities of the Company, nor was
Donaldson, Lufkin & Jenrette furnished with any such appraisals. Donaldson,
Lufkin & Jenrette did not undertake to verify any of the information furnished
to or reviewed by it. The Opinion was necessarily based on economic, market,
financial and other conditions as they existed on, and the information made
available to Donaldson, Lufkin & Jenrette as of, October 18, 1998.
The following is a summary of the material analyses performed by Donaldson,
Lufkin & Jenrette in connection with the preparation of its Opinion and included
in the presentation made by Donaldson, Lufkin & Jenrette to the Board on October
18, 1998.
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. To provide contextual
data and comparative market information, Donaldson, Lufkin & Jenrette compared
selected share price, earnings, and operating and financial ratios for the
Company to the corresponding data and ratios of certain other companies whose
securities are publicly traded. Although no company used in the comparable
company analysis is identical to the Company, Donaldson, Lufkin & Jenrette
believes the selected companies to be appropriate comparisons to the Company
because they have similar operating characteristics, size or geographical focus.
These selected companies included: the Parent, American Management Systems,
Inc., Computer Management Sciences, Computer Sciences Corp., Computer Task
Group, Inc., Electronic Data Systems Corporation, Keane, Inc., Maximus, Inc.,
SPR Inc. and Systems & Computer Technology Corp. An analysis of comparable
companies is not purely mathematical, rather it involves complex considerations
and judgments concerning similarities and differences in financial, operational
and other characteristics of potentially comparable companies.
The data and ratios compared by Donaldson, Lufkin & Jenrette included
measures of a value defined by market capitalization of common stock acquired
plus total debt assumed less cash and cash equivalents of the comparable
companies ("Enterprise Value") as a multiple of the last twelve-month reporting
period prior to the announcement ("LTM"), earnings before interest, taxes and
depreciation and amortization ("EBITDA") and earnings before interest and taxes
("EBIT"). In addition, ratios included price to earnings ratios ("P/E
Multiples") for LTM earnings, 1998 estimated ("1998E") earnings and 1999
estimated ("1999E") earnings. Comparable company analysis was conducted based
upon closing prices on October 16, 1998.
Donaldson, Lufkin & Jenrette computed the mean and median multiples of
Enterprise Value to LTM EBITDA and EBIT for the comparable companies. The mean
multiples of Enterprise Value to LTM EBITDA and EBIT for such comparable
companies were 12.6x and 15.3x, respectively, and the median multiples of
Enterprise Value to LTM EBITDA and EBIT were 11.5x and 13.3x, respectively. The
maximum and minimum values for comparable company Enterprise Value multiples
were 22.9x and 7.7x for LTM EBITDA and 23.5x and 9.2x for LTM EBIT. This
compares with implied Enterprise Value multiples of LTM EBITDA and EBIT for the
Company based upon the proposed consideration to be received by the holders of
shares of Common Stock of 11.2x and 21.3x, respectively.
Donaldson, Lufkin & Jenrette also examined the mean and median P/E Multiples
for LTM earnings, 1998E earnings and 1999E earnings for the comparable
companies. The mean P/E Multiples for LTM earnings, 1998E earnings and 1999E
earnings for such comparable companies were 24.9x, 20.4x and 17.3x,
respectively, and the median P/E Multiples for LTM earnings, 1998E earnings and
1999E earnings were 23.8x, 20.2x and 17.4x, respectively. The maximum and
minimum values for comparable company P/E
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Multiples were 35.8x and 13.9x for LTM earnings, 30.7x and 13.3x for 1998E
earnings and 23.3x and 10.4x for 1999E earnings. This compares with implied P/E
Multiples of LTM earnings, 1998E earnings and 1999E earnings for the Company
based upon the proposed consideration to be received by holders of shares of
Common Stock of 31.1x, 21.1x and 19.2x, respectively.
Based on its comparable company analyses, including its judgment as to the
relevance of such analyses to a valuation of the Company, Donaldson, Lufkin &
Jenrette determined that the implied value per share of Common Stock ranged from
$13.75 to $20.00.
TRANSACTION ANALYSIS. Donaldson, Lufkin & Jenrette reviewed publicly
available information for a number of selected transactions involving the
combination of information technology companies completed since June 1995. The
transactions selected were not intended to represent a complete list of
information technology transactions which have occurred during the last three
years; rather they included transactions involving combinations of companies
with operating characteristics, size or geographical focus believed to be
comparable to such characteristics of the Company. These selected transactions
include: First Consulting Group, Inc./Integrated Systems Consulting; The Metzler
Group, Inc./Peterson Worldwide LLC; The Metzler Group, Inc./LECG, Inc.; Data
Processing Resources Corp./Systems and Programming; Keane, Inc./Bricker &
Associates, Inc.; Renaissance Worldwide, Inc./Triad Data Inc.; Complete Business
Solutions, Inc./c.w. Costello & Associates, Inc.; Affiliated Computer Services,
Inc./ Computer Data Systems; HBO & Company/AMISYS Managed Care Systems;
COREStaff, Incorporated/Metamor Technologies, Ltd; Norrell Corporation/Comtex
Information Systems, Inc.; The Registry, Inc./ Shamrock Computer Resources;
AccuStaff, Inc./Career Horizons, Inc.; Affiliated Computer Services, Inc./The
Genix Group, Inc.; Interim Services, Inc./Brandon Systems Corporation; The
Continuum Company, Inc./Hogan Systems, Inc.; HBO & Company/CliniCom
Incorporated; and HBO & Company/First Data Health Systems Corp. Although these
transactions were used for comparison purposes, none of such transactions is
directly comparable to the Merger. An analysis of comparable transactions is not
purely mathematical, rather it involves complex considerations and judgments
concerning similarities and differences in financial, operational and other
characteristics of potentially comparable transactions.
Donaldson, Lufkin & Jenrette reviewed the consideration paid in such
comparable transactions in terms of the Enterprise Value in such transactions as
a multiple of LTM EBITDA and EBIT. The median multiple of Enterprise Value to
LTM EBITDA and EBIT for such comparable transactions was 16.3x and 18.8x,
respectively. The maximum and minimum multiples for comparable transaction
Enterprise Value multiples were 49.9x and 7.8x for LTM EBITDA and 66.8x and
10.1x for LTM EBIT.
Donaldson, Lufkin & Jenrette reviewed the consideration paid in such
transactions in terms of the equity value in such transactions as a multiple of
LTM net income. The median multiple of equity value to LTM net income was 29.4x
with a high multiple of 61.4x and a low multiple (for transactions involving
targets that had net income) of 18.8x.
Based on its comparable transaction analyses, including its judgment as to
the relevance of such analyses to a valuation of the Company, Donaldson, Lufkin
& Jenrette determined that the implied value per share of Common Stock ranged
from $16.25 to $24.25.
