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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
and
SCHEDULE 13D
under the Securities Exchange Act of 1934
------------------------
TRIAD SYSTEMS CORPORATION
(Name of Subject Company)
------------------------
CCI ACQUISITION CORP.
COOPERATIVE COMPUTING, INC.
(Bidders)
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Common Stock, $.001 par value
(Title of Class of Securities)
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895818 20 1
(CUSIP Number of Class of Securities)
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LAWRENCE D. STUART, JR.
HICKS, MUSE, TATE & FURST INCORPORATED
200 CRESCENT COURT, SUITE 1600
DALLAS, TEXAS 75201-6950
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of the Bidders)
------------------------
Copy to:
THOMAS A. ROBERTS
DAVID A. BRYSON
WEIL, GOTSHAL & MANGES LLP
100 CRESCENT COURT, SUITE 1300
DALLAS, TEXAS 75201-6950
------------------------
OCTOBER 17, 1996
(Date of Event which Requires Filing of this Statement on Schedule 13D)
CALCULATION OF FILING FEE
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<TABLE>
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
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$182,232,844 $36,447
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</TABLE>
* Estimated for purposes of calculating the amount of the filing fee only. The
amount assumes the purchase, at a price per Share of $9.25 in cash, of the
17,749,158 shares of common stock, $.001 par value ("Shares"), of the Company
issued and outstanding as of September 30, 1996, 1,838,190 Shares issuable
upon the exercise of outstanding options, and an estimated 113,500 Shares
issuable under the subject company's 1990 Employee Stock Purchase Plan.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: None Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
Page 1 of Pages
Exhibit Index is located on Page
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CUSIP NO. 895818 20 1 14D-1 Page 2 of 7 Pages
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
CCI Acquisition Corp.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
2
(b) / /
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3 SEC USE ONLY
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SOURCE OF FUNDS
4 BK, AF
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEM 2(e) or 2(f). / /
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CITIZENSHIP OR PLACE OF ORGANIZATION
6 State of Delaware
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
7 PERSON 3,537,094*
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
8 CERTAIN SHARES / /
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9 18.0%
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TYPE OF REPORTING PERSON
10 CO
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</TABLE>
* On October 17, 1996, Cooperative Computing, Inc., a Texas corporation
("Parent"), and CCI Acquisition Corp., a Delaware corporation and an affiliate
of Parent ("Purchaser"), entered into a Stockholders Agreement (the
"Stockholders Agreement") with certain stockholders (collectively, the
"Selling Stockholders") of Triad Systems Corporation (the "Company"), pursuant
to which the Selling Stockholders, which include all of the members of the
Board of Directors of the Company, agreed to validly tender and not withdraw
pursuant to Purchaser's offer to purchase an aggregate of 3,537,094 shares of
common stock, $.001 par value per share (the "Shares"), of the Company
representing all of the outstanding Shares which are owned of record or
beneficially by them. Such Shares represent approximately 18.0% of the Shares
outstanding calculated on a fully-diluted basis. The Stockholders Agreement is
described more fully in Section 12 of the Offer to Purchase, dated October 23,
1996.
2
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<TABLE>
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CUSIP NO. 895818 20 1 14D-1 Page 3 of 7 Pages
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Cooperative Computing, Inc.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
2
(b) / /
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3 SEC USE ONLY
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SOURCE OF FUNDS
4 OO
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
5 REQUIRED PURSUANT TO ITEM 2(e) or 2(f). / /
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CITIZENSHIP OR PLACE OF ORGANIZATION
6 State of Texas
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
7 PERSON 3,537,094*
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
8 EXCLUDES CERTAIN SHARES / /
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9 18.0%
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TYPE OF REPORTING PERSON
10 CO
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</TABLE>
* On October 17, 1996, Cooperative Computing, Inc., a Texas corporation
("Parent"), and CCI Acquisition Corp., a Delaware corporation and an affiliate
of Parent ("Purchaser"), entered into a Stockholders Agreement (the
"Stockholders Agreement") with certain stockholders (collectively, the
"Selling Stockholders") of Triad Systems Corporation (the "Company"), pursuant
to which the Selling Stockholders, which include all of the members of the
Board of Directors of the Company, agreed to validly tender and not withdraw
pursuant to Purchaser's offer to purchase an aggregate of 3,537,094 shares of
common stock, $.001 par value per share (the "Shares"), of the Company
representing all of the outstanding Shares which are owned of record or
beneficially by them. Such Shares represent approximately 18.0% of the Shares
outstanding calculated on a fully-diluted basis. The Stockholders Agreement is
described more fully in Section 12 of the Offer to Purchase, dated October 23,
1996.
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TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 is filed by CCI Acquisition
Corp., a Delaware corporation ("Purchaser"), and Cooperative Computing, Inc., a
Texas corporation ("Parent"), relating to the offer by Purchaser to purchase all
outstanding shares of common stock, $.001 par value (the "Shares"), of Triad
Systems Corporation (the "Company"), at $9.25 per Share, net to the seller in
cash, on the terms and subject to the conditions set forth in the Offer to
Purchase, dated October 23, 1996 (the "Offer to Purchase"), and in the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively (which collectively constitute the "Offer"). The sole
stockholders of each of Parent and Purchaser are Glenn E. Staats and Preston W.
Staats, Jr. Pursuant to the terms of the Securities Purchase Agreement, a copy
of which is attached as Exhibit (c)(3) hereto, the stockholders of Parent will
contribute all of the issued and outstanding common stock of Purchaser to Parent
prior to consummation of the Offer and, as a result, Purchaser will become a
wholly owned subsidiary of Parent.
This Tender Offer Statement on Schedule 14D-1 also constitutes a statement
on Schedule 13D with respect to the acquisition by Purchaser and Parent of
beneficial ownership of 3,537,094 Shares owned of record or beneficially by
certain stockholders of the Company pursuant to the terms of the Stockholders
Agreement, a copy of which is attached as Exhibit (c)(2) hereto. The item
numbers and responses thereto below are in accordance with the requirements of
Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Triad Systems Corporation, a
Delaware corporation. The address of the Company's principal executive offices
is 3055 Triad Drive, Livermore, California 94550.
(b) The information set forth on the cover page and under "Introduction" in
the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(g) This Statement is filed by Purchaser and Parent. The information
set forth on the cover page of the Offer to Purchase and under "Introduction,"
in Section 9, and in Schedule I to the Offer to Purchase is incorporated herein
by reference.
(e)-(f) During the last five years, neither Purchaser or Parent nor, to
their knowledge, any of the persons listed in Schedule I (Directors and
Executive Officers) to the Offer to Purchase, (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) has been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state securities law or finding
any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) None.
(b) The information set forth under "Introduction," and in Sections 9, 11,
and 12 of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCES AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth under "Introduction" and in Section 10 of
the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
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ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS.
(a)-(e) The information set forth under "Introduction" and in Sections 12
and 13 of the Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth under Section 7 of the Offer to Purchase
is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth under "Introduction" and in Section 12 and
Section 9 of the Offer to Purchase is incorporated herein by reference.
(b) The information set forth under "Introduction" and in Section 12 of the
Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth under "Introduction" and in Sections 9, 11, and
12 of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under "Introduction" and in Section 16 of the
Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth under Sections 9, 10, and 12 of the Offer to
Purchase is incorporated herein by reference.
(b)-(e) The information set forth under Sections 10 and 15 of the Offer to
Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated October 23, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Form of Summary Advertisement, dated October 23, 1996.
(a)(8) Text of Press Release, dated October 17, 1996.
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(b) Commitment Letter, dated October 16, 1996, from Chase Securities,
Inc. and The Chase Manhattan Bank to Purchaser.
(c)(1) Agreement and Plan of Merger, dated October 17, 1996, among Parent,
Purchaser, and the Company.
(c)(2) Stockholders Agreement, dated October 17, 1996, among Parent,
Purchaser, and the Selling Stockholders.
(c)(3) Securities Purchase Agreement, dated as of October 16, 1996, among
Hicks Muse, Parent, Applied Data Specialty, Inc., Canadian
Aftermarket Network, Inc., and Purchaser.
(d) None.
(e) Not applicable.
(f) None.
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SIGNATURES
After due inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: October 23, 1996
CCI ACQUISITION CORP.
By: /s/ PATRICK K. McGEE
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Name: Patrick K. McGee
Title: Vice President
COOPERATIVE COMPUTING, INC.
By: /s/ MATTHEW HALE
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Name: Matthew Hale
Title: Vice President and
Chief Financial Officer
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EXHIBIT INDEX
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EXHIBIT PAGE
NUMBER DESCRIPTION NO.
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(a)(1) -- Offer to Purchase, dated October 23, 1996
(a)(2) -- Letter of Transmittal
(a)(3) -- Notice of Guaranteed Delivery
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees
(a)(5) -- Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
(a)(6) -- Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
(a)(7) -- Form of Summary Advertisement, dated October 23, 1996
(a)(8) -- Text of Press Release, dated October 17, 1996
(b) -- Commitment Letter, dated October 16, 1996, from Chase Securities,
Inc. and The Chase Manhattan Bank to Purchaser
(c)(1) -- Agreement and Plan of Merger, dated October 17, 1996, among Parent,
Purchaser, and the Company
(c)(2) -- Stockholders Agreement, dated October 17, 1996, among Parent,
Purchaser, and the Selling Stockholders
(c)(3) -- Securities Purchase Agreement, dated as of October 16, 1996, among
Hicks Muse, Parent, Applied Data Specialty, Inc., Canadian
Aftermarket Network, Inc., and Purchaser
(d) -- None
(e) -- Not applicable
(f) -- None
</TABLE>
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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TRIAD SYSTEMS CORPORATION
AT
$9.25 NET PER SHARE
BY
CCI ACQUISITION CORP.
AN AFFILIATE OF
COOPERATIVE COMPUTING, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT
NEW YORK CITY TIME, ON WEDNESDAY, NOVEMBER 20, 1996, UNLESS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY (A) DETERMINED THAT
EACH OF THE MERGER AGREEMENT, THE OFFER AND THE MERGER IS FAIR TO AND IN THE
BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, (B) APPROVED THE EXECUTION,
DELIVERY AND PERFORMANCE OF THE MERGER AGREEMENT AND THE RELATED STOCKHOLDERS
AGREEMENT REFERENCED BELOW AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (C) RESOLVED TO RECOMMEND
ACCEPTANCE OF THE OFFER, APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
APPROVAL OF THE MERGER BY THE HOLDERS OF COMPANY COMMON STOCK.
PURSUANT TO THE MERGER AGREEMENT, THE COMPANY EXPECTS TO DISTRIBUTE TO ITS
STOCKHOLDERS OWNERSHIP INTERESTS IN AN ENTITY THAT WILL OWN, DIRECTLY OR
INDIRECTLY, CERTAIN REAL PROPERTY AND RELATED ASSETS OF THE COMPANY. THE MERGER
AGREEMENT PROVIDES THAT SUCH DISTRIBUTION WILL BE MADE IN THE FORM OF A DIVIDEND
PAYABLE TO THE RECORD HOLDERS OF COMPANY COMMON STOCK IMMEDIATELY PRIOR TO THE
ACCEPTANCE OF SHARES IN THE OFFER. THE PAYMENT OF SUCH DIVIDEND IS CONTINGENT
UPON THE CONSUMMATION OF THE OFFER AND IS SUBJECT TO A NUMBER OF CONDITIONS,
INCLUDING COMPLIANCE WITH ALL APPLICABLE LAWS.
PARENT AND PURCHASER HAVE ENTERED INTO A STOCKHOLDERS AGREEMENT WITH
CERTAIN SELLING STOCKHOLDERS, WHICH INCLUDE ALL OF THE MEMBERS OF THE BOARD OF
DIRECTORS OF THE COMPANY, PURSUANT TO WHICH, AMONG OTHER THINGS, SUCH
STOCKHOLDERS HAVE AGREED TO VALIDLY TENDER (AND NOT WITHDRAW) IN THE OFFER, UPON
THE TERMS AND SUBJECT TO THE CONDITIONS THEREOF, APPROXIMATELY 18% OF THE
COMPANY'S OUTSTANDING SHARES (CALCULATED ON A FULLY DILUTED BASIS) AT THE OFFER
PRICE.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES
WHICH WOULD REPRESENT, ON A FULLY DILUTED BASIS, AT LEAST 51% OF THE OUTSTANDING
SHARES, AND THE FUNDING CONDITION. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER
CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE INTRODUCTION AND SECTIONS 1
AND 14 HEREOF.
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IMPORTANT
Any stockholder desiring to tender all or a portion of such stockholder's
Shares and the associated Rights should either (1) complete and sign the Letter
of Transmittal (or a manually signed facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, mail or deliver it and any other
required documents to the Depositary and either deliver the certificates for
such Shares to the Depositary along with the Letter of Transmittal or tender
such Shares pursuant to the procedures for book-entry transfer set forth in
Section 3 hereof or (2) request his broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for him. Any stockholder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such stockholder desires to tender such
Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedure for book-entry transfer on a timely basis should tender such
Shares by following the procedures for guaranteed delivery set forth in Section
3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other related materials may be directed to the
Information Agent or to brokers, dealers, commercial banks and trust companies.
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The Dealer Manager for the Offer is:
CHASE SECURITIES INC.
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October 23, 1996
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TABLE OF CONTENTS
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PAGE
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INTRODUCTION............................................................................ 4
1. Terms of the Offer................................................................ 5
2. Acceptance for Payment and Payment for Shares..................................... 7
3. Procedure for Tendering Shares.................................................... 8
4. Withdrawal Rights................................................................. 10
5. Certain Federal Income Tax Consequences of the Offer, the Merger and the
Spin-Off.......................................................................... 11
6. Price Range of the Shares; Dividends on the Shares................................ 13
7. Effect of the Offer on the Market for the Shares, Nasdaq Stock Market Listing,
Exchange Act Registration and Margin Securities................................... 13
8. Certain Information Concerning the Company........................................ 14
9. Certain Information Concerning Purchaser, Parent, Hicks Muse and HM Inc........... 16
10. Source and Amount of Funds........................................................ 17
11. Background of the Offer........................................................... 24
12. Purpose of the Offer and the Merger; Plans for the Company; the Merger Agreement;
the Stockholders Agreement; the Rights Agreement; the Spin-Off; Other Matters..... 25
13. Dividends and Distributions....................................................... 38
14. Certain Conditions of the Offer................................................... 38
15. Certain Legal Matters............................................................. 40
16. Fees and Expenses................................................................. 41
17. Miscellaneous..................................................................... 42
Schedule I -- Directors and Executive Officers of Parent, Purchaser and HM Inc.......... I-1
</TABLE>
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To the Holders of Common Stock of
Triad Systems Corporation:
INTRODUCTION
CCI Acquisition Corp., a Delaware corporation ("Purchaser") and an
affiliate of Cooperative Computing, Inc., a Texas corporation ("Parent"), hereby
offers to purchase all of the outstanding shares of the common stock, $.001 par
value (the "Common Stock"), of Triad Systems Corporation, a Delaware corporation
(the "Company"), and the associated common stock purchase rights (the "Rights";
and together with the Common Stock, the "Shares") at a purchase price of $9.25
per Share (the "Offer Price"), net to the seller in cash, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, together with any amendments or supplements hereto
or thereto, collectively constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 17, 1996, among Parent, Purchaser and the Company (the "Merger
Agreement"). The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser and further provides that, subject to the
satisfaction or waiver of certain conditions, Purchaser will be merged with and
into the Company (the "Merger"), with the Company surviving the Merger. Pursuant
to the terms of the Securities Purchase Agreement, dated as of October 16, 1996,
entered into among Hicks, Muse, Tate & Furst Equity Fund III, L.P., a Delaware
limited partnership ("Hicks Muse"), Parent, and Applied Data Specialty, Inc.,
and, Canadian Aftermarket Network, Inc., both of which are Texas corporations
and affiliates of Parent, and Purchaser (the "Securities Purchase Agreement"),
the stockholders of Purchaser have agreed to contribute all of the issued and
outstanding common stock of Purchaser to Parent prior to the consummation of the
Offer (as a result of which, Purchaser will become a wholly owned subsidiary of
Parent). Accordingly, the Company will become a direct wholly owned subsidiary
of Parent (the "Surviving Corporation"). In the Merger, each issued and
outstanding Share (other than Shares owned by stockholders of the Company who
shall have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for such shares under
Delaware law ("Dissenting Shares") and Shares directly or indirectly owned by
the Company or any subsidiary of the Company, Parent, Purchaser or any other
subsidiary of Parent) will be converted at the effective time of the Merger (the
"Effective Time") into the right to receive the Offer Price in cash, without
interest and less any required withholding taxes (the "Merger Consideration").
In addition, pursuant to the Merger Agreement, the Company expects to distribute
to its stockholders ownership interests in an entity that will own, directly or
indirectly, certain real property and related assets of the Company (the
"Spin-Off"). The Merger Agreement provides that such distribution will be made
in the form of a dividend payable to the record holders of the Shares
immediately prior to the acceptance of Shares in the Offer. The payment of such
dividend is contingent upon the consummation of the Offer and is subject to a
number of conditions, including compliance with all applicable laws, including
state and federal securities laws.
The Board of Directors of the Company (the "Board") has unanimously (i)
determined that each of the Merger Agreement, the Offer and the Merger is fair
to and in the best interests of the stockholders of the Company (the
"Stockholders"), (ii) approved the execution, delivery and performance of the
Merger Agreement and the Stockholders Agreement referenced below and the
consummation of the transactions contemplated thereby, including the Offer and
the Merger, and (iii) resolved to recommend acceptance of the Offer, approval
and adoption of the Merger Agreement and approval of the Merger by the holders
of the Shares.
Hambrecht & Quist LLC, the Company's financial advisor ("Hambrecht &
Quist"), has delivered to the Company its written opinion, dated October 16,
1996, that the consideration to be received by holders of the Shares pursuant to
the Offer is fair to such Stockholders from a financial point of view. A copy of
the opinion of Hambrecht & Quist is contained in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
filed with the Securities and Exchange Commission (the "Commission")
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in connection with the Offer. A copy of the Schedule 14D-9 is being furnished to
the Stockholders concurrently herewith.
The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the Expiration Date (as defined in
Section 1 below) that number of Shares (the "Minimum Number of Shares") which
would represent, on a fully diluted basis, at least 51% of the outstanding
Shares (the "Minimum Tender Condition"). The Offer is also subject to certain
other conditions. See Sections 1 and 14.
The Company has informed Purchaser that, as of September 30, 1996, (i)
17,749,158 Shares were issued and outstanding and (ii) 1,838,190 Shares were
reserved for issuance upon the exercise of outstanding stock options
(collectively, "Triad Options") granted by the Company. In addition, the Company
has informed Parent that an estimated 113,500 Shares will be issued under the
Company's 1990 Employee Stock Purchase Plan (the "ESPP") prior to the Expiration
Date. Based on the foregoing, at least 10,047,433 Shares must be validly
tendered and not withdrawn in the Offer in order for the Minimum Tender
Condition to be met.
Concurrently with the execution of the Merger Agreement, Parent and
Purchaser entered into a Stockholders Agreement, dated October 17, 1996 (the
"Stockholders Agreement"), with certain Stockholders of the Company (the
"Selling Stockholders") owning, in the aggregate, 3,537,094 (or approximately
18.0%) of the outstanding Shares calculated on a fully-diluted basis (as defined
in the Merger Agreement). Pursuant to the Stockholders Agreement, the Selling
Stockholders, which include all of the members of the Board, have agreed to
validly tender pursuant to the Offer and not withdraw all Shares which are owned
of record or beneficially by them prior to the Expiration Date.
The consummation of the Merger is subject to the satisfaction or waiver of
a number of conditions, including, if required, the approval of the Merger by
the requisite vote of the Stockholders. Under the Delaware General Corporation
Law ("DGCL"), the Stockholder vote necessary to approve the Merger will be the
affirmative vote of at least a majority of the outstanding Shares, including
Shares held by Purchaser and its affiliates. If the Minimum Tender Condition is
met and the Offer is consummated, Purchaser will own a sufficient number of
shares to cause the Merger to be approved. If Purchaser acquires at least 90% of
the outstanding Shares pursuant to the Offer or otherwise, Purchaser would be
able to effect the Merger pursuant to the "short-form" merger provisions of
Section 253 of the DGCL, without prior notice to, or any action by, any other
Stockholder. In each event, Purchaser intends to effect the Merger as promptly
as practicable following the purchase of Shares in the Offer. See Section 12.
The Merger Agreement, the Stockholders Agreement and the Spin-Off are more
fully described in Section 12. Certain Federal income tax consequences of the
sale of Shares pursuant to the Offer, the exchange of Shares for the Merger
Consideration pursuant to the Merger and the Spin-Off are described in Section
5.
Tendering Stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 to the Letter of
Transmittal, transfer taxes on the sale of Shares pursuant to the Offer or the
Merger. Purchaser will pay all charges and expenses of Chase Securities Inc., as
the dealer manager (the "Dealer Manager"), ChaseMellon Shareholder Services,
L.L.C., as the depositary (the "Depositary"), and ChaseMellon Shareholder
Services, L.L.C., as the information agent (the "Information Agent"), incurred
in connection with the Offer. See Section 16.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment (and thereby purchase) all
Shares that are validly tendered and not withdrawn in accordance with Section 4
below prior to the Expiration Date. As used in the Offer, the term "Expiration
Date" shall mean 12:00 midnight, New York City time, on Wednesday, November 20,
1996, unless and until Purchaser, in accordance with the terms of the Offer and
the Merger Agreement, shall have extended the period of time during which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date at which the Offer, as
5
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so extended by Purchaser, shall expire. As used in this Offer to Purchase,
"business day" has the meaning set forth in Rule 14d-1(c)(6) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
In the event that the Offer is not consummated, Purchaser may seek to
acquire additional Shares through open market purchases, privately negotiated
transactions, or otherwise, upon such terms and conditions and at such prices as
it shall determine, which may be more or less than the Offer Price and could be
for cash or other consideration.
The Offer is conditioned upon, among other things, satisfaction of each of
the Minimum Tender Condition and the Funding Condition (as defined herein), and
the expiration or termination of all waiting periods imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder (the "HSR Act"). The Offer is also subject to certain
other conditions set forth in Section 14 below. Subject to the terms of the
Merger Agreement, Purchaser expressly reserves the right (but shall not be
obligated) to waive any or all of the conditions of the Offer. Subject to the
terms of the Merger Agreement, if by the Expiration Date any or all of the
conditions of the Offer are not satisfied or waived, Purchaser reserves the
right (but shall not be obligated) to (i) extend the period during which the
Offer is open and, subject to the rights of tendering Stockholders to withdraw
their Shares, retain all tendered Shares until the Expiration Date, (ii) waive
or reduce the Minimum Tender Condition or waive any or all of the conditions of
the Offer and, subject to complying with applicable rules and regulations of the
Commission, accept for payment or purchase all validly tendered Shares and not
extend the Offer, or (iii) terminate the Offer and not accept for payment any
Shares and return promptly all tendered Shares to tendering Stockholders.
Subject to the terms of the Merger Agreement, Purchaser expressly reserves
the right, in its sole discretion, at any time or from time to time, to extend
the period of time during which the Offer is open by giving oral or written
notice of such extension to the Depositary and by making a public announcement
of such extension. There can be no assurance that Purchaser will exercise its
right to extend the Offer. Purchaser also expressly reserves the right, subject
to applicable laws (including applicable regulations of the Commission
promulgated under the Exchange Act), and to the terms of the Merger Agreement,
at any time or from time to time, (i) to delay acceptance for payment of or
payment for any Shares, regardless of whether the Shares were theretofore
accepted for payment, or to terminate the Offer and not accept for payment or
pay for any Shares not theretofore accepted for payment or paid for, upon the
occurrence of any of the conditions specified in Section 14 below, by giving
oral or written notice of such delay in payment or termination to the
Depositary, and (ii) to amend the Offer in any respect, by giving oral or
written notice to the Depositary. Any extension, delay in payment, termination
or amendment will be followed as promptly as practicable by public announcement,
the announcement in the case of an extension to be issued no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which Purchaser may
choose to make any public announcement, Purchaser will have no obligation to
publish, advertise or otherwise communicate any such announcement other than by
issuing a release to the Dow Jones News Service or as otherwise may be required
by law. The reservation by Purchaser of the right to delay acceptance for
payment of or payment for Shares is subject to the provisions of Rule 14e-1(c)
under the Exchange Act, which requires that Purchaser pay the consideration
offered or return the Shares deposited by or on behalf of Stockholders promptly
after the termination or withdrawal of the Offer. Any delay in acceptance for
payment or payment beyond the time permitted by applicable law will be
effectuated by an extension of the period of time during which the Offer is
open.
Pursuant to the terms of the Merger Agreement, Parent and Purchaser
expressly reserved the right to amend or modify the terms of the Offer, except
that, without the prior written consent of the Company, Purchaser may not (and
Parent shall not cause Purchaser to) (i) decrease the Offer Price or the form of
consideration therefor or decrease the number of Shares sought pursuant to the
Offer, (ii) change, in any material respect, the conditions to the Offer, (iii)
impose additional material conditions to the Offer, (iv) waive the Minimum
Tender Condition, (v) extend the Expiration Date (except that Purchaser may
extend the Expiration Date (a) as required by law, (b) for up to ten business
days after the initial Expiration Date or for longer periods (not to exceed 90
calendar days from the date of commencement) in the event that any condition to
the Offer is not satisfied, or (c) for one or more times for an aggregate period
of up to 15 days
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(not to exceed 90 calendar days from the date of commencement) for any reason
other than those specified in the immediately preceding clauses (a) and (b)), or
(vi) amend any term of the Offer in any manner materially adverse to holders of
Shares; provided, however, that, except as set forth above, Purchaser may waive
any other condition to the Offer in its sole discretion; and provided further,
that the Offer may be extended in connection with an increase in the
consideration to be paid pursuant to the Offer so as to comply with applicable
rules and regulations of the Commission. Assuming the prior satisfaction or
waiver of the conditions to the Offer, Purchaser shall accept for payment, and
pay for, in accordance with the terms of the Offer, all Shares validly tendered
and not properly withdrawn pursuant to the Offer as soon as practicable after
the Expiration Date.
The Commission has announced that, under its interpretation of Rules
14d-4(c) and 14d-6(d) under the Exchange Act, material changes in the terms of a
tender offer or information concerning a tender offer may require that the
tender offer be extended so that it remains open a sufficient period of time to
allow security holders to consider such material changes or information in
deciding whether or not to tender or withdraw their securities. The minimum
period during which an offer must remain open following material changes in the
terms of the Offer or information concerning the Offer, other than a change in
price or a change in percentage of securities sought, will depend upon the facts
and circumstances, including the relative materiality of the terms or
information. If Purchaser decides to increase or, subject to the consent of the
Company, to decrease the consideration in the Offer, to make a change in the
percentage of Shares sought or, subject to the consent of the Company, to change
or waive the Minimum Tender Condition and, if at the time that notice of any
such changes is first published, sent or given to Stockholders, the Offer is
scheduled to expire at any time earlier than the tenth business day after (and
including) the date of such notice, then the Offer will be extended at least
until the expiration of such period of ten business days.
The Company has provided Purchaser with its stockholder list and security
position listings for the purpose of disseminating the Offer to Stockholders.
This Offer to Purchase, the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Company's stockholder list
or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares by Purchaser.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment (and thereby purchase) and,
under the terms of the Offer, pay for Shares that are validly tendered and not
properly withdrawn on or prior to the Expiration Date, as soon as practicable
after the later of the following dates: (i) the Expiration Date and (ii) the
date of satisfaction or waiver of all of the conditions to the Offer set forth
herein. Purchaser expressly reserves the right, in its discretion, subject to
applicable laws and regulations, to delay acceptance for payment of or payment
for Shares in order to comply, in whole or in part, with any applicable law,
government regulation or condition contained herein. See Section 14 below.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates for such
Shares (or a timely Book-Entry Confirmation (as defined in Section 3) with
respect to such Shares) and (ii) the Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed with all required
signature guarantees, and all other documents required by the Letter of
Transmittal. See Section 3 below.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) tendered Shares as, if and when Purchaser gives
oral or written notice to the Depositary of Purchaser's acceptance of such
Shares for payment. In all cases, payment for Shares purchased pursuant to the
Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering Stockholders for the purpose
of receiving payment from Purchaser and transmitting payment to tendering
Stockholders whose Shares have theretofore been accepted for payment. If, for
any reason,
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acceptance for payment of any Shares tendered pursuant to the Offer is delayed,
or Purchaser is unable to accept for payment Shares tendered pursuant to the
Offer, then, without prejudice to Purchaser's rights under Section 14, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn, except to the extent that the tendering
Stockholders are entitled to withdrawal rights as described in Section 4 below
and as otherwise required by Rule 14e-1(c) under the Exchange Act. Under no
circumstances will interest on the Offer Price be paid by Purchaser, regardless
of any delay in making such payment.
If any tendered Shares are not purchased for any reason or if certificates
are submitted for more Shares than are tendered, certificates for such Shares
not purchased or tendered will be returned pursuant to the instructions of the
tendering Stockholder without expense to the tendering Stockholder (or, in the
case of Shares delivered by book-entry transfer, into the Depositary's account
at a Book-Entry Transfer Facility (as defined in Section 3) pursuant to the
procedures set forth in Section 3, such Shares will be credited to an account
maintained at the appropriate Book-Entry Transfer Facility) as promptly as
practicable following the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay such increased
consideration for all such Shares purchased pursuant to the Offer, whether or
not such Shares were tendered prior to such increase in consideration.
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its or Parent's affiliates the right to
purchase Shares tendered pursuant to the Offer; however no such transfer or
assignment will release Purchaser from its obligations under the Offer or
prejudice the rights of tendering Stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES
Valid Tenders. For Shares to be validly tendered pursuant to the Offer,
either (a) a Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees and
any other documents required by the Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase prior to the Expiration Date and either (i) certificates
representing Shares must be received by the Depositary at any such address prior
to the Expiration Date or (ii) such Shares must be delivered pursuant to the
procedures for book-entry transfer set forth below and a Book-Entry Confirmation
(as defined below) must be received by the Depositary prior to the Expiration
Date or (b) the tendering Stockholder must comply with the guaranteed delivery
procedures set forth below. No alternative, conditional or contingent tenders
will be accepted.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company and the Philadelphia Depository
Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the
"Book-Entry Transfer Facilities") for purposes of the Offer within two business
days after the date of this Offer to Purchase. Any financial institution that is
a participant in any of the Book-Entry Transfer Facilities' systems may make
book-entry delivery of Shares by causing a Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at such Book-Entry Transfer
Facility in accordance with that Book-Entry Transfer Facility's procedure for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility, the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees and
any other required documents, must, in any case, be transmitted to, and received
by, the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase prior to the Expiration Date, or the tendering Stockholder
must comply with the guaranteed delivery procedures described below. The
confirmation of a book-entry transfer of Shares into the Depositary's account at
a Book-Entry Transfer Facility as described above is referred to herein as a
"Book-Entry Confirmation". DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantee. Signatures on Letters of Transmittal must be
guaranteed by a member firm of a registered national securities exchange
(registered under Section 6 of the Exchange Act) or of the National
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Association of Securities Dealers, Inc. (the "NASD"), or by a commercial bank or
trust company having an office or correspondent in the United States or by any
other "Eligible Guarantor Institution" (as defined in Rule 17A.d-15 under the
Exchange Act) (each of the foregoing constituting an "Eligible Institution"),
unless the Shares tendered thereby are tendered (i) by a registered holder of
Shares who has not completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the Letter
of Transmittal or (ii) for the account of an Eligible Institution. See
Instruction 1 of the Letter of Transmittal. If the certificates representing
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal or if payment is to be made or certificates for Shares not
accepted for payment or not tendered are to be issued to a person other than the
registered holder, then the certificates representing Shares must be endorsed or
accompanied by appropriate stock powers, in each case signed exactly as the name
or names of the registered holder or holders appear on the certificates, with
the signatures on the certificates or stock powers guaranteed as described above
and as provided in the Letter of Transmittal. See Instructions 1 and 5 of the
Letter of Transmittal.
Guaranteed Delivery. If a Stockholder desires to tender Shares pursuant to
the Offer and such Stockholder's certificates are not immediately available or
the procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary prior to the
Expiration Date, such Shares may nevertheless be tendered if all of the
following guaranteed delivery procedures are compiled with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) the certificates for all tendered Shares in proper form for
transfer or a Book-Entry Confirmation with respect to all tendered Shares,
together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof) and any other documents required
by the Letter of Transmittal, are received by the Depositary within three
Nasdaq Stock Market trading days after the date of execution of such Notice
of Guaranteed Delivery.
THE NOTICE OF GUARANTEED DELIVERY MAY BE DELIVERED BY HAND OR TRANSMITTED
BY FACSIMILE TRANSMISSION OR MAILED TO THE DEPOSITARY AND MUST INCLUDE AN
ENDORSEMENT BY AN ELIGIBLE INSTITUTION IN THE FORM SET FORTH IN SUCH NOTICE OF
GUARANTEED DELIVERY.
IN ALL CASES, SHARES SHALL NOT BE DEEMED VALIDLY TENDERED UNLESS A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED
FACSIMILE THEREOF) IS RECEIVED BY THE DEPOSITARY.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE
TENDERING STOCKHOLDER. IF DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer in all cases will be made only after timely
receipt by the Depositary of certificates for (or Book-Entry Confirmation with
respect to) such Shares, and a Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, with any required
signature guarantee and all other documents required by the Letter of
Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING OF 31% OF THE PAYMENTS MADE TO STOCKHOLDERS WITH RESPECT TO THE
PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER OR THE MERGER, EACH
SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH HIS CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTIFY THAT HE IS NOT SUBJECT TO BACKUP FEDERAL
INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE
LETTER OF TRANSMITTAL. SEE INSTRUCTION 10 OF THE LETTER OF TRANSMITTAL. SEE
SECTION 5 BELOW.
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Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time or receipt) and acceptance for payment
of any tender of Shares pursuant to any of the procedures described above will
be determined by Purchaser in its sole discretion, which determination shall be
final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of Shares determined not to be in proper form or the
acceptance of or payment for which may, in the opinion of counsel, be unlawful
and reserves the absolute right to waive any defect or irregularity in any
tender of Shares. Subject to the terms of the Merger Agreement, Purchaser also
reserves the absolute right to waive or to amend any of the conditions of the
Offer. Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding on all parties. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
None of the Purchaser, Parent, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
Other Requirements. By executing a Letter of Transmittal, a tendering
Stockholder irrevocably appoints designees of Purchaser as his attorneys-in-fact
and proxies, with full power of substitution, in the manner set forth in the
Letter of Transmittal, to the full extent of such Stockholder's rights with
respect to the Shares tendered by such Stockholder and purchased by Purchaser
and with respect to any and all other Shares or other securities issued or
issuable in respect of such Shares, on or after the date of the Offer. All such
powers of attorney and proxies shall be considered coupled with an interest in
the tendered Shares. Such appointment will be effective when, and only to the
extent that, Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior powers of attorney and proxies given by such Stockholder with
respect to such Shares (and any other Shares or other securities so issued in
respect of such purchased Shares) will be revoked, without further action, and
no subsequent powers of attorney and proxies may be given (and, if given, will
not be deemed effective) by such Stockholder. The designees of Purchaser will be
empowered to exercise all voting and other rights of such Stockholder with
respect to such Shares (and any other Shares or securities so issued in respect
of such purchased Shares) as they in their sole discretion may deem proper,
including, without limitation, in respect of any annual or special meeting of
the Stockholders, or any adjournment or postponement thereof, or in connection
with any action by written consent in lieu of any such meeting or otherwise
(including any such meeting or action by written consent to approve the Merger).
Purchaser reserves the absolute right to require that, in order for Shares to be
validly tendered, immediately upon Purchaser's acceptance for payment of such
Shares, Purchaser must be able to exercise full voting and other rights with
respect to such Shares, including voting at any meeting of Stockholders then
scheduled.
A tender of Shares pursuant to any of the procedures described above will
constitute the tendering Stockholder's acceptance of the terms and conditions of
the Offer. Purchaser's acceptance for payment of Shares tendered pursuant to the
Offer will constitute a binding agreement between the tendering Stockholder and
Purchaser upon the terms and conditions of the Offer.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except as
otherwise provided in this Section 4. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by Purchaser as provided herein, may also be withdrawn at
any time after December 21, 1996. If Purchaser extends the Offer, is delayed in
its purchase of or payment for Shares or is unable to purchase or pay for Shares
for any reason, then, without prejudice to the rights of Purchaser hereunder,
tendered Shares may be retained by the Depositary on behalf of Purchaser and may
not be withdrawn except to the extent that tendering Stockholders are entitled
to withdrawal rights as set forth in this Section 4.
The reservation by Purchaser of the right to delay the acceptance or
purchase of or payment for Shares is subject to the provisions of Rule 14e-1(c)
under the Exchange Act, which requires Purchaser to pay the consideration
offered or return Shares deposited by or on behalf of Stockholders promptly
after the termination or withdrawal of the Offer.
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For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If certificates evidencing Shares have been delivered or otherwise
identified to the Depositary, then prior to the release of such certificates,
the tendering Stockholder must also submit the serial numbers shown on the
particular certificates evidencing the Shares to be withdrawn, and the signature
on the notice of withdrawal must be guaranteed by an Eligible Institution
(except in the case of Shares tendered for the account of an Eligible
Institution). If Shares have been tendered pursuant to the procedure for
book-entry transfer set forth in Section 3, the notice of withdrawal must
specify the name and number of the account at the applicable Book-Entry Transfer
Facility to be credited with the withdrawn Shares. All questions as to form and
validity (including time of receipt) of notice of withdrawal will be determined
by Purchaser, in its sole discretion, whose determination shall be final and
binding on all parties. No withdrawal of Shares shall be deemed to have been
properly made until all defects and irregularities have been cured or waived.
