SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 28, 1996
COMPUTER SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 1-4850 95-2043126
(State or Other (Commission (I.R.S. Employer
Jurisdiction File Number) Identification No.)
of Incorporation)
2100 East Grand Avenue
El Segundo, California 90245
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (310) 615-0311
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
The registrant hereby incorporates by reference into this report: (a) the
Agreement and Plan of Merger dated as of April 28, 1996 by and among the
registrant, The Continuum Company, Inc. and Continental Acquisition, Inc., a
copy of which is attached hereto as Exhibit 2.1; and (b) the joint press
release of the registrant and The Continuum Company, Inc. dated April 29,
1996, a copy of which is attached hereto as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
The exhibits listed below are filed as a part of this report:
2.1 Agreement and Plan of Merger dated as of April 28, 1996 by
and among the registrant, The Continuum Company, Inc. and
Continental Acquisition, Inc.
99.1 Joint press release of the registrant and The Continuum
Company, Inc. dated April 29, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
COMPUTER SCIENCES CORPORATION
Dated: May 1, 1996 By: /s/ Hayward D. Fisk
------------------------
Name: Hayward D. Fisk
Title: Vice President
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EXHIBIT INDEX
Exhibit
2.1 Agreement and Plan of Merger dated as of April 28, 1996 by and among
the registrant, The Continuum Company, Inc. and Continental
Acquisition, Inc.
99.1 Joint press release of the registrant and The Continuum Company, Inc.
dated April 29, 1996
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 28, 1996
AMONG
COMPUTER SCIENCES CORPORATION,
THE CONTINUUM COMPANY, INC.
AND
CONTINENTAL ACQUISITION, INC.
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TABLE OF CONTENTS
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ARTICLE 1 THE MERGER ............................................... 1
SECTION 1.1. The Merger ........................................ 1
SECTION 1.2. Effective Time .................................... 1
SECTION 1.3. Closing of the Merger ............................. 1
SECTION 1.4. Effects of the Merger ............................. 2
SECTION 1.5. Certificate of Incorporation and Bylaws ........... 2
SECTION 1.6. Directors ......................................... 2
SECTION 1.7. Officers .......................................... 2
SECTION 1.8. Conversion of Shares .............................. 2
SECTION 1.9. No Appraisal Rights ............................... 3
SECTION 1.10. Exchange of Certificates .......................... 3
SECTION 1.11. Stock Options ..................................... 5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............ 6
SECTION 2.1. Organization and Qualification; Subsidiaries ..... 6
SECTION 2.2. Capitalization of the Company and its Subsidiaries 6
SECTION 2.3. Authority Relative to this Agreement; Recommendation 7
SECTION 2.4. SEC Reports; Financial Statements ................. 8
SECTION 2.5. Information Supplied .............................. 8
SECTION 2.6. Consents and Approvals; No Violations ............. 9
SECTION 2.7. No Default ........................................ 9
SECTION 2.8. No Undisclosed Liabilities; Absence of Changes .... 10
SECTION 2.9. Litigation ........................................ 10
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SECTION 2.10. Compliance with Applicable Law .................... 10
SECTION 2.11. Employee Benefit Plans; Labor Matters ............. 11
SECTION 2.12. Environmental Laws and Regulations ................ 12
SECTION 2.13. Taxes ............................................. 13
SECTION 2.14. Title to Property ................................. 16
SECTION 2.15. Intellectual Property; Software ................... 16
SECTION 2.16. Insurance ......................................... 17
SECTION 2.17. Vote Required ..................................... 17
SECTION 2.18. Tax Treatment; Pooling ............................ 17
SECTION 2.19. Affiliates ........................................ 17
SECTION 2.20. Certain Business Practices ........................ 17
SECTION 2.21. Insider Interests ................................. 17
SECTION 2.22. Opinion of Financial Adviser ...................... 18
SECTION 2.23. Brokers ........................................... 18
SECTION 2.24. Disclosure ........................................ 18
SECTION 2.25. No Existing Discussions ........................... 18
SECTION 2.26. Section 203 of the DGCL ........................... 18
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION . 18
SECTION 3.1. Organization ...................................... 18
SECTION 3.2. Capitalization of Parent and its Subsidiaries ..... 18
SECTION 3.3. Authority Relative to this Agreement;
Recommendation ................................ 19
SECTION 3.4. SEC Reports; Financial Statements ................. 20
SECTION 3.5. Information Supplied .............................. 20
SECTION 3.6. Consents and Approvals; No Violations ............. 21
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SECTION 3.7. No Default ........................................ 21
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes .... 22
SECTION 3.9. Litigation ........................................ 22
SECTION 3.10. Compliance with Applicable Law .................... 22
SECTION 3.11. Employee Benefit Plans; Labor Matters ............. 22
SECTION 3.12. Environmental Laws and Regulations ................ 23
SECTION 3.13. Tax Matters ....................................... 23
SECTION 3.14. Title to Property ................................. 23
SECTION 3.15. Intellectual Property; Software ................... 23
SECTION 3.16. Insurance ......................................... 23
SECTION 3.17. Vote Required ..................................... 24
SECTION 3.18. Tax Treatment; Pooling ............................ 24
SECTION 3.19. Affiliates ........................................ 24
SECTION 3.20. Certain Business Practices ........................ 24
SECTION 3.21. Insider Interests ................................. 25
SECTION 3.22. Opinion of Financial Adviser ...................... 25
SECTION 3.23. Brokers ........................................... 25
SECTION 3.24. Disclosure ........................................ 25
SECTION 3.25. No Prior Activities ............................... 25
ARTICLE 4 COVENANTS ................................................ 25
SECTION 4.1. Conduct of Business of the Company ................ 25
SECTION 4.2. Conduct of Business of Parent ..................... 27
SECTION 4.3. Preparation of S-4 and the Proxy Statement ........ 28
SECTION 4.4. Other Potential Acquirers ......................... 29
SECTION 4.5. Comfort Letters ................................... 30
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SECTION 4.6. Meetings of Stockholders .......................... 30
SECTION 4.7. Stock Exchange Listing ............................ 31
SECTION 4.8. Access to Information ............................. 31
SECTION 4.9. Additional Agreements; Reasonable Efforts ......... 31
SECTION 4.10. Employee Benefits ................................. 32
SECTION 4.11. Public Announcements .............................. 32
SECTION 4.12. Indemnification ................................... 32
SECTION 4.13. Notification of Certain Matters ................... 33
SECTION 4.14. Affiliates; Pooling; Tax Free Reorganization ...... 33
SECTION 4.15. Stockholders Agreement ............................ 34
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER ................. 34
SECTION 5.1. Conditions to Each Party's Obligations to
Effect the Merger ............................. 34
SECTION 5.2. Conditions to the Obligations of the Company ...... 35
SECTION 5.3. Conditions to the Obligations of Parent and
Acquisition ................................... 36
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER ........................... 36
SECTION 6.1. Termination ....................................... 36
SECTION 6.2. Effect of Termination ............................. 37
SECTION 6.3. Fees and Expenses ................................. 38
SECTION 6.4. Amendment ......................................... 39
SECTION 6.5. Extension; Waiver ................................. 39
ARTICLE 7 MISCELLANEOUS ............................................ 39
SECTION 7.1. Nonsurvival of Representations and Warranties ..... 39
SECTION 7.2. Entire Agreement; Assignment ...................... 39
SECTION 7.3. Validity .......................................... 39
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SECTION 7.4. Notices ........................................... 39
SECTION 7.5. Governing Law ..................................... 40
SECTION 7.6. Descriptive Headings .............................. 40
SECTION 7.7. Parties in Interest ............................... 40
SECTION 7.8. Certain Definitions ............................... 40
SECTION 7.9. Personal Liability ................................ 41
SECTION 7.10. Specific Performance .............................. 41
SECTION 7.11. Counterparts ...................................... 41
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TABLE OF DEFINED TERMS
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Cross Reference
Term in Agreement Page
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Acquisition .........................Preamble...........................1
affiliate Section 7.8(a)....................40
Articles Amendment ..................Section 3.2(a)....................19
business day ........................Section 7.8(b)....................40
Certificates ........................Section 1.10(b)....................3
Closing Date ........................Section 1.3........................1
Closing .............................Section 1.3........................1
Code ................................Preamble...........................1
Company Affiliates ..................Section 2.19......................17
Company Board .......................Section 2.3(a).....................8
Company Financial Adviser ...........Section 2.22......................18
Company Permits .....................Section 2.10......................10
Company .............................Preamble...........................1
Company SEC Reports .................Section 2.4(a).....................8
Company Securities ..................Section 2.2(a).....................7
Company Stock Option ................Section 1.11(a)....................5
Company Stock Options ...............Section 1.11(a)....................5
DGCL ................................Section 1.1........................1
DST .................................Section 2.19......................17
Effective Time ......................Section 1.2........................1
Employee Plans ......................Section 2.11(a)...................11
Environmental Claim..................Section 2.12(a)...................13
Environmental Laws ..................Section 2.12(a)...................13
ERISA Affiliate .....................Section 2.11(a)...................11
ERISA ...............................Section 2.11(a)...................11
Exchange Act ........................Section 2.2(c).....................7
Exchange Agent ......................Section 1.10(a)....................3
Exchange Fund .......................Section 1.10(a)....................3
FCPA ................................Section 2.20......................17
Governmental Entity .................Section 2.6........................9
HOGN Merger Agreement ...............Section 1.11(a)....................5
HOGN ................................Section 1.11(a)....................5
HSR Act .............................Section 2.6........................9
Indemnified Liabilities..............Section 4.12......................33
Indemnified Persons .................Section 4.12......................33
IRS .................................Section 2.11(a)...................11
knowledge ...........................Section 7.8(c)....................40
known ...............................Section 7.8(c)....................40
Lien ................................Section 2.2(b).....................7
Material Adverse Effect .............Section 2.1(a).....................6
Material Adverse Effect .............Section 3.1(a)....................18
Merger Certificate ..................Section 1.2........................1
Merger Consideration ................Section 1.8(a).....................2
Merger ..............................Section 1.1........................1
NGCL ................................Section 3.3(a)....................20
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Term in Agreement Page
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Notice of Superior Proposal .........Section 4.4(b)....................29
NYSE ................................Section 1.10(f)....................4
Parent Affiliates ...................Section 3.19......................24
Parent Benefit Plans ................Section 3.2(a)....................19
Parent Common Stock .................Section 1.8(a).....................2
Parent Financial Adviser ............Section 3.22......................25
Parent Intellectual Rights ..........Section 3.15(a)...................24
Parent Permits ......................Section 3.10......................22
Parent ..............................Preamble...........................1
Parent SEC Reports ..................Section 3.4(a)....................20
Parent Securities ...................Section 3.2(a)....................19
person ..............................Section 7.8(e)....................41
Proxy Statement .....................Section 2.5........................8
S-4 .................................Section 2.5........................8
SEC .................................Section 2.4(a).....................8
Securities Act ......................Section 2.4(a).....................8
Shares ..............................Section 1.8(a).....................2
Stockholders Agreement ..............Section 4.15......................34
subsidiaries ........................Section 7.8(f)....................41
subsidiary ..........................Section 7.8(f)....................41
Superior Proposal ...................Section 4.4(b)....................30
Surviving Corporation ...............Section 1.1........................1
Third Party Acquisition .............Section 4.4(b)....................30
Third Party .........................Section 4.4(b)....................30
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April
28, 1996, is among THE CONTINUUM COMPANY, INC., a Delaware corporation
("Company"), COMPUTER SCIENCES CORPORATION, a Nevada corporation ("Parent"),
and CONTINENTAL ACQUISITION, INC., a Delaware corporation and a wholly owned
subsidiary of Parent ("Acquisition").
WHEREAS, the Boards of Directors of the Company, Parent and Acquisition
each have, in light of and subject to the terms and conditions set forth
herein, (i) determined that the Merger (as defined below) is fair to their
respective shareholders and in the best interests of such shareholders and
(ii) approved the Merger in accordance with this Agreement;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Merger is intended to be treated as a "pooling of interests"
for financial accounting purposes.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Parent and Acquisition hereby agree as
follows:
ARTICLE 1
THE MERGER
SECTION 1.1. The Merger. At the Effective Time (as defined below) and
upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), Acquisition
shall be merged with and into the Company (the "Merger"). Following the
Merger, the Company shall continue as the surviving corporation (the
"Surviving Corporation") and the separate corporate existence of Acquisition
shall cease. The Merger is intended to qualify as a tax-free reorganization
under Section 368 of the Code.
SECTION 1.2. Effective Time. Subject to the terms and conditions set
forth in this Agreement, a Certificate of Merger (the "Merger Certificate")
shall be duly executed and acknowledged by the Company and thereafter
delivered to the Secretary of State of the State of Delaware for filing
pursuant to the DGCL on the Closing Date (as defined in Section 1.3). The
Merger shall become effective at such time as a properly executed and
certified copy of the Merger Certificate is duly filed by the Secretary of
State of the State of Delaware in accordance with the DGCL or such later time
as Parent and the Company may agree upon and set forth in the Merger
Certificate (the time the Merger becomes effective being referred to herein as
the "Effective Time").
SECTION 1.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date to be specified by the
parties, which shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Article 5
(the "Closing Date"), at the offices of Gibson, Dunn &
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Crutcher, 333 South Grand Avenue, Los Angeles, California 90071, unless
another time, date or place is agreed to in writing by the parties hereto.
SECTION 1.4. Effects of the Merger. The Merger shall have the effects
set forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of the Company and Acquisition shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the
Company and Acquisition shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.5. Certificate of Incorporation and Bylaws. The Certificate
of Incorporation of the Company in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until amended in
accordance with applicable law; provided, however, that Article Fourth of the
Certificate of Incorporation of the Company shall be amended in its entirety
to read as follows: "The aggregate number of shares which the Corporation
shall have the authority to issue is one thousand (1,000), $.10 par value per
share, to be designated 'Common Stock'". The Bylaws of the Company in effect
at the Effective Time shall be the Bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 1.6. Directors. The directors of Acquisition at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
SECTION 1.7. Officers. The officers of the Company at the Effective
Time shall be the initial officers of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation until such officer's successor is duly elected or
appointed and qualified.
SECTION 1.8. Conversion of Shares.
(a) At the Effective Time, each share of common stock, par value $.10
per share, of the Company (individually a "Share" and collectively, the
"Shares") issued and outstanding immediately prior to the Effective Time
(other than (i) Shares held in the Company's treasury or by any of the
Company's subsidiaries (excluding 7,837 Shares held of record by Paxus
Corporation Limited) and (ii) Shares held by Parent, Acquisition or any other
subsidiary of Parent) shall, by virtue of the Merger and without any action on
the part of Acquisition, the Company or the holder thereof, be converted into
and shall become .79 of a fully paid and nonassessable share of common stock,
$1.00 par value per share, of Parent ("Parent Common Stock") (the "Merger
Consideration"). Unless the context otherwise requires, each reference in
this Agreement to shares of Parent Common Stock shall include the associated
Rights (as such term is defined in Section 3.2(a) hereof). Notwithstanding
the foregoing, if between the date of this Agreement and the Effective Time
the outstanding shares of Parent Common Stock or the Shares shall have been
changed into a different number of shares or a different class, by reason of
any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, then the exchange ratio contemplated by the
Merger shall be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares.
(b) At the Effective Time, each outstanding share of the common stock,
par value $0.01 per share, of Acquisition shall be converted into one share of
common stock, par value $.10 per share, of the Surviving Corporation.
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(c) At the Effective Time, each Share held in the treasury of the
Company and each Share held by Parent, Acquisition or any subsidiary of
Parent, Acquisition or the Company (excluding 7,837 Shares held of record by
Paxus Corporation Limited) immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Acquisition, the
Company or the holder thereof, be canceled, retired and cease to exist and no
payment shall be made with respect thereto.
SECTION 1.9. No Appraisal Rights. The holders of Shares and the holders
of shares of Parent Common Stock shall not be entitled to appraisal rights.
SECTION 1.10. Exchange of Certificates.
(a) As of the Effective Time, Parent shall deposit with Chemical Mellon
Shareholder Services, L.L.C., or such other agent or agents as may be
appointed by Parent and Acquisition (the "Exchange Agent"), for the benefit of
the holders of Shares, for exchange in accordance with this Article I, through
the Exchange Agent: (i) certificates representing the appropriate number of
shares of Parent Common Stock and (ii) cash to be paid in lieu of fractional
shares of Parent Common Stock (such shares of Parent Common Stock and such
cash are hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 1.8 in exchange for outstanding Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") whose shares were converted into the
right to receive shares of Parent Common Stock pursuant to Section 1.8: (i) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Parent and the Company may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of
whole shares of Parent Common Stock and, if applicable, a check representing
the cash consideration to which such holder may be entitled on account of a
fractional share of Parent Common Stock, which such holder has the right to
receive pursuant to the provisions of this Article I, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a transferee if the Certificate representing
such Shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 1.10, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Parent Common Stock and cash
in lieu of any fractional shares of Parent Common Stock as contemplated by
this Section 1.10.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 1.10(f) until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect
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of applicable laws, following surrender of any such Certificate, there shall
be paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 1.10(f) and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Parent Common Stock.