DISCOUNTED CASH FLOW ANALYSIS. Donaldson, Lufkin & Jenrette also conducted
a discounted cash flow analysis based on the estimated unleveraged after-tax
free cash flows that were projected to be generated by the Company over the
five-year period ending December 31, 2003, using projections of the Company's
future financial performance provided by management, as adjusted to exclude
discontinued operations and unusual items. Using these projections, Donaldson,
Lufkin & Jenrette then calculated the estimated terminal value for the Company
at the end of the five-year period by applying terminal multiples (ranging from
7.5x to 11.5x, which Donaldson, Lufkin & Jenrette believed to be an appropriate
range for the Company based on its experience and judgment) to the projected
2003 EBITDA included in management's projections. The unleveraged after-tax free
cash flows for the projected five-year period and the terminal value were then
discounted using annual discount rates which ranged from 15.9% to 18.3%
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(chosen based on an analysis of the weighted average cost of capital of the
comparable companies and the Company and certain assumptions regarding the
required rates of returns of holders or prospective purchasers of shares of
Common Stock which Donaldson, Lufkin & Jenrette believed to be appropriate) to
imply a hypothetical range of per share values for the Company. Based on this
analysis, Donaldson, Lufkin & Jenrette determined that the implied value per
share of Common Stock ranged from $18.75 to $24.50.
In course of its engagement, the Company provided Donaldson, Lufkin &
Jenrette with various different sets of projections of the Company's future
financial performance. Such projections were prepared by the chief financial
officer of the Company for internal purposes only and not with a view toward
public disclosure or compliance with the published guidelines of the SEC or the
American Institute of Certified Public Accountants. The various sets of
projections provided to Donaldson, Lufkin & Jenrette were prepared at different
times between December 1997 to October 1998, and they reflected changing
economic and business conditions as well as the plans and prospects of the
Company at the times they were prepared. The projections generally reflected
variations on one of two possible scenarios--a favorable case, which the
Company's management believed could be realized if certain optimistic
assumptions regarding the Company's future performance proved to be correct (the
"Favorable Case"), and an expected case, which reflected what management
believed were the assumptions regarding the Company's future performance most
likely to be realized under the circumstances (the "Expected Case"). The
Favorable Case projections were utilized by the Company primarily in connection
with seeking indications of interest from the Parent or other third parties with
respect to an acquisition or other business combination. The Expected Case
projections were prepared by management as a basis for the Opinion rendered by
Donaldson, Lufkin & Jenrette and generally reflected lower estimates of net
sales and operating income than the Favorable Case projections. The Favorable
Case projections ranged from 2.8% higher in 1998 to 44.4% higher in 2003 for
revenues and from 1.8% higher in 1998 to 54.7% higher in 2003 for EBIT as
compared to the Expected Case projections. The Company's management advised
Donaldson, Lufkin & Jenrette that the Expected Case projections reflected the
best currently available estimates and judgments of management as to the future
financial and operating performance of the Company. Accordingly, Donaldson,
Lufkin & Jenrette based its discounted cash flow analysis described above on
such projections. Donaldson, Lufkin noted, however, that the Expected Case
projections were considerably more favorable that the Company's historical
results. For example, the compound annual growth rate for revenues and
contribution for the period from 1994 to 1997 was 1.9% and (4.9%), respectively,
compared to projected compound annual growth rates for revenues and contribution
for the period from 1998 to 2003 of 9.4% and 11.6%, respectively.
OTHER FACTORS. In evaluating the fairness of the consideration to be
received by the holders of shares of Common Stock in the Offer and the Merger
from a financial point of view, Donaldson, Lufkin & Jenrette also considered
other selected issues which came to its attention in the course of discussions
with the Company's management, including (i) the information provided by the
Company regarding the number of potential acquirors contacted by the Company
during the previous three years and the degree of interest expressed by
potential acquirors in consummating a business combination with the Company,
(ii) the fact that P. E. Esping, the former Chairman and Chief Executive Officer
of the Company, passed away in June 1998, Jerrold L. Morrison, the President and
Chief Operating Officer of the Company, would be departing the Company by the
end of 1998 and the potential effect which this lack of senior management could
have on the Company's business, operations and prospects and (iii) the fact that
the Company's financial projections assumed growth rates for revenues and EBIT
that are significantly higher than the Company's actual historical results.
The summary set forth above does not purport to be a complete description of
the analyses performed by Donaldson, Lufkin & Jenrette in connection with the
preparation of the Opinion. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such
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<PAGE>
an opinion is not readily susceptible to summary description. Each of the
analyses conducted by Donaldson, Lufkin & Jenrette was carried out in order to
provide a different perspective on the transaction and add to the total mix of
information available. Donaldson, Lufkin & Jenrette did not form a conclusion as
to whether any individual analysis, considered in isolation, supported or failed
to support an opinion as to fairness from a financial point of view. Rather, in
reaching its conclusion, Donaldson, Lufkin & Jenrette considered the results of
the analyses in light of each other and ultimately reached its opinion based on
the results of all analyses taken as a whole. Donaldson, Lufkin & Jenrette did
not place particular reliance or weight on any individual analysis, but instead
concluded that its analyses, taken as a whole, supported its determination.
Accordingly, notwithstanding the separate factors summarized above, Donaldson,
Lufkin & Jenrette believes that its analyses must be considered as a whole and
that selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinion.
Any estimates incorporated in the analyses performed by Donaldson, Lufkin &
Jenrette are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analysis. Additionally, estimates of the value of businesses and securities
neither purport to be appraisals nor necessarily reflect the prices at which
businesses or securities may actually be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. No public company
utilized as a comparison is identical to the Company, and none of the similar
transactions utilized as a comparison is identical to the Offer and the Merger.
Accordingly, an analysis of publicly traded comparable companies and comparable
acquisition transactions is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies or the companies involved in
comparable acquisition transactions and other factors that could affect the
public trading value of the comparable companies or company or transaction to
which they are being compared. The analyses performed by Donaldson, Lufkin &
Jenrette are not necessarily indicative of actual values of future results,
which may be significantly more or less favorable than suggested by such
analyses.
Pursuant to the terms of an engagement letter dated October 15, 1998, the
Company agreed to pay Donaldson, Lufkin & Jenrette a retainer of $100,000 and an
additional $500,000 for rendering of the Opinion. In the event the Company
requests an update to the Opinion, the Company is obligated to pay an additional
$100,000 to Donaldson, Lufkin & Jenrette with respect to each such update. The
Company also agreed to reimburse Donaldson, Lufkin & Jenrette promptly for
certain out-of-pocket expenses (including reasonable fees and out-of-pocket
expenses of counsel) incurred by Donaldson, Lufkin & Jenrette in connection with
its engagement, and to indemnify Donaldson, Lufkin & Jenrette and certain
related persons against certain liabilities in connection with its engagement,
including liabilities under the Federal securities laws. The terms of the fee
arrangement with Donaldson, Lufkin & Jenrette, which Donaldson, Lufkin &
Jenrette and the Company believe are customary in transactions of this nature,
were negotiated at arms-length between the Company and Donaldson, Lufkin &
Jenrette and the Board was aware of and approved the arrangement.