None of Purchaser, Parent, the Dealer Manager, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failing to give such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be tendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3 above.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER, THE MERGER AND THE
SPIN-OFF
The following is a summary of the material federal income tax consequences
of the Offer, the Merger and the Spin-Off to holders whose Shares are purchased
pursuant to the Offer or whose Shares are converted into the right to receive
the Merger Consideration in the Merger (including any cash amounts received by
dissenting Stockholders pursuant to the exercise of appraisal rights). The
discussion applies only to holders of Shares in whose hands Shares are capital
assets, and may not apply to Shares received pursuant to the exercise of
employee stock options or otherwise as compensation, or to holders of Shares who
are not citizens or residents of the United States.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON PRESENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED
BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER, THE
MERGER AND THE SPIN-OFF, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL
AND FOREIGN TAX LAWS.
Receipt of the Offer Price or the Merger Consideration. The receipt by a
holder of Shares of the Offer Price or the Merger Consideration (including any
cash amounts received by dissenting Stockholders pursuant to the exercise of
appraisal rights) in exchange for such Shares will be a taxable transaction for
federal income tax purposes. In general and subject to the effect of the
Spin-Off discussed below, for federal income tax purposes, a holder of Shares
will recognize gain (or loss) equal to the difference between his adjusted tax
basis in the Shares sold pursuant to the Offer or converted to cash in the
Merger and the amount of cash received therefor. Gain (or loss) must be
determined separately for each block of Shares (i.e., Shares acquired at the
same cost in a single transaction) sold pursuant to the Offer or converted to
cash in the Merger. Such gain (or loss) will be capital gain (or loss) and will
be long-term gain (or loss) if, on the date of sale (or, if applicable, the
Effective Time), the Shares were held for more than one year.
The Spin-Off. Contingent upon the consummation of the Offer, the Company
expects to declare a dividend payable to Stockholders of record immediately
prior to the acceptance of Shares in the Offer consisting of ownership interests
in an entity ("Spinco") that will own, directly or indirectly, certain real
property and related assets of the Company. Receipt by holders of Shares of the
stock of Spinco pursuant to the Spin-Off will be a taxable event. Following the
consummation of the Offer and the occurrence of the Merger, Purchaser currently
intends to cause the Company to file its tax returns and information returns on
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the basis that the Spin-Off is a distribution of the stock of Spinco subject to
Section 301 of the Internal Revenue Code of 1986, as amended (the "Code").
However, the authorities governing the treatment of the Spin-Off for federal
income tax purposes are unclear, and consequently, the amount and character of
the taxable income or loss recognized upon such receipt is uncertain.
Assuming the Spin-Off will be treated as a distribution subject to Section
301 of the Code, the amount of the distribution will equal the fair market value
of the shares of Spinco, and such distribution of the shares of Spinco will be
taxable to the holders of Shares at the time the shares of Spinco are
unqualifiedly subject to their demands. The amount distributed would be taxable
as a dividend (and hence as ordinary income) for federal income tax purposes to
the extent of the Company's current and accumulated earnings and profits
allocable to the distribution of the shares of Spinco. Under generally
applicable rules, the amount, if any, of the dividend that exceeds such earnings
and profits would first be treated as a non-taxable return of capital to the
extent of the Stockholder's tax basis in such Stockholder's Shares, and such
Stockholder's tax basis would be reduced accordingly (but not below zero), and
thereafter as capital gain, long-term capital gain if the holder has held the
Shares for more than one year. In the case of the Spin-Off, however, at the time
of the distribution of the stock of Spinco the holders of Shares who tendered
pursuant to the Offer will have previously disposed of such Shares in exchange
for the Offer Price (and, in the event the Merger occurs prior to the Spin-Off,
the holders of Shares receiving Merger Consideration will have previously
disposed of such Shares in exchange for Merger Consideration). As a result, if
the Spin-Off is taxed as a distribution under Section 301 of the Code and if the
amount of the distribution exceeds the allocable earnings and profits of the
Company, the proper calculation of the resultant gain (or loss) is unclear; the
amount, if any, of such excess may be treated as capital gain. The determination
of a corporation's earnings and profits requires complex factual and legal
analyses; moreover, the amount of a corporation's current earnings and profits
cannot be determined until the close of the taxable year of the distribution. To
the extent that the receipt of the Spinco shares is treated as a dividend under
the foregoing rules, certain corporate stockholders may be eligible for the
dividends received deduction with respect to such dividend, subject to certain
holding period and other limitations.
It is possible, however, that instead of being taxed for federal income tax
purposes as a distribution under Section 301 of the Code, the distribution of
the stock of Spinco would be taxed as consideration received in constructive
redemption of the Shares in conjunction with the sale of the Shares for the
Offer Price or the Merger Consideration, as the case may be. If this treatment
applies, a holder of Shares would recognize gain or loss equal to the difference
between (i) the sum of the Offer Price or the Merger Consideration and the fair
market value of the Spinco shares received and (ii) such holder's adjusted tax
basis in the Shares. Holders of Shares should be aware that because the Spin-Off
may occur in a taxable year which succeeds the year of receipt of the Offer
Price or the Merger Consideration, a Stockholder may be required to treat a
portion of such Stockholder's Shares (and hence a corresponding portion of such
Stockholder's adjusted tax basis in the Shares) as being redeemed by the Company
in exchange for the shares of Spinco. As a consequence, such Stockholder may
recognize a greater amount of capital gain in the earlier year than would be the
case if the Spin-Off is treated for tax purposes as giving rise to dividend
income (as discussed above), subject to recognizing correspondingly reduced
income equal to such allocated basis in Shares in the succeeding year. Any such
gain (or loss) (including with respect to a deemed redemption) will be capital
gain or loss and will be long-term capital gain (or loss) if, on the date of the
exchange, the Stockholder has held the Shares for more than one year.
Regardless of whether the receipt of the shares of Spinco is treated as a
distribution under Section 301 of the Code or as consideration for the
constructive redemption of shares, a holder's tax basis in the shares of Spinco
generally will be equal to the fair market value of the Spinco shares on the
date of the distribution, and a new holding period will begin for the Spinco
shares. In addition, the federal tax consequences described above may vary with
respect to persons who purchase Shares after the consummation of the Offer but
prior to the Effective Time of the Merger.
Backup Withholding. Payments in connection with the Offer, the Merger or
the Spin-Off may be subject to "backup withholding" at a 31% rate. Backup
withholding generally applies if the Stockholder (a) fails to furnish his social
security number or other taxpayer identification number ("TIN"), (b) furnishes
an
12
<PAGE> 13
incorrect TIN, (c) fails properly to report interest or dividends or (d) under
certain circumstances, fails to provide a certified statement, signed under
penalties of perjury, that the TIN provided is his correct number and that he is
not subject to backup withholding. Backup withholding is not an additional tax
but merely an advance payment, which may be refunded to the extent it results in
an overpayment of tax. Certain persons generally are exempt from backup
withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Each Stockholder should consult with
his own tax advisor as to his qualification for exemption from withholding and
the procedure for obtaining such exemption.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
According to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1995 (the "Company 10-K"), the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1996 (the "Company 10-Q") and
information supplied to Purchaser by the Company, the Shares commenced trading
on Nasdaq Stock Market under the symbol "TRSC" on December 18, 1979. Based on
the foregoing, the Company has never paid regular cash dividends on the Shares;
further, the Merger Agreement prohibits the Company from declaring or paying any
dividend or distribution on the Shares (other than the Spin-Off). The following
table sets forth, for the periods indicated, the high and low closing sales
prices per Share on the Nasdaq Stock Market.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
Fiscal Year 1995:
First Quarter....................................................... $5 3/8 $4 5/8
Second Quarter...................................................... 6 5
Third Quarter....................................................... 7 5/8 5 5/8
Fourth Quarter...................................................... 7 5/8 5 1/8
Fiscal Year 1996:
First Quarter....................................................... 6 3/8 5 1/4
Second Quarter...................................................... 6 3/4 5 1/2
Third Quarter....................................................... 6 7/8 5 1/4
Fourth Quarter...................................................... 6 5/8 4 3/4
Fiscal Year 1997:
First Quarter (through October 22, 1996)............................ 9 11/16 5
</TABLE>
On October 16, 1996, the last full trading day before the public
announcement of Purchaser's intention to acquire the Shares, the closing sales
price per Share on the Nasdaq Stock Market was $5.50. On October 22, 1996, the
last full trading day before the commencement of the Offer, the closing sales
price per Share on the Nasdaq Stock Market was $9 11/16 per Share. Stockholders
are urged to obtain current market quotations for the Shares.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NASDAQ STOCK MARKET
LISTING, EXCHANGE ACT REGISTRATION AND MARGIN SECURITIES
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
The extent of the public market for the Shares and, according to the
published guidelines of the NASD, the continued trading of the Shares on the
Nasdaq Stock Market, after commencement of the Offer, will depend upon the
number of holders of Shares remaining at such time, the interest in maintaining
a market in such Shares on the part of securities firms, the possible
termination of registration of such Shares under the Exchange Act, as described
below, and other factors.
13
<PAGE> 14
The Company has informed Purchaser that, as of September 30, 1996,
17,749,158 Shares were outstanding. If, as a result of the purchase of Shares
pursuant to the Offer or otherwise, trading of the Shares on the Nasdaq Stock
Market is discontinued, the liquidity of and market for the Shares could be
adversely affected. Purchaser cannot predict whether or to what extent the
reduction in the number of Shares that might otherwise trade publicly would have
an adverse or beneficial effect on the market price for or marketability of the
Shares or whether it would cause future prices to be greater or less than the
Offer Price.
The Shares are currently registered under Section 12(g) of the Exchange
Act. Registration of the Shares under the Exchange Act may be terminated upon
application by the Company to the Commission if the Shares are neither listed on
a national securities exchange nor held by more than 300 holders of record.
Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
its stockholders and to the Commission and could make certain provisions of the
Exchange Act no longer applicable to the Company such as the short-swing profit
recovery provisions of Section 16(b) of the Exchange Act, the requirement of
furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in
connection with stockholders' meetings and the related requirement of furnishing
an annual report to stockholders and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144 or
144A promulgated under the Securities Act of 1933, as amended, may be impaired
or eliminated.
Purchaser intends to seek to cause the Company to terminate the
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for such termination are met. If registration
of the Shares is not terminated prior to the Merger, the registration of the
Shares under the Exchange Act will be terminated following consummation of the
Merger.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the loan value of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares would
no longer be "margin securities" or be eligible for listing on the Nasdaq Stock
Market.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive offices
located at 3055 Triad Drive, Livermore, California 94550. According to the
Company 10-K, the Company is a leading provider of business and information
management solutions for the automotive aftermarket and the hardlines and lumber
industry. The Company offers customers a variety of proprietary database
products with periodic updates, software and hardware products, financing and
ongoing support services.
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted from the Company 10-K, the
Company 10-Q and the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1995. More comprehensive financial information is
included in such reports and other documents filed by the Company with the
Commission, and the following summary is qualified in its entirety by reference
to such reports and other documents and all of the financial information
(including any related notes) contained therein. Such reports and other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information".
14
<PAGE> 15
TRIAD SYSTEMS CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED YEAR ENDED SEPTEMBER 30,
JUNE 30, JUNE 30, ------------------------------
1996 1995 1995 1994
----------- ----------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Total revenues............................. $ 125,602 $ 127,270 $ 175,077 $ 167,278
Operating income........................... 1,542 14,075 20,532 19,361
Income (loss) before income taxes and
extraordinary
charge................................... (1,186) 8,819 13,591 11,902
Provision for (benefit from) income
taxes.................................... (451) 3,351 5,165 4,523
Income (loss) before extraordinary
charge................................... (735) 5,468 8,426 7,379
Extraordinary charge on repurchase of debt,
net of taxes............................. -- 153 396 143
Net income (loss).......................... (735) 5,315 8,030 7,236
</TABLE>
CONSOLIDATED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT JUNE 30, AT JUNE 30, ------------------------------
1996 1995 1995 1994
----------- ----------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Total current assets....................... $ 37,291 $ 37,913 $ 34,777 $ 38,386
Total assets............................... 134,059 131,087 132,709 136,363
Notes payable and current portion of
long-term debt........................... 7,575 6,699 3,032 6,773
Total current liabilities.................. 37,366 37,193 33,346 38,302
Long-term debt............................. 50,806 52,756 52,577 56,633
Total liabilities.......................... 119,533 122,114 118,488 124,222
Stockholders' equity....................... 14,526 8,973 14,221 12,141
</TABLE>
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act. In accordance therewith, the Company files
periodic reports, proxy statements and other information with the Commission
under the Exchange Act relating to its business, financial condition and other
matters. The Company is required to disclose in such proxy statements certain
information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company. Such reports, proxy statements and other
information may be inspected at the Commission's office at 450 Fifth Street,
N.W., Washington, D.C. 20549, and also should be available for inspection and
copying at the regional offices of the Commission located at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7
World Trade Center, 13th Floor, New York, New York 10048. Copies may be obtained
upon payment of the Commission's prescribed fees by writing to its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although Purchaser and Parent do not have any knowledge
that any such information is untrue, neither Purchaser nor Parent takes any
responsibility for the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may affect
the significance or accuracy of any such information.
15
<PAGE> 16
9. CERTAIN INFORMATION CONCERNING PURCHASER, PARENT, HICKS MUSE AND HM INC.
Purchaser, a Delaware corporation, was organized to acquire all the
outstanding Shares pursuant to the Merger Agreement and has not conducted any
unrelated activities since its organization. All of the outstanding capital
stock of Purchaser (the "Purchaser Stock") is owned by Glenn E. Staats and
Preston W. Staats, Jr., who are currently the sole stockholders of Parent (the
"Parent Stockholders"). Pursuant to the terms of the Securities Purchase
Agreement, the Parent Stockholders have agreed to contribute the Purchaser Stock
to Parent prior to the consummation of the Offer, as a result of which
contribution, Purchaser will become a wholly owned subsidiary of Parent. The
principal executive offices of Purchaser are located at 6207 Bee Cave Road,
Austin, Texas 78746.
Parent, a Texas corporation, is a provider of business and information
technology solutions to the automotive aftermarket industry. The principal
executive offices of Parent are located at 6207 Bee Cave Road, Austin, Texas
78746. Parent offers customers electronic catalogs, interchange and other
database products, as well as enterprise wide software applications integrated
with computer hardware and full implementation and ongoing support. Parent also
provides facilities management services to many of its large customers. Glenn E.
Staats and Preston W. Staats, Jr. may convey a significant portion of their
shares in Parent to certain employees and others in connection with the
transactions contemplated hereby.
Hicks Muse has agreed, pursuant to the Securities Purchase Agreement, to
make an equity investment in Parent simultaneously with the consummation of the
Offer, the proceeds of which investment Parent intends to contribute to
Purchaser to use, along with the proceeds of the Tender Facility (as defined
below), to purchase Shares in the Offer and to pay the expenses of the
transactions contemplated by the Offer. A portion of such equity investment may
be made by affiliates of Hicks Muse or by certain other persons designated by
Hicks Muse. The ultimate general partner of Hicks Muse is Hicks Muse Fund III
Incorporated, a Texas corporation ("HM Inc."). The principal executive offices
of Hicks Muse are located at 200 Crescent Court, Suite 1600, Dallas, Texas
75201. For a description of the Securities Purchase Agreement, see Section 10.
During the last five years, none of Purchaser, Parent, Hicks Muse or HM
Inc., or, to the best knowledge of Purchaser or Parent, any of the persons
listed in Schedule I (i) has been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) or (ii) was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
Federal or state securities laws or finding any violation of such laws. The
name, business address, present principal occupation or employment, five-year
employment history and citizenship of each director and executive officer of
Purchaser, Parent, and HM Inc. are set forth in Schedule I.
None of Purchaser, Parent, Hicks Muse or HM Inc. or, to the best knowledge
of Purchaser or Parent, any of the persons listed in Schedule I or any associate
or majority owned subsidiary of any such persons, beneficially owns or has a
right to acquire any equity security of the Company. None of Purchaser, Parent,
Hicks Muse or HM Inc. or, to the best knowledge of Purchaser or Parent, any of
the other persons referred to above, or any of the respective directors,
executive officers or subsidiaries of any of the foregoing, has effected any
transaction in any equity security of the Company during the past 60 days.
Except as described in this Offer to Purchase, (i) none of Purchaser,
Parent, Hicks Muse or HM Inc. or, to the best knowledge of Purchaser or Parent,
any of the persons listed in Schedule I has any contract, arrangement,
understanding or relationship (whether or not legally enforceable) with any
other person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against
loss, or the giving or withholding of proxies; (ii) there have been no contacts,
negotiations or transactions between Purchaser, Parent, Hicks Muse or HM Inc. or
any of their respective subsidiaries or, to the best knowledge of Purchaser or
Parent, any of the persons listed on Schedule I on the one hand, and the Company
or any of its directors, officers or affiliates, on the other hand, that are
required to be disclosed pursuant to the rules and regulations of the
Commission.
16
<PAGE> 17
10. SOURCE AND AMOUNT OF FUNDS
Parent and Purchaser estimate that the total amount of funds required by
the Purchaser to purchase all of the 17,749,158 Shares issued and outstanding,
the 1,838,190 Shares issuable upon the exercise of outstanding Triad Options and
the estimated 113,500 Shares issuable under the ESPP, pursuant to the Offer and
the Merger (net of proceeds receivable by the Company upon exercise of the Triad
Options and contributions under the ESPP aggregating $7.6 million) will be
approximately $174.7 million. In addition, Parent and Purchaser estimate that
the total amount of funds required to refinance certain existing indebtedness of
the Company and Parent, provide for working capital and pay fees and expenses
incurred in connection with the Offer and the Merger will be approximately $61.3
million.
The Parent and Purchaser expect to obtain debt and equity financing in an
aggregate amount of approximately $236 million for the purchase of Shares by the
Purchaser in the Offer and the payment of related fees and expenses, and the
refinancing of certain of existing indebtedness of the Company and Parent, of
which up to $140 million will be obtained from the bank facilities described
below, and a minimum of $95 million will be obtained from the sale by Parent of
its common stock to Hicks Muse (which amount will be contributed by Parent to
the capital of Purchaser (the "Equity Financing")). At the closing of the
Merger, Parent and Purchaser expect that the Company, as the Surviving
Corporation, will obtain the funds to refinance the borrowings of Parent,
Purchaser, and the Company under each of the Tender Facility and the Interim
Facility described below and to finance the purchase price of permitted
acquisitions and for general corporate purposes, through bank borrowings by the
Company in an aggregate amount of up to $170 million.
The following table has been prepared by Parent and Purchaser after
discussions with management of the Company and sets forth the approximate
amounts, proposed sources, and uses of funds necessary to consummate the Offer
and the Merger:
<TABLE>
<S> <C>
Sources:
Bank financing....................................................... $140,000,000
Sale of Common Stock................................................. 96,000,000
------------
Total........................................................ $236,000,000
============
Uses:
Purchase stock of the Company(1)..................................... $174,700,000
Refinance existing debt of the Company............................... 36,700,000
Refinance existing debt of Parent.................................... 5,100,000
Working capital requirements......................................... 4,000,000
Transaction costs.................................................... 15,500,000
------------
Total........................................................ $236,000,000
============
</TABLE>
- ---------------
(1) Amount represents the amount payable to purchase the 17,749,158 Shares
issued and outstanding, the 1,838,190 Shares issuable upon the exercise of
outstanding Triad options and the estimated 113,500 Shares issuable under
the ESPP, net of proceeds receivable by the Company upon exercise of the
Triad Options and contributions under the ESPP aggregating $7.6 million).
Credit Facilities
The following is a summary of the material terms of the Bank Commitment
Letter (as defined below). This summary is not a complete description of the
terms and conditions thereof and is qualified in its entirety by reference to
the full text thereof which is incorporated herein by reference and a copy of
which has been filed with the Commission as an exhibit to the Schedule 14D-1.
The Bank Commitment Letter may be examined, and copies thereof may be obtained,
as set forth in Section 8 above.
Pursuant to a commitment letter, dated October 16, 1996, among Purchaser,
the Chase Manhattan Bank ("Chase") and Chase Securities Inc. ("CSI") (the "Bank
Commitment Letter"), Chase has committed to provide for (i) a senior credit
facility of up to $103.5 million, which may be used to finance the Offer (and a
17
<PAGE> 18
portion of which may be used by Parent in order to refinance certain of its
indebtedness and to provide for its general corporate requirements) (the "Tender
Facility"), (ii) a senior credit facility of up to $36.5 million to be made
available to the Company until the date of the Merger to provide for the
refinancing or defeasance of certain indebtedness of the Company (the "Interim
Facility") and (iii) a senior credit facility of up to $170.0 million which may
be used in order to finance the Merger and certain related expenses, to
refinance certain indebtedness of the Company (including the Interim Facility),
to repay amounts owing under the Tender Facility and to provide financing for
future acquisitions in the same line of business and for other general corporate
purposes (the "Merger Facility", and together with the Tender Facility and the
Interim Facility, the "Credit Facilities").
Chase's commitment under the Bank Commitment Letter and CSI's agreement to
perform the services described therein are subject to (a) their not becoming
aware after the date of the Bank Commitment Letter of any information or other
matter which in their reasonable judgment (i) is materially inconsistent in a
material and adverse manner with any information or other matter disclosed to
them prior to the date of the Bank Commitment Letter (including any material
potential liability or contingent obligation not reflected in the Projections
(as defined in the Bank Commitment Letter)) or (ii) could reasonably be expected
to have a material adverse effect on the business, operations, financial
condition or prospects of Parent, Purchaser, the Company and their subsidiaries
taken as a whole or on their ability to perform the covenants and obligations in
a timely manner under the financing agreements, (b) there not having occurred a
material disruption of or material adverse change in financial, banking or
capital market conditions that, in their reasonable judgment, could materially
impair the syndication of any of the Credit Facilities, (c) their satisfaction
that there shall have been no competing offering, placement or arrangement of
any debt securities or bank financing by or on behalf of Parent, Purchaser, the
Company, Hicks Muse or any of their respective affiliates prior to and during
the syndication of the Credit Facilities (which, in the case of Hicks Muse or
any of its other affiliates, would materially impair the syndication of the
Credit Facilities), (d) the negotiation, execution and delivery on or before
January 15, 1997 of definitive documentation with respect to the Credit
Facilities reasonably satisfactory to Chase and its counsel and (e) the other
conditions set forth in the term sheets included in the Bank Commitment Letter.
Tender Facility. The borrower of the Tender Facility will be Purchaser,
provided that to the extent that Parent will refinance any of its existing
indebtedness of up to $5.1 million (the "Parent Refinancing") or will require
funds for its general corporate purposes of up to $3.4 million, Parent will be
permitted to be a borrower or Purchaser will be permitted to make intercompany
advances to Parent therefor (the "Parent Uses"). Loans under the Tender Facility
will be available for multiple draws (the "Tender Loans") which, once repaid,
may not be reborrowed. The proceeds of the Tender Loans will be used to finance,
in part, (i) the acquisition by Purchaser of not less than 51% of the Shares,
(ii) the payment of interest, fees and other expenses incurred in connection
with the Offer and the Merger and (iii) the Parent Uses. The Tender Facility
will be repayable at any time after three months following the closing date upon
demand but in no event later than the earlier of the date of the Merger and six
months after the closing date.
The Tender Loans bear interest at floating rates (equalling the highest of
(i) the prime rate announced by Chase, (ii) the secondary market rate for
certificates of deposit plus 1% or (iii) the federal funds effective rate from
time to time plus 0.5%) or Eurodollar rates, plus certain applicable margins.
The Tender Facility will be guaranteed by Parent and each of its direct and
indirect subsidiaries other than the Company and its subsidiaries and certain
foreign subsidiaries (each of Parent and such subsidiaries being referred to as
a "Tender Credit Party"). The Tender Facility will be secured by a perfected
first priority pledge of (i) all of the capital stock of Purchaser and, unless
Purchaser owns at least 90% of all of the shares of the Company, all shares of
the Company owned by Purchaser or any affiliate or designee thereof, whether
acquired in the Offer or otherwise, (ii) all intercompany notes, and (iii) to
the extent permitted under its existing contractual obligations, the material
tangible and intangible assets of Parent.
The definitive financing documentation with respect to the Tender Facility
will contain customary representations, warranties and covenants (including,
without limitation the following: limitations on indebtedness; liens; mergers,
consolidations, liquidations, and dissolutions; sales of assets; leases;
dividends, stock
18
<PAGE> 19
repurchases and other payments in respect of capital stock; capital
expenditures; investments, loans and advances; optional payments of subordinated
debt; modifications of equity and debt instruments; transactions with
affiliates; sale and leasebacks; changes in fiscal year; negative pledge
clauses; and, in the case of Purchaser, conduct of business or the incurrence of
liabilities other than those related to the Offer and the Merger). Certain
negative covenants will include customary exceptions. The Tender Facility will
also contain customary events of default (including nonpayment of principal when
due, nonpayment of interest, fees or other amounts within certain time periods,
material inaccuracy of representations and warranties, violation of covenants
with a grace period in the case of certain affirmative covenants, cross-default,
bankruptcy, certain ERISA events, material judgments, actual or asserted
invalidity of any loan document or change of control).
Chase's obligation to fund the Tender Facility is contingent upon a number
of material conditions, including: (i) each Tender Credit Party shall have
executed and delivered satisfactory definitive financing documentation with
respect to the Tender Facility; (ii) Parent shall have received the Equity
Financing and shall have contributed all proceeds thereof to Purchaser for use
in connection with the Offer; (iii) the Offer shall have been (or shall
concurrently be) consummated pursuant to the Merger Agreement; the Spin-Off
shall have occurred prior to (or concurrently with) the Merger as contemplated
in the Merger Agreement in such a manner as to provide the Company with a
release in respect of its indebtedness secured by the real estate distributed
pursuant thereto; and no material provision of the Merger Agreement or the
Securities Purchase Agreement shall have been amended, supplemented, waived or
otherwise modified without the prior written consent of Chase, as agent under
the Credit Facilities (the "Agent"); (iv) the Board shall have approved the
Offer; (v) Purchaser shall have acquired, concurrently with the making of the
first loans not less than 51% of the Common Stock of the Company, and there
shall not have been any material change in the Shares outstanding on October 16,
1996 (net of treasury shares and after giving effect to any dilution), other
than the issuance of options to acquire shares under the Company's stock option
plans as of such date; (vi) the documents and materials filed publicly by
Parent, Purchaser and the Company in connection with the Offer and the Merger
shall be reasonably satisfactory in form and substance to the Agent; (vii) the
capital structure, corporate structure, ownership and management of each Tender
Credit Party after the Offer and as contemplated by the Merger Agreement shall
be reasonably satisfactory in all respects, Parent, Purchaser and their
subsidiaries shall have no outstanding indebtedness, liens or preferred equity
after giving effect to the Offer other than indebtedness or liens under the
Tender Facility or existing on October 16, 1996 (to the extent not refinanced in
the Parent Refinancing), and such other indebtedness, liens or preferred equity
as shall be approved by the Lenders, and the sources and uses of funding for the
Offer and Merger shall be as set forth in the Bank Commitment Letter; (viii) all
fees and expenses required to be paid on or before the closing date to the
Lenders, the Agent and CSI shall have been paid; (ix) all governmental,
shareholder and third party approvals necessary or advisable in connection with
the Offer, the Merger, the financing contemplated by the Bank Commitment Letter
and the continuing operations of Parent, Purchaser, the Company and their
subsidiaries after the Offer, the Merger and the contemplated contribution (the
"Surviving Corporation Contribution") by Parent after the consummation of the
Merger of its assets (other than the stock of the Surviving Corporation) to the
Surviving Corporation shall have been obtained and be in full force and effect
(or there shall be a plan reasonably satisfactory to the Agent for obtaining
thereof) and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the Offer, the
Merger, the Surviving Corporation Contribution or the financing thereof; (x) the
Lenders shall have received (A) a satisfactory projected pro forma balance sheet
of Parent, Purchaser, the Company and their subsidiaries as at the closing date,
consistent with the statement of proposed sources and uses as set forth in the
Bank Commitment Letter, (B) audited financial statements of the Company for 1992
through 1995, (C) unaudited financial statements of the Parent for 1992 through
1995 and satisfactory evidence of a satisfactory review thereof by a nationally
recognized accounting firm, and (D) unaudited interim combined financial
statements of each of Parent, Purchaser, the Company for each fiscal month (if
reasonably available) and quarterly period ended subsequent to December 31, 1995
as to which such financial statements are available, and such financial
statements shall not, in the reasonable judgment of the Lenders, reflect any
material adverse change in the financial condition of any of them as reflected
in the financial statements or projections previously furnished to the Lenders,
and the Lenders shall be satisfied that projected combined financial results for
Parent, Purchaser
19
<PAGE> 20
and the Company for the 1996 fiscal year will be achieved; (xi) the Lenders
shall have received a reasonably satisfactory business plan or budget for Parent
and Purchaser and their subsidiaries (including the Company) (the "Business
Plan") for the remainder of the 1996 fiscal year and the fiscal year 1997; (xii)
the Lenders shall be satisfied that, following the Offer, the Merger and the
Surviving Corporation Contribution, the leasing subsidiaries of the Surviving
Corporation will have available to them independent financing in amounts and on
terms that will enable them to support the sales of the Surviving Corporation as
necessary to achieve the Business Plan; (xiii) the Lenders shall have received
the results of a recent lien, tax and judgment search and such search shall
reveal no liens on any of their assets (other than the real estate which is the
subject of the Spin-Off) except for liens permitted by the credit documentation
or liens to be discharged in connection with the contemplated transactions;
(xiv) all actions necessary or advisable to perfect the lien of the Agent shall
have been taken and all fees shall have been paid or duly provided for; (xv) the
Agent shall have received satisfactory evidence that the fees and expenses to be
incurred in connection with the Offer, the Merger and the financing thereof
shall not exceed an amount reasonable and customary for transactions of this
type; (xvi) the Lenders shall have received a satisfactory solvency opinion from
an independent valuation firm satisfactory to the Agent which shall document the
solvency of Parent, Purchaser, the Surviving Corporation and their subsidiaries
taken as a whole after giving effect to the Offer, the Merger, the Surviving
Corporation Contribution and the other transactions contemplated hereby; (xvii)
the Lenders shall have received a satisfactory environmental audit or review
with respect to the material real property owned or leased by Parent, Purchaser,
the Company and their subsidiaries; (xviii) the Agent shall have determined that
reasonably satisfactory insurance relating to Parent, Purchaser, the Company and
their subsidiaries will be in place after the Offer and the Merger; (xiv) the
leases entered into by Parent in connection with the Spin-Off shall be on terms
and conditions reasonably satisfactory to the Agent; (xv) the Lenders shall have
received such legal opinions, documents and other instruments as are customary
for transactions of this type or as they may reasonably request.
Chase's obligations to fund each Tender Loan are subject to certain
on-going conditions including: (i) all representations and warranties in the
definitive financing documentation with respect to the Tender Facility
(including, without limitation, the material adverse change and litigation
representations) being true and correct in all material respects and (ii) there
being no default or event of default in existence at the time of, or after
giving effect to the making of, such Tender Loan.
Interim Facility. The borrower of the Interim Facility will be the Company.
Loans under the Interim Facility will be available for multiple draws (the
"Interim Loans") which, once repaid, may not be reborrowed. The Interim Loans
will be used to finance, in part, the refinancing or defeasance of the existing
indebtedness of the Company. The Interim Loans will be repayable at any time
after three months following the closing date of the Interim Facility upon
demand but in no event later than the earlier of the date of the Merger and six
months after such closing date.
The Interim Loans bear interest at a floating rate (equalling the highest
of (i) the prime rate announced by Chase, (ii) the secondary market rate for
certificates of deposit plus 1% or (iii) the federal funds effective rate from
time to time plus 0.5%) or Eurodollar rates, plus certain applicable margins.
The Interim Facility will be guaranteed by each of the direct and indirect
subsidiaries of the Company (each, an "Interim Credit Party") other than certain
foreign subsidiaries. The Interim Facility will be secured by a perfected first
priority security interest in all of the material tangible and intangible assets
of the Company and its subsidiaries to the extent permitted under the existing
contractual obligations of the Company and its subsidiaries.
The Interim Facility will contain customary representations, warranties and
covenants (including, without limitation, limitations on indebtedness; liens;
mergers, consolidations, liquidations, and dissolutions; sales of assets;
leases; dividends, stock repurchases and other payments in respect of capital
stock; capital expenditures; investments, loans and advances; optional payments
of subordinated debt; modifications of equity and debt instruments; transactions
with affiliates; sale and leasebacks; changes in fiscal year; negative pledge
clauses). Certain negative covenants will include customary exceptions. The
Interim Facility will also contain customary events of default (including
nonpayment of principal when due, nonpayment of interest,
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fees or other amounts within certain time periods, material inaccuracy of
representations and warranties, violation of covenants with a grace period in
the case of certain affirmative covenants, cross-default, bankruptcy, certain
ERISA events, material judgments, actual or asserted invalidity of any loan
document or change of control).
Chase's obligations to lend under the Interim Facility is contingent upon a
number of material conditions, including: (i) each Tender Credit Party shall
have executed and delivered satisfactory definitive financing documentation with
respect to the Tender Facility, (ii) the first loans shall have been made under
the Tender Facility and the conditions precedent thereto shall have been
satisfied, (iii) all actions necessary or advisable to perfect the lien of the
Agent shall have been taken and all fees shall have been paid or duly provided
for, and (iv) the Lenders shall have received such legal opinions, documents and
other instruments as are customary for transaction of this type or as they may
reasonably request.
Chase's obligations to fund each Interim Loan are subject to certain
on-going conditions including: (i) all representations and warranties in the
definitive financing documentation with respect to the Interim Facility
(including, without limitation, the material adverse change and litigation
representations) being true and correct in all material respects and (ii) there
being no default or event of default in existence at the time of, or after
giving effect to the making of, such Interim Loan.
Merger Facility. The borrower of the Merger Facility will be the Company,
as the Surviving Corporation. Loans under the Merger Facility will be available
in the form of a six-year senior secured $135.0 million term loan (the "Term
Loan") and a six-year senior secured $35.0 million revolving loan (the
"Revolving Loan" and together with the Term Loan, the "Merger Loans"), of which
up to an agreed amount may be used for letters of credit and swing line loans.
The Term Loan will be repayable pursuant to an amortization schedule to be
agreed upon, and the Revolving Loan is repayable on a date approximately six
years after the closing date of the Merger Facility. The proceeds of the Term
Loan will be used to (i) refinance the borrowings of Purchaser and Parent under
the Tender Facility, (ii) finance the payment of the consideration payable in
the Merger to remaining holders of shares, (iii) refinance all or such portion
of the indebtedness of the Company outstanding after the Merger, including the
Interim Facility, (iv) pay fees and expenses of the Merger and the Tender Offer,
and (v) to finance general corporate expenditures. The proceeds of the Revolving
Loan shall be used for working capital purposes and other general corporate
purposes of the Company and its subsidiaries and, for the Merger in an amount
not to exceed $5.0 million.
The Merger Loans will bear interest at a floating rate (equalling the
highest of (i) the prime rate announced by Chase, (ii) the secondary market rate
for certificates of deposit plus 1% or (iii) the federal funds effective rate
from time to time plus 0.5%) or Eurodollar rates, plus certain applicable
margins.
The Merger Loans will be subject to mandatory prepayment provisions from
the net proceeds from sales or issuances of debt or equity, the sale or other
disposition by Parent, the Company or any of their respective subsidiaries of
assets and excess cash flow, subject to certain exceptions.
The Merger Facility will be guaranteed by Parent and each of its direct and
indirect subsidiaries (each a "Merger Credit Party") other than the Company and
certain foreign subsidiaries. The Merger Facility will be secured by a perfected
first priority security interest in (i) all of the capital stock of the Company
and each of its direct and indirect subsidiaries (provided that if the pledge of
all of the capital stock of any foreign subsidiary would have adverse tax
consequences, only 65% of the capital stock of such foreign subsidiary shall be
required to be pledged) and (ii) all tangible and intangible assets except for
those assets as to which the agent shall determine that the costs of obtaining
such a security interest are excessive in relation to the value of the security
to be afforded thereby.
The Merger Facility will contain customary representations, warranties and
covenants (including, without limitation, the following: limitations on
indebtedness; liens; mergers, consolidations, liquidations, and dissolutions;
sales of assets; leases; dividends, stock repurchases and other payments in
respect of capital stock; capital expenditures; investments, loans and advances;
optional payments of subordinated debt; modifications of equity and debt
instruments; transactions with affiliates; sale and leasebacks; changes in
fiscal year; negative pledge clauses; changes in lines of business; and changes
in passive holding company status of Parent after the
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consummation of the Merger). The Merger Facility will also contain customary
events of default (including nonpayment of principal when due, nonpayment of
interest, fees or other amounts within certain time periods, material inaccuracy
of representations and warranties, violation of covenants with a grace period in
the case of certain affirmative covenants, cross-default, bankruptcy, certain
ERISA events, material judgments, actual or asserted invalidity of any loan
document or change of control).