(d) In the event that any Certificate for Shares shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange therefor, upon
the making of an affidavit of that fact by the holder thereof such shares of
Parent Common Stock and cash in lieu of fractional shares, if any, as may be
required pursuant to this Agreement provided, however, that Parent or its
Exchange Agent, may, in its discretion, require the delivery of a suitable
bond or indemnity.
(e) All shares of Parent Common Stock issued upon the surrender for
exchange of Shares in accordance with the terms hereof (including any cash
paid pursuant to Section 1.10(c) or 1.10(f)) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such Shares, subject,
however, to the Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time
which may have been declared or made by the Company on such Shares in
accordance with the terms of this Agreement or prior to the date hereof and
which remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article I.
(f) No fractions of a share of Parent Common Stock shall be issued in
the Merger, but in lieu thereof each holder of Shares otherwise entitled to a
fraction of a share of Parent Common Stock shall, upon surrender of his or her
Certificate or Certificates, be entitled to receive an amount of cash (without
interest) determined by multiplying the closing price for Parent Common Stock
as reported on the New York Stock Exchange (the "NYSE") Composite Transactions
on the business day five days prior to the Effective Date by the fractional
share interest to which such holder would otherwise be entitled. The parties
acknowledge that payment of the cash consideration in lieu of issuing
fractional shares was not separately bargained for consideration but merely
represents a mechanical rounding off for purposes of simplifying the corporate
and accounting complexities which would otherwise be caused by the issuance of
fractional shares.
(g) Any portion of the Exchange Fund which remains undistributed to the
shareholders of the Company for six months after the Effective Time shall be
delivered to Parent, upon demand, and any shareholders of the Company who have
not theretofore complied with this Article I shall thereafter look only to
Parent for payment of their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any applicable dividends or
distributions with respect to Parent Common Stock, as the case may be.
(h) Neither Parent nor the Company shall be liable to any holder of
Shares, or Parent Common Stock, as the case may be, for such shares (or
dividends or
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distributions with respect thereto) or cash from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
SECTION 1.11. Stock Options.
(a) At the Effective Time, each outstanding option to purchase Shares (a
"Company Stock Option" or collectively, "Company Stock Options") (i) issued
pursuant to the 1983 Incentive Stock Option Plan, the 1992 Stock Option Plan,
the 1994 Directors Stock Option Plan, the 1995 Directors' Stock Option Plan or
the 1994 Incentive Stock Plan of the Company or pursuant to any of the
individual nonqualified stock option agreements of the Company with W. Michael
Long, E. Lee Walker, Jean-Michel Renck, Jean-Louis Rossignol, Jean-Charles
Miginiac, Michael H. Anderson, James J. Delamore, Paul Zoukis, Kevan Howley
and Federal Home Life Insurance Company and (ii) issued by Hogan Systems, Inc.
("HOGN") pursuant to the 1982 Incentive Stock Option Plan, the 1984 Incentive
Stock Option Plan, the 1985 Incentive Stock Option Plan, the 1982 Nonstatutory
Stock Option Plan, the 1984 Nonstatutory Stock Option Plan or the 1985
Nonstatutory Stock Option Plan of HOGN (which options have been assumed by the
Company pursuant to Section 4.13 of the Agreement and Plan of Merger dated as
of December 10, 1995, as amended by the First Amendment thereto dated as of
February 7, 1996 (as so amended, the "HOGN Merger Agreement") among the
Company, HOGN and Continuum Acquisition Corporation ("CAC"), pursuant to which
CAC merged with an into HOGN, and HOGN became a wholly-owned subsidiary of the
Company on March 15, 1996 (the "HOGN Merger")), whether vested or unvested,
shall be assumed by Parent. All plans or agreements described above pursuant
to which any Company Stock Option has been issued or may be issued are
referred to collectively as the Company Plans. Each Company Stock Option
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Company Stock Option, the same number
of shares of Parent Common Stock as the holder of such Company Stock Option
would have been entitled to receive pursuant to the Merger had such holder
exercised such option in full immediately prior to the Effective Time, at a
price per share equal to (y) the aggregate exercise price for the shares of
Company Common Stock otherwise purchasable pursuant to such Company Stock
Option divided by (z) the number of full shares of Parent Common Stock deemed
purchasable pursuant to such Company Stock Option; provided, however, that in
the case of any option to which section 421 of the Code applies by reason of
its qualification under section 422 of the Code ("incentive stock options" or
"ISOs"), the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be
determined in order to comply with section 424(a) of the Code. With respect
to any Company Stock Option that provides for the acceleration of vesting in
the event that the Shares achieve certain public trading price thresholds,
such trading price thresholds shall be adjusted by dividing the threshold set
forth in the Company Stock Option by the exchange ratio contemplated by the
Merger.
(b) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Company Stock Options appropriate notices setting
forth such holders' rights pursuant to the respective Company Plans and the
agreements evidencing the grants of such Options shall continue in effect on
the same terms and conditions (subject to the adjustments required by this
Section 1.11 after giving effect to the Merger). Parent shall comply with the
terms of the Company Plans and ensure, to the extent required by, and subject
to the provisions of, such Plans, that Company Stock Options which qualified
as incentive stock options immediately prior to the Effective Time continue to
qualify as incentive stock options of Parent after the Effective Time.
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(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of Company Stock Options assumed in accordance with this Section
1.11. As soon as practicable after the Effective Time, Parent shall file a
registration statement on Form S-8 (or any successor or other appropriate
forms) with respect to the shares of Parent Common Stock subject to any
Company Stock Options held by persons who are or were directors, officers or
employees of the Company or its subsidiaries and shall use its best efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding. With
respect to those individuals who subsequent to the Merger will be subject to
the reporting requirements under Section 16(a) of the Exchange Act, where
applicable, Parent shall administer Company Plans assumed pursuant to this
Section 1.11 in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act, as it may be amended, to the extent the applicable Company Plan
complied with such rule immediately prior to the Merger.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule previously delivered by
the Company to Parent (the "Company Disclosure Schedule"), the Company hereby
represents and warrants to each of Parent and Acquisition as follows:
SECTION 2.1. Organization and Qualification; Subsidiaries.
(a) Each of the Company and its subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to
own, lease and operate its properties and to carry on its businesses as now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power and authority would not have a Material
Adverse Effect (as defined below) on the Company. When used in connection
with the Company or its subsidiaries, the term "Material Adverse Effect" means
any change or effect (i) that is or is reasonably likely to be materially
adverse to the business, results of operations, condition (financial or
otherwise) or prospects of the Company and its subsidiaries, taken as whole,
other than any change or effect arising out of general economic conditions
unrelated to any business in which the Company and its subsidiaries are
engaged, or (ii) that may impair the ability of the Company to consummate the
transactions contemplated hereby.
(b) The Company has heretofore delivered to Acquisition or Parent
accurate and complete copies of the Certificate of Incorporation and Bylaws
(or similar governing documents), as currently in effect, of the Company and
its subsidiaries. Each of the Company and its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in
such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Material Adverse Effect on the Company.
SECTION 2.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of: 40,000,000
Shares, of which, as of April 25, 1996, 24,240,897 Shares were issued and
outstanding (including 67,918 Shares held in treasury and 7,837 Shares held of
record by
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Paxus Corporation Limited), and 5,000,000 shares of preferred stock, par value
$.01 per share, no shares of which are outstanding. All of the outstanding
Shares have been validly issued, and are fully paid, nonassessable and free of
preemptive rights. As of April 25, 1996, approximately 3,393,884 Shares were
reserved for issuance and issuable upon or otherwise deliverable in connection
with the exercise of outstanding Company Stock Options issued pursuant to the
Company Plans, and 51,526 Shares were reserved for issuance pursuant to the
Employee Stock Purchase Plan (the "ESPP"). Between April 25, 1996 and the
date hereof, no shares of the Company's capital stock have been issued other
than pursuant to Company Stock Options already in existence on such date, and,
between April 25, 1996 and the date hereof, no stock options have been
granted. Except as set forth above, as of the date hereof, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or its subsidiaries convertible
into or exchangeable for shares of capital stock or voting securities of the
Company, (iii) no options or other rights to acquire from the Company or its
subsidiaries, and, except as described in the Company SEC Reports (as defined
below), no obligations of the Company or its subsidiaries to issue, any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv)
no equity equivalents, interests in the ownership or earnings of the Company
or its subsidiaries or other similar rights (collectively, "Company
Securities"). As of the date hereof, there are no outstanding obligations of
the Company or its subsidiaries to repurchase, redeem or otherwise acquire any
Company Securities. Except for the agreement referred to in Section 4.14(c)
hereof, there are no stockholder agreements, voting trusts or other agreements
or understandings to which the Company is a party or by which it is bound
relating to the voting or registration of any shares of capital stock of the
Company.
(b) Section 2.2(b) of the Company Disclosure Schedule identifies each
subsidiary of the Company as of the date hereof and shows the jurisdiction of
incorporation or organization of each such subsidiary. All of the outstanding
capital stock of the Company's subsidiaries (other than director's qualifying
shares in the case of foreign subsidiaries) is owned by the Company, directly
or indirectly, free and clear of any Lien (as defined below) or any other
limitation or restriction (including any restriction on the right to vote or
sell the same, except as may be provided as a matter of law). There are no
securities of the Company or its subsidiaries convertible into or exchangeable
for, no options or other rights to acquire from the Company or its
subsidiaries, and no other contract, understanding, arrangement or obligation
(whether or not contingent) providing for the issuance or sale, directly or
indirectly, of any capital stock or other ownership interests in, or any other
securities of, any subsidiary of the Company. There are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase,
redeem or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any subsidiary of the Company. For purposes of this
Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset.
(c) The Shares constitute the only class of equity securities of the
Company or its subsidiaries registered or required to be registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
SECTION 2.3. Authority Relative to this Agreement; Recommendation.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the
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transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company (the "Company Board") and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby, except, as
referred to in Section 2.17, the approval and adoption of this Agreement by
the holders of at least two-thirds of the then outstanding Shares. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid, legal and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
(b) The Company Board has resolved to recommend that the shareholders of
the Company approve and adopt this Agreement.
SECTION 2.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents with
the Securities and Exchange Commission (the "SEC") since March 31, 1992, each
of which has complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act, each as in effect on the dates such forms, reports and
documents were filed. The Company has heretofore delivered or promptly will
deliver to Acquisition or Parent, in the form filed with the SEC (including
any amendments thereto but excluding any exhibits), (i) its Annual Reports on
Form 10-K for each of the fiscal years ended March 31, 1993, 1994 and 1995,
(ii) all definitive proxy statements relating to the Company's meetings of
shareholders (whether annual or special) held since March 31, 1992 and (iii)
all other reports or registration statements filed by the Company with the SEC
since March 31, 1992 (all of the foregoing, collectively, the "Company SEC
Reports"). None of such Company SEC Reports, including, without limitation,
any financial statements or schedules included or incorporated by reference
therein, contained, when filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements of the Company included in the
Company SEC Reports fairly present, in conformity with generally accepted
accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended.
(b) The Company has heretofore made available or promptly will make
available to Acquisition or Parent a complete and correct copy of any
amendments or modifications, which are required to be filed with the SEC but
have not yet been filed with the SEC, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC
pursuant to the Exchange Act.
SECTION 2.5. Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in
(i) the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of shares of Parent Common Stock in the Merger
(the "S-4") will, at the time the S-4 is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the proxy
statement relating to the meeting of the Company's shareholders and the
meeting of Parent's shareholders to be held in connection with the Merger (the
"Proxy Statement") will, at the date mailed to shareholders of the Company and
at the times of the
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meeting or meetings of shareholders of the Company to be held in connection
with 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 Proxy Statement, insofar as it relates to the
meeting of the Company's shareholders to vote on the Merger, will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
SECTION 2.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the filing and recordation of the
Merger Certificate as required by the DGCL, no filing with or notice to, and
no permit, authorization, consent or approval of, any court or tribunal or
administrative, governmental or regulatory body, agency or authority (a
"Governmental Entity") is necessary for the execution and delivery by the
Company of this Agreement or the consummation by the Company of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not have a Material Adverse Effect on the Company. Except
as set forth in Section 2.6 of the Company Disclosure Schedule, neither the
execution, delivery and performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or Bylaws (or similar governing documents) of the
Company or any of its subsidiaries, (ii) 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, amendment, cancellation or
acceleration or Lien) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, 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 respective properties or assets
may be bound, or (iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, except in the
case of (ii) or (iii) for violations, breaches or defaults which would not
have a Material Adverse Effect on the Company.
SECTION 2.7. No Default. Except as set forth in Section 2.7 of the
Company Disclosure Schedule, none of the Company or its subsidiaries is in
breach, default or violation (and no event has occurred which with notice or
the lapse of time or both would constitute a breach, default or violation) of
any term, condition or provision of (i) its Certificate of Incorporation or
Bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or any of its subsidiaries is now a party or
by which any of them or any of their respective properties or assets may be
bound or (iii) any order, writ, injunction, decree, law, statute, rule or
regulation applicable to the Company, its subsidiaries or any of their
respective properties or assets, except in the case of (ii) or (iii) for
violations, breaches or defaults that would not have a Material Adverse Effect
on the Company. Except as set forth in Section 2.7 of the Company Disclosure
Schedule, each note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is now a party or by which any of them or any of their respective
properties or assets may be bound that is material to the Company and its
subsidiaries taken as a whole and that has not expired is in full force and
effect and is not subject to any material default thereunder of which the
Company is aware by any party obligated to the Company or any subsidiary
thereunder.
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SECTION 2.8. No Undisclosed Liabilities; Absence of Changes. Except as
and to the extent publicly disclosed by the Company in the Company SEC
Reports, as of December 31, 1995, none of the Company or its subsidiaries had
any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company (including the notes thereto) or which would have a Material Adverse
Effect on the Company. Except as publicly disclosed by the Company, since
December 31, 1995, none of the Company or its subsidiaries has incurred any
liabilities of any nature, whether or not accrued, contingent or otherwise,
which could reasonably be expected to have, and there have been no events,
changes or effects with respect to the Company or its subsidiaries having or
which reasonably could be expected to have, a Material Adverse Effect on the
Company. Except as and to the extent publicly disclosed by the Company in the
Company's SEC Reports and except as set forth in Section 2.8 of the Company
Disclosure Schedule, since December 31, 1995, there has not been (i) any
material change by the Company in its accounting methods, principles or
practices (other than as required after the date hereof by concurrent changes
in generally accepted accounting principles), (ii) any revaluation by the
Company of any of its assets having a Material Adverse Effect on the Company,
including, without limitation, any write-down of the value of capitalized
software or inventory or write-off of notes or accounts receivable other than
in the ordinary course of business or (iii) except for the HOGN Merger, any
other action or event that would have required the consent of Parent pursuant
to Section 4.1 of this Agreement had such action or event occurred after the
date of this Agreement.
SECTION 2.9. Litigation. Except as publicly disclosed by the Company in
the Company SEC Reports, 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 Governmental Entity which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
the Company or could reasonably be expected to prevent or delay the
consummation of the transactions contemplated by this Agreement. Except as
publicly disclosed by the Company in the Company SEC Reports, none of the
Company or its subsidiaries is subject to any outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen in the
future, could reasonably be expected to have a Material Adverse Effect on the
Company or could reasonably be expected to prevent or delay the consummation
of the transactions contemplated hereby.
SECTION 2.10. Compliance with Applicable Law. Except as publicly
disclosed by the Company in the Company SEC Reports, the Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals which
would not have a Material Adverse Effect on the Company. Except as publicly
disclosed by the Company in the Company SEC Reports, the Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply would not have a Material Adverse Effect on the
Company. Except as publicly disclosed by the Company in the Company SEC
Reports, the businesses of the Company and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity except that no representation or warranty is made in this Section 2.10
with respect to Environmental Laws (as defined in Section 2.12 below) and
except for violations or possible violations which do not, and, insofar as
reasonably can be foreseen, in the future will not, have a Material Adverse
Effect on the Company. Except as publicly disclosed by the Company in the
Company SEC Reports, no investigation or review by any Governmental Entity
with respect to the Company or its
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subsidiaries is pending or, to the knowledge of the Company, threatened, nor,
to the knowledge of the Company, has any Governmental Entity indicated an
intention to conduct the same, other than, in each case, those which the
Company reasonably believes will not have a Material Adverse Effect on the
Company.
SECTION 2.11. Employee Benefit Plans; Labor Matters.