Donaldson, Lufkin & Jenrette has been engaged to perform investment banking
services for the Parent in the past and has been compensated for such services.
Those services have included acting as a co-manager for an offering by the
Parent of convertible debt securities in March 1998. In connection with the
engagement of Donaldson, Lufkin & Jenrette, the Board was advised of the
services which had been performed by Donaldson, Lufkin & Jenrette on behalf of
the Parent.
The Board selected Donaldson, Lufkin & Jenrette as its financial advisor
because it is a nationally recognized investment banking firm and Donaldson,
Lufkin & Jenrette has substantial experience in transactions similar to the
Offer and the Merger. In the ordinary course of business, Donaldson, Lufkin &
Jenrette may trade the securities of both the Company and the Parent for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities. Donaldson, Lufkin & Jenrette,
as part of its investment banking services, is regularly engaged in the
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<PAGE>
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.
CERTAIN INFORMATION CONCERNING THE COMPANY, THE PURCHASER AND PARENT
THE COMPANY. The Company is a Delaware corporation with its principal
executive offices at 2828 North Haskell, Dallas, Texas 75204. The Company
provides specialized information technology services primarily to local
governments and healthcare institutions through three wholly owned subsidiaries:
Business Records Corporation, Inc., BRC Health Care, Inc. and The Pace Group.
The Company's products and services can be classified into four major
categories: information systems and services, government records management,
consulting services and millennium technology services. See "Selected
Consolidated Financial Data of the Company."
PURCHASER. The Purchaser, a Delaware corporation and a wholly owned
subsidiary of Parent, was organized to acquire the Company and has not conducted
any unrelated activities since its organization. The principal offices of the
Purchaser are located at 2828 North Haskell, Dallas, Texas 75204. All
outstanding shares of capital stock of the Purchaser are owned by Parent.
PARENT. Parent, based at 2828 North Haskell, Dallas, Texas 75204, is an
information technology services firm with 30 years experience providing
consulting, project management, technical support and system services that
enable its clients to achieve their strategic and operational objectives.
Parent's specializes in information technology outsourcing, consulting,
information systems and document management. See "Selected Consolidated
Financial Data of Parent."
THE SURVIVING CORPORATION FOLLOWING THE MERGER
As a result of the Merger, Parent will acquire the remaining equity interest
in the Company it did not acquire in the Offer. Upon consummation of the Merger,
the Company will become a wholly owned subsidiary of Parent and (i) each issued
and outstanding share of Common Stock owned or held by Parent, the Purchaser,
the Company or any direct or indirect subsidiary of Parent or the Company shall
be cancelled, 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 of Common Stock outstanding immediately prior to the Effective Time shall,
except as otherwise provided in (i) above and except for shares of Common Stock
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 in accordance with
Section 262 of the DGCL, be converted into the right to receive $19.00 in cash,
less any required withholding taxes. Accordingly, the Company's Common Stock
will cease to be publicly traded and will no longer be quoted on the Nasdaq
National Market.
STOCK OPTIONS. Effective as of the consummation of the Offer, vesting of
all options (each an "Option") to purchase shares of Common Stock previously
issued to employees, advisers, or Directors of, or consultants to, the Company
was accelerated, such that all of such Options became fully vested and
immediately exercisable until the first to occur of (i) with regard to any such
Option, the 180th day following the date such Option would otherwise terminate
or (ii) with regard to all Options, the Effective Time. In connection with the
Merger, at or immediately prior to the Effective Time, each then outstanding
Option will be cancelled, and each holder of a cancelled Option will have the
right to receive from the Company, subject to federal income tax and other
applicable withholding, on the first day following the Effective Time, an amount
in cash equal to the product of (A) the number of shares of Common Stock
previously subject to such Option and (B) the excess, if any, of $19.00 over the
exercise price per share of Common Stock previously subject to such Option.
20
<PAGE>
BOARD OF DIRECTORS. The Merger Agreement provides that effective upon
purchase and payment for any shares of Common Stock 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 that equals the
product of (i) the total number of directors on the Board of Directors (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 of Directors, 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.
Following the Purchaser's purchase of shares of Common Stock in the Offer,
the Purchaser designated three directors, Jeffrey A. Rich, Henry Hortenstine and
David W. Black, who were appointed to the Company's Board of Directors on
December 18, 1998. In connection therewith, Messrs. Monnich and Brinkman
resigned from the Company's Board of Directors. Also, Jerrold L. Morrison,
President and Chief Operating Officer of the Company, departed from the
employment of the Company, and David W. Black was appointed Secretary and Nancy
Vineyard was appointed as Treasurer following Purchaser's purchase of shares of
Common Stock in the Offer.
OPERATION OF THE COMPANY. It is expected that, initially following the
Merger, the business and operations of the Company will continue without
substantial change. Parent intends to conduct a detailed review of the Company
and its assets, corporate structure, dividend policy, capitalization,
operations, properties, policies, management and personnel and to consider,
subject to the terms of the Merger Agreement, what, if any, changes would be
desirable in light of the circumstances then existing, and reserves the right to
take such actions or effect such changes as it deems desirable. Such changes
could include changes in the Company's business, corporate structure,
capitalization, management or dividend policy.
Except as otherwise described herein, the Purchaser and Parent have no
current plans or proposals that would relate to, or result in, any extraordinary
corporate transaction involving the Company, such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries, a sale or transfer
of a material amount of assets of the Company or any of its subsidiaries, any
change in the Company's capitalization or dividend policy or any other material
change in the Company's business, corporate structure or personnel. However,
certain businesses of the Company which generated approximately $15 million of
the Company's revenues for twelve month period ending September 30, 1998 (which
are approximately $121 million in the aggregate) have either been divested by
the Company or may be divested by Parent following the Merger.