Chase's obligations to lend under the Merger Facility is contingent upon a
number of material conditions, including: (i) each Merger Credit Party shall
have executed and delivered satisfactory definitive financing documentation with
respect to the Merger Facility, (ii) all obligations of Purchaser or the
Surviving Corporation under the Tender Facility and the Company under the
Interim Facility shall have been refinanced with the proceeds of the Merger
Facility, (iii) the Spin-Off shall have occurred on a basis that provides to the
Company a release from its obligations under the indebtedness secured by the
underlying real estate, the Merger shall have been (or shall be concurrently
therewith) consummated pursuant to the Merger Agreement and all required
stockholder approval to effect the Merger shall have been obtained, and no
material provision of the Merger Agreement shall have been amended,
supplemented, waived or otherwise modified without the prior written consent of
the Agent; (iv) except for certain agreed indebtedness, neither Purchaser nor
the Surviving Corporation shall have any outstanding indebtedness, liens or
preferred equity after giving effect to the Merger other than such indebtedness,
liens or preferred equity as shall be approved by the Lenders, (v) the documents
and materials filed publicly by Parent, Purchaser and the Company in connection
with the Offer and the Merger shall have been furnished to the Agent, (vi) the
Lenders, the Agent and CSI shall have received all fees and expenses required to
be paid on or before the closing date; (vii) except for certain agreed
approvals, all governmental, shareholder and third party approvals necessary or
advisable in connection with the Merger, the Spin-Off, the Surviving Corporation
Contribution, the financing contemplated by the Bank Commitment Letter and the
continuing operations of Parent, Purchaser and their subsidiaries after the
Merger and the Surviving Corporation Contribution shall have been obtained and
be in full force and effect and all applicable waiting periods shall have
expired without any action being taken or threatened by any competent authority
which would restrain, prevent or otherwise impose adverse conditions on the
Offer, the Merger, the Spin-Off, the Surviving Corporation Contribution or the
financing thereof; (viii) all actions necessary or advisable to perfect the lien
of the Agent shall have been taken and all fees shall have been paid or duly
provided for; (ix) the Agent shall have received satisfactory evidence that the
fees and expenses to be incurred in connection with the Offer, the Merger and
the financing thereof shall not exceed an amount reasonably and customary for
transactions of this type; (x) the Agent shall have determined that reasonably
satisfactory insurance relating to Parent, Purchaser, the Company and their
subsidiaries will be in place after the Offer and the Merger; and (xi) the
Lenders shall have received such legal opinions, documents and other instruments
as are customary for transactions of this type or as they may reasonably
request.
Chase's obligations to fund each Merger Loan are subject to certain
on-going conditions including: (i) all representations and warranties in the
definitive financing documentation with respect to the Merger Facility
(including, without limitation, the material adverse change and litigation
representations) being true and correct in all material respects and (ii) there
being no default or event of default in existence at the time of, or after
giving effect to the making of, such Merger Loan.
The margin regulations promulgated by the Federal Reserve Board place
restrictions on the amount of credit that may be extended for the purposes of
purchasing margin stock (including the Shares) if such credit is secured
directly or indirectly by margin stock. The Purchaser believes that the
financing of the acquisition of the Shares will be in full compliance with or
not subject to the margin regulations.
THE SECURITIES PURCHASE AGREEMENT
The following is a summary of the material terms of the Securities Purchase
Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is incorporated herein by reference and a copy of which has
been filed with the Commission as an exhibit to the Schedule 14D-1. The
Securities Purchase Agreement may be examined, and copies thereof may be
obtained, as set forth in Section 8 above.
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Pursuant to the Securities Purchase Agreement, Hicks Muse has agreed to
make the Equity Financing simultaneously with the consummation of the Offer, the
proceeds of which Parent intends to contribute to Purchaser to use, along with
the proceeds from the Tender Facility, to purchase the Shares in the Offer and
to pay the expenses of the transactions contemplated by the Offer.
The Securities Purchase Agreement provides that prior to and as a condition
of the Equity Financing, the Parent Stockholders will contribute all the capital
stock of Purchaser to Parent, at which time Purchaser will become a wholly owned
subsidiary of Parent. The Securities Purchase Agreement also provides that
Applied Data Specialty, Inc. and Canadian Aftermarket Network, Inc., which are
affiliates of Parent (wholly owned by the Parent Stockholders), will be merged
with and into Parent prior to and as a condition to the Equity Financing. Hicks
Muse's obligation to consummate the Equity Financing is also conditioned upon
there being validly tendered and not withdrawn prior to the time the Offer
expires a number of Shares which constitutes at least 51% of the Shares on a
fully-diluted basis and such Shares having been accepted for payment by
Purchaser in accordance with the terms of the Offer and the Offer having
otherwise been consummated.
In addition, the Equity Financing is conditioned upon certain other
customary closing conditions, including but not limited to (i) the
representations and warranties of Parent and the Parent Stockholders being true
and complete in all material respects as of the closing of the Equity Financing,
(ii) Parent and the Parent Stockholders having complied with and performed all
of their covenants and conditions to be complied with or performed prior to
closing (iii) Parent having obtained all approvals, consents or waivers
scheduled in the Securities Purchase Agreement or required to be scheduled
therein or necessary or advisable to the consummations of the transactions
contemplated thereby (iv) the expiration or termination of the applicable HSR
Act waiting period and (v) there being no order, decree or judgement of any
court, agency or governmental entity (as defined therein) being rendered against
any party to the Securities Purchase Agreement which would render it unlawful as
of the closing date to effect the transactions contemplated thereby in
accordance with its terms.
The Securities Purchase Agreement provides that it may be terminated (i) by
mutual written consent of Hicks Muse and Parent; (ii) by either Hicks Muse or
Parent if the closing of the Equity Financing shall not have occurred on or
before February 1, 1997; (iii) by either Hicks Muse or Parent if there shall
have been entered a final, nonappealable order or injunction or any governmental
entity restraining or prohibiting the consummation of the transactions
contemplated hereby or any material part thereof; (iv) by either Hicks Muse or
Parent if, prior to the closing, Parent or the Parent Stockholders with respect
to Hicks Muse, or Hicks Muse with respect to Parent, is in material breach of
any representation, warranty, covenant or agreement contained in the Securities
Purchase Agreement and such breach shall not be cured within fifteen (15) days
of the date of notice of default served by the party claiming such material
default, provided that such terminating party shall not also be in material
breach of such agreement at the time notice of termination is delivered; (vi) by
either Hicks Muse or Parent if the Merger Agreement shall have been terminated;
or (vii) by Hicks Muse in the event it shall request Parent to terminate the
Merger Agreement or Offer in accordance with its rights under the Securities
Purchase Agreement.
The Securities Purchase Agreement provides that without the express written
consent of Hicks Muse, neither Parent nor Purchaser shall amend or modify the
Merger Agreement or the terms of the Offer or waive any condition of or right
under or with respect to the Offer or the Merger Agreement. Each of Parent and
Purchaser also agrees to exercise its rights under the Merger Agreement in
accordance with the reasonable requests of Hicks Muse (including without
limitation the right to terminate the Merger Agreement in the event it has such
right). Notwithstanding the foregoing, neither Parent nor Purchaser is required
to take any action that would cause it to breach the Merger Agreement. Further,
nothing in the Securities Purchase Agreement prevents Parent or Purchaser from
terminating the Merger Agreement or the Offer in accordance with their
respective terms without the consent of Hicks Muse.
Pursuant to the Securities Purchase Agreement in the event the Offer is not
consummated and Parent, Canadian Aftermarket Network, Inc. or Applied Data
Specialty, Inc. receives any fee from the Company or any of its affiliates (as
defined) in the nature of a topping fee, bust-up fee or any similar arrangement
(the "Company Topping Fee"), such company agrees to pay to Hicks Muse a fee
equal to 50% of the Company
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Topping Fee after deduction of any portion of such fee Purchaser and its
affiliates are required to pay to their financing sources for the Offer (other
than to Parent and Hicks Muse and their affiliates).
11. BACKGROUND OF THE OFFER
During the period from August 1994 through January 1996, certain members of
senior management of the Company and Parent met on at least five occasions and
discussed, in general terms, a possible business alliance or business
combination between Parent and the Company. Although neither price nor the
specific terms of any business combination were discussed at any of the
meetings, it was assumed by the parties that the Company, as a public company,
would be the surviving entity in any business combination. Following the January
1996 meeting, management of Parent determined that acquisition of the Company by
Parent would best enable Parent and its shareholders to achieve their strategic
goals.
In June 1996, Hicks Muse and Parent entered into a confidentiality
agreement whereby Hicks Muse agreed to treat as confidential certain information
provided to it by Parent. During June and July 1996, on several occasions
representatives of Parent met, and had telephone conversations, with
representatives of Hicks Muse regarding a potential acquisition of the Company
by Parent. During this period, representatives of Hicks Muse conducted a due
diligence review of Parent. At certain of the meetings, Parent made a formal
presentation regarding the potential acquisition, including estimates of
requisite financing, market information, and pro forma financial information and
projections (which, with respect to the Company, were based solely on the
publicly-available information filed by the Company with the Commission). In
July 1996, Parent received a verbal commitment from Hicks Muse that Hicks Muse
or an affiliate thereof would provide equity financing for the acquisition by
Parent of the Company and would also assist in arranging debt financing for the
transaction.
During the last week of July and first two weeks of August 1996,
representatives of CSI and Coopers & Lybrand visited Parent's offices to conduct
a due diligence review of Parent. At the conclusion of their due diligence
review, Chase made an oral commitment, subject to certain conditions, to provide
debt financing for the acquisition of the Company by Parent.
On August 21, 1996 members of senior management of Parent met with members
of senior management of the Company and a representative of Richard C. Blum &
Associates, L.P. ("Blum") at the Company's offices in Livermore, California.
Blum is the beneficial owner of approximately 11.3% of the Company's outstanding
Shares and Richard C. Blum, Chairman and President of Blum, is a director of the
Company. At that meeting, Parent first introduced the idea of an acquisition of
the Company by Parent or an affiliate thereof and indicated that it had arranged
for the financing of such a transaction. The meeting was adjourned and
reconvened on August 22, 1996. Messrs. Hicks and Blum, along with other
representatives of Blum, joined the reconvened meeting, at which time the
possible transaction was discussed. At that meeting, Parent stated that it was
prepared to proceed with an acquisition of the Company at a price of $7.50 per
share. This proposal did not contemplate the Spin-Off, which was subsequently
negotiated by the parties. The participants also discussed the possibility of
Blum rolling over the Shares beneficially owned by it into an investment in
Parent in connection with an acquisition of the Company by Parent. Accordingly,
on August 29, 1996, Parent and Blum entered into a confidentiality agreement
whereby Blum agreed to treat as confidential certain information provided to it
by Parent. On September 3 and 4, 1996, representatives of Blum visited Parent's
headquarters to conduct a due diligence review of Parent. Representatives of
Hicks Muse were also present.
On September 5, 1996, during a regularly scheduled meeting of the Board,
the potential acquisition by Parent was discussed generally by the Board. The
Board authorized the Company to continue discussions with Parent regarding a
potential transaction. In connection therewith, Mr. Blum informed Mr. Hicks (a)
that Blum was not willing to consider any transaction that was not made
available to all stockholders of the Company and (b) that although the Board was
prepared to entertain Parent's proposal, it considered the price of $7.50 per
Share inadequate.
On September 9, 1996, Blum informed Parent in writing that Blum would not
participate in a transaction involving the Company that was not made available
to all of the Company's stockholders. Accordingly, Blum decided that it would
not roll over its investment in the Company into Parent.
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On September 24, 1996, Hicks Muse delivered a commitment letter to Parent
providing for, among other things and subject to certain conditions, an
investment by Hicks Muse or an affiliate thereof in the common equity of Parent,
and the purchase of debt securities of Parent to be funded at the consummation
of the Merger.
On September 27, 1996, Hicks Muse delivered a letter to the Company stating
that Hicks Muse and Parent were prepared to offer to purchase all of the
outstanding Shares at a price of $9 per Share in cash. This proposal also did
not contemplate the Spin-Off which was subsequently negotiated by the parties.
On October 3, 1996, the Board held a special meeting to review the proposed
offer from Hicks Muse and Parent and concluded that, in order to maximize the
consideration to be received by the Company's stockholders, the real estate
owned by the Company in Livermore, California, should be excluded from the
transaction and the Company should seek an increase in the cash price per share.
Over the next two weeks, representatives of Parent, the Company, Hicks Muse and
Blum negotiated the details of the structure of the transaction, including the
Spin-Off and the Offer Price.
On October 16, 1996, Chase and CSI delivered the Bank Commitment Letter to
Purchaser regarding certain debt financing in connection with the Offer and the
Merger, subject to the terms and conditions set forth therein.
On October 16, 1996, the Board unanimously approved the Offer, the Merger,
the Merger Agreement, and the Spin-Off at a special meeting, and, in the early
morning hours of October 17, 1996, Purchaser, Parent and the Company executed
the Merger Agreement, and Parent, the Company and the Selling Stockholders
executed the Stockholders Agreement. On October 17, 1996, the Company and Parent
issued a joint press release announcing the execution of the Merger Agreement.
On October 23, 1996, Purchaser commenced the Offer.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER
AGREEMENT; THE STOCKHOLDERS AGREEMENT; THE RIGHTS AGREEMENT; THE SPIN-OFF;
OTHER MATTERS
Purpose of the Offer and the Merger; Plans for the Company
The purpose of the Offer and the Merger is to enable Parent, through
Purchaser, to acquire, in one or more transactions, control of the Board, and
the entire equity interest in, the Company. The Offer is intended to increase
the likelihood that the Merger will be completed promptly.
Parent intends, from time to time after completion of the Offer, to
evaluate and review the Company's assets, operations, management and personnel
and consider what, if any, changes would be desirable in light of circumstances
which then exist. Parent reserves the right to take such actions or effect such
changes as it deems advisable.
Following the completion of the Merger, Parent presently intends to
integrate the Company's business with Parent's existing operations. Parent
regards this integration as an opportunity to achieve certain cost savings.
Except as noted in this Offer to Purchase, Purchaser and Parent have no
present plans or proposals that would result in an extraordinary corporate
transaction, such as a merger, reorganization, liquidation, or sale or transfer
of a material amount of assets, involving the Company or any subsidiary or any
other material changes in the Company's capitalization, dividend policy,
corporate structure, business or composition of its management.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which is
incorporated herein by reference and a copy of which has been filed with the
Commission as an exhibit to the Schedule 14D-1. The Merger Agreement may be
examined, and copies thereof may be obtained, as set forth in Section 8 above.
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The Offer. The Merger Agreement provides for the commencement of the Offer,
in connection with which the Purchaser has expressly reserved the right to waive
certain conditions of the Offer; however, without the prior written consent of
the Company, Purchaser has agreed not to (i) decrease the Offer Price or the
form of consideration therefor or decrease the number of Shares sought pursuant
to the Offer, (ii) change, in any material respect, the conditions to the Offer,
(iii) impose additional material conditions to the Offer, (iv) waive the
condition that there shall be validly tendered and not withdrawn prior to the
time the Offer expires a number of Shares which constitutes at least 51% of the
Shares outstanding on a fully-diluted basis (as defined in the Merger Agreement)
on the date of purchase, (v) extend the expiration date of the Offer (except
that Purchaser may extend the expiration date of the Offer (a) as required by
law, (b) for up to ten business days after the initial expiration date or for
longer periods (not to exceed 90 calendar days from the date of commencement) in
the event that any condition to the Offer is not satisfied, or (c) for one or
more times for an aggregate period of up to 15 days (not to exceed 90 calendar
days from the date of commencement) for any reason other than those specified in
the immediately preceding clauses (a) or (b)), or (vi) amend any term of the
Offer in any manner materially adverse to holders of Shares; provided, however,
that, except as set forth above, Purchaser may waive any other condition to the
Offer in its sole discretion; and provided further, that the Offer may be
extended in connection with an increase in the consideration to be paid pursuant
to the Offer so as to comply with applicable rules and regulations of the
Commission.
Board Representation. The Merger Agreement provides that promptly upon the
purchase by Parent or any of its subsidiaries of such number of Shares which
represents at least 51% of the outstanding Shares on a fully-diluted basis (as
defined in the Merger Agreement), and from time to time thereafter, Parent shall
be entitled to designate such number of directors, rounded up to the next whole
number (but in no event more than one less than the total number of directors of
the Board of the Company) as will give Parent, subject to compliance with
Section 14(f) of the Exchange Act, representation on the Board equal to the
product of (x) the number of directors on the Board (giving effect to any
increase in the number of directors pursuant to the Merger Agreement) and (y)
the percentage that such number of Shares so purchased bears to the aggregate
number of Shares outstanding (such number being the "Board Percentage"). The
Company has agreed, upon request of Parent, to promptly satisfy the Board
Percentage by increasing the size of the Board or using its best efforts to
secure the resignations of such number of directors as is necessary to enable
Parent's designees to be elected to the Board and to cause Parent's designees
promptly to be so elected, provided that no such action shall be taken which
would result in there being, prior to the consummation of the Merger, less than
two directors of the Company that are not affiliated with Parent. Following the
election or appointment of Parent's designees pursuant to the Merger Agreement
and prior to the Effective Time of the Merger, any amendment or termination of
the Merger Agreement, extension for the performance or waiver of the obligations
or other acts of Parent or Purchaser or waiver of the Company's rights
thereunder shall require the concurrence of a majority of the directors of the
Company then in office who are Continuing Directors. The term "Continuing
Directors" means (i) each member of the Board on the date of the Merger
Agreement who voted to approve the Merger Agreement and (ii) any successor to
any Continuing Director that was recommended to succeed such Continuing Director
by a majority of the Continuing Directors then on the Board.
Consideration to be Paid in the Merger. The Merger Agreement provides that
upon the terms (but subject to the conditions) set forth in the Merger
Agreement, Purchaser will be merged with and into the Company. In the Merger, at
the Effective Time, by virtue of the Merger and without any action on the part
of Purchaser, the Company or the holders of any of the Shares, each Share issued
and outstanding immediately prior to the Effective Time (excluding Shares owned
directly or indirectly by the Company or any of its subsidiaries or by Parent,
Purchaser or any other subsidiary of Parent and Dissenting Shares) shall be
converted into the right to receive $9.25 per share in cash, without any
interest thereon, less any required withholding taxes. Each share of the capital
stock of Purchaser issued and outstanding immediately prior to the Effective
Time shall be converted into and become one fully paid and nonassessable share
of Common Stock, par value $.01 per share, of the Surviving Corporation.
Stockholder Meeting. The Merger Agreement provides that as soon as
practicable after the date thereof, the Company and Parent shall prepare and
file with the Commission a proxy statement (if required by
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applicable law) in definitive form relating to a meeting of the Stockholders to
approve the Merger (as may be amended from time to time, the "Proxy Statement").
Pursuant to the Merger Agreement, the Company is required to use its best
efforts to respond to all Commission comments with respect to the Proxy
Statement and to cause the Proxy Statement to be mailed to the Stockholders at
the earliest practicable date. The Merger Agreement also provides that the
Company will, as soon as practicable following the acceptance for payment of and
payment for Shares in the Offer, duly call, give notice of, convene and hold a
meeting (the "Special Meeting") of its Stockholders for the purpose of approving
the Merger Agreement and the transactions contemplated thereby. At the Special
Meeting, Parent shall cause all the Shares then owned by Parent and Purchaser
and any of their subsidiaries or affiliates to be voted in favor of the Merger.
Notwithstanding the foregoing, the Merger Agreement provides that in the event
if Purchaser acquires at least 90% of the outstanding Shares in the Offer, the
Merger may be effected without a meeting of the Stockholders in accordance with
Section 253 of the DGCL.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to corporate
existence and power, capital structure, corporate authorization,
noncontravention, consents and approvals, Commission filings, information
supplied, compliance with applicable laws, litigation, taxes, pension and
benefit plans and ERISA, absence of certain changes or events, absence of
material liabilities, opinion of financial advisor, vote required, labor
matters, intangible property, environmental matters, real property, board
recommendation, material contracts, related party transactions, indebtedness,
liens and other matters.
Parent and Purchaser have also made certain representations and warranties
with respect to corporate existence and power, corporate authorization, consents
and approvals, noncontravention, information supplied, board recommendation,
financing, and other matters.
Conduct of Business Pending the Merger. The Company has agreed that during
the period from the date of the Merger Agreement to the Effective Time, except
as otherwise provided in the Merger Agreement or consented to by Parent, the
Company and its subsidiaries will conduct their business in the usual, regular
and ordinary course of business in substantially the same manner as conducted
prior to the date of the Merger Agreement and shall use all reasonable efforts
to preserve intact their business organizations, keep available the services of
its current officers and employees and preserve relationships with third parties
with whom they have business dealings to the end that their goodwill and ongoing
business shall not be impaired in any material respect at the Effective Time.
The Company has further agreed that it shall not, nor shall it permit any of its
subsidiaries to: (i) declare or pay any dividends on or make any other
distributions in respect of any of its capital stock (other than the Spin-Off);
(ii) split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (iii) repurchase or otherwise
acquire any shares of its capital stock, except as required by the terms of its
securities already outstanding or as contemplated by the Merger Agreement or
employee benefit and dividend reinvestment plans in effect as of October 17,
1996; (iv) grant any options, warrants or rights to purchase Shares or amend or
reprice any option or any of the Company's stock option plans; (v) amend the
ESPP, permit any person not a participant in the ESPP on October 17, 1996 to
become a participant in the ESPP, or permit any participant in the ESPP to
increase such participant's current payroll deductions with respect to the ESPP;
or (vi) issue, deliver or sell, or authorize or propose to issue, deliver or
sell, any shares of its capital stock, any Company voting debt or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Company voting debt or convertible securities, other than (a) issuances
of shares upon the exercise of options granted under stock option plans of the
Company which were outstanding as of October 17, 1996, or in satisfaction of
stock grants or stock based awards made prior to October 17, 1996 pursuant to
stock option plans of the Company or based upon individual agreements such as
employment agreements or executive termination agreements (in each case, as in
effect on October 17, 1996), or the issuance of options to purchase up to 75,000
Shares in connection with an offer of employment outstanding on the date of
October 17, 1996; and (b) issuances by a wholly owned subsidiary of its capital
stock to its parent; (vii) make or propose to make any changes in its
Certificate of Incorporation or Bylaws; (viii) acquire or agree to acquire by
merger or consolidation or purchase a substantial equity interest in or
substantial portion of assets of any corporation, partnership, association or
other business organization or division thereof; (ix) sell,
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lease, encumber or otherwise dispose of, or agree to sell, lease (whether such
lease is an operating or capital lease), encumber or otherwise dispose of, any
of its assets except for dispositions of real property or non-material
dispositions in the ordinary course of business consistent with past practice
which are not material, individually or in the aggregate, to the Company and its
subsidiaries taken as a whole; (x) authorize, recommend, or propose to adopt a
plan of complete or partial liquidation or dissolution except as permitted by
the Merger Agreement; (xi) take or agree to take any action that would result in
any of the Company's representations or warranties contained in the Merger
Agreement being untrue in any material respects or any of the Company's
covenants contained in the Merger Agreement not being satisfied in all material
respects; (xii) increase in any manner the compensation of directors, officers
or key employees, other than in the ordinary course and consistent with past
practice, pay or agree to pay any pension, retirement allowance or other
employee benefit not required or contemplated by any benefit plans or pension
plans of the Company as in effect on October 17, 1996 to any such director,
officer or key employee, enter into any new, or materially amend any existing,
employment, severance or termination agreement with any such director, officer
or key employee or, except as may be required by law, become obligated under any
new employee benefit plan or pension plan; (xiii) assume or incur indebtedness
for borrowed money or act as guarantor for any such indebtedness, issue or sell
any debt securities or warrants or rights to acquire debt securities or
guarantee any debt securities of others, or enter into any lease or create any
mortgages, liens or security interests on Company property or enter into any
"keep well" or other agreement or arrangement to maintain the financial
condition of another person other than certain arrangements disclosed in the
Merger Agreement; (xiv) enter into any contract, agreement or other document or
instrument that would be required to be filed with the Commission or enter into
any amendment, modification or waiver under any contract, agreement or other
document or instrument previously filed with the Commission which amendment,
modification or waiver would be required to be so filed; (xv) take any action,
other than in the ordinary course of business consistent with past practice or
as required by the Commission or by law, with respect to accounting policies,
procedures and practices; or (xvii) incur any capital expenditures in excess of
$2,000,000, or any product or software development costs in excess of $4,000,000
in the aggregate.
Other Agreements. The Company, Parent and Purchaser have agreed to use
their respective best efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by the Merger Agreement and the Stockholders
Agreement, subject, as applicable, to Stockholder approval, including
cooperating fully with the other party, including by provision of information
and making of all necessary filings in connection with, among other things,
approvals under the HSR Act. Parent and the Company have also made certain
agreements regarding publicity, access to information and confidentiality.
No Solicitation. From and after the date of the Merger Agreement until the
termination thereof, neither the Company nor any of its subsidiaries, nor any of
their respective officers, directors, employees, representatives, agents or
affiliates (including, without limitation, any investment banker, attorney or
accountant retained by the Company or any of its subsidiaries) (such officers,
directors, employees, representatives, agents, affiliates, investment bankers,
attorneys and accountants being collectively referred to as "Representatives"),
will, directly or indirectly, initiate, solicit or encourage (including by way
of furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain an Acquisition Proposal
or agree to or endorse any Acquisition Proposal, and neither the Company nor any
of its subsidiaries will authorize or permit any of its Representatives to take
any such action, and the Company shall notify Parent orally (within one business
day) and in writing (as promptly as practicable) of all of the relevant details
relating to, and all material aspects of, all inquiries and proposals which it
or any of its subsidiaries or any of their respective Representatives may
receive relating to any of such matters and, if such inquiry or proposal is in
writing, the Company shall deliver to Parent a copy of such inquiry or proposal
promptly; provided, however, that the Board is not prohibited from (i)
furnishing information to, or entering into discussions with, any person or
entity that makes an unsolicited written bona fide Acquisition Proposal and in
respect of which such person or entity has the necessary funds or commitments
therefor if, and only to the extent that, (A) the Board, after consultation with
and based upon the advice of independent legal counsel
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(who may be the Company's regularly engaged independent legal counsel),
determines in good faith that such action is necessary for the Board to comply
with its fiduciary duties to stockholders under applicable law, (B) prior to
taking such action, the Company (x) provides reasonable notice to Parent to the
effect that it is taking such action and (y) receives from such person or entity
an executed confidentiality agreement in reasonably customary form, and (C) the
Company shall promptly and continuously advise Parent as to all of the relevant
details relating to, and all material aspects of, any such discussions or
negotiations, or (ii) failing to make or withdrawing or modifying its
recommendation to the holders of the Shares to approve the Merger Agreement and
the transactions contemplated thereby, including the Merger, and to accept the
Offer and tender their Shares pursuant thereto, if there exists an Acquisition
Proposal and the Board, after consultation with and based upon the advice of
independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is necessary for
the Board to comply with its fiduciary duties to stockholders under applicable
law. The term "Acquisition Proposal" means any of the following transactions
(other than the transactions between the Company, Parent and Purchaser
contemplated in the Merger Agreement) involving the Company or any of its
subsidiaries: (i) any merger, consolidation, share exchange, recapitalization,
business combination or other similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 15% or more of the
assets (other than real property) of the Company and its subsidiaries taken as a
whole, in a single transaction or series of transactions; (iii) any tender offer
or exchange offer for 15% or more of the outstanding shares of capital stock of
the Company or the filing of a registration statement under the Securities Act
in connection therewith; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
Fees and Expenses. The Merger Agreement provides that all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expense, except
as otherwise provided in the Merger Agreement and except with respect to claims
for damages incurred as a result of the breach of the Merger Agreement. In
addition, the Company has agreed to pay Parent a fee in immediately available
funds equal to $4,000,000 upon the termination of the Merger Agreement in
accordance with the terms thereof if any of the following events occurs (each, a
"Trigger Event"): (i) the Board shall have withdrawn or adversely modified, or
taken a public position materially inconsistent with, its approval or
recommendation of the Offer, the Merger, the Merger Agreement or the
Stockholders Agreement; or (ii) an Acquisition Proposal has been recommended or
accepted by the Company or the Company shall have entered into an agreement
(other than a confidentiality agreement as contemplated by the Merger Agreement)
with respect to an Acquisition Proposal. In the event (i) the Merger Agreement
shall be terminated in accordance with its terms, (ii) at or prior to such
termination, any person or group of persons shall have made an Acquisition
Proposal (each such person or member of a group of such persons being referred
to as a "Designated Person"), and (iii) either (A) a transaction contemplated by
the term "Acquisition Proposal" shall be consummated, on or before the 90th day
following the termination of the Merger Agreement, with any Designated Person or
any affiliate of any Designated Person or (B) the Company or any of its
subsidiaries shall enter into an agreement, on or before the 90th day following
the termination of the Merger Agreement, with respect to an Acquisition Proposal
with any Designated Person or any affiliate of any Designated Person and a
transaction contemplated by the term "Acquisition Proposal" shall thereafter be
consummated with such Designated Person or affiliate thereof, then the Company
shall pay to Parent a fee in immediately available funds equal to $4,000,000,
such fee to be paid contemporaneously with the consummation of the contemplated
transaction. Any amounts payable to Parent pursuant to the foregoing that are
not paid when due shall bear interest at the rate of 9% per annum from the date
due through and including the date paid.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligation of each party to effect the Merger is subject to the satisfaction
prior to the Closing Date of the following conditions: (i) the Merger Agreement
and the Merger shall have been approved and adopted by the affirmative vote of
the holders of a majority of the Shares entitled to vote thereon if such vote is
required by applicable law; provided that Parent and Purchaser shall vote all
Shares purchased pursuant to the Offer in favor of the Merger, (ii) the waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
shall have been terminated or shall have expired, (iii) no temporary restraining
order, preliminary or permanent
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injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect; provided, however, that prior to invoking the condition, each
party shall use all commercially reasonable efforts to have any such decree,
ruling, injunction or order vacated, (iv) no statute, rule, order, decree or
regulation shall have been enacted or promulgated by any government or
governmental agency or authority which prohibits the consummation of the Merger;
and (v) Purchaser shall have accepted for payment and paid for the Shares
tendered in the Offer such that, after such acceptance and payment, Parent and
its affiliates shall own, at consummation of the Offer, a majority of the
outstanding Shares of the Company; provided that this condition shall be deemed
to have been satisfied if Purchaser fails to accept for payment and pay for
Shares pursuant to the Offer in violation of the terms and conditions of the
Offer.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company or Parent by (a) mutual written consent of the
Company and Parent or by mutual action of their respective Boards of Directors;
(b) either the Company or Parent, (i) prior to consummation of the Offer if
there has been a breach of any representation, warranty, covenant or agreement
on the part of the other set forth in the Merger Agreement, which breach has not
been cured within three business days following receipt by the breaching party
of notice of such breach, or (ii) if any permanent injunction or other order of
a court or other competent authority preventing the consummation of the Merger
shall have become final and non-appealable; (c) either the Company or Parent, so
long as such party has not breached its obligations under the Merger Agreement,
if the Merger shall not have been consummated on or before February 18, 1997;
provided, that such right to terminate the Merger Agreement under this clause
shall not be available to any party whose failure to fulfill any obligation
under the Merger Agreement has been the cause of or resulted in the failure of
the Merger to occur on or before such date; (d) Parent or the Company in the
event that a Trigger Event has occurred (see "Fees and Expenses" above); (e)
Parent in the event an Acquisition Proposal has been made to the Company and the
Company shall fail to reaffirm its approval or recommendation of the Offer, the
Merger, the Merger Agreement and the Stockholders Agreement on or before the
fifth business day following the date on which such Acquisition Proposal shall
have been made; (f) Parent, if the Offer terminates, is withdrawn, abandoned or
expires by reason of the failure to satisfy any of the conditions described in
Section 14 of this Offer to Purchase; or (g) the Company, if the Offer shall
have expired or have been withdrawn, abandoned or terminated without any Shares
being purchased by Purchaser thereunder on or prior to the 90th day after the
date of commencement of the Offer. In the event of termination of the Merger
Agreement by either the Company or Parent as provided therein, the Merger
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Purchaser or the Company, or their respective
affiliates, officers, directors or shareholders, except to the extent that such
termination results from the material breach by a party to the Merger Agreement
of any of its representations or warranties, or any of its covenants or
agreements (subject to certain limitations) or as otherwise provided in the
Merger Agreement.
Indemnification. The Merger Agreement provides that the Company shall, and
from and after the Effective Time, the Surviving Corporation shall, indemnify,
defend and hold harmless each person who was at the date of the Merger
Agreement, or had been at any time prior to the date of the Merger Agreement or
who becomes prior to the Effective Time, an officer or director of the Company
or any of its subsidiaries (the "Indemnified Parties") against all losses,
claims, damages, costs, expenses (including attorneys' fees and expenses),
liabilities or judgments or amounts paid in settlement with the approval of the
indemnifying party (which approval shall not be unreasonably withheld) of or in
connection with any threatened or actual claim, 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 a director or officer of the Company or any
of its subsidiaries whether pertaining to any matter existing or occurring at or
prior to the Effective Time and whether asserted or claimed prior to, or at or
after, the Effective Time ("Indemnified Liabilities"), including all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out of,
or pertaining to the Merger Agreement or the transactions contemplated thereby,
in each case to the full extent a corporation is permitted under the DGCL to
indemnify its own directors or officers, as the case may be, and Parent and the
Surviving Corporation, as the case may be, shall pay expenses in advance of the
final disposition of any such action or proceeding to each
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Indemnified Party to the full extent permitted by law. All rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the Indemnified Parties
with respect to matters occurring through the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Indemnified Liabilities asserted or made
within such period shall continue until the disposition of such Indemnified
Liabilities.
Directors' and Officers' Insurance. For a period of three years after the
Effective Time, the Surviving Corporation shall cause to be maintained in effect
the current policies of directors' and officers' liability insurance maintained
by the Company and its subsidiaries (provided that Parent may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous in any material respect to the
Indemnified Parties) with respect to matters arising before the Effective Time,
provided that the Surviving Corporation shall not be required to pay an annual
premium for such insurance in excess of 175% of the last annual premium paid by
the Company prior to the date of the Merger Agreement, but in such case shall
purchase as much coverage as possible for such amount.
Amendment. Subject to applicable law, the Merger Agreement may be amended,
modified or supplemented only by written agreement of Parent, Purchaser and the
Company at any time prior to the Effective Time with respect to any of the terms
contained therein; provided, however, that after the Merger Agreement is
approved by the Stockholders, no such amendment or modification shall reduce the
amount or change the form of consideration to be delivered to the Stockholders
of the Company.
Timing. The Merger Agreement provides that the closing of the Merger shall
occur on the second business day after satisfaction of the conditions set forth
in the Merger Agreement (or as soon as practicable thereafter following
satisfaction or waiver of such conditions). The Merger shall become effective
upon such filing or at such time thereafter as may be provided in the
certificate of merger to be filed with the Secretary of State of the State of
Delaware, as provided in the DGCL, on the date of the closing of the Merger or
as soon as practicable thereafter.
The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Purchaser pursuant to the Offer. Although Parent has agreed to cause
the Merger to be consummated on the terms set forth above, there can be no
assurance as to the timing of the Merger.
Delaware Law. The Board of the Company has approved the Merger Agreement
and the transactions contemplated thereby, including the Offer, the Merger and
the Stockholders Agreement, and the entry by Purchaser into the Stockholders
Agreement for purposes of Section 203 of the DGCL. Accordingly, the restrictions
of Section 203 do not apply to the transactions contemplated by the Offer, the
Merger Agreement or the Stockholders Agreement. Section 203 of the DGCL prevents
an "interested stockholder" (generally, a stockholder owning 15% or more of a
corporation's outstanding voting stock or an affiliate or associate thereof)
from engaging in a "business combination" (defined to include a merger and
certain other transactions) with a Delaware corporation for a period of three
years following the date on which such stockholder became an interested
stockholder unless (i) prior to such date, the corporation's board of directors
approved either the business combination or the transaction which resulted in
such stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in such stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the corporation's
voting stock outstanding at the time the transaction commenced (excluding shares
owned by certain employee stock plans and persons who are directors and also
officers of the corporation) or (iii) on or subsequent to such date, the
business combination is approved by the corporation's board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock not owned by the interested stockholder. As described above, the foregoing
description of Section 203 of the DGCL does not apply to the Offer or the Merger
(or the transactions contemplated thereby).
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THE STOCKHOLDERS AGREEMENT
The following is a summary of the material terms of the Stockholders
Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is incorporated herein by reference and a copy of which has
been filed with the Commission as an exhibit to the Schedule 14D-1. The
Stockholders Agreement may be examined, and copies thereof may be obtained, as
set forth in Section 8 above.
Tender of Shares. Simultaneously with the execution of the Merger
Agreement, Parent, Purchaser and each of the Selling Stockholders entered into
the Stockholders Agreement. Upon the terms and subject to the conditions of such
agreement, each of the Selling Stockholders has (i) agreed to validly tender and
not to withdraw pursuant to and in accordance with the terms of the Offer, not
later than the fifth business day after commencement of the Offer, the
respective number of Shares owned beneficially by him or it; (ii) acknowledged
that the transfer by such Selling Stockholder of his or its Shares to Purchaser
will pass to and unconditionally vest in Purchaser good and valid title to such
Shares free and clear of all claims, liens, restrictions, security interests,
pledges, limitations and encumbrances whatsoever and (iii) agreed to permit
Parent and Purchaser to publish and disclose his or its identity and ownership
of Shares and the nature of his or its commitments, arrangements and
understandings under the Stockholders Agreement in the documents relating to the
Offer and, if stockholder approval for the Merger is required, in any proxy
statement relating thereto (including all documents and schedules filed with the
Commission). In addition, Parent and Purchaser have acknowledged in the
Stockholders Agreement that the Company may, in order to assist Stockholders who
are also employees of the Company in complying with their obligations to tender
Shares hereunder, lend funds to such Stockholders upon terms specified in the
Merger Agreement in order to fund all or a portion of the exercise price under
the Triad Options held by such Stockholders, provided that the failure of the
Company to lend such funds will not relieve any such Stockholder of its
obligations under the Stockholders Agreement.