(a) Section 2.11(a) of the Company Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements, and any severance agreements, written or otherwise,
for the benefit of, or relating to, any employee of the Company, any trade or
business (whether or not incorporated) which is a member of a controlled group
including the Company or which is under common control with the Company (an
"ERISA Affiliate") within the meaning of Section 414 of the Code, as well as
each plan with respect to which the Company or an ERISA Affiliate could incur
liability under Section 4069 (if such plan has been or were terminated) or
Section 4212(c) of ERISA (together, the "Employee Plans"), excluding former
agreements under which the Company has no remaining obligations and any of the
foregoing that are required to be maintained by the Company under the laws of
any foreign jurisdiction. The Company has made available to Parent a copy of
(i) the most recent annual report on Form 5500 filed with the Internal Revenue
Service (the "IRS") for each disclosed Employee Plan where such report is
required and (ii) the documents and instruments governing each such Employee
Plan (other than those referred to in Section 4(b)(4) of ERISA).
(b) (i) None of the Employee Plans promises or provides retiree medical
or other retiree welfare benefits to any person and none of the Employee Plans
is a "multi-employer plan" as such term is defined in Section 3(37) of ERISA;
(ii) neither the Company nor any ERISA Affiliate has incurred any excise taxes
under Chapter 43 of Subtitle A of the Code or Section 5000 of the Code or any
penalties under Section 502(i) or 502(l) of ERISA with respect to any Employee
Plan, which could result in any Material Adverse Effect on the Company; (iii)
all Employee Plans are in compliance in all material respects with the
requirements prescribed by any and all statutes (including ERISA and the
Code), orders, or governmental rules and regulations currently in effect with
respect thereto (including all applicable requirements for notification to
participants or the Department of Labor, IRS or Secretary of the Treasury),
and the Company and each of its subsidiaries have performed all material
obligations required to be performed by them under, are not in any material
respect in default under or violation of, and have no knowledge of any default
or violation by any other party to, any of the Employee Plans; (iv) each
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code is the subject of a
favorable determination letter from the IRS, and nothing has occurred which
may reasonably be expected to impair such determination; (v) all contributions
required to be made to any Employee Plan pursuant to Section 412 of the Code,
or the terms of the Employee Plan or any collective bargaining agreement, have
been made on or before their due dates and a reasonable amount has been
accrued for contributions to each Employee Plan for the current plan years;
(vi) with respect to each Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding any such event for which the
thirty (30) day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041
of ERISA has occurred; and (vii) neither the Company nor any ERISA Affiliate
has incurred, nor reasonably expects to incur, any liability under Title IV of
ERISA (other than liability for premium payments to the Pension Benefit
Guaranty Corporation arising in the ordinary course).
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(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true
and complete list, as of the date of this Agreement, of each person who holds
any Company Stock Options, together with the number of Shares which are
subject to such option, the date of grant of such option, the extent to which
such option is vested (or will become vested within six months from the date
hereof, or as a result of, the Merger), the option price of such option (to
the extent determined as of the date hereof), whether such option is intended
to qualify as an incentive stock option within the meaning of Section 422(b)
of the Code, and the expiration date of such option. Section 2.11(c) of the
Company Disclosure Schedule also sets forth the total number of such ISOs and
such nonqualified options. The Company has furnished Parent with complete
copies of the Company Plans pursuant to which the Company Stock Options were
issued. Other than the automatic vesting of Company Stock Options that may
occur without any action on the part of the Company or its officers or
directors, the Company has not taken any action that would result in any
Company Stock Options that are unvested becoming vested in connection with or
as a result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(d) The Company has made available to Parent (i) a description of the
terms of employment and compensation arrangements of all officers of the
Company and a standard form of employment agreement used for officers of the
Company, (ii) copies of all employment agreements with officers of the Company
which contain provisions that differ from the standard terms and conditions
contained in the form of employment agreement provided to Parent; (iii) copies
of all agreements with consultants who are individuals obligating the Company
to make annual cash payments in an amount exceeding $300,000; (iv) a schedule
listing all officers of the Company who have executed a non-competition
agreement with the Company; (v) copies (or descriptions) of all severance
agreements, programs and policies of the Company with or relating to its
employees, except programs and policies required to be maintained by law; and
(vi) copies of all plans, programs, agreements and other arrangements of the
Company with or relating to its employees which contain change in control
provisions.
(e) Except as disclosed in Section 2.11(e) of the Company Disclosure
Schedule, there shall be no payment, accrual of additional benefits,
acceleration of payments, or vesting in any benefit under any Employee Plan or
any agreement or arrangement disclosed under this Section 2.11 solely by
reason of entering into or in connection with the transactions contemplated by
this Agreement.
(f) There are no controversies pending or, to the knowledge of the
Company, threatened, between the Company or any of its subsidiaries and any of
their respective employees, which controversies have or may reasonably be
expected to have a Material Adverse Effect of the Company. Neither the
Company nor any of its subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or its subsidiaries, except as disclosed in Section 2.11(f) of the
Company Disclosure Schedule, nor does the Company know of any activities or
proceedings of any labor union to organize any such employees. The Company
has no knowledge of any strikes, slowdowns, work stoppages, lockouts or
threats thereof, by or with respect to any employees of the Company or any of
its subsidiaries.
SECTION 2.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by the Company in the Company SEC
Reports, (i) each of the Company and its subsidiaries is in material
compliance with all applicable federal, state, local and foreign laws and
regulations relating to pollution or
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protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), except for non-compliance that would not
have a Material Adverse Effect on the Company, which compliance includes, but
is not limited to, the possession by the Company and its subsidiaries of all
material permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof; (ii) none of the Company or its subsidiaries has received written
notice of, or, to the knowledge of the Company, is the subject of, any action,
cause of action, claim, investigation, demand or notice by any person or
entity alleging liability under or non-compliance with any Environmental Law
(an "Environmental Claim") that could reasonably be expected to have a
Material Adverse Effect on the Company; and (iii) to the knowledge of the
Company, there are no circumstances that are reasonably likely to prevent or
interfere with such material compliance in the future.
(b) Except as publicly disclosed by the Company, there are no
Environmental Claims which could reasonably be expected to have a Material
Adverse Effect on the Company that are pending or, to the knowledge of the
Company, threatened against the Company or its subsidiaries or, to the
knowledge of the Company, against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has or may have
retained or assumed either contractually or by operation of law.
SECTION 2.13 Taxes.
(a) Definitions. For purposes of this Agreement:
(i) the term "Tax" (including "Taxes") means (A) all federal,
state, local, foreign and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts with
respect thereto, (B) any liability for payment of amounts described in clause
(A) whether as a result of transferee liability, of being a member of an
affiliated, consolidated, combined or unitary group for any period, or
otherwise through operation of law, and (C) any liability for the payment of
amounts described in clauses (A) or (B) as a result of any tax sharing, tax
indemnity or tax allocation agreement or any other express or implied
agreement to indemnify any other person; and
(ii) the term "Tax Return" means any return, declaration, report,
statement, information statement and other document required to be filed with
respect to Taxes.
(b) Except as set forth in Section 2.13(b) of the Company Disclosure
Schedule, the Company and its subsidiaries have accurately prepared and timely
filed all Tax Returns they are required to have filed. Such Tax Returns are
accurate and correct in all material respects and do not contain a disclosure
statement under Section 6662 of the Code (or any predecessor provision or
comparable provision of state, local or foreign law).
(c) The Company and its subsidiaries have paid or adequately provided
for all Taxes they are required to have paid or to pay.
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(d) Except as set forth in Section 2.13(d) of the Company Disclosure
Schedule:
(i) no claim has been made by any taxing authority in any
jurisdiction where the Company and its subsidiaries do not file Tax Returns
that any of them is or may be subject to Tax by that jurisdiction; and
(ii) no current extensions or waivers of statutes of limitations
with respect to the Tax Returns have been given by or requested from the
Company or any of its subsidiaries.
(e) Section 2.13(e) of the Company Disclosure Schedule sets forth:
(i) the taxable years of the Company and its subsidiaries as to
which the applicable statutes of limitations on the assessment and collection
of Taxes have not expired;
(ii) those years for which examinations by the taxing authorities
have been completed;
(iii) those taxable years for which examinations by taxing
authorities are presently being conducted;
(iv) those years for which notice of pending or threatened examination or
adjustment has been received; and
(v) those years for which required income Tax Returns have not yet
been filed.
(f) Except as set forth in Section 2.13(f) of the Company Disclosure
Schedule, all deficiencies asserted or assessments made against the Company or
any subsidiary as a result of any examinations by any taxing authority have
been fully paid.
(g) Except as set forth in Section 2.13(g) of the Company Disclosure
Schedule, there are no liens for Taxes (other than for current Taxes not yet
due and payable) upon the assets of the Company or any subsidiary.
(h) Except as set forth in Section 2.13(h) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to or
bound by any tax indemnity, tax sharing or tax allocation agreement.
(i) Neither the Company nor any of its subsidiaries is a party to or
bound by any closing agreement or offer in compromise with any taxing
authority.
(j) Except to the extent indicated in Section 2.13(j) of the Company
Disclosure Schedule:
(i) neither the Company nor any of its subsidiaries has been a
member of an affiliated group of corporations, within the meaning of Section
1504 of the Code, or a member of combined, consolidated or unitary
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group for state, local or foreign Tax purposes (other than the group the
common parent of which is the Company);
(ii) neither the Company nor any of its subsidiaries has any
liability for Taxes of any person (other than the Company and its
subsidiaries) under Treasury Regulations Section 1.1502-6 (or any
corresponding provision of state, local or foreign income Tax law), as
transferee or successor, by contract, or otherwise;
(iii) neither the Company nor any of its subsidiaries has filed a
consent pursuant to the collapsible corporation provisions of Section 341(f)
of the Code (or any corresponding provision of state, local or foreign income
Tax law) or agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local or foreign income Tax law) apply to any disposition
of any asset owned by any of them;
(iv) neither the Company nor any or its subsidiaries has made a
consent dividend election under Section 565 of the Code;
(v) neither the Company nor any of its subsidiaries has been a
personal holding company under Section 542 of the Code; and
(vi) neither the Company nor any of its subsidiaries has
participated in an international boycott within the meaning of Section 999 of
the Code.
(k) Except as set forth in Section 2.13(k) of the Company Disclosure
Schedule, none of the assets of the Company or its subsidiaries is property
that the Company or any of its subsidiaries is required to treat as being
owned by any other person pursuant to the so-called "safe harbor lease"
provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954,
as amended; none of the assets of the Company or its subsidiaries directly or
indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code; none of the assets of the Company or its subsidiaries is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(l) Except as set forth in Section 2.13(l) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has agreed to make,
or is it required to make, any adjustment under Sections 481(a) or 263A of the
Code or any comparable provision of state, local or foreign tax laws by reason
of a change in accounting method or otherwise. Neither the Company nor any of
its subsidiaries has taken action that is not in accordance with past practice
that could defer a liability for Taxes of the Company or any of its
subsidiaries from any taxable period ending on or before the Closing Date to
any taxable period ending after such date.
(m) Except as set forth in Section 2.13(m) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in connection with this Agreement or any
change of control of the Company or any of its subsidiaries, in the payment of
any "excess parachute payments" within the meaning of Section 28OG of the
Code.
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(n) Section 2.13(n) of the Company Disclosure Schedule sets forth all
foreign jurisdictions in which the Company or any subsidiary is subject to
Tax, is engaged in business or has a permanent establishment.
(o) Except as set forth in Section 2.13(o) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
joint venture, partnership, or other arrangement or contract that could be
treated as a partnership for federal income tax purposes.
(p) No material election with respect to Taxes of the Company or its
subsidiaries will be made after the date of this Agreement without the prior
written consent of Parent.
(q) None of the income recognized, for federal, state, local or foreign
income tax purposes, by the Company or its subsidiaries during the period
commencing on the date hereof and ending on the Closing Date will be derived
other than in the ordinary course of business.
SECTION 2.14. Title to Property. The Company and each of its
subsidiaries have good and defensible title to all of their properties and
assets, free and clear of all liens, charges and encumbrances except liens for
taxes not yet due and payable and such liens or other imperfections of title,
if any, as do not materially detract from the value of or interfere with the
present use of the property affected thereby or which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company; and, to
the Company's knowledge, all leases pursuant to which the Company or any of
its subsidiaries lease from others real or personal property are in good
standing, valid and effective in accordance with their respective terms, and
there is not, to the knowledge of the Company, under any of such leases, any
existing material default or event of default (or event which with notice of
lapse of time, or both, would constitute a material default and in respect of
which the Company or such subsidiary has not taken adequate steps to prevent
such a default from occurring) except where the lack of such good standing,
validity and effectiveness, or the existence of such default or event, would
not have a Material Adverse Effect on the Company.
SECTION 2.15. Intellectual Property; Software.
(a) Each of the Company and its subsidiaries owns, or possesses adequate
licenses or other valid rights to use, all existing United States and foreign
patents, trademarks, trade names, service marks, copyrights, trade secrets and
applications therefor that are material to its business as currently conducted
(the "Company Intellectual Property Rights").
(b) The validity of the Company Intellectual Property Rights and the
title thereto of the Company or any subsidiary, as the case may be, is not
being questioned in any litigation to which the Company or any subsidiary is a
party.
(c) Except as set forth in Section 2.15(c) of the Company Disclosure
Schedule, the conduct of the business of the Company and its subsidiaries as
now conducted does not, to the Company's knowledge, infringe any valid
patents, trademarks, trade names, service marks or copyrights of others. The
consummation of the transactions completed hereby will not result in the loss
or impairment of any Company Intellectual Property Rights.
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(d) Prior to the execution and delivery of this Agreement, the Company
has provided Parent with a list of all material applications software (other
than personal computer software licensed from third parties) which the Company
or any subsidiary owns or has the right to market or use to provide services
to third parties.
(e) Except as set forth in Section 2.15(e) of the Company Disclosure
Schedule, neither the Company nor any subsidiary has licensed (or otherwise
entered into any agreement permitting) any person to use or market any of its
computer software (whether or not copyrighted) other than licenses to end-
users to use (but not market, distribute, sell or transfer) the computer
software.
(f) Each of the Company and its subsidiaries considers its computer
software as trade secrets, and each has taken steps it believes appropriate to
protect and maintain the same as such, except in cases where the Company has
elected to rely on patent or copyright protection in lieu of trade secret
protection.
SECTION 2.16. Insurance. The Company and its subsidiaries maintain
general liability and other business insurance that the Company believes to be
reasonably prudent for its business.
SECTION 2.17. Vote Required. The affirmative vote of the holders of at
least two-thirds of the outstanding Shares is the only vote of the holders of
any class or series of the Company's capital stock necessary to approve and
adopt this Agreement.
SECTION 2.18. Tax Treatment; Pooling. Neither the Company nor, to the
knowledge of the Company, any of its affiliates has taken or agreed to take
action that would prevent the Merger from (a) constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code or (b) being
treated for financial accounting purposes as a pooling of interests in
accordance with generally accepted accounting principles and the published
rules, regulations and interpretations of the SEC (a "Pooling Transaction").
SECTION 2.19. Affiliates. Except for DST Systems, Inc. ("DST") and the
directors and executive officers of the Company, each of whom is listed in
Section 2.19 of the Company Disclosure Schedule, there are no persons who, to
the knowledge of the Company, may be deemed to be affiliates of the Company
under Rule 145 of the Securities Act ("Company Affiliates"). Concurrently
with the execution and delivery of this Agreement, the Company has delivered
to Parent an executed letter agreement, substantially in the form of Exhibit A
hereto, from certain of the Company Affiliates, and will deliver to Parent,
within ten days after the date of this Agreement, an executed letter
agreement, substantially in the form of Exhibit A hereto, from all other
Company Affiliates.
SECTION 2.20. Certain Business Practices. None of the Company, any of
its subsidiaries or any directors, officers, agents or employees of the
Company or any of its subsidiaries has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties
or campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended (the "FCPA"), or (iii) made any other unlawful payment.
SECTION 2.21. Insider Interests. No officer or director of the Company
has any interest in any material property, real or personal, tangible or
intangible, including without limitation, any computer software or Company
Intellectual Property Rights, used
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in or pertaining to the business of the Company or any subsidiary, expect for
the ordinary rights of a stockholder or employee stock optionholder.
SECTION 2.22. Opinion of Financial Adviser. Lehman Brothers Inc. (the
"Company Financial Adviser") has delivered to the Company Board its written
opinion, dated the date of this Agreement, to the effect that, as of such
date, the exchange ratio contemplated by the Merger is fair to the holders of
Shares.
SECTION 2.23. Brokers. No broker, finder or investment banker (other
than the Company Financial Adviser, a true and correct copy of whose
engagement agreement has been provided to Acquisition or Parent) is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 2.24. Disclosure. No representation or warranty of the Company
in this Agreement or any certificate, schedule, document or other instrument
furnished or to be furnished to Parent pursuant hereto or in connection
herewith contains, as of the date of such representation, warranty or
instrument, or will contain any untrue statement of a material fact or, at the
date thereof, omits or will omit to state a material fact necessary to make
any statement herein or therein, in light of the circumstances under which
such statement is or will be made, not misleading.