GOVERNMENT APPROVALS
None of the Company, the Purchaser or Parent is aware of any license or
regulatory permit that is material to the business of the Company and its
subsidiaries, taken as a whole, that might be adversely affected by the Merger
as contemplated herein or of any approval or other action, except as otherwise
described in this Proxy Statement, by any governmental entity that would be
required for consummation of the Merger. Should any such approval or other
action be required, the Purchaser and Parent currently contemplate that such
approval or other action will be sought. While, except as otherwise expressly
described herein, the Purchaser does not presently intend to delay the
consummation of the Merger pending the outcome of any such matter, there can be
no assurance that any such approval or other action, if needed, would be
obtained or would be obtained without substantial conditions or that failure to
obtain any such approval or other action might not result in consequences
adverse to the Company's business or that certain parts of the Company's
business might not have to be disposed of if such approvals were not obtained or
such other actions were not taken. Because of the failure of such approvals or
other actions or
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<PAGE>
because of conditions to be imposed in connection with such approvals or other
actions, the Merger Agreement could be terminated pursuant to its terms.
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.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." The Company's Board of Directors has approved the Merger Agreement
and the transactions contemplated thereby (including the Offer) and, therefore,
Section 203 of DGCL is inapplicable to the Merger.
The Company and the Purchaser do not believe that any state takeover
statutes purport to apply to the Merger. Neither the Purchaser nor Parent has
currently complied with any state takeover statute or regulation. The Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly applicable to the Merger and nothing in this Proxy Statement or any
action taken in connection with the Merger is intended as a waiver of such
right. If it is asserted that any state takeover statute is applicable to the
Merger and an appropriate court does not determine that it is inapplicable or
invalid as applied to the Merger, the Purchaser might be required to file
certain information with, or to receive approvals from, the relevant state
authorities, and the Purchaser might be delayed in consummating the Merger.
ANTITRUST. Pursuant to the applicable provisions of the Hart-Scott-Rodino
Anti-trust Improvements Act of 1976 (the "HSR Act"), the purchase of shares of
Common Stock under the Offer was consummated following the expiration of a
15-calendar day waiting period following the filing by the Company and Parent of
their respective Notification and Report Forms with respect to the Offer.
The Merger does not require an additional filing under the HSR Act because
the Purchaser owns 50% or more of the outstanding shares of Common Stock at the
time of the Merger.
The Federal Trade Commission (the "FTC") and the Antitrust Division of the
U.S. Department of Justice (the "Antitrust Division") frequently scrutinize the
legality under the antitrust laws of transactions such as the Purchaser's
proposed acquisition of the Company. At any time before or after the Merger, the
Antitrust Division or FTC could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking to enjoin
the consummation of the Merger or seeking the divestiture of shares of Common
Stock acquired by the Purchaser or the divestiture of substantial assets of
Parent or its subsidiaries, or the Company or its subsidiaries. Private parties
may also bring legal action under the antitrust laws under certain
circumstances. There can be no assurance that a challenge to the Merger on
antitrust grounds will not be made or, if such a challenge is made, of the
results thereof.
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<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
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 includes 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. As of December 22,
1998, Mr. Morrison has departed from the employment of the Company; pursuant to
his Transition Compensation Arrangement Mr. Morrison was paid $342,047.91.
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 includes
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.
THE STOCK TENDER AGREEMENT. In connection with the execution of the Merger
Agreement, Parent entered into a Stock Tender Agreement, dated as of October 19,
1998 (the "Stock Tender Agreement"), with Kathryn A. Esping, individually and as
Independent Executor of the Estate of P.E. Esping and as Director of the Esping
Family Foundation, and with Paul Stoffel (collectively, the "Stock Tender
Parties"), which was filed as an Exhibit to the Tender Offer Statement on
Schedule 14D-1 filed by the Purchaser and Parent with the Commission in
connection with the Offer. Pursuant to the Stock Tender Agreement, so long as
Parent, the Purchaser or the Company did not terminate the Merger Agreement, the
Stock Tender Parties agreed to validly tender (and not thereafter withdraw) the
shares of Common Stock owned by them pursuant to and in accordance with the
terms of the Offer. On a fully diluted basis as of the commencement of the
Offer, the Stock Tender Parties collectively owned a total of 2,968,350 shares
of Common Stock (not including 324,000 shares of Common Stock issuable under
exercisable options), which represented approximately 17.4% of the then
outstanding shares of Common Stock. The Stock Tender Parties validly tendered
their shares of Common Stock pursuant to the Offer, and their pro rata portion
of such shares were purchased by the Purchaser in the Offer.
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 for the purposes
of each of these stock options constitutes a change in control. See "The
Merger--The Surviving Corporation Following the Merger--Stock Options." The
following schedule sets
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<PAGE>
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. As described above under the caption "Background of the
Merger," over the preceding three years, Paul T. Stoffel, the Chairman of the
Board of the Company, contacted certain third parties regarding the possibility
of entering into a material business transaction involving the Company and
engaged in a certain other activities with regard thereto. Among other things,
Mr. Stoffel was the principal negotiator for the Company with the Parent. Mr.
Stoffel undertook these actions with the expectation of receiving compensation
should his efforts result in a transaction. Although members of the Board were
aware of Mr. Stoffel's actions and, generally, his expectation of compensation,
no agreement regarding these matters was entered into prior to October 18, 1998.
On that day, pursuant to an Agreement (the "Stoffel Agreement"), the Company
agreed to pay Mr. Stoffel 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 accordance with the Stoffel Agreement, the Company paid Mr.
Stoffel $1,300,000 following the consummation of the Offer. 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.
SOURCE OF FUNDS
The total amount of funds used by the Purchaser to acquire the tendered
shares of Common Stock in the Offer and to pay fees and expenses related to the
Offer was approximately $167.4 million. The Purchaser obtained the funds to
consummate the Offer through capital contributions and advances made by Parent.
Parent funded its capital contributions or advances to the Purchaser through
the use of a combination of (i) internally generated funds and (ii) borrowings
under its existing bank credit facility.
Pursuant to a $200 million Restated Credit Agreement dated June 30, 1996,
among Parent, Wells Fargo Bank (Texas) N.A., as Agent, Bank One, Texas, N.A., as
Co-Agent, and the other lenders that are parties thereto, as amended (the
"Credit Agreement"), Parent could borrow up to an aggregate of $200 million for
general corporate purposes on a revolving basis. As of December 31, 1998, Parent
had approximately $176.5 million in indebtedness outstanding under the Credit
Agreement, including
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$165.0 million used in connection with the Offer. The Credit Agreement expires
in July 2000, and loans under the Credit Agreement bear interest at LIBOR plus
0.50%.
The total amount of funds required by the Purchaser to consummate the Merger
is estimated to be approximately $104.4 million. The Purchaser expects to obtain
the funds necessary to consummate the Merger through the use of cash and
marketable securities held by the Company and, to the extent necessary,
additional capital contributions or advances made by Parent. Parent expects to
fund any necessary capital contributions or advances to the Purchaser through
the use of internally generated funds.