Voting. Each Selling Stockholder has agreed that during the period
commencing on the date of the Stockholders Agreement and continuing until the
first to occur of the Effective Time or termination of the Merger Agreement in
accordance with its terms, at any meeting of the Stockholders, however called,
or in connection with any written consent of the Stockholders, such Selling
Stockholder will vote (or cause to be voted) the Shares held of record or
beneficially owned by such Stockholder, (i) in favor of the Merger, the
execution and delivery by the Company of the Merger Agreement and the approval
of the terms thereof, and each of the other actions contemplated by the Merger
Agreement and the Stockholders Agreement and any actions required in furtherance
thereof; (ii) against any action or agreement that would result in a breach in
any respect of any covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement or the Stockholders
Agreement; and (iii) except as otherwise agreed to in writing in advance by
Parent, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries; (B) a sale, lease or
transfer of a material amount of assets of the Company or its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; (C)(1) any change in a majority of the persons who constitute
the board of directors of the Company; (2) any change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation or Bylaws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action which, in the case of
each of the matters referred to in clauses (C)(1), (2), or (3), is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the Merger and the transactions contemplated by the
Stockholders Agreement and the Merger Agreement. The Selling Stockholders
further agreed not to enter into any agreement or understanding with any person
or entity the effect of which would be inconsistent or violative of the
provisions and agreements described above. In addition, each Selling Stockholder
granted to Parent a proxy to vote the Shares of such Stockholder in accordance
with the provisions and agreements described above.
Representations, Warranties, Covenants and Other Agreements. In connection
with the Stockholders Agreement, the Selling Stockholders have made certain
customary representations, warranties and covenants,
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including with respect to (i) their ownership of the Shares, (ii) their
authority to enter into and perform their obligations under the Stockholders
Agreement, (iii) noncontravention, (iv) the absence of liens and encumbrances on
and in respect of their Shares, (v) restrictions on the transfer of their
Shares, (vi) the solicitation of Acquisition Proposals, and (vii) the waiver of
their appraisal rights.
Termination. Other than as provided therein, the Stockholders Agreement
terminates by its terms upon the termination of the Merger Agreement by Parent.
RIGHTS AGREEMENT
The Company has advised Parent that pursuant to the Rights Agreement, on
October 28, 1988 the Board declared a dividend distribution of one Right for
each Share outstanding at the close of business on November 8, 1988 (the "Rights
Record Date") and with respect to any Shares issued thereafter until the earlier
of the Distribution Date (as defined below) or the Rights Expiration Date (as
defined below). Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the Company one
share of Common Stock (the "Rights Common Stock") of the Company at a purchase
price of $47.00 per share of Rights Common Stock, subject to adjustment (the
"Rights Purchase Price"). The description and terms of the Rights are set forth
in the Rights Agreement. The following is a summary of the material terms of the
Rights Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof, a copy of which has been filed with the Commission as Exhibit 4.2
to the Company's Annual Report on Form 10-K for the fiscal year ended September
30, 1993.
Initially, the Rights were and continue to be attached to all certificates
representing Shares outstanding, and no separate certificates evidencing the
Rights (the "Rights Certificates") were or have been distributed. The Rights
will separate from the Common Stock and a "Distribution Date" will occur upon
the earlier of (i) the first date of a public announcement by the Company or an
Acquiring Person (as defined below) (or such earlier date as a majority of the
Board of Directors shall become aware) that a person or group of affiliated or
associated persons has become an Acquiring Person, or (ii) the tenth day (or
such later date as the Board of Directors shall determine) after the date of the
commencement by any person or entity (other than an Exempt Person (as defined
below)) of, or of the first public announcement of the intent of any person or
entity (other than an Exempt Person) to commence (which intention to commence
remains in effect for five business days after such announcement), a tender
offer or exchange offer that would result in such person or group becoming an
Acquiring Person. Except as set forth below, an "Acquiring Person" is a person
or group of affiliated or associated persons who, without prior approval of the
Board, has acquired beneficial ownership of 20% or more of the outstanding
Shares. The term Acquiring Person excludes (A) an "Exempt Person", which is
defined as (i) the Company, (ii) any subsidiary of the Company, (iii) any
employee benefit plan or employee stock plan of the Company or of any subsidiary
of the Company or (iv) any person or entity organized, appointed, established or
holding Common Stock for or pursuant to the terms of any such plan, and (B)
parties to that certain Unit Purchase Agreement, dated as of July 2, 1992, as
amended (the "Unit Purchase Agreement"), among the Company, Blum, and certain
other purchasing parties thereto, so long as certain standstill provisions with
respect to such parties pursuant to the Unit Purchase Agreement remain in
effect.
Until the occurrence of the Distribution Date, (i) the Rights will be
evidenced by the Share certificates and will be transferred with and only with
such Shares certificates, (ii) new Share certificates issued after the Rights
Record Date will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any certificates for Shares
outstanding will also constitute the transfer of the Rights associated with the
Shares represented by such certificate. Pursuant to the Rights Agreement, the
Company shall not be required to issue fractions of Rights or Rights Common
Stock, and in lieu thereof shall pay to holders of record of such Rights or
Rights Common Stock the then current market value of such Right or Rights Common
Stock.
As soon as practicable after the occurrence of the Distribution Date,
Rights Certificates will be mailed to holders of record of Shares as of the
close of business on the Distribution Date and, thereafter, the separate
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Rights Certificates alone will represent the Rights. Only Shares issued prior to
the earlier of the Distribution Date or the Rights Expiration Date will be
issued with Rights.
The Rights are not exercisable until the occurrence of the Distribution
Date. The Rights will expire at the close of business on November 9, 1998,
unless earlier redeemed by the Company as described below (the "Rights
Expiration Date").
In the event that, at any time following the Distribution Date, any person
becomes an Acquiring Person (subject to certain exceptions described below),
each holder of a Right will thereafter have the right to receive, upon exercise
of the Right, that number of Shares (or, in certain circumstances, cash,
property or other securities of the Company) having a current market value equal
to two times the Rights Purchase Price. Notwithstanding the foregoing, following
the occurrence of the event set forth in this paragraph, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person shall not be adjusted as described
above and any holder of any such Right (including any purported transferee or
subsequent holder) shall continue to receive upon the exercise of such Right the
number of shares of Rights Common Stock otherwise provided in the Rights
Agreement without giving effect to the adjustment described above. For example,
at an exercise price of $50 per Right, each Right not owned by an Acquiring
Person (or by certain related parties) following an event set forth in this
paragraph would entitle its holder to purchase $100 worth of Shares (or other
consideration, as noted above) for $50. Assuming that the Shares had a per share
market value of $10 at such time, the holder of each valid Right would be
entitled to purchase ten Shares for $50.
In the event that, at any time on or following the Distribution Date, (i)
the Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a merger which
follows a "Permitted Offer" described below), or (ii) 50% or more of the
Company's assets or earning power is sold, mortgaged or transferred, each holder
of a Right shall thereafter have the right to receive, upon exercise and payment
of the Rights Purchase Price in accordance with the terms of the Rights
Agreement, common stock or other securities of the acquiring company offered as
consideration for Common Stock in such transaction having a market value at the
time of the transaction equal to two times the Rights Purchase Price. The events
set forth in this paragraph and in the preceding paragraph are referred to as
the "Rights Triggering Events."
The Rights Purchase Price payable, and the number of shares of Rights
Common Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision or split of the outstanding
shares of Common Stock into a greater number, (ii) in the event the Company
combines or consolidates the Common Stock into a smaller number of shares or
effects a reverse split of outstanding shares of Common Stock, or (iii) in the
event the Company issues any shares of capital stock in a reclassification of
the Common Stock.
With certain exceptions, no adjustment in the Rights Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Rights
Purchase Price . No fractional shares of Rights Common Stock will be issued and,
in lieu thereof, an adjustment in cash will be made based on the market price of
the Rights Common Stock on the last trading date prior to the date of exercise.
At any time prior to the earlier of the date on which any person or entity
becomes an Acquiring Person or November 9, 1998, the Company may redeem the
Rights in whole, but not in part, at a price (the "Redemption Price") of $.01
per Right by resolution of the Board of Directors. Notice of the redemption of
the Rights shall be mailed to each holder of record of Rights within 10 days of
such resolution, and the redemption of the Rights may be made effective at such
time, on such basis, and with such conditions as the Board of Directors in its
sole discretion may establish. Immediately upon such action of the Board of
Directors ordering redemption of the Rights, the Rights will terminate and the
only right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company including, without limitation, the right
to vote or to receive dividends.
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Other than those provisions relating to the Redemption Price of the Rights,
the Company and Rights Agent may amend the Rights Agreement, (i) prior to the
time any person becomes an Acquiring Person, in any manner the Company deems
necessary or desirable, and (ii) following the time a person becomes an
Acquiring Person, in order to cure any ambiguity and to make changes which do
not adversely affect the interests of holders of Rights Certificates.
THE COMPANY HAS INFORMED PARENT AND PURCHASER THAT, BECAUSE (I) THE OFFER
IS AN OFFER TO PURCHASE ALL OF THE OUTSTANDING SHARES AND THE BOARD OF DIRECTORS
HAS UNANIMOUSLY DETERMINED THAT THE OFFER DESCRIBED HEREIN IS FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (A "PERMITTED OFFER") AND (II) THE
PRICE PER SHARE TO BE PAID IN THE MERGER IS OF THE SAME FORM AND AMOUNT AS THE
PURCHASER SHALL PAY IN THE OFFER, THE ACQUISITION OF SHARES PURSUANT TO THE
OFFER OR THE CONSUMMATION OF THE MERGER WILL NOT (A) CAUSE ANY PERSON TO BECOME
AN ACQUIRING PERSON, (B) CAUSE A DISTRIBUTION DATE TO OCCUR OR CAUSE OR REQUIRE
THE DISTRIBUTION OF ANY RIGHTS CERTIFICATES TO THE RECORD HOLDERS OF SHARES, OR
(C) GIVE RISE TO A RIGHTS TRIGGERING EVENT. IN ADDITION, THE COMPANY HAS AGREED,
PURSUANT TO THE MERGER AGREEMENT, TO TAKE ALL ACTION NECESSARY SO AS TO RENDER
THE RIGHTS AGREEMENT INAPPLICABLE TO THE MERGER AGREEMENT, THE STOCKHOLDERS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY SUCH AGREEMENTS. PURSUANT TO THE
RIGHTS AGREEMENT, UPON THE CONSUMMATION OF THE OFFER AND THE MERGER, THE RIGHTS
SHALL EXPIRE.
THE SPIN-OFF
The following is a summary of certain of the terms of the Merger Agreement
relating to the Spin-Off. This summary is not a complete description of the
terms of the Merger Agreement relating to the Spin-Off and is qualified in its
entirety by reference to the full text thereof, which is incorporated herein by
reference. See "The Merger Agreement" above.
Pursuant to the terms of the Merger Agreement, immediately prior to the
acceptance of Shares in the Offer, the Company will declare a dividend, payable
to then record holders of Shares, consisting of ownership interests in Spinco,
which will own, directly or indirectly, certain assets specified in the Merger
Agreement (the "Designated Assets"), the payment of such dividend to be
contingent upon the consummation of the Offer and subject to compliance with all
applicable laws. The Designated Assets include (i) all real estate located in
Triad Park, Livermore, California, owned by the Company (approximately 206
acres); (ii) all buildings (three buildings comprising 220,000 square feet) and
improvements therein (not including cubicles, furnishings and office equipment)
occupied and used by employees of the Company and located in Triad Park,
Livermore, California; (iii) all improvements in and to Triad Park not yet sold
to the City of Livermore, California; and (iv) copies of all books and records
related to the foregoing assets. Although the fair market value of the
Designated Assets will be determined by appraisal, the current book value of the
Designated Assets, net of indebtedness assumed, is approximately $23.7 million,
or approximately $1.20 per Share on a fully diluted basis.
The form of entity that will be used for Spinco, all transactions related
to such dividend (including, without limitation, any intercompany transfers) and
all documents, agreements and instruments related to such dividend and related
transactions (including, without limitation, any agreements between Spinco and
the Company or any of its subsidiaries providing for the allocation of expenses
or liabilities and indemnification) (the "Spin-Off Documents"), shall be in form
and substance reasonably acceptable to Parent and the Company. Notwithstanding
the foregoing, (i) all indebtedness of the Company or any of its subsidiaries
(other than the Company's Revolving Credit Loan Agreement with Comerica
Bank-California) secured, in whole or in part, by any of the Designated Assets
shall be assumed by Spinco and shall be paid, when due, by Spinco and the
Company shall be released from any liability with respect thereto, (ii) all
costs and expenses solely attributable to the transactions related to such
dividend (including, without limitation, any necessary and reasonable fees and
expenses of counsel, accountants and advisors and any filing fees), whether
before or after the consummation of the Offer, shall be paid by Spinco when such
amounts are due, (iii) Spinco shall indemnify and hold the Company and its
subsidiaries harmless from and against any loss, cost, damage or expense
(including, without limitation, the reasonable fees and expenses of counsel)
arising out of or related to any failure of Spinco to discharge the obligations
specified in clause (i) or clause (ii), (iv) Spinco shall indemnify and hold
Parent, the Company and its subsidiaries harmless from and against any taxes
(and any
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fees, costs and expenses with respect to such taxes or any dispute thereof)
attributable to, arising out of or relating to (a) Spinco, (b) the formation of
Spinco, (c) the transfer of the Designated Assets to Spinco by the Company or
any of its subsidiaries, (d) the assumption or refinancing of any liabilities
with respect to the Designated Assets, (e) the sale, exchange, distribution,
dividend or other distribution of any assets by Spinco, (f) the sale, exchange,
distribution, dividend or other disposition of interests in Spinco by the
Company or any of its Subsidiaries, and (g) any steps which are attendant to or
necessary in connection with any of the foregoing transactions, which
indemnification obligations shall survive until 60 days after the expiration of
the applicable statute of limitations with respect to the assessment of taxes
relating to the foregoing transactions, and which indemnification obligations
shall be due and payable at such times as taxes (including estimated taxes)
become due and payable (plus interest from the date of unreimbursed payment by
the Company at a rate of 9% per annum) (with the filing of tax returns and
calculation of the estimated tax amount (the "Estimated Tax Amount") being based
upon an appraisal of the Designated Assets by an independent appraiser mutually
acceptable to Parent and the Company and a certification of the adjusted bases
of the Designated Assets provided by Price Waterhouse & Co. or such other "big
six" accounting firm as may be agreed to by Parent and the Company, the costs of
which appraisal and certification will be paid by Spinco) and at such time as
there is a final determination of a deficiency with respect to such reported
taxes (plus interest from the date of unreimbursed payment by the Company at a
rate of 9% per annum), (v) with respect to the taxes identified in the
immediately preceding clause (iv), the Company will not agree, without Spinco's
consent, to any extension of the applicable statute of limitations, which
consent will not be unreasonably withheld, and such consent will not be required
if the failure to agree to such extension may reasonably be expected to result
in the proposed assessment of a deficiency for material taxes unrelated to
Spinco or in liability for indemnified taxes which exceeds Spinco's cash, notes
receivable from real property sales and cash equivalent assets at such time, and
(vi) any such indemnification shall be made on an after-tax basis and shall be
adjusted to take into account any tax benefits and tax detriments attributable
to the indemnified loss and to the receipt or accrual of an indemnification
payment hereunder (including any additional payments pursuant to this clause
(vi)). The Company will use its best efforts to facilitate the dividend and
shall seek all consents necessary (including, without limitation, the consent of
the Company's lenders) to consummate the dividend and related transactions as
soon as practicable, subject to the conditions described herein.
Prior to payment of the dividend, the current lease agreement with respect
to the home office building will be amended to provide for (1) continuation of
the current rent for two years; (2) adjustment of the rental for the succeeding
three years at the current market rental rate at the beginning of such
succeeding three years; and (3) adjustment of the term of the lease to five
years with a five year option to renew at a rental equal to the current market
rental rate at the beginning of such renewal term. "Current market rental rate"
shall be determined by the Company and Spinco, each selecting an appraiser to
make such determination, and if such appraisers cannot agree, then they shall
select a third appraiser whose determination shall be final and binding on all
parties. Each party shall bear the cost of its appraiser and the cost of the
third appraiser, if necessary, shall be split evenly between the parties.
Finally, under no circumstances shall the rental rate referred to in (2) above
be less than the rental rate in effect prior to such adjustment or more than 1.2
multiplied by the rental rate in effect prior to such adjustment. In addition,
the lease agreement shall be amended to provide that the Company may sublease
the property with the consent of the landlord, which consent will not be
unreasonably withheld, and that in the event the Company shall sublease the
property and shall receive in rent thereunder an amount in excess of the rent
payable under the lease, such excess shall be paid to the landlord.
In order to facilitate the orderly management of Spinco, following payment
of the dividend for a period of one year the Company will provide (at no cost to
Spinco) at least two cubicles of office space, telephone and secretarial support
to two employees of Spinco and will give such Spinco employees reasonable access
to such other office equipment as is reasonable and necessary. Furthermore, at
the time of payment of the dividend, the Company shall cause Spinco to have at
least $100,000 in cash or cash equivalent assets available to it (any such
amounts that do not represent proceeds from the sale of Designated Assets shall
be subject to repayment by Spinco). All funds received in respect of sales of
Designated Assets from the date of the Merger Agreement through the date of the
payment of the dividend shall be credited to the account of Spinco, but shall be
available to satisfy the obligations of Spinco to Company under the Merger
Agreement.
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Company shall not be required to pay the dividend until such time as Spinco
has either (i) paid all amounts owed by it to Company with respect to the
Estimated Tax Amount, third party costs related to the dividend or related
transactions or similar matters for which Spinco has agreed to pay or for which
there are existing indemnity claims which it has agreed to indemnify the Company
or (ii) have made adequate and commercially reasonable provision for the prompt
payment of any such amounts from time to time in the future as such amounts are
paid or become due and payable by the Company. Such additional terms and
provisions, when negotiated by the parties, shall, together with the applicable
provisions of the Merger Agreement, be set forth in customary documentation with
respect to spin-off transactions, all of which shall be finalized by the parties
prior to the consummation of the Offer.
OTHER MATTERS
Severance Benefits. In 1989, the Board adopted resolutions setting forth a
severance policy for executive officers and other employees of the Company (the
"1989 Resolutions"). In the Merger Agreement, the Company has represented and
warranted that the Board has unanimously adopted resolutions rescinding the 1989
Resolutions, retroactive to the date of the adoption of the 1989 Resolutions,
and adopting a severance pay policy the terms of which are to consist of the
arrangements described in the 1989 Resolutions, modified as follows: (A)
employees (other than executive officers) shall be eligible for severance
benefits in accordance with such policy only if they are involuntarily
terminated without cause by the Company and its subsidiaries within six (6)
months following a change in control (as defined in the 1989 Resolutions); (B)
executive officers of the Company shall be eligible for severance benefits in
accordance with such policy only if they are involuntarily terminated by the
Company and its subsidiaries within twelve (12) months following a change in
control (defined as described above) of the Company; (C) the Board shall have
the right to clarify the terms of such severance policy at any time and from
time to time, including, but not limited to, resolving any ambiguities or
supplying any omission in such severance policy; (D) the Board shall have the
right to amend or terminate such severance policy in its sole discretion at any
time and from time to time, except no such amendment or termination which
materially and adversely affects the rights of any employee of the Company or
any of its subsidiaries under the severance policy shall be effective with
respect to: (i) any person whose employment with the Company and its
subsidiaries has terminated prior to the date of such amendment or termination,
(ii) any such employee for a period of six months beginning on the date of a
change in control (defined as described above) of the Company and (iii) any
executive officer of the Company for a period of twelve months beginning on the
date of a change in control (defined as described above); and (E) for all
purposes of the severance policy, the date of a change in control of the Company
involving a person or an affiliated group of persons shall be the date of the
earliest to occur of any of the events defined in the 1989 Resolutions with
respect to such person or affiliated group of persons.
Appraisal Rights. No appraisal rights are available to holders of Shares in
connection with the Offer. However, if the Merger is consummated, holders of
Shares will have certain rights under Section 262 of the DGCL to dissent and
demand appraisal of, and payment in cash for the fair value of, their Shares.
Such rights, if the statutory procedures are complied with, could lead to a
judicial determination of the fair value (excluding any element of value arising
from accomplishment or expectation of the Merger) required to be paid in cash to
such dissenting holders for their Shares. Any such judicial determination of the
fair value of Shares could be based upon considerations other than or in
addition to the Offer Price and the market value of the Shares, including asset
values and the investment value of the Shares. The value so determined could be
more or less than the Offer Price or the Merger Consideration.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses his right to appraisal, as
provided in the DGCL, the Shares of such holder will be converted into the
Merger Consideration in accordance with the Merger Agreement. A Stockholder may
withdraw his demand for appraisal by delivery to Parent of a written withdrawal
of his demand for appraisal and acceptance of the Merger.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of such rights.
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Going Private Transactions. Rule 13e-3 under the Exchange Act is applicable
to certain "going-private" transactions. Purchaser does not believe that Rule
13e-3 will be applicable to the Merger unless, among other things, the Merger is
completed more than one year after termination of the Offer. If applicable, Rule
13e-3 would require, among other things, that certain financial information
regarding the Company and certain information regarding the fairness of the
Merger and the consideration offered to minority Stockholders be filed with the
Commission and disclosed to minority Stockholders prior to consummation of the
Merger.
13. DIVIDENDS AND DISTRIBUTIONS
If, on or after the date of the Merger Agreement, the Company should (a)
split, combine or otherwise change the Shares or its capitalization, (b) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares or (c) issue or sell additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or operations, conditional or otherwise, to acquire,
any of the foregoing, then subject to the provisions of Section 14 below,
Purchaser, in its sole discretion, may make such adjustments as it deems
appropriate in the Offer Price and other terms of the Offer, including, without
limitation, the number or type of securities offered to be purchased.
If, on or after the date of the Merger Agreement, the Company should
declare or pay any cash dividend on the Shares or make other distributions on
the Shares or issue with respect to the Shares (other than the Spin-Off), any
additional Shares, shares of any other class of capital stock, other voting
securities or any securities convertible into, or rights, warrants or options,
conditional or otherwise, to acquire, any of the foregoing, payable or
distributable to Stockholders of record on a date prior to the transfer of the
Shares purchased pursuant to the Offer to Purchase or its nominee or transferee
on the Company's stock transfer records, then, subject to the provisions of
Section 14 below, (a) the Offer Price may, in the sole discretion of Purchaser,
be reduced by the amount of any such cash dividend or cash distribution and (b)
the whole of any such noncash dividend, distribution or issuance to be received
by the tendering Stockholders will (i) be received and held by the tendering
Stockholders for the account of Purchaser and will be required to be promptly
remitted and transferred by each tendering Stockholder to the Depositary for the
account of Purchaser, accompanied by appropriate documentation of transfer, or
(ii) at the direction of Purchaser, be exercised for the benefit of Purchaser,
in which case the proceeds of such exercise will promptly be remitted to
Purchaser. Pending such remittance and subject to applicable law, Purchaser will
be entitled to all rights and privileges as owner of any such noncash dividend,
distribution, issuance or proceeds and may withhold the entire Offer Price or
deduct from the Offer Price the amount or value thereof, as determined by
Purchaser in its sole discretion.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two preceding paragraphs and
nothing herein shall constitute a waiver by Purchaser or Parent of any of its
rights under the Merger Agreement or a limitation of remedies available to
Purchaser or Parent for any breach of the Merger Agreement, including
termination thereof.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
promptly after expiration or termination of the Offer), to pay for any Shares
tendered, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered, and may amend or
terminate the Offer (whether or not any Shares have theretofore been purchased
or paid for) if, (i) there have not been validly tendered and not withdrawn
prior to the Expiration Date a number of Shares which constitutes 51% of the
Shares outstanding on a fully-diluted basis on the date of purchase ("on a
fully-diluted basis" having the meaning, as of any date: the number of Shares
outstanding, together with Shares the Company may be required to issue pursuant
to obligations outstanding at that date under employee stock option or other
benefit plans, or otherwise), or (ii) any applicable waiting periods under the
HSR Act shall not have expired or been terminated prior to the Expiration Date;
or (iii) the debt financing sources for Purchaser
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shall not have provided the applicable debt financing to Purchaser pursuant to
the financing commitment with respect thereto previously delivered to the
Company by Purchaser (the "Funding Condition"); or (iv) at any time on or after
the date of the Merger Agreement and before acceptance for payment of, or
payment for, such Shares any of the following events shall occur or shall be
deemed by Purchaser to have occurred:
(A) there shall have been any statute, rule or regulation enacted,
entered or enforced or deemed applicable, or any decree, order or
injunction entered or enforced by any government or governmental authority
in the United States or by any court in the United States that: (1)
restrains or prohibits the making or consummation of the Offer or the
Merger, (2) makes the purchase of or payment for some or all of the Shares
pursuant to the Offer or the Merger illegal, (3) imposes material
limitations on the ability of Purchaser, the Company or any of their
respective affiliates or subsidiaries effectively to acquire or hold, or
requiring Purchaser, the Company or any of their respective affiliates or
subsidiaries to dispose of or hold separate, any material portion of the
assets or the business of the Company and its subsidiaries taken as a
whole, or imposes limitations on the ability of Purchaser, the Company or
any of their respective affiliates or subsidiaries to continue to conduct,
own or operate, as heretofore conducted, owned or operated, all or any
material portion of the businesses or assets of the Company and its
subsidiaries taken as a whole, (4) imposes or results in material
limitations on the ability of Purchaser or any of its affiliates to
exercise full rights of ownership of the Shares purchased by them,
including, without limitation, the right to vote the Shares purchased by
them on all matters properly presented to the stockholders of the Company;
or (5) prohibits or restricts in a material manner the financing of the
Offer;
(B) any change (or any condition, event or development involving a
prospective change) shall have occurred in the business, operations, assets
or condition (financial or otherwise) of the Company and its Subsidiaries
taken as a whole;
(C) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States for a
period in excess of five hours, (2) the declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States, (3)
any material adverse change in United States currency exchange rates or a
suspension of, or a limitation on, the markets therefor, (4) the
commencement of a war, armed hostilities or other international or national
calamity, directly or indirectly involving the United States, (5) any
limitations (whether or not mandatory) imposed by any governmental
authority on the nature or extension of credit or further extension of
credit by banks or other lending institutions, or (6) in the case of any of
the foregoing, a material acceleration or worsening thereof;
(D) the representations and warranties of the Company contained in the
Merger Agreement (without giving effect to any "Material Adverse Effect",
"materiality" or similar qualifications contained therein) shall not be
true and correct in all material respects as of the date of consummation of
the Offer as though made on and as of such date except (1) for changes
specifically permitted by the Merger Agreement and (2) that those
representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date;
(E) the obligations of the Company contained in the Merger Agreement
(without giving effect to any "Material Adverse Effect", "materiality" or
similar qualifications contained therein) shall not have been performed or
complied with in all material respects by the Company;
(F) the Merger Agreement shall have been terminated in accordance with
its terms;
(G) prior to the purchase of Shares pursuant to the Offer, an
Acquisition Proposal for the Company exists and the Board shall have
withdrawn or materially modified or changed (including by amendment of the
Schedule 14D-9) in a manner adverse to Purchaser its recommendation of the
Offer, the Merger Agreement or the Merger; or
(H) Parent, Purchaser and the Company shall not have reached agreement
as to the Spin-Off Documents and the transactions contemplated thereby in
accordance with the provisions of the Merger Agreement relating thereto.
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The foregoing conditions are for the sole benefit of Purchaser and its
affiliates and may be asserted by Purchaser regardless of the circumstances
(including, without limitation, any action or inaction by Purchaser or any of
its affiliates) giving rise to any such condition or may be waived by Purchaser,
in whole or in part, from time to time in its sole discretion, except as
otherwise provided in the Agreement. The failure by Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right and may be asserted
at any time and from time to time. Any determination by Purchaser concerning any
of the events described herein shall be final and binding.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company, but without any independent
investigation thereof, neither Purchaser nor Parent is aware of any license or
regulatory permit that appears to be material to the business of the Company and
its subsidiaries, taken as a whole, that might be adversely affected by
Purchaser's acquisition of Shares as contemplated herein or of any approval or
other action by any Governmental Authority that would be required for the
acquisition or ownership of Shares by Purchaser as contemplated herein. Should
any such approval or other action be required, Purchaser and Parent currently
contemplate that such approval or other action will be sought, except as
described below under "State Takeover Laws." While, except as otherwise
expressly described in this Section 15, Purchaser does not presently intend to
delay the acceptance for payment of or payment for Shares tendered pursuant to
the Offer pending the outcome of any such matter, there can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
Company's business or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or such other actions
were not taken or in order to obtain any such approval or other action. If
certain types of adverse action are taken with respect to the matters discussed
below, Purchaser could decline to accept for payment or pay for any Shares
tendered. See Section 14 above for certain conditions to the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in such states. In
Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws, that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." The Company has represented in the Merger Agreement that it
properly approved, among other things, the Offer and the Merger for purposes of
Section 203 of the DGCL.
Based on information supplied by the Company and the Company's
representations in the Merger Agreement, Purchaser does not believe that any
state takeover statutes apply to the Offer or the Merger. Neither Purchaser nor
Parent has currently complied with any state takeover statute or regulation.
Purchaser reserves the right to challenge the applicability or validity of any
state law purportedly applicable to the Offer or the Merger and nothing in this
Offer to Purchase or any action taken in connection with the Offer or the Merger
is intended as a waiver of such right. If it is asserted that any state takeover
statute is applicable to the Offer or the Merger and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer or the
Merger, Purchaser might be required to file certain information with, or to
receive approvals
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from, the relevant state authorities, and Purchaser might be unable to accept
for payment or pay for Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer or the Merger. In such case, Purchaser may not be
obligated to accept for payment or pay for any Shares tendered pursuant to the
Offer.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares under the Offer may be consummated following the expiration
of a 15-calendar-day waiting period following the filing by Parent of a
Notification and Report Form with respect to the Offer, unless Parent receives a
request for additional information or documentary material from the Antitrust
Division or the FTC or unless early termination of the waiting period is
granted. Parent expects to file a Notification and Report Form with respect to
the Offer as soon as practicable following commencement of the Offer. If, within
the initial 15-day waiting period, either the Antitrust Division or the FTC
requests additional information or documentary material from Parent concerning
the Offer, the waiting period will be extended and would expire at 11:59 p.m.,
New York City time, on the tenth calendar day after the date of substantial
compliance by Parent with such request. Only one extension of the waiting period
pursuant to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with the
consent of Parent. In practice, complying with a request for additional
information or documentary material can take a significant amount of time. In
addition, if the Antitrust Division or the FTC raises substantive issues in
connection with a proposed transaction, the parties frequently engage in
negotiations with the relevant governmental agency concerning possible means of
addressing those issues and may agree to delay consummation of the transaction
while such negotiations continue. Moreover, the Merger Agreement generally
provides that the Offer may be extended for an aggregate period of not more than
60 days in the event that any condition to the Offer is not satisfied.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's proposed acquisition of
the Company. At any time before or after Purchaser's purchase of Shares pursuant
to the Offer, the Antitrust Division or the FTC could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or the
consummation of the Merger or seeking the divestiture of Shares acquired by
Purchaser or the divestiture of substantial assets of Parent or its
subsidiaries, or the Company or its subsidiaries. Private parties may also bring
legal action under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, of the result thereof.
16. FEES AND EXPENSES
Chase Securities Inc. is acting as Dealer Manager in connection with the
Offer and has provided certain financial advisory services to Parent in
connection with the proposed acquisition of the Company. Parent has agreed to
pay Chase Securities a fee of $250,000 which became payable upon execution of
the Merger Agreement. In addition, Parent has agreed to reimburse Chase
Securities for all out-of-pocket expenses incurred by Chase Securities,
including the reasonable fees of its counsel, and to indemnify Chase Securities
and certain related persons against certain liabilities and expenses, including
certain liabilities under the federal securities laws.
Purchaser has retained ChaseMellon Shareholder Services, L.L.C. to act as
the Information Agent and as the Depositary in connection with the Offer. The
Information Agent and the Depositary each will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable out-of-
pocket expenses and will be indemnified against certain liabilities and expenses
in connection therewith, including certain liabilities under the federal
securities laws.
Except as set forth above, Purchaser will not pay any fees or commissions
to any broker or dealer or other person for soliciting tenders of Shares
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
will be reimbursed by Purchaser for customary mailing and handling expenses
incurred by them in forwarding the offering materials to their customers.
41
<PAGE> 42
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser by Chase Securities or one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
Purchaser has filed with the Commission the Schedule 14D-1 pursuant to Rule
14d-1 under the Exchange Act containing certain additional information with
respect to the Offer. Such Schedule and any amendments thereto, including
exhibits, may be examined and copies may be obtained from the principal office
of the Commission in the manner set forth in Section 8 above (except that they
will not be available at the regional offices of the Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
CCI ACQUISITION CORP.
COOPERATIVE COMPUTING, INC.
October 23, 1996
42
<PAGE> 43
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT, PURCHASER AND HM INC.
A. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The following table sets forth the name, present principal occupation or
employment and material occupation, positions, offices or employment for the
past five years of each director and executive officer of Parent. Unless
otherwise indicated below, the address of each director and officer is 6207 Bee
Cave Road, Austin, Texas 78146 and each such person is a citizen of the United
States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND OR EMPLOYMENT AND FIVE-YEAR
BUSINESS ADDRESS EMPLOYMENT HISTORY
----------------------------------------- -----------------------------------------
<S> <C>
Glenn E. Staats.......................... Chairman of the Board (1985-present);
Director, President and Chief Executive
Officer (1976-present)
Preston W. Staats, Jr. .................. Director, Secretary and Executive Vice
President (1978-present)
Marsha A. Staats......................... Director (1985-present); Physician and
Instructor, Central Texas Medical
Foundation (1992-present); Private
Practice, Internal Medicine (1990-1992)
Sharon W. Staats......................... Director (1985-present); Vice President,
Licensing and Database Services (1995-
present); Chief Financial Officer
(1978-1995)
Matthew Hale............................. Chief Financial Officer (April
1995-present); Chief Financial Officer,
Arrowsmith Technology, Inc. (April
1993-March 1995); Controller, MasPar
Systems Corporation (October 1991-March
1993); Vice President, Finance, Masstor
Systems Corporation. (December
1988-August 1991).
</TABLE>
I-1
<PAGE> 44
B. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The following table sets forth the name, business address, present
principal occupation or employment and material occupations, positions, offices
or employment for the past five years of each director and executive officer of
Purchaser. Unless otherwise indicated below, the address of each director and
officer is: 6207 Bee Cave Road, Austin, Texas 78146 and each such person is a
citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND OR EMPLOYMENT AND FIVE-YEAR
BUSINESS ADDRESS EMPLOYMENT HISTORY
----------------------------------------- -----------------------------------------
<S> <C>
Thomas O. Hicks.......................... Director (October 16, 1996-present);
Hicks, Muse, Tate & Furst Incorporated Chairman of the Board and Chief Executive
200 Crescent Court, Suite 1600 Officer, Hicks, Muse, Tate & Furst
Dallas, Texas 75201 Incorporated (1989-present)
Lawrence D. Stuart, Jr................... Director (October 16, 1996-present);
Hicks, Muse, Tate & Furst Incorporated Managing Director and Principal, Hicks,
200 Crescent Court, Suite 1600 Muse, Tate & Furst Incorporated (October
Dallas, Texas 75201 1995-present); Managing
Director -- Dallas Office, Weil, Gotshal
& Manges LLP (1988-September 1995)
Glenn E. Staats.......................... Director and President (October 16,
1996); Chairman of the Board, Cooperative
Computing, Inc. (1985-present); Director,
President and Chief Executive Officer,
Cooperative Computing, Inc.
(1976-present)
Preston W. Staats, Jr. .................. Director and Executive Vice President
(October 16, 1996); Director, Secretary
and Executive Vice President, Cooperative
Computing, Inc. (1978-present)
Patrick K. McGee......................... Vice President (October 16,
Hicks, Muse, Tate & Furst Incorporated 1996-present); Vice President, Hicks,
200 Crescent Court, Suite 1600 Muse, Tate & Furst Incorporated
Dallas, Texas 75201 (1994-present); Vice President, Merrill
Lynch & Co. (1994); Associate, Merrill
Lynch & Co. (1990-1994)
</TABLE>
I-2
<PAGE> 45
C. DIRECTORS AND EXECUTIVE OFFICERS OF HICKS, MUSE FUND III INCORPORATED
The following table sets forth the name, business address, present
principal occupation or employment and material occupations, positions, offices
or employment for the past five years of each director and executive officer of
Hicks, Muse Fund III Incorporated, the ultimate general partner of Hicks Muse.
Unless otherwise indicated below, the address of each director and officer is
200 Crescent Court, Suite 1600, Dallas, Texas 75201, and each such person is a
citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND OR EMPLOYMENT AND FIVE-YEAR
BUSINESS ADDRESS EMPLOYMENT HISTORY
----------------------------------------- -----------------------------------------
<S> <C>
Thomas O. Hicks.......................... Chairman of the Board, President, Chief
Executive Officer, Chief Operating
Officer and Secretary (May 1996-present);
Chairman of the Board and Chief Executive
Officer, Hicks, Muse, Tate & Furst
Incorporated (1989-present)
John R. Muse............................. Managing Director and Principal,
Executive Vice President and Treasurer
(May 1996-present); Managing Director and
Principal, Hicks, Muse, Tate & Furst
Incorporated (1989-present)
Charles W. Tate.......................... Managing Director and Principal,
Executive Vice President (May
1996-present); Managing Director and
Principal, Hicks, Muse, Tate & Furst
Incorporated (1991-present)
Jack D. Furst............................ Managing Director and Principal,
Executive Vice President (May
1996-present); Managing Director and
Principal, Hicks, Muse, Tate & Furst
Incorporated (1989-present)
Lawrence D. Stuart, Jr................... Managing Director and Principal,
Executive Vice President (May
1996-present); Managing Director and
Principal, Hicks, Muse, Tate & Furst
Incorporated (October 1995-present);
Managing Partner -- Dallas Office, Weil,
Gotshal & Manges LLP (1988-September
1995)
Alan B. Menkes........................... Managing Director and Principal,
Executive Vice President (May
1996-present); Managing Director and
Principal, Hicks, Muse, Tate & Furst
Incorporated (April 1996-present); Vice
President, Hicks, Muse, Tate & Furst
Incorporated (1992-1996); The Carlyle
Group (1988-1992)
Michael J. Levitt........................ Managing Director and Principal,
Executive Vice President (May
1996-present); Managing Director and
Principal, Hicks, Muse, Tate & Furst
Incorporated (April 1996-present);
Managing Director and Deputy Head of
Investment Banking, Smith Barney Inc.