Section 2.25. No Existing Discussions. As of the date hereof, the
Company is not engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to any Third Party Acquisition
(as defined in Section 4.4).
Section 2.26. Section 203 of the DGCL. The Company Board has taken all
actions so that the restrictions contained in Section 203 of the DGCL
applicable to an "interested stockholder" or a "business combination" (as
defined in Section 203) will not apply to the execution, delivery or
performance of this Agreement or the Stockholder Agreement or the consummation
of the Merger or the other transactions contemplated by this Agreement or the
Stockholder's Agreement (as defined in Section 4.15 hereof).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
SECTION 3.1. Organization.
(a) Each of Parent and its subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to
own, lease and operate its properties and to carry on its businesses as now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power and authority would not have a Material
Adverse Effect (as defined below) on Parent. When used in connection with
Parent or Acquisition, the term "Material Adverse Effect" means any change or
effect that is (i) materially adverse to the business, results of operations,
condition (financial or otherwise) or prospects of Parent and its
subsidiaries, taken as a whole, other than any change or effect arising out of
general economic conditions unrelated to any businesses in
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which Parent and its subsidiaries are engaged, or (ii) that may impair the
ability of Parent and/or Acquisition to consummate the transactions
contemplated hereby.
(b) Parent has heretofore delivered to the Company accurate and complete
copies of the Articles of Incorporation and Bylaws, as currently in effect, of
Parent and Acquisition. Each of Parent and its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in
such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Material Adverse Effect on Parent.
SECTION 3.2. Capitalization of Parent and its Subsidiaries.
(a) The authorized capital stock of Parent consists of 75,000,000 shares
of Parent Common Stock (increasing to 275,000,000 shares contingent upon the
approval of Parent's shareholders of an amendment to Parent's Articles of
Incorporation increasing Parent's authorized capital (the "Articles
Amendment") at the meeting of shareholders of Parent convened for the purpose
of voting on the issuance of shares of Parent Common Stock in the Merger), of
which, as of April 15, 1996, 56,354,755 shares of Parent Common Stock
(including 314,240 shares held in Parent's treasury) were issued and
outstanding (each, together with a preferred stock purchase right (the
"Rights") issued pursuant to the Rights Agreement, amended and restated as of
October 30, 1995, between Parent and Chemical Mellon Shareholder Services,
L.L.C. (the "Rights Agreement")), and 1,000,000 shares of preferred stock,
$1.00 par value per share, none of which are outstanding. All of the
outstanding shares of Parent Common Stock have been validly issued, and are
fully paid, nonassessable and free of preemptive rights. As of April 15,
1996, 4,692,315 shares of Parent Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding options. Between April 15, 1996 and the date hereof, no shares of
Parent's capital stock have been issued other than pursuant to stock options
already in existence on such date, and, except for grants of stock options to
employees, officers and directors in the ordinary course of business
consistent with past practice. Except as set forth above and except for the
Rights, as of the date hereof, there are outstanding (i) no shares of capital
stock or other voting securities of Parent, (ii) no securities of Parent or
its subsidiaries convertible into or exchangeable for shares of capital stock
or voting securities of Parent, (iii) no options or other rights to acquire
from Parent or its subsidiaries, and no obligations of Parent or its
subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Parent, and (iv) no equity equivalents, interests in the ownership or earnings
of Parent or its subsidiaries or other similar rights (collectively, "Parent
Securities"). As of the date hereof, there are no outstanding obligations of
Parent or any of its subsidiaries to repurchase, redeem or otherwise acquire
any Parent Securities. There are no stockholder agreements, voting trusts or
other agreements or understandings to which Parent is a party or by which it
is bound relating to the voting of any shares of capital stock of Parent.
(b) The Parent Common Stock (including the associated Rights)
constitutes the only class of equity securities of Parent or its subsidiaries
registered or required to be registered under the Exchange Act.
SECTION 3.3. Authority Relative to this Agreement; Recommendation.
(a) Each of Parent and Acquisition has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions
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contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the boards of directors of Parent and Acquisition and by
Parent as the sole shareholder of Acquisition, and no other corporate
proceedings on the part of Parent or Acquisition are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby, except
that, as referred to in Section 3.17, (i) the approval of Parent's
shareholders of the issuance of Parent Common Stock in the Merger is required
pursuant to Rule 312 of the NYSE, (ii) the approval of Parent's shareholders
of the Merger is required pursuant to the Nevada General Corporation Law (the
"NGCL") and (iii) the approval of Parent's shareholders of the Articles
Amendment is required pursuant to the NGCL and Parent's Articles of
Incorporation and Bylaws. This Agreement has been duly and validly executed
and delivered by each of Parent and Acquisition and constitutes a valid, legal
and binding agreement of each of Parent and Acquisition, enforceable against
each of Parent and Acquisition in accordance with its terms.
(b) The Board of Directors of Parent has resolved to recommend that the
shareholders of Parent approve the issuance of Parent Common Stock in the
Merger and the Articles Amendment.
SECTION 3.4. SEC Reports; Financial Statements.
(a) Parent has filed all required forms, reports and documents with the
SEC since March 31, 1992, each of which has complied in all material respects
with all applicable requirements of the Securities Act and the Exchange Act,
each as in effect on the dates such forms, reports and documents were filed.
Parent has heretofore delivered to the Company, in the form filed with the SEC
(including any amendments thereto but excluding any exhibits), (i) its Annual
Reports on Form 10-K for the fiscal years ended April 2, 1993, April 1, 1994
and March 31, 1995, (ii) all definitive proxy statements relating to Parent's
meetings of shareholders (whether annual or special) held since March 31, 1992
and (iii) all other reports or registration statements filed by Parent with
the SEC since March 31, 1992 (all of the foregoing, collectively, the "Parent
SEC Reports"). None of such Parent SEC Reports, including, without
limitation, any financial statements or schedules included or incorporated by
reference therein, contained, when filed, any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements of Parent included in the Parent SEC
Reports fairly present, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of Parent and its
consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended.
(b) Parent has heretofore made available or promptly will make available
to the Company a complete and correct copy of any amendments or modifications,
which are required to be filed with the SEC but have not yet been filed with
the SEC, to agreements, documents or other instruments which previously had
been filed by Parent with the SEC pursuant to the Exchange Act.
SECTION 3.5. Information Supplied. None of the information supplied or
to be supplied by Parent or Acquisition for inclusion or incorporation by
reference to (i) the S-4 will, at the time the S-4 is filed with the SEC and
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements
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therein not misleading and (ii) the Proxy Statement will, at the date mailed
to shareholders and at the times of the meeting or meetings of shareholders of
Parent to be held in connection with 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 Proxy Statement,
insofar as it relates to the meeting of Parent's shareholders to vote in the
Merger, will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder, and the S-4 will
comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
SECTION 3.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act and the rules of the NYSE, and the
filing and recordation of the Articles Amendment and the Merger Certificate as
required by the NGCL and the DGCL, respectively, no filing with or notice to,
and no permit, authorization, consent or approval of, any Governmental Entity
is necessary for the execution and delivery by Parent or Acquisition of this
Agreement or the consummation by Parent or Acquisition of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Material Adverse Effect on Parent. Neither the
execution, delivery and performance of this Agreement by Parent or Acquisition
nor the consummation by Parent or Acquisition of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective Certificate of Incorporation or Bylaws (or similar governing
documents) of Parent or Acquisition or any of Parent's subsidiaries, (ii)
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,
amendment, cancellation or acceleration or Lien) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent
or Acquisition or any of Parent's other subsidiaries is a party or by which
any of them or any of their respective properties or assets may be bound or
(iii) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to Parent or Acquisition or any of Parent's subsidiaries
or any of their respective properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults which would not have a Material
Adverse Effect on Parent.
SECTION 3.7. No Default. None of Parent or any of its subsidiaries is
in breach, default or violation (and no event has occurred which with notice
or the lapse of time or both would constitute a breach, default or violation)
of any term, condition or provision of (i) its Articles of Incorporation or
Bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or any of its subsidiaries is now a party or by
which any of them or any of their respective properties or assets may be bound
or (iii) any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent, its subsidiaries or any of their respective properties
or assets, except in the case of (ii) or (iii) for violations, breaches or
defaults that would not have a Material Adverse Effect on Parent. Each note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent or any of its subsidiaries is now a
party or by which any of them or any of their respective properties or assets
may be bound that is material to Parent and its subsidiaries taken as a whole
and that has not expired is in full force and effect and is not subject to any
material default thereunder of which Parent is aware by any party obligated to
Parent or any subsidiary thereunder.
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SECTION 3.8. No Undisclosed Liabilities; Absence of Changes. Except as
and to the extent publicly disclosed by Parent in the Parent SEC Reports, as
of December 31, 1995, none of Parent or its subsidiaries had any liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
that would be required by generally accepted accounting principles to be
reflected on a consolidated balance sheet of Parent and its consolidated
subsidiaries (including the notes thereto) or which would have a Material
Adverse Effect on Parent. Except as publicly disclosed by Parent, since
December 31, 1995, none of Parent or its subsidiaries has incurred any
liabilities of any nature, whether or not accrued, contingent or otherwise,
which could reasonably be expected to have, and there have been no events,
changes or effects with respect to Parent or its subsidiaries having or which
could reasonably be expected to have, a Material Adverse Effect on Parent.
SECTION 3.9. Litigation. Except as publicly disclosed by Parent in the
Parent SEC Reports, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Parent, threatened against
Parent or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect or could
reasonably be expected to prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as publicly disclosed by
Parent in the Parent SEC Reports, none of Parent or its subsidiaries is
subject to any outstanding order, writ, injunction or decree which, insofar as
can be reasonably foreseen in the future, could reasonably be expected to have
a Material Adverse Effect on Parent or could reasonably be expected to prevent
or delay the consummation of the transactions contemplated hereby.
SECTION 3.10. Compliance with Applicable Law. Except as publicly
disclosed by Parent in the Parent SEC Reports, Parent and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Parent Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have a
Material Adverse Effect on Parent. Except as publicly disclosed by Parent in
the Parent SEC Reports, Parent and its subsidiaries are in compliance with the
terms of the Parent Permits, except where the failure so to comply would not
have a Material Adverse Effect on Parent. Except as publicly disclosed by
Parent in the Parent SEC Reports, the businesses of Parent and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity except that no representation or
warranty is made in this Section 3.10 with respect to Environmental Laws and
except for violations or possible violations which do not, and, insofar as
reasonably can be foreseen, in the future will not, have a Material Adverse
Effect on Parent. Except as publicly disclosed by Parent in the Parent SEC
Reports, no investigation or review by any Governmental Entity with respect to
Parent or its subsidiaries is pending or, to the knowledge of Parent,
threatened, nor, to the knowledge of Parent, has any Governmental Entity
indicated an intention to conduct the same, other than, in each case, those
which Parent reasonably believes will not have a Material Adverse Effect on
Parent.
SECTION 3.11. Employee Benefit Plans; Labor Matters. With respect to
each employee benefit plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan," as defined in Section 3(3) of
ERISA), maintained or contributed to by Parent or any of its subsidiaries, or
with respect to which Parent or any of its subsidiaries could incur liability
under Section 4069, 4212(c) or 4204 of ERISA (the "Parent Benefit Plans"), no
event has occurred and, to the knowledge of Parent, there currently exists no
condition or set of circumstances, in connection with which Parent or
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any of its subsidiaries could be subject to any liability under the terms of
the Parent Benefit Plans, ERISA, the Code or any other applicable law which
would have a Material Adverse Effect on Parent. There is no pending or
threatened labor dispute, strike or work stoppage against Parent or any of its
subsidiaries which may reasonably be expected to have a Material Adverse
Effect on Parent.
SECTION 3.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by Parent in the Parent SEC Reports,
(i) each of Parent and its subsidiaries is in material compliance with all
Environmental Laws, except for non-compliance that would not have a Material
Adverse Effect on Parent, which compliance includes, but is not limited to,
the possession by Parent and its subsidiaries of all material permits and
other governmental authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof; (ii) none of
Parent or its subsidiaries has received written notice of, or, to the
knowledge of Parent, is the subject of, any Environmental Claim that could
reasonably be expected to have a Material Adverse Effect on Parent; and (iii)
to the knowledge of Parent, there are no circumstances that are reasonably
likely to prevent or interfere with such material compliance in the future.
(b) Except as publicly disclosed by Parent, there are no Environmental
Claims which could reasonably be expected to have a Material Adverse Effect on
Parent that are pending or, to the knowledge of Parent, threatened against
Parent or any of its subsidiaries or, to the knowledge of Parent, against any
person or entity whose liability for any Environmental Claim Parent or its
subsidiaries has or may have retained or assumed either contractually or by
operation of law.
SECTION 3.13. Tax Matters. Parent and its subsidiaries have accurately
prepared and duly filed with the appropriate federal, state, local and foreign
taxing authorities all tax returns, information returns and reports required
to be filed with respect to Parent and its subsidiaries and have paid in full
or made adequate provision for the payment of all Taxes.
SECTION 3.14. Title to Property. Parent and each of its subsidiaries
have good and defensible title to all of their properties and assets, free and
clear of all liens, charges and encumbrances except liens for taxes not yet
due and payable and such liens or other imperfections of title, if any, as do
not materially detract from the value of or interfere with the present use of
the property affected thereby or which, individually or in the aggregate,
would not have a Material Adverse Effect on Parent; and, to Parent's
knowledge, all leases pursuant to which Parent or any of its subsidiaries
lease from others real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, to the
knowledge of Parent, under any of such leases, any existing material default
or event of default (or event which with notice or lapse of time, or both,
would constitute a material default and in respect of which the Parent or such
subsidiary has not taken adequate steps to prevent such a default from
occurring) except where the lack of such good standing, validity and
effectiveness, or the existence of such default or event of default would not
have a Material Adverse Effect on Parent.
SECTION 3.15. Intellectual Property; Software.
(a) Each of Parent and its subsidiaries owns, or possesses adequate
licenses or other valid rights to use, all existing United States and foreign
patents, trademarks, trade names, services marks, copyrights, trade secrets,
and applications
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therefor that are material to its business as currently conducted (the "Parent
Intellectual Property Rights").
(b) The validity of the Parent Intellectual Property Rights and the
title thereto of Parent or any subsidiary, as the case may be, is not being
questioned in any litigation to which Parent or any subsidiary is a party.
(c) The conduct of the business of Parent and its subsidiaries as now
conducted does not, to Parent's knowledge, infringe any valid patents,
trademarks, tradenames, service marks or copyrights of others. The
consummation of the transactions contemplated hereby will not result in the
loss or impairment of any Parent Intellectual Property Rights.
(d) Each of Parent and its subsidiaries considers its computer software
as trade secrets, and each has taken steps it believes appropriate to protect
and maintain the same as such.
SECTION 3.16 Insurance. Parent and its subsidiaries maintain general
liability and other business insurance that Parent believes to be reasonably
prudent for its business.
SECTION 3.17. Vote Required. The vote of the holders of Parent's
capital stock necessary to approve the issuance of the Parent Common Stock in
the Merger is, pursuant to the Rule 312 of the NYSE, the affirmative vote of
the holders of a majority of the outstanding shares of Parent Common Stock
voted on the proposal to so issue the Parent Common Stock, provided that the
total vote cast on such proposal represents over 50% in interest of the
outstanding Parent Common Stock. The vote of the holders of Parent's capital
stock necessary to approve the Merger is, pursuant to the NGCL, the
affirmative vote of the holders of a majority of the outstanding shares of
Parent Common Stock. The vote of the holders of Parent's capital stock
necessary to approve the Articles Amendment is, pursuant to the NGCL and
Parent's Articles of Incorporation and Bylaws, the affirmative vote of the
holders of a majority of the outstanding shares of Parent Common Stock.
Parent, as the sole stockholder of Acquisition, has approved and adopted this
Agreement.
SECTION 3.18. Tax Treatment; Pooling. Neither Parent nor, to the
knowledge of Parent, any of its affiliates has taken or agreed to take any
action that would prevent the Merger (a) from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code or (b) from
being treated as a Pooling Transaction for financial accounting purposes.
SECTION 3.19. Affiliates. Except for the directors and executive
officers of Parent, there are no persons who, to the knowledge of Parent, may
be deemed to be affiliates of Parent under Rule 1-02 of Regulation S-X of the
SEC ("Parent Affiliates"). Concurrently with the execution and delivery of
this Agreement, Parent has delivered to the Company an executed letter
agreement, substantially in the form of Exhibit B hereto, from certain of the
Parent Affiliates, and will deliver to Parent, within ten days after the date
of this Agreement, an executed letter agreement, substantially in the form of
Exhibit B hereto, from all other Parent Affiliates.