STOCKHOLDER LITIGATION
A putative class action complaint entitled MATADOR CAPITAL MANAGEMENT
CORPORATION, EVERGLADES PARTNERS, L.P., EVERGLADES OFFSHORE FUND, LTD. AND
CONTRARIAN OPPORTUNITIES FUND, L.P. V. BRC HOLDINGS, INC., ACS ACQUISITION
CORPORATION, AFFILIATED COMPUTER SERVICES, INC., PAUL T. STOFFEL, L.D. BRINKMAN,
ROBERT E. MASTERSON AND DAVID H. MONNICH , C.A. NO. 16758-NC, was filed on
October 30, 1998, in the Court of Chancery of the State of Delaware against the
Company, its directors and the Purchaser and Parent by Matador Capital
Management and related companies ("Matador") seeking, among other things, to
enjoin the Offer and the Merger. The complaint alleged, among other things,
certain misstatements and omissions in certain documents mailed to the Company's
stockholders in connection with the Offer, certain breaches of the fiduciary
duties of the Company's Board of Directors and the aiding and abetting of such
breaches of fiduciary duties by Parent and the Purchaser.
A hearing on Matador's motion for an order preliminarily enjoining the Offer
and the Merger was held on November 20, 1998. On November 25, 1998, the Court of
Chancery issued an opinion and related order (the "Chancery Opinion") denying
Matador's motion for a preliminary injunction except insofar as it sought to
require the disclosure and dissemination of certain additional information
outlined in the Chancery Opinion to the Company's stockholders by the Company.
On December 2, 1998, the Court of Chancery entered a further order (the "Order")
permitting the Offer to be consummated on December 14, 1998, following
dissemination by the Company to its stockholders of a disclosure reviewed by the
Court of Chancery. The Company mailed such disclosure to the Company's
stockholders on December 2, 1998.
On November 4, 1998, Matador filed with the Commission Schedule 13Ds with
respect to its ownership of shares of Common Stock and a Schedule 14D-9 with
respect to the Offer. In such filings, Matador stated that it has had
discussions with the senior management of the Company over the past 18 months,
and may in the future have additional discussions with senior management,
concerning various operational and financial aspects of the Company's business.
Matador also stated that it may solicit indications of interest from potential
purchasers of the Company and may retain one or more investment banking firms to
assist it and to explore ways of maximizing long-term stockholder value. Matador
stated that it has had and may in the future have discussions with other
stockholders regarding various ways of maximizing long-term stockholder value.
Matador stated that it may also seek to obtain financing for a bid for the
Company alone or with other investors.
In connection with the Matador litigation, Mr. Morrison has stated in a
deposition that he thinks $19.00 per share of Common Stock is a low price and
that the Company could get the market price of the stock to as high as $35.00 in
approximately 18 months if, among over things, the Company were successful in
continuing the growth of the business, was aggressive with respect to
acquisitions and promoted the Company to the financial community.
On December 4, 1998, the Company received a letter (the "Matador Letter")
from Matador, in which Matador proposed to acquire, through an affiliated
entity, all of the outstanding stock of the Company at a price of $21 per share,
subject to the completion of due diligence, execution of definitive
documentation and completion of financing for the transaction.
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On December 6, 1998, the Board of Directors of the Company met to review the
Matador Letter. Based on such review and consultation with the Company's
financial advisors and legal counsel, the Board of Directors approved the
providing of nonpublic information regarding the Company to Matador Capital,
subject to the execution by Matador Capital of a confidentiality agreement on
December 7, 1998.
On December 10, 1998, the Company filed a lawsuit styled BRC HOLDINGS, INC.
V. MATADOR CAPITAL MANAGEMENT CORPORATION (Civil Action No. 3-98-CV-2893-L) in
the United States District Court for the Northern District of Texas, Dallas
Division, which alleges, among other things, that Matador made materially false
and misleading statements to the Company's stockholders, and seeks injunctive
relief and damages.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is filed as Exhibit A hereto and is incorporated herein by
reference. Such summary is qualified in its entirety by reference to 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
of Common Stock tendered pursuant to the Offer was subject to the satisfaction
of the Minimum Condition and certain other conditions, each of which was
satisfied or waived by Purchaser. On December 15, 1998, Purchaser accepted for
payment (and has now paid for) a total of 8,704,238 shares of Common Stock,
validly tendered in the Offer and not withdrawn, and deposited the purchase
price therefor with the depository for the Offer (the "Shares Purchase"). As a
result of the Shares Purchase, Purchaser currently owns a total of 8,704,228 or
approximately 51% of the Company's outstanding Common Stock on a fully diluted
basis.
THE MERGER. The Merger Agreement provides that, following the purchase of
shares of Common Stock 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. 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.
At the Effective Time, (i) each issued and outstanding share of Common Stock
owned or held by Parent, the Purchaser, the Company or any direct or indirect
subsidiary of Parent or the Company shall be cancelled, 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 of Common Stock outstanding
immediately prior to the Effective Time shall, except as otherwise provided in
(i) above and except for shares of Common Stock 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 DGCL, be converted into the right to receive $19.00 in cash,
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 unanimously
(i) determined that the Offer and the Merger, taken together, are fair to the
holders of the shares of Common Stock as
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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 Common Stock) 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 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
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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; (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 Company's Board of Directors 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 which the Board of
Directors 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 Company's Board of Directors 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.
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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 of the Merger Agreement and the
Effective Time, the Company agreed to 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, permit Parent and the Purchaser to make such inspections as
Parent and the Purchaser may reasonably require and 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 shares of Common Stock 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 that equals the
product of (i) the total number of directors on the Board of Directors (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 of
Common Stock 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 Company's Board of Directors, 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 its Board of Directors
remain members of the board until the Effective Time. Pursuant to the Merger
Agreement, the Company mailed contemporaneously with the Offer to Purchase to
its stockholders an Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder
regarding the proposed change in the composition of the Company's Board of
Directors. With respect to the foregoing, as of December 18, 1998, Messrs.
Brinkman and Monnich have resigned and Messrs. Rich, Hortenstine and Black have
been appointed to the Board of Directors.
STOCKHOLDERS' MEETING. Pursuant to the Merger Agreement, the Company agreed
to cause the 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, this Proxy
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 of Common Stock 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 by-laws 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.
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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 of Common Stock 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 shares of Common Stock
pursuant to the Offer.
TERMINATION. After the purchase of shares of Common Stock pursuant to the
Offer, 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 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 (ii) January 31, 1999 has arrived (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).
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. 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 nine
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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; (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 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
(the "Termination Fee").
"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, Purchaser any affiliate thereof (a "Third Party");
(ii) the acquisition by Third Party of 19.9% or more 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 of Common Stock 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 repurchase by the Company or any of its subsidiaries of more than 19.9%
of the outstanding shares of Common Stock.
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 a 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. If the Merger is consummated, holders of shares of Common
Stock 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 of Common Stock. See "The Special Meeting--Appraisal
Rights."