(1993-1996); Morgan Stanley & Co.
(1986-1993)
</TABLE>
I-3
<PAGE> 46
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each Stockholder or
his broker, dealer, commercial bank, trust company or other nominee to the
Depositary, at one of the addresses set forth below:
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
By Mail: By Hand/Overnight Delivery:
<S> <C>
P.O. Box 798 120 Broadway
Midtown Station 13th Floor
New York, NY 10018 New York, NY 10271
Attention: Reorganization Attention: Reorganization
Department Department
</TABLE>
By Facsimile Transmission:
(201) 329-8936
(For Eligible Institutions Only)
Confirm by Telephone: (201) 296-4983
Any questions and request for assistance or additional copies of this
Offering Circular, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at the telephone numbers and
addresses below. You may also contact your local broker, dealer, commercial bank
or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
450 West 33rd Street, 15th Floor
New York, New York 10001
Toll Free (800) 241-6594
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TRIAD SYSTEMS CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 23, 1996
BY
CCI ACQUISITION CORP.
AN AFFILIATE
OF
COOPERATIVE COMPUTING, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, NOVEMBER 20, 1996, UNLESS EXTENDED.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
By Mail: By Hand/Overnight Delivery:
<S> <C>
P.O. Box 798 120 Broadway
Midtown Station 13th Floor
New York, NY 10018 New York, NY 10271
Attention: Reorganization Attention: Reorganization
Department Department
</TABLE>
By Facsimile Transmission:
(201) 329-8936
(For Eligible Institutions Only)
Confirm by Telephone: (201) 296-4983
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU
MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED
BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THE LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) of Triad Systems Corporation (the "Stockholders") if certificates
evidencing Shares ("Certificates") are to be forwarded herewith or if delivery
of Shares is to be made by book-entry transfer to an account maintained by
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") at The Depository
Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC")
(each a "Book-Entry Transfer Facility") pursuant to the procedures set forth
under "Procedure for Tendering Shares" in the Offer to Purchase (as defined
below).
Stockholders whose Certificates are not immediately available or who cannot
deliver either their Certificates for, or a Book-Entry Confirmation (as defined
under "Procedure for Tendering Shares -- Book-Entry Transfer" in the Offer to
Purchase) with respect to, their Shares and all other required documents to the
Depositary prior to the Expiration Date (as defined under "General Terms of the
Offer" in the Offer to Purchase) may tender their Shares according to the
guaranteed delivery procedure set forth under "Procedure for Tendering
Shares -- Guaranteed Delivery" in the Offer to Purchase. See Instruction 2
hereof. Delivery of documents to a Book-Entry Transfer Facility does not
constitute delivery to the Depositary.
<PAGE> 2
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER).
Name of Tendering Institution:
-----------------------------------------------
Check Box of Book-Entry Transfer Facility:
/ / DTC / / PDTC
Account Number:
--------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------
/ / CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
---------------------------------------------
Window Ticket Number (if any):
-----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------
Name of Institution that Guaranteed Delivery:
--------------------------------
If Delivered by Book-Entry Transfer, Check Box of Applicable Book-Entry
Transfer Facility:
/ / DTC / / PDTC
Account Number:
--------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES NUMBER OF SHARES NUMBER OF
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) CERTIFICATE REPRESENTED BY SHARES
APPEAR(S) ON THE CERTIFICATE(S) NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
- ---------------------------------------------------------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
AFFIX LABEL HERE
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Shares
- ---------------------------------------------------------------------------------------------------------
(1) Need not be completed by holders of Shares delivering Shares by Book-Entry Transfer.
(2) Unless otherwise indicated, it will be assumed that all Shares represented by Certificates delivered
to the Depositary are being tendered. See Instruction 4.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares accepted
for payment are to be issued in the name of someone other than the undersigned,
or if Shares delivered by book-entry transfer that are not accepted for payment
are to be returned by credit to an account maintained at a Book-Entry Transfer
Facility, other than to the account indicated above.
Issue (check appropriate box(es)):
/ / Check to:
/ / Certificate to:
Name:
- ----------------------------------------------
(Please Type or Print)
Address:
- --------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
(Include Zip Code)
- ------------------------------------------------------
(Tax Identification or Social Security No.)
(See Substitute Form W-9)
Credit unpurchased Shares delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below:
/ / DTC / / PDTC
(check one)
- ------------------------------------------------------
(DTC/PDTC Account Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares accepted
for payment are to be sent to someone other than the undersigned or to the
undersigned at an address other than that shown above.
Mail (check appropriate box(es)):
/ / Check to:
/ / Certificate to:
Name:
- ----------------------------------------------
(Please Type or Print)
Address:
- --------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
(Include Zip Code)
- ------------------------------------------------------
(Tax Identification or Social Security No.)
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to CCI Acquisition Corp., a Delaware
corporation ("Purchaser") and an affiliate of Cooperative Computing, Inc., a
Texas corporation, the above-described shares of common stock, $.001 par value
(the "Common Stock"), of Triad Systems Corporation, a Delaware corporation (the
"Company"), together with the associated common stock purchase rights (the
"Rights"; and together with the Common Stock, the "Shares") at a purchase price
of $9.25 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated October 23, 1996 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer").
Subject to, and effective upon, acceptance for payment of, or payment for,
Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns and transfers to,
or upon the order of, Purchaser all right, title and interest in and to all of
the Shares that are being tendered hereby and any and all other Shares or other
securities issued or issuable in respect of such Shares on or after October 23,
1996 (a "Distribution") and irrevocably constitutes and appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares (and any Distributions), with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver certificates (the "Certificates") evidencing such
Shares (and any Distributions), or transfer ownership of such Shares (and any
Distributions) on the account books maintained by a Book-Entry Transfer Facility
(as defined in the Offer to Purchase) together, in any such case, with all
accompanying evidences of transfer and authenticity to, or upon the order of,
Purchaser upon receipt by the Depositary, as the undersigned's agent, of the
purchase price with respect to such Shares, (ii) present such Shares (and any
Distributions) for transfer on the books of the Company and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any Distributions), all in accordance with the terms and subject to
the conditions of the Offer.
<PAGE> 4
The undersigned hereby irrevocably appoints each designee of Purchaser as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights with respect to all
Shares (and any Distributions) tendered hereby, including, without limitation,
the right to vote such Shares (and any Distributions) in such manner as each
such attorney and proxy or his substitute shall, in his sole discretion, deem
proper. All such powers of attorney and proxies, being deemed to be irrevocable,
shall be considered coupled with an interest in the Shares tendered herewith.
Such appointment will be effective when, and only to the extent that, Purchaser
accepts such Shares for payment. Upon such acceptance for payment, all prior
powers of attorney and proxies given by the undersigned with respect to such
Shares (and any Distributions) will be revoked, without further action, and no
subsequent powers of attorney's and proxies may be given with respect thereto
(and, if given, will be deemed ineffective). The designees of Purchaser will,
with respect to the Shares (and any Distributions) for which such appointment is
effective, be empowered to exercise all voting and other rights of the
undersigned with respect to such Shares (and any Distributions) as they in their
sole discretion may deem proper, including, without limitation, in respect of
any annual or special meeting of the stockholders of the Company, or any
adjournment or postponement thereof, or in connection with any action by or
written consent in lieu of any such meeting or otherwise. Purchaser reserves the
absolute right to require that, in order for Shares to be deemed validly
tendered, immediately upon the acceptance for payment of such Shares, Purchaser
or its designees are able to exercise full voting rights with respect to such
Shares (and any Distributions), including voting at any meeting of stockholders
of the Company then scheduled.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares (and
any Distributions) tendered hereby and that when such Shares (and any
Distributions) are accepted for payment and paid for by Purchaser, Purchaser
will acquire good, marketable and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances, and that the Shares (and any
Distributions) tendered hereby will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or Purchaser to be necessary or desirable to complete
the sale, assignment and transfer of Shares (and any Distributions) tendered
hereby. In addition, the undersigned shall promptly remit and transfer to the
Depositary for the account of Purchaser any and all Distributions issued to the
undersigned on or after October 23, 1996 in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of any such Distributions and may
withhold the entire purchase price or deduct from the purchase price the amount
of value thereof, as determined by Purchaser in its sole discretion.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in "Procedure for Tendering Shares" in the Offer
to Purchase and in the instructions hereto will constitute a binding agreement
between the undersigned and Purchaser with respect to such Shares upon the terms
and subject to the conditions of the Offer. The undersigned recognizes that,
under certain circumstances set forth in the Offer to Purchase, Purchaser may
not be required to accept for payment any of the Shares tendered hereby or may
accept for payment fewer than all of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any Certificates
evidencing Shares not tendered or not accepted for payment (and accompanying
documents, as appropriate) to the address(es) of the registered holder(s)
appearing under "Description of Shares Tendered." In the event that both the
"Special Payment Instructions" and the "Special Delivery Instructions" are
completed, please issue the check for the purchase price and/or return any such
Certificates evidencing Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to, the person(s) so indicated. Unless
otherwise indicated herein under "Special Payment Instructions," in the case of
a book-entry delivery of Shares, please credit the account maintained at the
Book-Entry Transfer Facility indicated above with respect to any Shares not
accepted for payment. The undersigned recognizes that Purchaser has no
obligation pursuant to the "Special Payment Instructions" to transfer any Shares
from the name of the registered holder thereof if Purchaser does not accept for
payment any of the Shares tendered hereby.
<PAGE> 5
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on this Letter of Transmittal must be guaranteed by a member firm of a
registered national securities exchange (registered under Section 6 of the
Exchange Act) by a member firm of the National Association of Securities
Dealers, Inc., by a commercial bank or trust company having an office or
correspondent in the United States or by any other "Eligible Guarantor
Institution" (bank, stockholder, savings and loan association or credit union
with membership approved signature guarantee medallion program) as defined in
Rule 17Ad-15 under the Exchange Act (each of the foregoing constituting an
"Eligible Institution"), unless the Shares tendered hereby are tendered (i) by
the registered holder (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of such Shares who has
completed neither the box entitled "Special Payment Instructions" nor the box
entitled "Special Delivery Instructions" herein or (ii) for the account of an
Eligible Institution. See Instruction 5. If the Certificates are registered in
the name of a person other than the signer of this Letter of Transmittal, or if
payment is to be made or delivered to, or Certificates evidencing unpurchased
Shares are to be issued or returned to, a person other than the registered
owner, then the tendered Certificates must be endorsed or accompanied by duly
executed stock powers, in either case signed exactly as the name or names of the
registered owner or owners appear on the Certificates, with the signatures on
the Certificates or stock powers guaranteed by an Eligible Institution as
provided herein. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
stockholders if Certificates evidencing Shares are to be forwarded herewith or
if delivery of Shares is to be made pursuant to the procedures for book-entry
transfer set forth under "Procedure for Tendering Shares -- Book-Entry Transfer"
in the Offer to Purchase. For a stockholder to validly tender Shares pursuant to
the Offer, either (a) a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), with any required
signature guarantees and any other required documents, must be received by the
Depositary at one of its addresses set forth herein on or prior to the
Expiration Date and either (i) Certificates for tendered Shares must be received
by the Depositary at one of such addresses on or prior to the Expiration Date or
(ii) Shares must be delivered pursuant to the procedures for book-entry transfer
set forth under "Procedure for Tendering Shares -- Book-Entry Transfer" in the
Offer to Purchase and a Book-Entry Confirmation must be received by the
Depositary on or prior to the Expiration Date or (b) the tendering stockholder
must comply with the guaranteed delivery procedures set forth below and under
"Procedure for Tendering Shares -- Guaranteed Delivery" in the Offer to
Purchase.
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary or
complete the procedures for book-entry transfer on or prior to the Expiration
Date may tender their Shares by properly completing and duly executing a Notice
of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth
in "Procedure for Tendering Shares -- Guaranteed Delivery" in the Offer to
Purchase. Pursuant to such procedures (i) such tender must be made by or through
an Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by Purchaser, must
be received by the Depositary prior to the Expiration Date and (iii) the
Certificates representing all tendered Shares in proper form for transfer, or a
Book-Entry Confirmation with respect to all tendered Shares, together with a
Letter of Transmittal (or a manually-signed facsimile thereof), properly
completed and duly executed, with any required signature guarantees and any
other documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq Stock Market trading days after the date of
execution of such Notice of Guaranteed Delivery. If Certificates are forwarded
separately to the Depositary, a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) must accompany each such
delivery.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
information required under "Description of Shares Tendered" should be listed on
a separate signed schedule attached hereto.
4. PARTIAL TENDERS. If fewer than all of the Shares represented by any
Certificates delivered to the Depositary herewith are to be tendered hereby,
fill in the number of Shares which are to be tendered in the box entitled
"Number of Shares Tendered." In such case, a new Certificate for the remainder
of the Shares that were evidenced by your old certificate(s) will be sent,
without expense, to be person(s) signing this Letter of Transmittal, unless
otherwise provided in the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal, as soon
as practicable after the Expiration Date. All Shares represented by
Certificate(s) delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or instruments of transfer
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of each person's authority to so act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Certificates or
separate instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s). Signatures on such Certificates or
instruments of transfer must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by the Certificate(s) listed and
transmitted hereby, the Certificate(s) must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear on the Certificate(s). Signatures on
such Certificate(s) or instruments of transfer must be guaranteed by an Eligible
Institution.
6. TRANSFER TAXES. Except as set forth in this Instruction 6, Purchaser will
pay or cause to be paid any transfer taxes with respect to the transfer and sale
of Shares to it or its order pursuant to the Offer. If, however, payment of the
purchase price is to be made to, or (in the circumstances permitted hereby) if
Certificates for Shares not tendered or not purchased are to be registered in
the name of, any person other
<PAGE> 6
than the registered holder(s), or if tendered Certificates are registered in the
name of any person other than the person(s) signing this Letter of Transmittal,
the amount of any transfer taxes (whether imposed on the registered holder(s) or
such person) payable on account of the transfer to such person will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Certificate(s) listed in this Letter of
Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or Certificates
for unpurchased Shares are to be issued in the name of a person other than the
signer of this Letter of Transmittal or if a check is to be sent and/or such
Certificates are to be returned to someone other than the signer of this Letter
of Transmittal or to an address other than that shown above, the appropriate
boxes on this Letter of Transmittal must be completed. If any tendered Shares
are not purchased for any reason and such Shares are delivered by Book-Entry
Transfer Facility, such shares will be credited to an account maintained at the
appropriate Book-Entry Transfer Facility.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance may be directed to the Information Agent or the Dealer Manager at
their respective addresses or telephone numbers set forth below and requests for
additional copies of the Offer to Purchase, this Letter of Transmittal and the
Notice of Guaranteed Delivery may be directed to the Information Agent or
brokers, dealers, commercial banks and trust companies and such materials will
be furnished at Purchaser's expense.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Purchaser, in whole or in part, at any time or from time to time, in the
Purchaser's sole discretion.
10. BACKUP WITHHOLDING TAX. Except in the case of foreign persons, each
tendering stockholder is required to provide the Depositary with a correct
Taxpayer Identification Number ("TIN") on Substitute Form W-9, which is provided
under "Important Tax Information" below, and to certify that the stockholder is
not subject to backup withholding. Failure to provide the information on the
Substitute Form W-9 may subject the tendering stockholder to 31% federal income
tax backup withholding on the payment of the purchase price for the Shares. The
tendering stockholder should indicate in the box in Part I of the Substitute
Form W-9 if the tendering stockholder has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the stockholder
has indicated in the box in Part I that a TIN has been applied for and the
Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% of all payments of the purchase price, if any, made thereafter
pursuant to the Offer until a TIN is provided to the Depositary. A tendering
stockholder who is a foreign person (i.e., who is not a citizen or resident of
the United States) should provide the Depositary with a completed Form W-8.
Please contact the Depositary, if necessary, in order to obtain a copy of Form
W-8.
11. LOST OR DESTROYED CERTIFICATES. If any Certificate(s) representing
Shares has been lost or destroyed, the holders should promptly notify the
Company's transfer agent, ChaseMellon Shareholder Services, L.L.C. at
1-800-241-6594. The holders will then be instructed as to the procedure to be
followed in order to replace the Certificate(s). This Letter of Transmittal and
related documents cannot be processed until the procedures for replacing lost or
destroyed Certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF), PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY
CONFIRMATION FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS AND/OR SIGNATURES) MUST
BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payor) with such
stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is his social security number. If the tendering
stockholder has not been issued a TIN and has applied for a number or intends to
apply for a number in the near future, such stockholder should so indicate on
the Substitute Form W-9. See Instruction 10. If the Depositary is not provided
with the correct TIN, the stockholder may be subject to a $50 penalty imposed by
the Internal Revenue Service (the "IRS"). In addition, payments that are made to
such stockholders with respect to Shares purchased pursuant to the Offer may be
subject to backup federal income tax withholding.
Certain stockholders are not subject to these backup withholding and
reporting requirements. In order for a foreign person to qualify as an exempt
recipient, such stockholders generally must submit a Form W-8. Form W-8 can be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions. Other exempt recipients should complete Form W-9 in order to avoid
the possible imposition of backup withholding.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the IRS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding with respect to payment of
the purchase price for Shares purchased pursuant to the Offer, generally a
stockholder must provide the Depositary with his correct TIN by completing the
Substitute Form W-9 below, certifying that the TIN provided on Substitute Form
W-9 is correct (or that such stockholder is awaiting a TIN) and that (i) such
stockholder is exempt from backup withholding or (ii) such stockholder has not
been notified by the IRS that he is subject to backup withholding as a result of
failure to report all interest or dividends or (iii) the IRS has notified the
stockholder that he is not longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are registered in more than one name or are not
in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report.
<PAGE> 7
IMPORTANT
STOCKHOLDER: SIGN HERE AND COMPLETE SUBSTITUTE
FORM W-9 ON REVERSE
- --------------------------------------------------------------------------------
(Signature(s) of Stockholder(s)
Dated:
- ------------------------------, 199__
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
the Certificate or on a security position listing or by person(s) authorized to
become registered holder(s) by Certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, agents, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 5.)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Type or Print)
Capacity (Full Title):
- --------------------------------------------------------------------------------
(See Instruction 5)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Codes and Telephone Numbers:
-------------------------------------------------------------------
(Home)
------------------------------------------------
(Business)
Taxpayer Identification or Social Security No.
----------------------------------------------------------
(Complete Substitute Form W-9 on Reverse)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
- --------------------------------------------------------------------------------
Authorized Signature(s)
- --------------------------------------------------------------------------------
(Name)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Address Including Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated:
- ------------------------------, 199__
'
<PAGE> 8
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- ---------------------------------------------------------------------------------------------------------
SUBSTITUTE PLEASE PROVIDE YOUR TIN IN THE BOX AT Part I -- Social Security Number
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING OR Employer Identification
BELOW Number
DEPARTMENT OF THE TREASURY -------------------------------------- -------------------------------
INTERNAL REVENUE SERVICE Name (If awaiting TIN, write "Applied
-------------------------------------- For")
PAYER'S REQUEST FOR TAXPAYER Business Name ---------------------------------
IDENTIFICATION NUMBER (TIN)
Please check appropriate box: Part II -- For Payees exempt
/ / Individual/Sole Proprietor / from backup withholding, see the
/ Corporation enclosed Guidelines for
Certification of Taxpayer
/ / Partnership / / Other Identification Number on
-------------------------------------- Substitute Form W-9, check the
Address Exempt box below, and complete
-------------------------------------- the Form W-9.
City, State, Zip Code Exempt / /
</TABLE>
Certification -- Under penalties of perjury, I certify that:
(1) The Number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
Certification Instructions -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- --------------------------------------------------------------------------------
SIGNATURE
----------------------------------------------------------- DATE
--------------------------------, 199
-----
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL INSTRUCTIONS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
IN PART I OF THE SUBSTITUTE FROM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments of the Offer Price made to me thereafter will be withheld until I
provide a number.
SIGNATURE
- ------------------------------------------------------ DATE
---------------------------, 199
---
<TABLE>
<S> <C>
The Information Agent for the Offer is: The Dealer Manager for the Offer is:
CHASEMELLON SHAREHOLDER CHASE SECURITIES INC.
SERVICES, L.L.C. 270 Park Avenue
450 West 33rd Street -- 15th Floor New York, New York 10017
New York, New York 10001 (212) 270-3939
1-800-241-6594
</TABLE>
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TRIAD SYSTEMS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, NOVEMBER 20, 1996, UNLESS EXTENDED.
CCI Acquisition Corp., a Delaware corporation ("Purchaser") and an
affiliate of Cooperative Computing, Inc., a Texas corporation ("Parent"), has
offered to purchase all of the outstanding shares of common stock, $.001 par
value (the "Common Stock"), of Triad Systems Corporation, a Delaware corporation
(the "Company"), and the associated common stock purchase rights (the "Rights";
and together with the Common Stock, the "Shares") at a purchase price of $9.25
per share, net to the Seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated October 23, 1996 (the
"Offer to Purchase"), and the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the
"Offer").
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer if certificates representing the Shares (the
"Certificates") are not immediately available or the procedures for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach ChaseMellon Shareholder Services, L.L.C. (the
"Depositary") prior to the Expiration Date (as defined in the Offer to
Purchase). This Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile transmission or mailed to the Depositary. See
"Procedure for Tendering Shares -- Guaranteed Delivery" in the Offer to
Purchase.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C>
By Mail: By Hand/Overnight Delivery:
P.O. Box 798 120 Broadway
Midtown Station 13th Floor
New York, NY 10018 New York, NY 10271
Attention: Reorganization Attention: Reorganization
Department Department
</TABLE>
Facsimile Transmission:
(201) 329-8936
(For Eligible Institutions Only)
Confirm By Telephone: (201) 296-4983
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile transmission to
a number other than as set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to CCI Acquisition Corp., a Delaware
corporation ("Purchaser") and an affiliate of Cooperative Computing, Inc., a
Texas corporation, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated October 23, 1996 (the "Offer to Purchase"), and related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"), receipt of each of which is
hereby acknowledged, the number of Shares (as defined in the Offer to Purchase)
indicated below pursuant to the guaranteed delivery procedures set forth under
"Procedure for Tendering Shares -- Guaranteed Delivery" in the Offer to
Purchase.
<TABLE>
<S> <C>
Number of Shares:____________________________ Name(s) of Record Holder(s):
Certificate Nos. (if available):_____________ _____________________________________________
_____________________________________________ _____________________________________________
Check ONE box if Shares will be tendered by (Please type or Print)
book-entry transfer:
Address(es):_________________________________
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company _____________________________________________
(Zip Code)
Account Number:______________________________
Area Code and Tel. No.:______________________
Dated: ______________________________, 199___
Signature(s):________________________________
_____________________________________________
</TABLE>
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an Eligible Institution (as such term is defined under
"Procedure for Tendering Shares -- Guaranteed Delivery" in the Offer to
Purchase), hereby guarantees to deliver to the Depositary the certificates
representing the Shares tendered hereby, in proper form for transfer, or a
Book-Entry Confirmation (as defined under "Procedure for Tendering
Shares -- Book-Entry Transfer" in the Offer to Purchase) with respect to such
Shares, in either case together with a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof), with any
required signature guarantees, and any other documents required by the Letter of
Transmittal, all within three Nasdaq Stock Market trading days after the date
hereof.
<TABLE>
<S> <C>
Name of Firm:________________________________ ____________________________________________
(Authorized Signature)
Address:_____________________________________ Name:_______________________________________
(Please type or print)
_____________________________________________ Title:______________________________________
(Zip Code)
Area Code and Tel. No.:______________________ Dated:________________________________, 1996
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT ONLY TOGETHER WITH YOUR
LETTER OF TRANSMITTAL.
<PAGE> 1
CHASE SECURITIES INC.
270 PARK AVENUE
NEW YORK, NEW YORK 10017
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TRIAD SYSTEMS CORPORATION
AT
$9.25 NET PER SHARE
BY
CCI ACQUISITION CORP.
AN AFFILIATE
OF
COOPERATIVE COMPUTING, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, NOVEMBER 20, 1996, UNLESS EXTENDED.
October 23, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by CCI Acquisition Corp., a Delaware corporation
("Purchaser") and an affiliate of Cooperative Computing, Inc., a Texas
corporation ("Parent"), to act as Dealer Manager in connection with Purchaser's
offer to purchase all of the outstanding shares of common stock, $.001 par value
(the "Common Stock"), of Triad Systems Corporation, a Delaware corporation (the
"Company"), and the associated common stock purchase rights (the "Rights"; and
together with the Common Stock, the "Shares"), at a purchase price of $9.25 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated October 23, 1996 (the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer") enclosed
herewith.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. Offer to Purchase, dated October 23, 1996.
2. The Letter of Transmittal to tender Shares is for your use and for
the information of your clients. Facsimile copies of the Letter of
Transmittal may be used to tender Shares.
<PAGE> 2
3. A letter to stockholders of the Company from William W. Stevens,
Chairman of the Company, together with a Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Securities and Exchange
Commission by the Company and mailed to stockholders of the Company.
4. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if neither of the two procedures for tendering Shares set forth
in the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
7. A return envelope addressed to ChaseMellon Shareholder Services,
L.L.C., the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, NOVEMBER 20, 1996, UNLESS THE
OFFER IS EXTENDED.
Please note the following:
1. The tender price is $9.25 per Share, net to the seller in cash.
2. The Offer is conditioned upon, among other things, there being
validly tendered and not properly withdrawn prior to the expiration of the
Offer that number of Shares which would represent, on a fully-diluted
basis, at least 51% of the outstanding Shares. See "INTRODUCTION," "Terms
of the Offer" and "Certain Conditions of the Offer" in the Offer to
Purchase.
3. The Offer is being made for all outstanding Shares.
4. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 to the Letter of
Transmittal, transfer taxes on the sale of Shares pursuant to the Offer.
However, federal income tax backup withholding at a rate of 31% may be
required unless an exemption is provided or unless the required taxpayer
identification information is provided. See Instruction 10 of the Letter of
Transmittal.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Wednesday, November 20, 1996, unless extended.
6. The Board of Directors of the Company has unanimously (A)
determined that each of the Merger Agreement (as defined in the Offer to
Purchase), the Offer and the Merger (as defined in the Offer to Purchase)
is fair to and in the best interests of the Company's stockholders, (B)
approved the execution, delivery and performance of the Merger Agreement
and the related Stockholders Agreement (as defined in the Offer to
Purchase) and the consummation of the transactions contemplated thereby,
including the Offer and the Merger, and (C) resolved to recommend
acceptance of the Offer, approval and adoption of the Merger Agreement and
approval of the Merger by the holders of Common Stock.
7. In all cases, payment for Shares purchased pursuant to the Offer
will be made only after timely receipt by the Depositary of (A)
certificates for such Shares (or a timely Book-Entry Confirmation (as
defined under "Procedure for Tendering Shares -- Book-Entry Transfer" in
the Offer to Purchase) with respect to such Shares) and (B) the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed
and duly executed with all required signature guarantees, and all other
documents required by the Letter of Transmittal. See Section 3 of the Offer
to Purchase.
For Shares to be validly tendered pursuant to the Offer, either (a) a
Letter of Transmittal (or a manually signed facsimile thereof), properly
completed and duly executed, with any required signature guarantees and any
other documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase prior to the Expiration Date and either (i) certificates representing
Shares must be received by the Depositary at any such address prior to the
<PAGE> 3
Expiration Date (as defined in the Offer to Purchase) or (ii) such Shares must
be delivered pursuant to the procedures for book-entry transfer set forth in the
Offer to Purchase and a Book-Entry Confirmation must be received by the
Depositary prior to the Expiration Date or (b) the tendering stockholder must
comply with the guaranteed delivery procedures set forth in the Offer to
Purchase. No alternative, conditional or contingent tenders will be accepted.
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates are not immediately available or the procedures for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Depositary prior to the Expiration
Date, such Shares may nevertheless be tendered by following the guaranteed
delivery procedures specified under "Procedure for Tendering
Shares -- Guaranteed Delivery" in the Offer to Purchase.
Purchaser will not pay any fees or commission to any broker, dealer or
other persons for soliciting tenders of Shares pursuant to the Offer (other than
the Dealer Manager, the Depositary and the Information Agent as described in the
Offer to Purchase). Purchaser will, however, upon request, reimburse you for
customary mailing and handling expenses incurred by you in forwarding the
offering materials to your customers. Purchaser will pay or cause to be paid any
transfer taxes payable on the sale of Shares to it, except as otherwise provided
in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Chase Securities Inc., the Dealer Manager for the Offer, at 270 Park Avenue, New
York, New York, 10017 ((212) 270-3939), or ChaseMellon Shareholder Services,
L.L.C., the Information Agent and Depositary for the Offer, at 450 West 33rd
Street -- 15th Floor, New York, New York 10001 ((212) 946-7234).
Requests for copies of the enclosed materials may be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
CHASE SECURITIES INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE COMPANY, THE
DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TRIAD SYSTEMS CORPORATION
AT
$9.25 NET PER SHARE
BY
CCI ACQUISITION CORP.
AN AFFILIATE
OF
COOPERATIVE COMPUTING, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, NOVEMBER 20, 1996, UNLESS EXTENDED.
October 23, 1996
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated October
23, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer") relating to the offer by CCI Acquisition Corp., a
Delaware corporation ("Purchaser"), and an affiliate of Cooperative Computing
Inc., a Texas corporation ("Parent"), to purchase all of the outstanding shares
of common stock, $.001 par value (the "Common Stock"), of Triad Systems
Corporation, a Delaware corporation (the "Company"), and the associated common
stock purchase rights (the "Rights"; and together with the Common Stock, the
"Shares") at a purchase price of $9.25 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
and the Letter of Transmittal. Holders who desire to tender Shares pursuant to
the Offer and whose certificates for such Shares (the "Certificates") are not
immediately available or the procedures for book-entry transfer set forth in the
Offer to Purchase cannot be completed on a timely basis or time will not permit
all required documents to reach ChaseMellon Shareholder Services, L.L.C. (the
"Depositary") prior to the Expiration Date (as defined in the Offer to Purchase)
may nevertheless tender their Shares according to the guaranteed delivery
procedures set forth under "Procedure of Tendering Shares -- Guaranteed
Delivery" in the Offer to Purchase.
We are (or our nominee is) the holder of record of Shares held by us for
your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Shares held by us for your account pursuant to
the terms and conditions set forth in the Offer.
<PAGE> 2
Please note the following:
1. The tender price is $9.25 per Share, net to the seller in cash.
2. The Offer is conditioned upon, among other things, there being
validly tendered and not properly withdrawn prior to the expiration of the
Offer that number of Shares which would represent, on a fully-diluted
basis, at least 51% of the outstanding Shares. See "INTRODUCTION," "Terms
of the Offer" and "Certain Conditions of the Offer" in the Offer to
Purchase.
3. The Offer is being made for all outstanding Shares.
4. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 to the Letter of
Transmittal, transfer taxes on the sale of Shares pursuant to the Offer.
However, federal income tax backup withholding at a rate of 31% may be
required unless an exemption is provided or unless the required taxpayer
identification information is provided. See Instruction 10 of the Letter of
Transmittal.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Wednesday, November 20, 1996, unless extended.
6. The Board of Directors of the Company has unanimously (A)
determined that each of the Merger Agreement (as defined in the Offer to
Purchase), the Offer and the Merger (as defined in the Offer to Purchase)
is fair to and in the best interests of the Company's stockholders, (B)
approved the execution, delivery and performance of the Merger Agreement
and the related Stockholders Agreement (as defined in the Offer to
Purchase) and the consummation of the transactions contemplated thereby,
including the Offer and the Merger, and (C) resolved to recommend
acceptance of the Offer, approval and adoption of the Merger Agreement and
approval of the Merger by the holders of Common Stock.
7. In all cases, payment for Shares purchased pursuant to the Offer
will be made only after timely receipt by the Depositary of (A)
certificates for such Shares (or a timely Book-Entry Confirmation (as
defined under "Procedure for Tendering Shares -- Book-Entry Transfer" in
the Offer to Purchase) with respect to such Shares) and (B) the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed
and duly executed with all required signature guarantees, and all other
documents required by the Letter of Transmittal. See Section 3 of the Offer
to Purchase.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth below. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise specified below. An
envelope to return your instructions to us is enclosed. Your instructions should
be forwarded to us in ample time to permit us to submit a tender on your behalf
prior to the expiration of the Offer.
THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE AND THE RELATED LETTER OF
TRANSMITTAL AND IS BEING MADE TO ALL HOLDERS OF SHARES.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, Purchaser may,
in its discretion, take such actions as it may deem necessary to make the Offer
in any jurisdiction (including, without limitation, the extension of the Offer).
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of Purchaser by Chase Securities Inc. or one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TRIAD SYSTEMS CORPORATION
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer
to Purchase dated October 23, 1996 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer") in connection with the offer by
CCI Acquisition Corp., a Delaware corporation ("Purchaser") and an affiliate of
Cooperative Computing, Inc., a Texas corporation, to purchase all of the
outstanding shares of common stock, $.001 par value (the "Common Stock"), of
Triad Systems Corporation, a Delaware corporation, and the associated common
stock purchase rights (the "Rights"; and together with the Common Stock, the
"Shares") at a purchase price of $9.25 per share, net to the seller in cash upon
the terms and subject to the conditions set forth in the Offer.
This will instruct you to tender to Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to be Tendered:
------------------------------
Date: , 199
- --------------------- --
- --------------------------------------------------------------------------------
SIGN HERE
Signature(s):
- --------------------------------------------------------------------------------
Print or Type Name(s):
- --------------------------------------------------------------------------------
Print or Type Address(es):
- --------------------------------------------------------------------------------
Area Code and Telephone Number(s):
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number(s):
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT (A)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security Numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer Identification Numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the type
of number to give the payer.
- ---------------------------------------------------------------
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
<C> <S> <C>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- -------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor- trustee(1)
savings trust account
(grantor is also trustee) The actual owner(1)
b. So-called trust account
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- -------------------------------------------------------------
9. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Department The public entity
of Agriculture in the name of
a public entity (such as a
State or local government,
school district, or prison)
that receives agricultural
program payments
</TABLE>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter your business or
"doing business" name. You may use either your Social Security Number or
Employer Identification Number.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE:If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service (the "IRS") and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan or a custodial account under Section 403(b)(7).
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, CHECK "EXEMPT" IN PART II OF THE FORM, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment. FOR ADDI-
TIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE> 1
EXHIBIT (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase
dated October 23, 1996 (the "Offer to Purchase") and the related Letter
of Transmittal, and is being made to all holders of Shares. The Offer
is not being made to (nor will tenders be accepted from or on behalf
of) holders of Shares in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. In any jurisdiction
where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made
on behalf of CCI Acquisition Corp. by Chase
Securities, Inc., or one or more
registered brokers or dealers
licensed under the laws of
such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
TRIAD SYSTEMS CORPORATION
AT
$9.25 NET PER SHARE
BY
CCI ACQUISITION CORP.
AN AFFILIATE OF
COOPERATIVE COMPUTING, INC.
CCI Acquisition Corp., a Delaware corporation ("Purchaser") and an
affiliate of Cooperative Computing, Inc., a Texas corporation ("Parent"), is
offering to purchase all of the outstanding shares of the common stock, $0.001
par value (the "Common Stock"), of Triad Systems Corporation, a Delaware
corporation (the "Company"), and the associated common stock purchase rights
(the "Rights"; and together with the Common Stock, the "Shares") at a purchase
price of $9.25 per share (the "Offer Price"), net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer to Purchase and
in the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
***************************************************************************
* *
* THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW *
* YORK CITY TIME, ON WEDNESDAY, NOVEMBER 20, 1996, UNLESS *
* THE OFFER IS EXTENDED. *
* *
***************************************************************************
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of October 17, 1996, among Parent, Purchaser and the Company (the
"Merger Agreement"). The Merger Agreement provides, among other things, for
the commencement of the Offer by Purchaser and further provides that, subject
to the satisfaction or waiver of certain conditions, Purchaser will be merged
with and into the Company (the "Merger"), with the Company surviving the
Merger. Pursuant to the terms of a Securities Purchase Agreement, dated as of
October 16, 1996, the stockholders of Purchaser have agreed to contribute all
of the issued and outstanding common stock of Purchaser to Parent prior to the
consummation of the Offer (as a result of which, Purchaser will become a wholly
owned subsidiary of Parent). Accordingly, the Company shall survive the Merger
as a direct wholly owned subsidiary of Parent (the "Surviving Corporation").
In the Merger, each issued and outstanding Share (other than Shares owned by
stockholders of the Company who shall have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
<PAGE> 2
appraisal for such shares under Delaware law and Shares directly or indirectly
owned by the Company or any subsidiary of the Company, Parent, Purchaser or any
other subsidiary of Parent) will be converted at the effective time of the
Merger (the "Effective Time") into the right to receive the Offer Price in
cash, without interest and less any required withholding taxes (the "Merger
Consideration").