SECTION 3.20. Certain Business Practices. None of Parent, any of its
subsidiaries or any directors, officers, agents or employees of Parent or any
of its subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign
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or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the FCPA, or (iii)
made any other unlawful payment.
SECTION 3.21. Insider Interests. No officer or director of the Parent
has any interest in any material property, real or personal, tangible or
intangible, including without limitation, any computer software or Parent
Intellectual Property Rights, used in or pertaining to the business of the
Parent or any subsidiary, except for the ordinary rights of a stockholder or
employee stock optionholder.
SECTION 3.22. Opinion of Financial Adviser. Goldman, Sachs & Co. (the
"Parent Financial Adviser") has delivered to the Board of Directors of Parent
its written opinion, dated as of the date of this Agreement, to the effect
that, as of such date, the exchange ratio contemplated by the Merger is fair
to the holders of shares of Parent Common Stock.
SECTION 3.23. Brokers. No broker, finder or investment banker (other
than the Parent Financial Adviser) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or
Acquisition.
SECTION 3.24 Disclosure. No representation or warranty of Parent in
this Agreement or any certificate, schedule, document or other instrument
furnished or to be furnished to the Company pursuant hereto or in connection
herewith contains, as of the date of such representation, warranty or
instrument, or will contain any untrue statement of a material fact or, at the
date thereof, omits or will omit to state a material fact necessary to make
any statement herein or therein, in light of the circumstances under which
such statement is or will be made, not misleading.
SECTION 3.25. No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
Acquisition has neither incurred any obligation or liability nor engaged in
any business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any person.
ARTICLE 4
COVENANTS
SECTION 4.1. Conduct of Business of the Company. Except as contemplated
by this Agreement or as described in Section 4.1 of the Company Disclosure
Schedule, during the period from the date hereof to the Effective Time, the
Company will, and will cause each of its subsidiaries to, conduct its
operations in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, with no less diligence and effort
than would be applied in the absence of this Agreement, seek to preserve
intact its current business organizations, keep available the service of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end that goodwill
and ongoing businesses shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, except as otherwise expressly
provided in this Agreement or as described in Section 4.1 of the Company
Disclosure Schedule, prior to the Effective Time, neither the Company nor any
of its subsidiaries will, without the prior written consent of Parent or
Acquisition:
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(a) amend its certificate of incorporation or Bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities (except bank loans) or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights), except for the issuance and sale of Shares pursuant to
options previously granted under the Company Plans;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
make any other actual, constructive or deemed distribution in respect of its
capital stock or otherwise make any payments to stockholders in their capacity
as such, or redeem or otherwise acquire any of its securities or any
securities of any of subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries (other than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring or
any other fashion the corporate structure of ownership of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person, except in the ordinary course of business
consistent with past practice and except for obligations of subsidiaries of
the Company incurred in the ordinary course of business; (iii) make any loans,
advances or capital contributions to, or investments in, any other person
(other than to subsidiaries of the Company or customary loans or advances to
employees, in each case in the ordinary course of business consistent with
past practice), (iv) pledge or otherwise encumber shares of capital stock of
the Company or its subsidiaries; or (v) mortgage or pledge any of its material
assets, tangible or intangible, or create or suffer to exist any material Lien
thereupon (other than tax Liens for taxes not yet due);
(g) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock appreciation
rights or performance units); provided, however, that this paragraph (g) shall
not prevent the Company or its subsidiaries from (i) entering into employment
agreements or severance agreements with new employees in the ordinary course
of business and consistent with past practice or (ii) increasing annual
compensation and/or providing for or amending bonus arrangements for employees
for fiscal 1997 in the ordinary course of year-end compensation reviews
consistent with past practice and paying bonuses to employees for fiscal 1996
in amounts previously disclosed to Parent (to the extent that such
compensation increases and new or
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amended bonus arrangements do not result in a material increase in benefits or
compensation expense to the Company);
(h) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions having a fair market value in
excess of $5 million in the aggregate (other than in connection with
outsourcing agreements entered into with customers of the Company or its
subsidiaries);
(i) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(j) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing-off notes
or accounts receivable other than in the ordinary course of business;
(k) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein (other than in connection with
outsourcing agreements entered into with customers of the Company or its
subsidiaries); (ii) enter into any contract or agreement other than in the
ordinary course of business consistent with past practice which would be
material to the Company and its subsidiaries taken as a whole; (iii) authorize
any new capital expenditure or expenditures which, individually, is in excess
of $1,000,000 or, in the aggregate, are in excess of $5,000,000; provided,
that none of the foregoing shall limit any capital expenditure required
pursuant to existing customer contracts;
(l) make any tax election or settle or compromise any income tax
liability material to the Company and its subsidiary taken as a whole;
(m) settle or compromise any pending or threatened suit, action or claim
which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on the
Company;
(n) commence any material software development project or terminate any
material software development project that is currently ongoing, in either
case, except pursuant to the terms of existing contracts with customers or
except as contemplated by the Company's project development budget previously
provided to Parent; or
(o) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(n) or any action which would make any
of the representations or warranties of the Company contained in this
Agreement untrue or incorrect.
SECTION 4.2. Conduct of Business of Parent. Except as contemplated by
this Agreement, during the period from the date hereof to the Effective Time,
Parent will, and will cause each of its subsidiaries to, conduct their
operations in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, with no less diligence and effort
than would be applied in the absence of this Agreement, seek to preserve
intact its current business organizations, keep available the service of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end that goodwill
and ongoing businesses shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, except as otherwise expressly
provided in this Agreement, prior to the Effective
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Time, neither Parent nor any of its subsidiaries will, without the prior
written consent of the Company:
(a) knowingly take any action that would result in a failure to maintain
the trading of the Parent Common Stock on the NYSE;
(b) declare, set aside or pay any dividend or other distribution in
respect of its capital stock, except for dividends payable in Parent Common
Stock or dividends by a subsidiary of Parent to Parent or another subsidiary
of Parent;
(c) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or the assets of, or by any other manner, any
business or any corporation, partnership or other business organization or
division thereof, or otherwise acquire or agree to acquire any assets of any
other entity (other than the purchase of assets from suppliers, clients or
vendors in the ordinary course of business and consistent with past practice),
which, in each case, would materially prevent or delay for more time than 30
days the consummation of the transactions contemplated by this Agreement;
(d) adopt or propose to adopt any amendments to its charter documents,
which would have an adverse impact on the consummation of the transactions
contemplated by this Agreement;
(e) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities (except for bank loans and commercial paper) or amend any of
the terms of any such securities or agreements outstanding on the date hereof
or make any public announcement thereof; provided, however, that (i) any
subsidiary may issue securities to Parent or any other subsidiary and (ii)
Parent may (A) issue securities or make a public announcement thereof having
an aggregate market value of up to $150 million or (B) grant stock options to
employees, officers or directors in the ordinary course of business consistent
with past practice and issue securities upon the exercise of employee, officer
or director stock options;
(f) acquire, sell, lease or dispose of any assets that are material to
Parent and its subsidiaries taken as a whole, other than (i) in the ordinary
course of business, (ii) in connection with outsourcing agreements entered
into with customers of Parent or its subsidiaries, (iii) pursuant to the terms
of existing agreements with affiliates or partners of the Company or (iv) in
transactions that are only among Parent and any of its subsidiaries; or
(g) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(f) or any action which would make any
of the representations or warranties of Parent contained in this Agreement
untrue or incorrect.
SECTION 4.3. Preparation of S-4 and the Proxy Statement. Parent and the
Company shall promptly prepare and file with the SEC the Proxy Statement, and
Parent shall prepare and file with the SEC the S-4, in which the Proxy
Statement will be included as a prospectus. Each of Parent and the Company
shall use its best efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing. Parent shall
also take any action (other than qualifying to do business in any jurisdiction
in which it is now not so qualified) required to be taken under any applicable
state securities laws in connection with the issuance of Parent Common Stock
in the
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Merger and upon the exercise of Company Stock Options, and the Company shall
furnish all information concerning the Company and the holders of Shares as
may be reasonably requested in connection with any such action.
SECTION 4.4. Other Potential Acquirers.
(a) The Company, its affiliates and their respective officers,
directors, employees, representatives and agents shall immediately cease any
existing discussions or negotiations, if any, with any parties conducted
heretofore with respect to any Third Party Acquisition (as defined below).
The Company may, directly or indirectly, furnish information and access, in
each case only in response to unsolicited requests therefor, to any person or
group pursuant to confidentiality agreements with terms no less favorable to
the Company than the Confidentiality Agreement dated January 10, 1996 between
the Company and Parent is with respect to Parent, and may participate in
discussions and negotiate with such entity or group concerning any Third Party
Acquisition, if (i) such entity or group has submitted a Superior Proposal (as
defined in paragraph (b) below) to the Company Board relating to any such
transaction and (ii) the Company Board by a majority vote determines in its
good faith judgment, after consultation with and based upon the advice of
Vinson & Elkins L.L.P. or other independent legal counsel, that it is required
to do so in order to comply with its fiduciary duties; provided, however, that
the Company shall not, in any event, be entitled to terminate this Agreement
as a result of the occurrence of the events described in clauses (i) and (ii)
of this sentence. The Company Board shall provide a copy of any such written
Superior Proposal and a summary of any such oral Superior Proposal to Parent
or Acquisition immediately after receipt thereof and thereafter keep Parent
and Acquisition promptly advised of any development with respect thereto.
Except as set forth above, neither the Company nor any of its affiliates
shall, nor shall the Company authorize or permit any of its or their
respective officers, directors, employees, representatives or agents to,
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any person or
group (other than Parent and Acquisition, any affiliate or associate of Parent
and Acquisition or any designees of Parent and Acquisition) concerning any
Third Party Acquisition; provided, however, that nothing herein shall prevent
the Company Board from taking, and disclosing to the Company's shareholders, a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to any tender offer.
(b) Except as set forth in this Section 4.4(b), the Company Board shall
not withdraw its recommendation of the transactions contemplated hereby or
approve or recommend, or cause the Company to enter into any agreement with
respect to, any Third Party Acquisition. Notwithstanding the foregoing, if
the Company Board by a majority vote determines in its good faith judgment,
after consultation with and based upon the advice of Vinson & Elkins L.L.P. or
other independent legal counsel, that it is required to do so in order to
comply with its fiduciary duties, the Company Board may withdraw its
recommendation of the transactions contemplated hereby or approve or recommend
a Superior Proposal, but in each case only (i) after providing reasonable
written notice to Parent (a "Notice of Superior Proposal") advising Parent
that the Company Board has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal and, (ii) if Parent does not, within
seven business days of Parent's receipt of the Notice of Superior Proposal,
make an offer which the Company Board by a majority vote determines in its
good faith judgment (based on the written advice of a financial adviser of
nationally recognized reputation) to be as favorable to the Company's
shareholders as such Superior Proposal; provided, however, that the Company
shall not be entitled to enter into any agreement with respect to a Superior
Proposal unless and until this Agreement is
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terminated by its terms pursuant to Section 6.1. 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 (which includes a "person" as such term is defined in Section
13(d)(3) of the Exchange Act) other than Parent, Acquisition or any affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of more than
30% of the total assets of the Company and its subsidiaries, taken as a whole;
(iii) the acquisition by a Third Party of 30% or more of the outstanding
Shares; (iv) the adoption by the Company of a plan of liquidation or the
declaration or payment of an extraordinary dividend; (v) the repurchase by the
Company or any of its subsidiaries of more than 20% of the outstanding Shares;
or (vi) the acquisition by the Company or any subsidiary, by merger, purchase
of stock or assets, joint venture or otherwise, of a direct or indirect
ownership interest or investment in any business whose annual revenues, net
income or assets is equal or greater than 40% of the annual revenues, net
income or assets of the Company and its subsidiaries taken as whole. For
purposes of this Agreement, a "Superior Proposal" means any bona fide proposal
to acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than 50% of the Shares then outstanding or all or
substantially all the assets of the Company and otherwise on terms which the
Company Board by a majority vote determines in its good faith judgment (based
on the written advice of a financial adviser of nationally recognized
reputation) to be more favorable to the Company's shareholders than the
Merger.
SECTION 4.5. Comfort Letters.
(a) The Company shall use all reasonable efforts to cause Ernst & Young
LLP to deliver a letter dated as of the date of the Proxy Statement and the S-
4, and addressed to itself and Parent and their respective Boards of
Directors, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for agreed upon procedures letters delivered
by independent public accountants in connection with registration statements
and proxy statements similar to the Proxy Statement and the S-4.
(b) Parent shall use all reasonable efforts to cause Deloitte & Touche
LLP to deliver a letter dated as of the date of the Proxy Statement and the S-
4 and addressed to itself and the Company and their respective Boards of
Directors, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for agreed upon procedures letters delivered
by independent accountants in connection with registration statements and
proxy statements similar to the Proxy Statement and the S-4.
SECTION 4.6. Meetings of Stockholders. Each of Parent and the Company
shall take all action necessary, in accordance with the NGCL and the DGCL,
respectively, and its respective certificate of incorporation and bylaws, to
duly call, give notice of, convene and hold a meeting of its stockholders as
promptly as practicable, in the case of the Company, to consider and vote upon
the adoption and approval of this Agreement and the transactions contemplated
hereby, and, in the case of Parent, to vote upon the issuance of Parent Common
Stock pursuant to the Merger and the Articles Amendment. The stockholder
votes required for the adoption and approval of the transactions contemplated
by this Agreement shall be the vote required by the DGCL and its charter and
bylaws, in the case of the Company, and the NGCL and Rule 312 of the NYSE, in
the case of Parent, and the stockholder vote required for the approval of the
Articles Amendment shall be the vote required by the NGCL and Parent's
Articles of Incorporation and Bylaws. The Company and Acquisition and Parent
will, through their respective Boards of Directors, recommend to their
respective shareholders approval of such matters; provided, however, that,
subject to the provisions of Section 6.3, the
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Company Board may withdraw its recommendation if (i) the Company receives a
Superior Proposal and, (ii) after complying with the provisions of Section
4.4(b), the Company Board by a majority vote determines in its good faith
judgment, after consultation with and based upon the advice of Vinson & Elkins
L.L.P. or other independent legal counsel, that it is required, in order to
comply with its fiduciary duties, to recommend the Superior Proposal; and
provided further, however, that the Company shall not, in any event, be
permitted to terminate this Agreement as a result of the occurrence of the
events described in clauses (i) and (ii) of this sentence. The Company and
Parent shall coordinate and cooperate with respect to the timing of such
meetings and shall use their best efforts to hold such meetings on the same
day and as soon as practicable after the date hereof.
SECTION 4.7. Stock Exchange Listing. Parent shall use all reasonable
efforts to cause the shares of Parent Common Stock to be issued in the Merger
and the shares of Parent Common Stock to be reserved for issuance upon
exercise of Company Stock Options to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Effective Time.
SECTION 4.8. Access to Information.
(a) Between the date hereof and the Effective Time, the Company will
give Parent and its authorized representatives, and Parent will give the
Company and its authorized representatives, reasonable access to all
employees, plants, offices, warehouses and other facilities and to all books
and records of itself and its subsidiaries, will permit the other party to
make such inspections as such party may reasonably require and will cause its
officers and those of its subsidiaries to furnish the other party with such
financial and operating data and other information with respect to the
business and properties of itself and its subsidiaries as the other party may
from time to time reasonably request.
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent, and Parent will furnish to the Company, within 25 business
days after the end of each calendar month (commencing with March 1996, and, in
the case of March 1996, within 90 days), an unaudited balance sheet of the
party furnishing such information as of the end of the such month and the
related statements of earnings, stockholders' equity (deficit) and, within 25
business days after the end of each calendar quarter (or, in the case of the
quarter ended March 31, within 90 days), cash flows for the quarter then
ended, each prepared in accordance with generally accepted accounting
principles in conformity with the practices consistently applied by such party
with respect to its monthly financial statements. All the foregoing shall be
in accordance with the books and records of the party furnishing such
information and shall fairly present its financial position (taking into
account the differences between the monthly and quarterly statements prepared
by such party in conformity with its past practices) as of the last day of the
period then ended.
(c) Each of the parties hereto will hold and will cause its consultants
and advisers to hold in confidence all documents and information furnished to
it in connection with the transactions contemplated by this Agreement pursuant
to the terms of (i) that certain Confidentiality Agreement entered into
between the Company and Parent dated January 10, 1996, (ii) that certain
Confidentiality Agreement entered into among the Company, Parent and HOGN
dated January 24, 1996, and (iii) that certain Confidentiality Agreement
entered into among the Company, Parent and HOGN dated February 20, 1996.