If any stockholder of shares of Common Stock 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 Common Stock of such
stockholder will be converted into the Merger Consideration in accordance with
the Merger Agreement. A stockholder may withdraw his or her demand for appraisal
by delivery to Parent of a written withdrawal of such demand for appraisal and
acceptance of the Merger.
ACCOUNTING TREATMENT. The Merger will be accounted for as a purchase.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The receipt of the right to receive cash by stockholders of the Company
pursuant to the Merger will be a taxable transaction for Federal income tax
purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and
may also be a taxable transaction under applicable state, local, foreign and
other tax laws. For Federal income tax purposes, Company stockholders will
generally recognize gain or loss equal to the difference between the amount of
cash received by the stockholder pursuant to the Merger and the aggregate tax
basis in the shares of Common Stock cancelled pursuant to the Merger. Gain or
loss will be calculated separately for each block of shares of Common Stock
cancelled pursuant to the Merger.
31
<PAGE>
If the shares cancelled in the Merger are held by a stockholder as capital
assets, gain or loss recognized by the stockholder will be capital gain or loss,
which will be long-term capital gain or loss if the stockholder's holding period
for the shares exceeds one year. Under present law, long-term capital gains
recognized by an individual stockholder will generally be taxed at a maximum
Federal marginal tax rate of 20%.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals) entitled to receive
cash pursuant to the Merger may be subject to 31% backup tax withholding unless
the stockholder provides its TIN and certifies that such number is correct or
properly certifies that it is awaiting a TIN. A stockholder that does not
furnish its TIN may be subject to a penalty imposed by the IRS. Each stockholder
should complete and sign the Substitute From W-9 included as part of the Letter
of Transmittal, which will be sent to stockholders at a later date in connection
with payment of the shares of Common Stock cancelled in the Merger, so as to
provide the information and certification necessary to avoid backup withholding.
If backup withholding applies to a stockholder, 31% of the payment to such
stockholder is required to be withheld. Backup withholding is not an additional
tax. Rather, the amount of the backup withholding can be credited against the
Federal income tax liability of the person subject to the backup withholding,
provided that the required information is given to the IRS. If backup
withholding results in an overpayment of tax, a refund can be obtained by the
stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES,
TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A
HOLDER OF SHARES IN LIGHT OF ITS INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE MERGER.
32
<PAGE>
MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed and traded on the Nasdaq National
Market under the symbol "BRCP." The last reported sales price published in
financial sources for the date preceding public announcement of the Offer was
$16 1/4 per share. The following table sets forth, for each of the periods
indicated, the high and low last reported sales prices as published in financial
sources. All prices have been adjusted for the 2 for 1 stock split of the Common
Stock that occurred April 6, 1998.
<TABLE>
<CAPTION>
SALES PRICE
-----------------
HIGH LOW
------- -------
<S> <C> <C>
1996
First Quarter............................................................................................... $ 19 3/4 $ 17 3/4
Second Quarter.............................................................................................. 19 1/2 16 1/2
Third Quarter............................................................................................... 18 1/2 14 3/4
Fourth Quarter.............................................................................................. 26 7/8 17
</TABLE>
<TABLE>
<CAPTION>
SALES PRICE
-----------------
HIGH LOW
------- -------
<S> <C> <C>
1997
First Quarter............................................................................................... $ 24 1/4 $ 16 1/2
Second Quarter.............................................................................................. 18 1/2 13
Third Quarter............................................................................................... 19 3/4 17 1/4
Fourth Quarter.............................................................................................. 21 7/8 17
</TABLE>
<TABLE>
<CAPTION>
SALES PRICE
-----------------
HIGH LOW
------- -------
<S> <C> <C>
1998
First Quarter............................................................................................... $ 21 5/8 $ 18 1/4
Second Quarter.............................................................................................. 20 7/8 16 1/4
Third Quarter............................................................................................... 20 1/2 14 1/2
Fourth Quarter.............................................................................................. 20 14 1/2
</TABLE>
<TABLE>
<CAPTION>
SALES PRICE
-----------------
HIGH LOW
------- -------
<S> <C> <C>
1998
First Quarter (through January 5, 1999)..................................................................... 18 7/8 18 13/16
</TABLE>
On January 5, 1998, the last full day of trading of the Common Stock on the
Nasdaq National Market for which sales price information is available before the
mailing of this Proxy Statement, the reported closing sale price of the Common
Stock was $18 13/16 per share.
The Company has not paid cash dividends on the shares of Common Stock since
its inception and has no present plans to pay cash dividends on the shares.
Pursuant to the Merger Agreement, the Company has agreed not to declare, set
aside, make or pay any dividend or distribution on the shares of Common Stock.
33
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
Set forth below is certain selected consolidated financial data with respect
to the Company and its subsidiaries excerpted or derived from the information
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as well as the Company's Quarterly Report on Form 10-Q for
the nine months ended September 30, 1998, which are incorporated by reference
herein. More comprehensive financial information is included in such reports and
other documents filed by the Company with the Commission, and the following
summary is qualified in its entirety by reference to such reports and such other
documents and all the financial information (including any related notes)
contained therein. Such reports and other documents should be available for
inspection and copies thereof should be obtainable in the manner set forth
herein under the caption "Available Information."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- ----------------------------------
1998 1997 1997 1996 1995
--------- --------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Revenues............................................. $ 93,335 $ 79,455 $ 107,487 $ 100,248 $ 103,567
Income (loss) from continuing operations............. 9,264 6,955 2,566 (5,612) 11,032
Discontinued operations, net:
Income (loss) from operations...................... 1,024 (540) (655) 4,246 (337)
Gain on Sale....................................... -- -- 18,339 -- --
Net income (loss).................................. $ 10,288 $ 6,415 $ 20,250 $ (1,366) $ 10,695
Basic EPS:
Income (loss) before discontinued operations......... $ .66 $ .50 $ .37 $ (.85) $ 1.74
Income (loss) from discontinued operations........... .07 (.04) (.09) .64 (.05)
Diluted EPS:
Income (loss) before discontinued operations......... $ .65 $ .49 $ .36 $ (.85) $ 1.68