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
(A) DETERMINED THAT EACH OF THE MERGER AGREEMENT, THE OFFER AND THE MERGER IS
FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (THE
"STOCKHOLDERS"), (B) APPROVED THE EXECUTION, DELIVERY AND PERFORMANCE OF THE
MERGER AGREEMENT AND THE RELATED STOCKHOLDERS AGREEMENT REFERENCED BELOW AND
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER, AND (C) RESOLVED TO RECOMMEND ACCEPTANCE OF THE OFFER, APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER BY THE
STOCKHOLDERS.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) THAT
NUMBER OF SHARES WHICH WOULD REPRESENT, ON A FULLY DILUTED BASIS, AT LEAST 51%
OF THE OUTSTANDING SHARES. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER
CONDITIONS AS SET FORTH IN THE MERGER AGREEMENT.
Pursuant to the Merger Agreements, the Company expects to distribute
to its stockholders ownership interests in an entity that will own, directly or
indirectly, certain real property and related assets of the Company. The
Merger Agreement provides that such distribution will be made in the form of a
dividend payable to the record holders of the Shares immediately prior to the
acceptance of Shares in the Offer. The payment of such dividend is contingent
upon the consummation of the Offer and is subject to a number of conditions,
including compliance with all applicable laws, including state and federal
securities laws.
Concurrently with the execution of the Merger Agreement, Parent and
Purchaser entered into a Stockholders Agreement, dated October 17, 1996 (the
"Stockholders Agreement"), with certain Stockholders of the Company (the
"Selling Stockholders") owning, in the aggregate, 3,537,094 (or approximately
18.0%) of the outstanding Shares calculated on a fully-diluted basis (as
defined in the Merger Agreement). Pursuant to the Stockholders Agreement, the
Selling Stockholders, which include all of the members of the Board of
Directors of the Company, have agreed to validly tender pursuant to the Offer
and not withdraw all Shares which are owned of record or beneficially by them
prior to the Expiration Date.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment (and thereby purchased) tendered Shares as, if and when
Purchaser gives oral or written notice to ChaseMellon Shareholder Services,
L.L.C., as the Depositary (in such capacity, the "Depositary"), of the
Purchaser's acceptance of such Shares for payment. Payment for Shares purchased
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering Stockholders for the
purpose of receiving payment from Purchaser and transmitting payment to
tendering Stockholders whose shares have theretofore been accepted for payment.
In all cases, payment for Shares purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) certificates for such Shares
(or a timely confirmation of a book-entry transfer of Shares into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (each, a "Book-Entry Transfer Facility") pursuant to
the procedure set forth in Section 3 of the Offer to Purchase) and (ii) the
Letter of Transmittal (or a manually signed facsimile thereof), properly
completed and duly executed with all required signature guarantees, and all
other documents required by the Letter of Transmittal. Under no circumstances
will interest on the Offer Price be paid by Purchaser, regardless of any delay
in making such payment.
The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on Wednesday, November 20, 1996, unless and until Purchaser, in
accordance with the terms of the Offer and the Merger Agreement, shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by the Purchaser, shall expire. Subject to the terms of the
Merger Agreement, Purchaser expressly reserves the right, in its sole
discretion, at any time or from time to time, to extend the period of time
during which the Offer is open by giving oral or written notice of such
extension to the Depositary and by making a public announcement of such
extension. There can be no assurance that Purchaser will exercise its right to
extend the Offer. Purchaser also expressly reserves the right, subject to
applicable laws (including
2
<PAGE> 3
applicable regulations of the Securities and Exchange Commission promulgated
under the Securities Exchange Act of 1934, as amended), and to the terms of the
Merger Agreement, at any time or from time to time, (i) to delay acceptance for
payment of or payment for any Shares, regardless of whether the Shares were
theretofore accepted for payment, or to terminate the Offer and not accept for
payment or pay for any Shares not theretofore accepted for payment or paid for,
upon the occurrence of any of the conditions specified in Section 14 of the
Offer to Purchase, by giving oral or written notice of such delay in payment or
termination to the Depositary, and (ii) to amend the Offer in any respect, by
giving oral or written notice to the Depositary. Any extension, delay in
payment, termination or amendment will be followed as promptly as practicable
by public announcement, the announcement in the case of an extension to be
issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Without limiting the manner in
which Purchaser may choose to make any public announcement, Purchaser will have
no obligation to publish, advertise or otherwise communicate any such
announcement other than by issuing a press release to the Dow Jones News
Service or as otherwise may be required by law.
Tenders of Shares made pursuant to the Offer are irrevocable, except
as otherwise provided below. Shares tendered pursuant to the Offer may be
withdrawn any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Purchaser, may also be withdrawn at any time after
December 21, 1996. For a withdrawal to be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn, the number of Shares to be withdrawn
and the name of the registered holder, if different from that of the person who
tendered such Shares. If certificates evidencing Shares have been delivered or
otherwise identified to the Depositary, then prior to the release of such
certificates, the tendering Stockholder must also submit the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn, and
the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution (as defined in Section 3 of the Offer to Purchase) (except in the
case of Shares tendered for the account of an Eligible Institution). If Shares
have been tendered pursuant to the procedure for book-entry transfer set forth
in Section 3 of the Offer to Purchase, the notice of withdrawal must specify
the name and number of the account at the applicable Book-Entry Transfer
Facility to be credited with the withdrawn Shares. All questions as to form
and validity (including time of receipt) of a notice of withdrawal will be
determined by Purchaser, in its sole discretion, whose determination shall be
final and binding on all parties. No withdrawal of Shares shall be deemed to
have been properly made until all defects and irregularities have been cured or
waived. None of Purchaser, Parent, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failing to give such notification.
The Company has provided Purchaser with its stockholder list and
security position listings for the purpose of disseminating the Offer to
Stockholders. The Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares by the Purchaser.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase, the Letter of
Transmittal and other tender offer documents may be directed to the Information
Agent as set forth below, and copies will be furnished promptly at the
Purchaser's expense. Questions or requests for assistance may be directed to
the Information Agent or the Dealer Manager. No fees or commissions will be
payable to brokers, dealers or other persons (other than the Dealer Manager,
the Depositary and the Information Agent) in connection with the solicitation
of tenders of shares pursuant to the Offer.
The Information Agent for the Offer is:
3
<PAGE> 4
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
450 West 33rd Street, 15th Floor
New York, New York 10001
Toll Free: (800) 241-6594
Banks and Brokerage Firms please call (212) 946-7234
4
<PAGE> 5
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Facsimile Transmission:
(201) 329-8936
(For Eligible Institutions Only)
Confirm by Telephone:
(201) 296-4983
By Mail: By Hand/Overnight Delivery:
P.O. Box 798 120 Broadway
Midtown Station 13th Floor
New York, New York 10018 New York, New York 10271
Attention: Reorganization Attention: Reorganization
Department Department
The Dealer Manager for the Offer is:
CHASE SECURITIES INC.
270 Park Avenue
New York, NY 10017
(212) 270-3939
October 23, 1996
<PAGE> 1
EXHIBIT (a)(8)
HICKS, MUSE, TATE & FURST AND COOPERATIVE COMPUTING, INC.
TO ACQUIRE TRIAD SYSTEMS CORP. IN TRANSACTION VALUED
AT APPROXIMATELY $300 MILLION
- --TRIAD SHAREHOLDERS TO RECEIVE $9.25 PER SHARE IN CASH FOR THEIR TRIAD STOCK,
REPRESENTING A 68 PERCENT PREMIUM OVER TRIAD'S CLOSING PRICE
ON OCTOBER 16TH--
--TRIAD SHAREHOLDERS WILL ALSO RECEIVE SHARES OF A SPIN-OFF THAT INCLUDES
ALL OF TRIAD'S REAL PROPERTY LOCATED IN LIVERMORE, CALIFORNIA--
DALLAS, TEX., AUSTIN, TEX. AND LIVERMORE, CALIF., Oct. 17, 1996 -- Hicks,
Muse, Tate & Furst Incorporated, of Dallas, a leading private investment
firm, Cooperative Computing, Inc. (CCI), of Austin, a provider of
information-management solutions to large warehouse distributors in the
automotive aftermarket business, and Triad Systems Corporation (NASDAQ: TRSC),
of Livermore, Calif., which provides information systems to the independent
jobber segment of the automotive parts aftermarket as well as to retail
hardware and lumber dealers, today announced that they have signed a definitive
agreement under which a company newly formed, and jointly owned, by Cooperative
Computing, Inc. and Hicks Muse will acquire Triad. Hicks Muse estimates the
combined enterprise value of CCI and Triad at approximately $300 million.
Under the agreement, which was unanimously approved by Triad's Board of
Directors, Hicks Muse and CCI will commence within five business days a cash
tender offer for all outstanding shares of Triad at a price of $9.25 per share,
representing a premium of 68 percent over Triad's closing price on the Nasdaq
National Market System of $5.50 per share on October 16, 1996.
In addition, Triad shareholders will receive shares in a spun-off entity whose
assets will consist of Triad's real property in Livermore, Calif., including
its 220,000-square-foot corporate headquarters and approximately 150 acres of
property held for sale in the Triad Park development. The spun-off real estate
entity will assume approximately $20.7 million of indebtedness currently
secured by the spun-off real estate. Over time, the real estate entity will
liquidate its real estate portfolio, with proceeds used to pay expenses
(including taxes), repay secured debt and distribute any remaining proceeds to
current Triad shareholders. Triad management has not expressed a view as to
the ultimate cash distribution to be realized by current Triad shareholders.
The tender offer will be followed by a "back-end" merger in which any Triad
shares that remain outstanding after the tender offer will be exchanged for
cash at the same price. Triad has 19,587,000 fully diluted shares outstanding,
valuing the cash portion of the consideration to be paid for outstanding shares
at approximately $181.2 million.
(more)
<PAGE> 2
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Cooperative Computing, Inc. founded in 1976 by Glenn E. Staats, Ph.D., is a
privately held firm that has experienced rapid growth in developing highly
sophisticated program distribution solutions for the automative aftermarket and
related industries. The company is well-known for its long-term investment in
research and development to produce leading-edge information solutions for its
clients. CCI's market focus has been on providing solutions to larger
warehouse distributors and their customer networks. Total integration of the
"automative aftermarket information highway" is the company's principal
strategic goal.
Triad Systems Corporation is known for its focus on the independent jobber
segment of the automotive aftermarket, where it has excelled in developing and
delivering innovative solutions. Triad is also known for providing business
solutions for the hardlines (hardware) and lumber marketplace. Founded in
1972, Triad has been a pioneer in sales and marketing strategies to its target
markets.
Thomas O. Hicks, Chairman and Chief Executive Officer of Hicks Muse, said:
"We are pleased to be partnering with CCI's owners, Glen and Preston Staats,
and Triad to create a platform company in the growing information services and
management industry."
Glenn E. Staats will be President and Chief Executive Officer of the new
Cooperative Computing, Inc. as well as its largest individual shareholder, and
Preston W. Staats, Ph.D., his brother, will be its Chief Operating Officer.
James R. Porter, currently President and Chief Executive Officer of Triad, has
agreed to serve as Chairman of the Board of the new Cooperative Computing, Inc.
Glenn Staats said: "My brother and I look forward to working with Jim Porter
and our counterparts at Triad to build the value of the combined enterprise for
our respective customers, business partners and employees."
Mr. Porter of Triad said: "We believe this transaction represents a very
attractive opportunity for our shareholders to maximize the value of their
investment in Triad. The combination of CCI and Triad will also benefit our
automotive-aftermarket and other customers by enhancing our ability to help
them use information-management systems to improve their operating efficiency.
It will also position us for continued growth in the businesses we are
currently in and others we may choose to pursue."
The parties expect to complete the transaction by calendar year-end. Upon
completion, the combined entity will be known as Cooperative Computing, Inc.,
with the current CCI and Triad becoming separate, wholly owned subsidiaries.
(more)
<PAGE> 3
Following transaction completion, the company will continue to maintain
offices and operations in both Austin and Livermore. In that regard, CCI,
under the agreement, will enter into a five-year lease of Triad's Livermore
facilities, for an annual rent of $2.5 million in each of the first two years,
adjusted to market rates in years three through five.
Triad's financial advisor with respect to the transaction is Hambrecht & Quist,
which has also rendered an opinion that the transaction is fair to Triad
shareholders from a financial point of view. Richard C. Blum & Associates,
L.P., assisted Triad in the negotiations.
As part of the agreement, Hicks Muse will invest $100 million in the combined
entity. The Chase Manhattan Bank has committed to provide the bank financing
for the acquisition, and ChaseMellon Shareholder Services, L.L.C. will serve as
Depositary Agent and Information Agent.
The tender offer is conditioned upon there being validly tendered and not
withdrawn shares representing at least a majority of Triad's fully diluted
shares outstanding and expiration of the applicable Hart-Scott-Rodino waiting
period, as well as customary closing conditions.
It is expected that CCI will file tender offer materials with the Securities
and Exchange Commission and distribute them promptly to Triad stockholders.
Hicks, Muse, Tate & Furst Incorporated is a leading private investment firm.
Over the past six years, Hicks Muse has completed, or currently has pending,
more than 55 transactions with an aggregate value in excess of $9 billion.
Headquartered in Dallas, the firm also has offices in New York City, St. Louis,
and Mexico City.
# # #
Contacts: Hicks Muse/CCI Triad Systems
Roy Winnick Tim Mehren
Kekst and Company (510) 449-0606
(212) 593-2655
<PAGE> 1
Exhibit (b)
[CHASE SECURITIES LETTERHEAD]
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
THE CHASE MANHATTAN BANK
270 Park Avenue
New York, New York 10017
October 16, 1996
CCI Acquisition Corp.
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Patrick K. McGee
Re: Cooperative Computing Inc. - Senior Secured Credit Facilities - Commitment
Letter
Ladies and Gentlemen:
You have advised Chase Securities Inc. ("CSI") and The Chase
Manhattan Bank ("Chase") that you, CCI Acquisition Corp., a Delaware
corporation ("Acquisition Co.") and an affiliate of Cooperative Computing,
Inc., a Delaware corporation ("CCI"), propose to make a tender offer (the
"Tender Offer") for all of the issued and outstanding shares of common stock,
par value $.001 per share (the "Shares"), of a corporation identified to us as
"Target", a Delaware corporation ("Target"), followed by the Merger described
below. The Tender Offer will be contingent upon (a) the purchase by
Acquisition Co. pursuant thereto of not less than 51% of the Shares (the
"Minimum Shares"), determined on a fully diluted basis after giving effect to
the exercise of any warrants, rights, options, conversion privileges or similar
rights, (b) receipt by Acquisition Co. of a capital contribution of no less
than $95,000,000 from CCI, which will be funded entirely from cash proceeds of
no less than $95,000,000 from the sale of CCI common stock to an affiliate of
Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), and (c) the contribution
to CCI of all of the capital stock of Acquisition Co. by the stockholders of
Acquisition Co. so that thereafter Acquisition Co. becomes a wholly-owned
subsidiary of CCI.
You have also advised us that prior to commencement of the Tender
Offer, Acquisition Co., CCI and Target will have entered into a merger
agreement in substantially the form previously delivered to us (the "Merger
Agreement") providing for the merger (the
<PAGE> 2
2
"Merger") of Acquisition Co. or its wholly owned subsidiary with and into
Target as soon as practicable after completion of the Tender Offer for cash
consideration equal to $9.25 per Share. The Merger Agreement will, among other
things, provide that each shareholder of Target (other than Acquisition Co. and
other than shareholders who have perfected appraisal rights) who has not
participated in the Tender Offer will, upon consummation of the Merger, receive
a cash merger price per Share equal to $9.25.
We understand that (i) in order to finance the Tender Offer and
certain related expenses, Acquisition Co. (a) will require a senior credit
facility of $103,500,000 (the "Tender Facility") (a portion of which may be
borrowed by CCI in order to refinance certain of its indebtedness and to
provide for its general corporate requirements) and (b) will receive a
$95,000,000 capital contribution from CCI which will be funded entirely from
the cash proceeds of a sale of CCI common stock to an affiliate of Hicks, Muse,
Tate and Furst Incorporated ("Hicks Muse"), (ii) in order to refinance or
defease certain indebtedness of Target until the date of the Merger, Target
will acquire senior credit facilities of up to $36,500,000 (the "Target
Facilities") and (iii) in order to finance the Merger and certain related
expenses, to refinance certain indebtedness of Target, to repay amounts owing
under the Tender Facility and to provide financing for future acquisitions in
the same line of business and for other general corporate purposes, the
surviving corporation of the Merger ("New Target") will require senior credit
facilities of up to $170,000,000 (the "Merger Facilities"), comprised of a term
loan facility of not more than $135,000,000 and a $35,000,000 revolving credit
facility, of which an amount of up to $5,000,000 may be drawn in connection
with the Merger.
CSI is pleased to advise you that it is willing to act as
exclusive advisor and arranger for the Tender Facility and the Merger
Facilities (the "Facilities"). Furthermore, Chase is pleased to advise you of
its commitment to provide the entire amount of the Facilities and to act as
administrative agent in respect thereof. Attached as Exhibits A, B and C to
this Commitment Letter are statements of terms and conditions (the "Term
Sheets") setting forth the principal terms and conditions on and subject to
which Chase is willing to make available the Facilities. As consideration for
Chase's commitment hereunder and CSI's and Chase's agreements to perform the
services described herein with respect to the Facilities, you agree to pay to
Chase the nonrefundable fees described in the Term Sheets and in the Fee Letter
dated the date hereof and delivered herewith (the "Fee Letter"). To the extent
that the Fee Letter amends, supplements or otherwise modifies any of the terms
hereof (including the terms of the Term Sheets), the terms of the Fee Letter
shall be controlling.
You agree that no other agents, co-agents or arrangers will be
appointed, no other titles will be awarded and no compensation (other than that
expressly contemplated by the Term Sheets and the Fee Letter) will be paid in
connection with the Facilities unless you and we shall so agree.
We intend to syndicate the Facilities to a group of financial
institutions (together with Chase, the "Lenders") identified by us in
consultation with you. CSI intends to commence syndication efforts promptly
upon the execution of this Commitment Letter, and you agree to, and to cause
CCI and Target to, actively assist CSI in completing a syndication
<PAGE> 3
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satisfactory to us and you. Such assistance shall include (a) the use of
commercially reasonable efforts to ensure that the syndication efforts benefit
materially from the existing lending relationships of CCI, Target and Hicks
Muse, (b) the hosting, with CSI, of one or more meetings with prospective
Lenders and other direct contact between the proposed Lenders and senior
management and advisors of CCI, Acquisition Co., Target and Hicks Muse and (c)
the preparation of a Confidential Information Memorandum and other marketing
materials to be used in connection with the syndication. You agree that we
shall have a reasonable time (which shall be no more than 45 days from the
execution of the Merger Agreement) prior to the closing date of the Tender
Facility to complete the syndication. Subject to the foregoing, Chase and CSI
are committed to work with you to close the financing contemplated hereby as
promptly as possible and accordingly are committed, subject to the terms and
conditions hereof, to close prior to completion of the syndication.
CSI, in cooperation with you, will manage all aspects of the
syndication, including decisions as to the selection of institutions to be
approached and when they will be approached, when their commitments will be
accepted, which institutions will participate, the allocations of the
commitments among the Lenders and the amount and distribution of fees among the
Lenders. To assist CSI in its syndication efforts, you agree to, and to cause
CCI, Acquisition Co. and their subsidiaries to, promptly prepare and provide to
CSI and Chase all information with respect to CCI, Acquisition Co., Target and
their subsidiaries, the Tender Offer, the Merger and the other transactions
contemplated hereby, including all projections, pro forma financial statements,
financial models and business plans (the "Projections"), as we may reasonably
request in connection with the arrangement and syndication of the Facilities.
You hereby represent and covenant that (a) all information other
than the Projections (the "Information") that has been or will be made
available to Chase or CSI by you or any of your representatives is or will be,
when furnished, complete and correct in all material respects and does not or
will not, when furnished, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances under
which such statements are made and (b) the Projections that have been or will
be made available to Chase or CSI by you or any of your representatives have
been or will be prepared in good faith based upon reasonable assumptions. In
arranging and syndicating the Facilities, we will use and rely on the
Information and Projections without independent verification thereof.
Chase's commitment hereunder and CSI's agreement to perform the
services described herein are subject to (a) our not becoming aware after the
date hereof of any information or other matter which in our reasonable judgment
(i) is materially inconsistent in a material and adverse manner with any
information or other matter disclosed to us prior to the date hereof (including
any material potential liability or contingent obligation not reflected in the
Projections) or (ii) could reasonably be expected to have a material adverse
effect on the business, operations, financial condition or prospects of CCI,
Acquisition Co., Target and their subsidiaries taken as a whole or on their
ability to perform the covenants and obligations in a timely manner under the
financing agreements, (b) there not having occurred a material disruption of or
material adverse change in financial, banking or capital market conditions
that, in our reasonable judgment, could materially impair the syndication of
any of the
<PAGE> 4
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Facilities, (c) our satisfaction that there shall have been no competing
offering, placement or arrangement of any debt securities or bank financing by
or on behalf of CCI, Acquisition Co., Target, Hicks Muse or any of their
respective affiliates prior to and during the syndication of the Facilities
(which, in the case of Hicks Muse or any of its other affiliates, would
materially impair the syndication of the Facilities), (d) the negotiation,
execution and delivery on or before January 15, 1997 of definitive
documentation with respect to the Facilities reasonably satisfactory to Chase
and its counsel and (e) the other conditions set forth in the Term Sheets. The
terms and conditions of Chase's commitment hereunder and of the Facilities, to
the extent not inconsistent with the terms and conditions herein and in the
Term Sheets, are not limited to those set forth herein and in the Term Sheets.
Those matters that are not covered by the provisions hereof and of the Term
Sheets are subject to the approval and agreement of Chase, CSI, CCI and
Acquisition Co.
You agree (a) to indemnify and hold harmless Chase, CSI and their
respective officers, directors, employees, affiliates, advisors, agents and
controlling persons (each, an "indemnified person") from and against any and
all losses, claims, damages, expenses and liabilities ("Losses") to which any
such indemnified person may become subject arising out of or in connection with
this Commitment Letter, the Facilities, the use of the proceeds thereof, the
Tender Offer, the Merger or any related transaction or any claim, litigation,
investigation or proceeding relating to any of the foregoing, regardless of
whether any indemnified person is a party thereto, including, without
limitation, Losses consisting of legal or other expenses incurred in connection
with investigating or defending any of the foregoing, provided that the
foregoing will not apply to any Losses of an indemnified person to the extent
they are found by a final decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such indemnified
person or material breach of this Commitment Letter by such indemnified person,
and (b) to reimburse Chase, CSI and their affiliates on demand for all
reasonable out-of-pocket expenses (including due diligence expenses,
syndication expenses, travel expenses, and reasonable fees, charges and
disbursements of counsel) incurred in connection with the Facilities and any
related documentation (including this Commitment Letter, the Term Sheets, the
Fee Letter and the definitive financing documentation), provided, that if the
Tender Offer is not consummated you shall not be required to reimburse any
expenses pursuant to this Clause (b) except to the extent that you shall in
turn be reimbursed for such expenses. No indemnified person shall be liable
for any indirect or consequential damages in connection with its activities
related to the Facilities.
This Commitment Letter shall not be assignable by you without the
prior written consent of Chase and CSI (and any purported assignment without
such consent shall be null and void), is intended to be solely for the benefit
of the parties hereto and is not intended to confer any benefits upon, or
create any rights in favor of, any person other than the parties hereto. This
Commitment Letter may not be amended or waived except by an instrument in
writing signed by you, Chase and CSI. This Commitment Letter may be executed
in any number of counterparts, each of which shall be an original, and all of
which, when taken together, shall constitute one agreement. Delivery of an
executed signature page of this Commitment Letter by facsimile transmission
shall be effective as delivery of a manually executed counterpart hereof. This
Commitment Letter and the Fee Letter are the
<PAGE> 5
5
only agreements which have been entered into among us with respect to the
Facilities and set forth the entire understanding of the parties with respect
thereto. This Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of New York.
This Commitment Letter is delivered to you on the understanding
that neither this Commitment Letter, the Term Sheets or the Fee Letter nor any
of their terms or substance shall be disclosed, directly or indirectly, to any
other person except (a) to your officers, agents and advisors who are directly
involved in the consideration of this matter, (b) to officers and
representatives of the Board of Directors of Target after this Commitment
Letter has been accepted by you, and (c) as may be compelled in a judicial or
administrative proceeding or as otherwise required by law (in which case you
agree to inform us promptly thereof), provided, that the foregoing restrictions
shall cease to apply (except in respect of the Fee Letter and its terms and
substance) after (i) this Commitment Letter has been accepted by you and (ii)
the Board of Directors of Target (consisting of a majority of the Directors
holding office as of the date hereof) has approved the Tender Offer and the
Merger.
The compensation, reimbursement, indemnification and
confidentiality provisions contained herein and in the Fee Letter shall remain
in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or Chase's commitment hereunder;
provided, that if definitive financing documentation is executed, the terms of
such definitive financing documentation shall supersede this Commitment Letter.
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of the terms hereof and of the Term Sheets and the Fee
Letter by returning to us executed counterparts hereof and of the Fee Letter
not later than 5:00 p.m., New York City time, on October 16, 1996. Chase's
commitment and CSI's agreements herein will expire at such time in the event
Chase has not received such executed counterparts in accordance with the
immediately preceding sentence.
<PAGE> 6
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Chase and CSI are pleased to have been given the opportunity to
assist you in connection with this important financing.
Very truly yours,
CHASE SECURITIES INC.
By: /s/ JOHN F. SIMON
----------------------------
Name: John F. Simon
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ MARIAN N. SCHULMAN
----------------------------
Name: Marian N. Schulman
Title: Attorney-in-Fact
Accepted and agreed to
as of the date first
written above by:
CCI ACQUISITION CORP.
By: /s/ LAWRENCE D. STUART, JR.
----------------------------
Name: Lawrence D. Stuart, Jr.
Title:
<PAGE> 7
Exhibit A
$103,500,000
CCI ACQUISITION CO. SENIOR SECURED CREDIT FACILITY
TENDER FACILITY
Summary of Terms and Conditions
October 16, 1996
--------------------------------------
The following sets forth the terms and conditions for a
$103,500,000 Senior Secured Credit Facility that will be available to CCI
Acquisition Corp., a Delaware corporation ("Acquisition Co.") and an affiliate
of Cooperative Computing, Inc., a Delaware corporation ("CCI"), in connection
with its proposed tender offer (the "Tender Offer") of $9.25 per share for all
of the issued and outstanding shares of common stock, par value $.001 per share
(the "Shares"), of a corporation identified to us as "Target", a Delaware
corporation ("Target"), pursuant to the Agreement and Plan of Merger, dated as
of October 16, 1996 (the "Merger Agreement"), among Acquisition Co., CCI and
Target. The Merger Agreement also provides for the merger (the "Merger") of
Acquisition Co. or its wholly-owned subsidiary and Target as soon as is
practicable after completion of the Tender Offer, subject to any necessary
approval of the Merger by the shareholders of Target (the survivor of the
Merger, "New Target"). Immediately prior to the consummation of the Tender
Offer, (a) Acquisition Co. will become a subsidiary of CCI and (b) Acquisition
Co. shall receive a capital contribution of no less than $95,000,000 from CCI
(the "CCI Contribution"), which will be funded entirely from the cash proceeds
of the sale of no less than $95,000,000 (the "HMTF Equity Investment") of CCI
common stock to an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks
Muse") pursuant to the Securities Purchase Agreement, dated as of October 16,
1996 (the "HMTF Securities Purchase Agreement"), between Hicks Muse or an
affiliate thereof and CCI.
I. Parties
Borrower: Acquisition Co. To the extent that CCI will
refinance any of its existing indebtedness of
up to $5,100,000 (the "CCI Refinancing") or will
require for its general corporate purposes
up to $3,400,000, CCI will be permitted to be a
borrower for such refinancing or purposes
(collectively, the "CCI Uses") or Acquisition
Co. will be permitted to make intercompany
advances to CCI therefor.
<PAGE> 8
2
Guarantors: CCI and each of its direct and indirect
subsidiaries (other than Target and its
subsidiaries and the Excluded Foreign Subsidiaries
referred to below) (the "Guarantors"; CCI and the
Guarantors, collectively, the "Credit Parties").
Lenders: The banks, financial institutions and other
entities, including The Chase Manhattan Bank
("Chase"),selected in the syndication effort
(collectively, the "Lenders").
Advisor and Arranger: Chase Securities Inc. (in such capacity, the
"Arranger").
Administrative Agent: The Chase Manhattan Bank (in such capacity, the
"Administrative Agent").
II. Tender Facility
Type and Amount: An aggregate principal amount of $103,500,000 will
be available to Acquisition Co. and, for the CCI
Uses, CCI under a senior secured credit facility
(the "Tender Facility").
Availability: Loans under the Tender Facility (the "Tender
Loans") will be available for multiple drawings
during the period commencing on the date (in no
event later than January 15, 1997) on which
Acquisition Co. accepts for payment at least 51%
of the Shares (the "Minimum Shares") in the Tender
Offer (the "Closing Date") and ending on the
Maturity Date (as defined below); provided that in
no event may the amount of the Tender Loans made
available to Acquisition Co. (other than to
finance the CCI Uses) exceed 50% of the purchase
price of Shares accepted for payment pursuant to
the Tender Offer or otherwise acquired by
Acquisition Co., unless the shares purchased in
the Tender Offer are at least 90% of all the
Shares (at which point the 50% limitation will not
be applicable). To the extent necessary for the
CCI Uses, letters of credit shall be made
available under the Tender Facility for CCI.
<PAGE> 9
3
Amortization: The Tender Loans will be repayable at any time
after three months following the Closing Date upon
demand but in no event later than the earlier of
the date of the Merger and six months after the
Closing Date (as defined below) (the date on which
the Tender Loans are repayable, the "Maturity
Date").
Purpose: After application of the funds received by
Acquisition Co. from CCI as equity contributions
and intercompany advances, the proceeds of the
Tender Loans will be used to finance in part (a)
the acquisition by Acquisition Co. of not less
than the Minimum Shares pursuant to the Tender
Offer, (b) the payment of interest, fees and other
expenses incurred in connection with the Tender
Offer and Merger and (c) the CCI Uses.
III. General Payment
Provisions
Fees and Interest Rates: As set forth on Annex I.
Optional Prepayments
and Commitment
Reductions: All or a portion of the outstanding Tender Loans
may be prepaid at any time and the unutilized
portion of the Tender Facility may be terminated
in whole or in part (in minimum amounts to be
agreed upon) at Acquisition Co.'s option. Such
prepayments of Tender Loans may not be reborrowed.
IV. Guarantees and
Collateral
Guarantees: All obligations of Acquisition Co. under the Credit
Documentation (as defined below) shall be
unconditionally guaranteed by the Guarantors.
Collateral: The obligations of Acquisition Co. and CCI under
the Tender Facility and the guarantee thereof will
be secured by a perfected first priority security
interest in (a) all of the capital stock of
Acquisition Co. and, unless Acquisition Co. owns at
least 90% of all the Shares, all Shares owned by
Acquisition Co. or any
<PAGE> 10
4
affiliate or designee thereof, whether acquired in
the Tender Offer or otherwise, (b) all
intercompany notes (including any note payable to
CCI related to the CCI Contribution) and (c) to
the extent permitted under its existing
contractual obligations, the material tangible and
intangible assets of CCI.
V. Certain Conditions
Initial Conditions: The availability of the Tender Facility on the
Closing Date shall be conditioned upon
satisfaction of, among other things, the following
conditions precedent on or before the Closing Date
(which shall occur no later than January 15,
1997):
(a) Each Credit Party shall have executed and
delivered satisfactory definitive financing
documentation with respect to the Tender Facility
(the "Credit Documentation").
(b) CCI shall have (i) received the HMTF Equity
Investment pursuant to the HMTF Securities
Purchase Agreement and (ii) contributed all
proceeds therefrom as a capital contribution to
Acquisition Co. for use solely in connection with
the Tender Offer.
(c) The Tender Offer shall have been, or shall
be concurrently, consummated pursuant to the Merger
Agreement; the distribution contemplated in the
Merger Agreement of certain specified real estate
of Target shall have occurred or be provided to
occur on or prior to the date of the Merger (the
"Real Estate Distribution") on a basis that
provides to Target a release in respect of its
indebtedness secured by such real estate; and, no
material provision of the Merger Agreement or the
HMTF Securities Purchase Agreement shall have been
amended, supplemented, waived or otherwise
modified without the prior written consent of the
Administrative Agent.
(d) The Board of Directors of Target
(consisting of a majority of the Directors holding
office as of the date hereof) shall have approved
the Tender Offer.
<PAGE> 11
5
(e) Acquisition Co. shall have acquired,
concurrently with the making of the first Tender
Loans, not fewer than the Minimum Shares, and
there shall not have been any material change in
the approximately 17,749,184 Shares outstanding on
October 16, 1996 (net of treasury Shares and after
giving effect to any dilution), other than the
issuance of options to acquire approximately
1,838,200 Shares under Target's stock option plans
as of October 16, 1996.
(f) The documents and materials filed publicly
by CCI, Acquisition Co. and Target in connection
with the Tender Offer and the Merger shall have
been furnished to the Administrative Agent in
reasonably satisfactory form and substance.
(g) The capital structure, corporate structure,
ownership and management of each Credit Party
after the Tender Offer and as contemplated by the
Merger Agreement shall be reasonably satisfactory
in all respects. CCI, Acquisition Co and their
subsidiaries shall have no outstanding
indebtedness, liens or preferred equity after
giving effect to the Tender Offer other than
indebtedness or liens under the Tender Facility or
existing on the date hereof (to the extent not
refinanced in the CCI Refinancing), and such other
indebtedness, liens or preferred equity as shall
be approved by the Lenders. The sources and uses
of funding for the Tender Offer and the Merger
shall be as set forth in the Sources and Uses
Chart (as defined in the Fee Letter).
(h) The Lenders, the Administrative Agent and
the Arranger shall have received all fees and
expenses required to be paid on or before the
Closing Date.
(i) All governmental, shareholder and third
party approvals (including debtholders',
landlords' and other consents) necessary or
advisable in connection with the Tender Offer, the
Merger, the financing contemplated hereby and the
continuing operations of CCI, Acquisition Co.,
Target and their subsidiaries after the Tender
Offer, the Merger and the
<PAGE> 12
6
contemplated contribution (the "New Target
Contribution") by CCI after the consummation of
the Merger of its assets (other than the stock of
New Target) to New Target shall have been obtained
and be in full force and effect (or there shall be
a plan reasonably satisfactory to the
Administrative Agent for the obtaining thereof)
and all applicable waiting periods shall have
expired without any action being taken or
threatened by any competent authority which would
restrain, prevent or otherwise impose adverse
conditions on Tender Offer, the Merger, the New
Target Contribution or the financing thereof.
(j) The Lenders shall have received (i) a
satisfactory projected pro forma balance sheet of
CCI, Acquisition Co., Target and their
subsidiaries as at the Closing Date and after
giving effect to each of (A) the Tender Offer, the
financings contemplated hereby and the Target
Facility (as defined in the Commitment Letter to
which this summary of Terms and Conditions is
attached, the "Commitment Letter") and (B) the
Merger and the New Target Contribution and the
financings contemplated by the Merger Facilities
(as defined in the Commitment Letter), consistent
with the statement of proposed sources and uses as
set forth in the Sources and Uses Chart, (ii)
audited financial statements of Target for 1992
through 1995, (iii) unaudited financial statements
of CCI for 1992 through 1995 and satisfactory
evidence of a satisfactory review thereof by a
nationally recognized accounting firm, and (iv)
unaudited interim combined financial statements of
each of CCI, Acquisition Co. and Target for each
fiscal month (if reasonably available) and
quarterly period ended subsequent to December 31,
1995 as to which such financial statements are
available, and such financial statements shall
not, in the reasonable judgment of the Lenders,
reflect any material adverse change in the
financial condition of any of them as reflected in
the financial statements or projections previously
furnished to the Lenders. (Chase hereby confirms
that the financial statements received to date do
not in its judgment reflect any such material
adverse change). The
<PAGE> 13
7
Lenders shall be satisfied that projected combined
financial results for CCI, Acquisition Co. and
Target for the 1996 fiscal year will be achieved
(including aggregate pro forma EBITDA (without
giving effect to any anticipated synergies from
the Merger) of at least $30,000,000, with pro
forma adjustments for Leases entered into by CCI
in connection with Real Estate Distribution).
(k) The Lenders shall have received a
reasonably satisfactory business plan or budget
for CCI, Acquisition Co. and their subsidiaries
(including Target) (the "Business Plan") for the
remainder of the 1996 fiscal year and the fiscal
year 1997. (Chase hereby confirms that the
current Business Plan is satisfactory).
(l) The Lenders shall be satisfied that,
following the Tender Offer, the Merger and the
New Target Contribution, the leasing subsidiaries
of New Target will have available to them
independent financing in amounts and on terms that
will enable them to support the sales of New
Target as necessary to achieve the Business Plan.
(m) The Lenders shall have received the
results of a recent lien, tax and judgment search
in each of the jurisdictions and offices where
assets of each of CCI, Acquisition Co., Target and
their subsidiaries are located or recorded, and
such search shall reveal no liens on any of their
assets (other than the real estate which is the
subject of the Real Estate Distribution) except
for liens permitted by the Credit Documentation or
liens to be discharged in connection with the
transactions contemplated hereby.
(n) All actions necessary or advisable to
perfect the lien of the Administrative Agent shall
have been taken and all fees shall have been paid
or duly provided for.