SECTION 4.9. Additional Agreements; Reasonable Efforts. Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use
all
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reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
(i) cooperating in the preparation and filing of the Proxy Statement and the
S-4, any filings that may be required under the HSR Act, and any amendments to
any thereof; (ii) obtaining consents of all third parties and Governmental
Entities necessary, proper or advisable for the consummation of the
transactions contemplated by this Agreement; (iii) contesting any legal
proceeding relating to the Merger and (iv) the execution of any additional
instruments necessary to consummate the transactions contemplated hereby.
Subject to the terms and conditions of this Agreement, Parent and Acquisition
agree to use all reasonable efforts to cause the Effective Time to occur as
soon as practicable after the shareholder votes with respect to the Merger.
In case at any time after the Effective Time any further action is necessary
to carry out the purposes of this Agreement, the proper officers and directors
of each party hereto shall take all such necessary action.
SECTION 4.10. Employee Benefits. Parent will provide the employees and
retirees of the Company and its subsidiaries for a period ending on the first
anniversary of the Effective Time with employee benefit plans (other than
stock option or other plans involving the potential issuance of securities of
the Company or Parent securities) which, in the aggregate, are not less
favorable than those currently provided by the Company and its subsidiaries,
as the case may be. Parent and the Company agree, and Parent will cause the
Surviving Corporation to agree, (i) that all obligations of the Company or any
subsidiary under any "change of control" or similar provisions relating to
employees contained in any existing contracts and all termination or severance
agreements with executive officers (subject to Section 1.11 hereof) will be
honored in accordance with their terms as of the date hereof and (ii) that the
ESPP of the Company will be amended to provide that the calendar semester for
employee participation under the ESPP ordinarily commencing on July 1, 1996
and ending on December 31, 1996 (the "July 1996 Semester") will, if the Merger
occurs, end on the Closing Date, and appropriate adjustments will be made to
the ESPP such that, immediately following the Effective Time, each of the
persons theretofore entitled to acquire Shares under the ESPP as of the end of
the July 1996 Semester will be entitled to acquire, on the same terms and
conditions as were applicable under the ESPP, the number of shares of Parent
Common Stock that such person would have been entitled to receive pursuant to
the Merger had such person acquired the Shares purchasable under the ESPP for
the July 1996 Semester immediately prior to the Effective Time.
Notwithstanding the foregoing, nothing contained herein shall be construed as
requiring Parent or the Surviving Corporation to continue any specific
employee benefit plans or to continue the employment of any specific person.
SECTION 4.11. Public Announcements. Parent, Acquisition and the
Company, as the case may be, will consult with one another before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, including, without limitation,
the Merger, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law or by obligations pursuant to any listing agreement with the NYSE as
determined by Parent, Acquisition or the Company, as the case may be.
SECTION 4.12. Indemnification. After the Effective Time, the Surviving
Corporation shall indemnify and hold harmless (and shall also advance expenses
as incurred to the fullest extent permitted under applicable law to) each
person who is now, or has been prior to the date hereof or who becomes prior
to the Effective Time, an officer
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or director of the Company or any of the Company's subsidiaries (the
"Indemnified Persons") against (i) all losses, claims, damages, costs,
expenses (including without limitation counsel fees and expenses), settlement
payments or liabilities arising out of or in connection with any claim,
demand, action, suit, proceeding or investigation based in whole or in part
on, or arising in whole or in part out of, the fact that such person is or was
an officer or director of the Company or any of the Company subsidiaries,
whether or not pertaining to any matter existing or occurring at or prior to
the Effective Time and whether or not asserted or claimed prior to or at or
after the Effective Time ("Indemnified Liabilities") and (ii) all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out
of, or pertaining to this Agreement, or the transactions contemplated hereby,
in each case to the fullest extent required or permitted under applicable law
or under the Surviving Corporation's certificate of incorporation or bylaws.
The parties hereto intend, to the extent not prohibited by applicable law,
that the indemnification provided for in this Section 4.12 shall apply without
limitation to negligent acts or omissions by an Indemnified Person. Parent
hereby guarantees the payment and performance of the Surviving Corporation's
obligations in this Section 4.12. Each Indemnified Person is intended to be a
third party beneficiary of this Section 4.12 and may specifically enforce its
terms. This Section 4.12 shall not limit or otherwise adversely affect any
rights any Indemnified Person may have under any agreement with the Company or
under the Company's Certificate of Incorporation or Bylaws.
SECTION 4.13. Notification of Certain Matters. The Company shall give
prompt notice to Parent and Acquisition, and Parent and Acquisition shall give
prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Company, Parent or Acquisition, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 4.13 shall not cure such
breach or non-compliance or limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 4.14. Affiliates; Pooling; Tax Free Reorganization.
(a) The Company shall use all reasonable efforts to obtain from any
Company Affiliate who has not previously executed such letter agreement and
from any person who may be deemed to have become a Company Affiliate after the
date of this Agreement and on or prior to the Effective Time, a letter
agreement substantially in the form of Exhibit A hereto as soon as
practicable.
(b) Parent shall use all reasonable efforts to obtain from any Parent
Affiliate who has not previously executed such letter agreement and from any
person who may be deemed to have become a Parent Affiliate after the date of
this Agreement and on or prior to the Effective Time, a letter agreement
substantially in the form of Exhibit B hereto as soon as practicable.
(c) Parent shall not be required to maintain the effectiveness of the S-
4 for the purpose of resale of shares of Parent Common Stock by stockholders
of the Company who may be affiliates of the Company or Parent pursuant to Rule
145 under the Securities Act. However, Parent shall assume, by written
instrument delivered to DST on or before the Effective Time (and subject to
the conditions set forth in such written instrument), the Company's
registration obligations under Section 11 of the Agreement dated September 30,
1993, among the Company, Continuum Acquisition, Inc., and
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Vantage Computer Systems, Inc. with respect to all shares of Parent Common
Stock issued to DST in the Merger.
(d) Each party hereto shall use all reasonable efforts to cause the
Merger to be treated for financial accounting purposes as a Pooling
Transaction, and shall not take, and shall use all reasonable efforts to
prevent any affiliate of such party from taking, any actions which could
prevent the Merger from being treated for financial accounting purposes as a
Pooling Transaction.
(e) The Company and Parent and Acquisition shall execute and deliver to
Vinson & Elkins L.L.P., counsel to the Company, certificates substantially in
the form attached hereto as Exhibits C-1 and C-2, respectively, at such time
or times as reasonably requested by such law firm in connection with its
delivery of an opinion with respect to the transactions contemplated hereby,
and the Company and Parent shall each provide a copy thereof to the other
parties hereto. Prior to the Effective Time, none of the Company, Parent or
Acquisition shall take or cause to be taken any action which would cause to be
untrue (or fail to take or cause not to be taken any action which would cause
to be untrue) any of the representations in Exhibits C-1 or C-2.
SECTION 4.15. Stockholder's Agreement. Parent has received an agreement
from DST (the "Stockholder's Agreement") whereby DST has agreed to vote all
its Shares in favor of the Merger.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) this Agreement shall have been approved and adopted by the requisite
vote of the shareholders of the Company, and the Articles Amendment and the
issuance of Parent Common Stock pursuant to the Merger shall have been
approved by the requisite vote of the shareholders of Parent;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired, and any other governmental or regulatory notices
or approvals required with respect to the transactions contemplated hereby
shall have been either filed or received;
(d) the S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop
order, and Parent shall have received all state securities laws or "blue sky"
permits and authorizations necessary to issue shares of Parent Common Stock in
exchange for Shares in the Merger; and
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(e) (i) the Company shall have received confirmation in writing from
Ernst & Young LLP that in accordance with generally accepted accounting
principles and applicable published rules and regulations of the SEC, the
Company is eligible to be a party to a merger accounted for as a Pooling
Transaction and that Ernst & Young LLP is not aware of any matters that
prohibit the use of pooling of interests accounting in connection with the
Merger, and such confirmation shall not have been withdrawn or modified in any
material respect, and (ii) Parent shall have received a written opinion from
its certified public accountants stating that the Merger will be accounted for
under generally accepted accounting principles as a Pooling Transaction and
such opinion shall not have been withdrawn or modified in any material
respect.
SECTION 5.2. Conditions to the Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction
at or prior to the Effective Time of the following conditions:
(a) the representations of Parent and Acquisition contained in this
Agreement or in any other document delivered pursuant hereto shall be true and
correct (except to the extent that the breach thereof would not have a
Material Adverse Effect on Parent) at and as of the Effective Time with the
same effect as if made at and as of the Effective Time (except to the extent
such representations specifically related to an earlier date, in which case
such representations shall be true and correct as of such earlier date), and
at the Closing Parent and Acquisition shall have delivered to the Company a
certificate to that effect;
(b) each of the covenants and obligations of Parent and Acquisition to
be performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and at the Closing Parent and Acquisition shall have
delivered to the Company a certificate to that effect;
(c) the shares of Parent Common Stock issuable to the Company
shareholders pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have been authorized
for listing on the NYSE upon official notice of issuance;
(d) the Company shall have received the opinion of Vinson & Elkins
L.L.P., counsel to the Company, to the effect that (i) the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code; (ii) each of Parent, Acquisition and the
Company will be a party to the reorganization within the meaning of Section
368(b) of the Code; and (iii) no gain or loss for Federal income tax purposes
will be recognized by a shareholder of the Company as a result of the Merger
with respect to Shares converted solely into shares of Parent Common Stock,
and such opinion shall not have been withdrawn or modified in any material
respect;
(e) Parent shall have obtained the consent or approval of each person
whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease or other agreement or instrument, except those for
which failure to obtain such consents and approvals would not, in the
reasonable opinion of the Company, individually or in the aggregate, have a
Material Adverse Effect on Parent; and
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(f) there shall have been no events, changes or effects with respect to
Parent or its subsidiaries having or which could reasonably be expected to
have a Material Adverse Effect on Parent.
SECTION 5.3. Conditions to the Obligations of Parent and Acquisition.
The respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations of the Company contained in this Agreement or in
any other document delivered pursuant hereto shall be true and correct (except
to the extent that the breach thereof would not have a Material Adverse Effect
on the Company) at and as of the Effective Time with the same effect as if
made at and as of the Effective Time (except to the extent such
representations specifically related to an earlier date, in which case such
representations shall be true and correct as of such earlier date), and at the
Closing the Company shall have delivered to Parent and Acquisition a
certificate to that effect;
(b) each of the covenants and obligations of the Company to be performed
at or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the Effective
Time and at the Closing the Company shall have delivered to Parent and
Acquisition a certificate to that effect;
(c) Parent shall have received from each affiliate of the Company
referred to in Sections 2.19 and 4.14 an executed copy of the letter attached
hereto as Exhibit A and shall have received from each affiliate of Parent
referred to in Sections 3.19 and 4.14 an executed copy of the letter attached
hereto as Exhibit B;
(d) the Company shall have obtained the consent or approval of each
person whose consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to any
obligation, right or interest of the Company or any subsidiary of the Company
under any loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except for those for which failure to obtain such
consents and approvals would not, in the reasonable opinion of Parent,
individually or in the aggregate, have a Material Adverse Effect on the
Company; and
(e) there shall have been no events, changes or effects with respect to
the Company or its subsidiaries having or which could reasonably be expected
to have a Material Adverse Effect on the Company.
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
SECTION 6.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval and adoption of this Agreement by the Company's
shareholders:
(a) by mutual written consent of Parent, Acquisition and the Company;
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(b) by Parent and Acquisition or the Company if (i) any court of
competent jurisdiction in the United States or other United States
Governmental Entity 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 is or shall have become
nonappealable or (ii) the Merger has not been consummated by December 31,
1996; provided that no party may terminate this Agreement pursuant to this
clause (ii) if such party's failure to fulfill any of its obligations under
this Agreement shall have been the reason that the Effective Time shall not
have occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition set forth in
this Agreement, or if any representation or warranty of Parent or Acquisition
shall have become untrue, in either case such that the conditions set forth in
Section 5.2(a) would be incapable of being satisfied by December 31, 1996 (or
as otherwise extended), (ii) there shall have been a breach by Parent or
Acquisition of any of their respective covenants or agreements hereunder
having a Material Adverse Effect on Parent or materially adversely affecting
(or materially delaying) the consummation of the Merger, and Parent or
Acquisition, as the case may be, has not cured such breach within twenty
business days after notice by the Company thereof, provided that the Company
has not breached any of its obligations hereunder, (iii) Parent shall have
convened a meeting of its shareholders to vote upon the Articles Amendment and
the issuance of Parent Common Stock in the Merger and shall have failed to
obtain the requisite vote of its shareholders for either such proposal or (iv)
the Company shall have convened a meeting of its shareholders to vote upon the
Merger and shall have failed to obtain the requisite vote of its shareholders;
or
(d) by Parent and Acquisition if (i) there shall have been a breach of
any representation or warranty on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, in either case such that the conditions set forth in Section
5.3(a) would be incapable of being satisfied by December 31, 1996 (or as
otherwise extended), (ii) there shall have been a breach by the Company of its
covenants or agreements hereunder having a Material Adverse Effect on the
Company or materially adversely affecting (or materially delaying) the
consummation of the Merger, and the Company has not cured such breach within
twenty business days after notice by Parent or Acquisition thereof, provided
that neither Parent nor Acquisition has breached any of their respective
obligations hereunder, (iii) the Company Board shall have recommended to the
Company's shareholders a Superior Proposal, (iv) the Company Board shall have
withdrawn, modified or changed its approval or recommendation of this
Agreement or the Merger or shall have failed to call, give notice of, convene
or hold a shareholders' meeting to vote upon the Merger, or shall have adopted
any resolution to effect any of the foregoing, (v) Parent shall have convened
a meeting of its shareholders to vote upon the Articles Amendment and the
issuance of Parent Common Stock in the Merger and shall have failed to obtain
the requisite vote of its shareholders for either such proposal or (vi) the
Company shall have convened a meeting of its shareholders to vote upon the
Merger and shall have failed to obtain the requisite vote of its shareholders.
SECTION 6.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provisions of this Section 6.2 and Sections 4.8(c) and 6.3 hereof.
Nothing contained in this Section 6.2 shall relieve any party from liability
for any breach of this Agreement.
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SECTION 6.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated pursuant to:
(i) Sections 6.1(d)(iii) or (iv);
(ii) Sections 6.1(d)(i) or (ii) and, within twelve months
thereafter, the Company enters into an agreement with respect to a Third Party
Acquisition, or a Third Party Acquisition occurs, involving any party (or any
affiliate thereof) (x) with whom the Company (or its agents) had negotiations
with a view to a Third Party Acquisition, (y) to whom the Company (or its
agents) furnished information with a view to a Third Party Acquisition or (z)
who had submitted a proposal or expressed an interest in a Third Party
Acquisition, in the case of each of clauses (x), (y) and (z) after the date
hereof and prior to such termination; or
(iii) Sections 6.1(c)(iv) or 6.1(d)(vi) and, at the time of the
Company shareholders' meeting at which the Company failed to obtain the
requisite vote, as applicable, there shall be outstanding an offer by a Third
Party to consummate, or there shall have been under consideration by the
Company or there shall have been publicly announced a plan or proposal with
respect to, a Third Party Acquisition;
Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent
and Acquisition for such damages, the Company shall pay to Parent the amount
of $45 million as liquidated damages immediately upon such a termination. It
is specifically agreed that the amount to be paid pursuant to this Section
6.3(a) represents liquidated damages and not a penalty.
(b) Upon the termination of this Agreement pursuant to Sections
6.1(c)(iv) or 6.1(d)(i), (ii), (iii), (iv) or (vi) (other than a termination
requiring the Company to pay liquidated damages as contemplated by Section
6.3(a) hereof), the Company shall reimburse Parent, Acquisition and their
affiliates (not later than ten business days after submission of statements
therefor) for all actual documented out-of-pocket fees and expenses, not to
exceed $2,000,000, actually and reasonably incurred by any of them or on their
behalf in connection with the Merger and the consummation of all transactions
contemplated by this Agreement (including, without limitation, fees payable to
investment bankers, counsel to any of the foregoing, and accountants).
(c) Upon the termination of this Agreement pursuant to Sections
6.1(c)(i), (ii) or (iii) or Section 6.1(d)(v), Parent shall reimburse the
Company and its affiliates (not later than ten business days after submission
of statements therefor) for all actual documented out-of-pocket fees and
expenses, not to exceed $2,000,000, actually and reasonably incurred by any of
them or on their behalf in connection with the Merger and the consummation of
all transactions contemplated by this Agreement (including, without
limitation, fees payable to investment bankers, counsel to any of the
foregoing, and accountants).
(d) Except as specifically provided in this Section 6.3, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
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SECTION 6.4. Amendment. This Agreement may be amended by action taken
by the Company, Parent and Acquisition at any time before or after approval of
the Merger by the shareholders of the Company (if required by applicable law)
but, after any such approval, no amendment shall be made which requires the
approval of such shareholders under applicable law without such approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of the parties hereto.