Income (loss) from discontinued operations........... .07 (.04) (.09) .64 (.05)
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER
30, AT DECEMBER 31,
------------- ----------------------
1998 1997 1996
------------- ---------- ----------
<S> <C> <C> <C>
BALANCE SHEET (AT END OF PERIOD):
Working capital..................................... $ 89,805 $ 34,851 $ 60,361
Total assets........................................ 201,501 202,110 $ 175,240
Total long-term debt................................ -- 144 14
Total stockholders' equity.......................... 176,324 167,428 154,196
Book value per share of Common Stock................ $ 12.83 $ 12.05 $ 10.77
</TABLE>
34
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF PARENT
Set forth below is certain selected consolidated financial information with
respect to Parent excerpted or derived from the information contained in
Parent's Annual Report on Form 10-K for the year ended June 30, 1998, as well as
Parent's Quarterly Report on Form 10-Q for the three months ended September 30,
1998, which is incorporated by reference herein. More comprehensive financial
information is included in such reports and other documents filed by Parent with
the Commission, and the following summary is qualified in its entirety by
reference to such reports and such other documents and all the financial
information (including any related notes) contained therein. Such reports and
other documents should be available for inspection and copies thereof should be
obtainable in the manner set forth under the caption "Available Information."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED JUNE 30,
------------------ ---------------------------------
1998 1997 1998 1997 1996
-------- -------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Revenues................................... $363,356 $264,994 $1,189,123 $928,925 $647,608
Net income................................. 18,995 13,450 54,422 (1) 49,666 33,525
Earnings per common share-basic............ $ 0.39 $ 0.29 $ 1.14 (1) $ 1.08 $ 0.88
Earnings per common share-diluted.......... $ 0.37 $ 0.28 $ 1.11 (1) $ 1.05 $ 0.85
Weighted average shares outstanding-
basic.................................... 48,269 46,947 47,599 46,136 38,228
Weighted average shares outstanding-
diluted.................................. 55,225 48,247 50,487 47,452 39,320
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER
30, AT JUNE 30,
------------- ----------------------------------
1998 1998 1997 1996
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE SHEET (AT END OF PERIOD):
Working capital............................................... $ 182,137 $ 198,118 $ 110,866 $ 79,929
Total assets.................................................. 985,357 949,798 761,477 636,098
Total long-term debt (less current portion)................... 249,756 234,848 130,680 57,208
Cumulative redeemable preferred stock......................... -- -- -- 1,100
Stockholders' equity.......................................... 523,555 503,670 427,481 363,204
Book value per share of common stock.......................... $ 10.85 $ 10.44 $ 9.11 $ 7.95
Pro forma book value.......................................... $ 10.85 $ 10.44
</TABLE>
- ------------------------
(1) Includes $12,974,000, $8,880,000 net of tax, or $.19 and $.18 per basic and
diluted share, respectively, of merger costs incurred by Parent in
connection with the merger of a wholly owned subsidiary of Parent with and
into ACS Government Solutions Group, Inc. in December 1997.
35
<PAGE>
AVAILABLE INFORMATION
PARENT. Parent is subject to the reporting requirements of the Exchange Act
and, in accordance therewith, is required to file reports and other information
with the Commission relating to its business, financial condition and other
matters. Information as of particular dates concerning the Parent's directors
and officers, their remuneration, the principal holders of the Parent's
securities and any material interest of such persons in transactions with Parent
is required to be disclosed in proxy statements distributed to the Parent
stockholders and filed with the Commission. Such reports, proxy statements and
other information should be available for inspection at the public reference
facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located in the Northwestern
Atrium Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661 and
Seven World Trade Center, 13th Floor, New York, New York 10048. Copies should be
obtainable, by mail, upon payment of the Commission's customary charges, by
writing to the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and can be obtained electronically on the Commission's
website at http://www.sec.gov. Such information should also be on file at the
Library of the NYSE, 20 Broad Street, New York, New York 10005.
THE COMPANY. The Company is subject to the reporting requirements of the
Exchange Act and, in accordance therewith, is required to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Information as of particular dates concerning the Company's
directors and officers, their remuneration, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is required to be disclosed in proxy statements distributed to
the Company stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located in
the Northwestern Atrium Center, 500 West Madison Street (Suite 1400), Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies should be obtainable, by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549, and can be obtained electronically on the
Commission's website at http://www.sec.gov. Such information should also be on
file with the Nasdaq National Market at 1735 K Street, N.W., Washington, D.C.
20006.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The information in the Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and in the Quarterly Reports on Form 10-Q for the three months
ended March 31, 1998, June 30, 1998 and September 30, 1998 and in the Current
Report on Form 8-K dated December 30, 1998, filed by the Company with the
Commission pursuant to the Exchange Act is incorporated by reference in this
Proxy Statement.
The information in the Annual Report on Form 10-K for the fiscal year ended
June 30, 1998, in the Quarterly Report on Form 10-Q for the three months ended
September 30, 1998 and in the Current Reports on Form 8-K dated July 7, 1998 and
December 30, 1998, filed by Parent with the Commission pursuant to the Exchange
Act is incorporated by reference in this Proxy Statement.
All documents filed by the Company, the Purchaser or Parent, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this
Proxy Statement and prior to the date of the Meeting, are incorporated by
reference in this Proxy Statement.
STOCKHOLDER PROPOSALS
In the unlikely event that for any reason the Merger is not consummated, the
deadline for submitting stockholder proposals for inclusion in the Company's
proxy statement and form of proxy for the Company's next annual meeting is
January 13, 1999. After January 13, 1999, a stockholder proposal would
36
<PAGE>
be considered untimely under applicable law. However, after consummation of the
Merger, the Company will become a wholly owned subsidiary of Parent and no
stockholders of the Company other than Parent will remain.
OTHER MATTERS
The Company's Board of Directors is not aware of any other matters that are
to be presented for action at the Meeting. However, if any other matters
properly come before the Meeting or any adjournment(s) thereof, it is intended
that the enclosed proxy will be voted in accordance with the judgment of the
persons voting the proxy.
<TABLE>
<S> <C> <C>
By order of the Board of Directors,
By: /s/ DAVID W. BLACK
------------------------------------------
David W. Black
SECRETARY
</TABLE>
January 8, 1998
37
<PAGE>
EXHIBIT A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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> <C> <C>