(o) The Administrative Agent shall have
received satisfactory evidence that the fees and
expenses to be
<PAGE> 14
8
incurred in connection with the Tender Offer, the
Merger and the financing thereof (including any
redemption or prepayment premiums for the
refinancing of all Target indebtedness) shall not
exceed an amount reasonable and customary for
transactions of this type.
(p) The Lenders shall have received a
satisfactory solvency opinion from an independent
valuation firm satisfactory to the Administrative
Agent which shall document the solvency of CCI,
Acquisition Co., New Target and their subsidiaries
taken as a whole after giving effect to the Tender
Offer, the Merger, the New Target Contribution and
the other transactions contemplated hereby.
(q) The Lenders shall have received a
satisfactory environmental audit or review with
respect to the material real property owned or
leased by CCI, Acquisition Co., Target and their
subsidiaries from a firm satisfactory to the
Administrative Agent.
(r) The Administrative Agent shall have
determined that reasonably satisfactory insurance
relating to the CCI, Acquisition Co., Target and
their subsidiaries will be in place after the
Tender Offer and the Merger.
(s) The Leases entered into by CCI in
connection with the Real Estate Distribution shall
be on terms and conditions reasonably satisfactory
to the Administrative Agent.
(t) The Lenders shall have received such legal
opinions (including opinions (i) from counsel to
CCI, Acquisition Co. and their subsidiaries and
(ii) from such special and local counsel as may be
required by the Administrative Agent), documents
and other instruments as are customary for
transactions of this type or as they may
reasonably request.
On-Going Conditions: The making of each Tender Loan shall be
conditioned upon (a) all representations and
warranties in the
<PAGE> 15
9
Credit Documentation (including, without
limitation, the material adverse change and
litigation representations) being true and correct
in all material respects and (b) there being no
default or event of default in existence at the
time of, or after giving effect to the making of,
such Tender Loan. As used herein and in the
Credit Documentation a "material adverse change"
shall mean any event, development or circumstance
that has had or could reasonably be expected to
have a material adverse effect on (a) the Tender
Offer or the Merger, (b) the business, assets,
property, condition (financial or otherwise) or
prospects of CCI, Acquisition Co., Target and
their subsidiaries taken as a whole, or (c) the
validity or enforceability of any of the Credit
Documentation or the rights and remedies of the
Administrative Agent and the Lenders thereunder.
VI. Representations,
Warranties, Covenants
and Events of Default
The Credit Documentation shall contain
representations, warranties, covenants and events
of default customary for financings of this type
and other terms deemed appropriate by the Lenders,
including, without limitation:
Representations and Accuracy of financial statements (including pro
Warranties: forma financial statements); absence of
undisclosed liabilities; no material adverse
change; corporate existence; compliance with law;
corporate power and authority; enforceability of
Credit Documentation; no conflict with law or
contractual obligations; no material litigation;
no default; ownership of property; liens;
intellectual property; no burdensome restrictions;
taxes; Federal Reserve regulations; ERISA;
Investment Company Act; subsidiaries;
environmental matters; solvency; accuracy of
disclosure; and creation and perfection of
security interests.
Affirmative Covenants: Delivery of financial statements, reports,
accountants'
<PAGE> 16
10
letters, projections, officers' certificates and
other information requested by the Lenders;
payment of other obligations; continuation of
business and maintenance of existence and material
rights and privileges; compliance with laws and
material contractual obligations; maintenance of
property and insurance; maintenance of books and
records; right of the Lenders to inspect property
and books and records; notices of defaults,
litigation and other material events; compliance
with environmental laws; and agreement to grant
security interests in after-acquired property.
Negative Covenants: Limitations on: indebtedness (including preferred
stock and guarantee obligations); liens; mergers,
consolidations, liquidations and dissolutions;
sales of assets; leases; dividends, stock
repurchases and other payments in respect of
capital stock; capital expenditures; investments,
loans and advances; optional payments of
subordinated debt; modifications of equity and
debt instruments; transactions with affiliates;
sale and leasebacks; changes in fiscal year;
negative pledge clauses; and, in the case of
Acquisition Co., conduct of business or the
incurrence of liabilities other than those related
to the Tender Offer and the Merger. Certain of
the negative covenants shall include customary
exceptions.
Events of Default: Nonpayment of principal when due; nonpayment of
interest, fees or other amounts within five
business days after the date due; material
inaccuracy of representations and warranties;
violation of covenants (subject, in the case of
certain affirmative covenants, to a 30-day grace
period); cross-default; bankruptcy; certain ERISA
events; material judgments; actual or asserted
invalidity of any guarantee or security document,
or security interest; and a change of control.
VII. Certain Other Terms
Voting: Amendments and waivers with respect to the Credit
<PAGE> 17
11
Documentation shall require the approval of
Lenders holding Loans and commitments representing
not less than 51% of the aggregate amount of the
Loans and commitments under the Tender Facility,
except that (a) the consent of each Lender
directly affected thereby shall be required with
respect to (i) reductions in the amount or
extensions of the scheduled date of maturity of
any Tender Loan, (ii) reductions in the rate of
interest or any fee or extensions of any due date
thereof, (iii) increases in the amount or
extensions of the expiry date of any Lender's
commitment and (b) the consent of 100% of the
Lenders shall be required with respect to (i)
modifications to any of the voting percentages and
(ii) releases of all or substantially all of the
collateral and guarantees.
Assignments and The Lenders shall be permitted to assign and sell
Participations: participations in their Tender Loans and
commitments, subject, in the case of assignments
(other than to another Lender or to an affiliate
of the assigning Lender), to the consent of the
Administrative Agent, any issuing Lender and any
swing line Lender (which consent in each case
shall not be unreasonably withheld). Non-pro rata
assignments shall be permitted. In the case of
partial assignments, the minimum assignment amount
shall be $5,000,000 unless otherwise agreed by
Acquisition Co. and the Administrative Agent.
Participants shall have the same benefits as the
Lenders with respect to yield protection and
increased cost provisions. Voting rights of
participants shall be limited to those matters
with respect to which the affirmative vote of the
Lender from which it purchased its participation
would be required as described under "Voting"
above. Pledges of Tender Loans in accordance with
applicable law shall be permitted without
restriction. Promissory notes shall be issued
under the Tender Facility upon request.
Yield Protection: The Credit Documentation shall contain customary
provisions (a) protecting the Lenders against loss
of yield resulting from changes in reserve, tax,
capital
<PAGE> 18
12
adequacy and other requirements of law and from
the imposition of withholding or other taxes and
(b) indemnifying the Lenders for "breakage costs"
incurred in connection with, among other things,
prepayment of a Eurodollar Loan (as defined in
Annex I) on a day other than the last day of an
interest period with respect thereto.
Expenses and Acquisition Co. shall pay from and after the
Indemnification: Closing Date (a) all reasonable out-of-pocket
expenses of the Administrative Agent and the
Arranger associated with the syndication of the
Tender Facility and the preparation, execution,
delivery and administration of the Credit
Documentation and any amendment or waiver with
respect thereto (including the reasonable fees and
disbursements and other charges of counsel) and
(b) all out-of-pocket expenses of the
Administrative Agent and the Lenders in connection
with the enforcement of the Credit Documentation
(including the fees and disbursements and other
charges of counsel).
Acquisition Co. shall indemnify, pay and hold
harmless the Administrative Agent, the Arranger
and the Lenders (and their respective directors,
officers, employees and agents) against any loss,
liability, cost or expense incurred in respect of
the financing contemplated hereby or the use or
the proposed use of proceeds thereof (except to
the extent resulting from the gross negligence or
willful misconduct of the indemnified party or
material breach by the indemnified party of the
definitive documents).
Governing Law and Forum: State of New York.
Counsel to the Arranger Simpson Thacher & Bartlett.
and the Administrative
Agent:
Commitment Termination The Credit Documentation must have been entered
Date: into on or before January 15, 1997.
<PAGE> 19
Annex I
to Term Sheet
Interest and Certain Fees
Interest Rate Options: Acquisition Co. or CCI, as the case may be, may
elect that all or a portion of the Tender Facility
bear interest at a rate per annum equal to:
the ABR plus the Applicable Margin; or
the Eurodollar Rate plus Applicable Margin.
As used herein:
"ABR" means the highest of (i) the rate of
interest publicly announced by Chase as its prime
rate in effect at its principal office in New York
City (the "Prime Rate"), (ii) the secondary market
rate for certificates of deposit (grossed up for
maximum statutory reserve requirements) plus 1%
and (iii) the federal funds effective rate from
time to time plus 0.50%.
"Applicable Margin" means (a) with respect to ABR
Loans (as defined below), 1.50% and (b) with
respect to Eurodollar Loans (as defined below),
2.50%.
"Eurodollar Rate" means the rate (grossed-up for
maximum statutory reserve requirements for
eurocurrency liabilities) at which eurodollar
deposits for one, two, three, six or, to the
extent available to each Lender, twelve months (as
selected by Acquisition Co. or CCI, as the case
may be) are offered to Chase in the interbank
eurodollar market in the approximate amount of
Chase's share of the relevant Tender Loan.
Interest Payment Dates: In the case of Tender Loans bearing interest based
upon the ABR ("ABR Loans"), quarterly in arrears.
In the case of Tender Loans bearing interest based
upon the Eurodollar Rate ("Eurodollar Loans"), on
the last day of each relevant interest period and,
in the case of any interest period longer than
three months, on each
<PAGE> 20
2
successive date three months after the first day
of such interest period.
Commitment Fees: Acquisition Co. shall pay a commitment fee
calculated at the rate of .50% per annum on the
average daily unused portion of the Tender
Facility, payable quarterly in arrears. Letters
of credit, however, for the purposes of the
commitment fee, shall be deemed utilization of the
Tender Facility. The foregoing commitment fee
shall be subject to reduction after the first
anniversary of the Closing Date by amounts to be
agreed upon based on the achievement of
performance targets to be determined. The
commitment fees payable hereunder shall not be
duplicative of any commitment fees payable under
the Fee Letter (as defined in the Commitment
Letter).
Letter of Credit Fees: Acquisition Co. and CCI shall pay a commission on
all outstanding letters of credit at a per annum
rate equal to the Applicable Margin then in effect
with respect to Eurodollar Loans under the Tender
Facility on the face amount of each such letter of
credit, less the fronting fee. Such commission
shall be shared ratably among the Lenders
participating in the Tender Facility and shall be
payable quarterly in arrears.
A fronting fee in an amount to be agreed upon on
the face amount of each letter of credit shall be
payable quarterly in arrears to the Issuing Lender
for its own account. In addition, customary
administrative, issuance, amendment, payment and
negotiation charges shall be payable to the
Issuing Lender for its own account.
Default Rate: At any time when Acquisition Co. or CCI, as the
case may be, is in default in the payment of any
amount due under the Tender Facility, the
principal of all Tender Loans shall bear interest
at 2% above the rate otherwise applicable thereto.
Overdue interest, fees and other amounts shall
bear interest at 2% above the rate applicable to
ABR Loans.
Rate and Fee Basis: All per annum rates shall be calculated on the
basis of a year of 360 days (or 365/366 days, in
the case of ABR Loans the interest rate payable on
which is then based on the Prime Rate) for actual
days elapsed.
<PAGE> 21
Exhibit B
$36,500,000
TARGET SENIOR SECURED CREDIT FACILITY
TARGET FACILITY
Summary of Terms and Conditions
October 16, 1996
-------------------------------
The following sets forth the terms and conditions for $36,500,000
Senior Secured Credit Facility that will be available to a corporation
identified to us as "Target", a Delaware corporation ("Target") in connection
with the proposed tender offer (the "Tender Offer"), for $9.25 per share, for
all of issued and outstanding shares of common stock, par value $.001 per share
(the "Shares"), by CCI Acquisition Corp., a Delaware corporation ("Acquisition
Co.") and an affiliate of Cooperative Computing, Inc., a Delaware corporation
("CCI"), pursuant to the Agreement and Plan of Merger, dated as of October 16,
1996 (the "Merger Agreement"), among Acquisition Co., CCI and Target. The
Merger Agreement also provides for the merger (the "Merger") of Acquisition Co.
or its wholly-owned subsidiary and Target as soon as is practicable after
completion of the Tender Offer, subject to any necessary approval of the Merger
by the shareholders of Target (the survivor of the Merger, "New Target").
Immediately prior to the consummation of the Tender Offer, (a) Acquisition Co.
will become a subsidiary of CCI and (b) Acquisition Co. shall receive a capital
contribution of no less than $95,000,000 from CCI (the "CCI Contribution"),
which will be funded entirely from the cash proceeds of the sale of no less
than $95,000,000 (the "HMTF Equity Investment") of CCI common stock to an
affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), pursuant to
the Securities Purchase Agreement, dated as of October 16, 1996 (the "HMTF
Securities Purchase Agreement"), between Hicks Muse or an affiliate thereof and
CCI.
I. Parties
Borrower: Target.
Guarantors: Each of the direct and indirect
subsidiaries of Target (other than
the Excluded Foreign Subsidiaries
referred to below) (the
"Guarantors"; Target and the
Guarantors, collectively, the
"Credit Parties").
Lenders: The banks, financial institutions
and other entities,
<PAGE> 22
2
including The Chase Manhattan Bank
("Chase"), selected in the
syndication effort (collectively,
the Lenders").
Advisor and Arranger: Chase Securities Inc. (in such
capacity, the "Arranger").
Administrative Agent: The Chase Manhattan Bank (in such
capacity, the "Administrative
Agent").
II. Tender Facility
Type and Amount: An aggregate principal amount of
$36,500,000 will be available to
Target under a senior secured credit
facility (the "Target Facility").
Availability: Loans will be available under Target
Facility ("Target Loans") for
multiple drawings during the period
commencing on the date (in no event
later than January 15, 1997) on
which Acquisition Co. accepts for
payment at least 51% of the Shares
(the "Minimum Shares") in the Tender
Offer (the "Closing Date") and
ending on the Maturity Date (as
defined below). To the extent
necessary letters of credit shall be
made available under the Target
Facility.
Amortization: The Target Loans will be repayable
at any time after three months
following the Closing Date upon
demand but in no event later than
the earlier of the date of the
Merger and six months after the
Closing Date (as defined below) (the
date on which the Target Loans are
repayable, the "Maturity Date").
Purpose: The proceeds of the Target Loans
will be used to finance in part the
refinancing or defeasance of the
existing indebtedness of Target.
III. General Payment
Provisions
Fees and Interest Rates: As set forth on Annex I.
<PAGE> 23
3
Optional Prepayments and All or a portion of the outstanding
Commitment Reductions: Target Loans may be prepaid at any
time and the unutilized portion of
the Target Facility may be
terminated in whole or in part (in
minimum amounts to be agreed upon)
at Target's option. Such prepayments
of Target Loans may not be
reborrowed.
IV. Guarantees and Collateral
Guarantees: All obligations of Target under the
Credit Documentation (as defined
below) shall be unconditionally
guaranteed by the Guarantors.
Collateral: The obligations of Target under the
Target Facility and the guarantee
thereof will be secured by a
perfected first priority security
interest to the extent permitted
under the existing contractual
obligations of Target and its
subsidiaries, the material tangible
and intangible assets of the Credit
Parties.
V. Certain Conditions
Initial Conditions: The availability of the Target
Facility on the Closing Date shall
be conditioned upon satisfaction of,
among other things, the following
conditions precedent on or before
the Closing Date (which shall occur
no later than January 15, 1997):
(a) Each Credit Party shall have
executed and delivered satisfactory
definitive financing documentation
with respect to the Tender Facility
(the "Credit Documentation").
(b) The first loans shall have
been made under the Tender Facility
(as defined in the Commitment Letter
to which the Summary of Terms and
Conditions is attached), and the
condition precedent thereto shall
have been satisfied.
(c) All actions necessary or
advisable to perfect the lien of the
Administrative Agent shall have been
<PAGE> 24
4
taken and all fees shall have been
paid or duly provided for.
(d) The Lenders shall have
received such legal opinions
(including opinions (i) from counsel
to CCI, Acquisition Co., Target and
their subsidiaries and (ii) from
such special and local counsel as
may be required by the
Administrative Agent), documents and
other instruments as are customary
for transactions of this type or as
they may reasonably request.
On-Going Conditions: The making of each Target Loan shall
be conditioned upon (a) all
representations and warranties in
the Credit Documentation (including,
without limitation, the material
adverse change and litigation
representations) being true and
correct in all material respects and
(b) there being no default or event
of default in existence at the time
of, or after giving effect to the
making of, such Target Loan. As
used herein and in the Credit
Documentation a "material adverse
change" shall mean any event,
development or circumstance that has
had or could reasonably be expected
to have a material adverse effect on
(a) the Tender Offer or the Merger,
(b) the business, assets, property,
condition (financial or otherwise)
or prospects of CCI, Acquisition
Co., Target and their subsidiaries
taken as a whole, or (c) the
validity or enforceability of any of
the Credit Documentation or the
rights and remedies of the
Administrative Agent and the Lenders
thereunder.
VI. Representations, Warranties,
Covenants and Events of Default
The Credit Documentation shall
contain representations, warranties,
covenants and events of default
customary for financings of this
type and other terms deemed
appropriate by the Lenders,
including, without limitation:
Representations and Accuracy of financial statements
Warranties: (including pro forma financial
statements); absence of undisclosed
<PAGE> 25
5
liabilities; no material adverse
change; corporate existence;
compliance with law; corporate power
and authority; enforceability of
Credit Documentation; no conflict
with law or contractual obligations;
no material litigation; no default;
ownership of property; liens;
intellectual property; no burdensome
restrictions; taxes; Federal Reserve
regulations; ERISA; Investment
Company Act; subsidiaries;
environmental matters; solvency;
accuracy of disclosure; and creation
and perfection of security
interests.
Affirmative Covenants: Delivery of financial statements,
reports, accountants' letters,
projections, officers' certificates
and other information requested by
the Lenders; payment of other
obligations; continuation of
business and maintenance of
existence and material rights and
privileges; compliance with laws and
material contractual obligations;
maintenance of property and
insurance; maintenance of books and
records; right of the Lenders to
inspect property and books and
records; notices of defaults,
litigation and other material
events; compliance with
environmental laws; and agreement to
grant security interests in after-
acquired property.
Negative Covenants: Limitations on: indebtedness
(including preferred stock and
guarantee obligations); liens;
mergers, consolidations,
liquidations and dissolutions; sales
of assets; leases; dividends, stock
repurchases and other payments in
respect of capital stock; capital
expenditures; investments, loans and
advances; optional payments of
subordinated debt; modifications of
equity and debt instruments;
transactions with affiliates; sale
and leasebacks; and changes in
fiscal year; negative pledge
clauses. Certain of the negative
covenants shall include customary
exceptions.
Events of Default: Nonpayment of principal when due;
nonpayment of interest, fees or
other amounts within five business
days after the date due; material
inaccuracy of representations and
warranties; violation of covenants
(subject, in the case of certain
affirmative covenants,
<PAGE> 26
6
to a 30-day grace period);
cross-default; bankruptcy; certain
ERISA events; material judgments;
actual or asserted invalidity of any
guarantee or security document, or
security interest; and a change of
control.
VII. Certain Other Terms
Voting: Amendments and waivers with respect
to the Credit Documentation shall
require the approval of Lenders
holding Loans and commitments
representing not less than 51% of
the aggregate amount of the Loans
and commitments under the Target
Facility, except that (a) the
consent of each Lender directly
affected thereby shall be required
with respect to (i) reductions in
the amount or extensions of the
scheduled date of maturity of any
Target Loan, (ii) reductions in the
rate of interest or any fee or
extensions of any due date thereof,
(iii) increases in the amount or
extensions of the expiry date of any
Lender's commitment and (b) the
consent of 100% of the Lenders shall
be required with respect to (i)
modifications to any of the voting
percentages and (ii) releases of all
or substantially all of the
collateral and guarantees.
Assignments and The Lenders shall be permitted to
Participations: assign and sell participations in
their Target Loans and commitments,
subject, in the case of assignments
(other than to another Lender or to
an affiliate of the assigning
Lender), to the consent of the
Administrative Agent, any issuing
Lender and any swing line Lender
(which consent in each case shall
not be unreasonably withheld).
Non-pro rata assignments shall be
permitted. In the case of partial
assignments, the minimum assignment
amount shall be $5,000,000 unless
otherwise agreed by Target and the
Administrative Agent. Participants
shall have the same benefits as the
Lenders with respect to yield
protection and increased cost
provisions. Voting rights of
participants shall be limited to
those matters with respect to which
the affirmative vote of the
<PAGE> 27
7
Lender from which it purchased its
participation would be required as
described under "Voting" above.
Pledges of Target Loans in
accordance with applicable law shall
be permitted without restriction.
Promissory notes shall be issued
under the Target Facility upon
request.
Yield Protection: The Credit Documentation shall
contain customary provisions (a)
protecting the Lenders against loss
of yield resulting from changes in
reserve, tax, capital adequacy and
other requirements of law and from
the imposition of withholding or
other taxes and (b) indemnifying the
Lenders for "breakage costs"
incurred in connection with, among
other things, prepayment of a
Eurodollar Loan (as defined in Annex
I) on a day other than the last day
of an interest period with respect
thereto.
Expenses and Target shall pay from and after the
Indemnification: Closing Date (a) all reasonable
out-of pocket expenses of the
Administrative Agent and the
Arranger associated with the
syndication of the Target Facility
and the preparation, execution,
delivery and administration of the
Credit Documentation and any
amendment or waiver with respect
thereto (including the reasonable
fees and disbursements and other
charges of counsel) and (b) all
out-of-pocket expenses of the
Administrative Agent and the Lender
in connection with the enforcement
of the Credit Documentation s
(including the fees and
disbursements and other charges of
counsel).
Target shall indemnify, pay and hold
harmless the Administrative Agent,
the Arranger and the Lenders (and
their respective directors,
officers, employees and agents)
against any loss, liability, cost or
expense incurred in respect of the
financing contemplated hereby or the
use or the proposed use of proceeds
thereof (except to the extent
resulting from the gross negligence
or willful misconduct of the
indemnified party or material breach
by the indemnified party of the
definitive documents).
<PAGE> 28
8
Governing Law and Forum: State of New York.
Counsel to the Arranger and Simpson Thacher & Bartlett.
the Administrative Agent:
Commitment Termination The Credit Documentation must have
Date: been entered into on or before
January 15, 1997.
<PAGE> 29
Annex I
to Term Sheet
Interest and Certain Fees
Interest Rate Options: Target may be, may elect that all or
a portion of the Target Facility
bear interest at a rate per annum
equal to:
the ABR plus the Applicable
Margin; or
the Eurodollar Rate plus
Applicable Margin.
As used herein:
"ABR" means the highest of (i) the
rate of interest publicly announced
by Chase as its prime rate in effect
at its principal office in New York
City (the "Prime Rate"), (ii) the
secondary market rate for
certificates of deposit (grossed up
for maximum statutory reserve
requirements) plus 1% and (iii) the
federal funds effective rate from
time to time plus 0.50%.
"Applicable Margin" means (a) with
respect to ABR Loans (as defined
below), 1.50% and (b) with respect
to Eurodollar Loans (as defined
below), 2.50%.
"Eurodollar Rate" means the rate
(grossed-up for maximum statutory
reserve requirements for
eurocurrency liabilities) at which
eurodollar deposits for one, two,
three, six or, to the extent
available to each Lender, twelve
months (as selected by Target) are
offered to Chase in the interbank
eurodollar market in the approximate
amount of Chase's share of the
relevant Loan.
Interest Payment Dates: In the case of Target Loans bearing
interest based upon the ABR ("ABR
Loans"), quarterly in arrears.
In the case of Target Loans bearing
interest based upon the Eurodollar
Rate ("Eurodollar Loans"), on the
last day of each relevant interest
period and, in the case of any
interest period longer than three
months, on each successive date
three months after the first day of
such interest period.
<PAGE> 30
2
Commitment Fees: Target shall pay a commitment fee
calculated at the rate of .50% per
annum on the average daily unused
portion of the Target Facility,
payable quarterly in arrears.
Letters of credit, however, for the
purposes of the commitment fee,
shall be deemed utilization of the
Target Facility. The foregoing
commitment fee shall be subject to
reduction after the first
anniversary of the Closing Date by
amounts to be agreed upon based on
the achievement of performance
targets to be determined. The
commitment fees payable hereunder
shall not be duplicative of any
commitment fees payable under the
Fee Letter (as defined in the
Commitment Letter to which this
Summary of Terms and Conditions is
attached).
Letter of Credit Fees: Target shall pay a commission on all
outstanding letters of credit at a
per annum rate equal to the
Applicable Margin then in effect
with respect to Eurodollar Loans
under the Target Facility on the
face amount of each such letter of
credit, less the fronting fee. Such
commission shall be shared ratably
among the Lenders participating in
the Target Facility and shall be
payable quarterly in arrears.
A fronting fee in an amount to be
agreed upon on the face amount of
each letter of credit shall be
payable quarterly in arrears to the
Issuing Lender for its own account.
In addition, customary
administrative, issuance, amendment,
payment and negotiation charges
shall be payable to the Issuing
Lender for its own account.
Default Rate: At any time when Target is in
default in the payment of any amount
due under the Target Facility, the
principal of all Target Loans shall
bear interest at 2% above the rate
otherwise applicable thereto.
Overdue interest, fees and other
amounts shall bear interest at 2%
above the rate applicable to ABR
Loans.
Rate and Fee Basis: All per annum rates shall be
calculated on the basis of a year of
360 days (or 365/366 days, in the
case of ABR Loans the interest rate
payable on which is then based on
the Prime Rate) for actual days
elapsed.
<PAGE> 31
Exhibit C
$170,000,000
TARGET SENIOR SECURED CREDIT FACILITIES
MERGER FACILITIES
Summary of Terms and Conditions
October 16, 1996
---------------------------------------
The following sets forth the terms and conditions for
$170,000,000 of Senior Secured Credit Facility that will be available to the
surviving corporation ("New Target") of the merger (the "Merger") of CCI
Acquisition Corp., a Delaware corporation ("Acquisition Co.") and a wholly
owned subsidiary of Cooperative Computing, Inc., a Delaware corporation
("CCI"), with a corporation identified as "Target", a Delaware corporation
("Target"), pursuant to the Agreement and Plan of Merger, dated as of October
16, 1996 (the "Merger Agreement"), among Acquisition Co., CCI and Target. The
Merger will be consummated as soon as is practicable after the completion of a
tender offer (the "Tender Offer") for all of the issued and outstanding shares
of common stock, par value $.001 per share (the "Shares"), of Target, subject
to any necessary approval of the Merger by the shareholders of Target.
Immediately prior to the consummation of the Tender Offer, CCI will have sold
not less than $95,000,000 of its common stock to an affiliate of Hicks, Muse,
Tate & Furst Incorporated ("Hicks Muse") (the "HMTF Equity Investment")
pursuant to the Securities Purchase Agreement, dated as of October 16, 1996
(the "HMTF Securities Purchase Agreement"), between Hicks Muse and CCI, and CCI
will have invested the entire proceeds thereof as a capital contribution in
Acquisition Co. Immediately following the consummation of the Merger, the CCI
will contribute (the "New Target Contribution") its assets (other than the
stock of New Target) to New Target.
I. Parties
Borrower: New Target.
Guarantors: CCI and each of its direct and indirect
subsidiaries (other than New Target and the
Excluded Foreign Subsidiaries referred to
below) (the "Guarantors"; New Target and the
Guarantors, collectively, the "Credit
Parties").
<PAGE> 32
Lenders: The banks, financial institutions and other
entities, including The Chase Manhattan Bank
("Chase"), selected in the syndication
effort (collectively, the "Lenders").
Advisor and Arranger: Chase Securities Inc. (in such capacity, the
"Arranger").
Administrative Agent: The Chase Manhattan Bank (in such capacity,
the "Administrative Agent").
II. Types and Amounts of Senior
Facilities
A. Term Loan Facilities
Type and Amount: Six-year Senior Secured Term Loan Facilities
(the "Term Loan Facilities") in the
amount of $135,000,000 (the "Term Loans").
Availability: On or before the date on which initial Term
Loans are made and the Merger is
consummated (the "Closing Date").
Amortization: The Term Loans shall be repayable pursuant
to an amortization schedule to be mutually
agreed upon.
Purpose: The proceeds of the Term Loans will be used
(i) to refinance the borrowings of
Acquisition Co. and CCI under the
$103,500,000 loan facility (the "Tender
Facility") arranged by the Arranger and made
available to Acquisition Co. for the Tender
Offer, (ii) to finance the payment of the
consideration payable in the Merger to
remaining holders of Shares (other than
Acquisition Co.), (iii) to finance the
refinancing by New Target of all or such
portion of the indebtedness of Target and
CCI outstanding after the Merger, including
the Target Facility, as New Target shall
determine (the "Refinancing") and (iv) the
payment of the fees and
<PAGE> 33
3
expenses of the Merger and the Tender Offer
and the transactions contemplated thereby.
B. Revolving Credit Facility
Type and Amount: Six-year Senior Secured Revolving Credit
Facility (the "Revolving Credit Facility";
together with the Term Loan Facilities, the
"Senior Facilities") in the amount of
$35,000,000 (the loans thereunder, the
"Revolving Credit Loans") of which up to an
amount to be agreed upon will be available
in the form of Letters of Credit and Swing
Line Loans. Revolving Credit Loans in
amount equal to the Closing Revolver Draw,
which shall in no event exceed $5,000,000,
may be drawn on the Closing Date.
Availability: The Revolving Credit Facility shall be
available on a revolving basis during the
period commencing on the Closing Date and
ending on the earlier of (a) a date
approximately six years after the Closing
Date and (b) the date on which the Term
Loans mature or are repaid in full (such
earlier date the "Revolving Credit
Termination Date").
Maturity: The Revolving Credit Termination Date.
Purpose: The proceeds of the Revolving Credit Loans
shall be used for working capital purposes
and other general corporate purposes of New
Target and its subsidiaries and, for the
Merger, in an amount of not more than
$5,000,000. Standby Letters of Credit shall
be used to provide credit support for
insurance and other general corporate
requirements of New Target and its
subsidiaries. Commercial Letters of Credit
shall be used to provide the primary means
of payment for the purchase of goods or
services by New Target and its subsidiaries
in the ordinary course of business.
<PAGE> 34
4
III. General Payment Provisions
Fees and Interest Rates: As set forth on Annex I.
Optional Prepayments Loans may be prepaid and commitments may be
and Commitment reduced by New Target in minimum amounts to
Reductions: be agreed upon. Optional prepayments of the
Term Loans shall be applied to the
installments thereof ratably in accordance
with the then remaining number of
installments and may not be reborrowed.
Mandatory Prepayments The following amounts shall be applied to
and Commitment prepay the Term Loans:
Reductions:
(a) 100% of the net proceeds of any sale
or issuance of equity or any incurrence of
indebtedness after the Closing Date by CCI or
New Target or any of their subsidiaries
(subject to certain customary exceptions
including permitted indebtedness and equity
issued in connection with permitted
acquisitions);
(b) 100% of the net proceeds of any
sale or other disposition by CCI or New
Target or any of their subsidiaries of any
material assets, except for the sale of
inventory or obsolete or worn-out property
in the ordinary course of business subject to
certain other customary exceptions
(including a basket and capacity for
reinvestment) to be agreed upon; and
(c) 75% of excess cash flow (to be
defined in a mutually satisfactory manner,
but treating as a use of cash future capital
investments) for each fiscal year of New
Target (commencing with the 1997 fiscal year
Each such prepayment of the Term Loans shall
be applied to the installments
<PAGE> 35
5
thereof ratably in accordance with the then
remaining number of installments and may not
be reborrowed.
The Revolving Credit Loans shall be prepaid
and the Letters of Credit shall be cash
collateralized or replaced to the extent such
extensions of credit exceed the amount of the
Revolving Credit Facility.
IV. Guarantees and Collateral
Guarantees: All obligations of New Target under the
Credit Documentation shall be
unconditionally guaranteed by the
Guarantors.
Collateral: The Senior Facilities and all guarantees
thereof will be secured by a perfected first
priority security interest in (a) all of the
capital stock of New Target and each of its
direct and indirect subsidiaries (provided,
that if the pledge of all of the capital
stock of any foreign subsidiary would have
adverse tax consequences, only 65% of the
capital stock of such foreign subsidiary (an
"Excluded Foreign Subsidiary") shall be
required to be pledged) and (b) all tangible
and intangible assets (including, without
limitation, intellectual property and real
property of each Credit Party), except for
those assets as to which the Administrative
Agent shall determine in its sole discretion
that the costs of obtaining such a security
interest are excessive in relation to the
value of the security to be afforded
thereby.
V. Certain Conditions
Initial Conditions: The availability of the Senior Facilities on
the Closing Date shall be conditioned
<PAGE> 36
6
upon satisfaction of, among other things, the
following conditions precedent on or before
the Closing Date (which shall occur no later
than July 15, 1997):
(a) Each Credit Party shall have executed
and delivered satisfactory definitive
financing documentation with respect to the
Senior Facilities (the "Credit
Documentation").
(b) All obligations of Acquisition Co. or
New Target under the Tender Facility and
Target under the Target Facility shall have
been refinanced with the proceeds of the
Senior Facilities.
(c) The distribution contemplated in the
Merger Agreement of certain specified real
estate of Target (the "Real Estate
Distribution") shall have occurred on a
basis that provides to Target a release from
its obligations under the indebtedness
secured by such real estate; the Merger
shall have been, or shall be concurrently,
consummated pursuant to the Merger Agreement
and all required stockholder approval to
effect the Merger shall have been obtained;
and, no material provision of the Merger
Agreement shall have been amended,
supplemented, waived or otherwise modified
without the prior written consent of the
Administrative Agent.
(d) Except as contemplated by the
discussion under the caption "Borrower"
above, neither Acquisition Co. nor New
Target shall have any outstanding
indebtedness, liens or preferred equity
after giving effect to the Merger other than
such indebtedness, liens or preferred equity
as shall be approved by the Lenders.
(e) The documents and materials filed
publicly by CCI, Acquisition Co. and
<PAGE> 37
7
Target in connection with the Tender Offer
and the Merger shall have been furnished to
the Administrative Agent.
(f) The Lenders, the Administrative Agent
and the Arranger shall have received all
fees and expenses required to be paid on or
before the Closing Date.
(g) Except as contemplated by the
discussion under the caption "Borrower"
above, all governmental, shareholder and
third party approvals (including
debtholders', landlords' and other consents)
necessary or advisable in connection with
the Merger, the Real Estate Distribution,
the New Target Contribution, the financing
contemplated hereby and the continuing
operations of CCI, Acquisition Co., Target
and their subsidiaries after the Merger and
the New Target Contribution shall have been
obtained and be in full force and effect and
all applicable waiting periods shall have
expired without any action being taken or
threatened by any competent authority which
would restrain, prevent or otherwise impose
adverse conditions on Tender Offer, the
Merger, the Real Estate Distribution, the
New Target Contribution or the financing
thereof.
(h) All actions necessary or advisable to
perfect the lien of the Administrative Agent
shall have been taken and all fees shall
have been paid or duly provided for.
(i) The Administrative Agent shall have
received satisfactory evidence that the fees
and expenses to be incurred in connection
with the Tender Offer, the Merger and the
financing thereof (including any redemption
or prepayment premiums for the refinancing
of all Target indebtedness) shall not exceed
an amount
<PAGE> 38
8
reasonable and customary for transactions
of this type.
(j) The Administrative Agent shall have
determined that reasonably satisfactory
insurance relating to the CCI, Acquisition
Co., Target and their subsidiaries will be
in place after the Tender Offer and the
Merger.
(k) The Lenders shall have received such
legal opinions (including opinions (i) from
counsel to CCI, Acquisition Co. and their
subsidiaries and (ii) from such special and
local counsel as may be required by the
Administrative Agent), documents and other
instruments as are customary for
transactions of this type or as they may
reasonably request.
On-Going Conditions: The making of each extension of credit
shall be conditioned upon (a) all
representations and warranties in the Credit
Documentation (including, without
limitation, the material adverse change and
litigation representations) being true and
correct in all material respects and (b)
there being no default or event of default
in existence at the time of, or after giving
effect to the making of, such extension of
credit. As used herein and in the Credit
Documentation a "material adverse change"
shall mean any event, development or
circumstance that has had or could
reasonably be expected to have a material
adverse effect on (a) the Merger or the
Contribution, (b) the business, assets,
property, condition (financial or otherwise)
or prospects of CCI, New Target and their
subsidiaries taken as a whole, or (c) the
validity or enforceability of any of the
Credit Documentation or the rights and
remedies of the Administrative Agent and the
Lenders thereunder.
<PAGE> 39
9
VI. Representations, Warranties,
Covenants and Events of Default
The Credit Documentation shall contain
representations, warranties, covenants and
events of default customary for financings
of this type and other terms deemed
appropriate by the Lenders, including,
without limitation:
Representations and Warranties: Accuracy of financial statements
(including pro forma financial statements);
absence of undisclosed liabilities; no
material adverse change; corporate
existence; compliance with law; corporate
power and authority; enforceability of
Credit Documentation; no conflict with law
or contractual obligations; no material
litigation; no default; ownership of
property; liens; intellectual property; no
burdensome restrictions; taxes; Federal
Reserve regulations; ERISA; Investment
Company Act; subsidiaries; environmental
matters; solvency; accuracy of disclosure;
and creation and perfection of security
interests.
Affirmative Covenants: Delivery of financial statements,
reports, accountants' letters, projections,
officers' certificates and other information
requested by the Lenders; payment of other
obligations; continuation of business and
maintenance of existence and material rights
and privileges; compliance with laws and
material contractual obligations;
maintenance of property and insurance;
maintenance of books and records; right of
the Lenders to inspect property and books
and records; notices of defaults, litigation
and other material events; compliance with
environmental laws; agreement to grant
security interests in after-acquired
property; and agreement to obtain, within a
period after the Closing Date to be
<PAGE> 40
10
agreed, interest rate protection in an
amount which shall assure that at least 50%
of the aggregate principal amount of the
Term Loans and other funded indebtedness on
the Closing Date is subject to interest rate
protection for a period of at least two
years following the Closing Date, on terms
and conditions satisfactory to the
Administrative Agent.