SECTION 6.5. Extension; Waiver. At any time prior to the Effective
Time, each party hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other party, (ii) waive any inaccuracies
in the representations and warranties of the other party contained herein or
in any document, certificate or writing delivered pursuant hereto or (iii)
waive compliance by the other party with any of the agreements or conditions
contained herein. Any agreement on the part of any party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall not
limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
SECTION 7.2. Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) shall not be assigned by operation of law or
otherwise; provided, however, that Acquisition may assign any or all of its
rights and obligations under this Agreement to any subsidiary of Parent, but
no such assignment shall relieve Acquisition of its obligations hereunder if
such assignee does not perform such obligations.
SECTION 7.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby,
and to such end, the provisions of this Agreement are agreed to be severable.
SECTION 7.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested), to each other party as follows:
if to Parent or Acquisition: Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, California 90245
Attention: Hayward D. Fisk, Esq.
and W. Brinson Weeks
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with a copy to: Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071
Attention: Ronald S. Beard, Esq.
if to the Company to: The Continuum Company, Inc.
9500 Arboretum Boulevard
Austin, Texas 78759-6399
Telecopy: (512) 338-7730
Attention: Jack Dennison, Esq.
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Telecopy: (713) 758-2346
Attention: C. Michael Harrington, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 7.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
SECTION 7.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
SECTION 7.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 1.11, 4.10, 4.12 and
7.2, nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 7.8. Certain Definitions. For the purposes of this Agreement,
the term:
(a) "affiliate" means (except as otherwise provided in Sections 2.19,
3.19 and 4.14) a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
the first mentioned person;
(b) "business day" means any day other than a day on which the NYSE is
closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "knowledge" or "known" means, with respect to any matter in
question, if an executive officer of the Company or Parent, as the case may
be, has actual knowledge of such matter;
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(e) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(f) "subsidiary" or "subsidiaries" of the Company, Parent, the Surviving
Corporation or any other person, means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other
legal entity of which the Company, Parent, the Surviving Corporation or any
such other person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, 50% or more of the
capital stock, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
SECTION 7.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company or Parent or any officer,
director, employee, agent, representative or investor of any party hereto.
SECTION 7.10. Specific Performance. The parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that, if a party
hereto is entitled to receive any payment or reimbursement of expenses
pursuant to Sections 6.3(a), (b) or (c), it shall not be entitled to specific
performance to compel the consummation of the Merger.
SECTION 7.11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
COMPUTER SCIENCES CORPORATION
By: /s/Van B. Honeycutt
------------------------
Name: Van B. Honeycutt
Title: President and Chief Executive Officer
THE CONTINUUM COMPANY, INC.
By: /s/W. Michael Long
------------------------
Name: W. Michael Long
Title: President and Chief Executive Officer
CONTINENTAL ACQUISITION, INC.
By: /s/Van B. Honeycutt
------------------------
Name: Van B. Honeycutt
Title: President and Chief Executive Officer
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EXHIBIT A
April __, 1996
Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, California 90245
Dear Sirs:
Reference is made to the provisions of the Agreement and Plan of Merger,
dated as of April 28, 1996 (together with any amendments thereto, the "Merger
Agreement"), among The Continuum Company, a Delaware corporation (the
"Company"), Computer Sciences Corporation, a Nevada corporation ("Parent"),
and Continental Acquisition, Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), pursuant to which Merger Sub will be
merged with and into the Company, with the Company continuing as the surviving
corporation (the "Merger"). This letter constitutes the undertakings of the
undersigned contemplated by the Merger Agreement.
I understand that I may be deemed to be an "affiliate" of the Company, as
such term is defined for purposes of Rule 145 ("Rule 145") promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), and that the
transferability of the shares of common stock, par value $1.00 per share, of
Parent (the "Parent Shares") which I will receive upon the consummation of the
Merger in exchange for my shares of common stock of the Company (the "Company
Shares"), or upon exercise of certain options I hold to purchase shares of
common stock of the Company is restricted. Nothing herein shall be construed
as an admission that I am an affiliate.
I hereby represent, warrant and covenant to Parent that:
(a) I will not transfer, sell or otherwise dispose of any of the Parent
Shares except (i) pursuant to an effective registration statement under the
Securities Act, or (ii) as permitted by, and in accordance with, Rule 145, if
applicable, or another applicable exemption under the Securities Act; and
(b) I will not (i) transfer, sell or otherwise dispose of any Company
Shares prior to the Effective Time (as defined in the Merger Agreement) or
(ii) sell or otherwise reduce my risk (within the meaning of the Securities
and Exchange Commission's Financial Reporting Release No. 1., "Codification of
Financial Reporting Policies," Section 201.01 [47 F.R. 21028] (May 17, 1982)
with respect to any Parent Shares until after such time (the "Delivery Time")
as financial results reflecting at least 30 days of post-merger combined
operations of Parent and the Company have been published by Parent, except as
permitted by Staff Accounting Bulletin No. 76 issued by the Securities and
Exchange Commission; and
(c) I shall execute and deliver to Vinson & Elkins, L.L.P., counsel to
the Company, and to the Company a certificate in such form as and at such time
or times as may be reasonably requested by such law firm or the Company, as
the case may be, in connection with such law firm's delivery of a tax opinion
with respect to the transactions contemplated by the Merger Agreement and
shall provide a copy thereof to Parent.
<PAGE>
I have not taken and will not take or agree to take any action that would
prevent the Merger from qualifying, or being accounted for, as a pooling-of-
interests.
I further understand that, in order to make more effective the provisions
of the foregoing paragraph, Parent may delay delivery to me of certificates in
respect of the Parent Shares until the Delivery Time.
I hereby acknowledge that, except as otherwise provided in the Merger
Agreement, Parent is under no obligation to register the sale, transfer,
pledge or other disposition of the Parent Shares or to take any other action
necessary for the purpose of making an exemption from registration available.
I understand that Parent will issue stop transfer instructions to its
transfer agents with respect to the Parent Shares and that a restrictive
legend will be placed on the certificates delivered to me evidencing the
Parent Shares in substantially the following form:
"This certificate and the shares represented hereby have been issued
pursuant to a transaction governed by Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), and
may not be sold or otherwise disposed of unless registered under the
Securities Act pursuant to a Registration Statement in effect at the time
or unless the proposed sale or disposition can be made in compliance with
Rule 145 or without registration in reliance on another exemption
therefrom. Reference is made to that certain letter agreement, dated
April 28, 1996, between the Holder and the Issuer, a copy of which is on
file in the principal office of the Issuer which contains further
restrictions on the transferability of this certificate and the shares
represented hereby."
The term Parent Shares as used in this letter shall mean and include not
only the common stock of Parent as presently constituted, but also any other
stock which may be issued in exchange for, in lieu of, or in addition to, all
or any part of such Parent Shares.
I hereby acknowledge that the receipt of this letter by Parent is an
inducement and a condition to Parent's obligation to consummate the Merger
under the Merger Agreement and that I understand the requirements of this
letter and the limitations imposed upon the transfer, sale or other
disposition of the Company Shares and the Parent Shares.
Very truly yours,
[AFFILIATE]
2
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EXHIBIT B
April __, 1996
Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, California 90245
Dear Sirs:
Reference is made to the provisions of the Agreement and Plan of Merger,
dated as of April 28, 1996 (together with any amendments thereto, the "Merger
Agreement"), among The Continuum Company, Inc., a Delaware corporation (the
"Company"), Computer Sciences Corporation, Inc., a Nevada corporation
("Parent"), and Continental Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), pursuant to which Merger Sub
will be merged with and into the Company, with the Company continuing as the
surviving corporation (the "Merger"). This letter constitutes the
undertakings of the undersigned contemplated by the Merger Agreement.
I hereby represent, warrant and covenant to the Parent that I will not
sell or otherwise reduce my risk (within the meaning of the Securities and
Exchange Commission's Financial Reporting Release No. 1., "Codification of
Financial Reporting Policies," Section 201.01 [47 F.R. 21028] (May 17, 1982)
with respect to any shares of common stock, par value $1.00 per share, of
Parent owned by me (the "Parent Shares") until after such time as financial
results reflecting at least 30 days of post-Merger combined operations of
Parent and the Company have been published by Parent, except as permitted by
Staff Accounting Bulletin No. 76 issued by the Securities and Exchange
Commission.
I have not taken and will not take or agree to take any action that would
prevent the Merger from qualifying, or being accounted for, as a pooling-of-
interests.
I understand that Parent shall not be bound by any attempted sale of any
Parent Shares, and will issue stop transfer instructions to its transfer agent
with respect to the Parent Shares.
The term Parent Shares as used in this letter shall mean and include not
only the common stock of Parent as presently constituted, but also any other
stock which may be issued in exchange for, in lieu of, or in addition to, all
or any part of such Parent Shares.
<PAGE>
I hereby acknowledge that the receipt of this letter by Parent is an
inducement and a condition to Parent's obligation to consummate the Merger
under the Merger Agreement and that I understand the requirements of this
letter and the limitations imposed upon the transfer, sale or other
disposition of Parent Shares.
Very truly yours,
[Affiliate]
2
<PAGE>
EXHIBIT C-1
[FORM OF OFFICER'S CERTIFICATE REGARDING CERTAIN TAX MATTERS TO BE
EXECUTED BY THE COMPANY]
__________________, 1996
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
Gentlemen:
This letter is being delivered to you pursuant to Section 4.14 of the
Agreement and Plan of Merger (the "Agreement"), dated as of April 28, 1996,
among The Continuum Company, Inc., a Delaware corporation (the "Company"),
Computer Sciences Corporation, a Nevada corporation ("Parent"), and
Continental Acquisition, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Acquisition Sub"). Unless otherwise indicated,
capitalized terms not defined herein have the meaning set forth in the
Agreement.
After due inquiry and investigation regarding the meaning of and factual
support for the following representations, the undersigned hereby certifies
and represents that, assuming the Merger were to occur on the date hereof, the
following facts are true:
1. Pursuant to the Merger, Acquisition Sub will merge with and into the
Company, and the Company will acquire all of the assets and liabilities of
Acquisition Sub. Specifically, the assets transferred to the Company pursuant
to the Merger will represent at least ninety percent (90%) of the fair market
value of the net assets and at least seventy percent (70%) of the fair market
value of the gross assets held by Acquisition Sub immediately prior to the
Merger. In addition, at least ninety percent (90%) of the fair market value
of the net assets and at least seventy percent (70%) of the fair market value
of the gross assets held by the Company immediately prior to the Merger will
continue to be held by the Company immediately after the Merger. For the
purpose of determining the percentage of the Company's and Acquisition Sub's
net and gross assets held by the Company immediately following the Merger, the
following assets will be treated as property held by Acquisition Sub or the
Company, as the case may be, immediately prior but not subsequent to the
Merger: (i) assets used by the Company or Acquisition Sub (other than assets
transferred from Parent to Acquisition Sub for such purpose) to pay expenses
or liabilities incurred in connection with the Merger and (ii) assets used to
make distributions, redemptions or other payments in respect of stock of the
Company (except for regular, normal distributions) or in respect of rights to
acquire such stock (including payments treated as such for tax purposes) that
are made in contemplation of the Merger or that are related thereto;
2. Other than in the ordinary course of business or pursuant to its
obligations under the Agreement, the Company has not disposed of any of its
assets (including any distribution of assets with respect to, or in redemption
of, stock) since commencement of negotiations with Parent regarding the
Merger;
3. The Company's principal reasons for participating in the Merger are
bona fide business purposes unrelated to taxes;
<PAGE>
4. The Company has no outstanding warrants, options, convertible
securities or any other type of right to acquire the Company stock (or any
other equity interest in the Company) or to vote (or restrict or otherwise
control the vote of) shares of stock of the Company which, if exercised, would
affect Parent's acquisition and retention of Control of the Company;
5. In the Merger, shares of stock of the Company representing "Control"
of the Company will be exchanged solely for shares of voting stock of Parent.
For purposes of this paragraph, shares of the stock of Company exchanged in
the Merger for cash and other property (including, without limitation, cash
paid to shareholders of the Company in lieu of fractional shares of Parent
voting stock) will be treated as shares of stock of the Company outstanding on
the date of the Merger but not exchanged for shares of voting stock of Parent.
As used in this letter, "Control" shall consist of direct ownership of shares
of stock possessing at least eighty percent (80%) of the total combined voting
power of shares of all classes of stock entitled to vote and at least eighty
percent (80%) of the total number of shares of all other classes of stock of
the corporation. For purposes of determining Control, a person shall not be
considered to own shares of voting stock if rights to vote such shares (or to
restrict or otherwise control the voting of such shares) are held by a third
party (including a voting trust) other than an agent of such person;
6. The payment of cash in lieu of fractional shares of Parent stock is
solely for the purpose of avoiding the expense and inconvenience to Parent of
issuing fractional shares and does not represent separately bargained for
consideration. The total cash consideration that will be paid in the Merger
to the Company shareholders in lieu of fractional shares of Parent stock will
not exceed one (1) percent of the total consideration that will be issued in
the Merger to the Company shareholders in exchange for their Shares;
7. The Company has no plan or intention to issue additional shares of
stock after the Merger, or take any other action, that would result in Parent
losing Control of the Company;
8. The Company has no plan or intention to sell or otherwise dispose of
any of its assets or of any of the assets acquired from Acquisition Sub in the
Merger except for dispositions made in the ordinary course of business or
payment of expenses incurred by the Company pursuant to the Merger and except
for transfers described in both Section 368(a)(2)(C) of the Code and Treasury
Regulation Section 1.368-2(j)(4);
9. Following the Merger, the Company will continue its historic business
or use a significant portion of its historic business assets in a business;
10. In the Merger, Acquisition Sub will have no liabilities assumed by
the Company and will not transfer to the Company any assets subject to
liabilities, except to the extent incurred in connection with the transactions
contemplated by the Agreement;
11. The fair market value of the Company's assets will, at the Effective
Time of the Merger, exceed the aggregate liabilities of the Company plus the
amount of liabilities, if any, to which such assets are subject;
12. The Company is not an "investment company" within the meaning of
Sections 368(a)(2)(F)(iii) and (iv) of the Code;
13. The Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code;
2
<PAGE>
14. There is no plan or intention ("Plan) on the part of the shareholders
of the Company who own five percent or more of the Company stock and, after
due inquiry with its officers and directors, the Company has no knowledge of,
and believes that there does not exist, any Plan on the part of the remaining
shareholders of the Company to engage in a sale, exchange, transfer,
distribution (including, without limitation, a distribution by a corporation
to its stockholders), pledge, disposition or any other transaction which
results in a reduction in the risk of ownership or a direct or indirect
disposition (a "Sale") of shares of Parent stock received in the Merger that
would reduce ownership by shareholders of the Company of Parent stock to a
number of shares having a value as of the effective time of the Merger of less
than fifty percent (50%) of the aggregate fair market value, immediately prior
to the Merger, of all outstanding shares of the Company stock. For purposes
of this paragraph, shares of the Company stock (i) with respect to which a
shareholder of the Company receives consideration in the Merger other than
shares of Parent stock (including, without limitation, cash received in lieu
of fractional shares of Parent stock) and/or (ii) with respect to which a Sale
occurs prior to and in contemplation of the Merger, shall be considered
outstanding shares of stock of the Company exchanged for shares of Parent
stock in the Merger and then disposed of pursuant to a Plan;
15. The fair market value of the shares of Parent stock received by each
shareholder of the Company will be approximately equal to the fair market
value of the shares of stock of the Company surrendered in exchange therefor
and the aggregate consideration received by shareholders of the Company in
exchange for their shares of stock of the Company will be approximately equal
to the fair market value of all of the outstanding shares of stock of the
Company immediately prior to the Merger;
16. Acquisition Sub, Parent, the Company and the shareholders of the
Company will each pay separately its or their own expenses relating to the
Merger;
17. There is no intercorporate indebtedness existing between Parent and
the Company or between Acquisition Sub and the Company that was issued,
acquired, or will be settled at a discount as a result of the Merger;
18. The terms of the Agreement are the product of arm's length
negotiations;
19. None of the compensation received by any shareholder-employees of the
Company will be separate consideration for, or allocable to, any of their
shares of stock of the Company; none of the shares of Parent stock received by
any shareholder-employees of the Company will be separate consideration for,
or allocable to, any employment agreement or any covenants not to compete; and
the compensation paid to any shareholder-employees of the Company will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services;
20. To the best knowledge of the Company, during the past five (5) years,
none of the outstanding shares of capital stock of the Company, including the
right to acquire or vote any such shares, have directly or indirectly been
owned by Parent.;
21. Factual statements contained in the S-4 with respect to the Company
and its subsidiaries are true, correct and complete in all material respects;
22. The Company is authorized to make all of the representations set
forth herein; and
23. The Agreement represents the full and complete agreement among
Parent, Acquisition Sub and the Company regarding the Merger, and there are no
other written or oral agreements regarding the Merger.