RECITALS
ARTICLE I The Tender Offer
1
1.1. The Tender Offer...................................................................
3
1.2. Company Actions....................................................................
3
1.3. Board of Directors.................................................................
ARTICLE II The Merger
4
2.1. The Merger.........................................................................
4
2.2. Effective Time.....................................................................
4
2.3. Effects of the Merger..............................................................
4
2.4. Certificate of Incorporation.......................................................
4
2.5. Bylaws.............................................................................
5
2.6. Directors..........................................................................
5
2.7. Officers...........................................................................
5
2.8. Conversion of the Shares...........................................................
5
2.9. Dissenting Shares..................................................................
5
2.10. Conversion of the Common Stock of the Purchaser....................................
5
2.11. Payment for Shares.................................................................
6
2.12. Closing............................................................................
ARTICLE III Representations and Warranties of the Company
7
3.1. Organization and Qualification.....................................................
7
3.2. Subsidiaries.......................................................................
8
3.3. Authorized Capital.................................................................
8
3.4. Corporate Authorization............................................................
8
3.5. Approvals; No Violations...........................................................
8
3.6. SEC Filings; Financial Statements..................................................
9
3.7. Absence of Undisclosed Liabilities.................................................
9
3.8. Compliance with Applicable Law.....................................................
9
3.9. Termination, Severance, and Employment Agreements..................................
10
3.10. Employee Benefits..................................................................
11
3.11. Taxes..............................................................................
11
3.12. Litigation.........................................................................
11
3.13. Environmental Matters..............................................................
12
3.14. Voting Requirements................................................................
12
3.15. Finders and Investment Bankers; Transaction Expenses...............................
13
3.16. Insurance..........................................................................
13
3.17. Title to Properties; Entire Business...............................................
13
3.18. Intellectual Property Rights.......................................................
13
3.19 Largest Customers..................................................................
13
3.20 Year 2000 Compliance...............................................................
13
3.21 Certain Material Contract..........................................................
ARTICLE IV Representations and Warranties of the Parent and the Purchaser
14
4.1. Organization and Qualification.....................................................
14
4.2. Corporate Authorization............................................................
14
4.3. Approvals; No Violations...........................................................
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
15
4.4. No Prior Activities................................................................
15
4.5. Information Supplied...............................................................
15
4.6. Financing..........................................................................
ARTICLE V Covenants
15
5.1. Conduct of Business of the Company.................................................
17
5.2. Proxy Statement....................................................................
18
5.3. Action of Stockholders of the Company; Voting and Disposition of the Shares........
18
5.4. Additional Agreements..............................................................
18
5.5. Notification of Certain Matters....................................................
19
5.6. Access to Information..............................................................
19
5.7. Public Announcements...............................................................
20
5.8. Officers' and Directors' Indemnification...........................................
20
5.9. Other Actions by the Company.......................................................
20
5.10. Available Funds....................................................................
ARTICLE VI Conditions to Consummation of the Merger
21
6.1. Stockholder Approval...............................................................
21
6.2. No Injunction......................................................................
21
6.3. Offer..............................................................................
21
6.4. Governmental Consents..............................................................
ARTICLE VII Termination; Amendment; Waiver
21
7.1. Termination........................................................................
22
7.2. Effect of Termination..............................................................
23
7.3. Fees and Expenses..................................................................
23
7.4. Amendment..........................................................................
24
7.5. Waiver.............................................................................
ARTICLE VIII Miscellaneous
24
8.1. Survival of Representations, Warranties, and Agreements............................
24
8.2. Brokerage Fees and Commissions.....................................................
24
8.3. Entire Agreement; Assignment.......................................................
24
8.4. Severability.......................................................................
25
8.5. Notices............................................................................
25
8.6. Governing Law......................................................................
25
8.7. Specific Performance...............................................................
26
8.8. Other Potential Bidders............................................................
26
8.9. Descriptive Headings; References...................................................
27
8.10. Parties in Interest................................................................
27
8.11. Beneficiaries......................................................................
27
8.12. Counterparts.......................................................................
27
8.13. Obligations........................................................................
27
8.14. Certain Definitions................................................................
Annex A Certain Conditions
Annex B-1 List of Those Signing the Stock Tender Agreement
Annex B-2 Stock Tender Agreement (omitted from this filing)
Schedules
</TABLE>
ii
<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 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
1
<PAGE>
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 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
2
<PAGE>
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 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
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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 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.
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.
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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 cancelled 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 cancelled 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.
(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
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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 cancelled. 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 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
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"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 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 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
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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 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,
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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 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
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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, 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 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
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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.
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
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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 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
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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 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
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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 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 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
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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 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);
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(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
(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.
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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 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.
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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 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 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
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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 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:
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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).
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,
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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;
(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.
(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.
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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.
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.
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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
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.
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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.
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.
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.
26
<PAGE>
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.
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
27
<PAGE>
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 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
A-1
<PAGE>
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
(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.
A-2
<PAGE>
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
<PAGE>
ANNEX B-2
(OMITTED FROM THIS FILING)
B2-1
<PAGE>
EXHIBIT B
Donaldson, Lufkin & Jenrette
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172 - (212) 892-3000
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 stockholders 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
<PAGE>
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 stockholders from a financial point
of view.
<TABLE>
<S> <C> <C>
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ TOM C. DAVIS
-------------------------------------
Tom C. Davis
MANAGING DIRECTOR
</TABLE>
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<PAGE>
EXHIBIT C
DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the Merger Agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to Sections
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
1
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series
of stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to all
such holders on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or
2
<PAGE>
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall
be not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion,
3
<PAGE>
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the surviving
or resulting corporation pursuant to subsection (f) of this section and who has
submitted such stockholder's certificates of stock to the Register in Chancery,
if such is required, may participate fully in all proceedings until it is
finally determined that such stockholder is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
4
<PAGE>
BRC HOLDINGS, INC.
BOARD OF DIRECTORS PROXY FOR THE SPECIAL MEETING
OF STOCKHOLDERS AT 9:00 A.M. FEBRUARY 11, 1999
2828 NORTH HASKELL, DALLAS, TEXAS 75204
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 1.
The undersigned stockholder of BRC Holdings, Inc. (the "Company") hereby
appoints Jeffrey A. Rich and David W. Black or either of them, as proxies,
each with full powers of substitution, to vote the shares of the undersigned
at the above-stated Special Meeting and at any adjournment(s) thereof:
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
(CONTINUED FROM REVERSE SIDE)
(1) Approval and adoption of the Agreement and Plan of Merger, dated as
of October 19, 1998 (the "Merger Agreement"), among the Company,
ACS Acquisition Corporation, a Delaware corporation (the "Purchaser"),
and Affiliated Computer Services, Inc., a Delaware corporation (the
"Parent"), and the merger of Purchaser with and into the Company as
contemplated by the Merger Agreement.
/ / FOR / / AGAINST / / ABSTAIN
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(2) In their discretion, the proxies are authorized to vote upon such
other business or matters as may properly come before the meeting or
any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE. IF A
CHOICE IS NOT INDICATED WITH RESPECT TO ITEM (1), THIS PROXY WILL BE VOTED
"FOR" SUCH ITEM. THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY
MATTER REFERRED TO IN ITEM (2). THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT
IS EXERCISED.
Receipt herewith of the Company's Notice of Meeting and Proxy Statement,
dated January 8, 1999, is hereby acknowledged.
Dated: ____________________, 1999
_________________________________
_________________________________
(Signature(s) of Shareholder(s))
(Joint owners must EACH sign. Please
sign EXACTLY as your name(s)
appear(s) on this card. When signing
as attorney, trustee, executor,
administrator, guardian or corporate
officer, please give your FULL title.)
PLEASE SIGN, DATE AND MAIL TODAY.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