3
<PAGE>
It is understood that (i) your opinions will be based on the
representations set forth herein and on the statements contained in the
Agreement (including all schedules and exhibits thereto) and documents related
thereto, and (ii) your opinions will be subject to certain limitations and
qualifications including that they may not be relied upon if any such
representations are not accurate in all material respects.
Notwithstanding anything herein to the contrary, the undersigned makes no
representations regarding any actions or conduct of the Company pursuant to
Parent's exercise of control over the Company after the Merger. It is
understood that your opinions will not address any tax consequence of the
Merger or any action taken in connection therewith except as expressly set
forth in such opinions.
Very truly yours,
THE CONTINUUM COMPANY, INC.
a Delaware corporation
By:_________________________
Title:______________________
4
<PAGE>
EXHIBIT C-2
[FORM OF OFFICER'S CERTIFICATE REGARDING CERTAIN TAX MATTERS
TO BE EXECUTED BY PARENT AND ACQUISITION SUB]
__________________, 1996
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
Gentlemen:
This letter is being delivered to you pursuant to Section 4.14 of the
Agreement and Plan of Merger (the "Agreement"), dated as of April 28, 1996,
among The Continuum Company, Inc., a Delaware corporation (the "Company"),
Computer Sciences Corporation, a Nevada corporation ("Parent"), and
Continental Acquisition, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Acquisition Sub"). Unless otherwise indicated,
capitalized terms not defined herein have the meanings set forth in the
Agreement.
After due inquiry and investigation regarding the meaning of and factual
support for the following representations, the undersigned hereby certify and
represent that, assuming the Merger were to occur on the date hereof, the
following facts are true:
1. Pursuant to the Merger, Acquisition Sub will merge with and into the
Company, and the Company will acquire all of the assets and liabilities of
Acquisition Sub. Specifically, the assets transferred to the Company pursuant
to the Merger will represent at least ninety percent (90%) of the fair market
value of the net assets and at least seventy percent (70%) of the fair market
value of the gross assets held by Acquisition Sub immediately prior to the
Merger. In addition, at least ninety percent (90%) of the fair market value
of the net assets and at least seventy percent (70%) of the fair market value
of the gross assets held by the Company immediately prior to the Merger will
continue to be held by the Company immediately after the Merger. For the
purpose of determining the percentage of the Company's and Acquisition Sub's
net and gross assets held by the Company immediately following the Merger, the
following assets will be treated as property held by Acquisition Sub or the
Company, as the case may be, immediately prior but not subsequent to the
Merger: (i) assets used by the Company or Acquisition Sub (other than assets
transferred from Parent to Acquisition Sub for such purpose) to pay expenses
or liabilities incurred in connection with the Merger and (ii) assets used to
make distributions, redemptions or other payments in respect of stock of the
Company (except for regular, normal distributions) or in respect of rights to
acquire such stock (including payments treated as such for tax purposes) that
are made in contemplation of the Merger or that are related thereto;
2. Acquisition Sub was formed solely for the purpose of consummating the
transactions contemplated by the Agreement and at no time will Acquisition Sub
conduct any business activities or other operations, or dispose of any of its
assets, other than pursuant to its obligations under the Agreement;
<PAGE>
3. Parent's principal reasons for participating in the Merger are bona
fide business purposes not related to taxes;
4. Prior to the Merger, Parent will be in "Control" of Acquisition Sub.
As used in this letter, "Control" shall consist of direct ownership of shares
of stock possessing at least eighty percent (80%) of the total combined voting
power of all classes of stock entitled to vote and at least eighty percent
(80%) of the total number of shares of all other classes of stock of the
corporation. For purposes of determining Control, a person shall not be
considered to own shares of voting stock if rights to vote such shares (or to
restrict or otherwise control the voting of such shares) are held by a third
party (including a voting trust) other than an agent of such person;
5. In the Merger, shares of stock of the Company representing Control of
the Company will be exchanged solely for shares of voting stock of Parent.
For purposes of this paragraph, shares of stock of the Company exchanged in
the Merger for cash and other property (including, without limitation, cash
paid to shareholders of the Company in lieu of fractional shares of Parent
voting stock) will be treated as shares of stock of the Company outstanding on
the date of the Merger but not exchanged for shares of voting stock of Parent;
6. The payment of cash in lieu of fractional shares of Parent stock is
solely for the purpose of avoiding the expense and inconvenience to Parent of
issuing fractional shares and does not represent separately bargained for
consideration. The total cash consideration that will be paid in the Merger
to the Company shareholders in lieu of fractional shares of Parent stock will
not exceed one (1) percent of the total consideration that will be issued in
the Merger to the Company shareholders in exchange for their Shares;
7. Parent has no plan or intention to cause the Company to issue
additional shares of stock after the Merger, or take any other action, that
would result in Parent losing Control of the Company;
8. Parent has no plan or intention to reacquire any of its stock issued
pursuant to the Merger;
9. Parent has no plan or intention to liquidate the Company; to merge
the company with or into another corporation, including Parent or its
affiliates; to sell, distribute or otherwise dispose of the stock of the
Company; or to cause the Company to sell or otherwise dispose of any of its
assets or of any assets acquired from Acquisition Sub, except for dispositions
made in the ordinary course of business or payment of expenses incurred by the
Company pursuant to the Merger and except for transfers described in both
Section 368(a)(2)(C) of the Code and Treasury Regulation Section 1.368-
2(j)(4);
10. In the Merger, Acquisition Sub will have no liabilities assumed by
the Company and will not transfer to the Company any assets subject to
liabilities, except to the extent incurred in connection with the transactions
contemplated by the Agreement;
11. Following the Merger, the Company will continue its historic business
or use a significant portion of its historic business assets in a business;
2
<PAGE>
12. During the past five (5) years, none of the outstanding shares of
capital stock of the Company, including the right to acquire or vote any such
shares, have directly or indirectly been owned by Parent;
13. Neither Parent nor Acquisition Sub is an "investment company" within
the meaning of Sections 368(a)(2)(F)(iii) and (iv) of the Code;
14. The fair market value of the Parent stock received by each
stockholder of the Company will be approximately equal to the fair market
value of the stock of the Company surrendered in exchange therefor, and the
aggregate consideration received by shareholders of the Company in exchange
for their stock of the Company will be approximately equal to the fair market
value of all of the outstanding shares of stock of the Company immediately
prior to the Merger;
15. Acquisition Sub, Parent, the Company and the shareholders of the
Company will each pay separately its or their own expenses relating to the
Merger;
16. There is no intercorporate indebtedness existing between Parent and
the Company or between Acquisition Sub and the Company that was issued,
acquired or will be settled at a discount as a result of the Merger;
17. The terms of the Agreement are the product of arm's-length
negotiations;
18. None of the compensation received by any shareholder-employee of the
Company will be separate consideration for, or allocable to, any of their
shares of stock of the Company; none of the shares of Parent stock received by
any shareholder-employee of the Company will be separate consideration for, or
allocable to, any employment agreement or any covenants not to compete; and
the compensation paid to any shareholder-employee of the Company will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services;
19. Factual statements contained in the S-4 with respect to Parent and
its subsidiaries are true, correct and complete in all material respects;
20. Parent and Acquisition Sub are authorized to make all of the
representations set forth herein; and
21. The Agreement represents the full and complete agreement among
Parent, Acquisition Sub and the Company regarding the Merger, and there are no
other written or oral agreements regarding the Merger.
It is understood that (i) your opinions will be based on the completeness
and accuracy of and compliance with, representations set forth herein and on
the statements contained in the Agreement (including all schedules and
exhibits thereto) and documents related thereto, and (ii) your opinions will
be subject to certain limitations and qualifications, including that they may
not be relied upon if any such representations are not accurate in all
material respect.
3
<PAGE>
It is understood that your opinions will not address any tax consequences
of the Merger or any action taken in connection therewith except as expressly
set forth in such opinions.
Very truly yours,
Computer Sciences Corporation,
a Nevada corporation
By: ____________________________
Title: _________________________
Continental Acquisition, Inc.,
a Delaware corporation
By: ____________________________
Title: _________________________
4
<PAGE>
EXHIBIT 99.1
Contact: CSC - Bruce Plowman or FOR IMMEDIATE RELEASE
Spencer Davis Moved On Business Wire and
310.615.0311 PR Newswire April 29, 1996
CNU - John L. Westermann III
512.345.5700
CSC TO MERGE WITH CONTINUUM IN SHARE
EXCHANGE VALUED AT $1.5 BILLION
EL SEGUNDO, CA and AUSTIN, TX, April 29 -- Computer Sciences Corporation
(NYSE:CSC) and The Continuum Company, Inc. (NYSE:CNU) announced today they
have signed a definitive agreement for CSC to merge with Continuum in a share
exchange to be accounted for as a pooling-of-interests. Shareholders of CNU
will receive 0.79 of a share of CSC for each share of CNU. The agreement,
which has been unanimously approved by the boards of directors of both
companies, will add a leading insurance and banking industry software and
services company to CSC's wide range of commercial activities.
CNU had pro forma revenues of approximately $490 million for the twelve
months ended December 31, 1995, reflecting the March 1996 acquisition of Hogan
Systems. Hogan Systems is a banking industry software and services company.
For the purposes of the combination (which is expected to be tax-free to
CNU shareholders), CNU had approximately 24.2 million shares outstanding as of
April 25, 1996. On the basis of 0.79 shares of CSC for each share of CNU,
shareholders of CNU would receive approximately 19.1 million shares of CSC
stock for a total consideration of approximately $1.5 billion based on CSC's
closing price on Friday, April 26, of $78 1/8. CSC also will assume all of
CNU's outstanding options at the same exchange ratio.
<PAGE>
The transaction requires the approval of the shareholders of both CSC and
CNU, as well as customary regulatory approvals. The companies said that DST
Systems, Inc., a Continuum shareholder owning approximately 23% of the
company, has agreed to vote its shares in favor of the transaction.
Van B. Honeycutt, CSC's president and chief executive officer, said:
"This strategic business combination is a compelling fit of markets,
technologies, services and products. The addition of Continuum will greatly
enhance our increasing focus on the financial services marketplace, where we
see enormous potential for information technology services in the insurance,
banking and other financial services sectors. Continuum catapults us into a
strong position in financial services and continues the shift of our business
toward the commercial sector."
W. Michael Long, chief executive officer of Continuum, said:
"As the lines that differentiate insurance, banking, securities and
mutual funds blur, we firmly believe that technology is the key to enabling
financial services providers to effectively deliver the full range of products
and services their customers expect. CSC is the ideal merger partner for
Continuum. By teaming with CSC, we gain the critical mass to better
capitalize on the significant marketplace potential and to pursue even larger
and more attractive opportunities to propel our growth. Our combined
capabilities will allow us to realize the potential faster than we could have
individually."
Under the terms of the agreement, Continuum will retain its name and its
Austin headquarters and become a subsidiary of CSC. Continuum's management
team will remain with the company, with Long continuing to serve as chief
executive officer reporting to Honeycutt.
CSC and CNU said they expect to schedule shareholder meetings this summer
to vote on the proposed transaction. CSC also will ask its shareholders to
increase the number of authorized shares of common stock from 75 million to
275 million. CSC had 56.0 million shares outstanding at the close of its
fiscal year ended March 29, 1996.
2
<PAGE>
CNU is an international consulting and computer services firm
headquartered in Austin, Texas, with offices in 17 countries serving the needs
of the global financial services industry for computer software and services.
Continuum has approximately 4,200 employees worldwide, serving the needs of
more than 850 financial institutions located in more than 40 countries.
Computer Sciences Corporation had $4.1 billion in annual revenues for the
12 months ended Dec. 29, 1995. The company is headquartered in El Segundo,
California, and has 34,000 employees in 575 offices worldwide. CSC provides
clients with a wide range of professional services including management
consulting; business reengineering; information systems consulting and
integration; and outsourcing.
Note to Analysts and Editors: Please see the attached background information.
3
<PAGE>
Background Fact Sheet on Continuum
Founded in 1968, The Continuum Company, Inc. (NYSE:CNU) is an
international consulting and computer services firm based in Austin, Texas.
With offices in 17 countries, the company provides computer software, services
and outsourcing to more than 850 banks and insurers in more than 40 countries.
CNU had pro forma revenues of approximately $490 million for the twelve months
ended December 31, 1995, reflecting the March 1996 acquisition of Hogan
Systems. Employees total about 4,200.
As a leading provider of global technology solutions, Continuum's
customers include approximately 43% of Fortune's Global 500 financial services
companies. Current clients include Aegon, Aetna, Allianz Life Insurance
Company of North America, Australian Mutual Provident, Axa, Banco Comercial
Portugues, Banco de la Nacion, First National Bank of Southern Africa, Bital,
CNA, Cigna, Desjardins, Deutsche Bank, Eureko, Financial Holding Corporation,
First Bank System, First Interstate Bank, Fleet Bank, GE Capital, GEICO,
General Accident, GIO Australia, Huntington Bankshares, Inc., ING, ITT
Hartford, Lincoln National Life Insurance Company, Metropolitan, National
Australia Group, Nationwide Building Society, NEDCOR, Norwich Union, PNC,
Prudential, Sun Alliance, SunCorp, Tranquilidade, Winterthur. About 50% of
Continuum's revenues come from customers outside of North America.
Continuum has three primary areas of business:
---------------------------------------------
-Software systems and products: These automate the administrative
functions of banks and insurance companies, such as issuing and servicing
policies, paying agents' commissions, processing deposits and loans and
complying with complex government regulations.
-Value-added services: These include developing, installing, customizing,
enhancing, maintaining and integrating software systems for clients.
-Outsourcing: This ranges from handling the remote processing of a single
insurance or banking application to running and managing a client's data
processing department. It also includes the provision of third-party
administration (TPA) services.
4
<PAGE>
Over the past few years, Continuum has evolved from a product company to
a services company, offering a full range of technology solutions to insurance
companies and banks worldwide.
In March, 1996, Continuum acquired Dallas-based Hogan Systems on a
pooling-of-interests basis. Hogan, now a wholly-owned subsidiary of
Continuum, is a leading provider of integrated on-line applications software
and related services to the banking industry. Clients include nearly 130 of
the world's largest banks in 20 countries. Hogan has about 700 employees and
operations in Dallas; Frankfurt, Germany; London; and Melbourne, Australia.
Merger Opportunities:
- --------------------
-Market Growth: Worldwide spending by the insurance industry in 1995 for
data processing personnel and software was estimated to be approximately $30
billion. Of that, only 10% was outsourced -- resulting in an untapped market
in the insurance industry alone of approximately $27 billion. Worldwide
spending in the banking sector on information technology services in 1995 was
another $30 billion for a total addressable market of $60 billion. A key part
of Continuum's growth strategy is to capitalize on that available market and
build its outsourcing business.
The banking and insurance communities view technology as a key strategy
for worldwide growth, and Continuum is well-positioned to provide the
professional services, systems integration, outsourcing and application
software the industry requires.
-Industry Convergence: The financial services industry is restructuring,
driven by changing consumer demands and behaviors, competition from new market
entrants, deregulation, the globalization of the economy, and new information
technologies. As the lines that separated insurance, banking, securities and
mutual funds are erased, a new breed of provider, heavily dependant on
innovative technology, is emerging to deliver the full range of needed
financial services.
5
<PAGE>
Continuum is well-positioned to play a key role in the transformation of the
global financial services industry.
-Scale: As a leader in information technology outsourcing for industry
and government, CSC provides Continuum with additional global strength,
financial resources and computing infrastructure which further enhances its
ability to compete for large outsourcing opportunities worldwide. In turn,
Continuum brings extensive experience, leading industry expertise, and long-
term strategic customer relationships in the insurance and banking industries,
which will support CSC's rapid development of the financial services vertical
market.
-Technology: A key focus of Continuum is on applying quickly changing
technologies such as client/server architecture, object-oriented development
and artificial intelligence to solving real business problems. The
compatibility of CSC and Continuum as technology-driven solutions providers
enables both companies to pool their efforts to advance today's best practices
in these areas. Other technical areas of focus will include business
reengineering, data warehousing and workflow management.
-Geographic Span: The companies share a compatible geographic focus.
Continuum's North American offices span the U.S. and Canada. In Europe, its
principal operating and sales offices are in the U.K., France, Germany and
Norway. Other European offices are in Denmark, Ireland, the Netherlands,
Switzerland, Sweden and Portugal. Principal operations in the Pacific Rim are
based in Sydney and Melbourne, Australia and Auckland, New Zealand. Other
Pacific Rim offices are in Japan, Singapore and Hong Kong. Continuum also
operates large data centers in Sydney, Melbourne and Auckland.
-Intellectual Property: Continuum has the world's largest commercially
available repository of intellectual property for insurance and banking
administration. This software is a key component of comprehensive solutions
for financial services companies.
6