Financial Covenants: Including, but not limited to, minimum
EBITDA, maximum ratio of debt to EBITDA,
minimum interest coverages (including after
capital expenditures and capitalized
software expenditures) and minimum fixed
charge coverage ratio.
Negative Covenants: Limitations on: indebtedness (including
preferred stock and guarantee obligations);
liens; mergers, consolidations, liquidations
and dissolutions; sales of assets; leases;
dividends, stock repurchases and other
payments in respect of capital stock;
capital expenditures; investments, loans and
advances; optional payments of subordinated
debt; modifications of equity and debt
instruments; transactions with affiliates;
sale and leasebacks; changes in fiscal year;
negative pledge clauses; changes in lines of
business; and changes in passive holding
company status of CCI after the consummation
of the Merger and the New Target
Contribution. Certain of the negative
covenants shall include customary
exceptions.
Events of Default: Nonpayment of principal when due;
nonpayment of interest, fees or other
amounts within five business days after the
date due; material inaccuracy of
representations and warranties; violation of
covenants (subject, in the case of certain
affirmative covenants, to a 30-day grace
period); cross-default; bankruptcy; certain
ERISA events; material judgments;
<PAGE> 41
11
actual or asserted invalidity of any
guarantee or security document, or security
interest; and a change of control.
VII. Certain Other Terms
Voting: Amendments and waivers with respect to the
Credit Documentation shall require the
approval of Lenders holding Loans and
commitments representing not less than 51%
of the aggregate amount of the Loans and
commitments under the Senior Facilities,
except that (a) the consent of each Lender
directly affected thereby shall be required
with respect to (i) reductions in the amount
or extensions of the scheduled date of
maturity of any Loan, (ii) reductions in the
rate of interest or any fee or extensions of
any due date thereof, (iii) increases in the
amount or extensions of the expiry date of
any Lender's commitment and (b) the consent
of 100% of the Lenders shall be required
with respect to (i) modifications to any of
the voting percentages and (ii) releases of
all or substantially all of the collateral
and guarantees.
Assignments and The Lenders shall be permitted to assign and
Participations: sell participations in their Loans and
commitments, subject, in the case of
assignments (other than to another Lender or
to an affiliate of the assigning Lender), to
the consent of the Administrative Agent, the
Issuing Lender and the Swing Line Lender
(which consent in each case shall not be
unreasonably withheld). Non-pro rata
assignments shall be permitted. In the case
of partial assignments, the minimum
assignment amount shall be $5,000,000 unless
otherwise agreed by New Target and the
Administrative Agent. Participants shall
have the same benefits as the Lenders with
<PAGE> 42
12
respect to yield protection and increased
cost provisions. Voting rights of
participants shall be limited to those
matters with respect to which the
affirmative vote of the Lender from which it
purchased its participation would be
required as described under "Voting" above.
Pledges of Loans in accordance with
applicable law shall be permitted without
restriction. Promissory notes shall be
issued under the Senior Facilities upon
request.
Yield Protection: The Credit Documentation shall contain
customary provisions (a) protecting the
Lenders against loss of yield resulting from
changes in reserve, tax, capital adequacy
and other requirements of law and from the
imposition of withholding or other taxes and
(b) indemnifying the Lenders for "breakage
costs" incurred in connection with, among
other things, prepayment of a Eurodollar
Loan (as defined in Annex I) on a day other
than the last day of an interest period with
respect thereto.
Expenses and New Target shall pay from and after the
Indemnification: Closing Date (a) all reasonable
out-of-pocket expenses of the Administrative
Agent and the Arranger associated with the
syndication of the Senior Facilities and the
preparation, execution, delivery and
administration of the Credit Documentation
and any amendment or waiver with respect
thereto (including the reasonable fees and
disbursements and other charges of counsel)
and (b) all out-of-pocket expenses of the
Administrative Agent and the Lenders in
connection with the enforcement of the
Credit Documentation (including the fees and
disbursements and other charges of counsel).
New Target shall indemnify, pay and hold
harmless the Administrative Agent, the
<PAGE> 43
13
Arranger and the Lenders (and their
respective directors, officers, employees
and agents) against any loss, liability,
cost or expense incurred in respect of the
financing contemplated hereby or the use or
the proposed use of proceeds thereof (except
to the extent resulting from the gross
negligence or willful misconduct of the
indemnified party or material breach by the
indemnified party of the definitive
documents).
Governing Law State of New York.
and Forum:
Counsel to the Simpson Thacher & Bartlett.
Arranger and the
Administrative Agent:
Commitment Termination The Credit Documentation must have been
Date: entered into on or before January 15, 1997.
<PAGE> 44
Annex I
to Term Sheet
Interest and Certain Fees
Interest Rate Options: New Target may elect that all or a portion of the
Senior Facilities bear interest at a rate per
annum equal to:
the ABR plus the Applicable Margin; or
the Eurodollar Rate plus Applicable Margin.
provided, that all Swing Line Loans shall bear interest
at a rate per annum equal to the ABR plus the
Applicable Margin.
As used herein:
"ABR" means the highest of (i) the rate of interest
publicly announced by Chase as its prime rate in effect
at its principal office in New York City (the "Prime
Rate"), (ii) the secondary market rate for certificates
of deposit (grossed up for maximum statutory reserve
requirements) plus 1% and (iii) the federal funds
effective rate from time to time plus 0.50%.
"Applicable Margin" means (a) with respect to ABR Loans
(as defined below), 1.50% and (b) with respect to
Eurodollar Loans (as defined below), 2.50%.
The foregoing margins shall be subject to reduction
after the first anniversary of the Closing Date by
amounts to be agreed upon based on the achievement of
performance targets to be determined.
"Eurodollar Rate" means the rate (grossed-up for
maximum statutory reserve requirements for eurocurrency
liabilities) at which eurodollar deposits for one, two,
three, six
<PAGE> 45
2
or, to the extent available to each Lender, twelve
months (as selected by New Target) are offered to
Chase in the interbank eurodollar market in the
approximate amount of Chase's share of the
relevant Loan.
Interest Payment Dates: In the case of Loans bearing interest based upon
the ABR ("ABR Loans"), quarterly in arrears.
In the case of Loans bearing interest based upon
the Eurodollar Rate ("Eurodollar Loans"), on the
last day of each relevant interest period and, in
the case of any interest period longer than three
months, on each successive date three months after
the first day of such interest period.
Commitment Fees: New Target shall pay a commitment fee calculated
at the rate of .50% per annum on the average daily
unused portion of the Senior Facilities, payable
quarterly in arrears. Swing Line Loans shall, for
purposes of the commitment fee calculations only,
not be deemed to be a utilization of the Revolving
Credit Facility. Letters of Credit, however, for
the purposes of the commitment fee, shall be
deemed utilization of the Revolving Credit
Facility. The foregoing commitment fee shall be
subject to reduction after the first anniversary
of the Closing Date by amounts to be agreed upon
based on the achievement of performance targets to
be determined. The commitment fees payable
hereunder shall not be duplicative of any
commitment fees payable under the Fee Letter (as
defined in the Commitment Letter to which this
Summary of Terms and Conditions is attached).
Letter of Credit Fees: New Target shall pay a commission on all
outstanding Letters of Credit at a per annum rate
equal to the Applicable Margin then in effect with
respect to Eurodollar Loans under the Revolving
Credit Facility on the face amount of each such
Letter of Credit, less the fronting fee. Such
commission shall be shared
<PAGE> 46
3
ratably amoung the Lenders participating in the
Revolving Credit Facility and shall be payable
quarterly in arrears.
A fronting fee in an amount to be agreed upon on
the face amount of each Letter of Credit shall be
payable quarterly in arrears to the Issuing Lender
for its own account. In addition, customary
administrative, issuance, amendment, payment and
negotiation charges shall be payable to the
Issuing Lender for its own account.
Default Rate: At any time when new Target is in default in
the payment of any amount due under the Senior
Facilities, the principal of all Loans shall
bear interest at 2% above the rate otherwise
applicable thereto. Overdue interest, fees and
other amounts shall bear interest at 2% above
the rate applicable to ABR Loans.
Rate and Fee Basis: All per annum rates shall be calculated on
the basis of a year of 360 days (or 365/366
days, in the case of ABR Loans the interest
rate payable on which is then based on the
Prime Rate) for actual days elapsed.
<PAGE> 1
EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
AMONG
COOPERATIVE COMPUTING, INC.,
CCI ACQUISITION CORP.
AND
TRIAD SYSTEMS CORPORATION
DATED OCTOBER 17, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Offer. . . . . . . . . . . . . . . . . . . . . 2
1.2 Offer Documents. . . . . . . . . . . . . . . . . . 3
1.3 Company Actions . . . . . . . . . . . . . . . . . . 3
1.4 Directors . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 The Merger . . . . . . . . . . . . . . . . . . . . 6
2.2 Closing . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Effective Time of the Merger . . . . . . . . . . . 6
2.4 Effects of the Merger . . . . . . . . . . . . . . . 7
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES . . . . . 7
3.1 Effect on Capital Stock . . . . . . . . . . . . . . 7
3.2 Conversion of Securities. . . . . . . . . . . . . . 8
3.3 Payment for Shares . . . . . . . . . . . . . . . . 8
3.4 Stock Transfer Books . . . . . . . . . . . . . . . 10
3.5 Company Stock Plans . . . . . . . . . . . . . . . . 11
3.6 Dissenting Shares . . . . . . . . . . . . . . . . . 11
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 12
4.1 Representations and Warranties of the Company . . . 12
4.2 Representations and Warranties of Parent and
Sub . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . . 32
5.1 Covenants of the Company . . . . . . . . . . . . . 32
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Preparation of the Proxy Statement; Company
Stockholders Meeting; Merger without a
Company Stockholders Meeting . . . . . . . . . . . 37
6.2 Access to Information . . . . . . . . . . . . . . . 38
6.3 Settlements . . . . . . . . . . . . . . . . . . . . 38
6.4 Fees and Expenses . . . . . . . . . . . . . . . . . 38
6.5 Brokers or Finders . . . . . . . . . . . . . . . . 39
6.6 Indemnification; Directors' and Officers'
Insurance . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
6.7 Best Efforts . . . . . . . . . . . . . . . . . . . 41
6.8 Conduct of Business of Sub . . . . . . . . . . . . 42
6.9 Publicity . . . . . . . . . . . . . . . . . . . . . 42
6.10 Spin-Off of Certain Real Estate . . . . . . . . . . 42
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 45
7.1 Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . . . . . . . 45
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . 46
8.1 Termination . . . . . . . . . . . . . . . . . . . . 46
8.2 Effect of Termination . . . . . . . . . . . . . . . 47
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . 47
8.4 Extension; Waiver . . . . . . . . . . . . . . . . . 47
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 47
9.1 Nonsurvival of Representations,
Warranties and Agreements . . . . . . . . . . . 47
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . 47
9.3 Interpretation . . . . . . . . . . . . . . . . . . 49
9.4 Counterparts . . . . . . . . . . . . . . . . . . . 49
9.5 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership . . . . . . . . 49
9.6 Governing Law . . . . . . . . . . . . . . . . . . . 49
9.7 No Remedy in Certain Circumstances . . . . . . . . 49
9.8 Assignment . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
ii
<PAGE> 4
GLOSSARY OF DEFINED TERMS
<TABLE>
<S> <C>
1989 Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1990 ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Board Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . 25
Company Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Company Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Company Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 4
Company SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Company Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . 16
Company Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 38
Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . . . . 6
Continuing Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
CSD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Designated Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Designated Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Designated Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Employee Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Environmental Costs and Liabilities . . . . . . . . . . . . . . . . . . . . 26
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Final Purchase Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Gains and Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 16
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Indemnified Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
IRSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Offer Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Offer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Option Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
OSHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Payment Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Remedial Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Schedule 14D-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Schedule 14D-9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Spin-Off Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Spinco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Trigger Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 17, 1996
(the "Agreement"), is made and entered into by Cooperative Computing, Inc., a
Texas corporation ("Parent"), CCI Acquisition Corp., a Delaware corporation
("Sub"), and Triad Systems Corporation, a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have unanimously approved the acquisition of the Company by Parent,
by means of the merger of Sub with and into the Company, upon the terms and
subject to the conditions set forth in the Agreement;
WHEREAS, to effectuate the acquisition, Parent and the Company
each desire that Sub commence a cash tender offer to purchase all of the
outstanding shares of common stock, par value $.001 per share, of the Company
("Shares" or "Company Common Stock"), upon the terms and subject to the
conditions set forth in this Agreement and the Offer Documents (as defined in
Section 1.2), and the Board of Directors of the Company has unanimously
approved such tender offer and agreed to recommend to its stockholders that
they accept the tender offer and tender their Company Common Stock pursuant
thereto;
WHEREAS, the holders of the issued and outstanding common stock
of Sub will contribute that stock to Parent prior to the consummation of the
Offer, as a result of which, Sub will become a wholly-owned subsidiary of
Parent;
WHEREAS, Parent and Sub are unwilling to enter into this
Agreement (and effect the transactions contemplated hereby) unless,
contemporaneously with the execution and delivery hereof, certain beneficial
and record holders of the Company Common Stock enter into agreements
(collectively, the "Stockholders Agreement") providing for certain matters with
respect to their Shares (including the tender of their Shares and certain other
actions relating to the Offer (as defined in Section 1.1)) and the other
transactions contemplated by this Agreement and in order to induce Parent and
Sub to enter into this Agreement, the Company has approved the execution and
delivery by Parent and such stockholders of the Stockholders Agreement, and
such stockholders have agreed to execute and deliver the Stockholders
Agreement; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to consummation
thereof;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein
<PAGE> 7
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
THE OFFER
1.1 The Offer. (a) Provided that none of the events set
forth in Exhibit A hereto shall have occurred and be continuing, as promptly as
practicable (but in any event not later than five business days after the
public announcement of the execution and delivery of this Agreement), Sub shall
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), an offer to purchase (the "Offer") all
outstanding shares of the Company Common Stock (together with the associated
Rights (as hereinafter defined)) at a price of $9.25 per share, net to the
seller in cash (the "Offer Consideration"). As used in this Agreement,
"Rights" shall mean the Common Stock Purchase Rights issued pursuant to the
Company Rights Agreement (as defined below). Except where the context
otherwise requires, all references herein to the shares of Common Stock shall
include the associated Rights. The obligation of Parent and Sub to commence
the Offer, consummate the Offer, accept for payment and to pay for shares of
Company Common Stock validly tendered in the Offer and not withdrawn shall be
subject only to those conditions set forth in Exhibit A hereto.
(b) Parent and Sub expressly reserve the right to amend or
modify the terms of the Offer, except that, without the prior written consent
of the Company, Sub shall not (and Parent shall not cause Sub to) (i) decrease
the Offer Consideration or the form of consideration therefor or decrease the
number of Shares sought pursuant to the Offer, (ii) change, in any material
respect, the conditions to the Offer, (iii) impose additional material
conditions to the Offer, (iv) waive the condition that there shall be validly
tendered and not withdrawn prior to the time the Offer expires a number of
shares of Company Common Stock which constitutes at least 51% of the Shares
outstanding on a fully-diluted basis on the date of purchase ("on a
fully-diluted basis" having the following meaning, as of any date: the number
of shares of Company Common Stock outstanding, together with Shares which the
Company may be required to issue pursuant to obligations outstanding at that
date under employee stock option or similar benefit plans, or otherwise), (v)
extend the expiration date of the Offer (except that Sub may extend the
expiration date of the Offer (a) as required by law, (b) for up to ten (10)
business days after the initial expiration date or for longer periods (not to
exceed 90 calendar days from the date of commencement) in the event that any
condition to the Offer is not satisfied, or (c) for one or more times for an
aggregate period of up to 15 days (not to exceed 90 calendar days from the date
of commencement) for any reason other than those specified in the immediately
preceding clause (a) or clause (b)), or (vi) amend any term of the Offer in any
manner materially adverse to
2
<PAGE> 8
holders of shares of Company Common Stock; provided, however, that, except as
set forth above, Sub may waive any other condition to the Offer in its sole
discretion; and provided further, that the Offer may be extended in connection
with an increase in the consideration to be paid pursuant to the Offer so as to
comply with applicable rules and regulations of the United States Securities
and Exchange Commission (the "SEC"). Assuming the prior satisfaction or waiver
of the conditions to the Offer, Sub shall accept for payment, and pay for, in
accordance with the terms of the Offer, all shares of Company Common Stock
validly tendered and not withdrawn pursuant to the Offer as soon as practicable
after the expiration date thereof.
1.2 Offer Documents. As soon as practicable on the date of
commencement of the Offer, Parent and Sub shall file or cause to be filed with
the SEC a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") with
respect to the Offer which shall contain the offer to purchase and related
letter of transmittal and other ancillary Offer documents and instruments
pursuant to which the Offer will be made (collectively with any supplements or
amendments thereto, the "Offer Documents") and shall contain (or shall be
amended in a timely manner to contain) all information which is required to be
included therein in accordance with the Exchange Act and the rules and
regulations thereunder and any other applicable law, and shall conform in all
material respects with the requirements of the Exchange Act and any other
applicable law; provided, however, that no agreement or representation hereby
is made or shall be made by Parent or Sub with respect to information supplied
by the Company expressly for inclusion in, or with respect to Company
information derived from the Company's public SEC filings that is included or
incorporated by reference in, the Offer Documents. Parent, Sub and the Company
each agree promptly to correct any information provided by them for use in the
Offer Documents if and to the extent that it shall have become false or
misleading in any material respect and Sub further agrees to take all lawful
action necessary to cause the Offer Documents as so corrected to be filed
promptly with the SEC and to be disseminated to holders of Company Common
Stock, in each case as and to the extent required by applicable law. In
conducting the Offer, Parent and Sub shall comply in all material respects with
the provisions of the Exchange Act and any other applicable law. The Company
and its counsel shall be given the opportunity to review and comment on the
Offer Documents and any amendments thereto prior to the filing thereof with the
SEC.
1.3 Company Actions. The Company hereby consents to the Offer
and represents that (a) its Board of Directors (at a meeting duly called and
held) has unanimously (i) determined that each of this Agreement, the Offer and
the Merger are fair to and in the best interests of the stockholders of the
Company, (ii) approved the execution, delivery and performance of this
Agreement and the Stockholders Agreement and the consummation of the
transactions contemplated hereby and thereby, including the
3
<PAGE> 9
Offer and the Merger, and such approval constitutes approval of the foregoing
for purposes of Section 203 of the Delaware General Corporation Law, as amended
(the "DGCL"), (iii) resolved to recommend acceptance of the Offer, approval and
adoption of this Agreement and the Stockholders Agreement and approval of the
Merger by the holders of Company Common Stock, (iv) taken all action necessary
in respect of the Amended and Restated Rights Agreement, dated as of December
6, 1993, between the Company and Chemical Trust Company of California, as
Rights Agent (the "Company Rights Agreement"), so as to render the Company
Rights Agreement inapplicable to any and all of the execution, delivery and
performance of this Agreement and the Stockholders Agreement and the
consummation of the transactions contemplated hereby and thereby, including the
Offer and the Merger (such necessary action to include, without limitation,
taking action to provide that none of Parent and its affiliates will become an
"Acquiring Person" and that no "Stock Acquisition Date" or "Distribution Date"
(as such terms are defined in the Company Rights Agreement) will occur as a
result of such execution, delivery and performance or such consummation), and
(v) adopted the resolutions described in Section 4.1(i)(xiii) regarding certain
employee severance benefits, and (b) Hambrecht & Quist, LLP has delivered to
the Board of Directors of the Company its written opinion that the Offer
Consideration to be received by the holders of Company Common Stock in the
Offer is fair, from a financial point of view, to such holders. The Board of
Directors of the Company may withdraw, modify or amend its approval or
recommendation of the Offer, this Agreement, the Stockholders Agreement or the
Merger only if the Board of Directors of the Company, in good faith and based
upon the advice of outside counsel, deems it necessary to do so in order to
properly fulfill such Board's fiduciary obligations. The Company hereby
consents to the inclusion in the Offer Documents of the recommendation referred
to in this Section 1.3. The Company hereby agrees to file with the SEC
simultaneously with the filing by Parent and Sub of the Schedule 14D-1, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing such
recommendations of the Board of Directors of the Company in favor of the Offer
and the Merger and otherwise complying with Rule 14d-9 under the Exchange Act.
The Schedule 14D-9 shall comply in all material respects with the Exchange Act
and any other applicable law and shall contain (or shall be amended in a timely
manner to contain) all information which is required to be included therein in
accordance with the Exchange Act and the rules and regulations thereunder and
any other applicable law. The Company, Parent and Sub each agree promptly to
correct any information provided by them for use in the Schedule 14D-9 if and
to the extent that it shall have become false or misleading in any material
respect and the Company further agrees to take all lawful action necessary to
cause the Schedule 14D-9 as so corrected to be filed promptly with the SEC and
disseminated to the holders of Company Common Stock, in each case as and to the
extent required by applicable
4
<PAGE> 10
law. Parent, Sub and their counsel shall be given an opportunity to review and
comment on the Schedule 14D-9 and any amendments thereto prior to the filing
thereof with the SEC. In connection with the Offer, the Company shall promptly
furnish, or cause its transfer agent to furnish, Parent with mailing labels,
security position listings and all available listings or computer files
containing the names and addresses of the record holders of the Company Common
Stock as of the latest practicable date and shall furnish, or cause its
transfer agent to furnish, Parent with such information and assistance
(including updated lists of stockholders, mailing labels and lists of security
positions) as Parent or its agents may reasonably request in communicating the
Offer to the record and beneficial holders of Company Common Stock. Subject to
the requirements of applicable law, and except for such actions as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer and the Merger, Parent and Sub and each of their
affiliates, associates, partners, employees, agents and advisors shall hold in
confidence the information contained in such labels and lists, shall use such
information only in connection with the Offer and the Merger, and, if this
Agreement is terminated, in accordance with its terms, shall deliver promptly
to the Company all copies of such information then in their possession.
1.4 Directors. (a) Promptly upon the purchase by Parent
or any of its subsidiaries of such number of shares of Company Common Stock
which represents at least 51% of the outstanding shares of Company Common Stock
(on a fully diluted basis), and from time to time thereafter, Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number (but in no event more than one less than the total number of directors
on the Board of Directors of the Company) as will give Parent, subject to
compliance with Section 14(f) of the Exchange Act, representation on the Board
of Directors of the Company equal to the product of (x) the number of directors
on the Board of Directors of the Company (giving effect to any increase in the
number of directors pursuant to this Section 1.4) and (y) the percentage that
such number of Shares so purchased bears to the aggregate number of Shares
outstanding (such number being, the "Board Percentage"), and the Company shall,
upon request by Parent, promptly satisfy the Board Percentage by (i) increasing
the size of the Board of Directors of the Company or (ii) using its best
efforts to secure the resignations of such number of directors as is necessary
to enable Parent's designees to be elected to the Board of Directors of the
Company and shall cause Parent's designees promptly to be so elected, provided
that no such action shall be taken which would result in there being, prior to
the consummation of the Merger, less than two directors of the Company that are
not affiliated with Parent. At the request of Parent, the Company shall take,
at the Company's expense, all lawful action necessary to effect any such
election, including, without limitation, mailing to its stockholders the
information required by Section
5
<PAGE> 11
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, unless such
information has previously been provided to the Company's stockholders in the
Schedule 14D-9.
(b) Following the election or appointment of Parent's
designees pursuant to this Section 1.4 and prior to the Effective Time of the
Merger, any amendment or termination of this Agreement, extension for the
performance or waiver of the obligations or other acts of Parent or Sub or
waiver of the Company's rights thereunder shall require the concurrence of a
majority of directors of the Company then in office who are "Continuing
Directors". The term "Continuing Director" shall mean (i) each member of the
board of directors on the date hereof who voted to approve this Agreement and
(ii) any successor to any Continuing Director that was recommended to succeed
such Continuing Director by a majority of the Continuing Directors then on the
board of directors.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, Sub shall be
merged with and into the Company at the Effective Time. At the Effective Time,
the separate corporate existence of Sub shall cease, and the Company shall
continue as the surviving corporation and a direct wholly owned subsidiary of
Parent (Sub and the Company are sometimes hereinafter referred to as
"Constituent Corporations" and, as the context requires, the Company is
sometimes hereinafter referred to as the "Surviving Corporation"), and shall
continue under the name "Triad Systems Corporation."
2.2 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the closing of the Merger (the "Closing") shall take
place at 10:00 a.m., New York time, on the second business day after
satisfaction of the conditions set forth in Section 7.1 (or as soon as
practicable thereafter following satisfaction or waiver of the conditions set
forth in Sections 7.2 and 7.3) (the "Closing Date"), at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, unless
another date, time or place is agreed to in writing by the parties hereto.
2.3 Effective Time of the Merger. Subject to the provisions
of this Agreement, the parties hereto shall cause the Merger to be consummated
by filing a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, as provided in the DGCL, as soon
as practicable on or after the Closing Date. The Merger shall become effective
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upon such filing or at such time thereafter as is provided in the Certificate
of Merger (the "Effective Time").
2.4 Effects of the Merger. (a) The Merger shall have
the effects as set forth in the applicable provisions of the DGCL.
(b) The directors of Sub and the officers of the Company
immediately prior to the Effective Time shall, from and after the Effective
Time, be the initial directors and officers of the Surviving Corporation until
their successors have been duly elected or appointed and qualified, or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
(c) The Certificate of Incorporation of the Company shall be
amended and restated in its entirety as set forth on Exhibit B hereto and, from
and after the Effective Time, such amended and restated Certificate of
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
DGCL.
(d) The Bylaws of the Company shall be amended and restated in
their entirety as set forth on Exhibit C hereto and, from and after the
Effective Time, such amended and restated Bylaws shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by applicable law,
the Certificate of Incorporation or the Bylaws.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or the holder of any capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
Each share of Company Common Stock and all other shares of capital stock of the
Company that are owned by the Company and all shares of Company Common Stock
and other shares of capital stock of the Company owned by Parent or Sub shall
be canceled and retired and shall cease to exist and no consideration shall be
delivered or deliverable in exchange therefor.
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3.2 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Sub, the Company or
the holders of any of the shares thereof:
(a) (i) Subject to the other provisions of this
Section 3.2, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (excluding shares owned, directly or
indirectly, by the Company or any Subsidiary (as defined below) of the Company
or by Parent, Sub or any other Subsidiary of Parent and Dissenting Shares (as
defined in Section 3.6)) shall be converted into the right to receive the Offer
Consideration, payable to the holder thereof, without any interest thereon,
less any required withholding taxes (the "Merger Consideration"), upon
surrender and exchange of the Certificates (as defined in Section 3.3). As
used in this Agreement, the word "Subsidiary", with respect to any party, means
any corporation, partnership, joint venture or other organization, whether
incorporated or unincorporated, of which: (i) such party or any other
Subsidiary of such party is a general partner; (ii) voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation, partnership, joint venture or other organization
is held by such party or by any one or more of its Subsidiaries, or by such
party and any one or more of its Subsidiaries; or (iii) at least 25% of the
equity, other securities or other interests is, directly or indirectly, owned
or controlled by such party or by any one or more of its Subsidiaries, or by
such party and any one or more of its Subsidiaries.
(ii) All such shares of Company Common Stock,
when converted as provided in Section 3.2(a)(i), no longer shall be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each Certificate previously evidencing such Shares shall thereafter represent
only the right to receive the Merger Consideration. The holders of
Certificates previously evidencing Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to the Company
Common Stock except as otherwise provided herein or by law and, upon the
surrender of Certificates in accordance with the provisions of Section 3.3,
shall only represent the right to receive for their Shares, the Merger
Consideration, without any interest thereon.
3.3 Payment for Shares. (a) Paying Agent. Prior to the
Effective Time, Sub shall appoint a United States bank or trust company
reasonably acceptable to the Company to act as paying agent (the "Paying
Agent") for the payment of the Merger Consideration, and Sub shall deposit or
shall cause to be deposited with the Paying Agent in a separate fund
established for the benefit of the holders of shares of Company Common Stock,
for payment in accordance with this Article III, through the Paying Agent (the
"Payment Fund"), immediately available funds in
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amounts necessary to make the payments pursuant to Section 3.2(a)(i) and this
Section 3.3 to holders (other than the Company or any Subsidiary of the Company
or Parent, Sub or any other Subsidiary of Parent, or holders of Dissenting
Shares). The Paying Agent shall, pursuant to irrevocable instructions, pay the
Merger Consideration out of the Payment Fund.
The Paying Agent shall invest portions of the Payment Fund as
Parent directs in obligations of or guaranteed by the United States of America,
in commercial paper obligations receiving the highest investment grade rating
from both Moody's Investors Services, Inc. and Standard & Poor's Corporation,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $1,000,000,000
(collectively, "Permitted Investments"); provided, however, that the maturities
of Permitted Investments shall be such as to permit the Paying Agent to make
prompt payment to former holders of Company Common Stock entitled thereto as
contemplated by this Section. The Surviving Corporation shall cause the
Payment Fund to be promptly replenished to the extent of any losses incurred as
a result of Permitted Investments. All earnings on Permitted Investments shall
be paid to the Surviving Corporation. If for any reason (including losses) the
Payment Fund is inadequate to pay the amounts to which holders of shares of
Company Common Stock shall be entitled under this Section 3.3, the Surviving
Corporation shall in any event be liable for payment thereof. The Payment Fund
shall not be used for any purpose except as expressly provided in this
Agreement.
(b) Payment Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall instruct the Paying
Agent to mail to each holder of record (other than the Company or any
Subsidiary of the Company or Parent, Sub or any other Subsidiary of Parent) of
a Certificate or Certificates which, immediately prior to the Effective Time,
evidenced outstanding shares of Company Common Stock (the "Certificates"), (i)
a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and shall be in such
form and have such other provisions as the Surviving Corporation reasonably may
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment therefor. Upon surrender of a Certificate
for cancellation to the Paying Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in respect thereof cash in an amount equal to the product of (x) the
number of shares of Company Common Stock represented by such Certificate and
(y) the Merger Consideration, and the Certificate so surrendered shall
forthwith be canceled. Absolutely no interest shall be paid or accrued on the
Merger Consideration payable upon the surrender of
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any Certificate. If payment is to be made to a person other than the person in
whose name the surrendered Certificate is registered, it shall be a condition
of payment that the Certificate so surrendered shall be promptly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the surrendered Certificate or
established to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 3.3(b), each Certificate (other than Certificates
representing Shares owned by Parent or any subsidiary of Parent or held in the
treasury of the Company) shall represent for all purposes only the right to
receive the Merger Consideration.
(c) Termination of Payment Fund; Interest. Any portion of the
Payment Fund which remains undistributed to the holders of Company Common Stock
for 180 days after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of Company Common Stock who have not
theretofore complied with this Article III and the instructions set forth in
the letter of transmittal mailed to such holder after the Effective Time shall
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration to which they are entitled. All interest accrued in respect of
the Payment Fund shall inure to the benefit of and be paid to the Surviving
Corporation.
(d) No Liability. Neither Parent nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock for
any cash from the Payment Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(e) Withholding Rights. The Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as the Surviving Corporation is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by the Surviving Corporation, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by the Surviving Corporation.
3.4 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company.
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On or after the Effective Time, any certificates presented to the Paying Agent
or Parent for any reason shall be converted into the Merger Consideration.
3.5 Company Stock Plans. (a) At the Effective Time, each
holder of a then outstanding option to purchase Shares under the Company's 1982
Amended and Restated Stock Option Plan, 1990 Stock Option Plan, and Amended and
Restated Outside Directors Stock Option Plan (collectively, the "Stock Option
Plans"), whether or not then exercisable (the "Options"), shall, in settlement
thereof, receive for each Share subject to such Option an amount (subject to
any applicable withholding tax) in cash equal to the difference between the
Offer Consideration and the per Share exercise price of such Option to the
extent such difference is a positive number (such amount being hereinafter
referred to as, the "Option Consideration"); provided, however, that with
respect to any person subject to Section 16(a) of the Exchange Act, any such
amount shall be paid as soon as practicable after the first date payment can be
made without liability to such person under Section 16(b) of the Exchange Act.
Upon receipt of the Option Consideration, the Option shall be canceled. The
surrender of an Option to the Company in exchange for the Option Consideration
shall be deemed a release of any and all rights the holder had or may have had
in respect of such Option. Prior to the Effective Time, the Company shall
obtain all necessary consents or releases from holders of Options under the
Stock Option Plans and take all such other lawful action as may be necessary to
give effect to the transactions contemplated by this Section 3.5. All Stock
Option Plans shall terminate as of the Effective Time and the provisions in any
other plan, program or arrangement providing for the issuance or grant of any
other interest in respect of the capital stock of the Company or any Subsidiary
thereof shall be canceled as of the Effective Time, and the Company shall take
all action necessary to ensure that following the Effective Time no participant
in any Stock Option Plan or other plans, programs or arrangements shall have
any right thereunder to acquire equity securities of the Company, the Surviving
Corporation or any Subsidiary thereof and to terminate all such plans.
(b) The Company shall take all actions reasonably necessary to
cause the last day of the current "Offering Period" (as such term is defined in
the Company's 1990 Employee Stock Purchase Plan (as amended to date, the "1990
ESPP")) to be the date immediately following the last payday occurring prior to
the expiration date of the Offer and apply the funds within the participant's
withholdings account on such expiration date to the purchase of whole Shares in
accordance with the terms of the 1990 ESPP. The Company shall cause the 1990
ESPP to be terminated effective as of the Final Purchase Date.
3.6 Dissenting Shares. Notwithstanding any other
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provisions of this Agreement to the contrary, shares of Company Common Stock
that are outstanding immediately prior to the Effective Time and which are held
by stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal
for such shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders instead shall be entitled
to receive payment of the appraised value of such shares of Company Common
Stock held by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such shares of Company Common Stock under such Section 262 shall
thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration upon surrender in the manner
provided in Section 3.3, of the Certificate or Certificates that, immediately
prior to the Effective Time, evidenced such shares of Company Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. The
Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Power. Each of the Company and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation, has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted, and is duly qualified and in
good standing to conduct business in each jurisdiction in which the business it
is conducting, or the operation, ownership or leasing of its properties, makes
such qualification necessary, other than in such jurisdictions where the
failure so to qualify would not have a Material Adverse Effect (as defined
below) with respect to the Company. The Company has heretofore made available
to Parent complete and correct copies of its and its Subsidiaries' respective
Certificates of Incorporation and Bylaws. All Subsidiaries of the Company and
their respective jurisdictions of incorporation or organization are identified
on Schedule 4.1(a). As used in this Agreement: a "Material Adverse Effect"
shall mean, with respect to any party, the result of one or more events,
changes or effects which, individually or in the aggregate, would have a
material adverse effect on the business, operations, assets or condition
(financial or otherwise) of such party and its Subsidiaries, taken as a whole.
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(b) Capital Structure. As of the date hereof, the authorized
capital stock of the Company consists of 50,000,000 Shares and 1,000,000 shares
of Preferred Stock, $.01 par value ("Preferred Stock"). At the close of
business on September 30, 1996: (i) 17,749,158 Shares were issued and
outstanding; (ii) no shares of Preferred Stock were issued and outstanding;
(iii) 1,838,190 Shares were reserved for issuance pursuant options outstanding
under the Stock Option Plans; (iv) 290,219 Shares remain available for issuance
pursuant to the 1990 ESPP, (v) except for the issuance of Shares pursuant to
the exercise of the Options, there are no employment, executive termination or
similar agreements providing for the issuance of Shares; (vi) 645,184 Shares
were held by the Company; and (vii) no bonds, debentures, notes or other
instruments or evidence of indebtedness having the right to vote (or
convertible into, or exercisable or exchangeable for, securities having the
right to vote) on any matters on which the Company stockholders may vote
("Company Voting Debt") were issued or outstanding. Since September 30, 1996,
no additional Shares have been made available for issuance under the 1990 ESPP.
As of September 30, 1996, the total amount of funds on deposit in all
participants' withholdings accounts for the current Offer Period under the 1990
ESPP was $416,000. All outstanding Shares are validly issued, fully paid and
nonassessable and are not subject to preemptive or other similar rights. No
Shares are owned by any Subsidiary of the Company. Except as set forth on
Schedule 4.1(b), all outstanding shares of capital stock of the Subsidiaries of
the Company are owned by the Company or a direct or indirect Subsidiary of the
Company, free and clear of all liens, charges, encumbrances, claims and options
of any nature. Except as set forth in this Section 4.1(b) and except for
changes since September 30, 1996 resulting from the exercise of employee stock
options granted prior to such date pursuant to the Stock Option Plans or from
the issuance of Shares under the 1990 ESPP as contemplated by Section 3.5(b) of
this Agreement and except for the potential issuance of options to purchase up
to 75,000 Shares that may be granted in connection with an offer of employment
outstanding on the date of this Agreement, there are outstanding: (i) no
shares of capital stock, Company Voting Debt or other voting securities of the
Company; (ii) no securities of the Company or any Subsidiary of the Company
convertible into, or exchangeable or exercisable for, shares of capital stock,
Company Voting Debt or other voting securities of the Company or any Subsidiary
of the Company; and (iii) no options, warrants, calls, rights (including
preemptive rights), commitments or agreements to which the Company or any
Subsidiary of the Company is a party or by which it is bound, in any case
obligating the Company or any Subsidiary of the Company to issue, deliver,
sell, purchase, redeem or acquire, or cause to be issued, delivered, sold,
purchased, redeemed or acquired, additional shares of capital stock or any
Company Voting Debt or other voting securities of the Company or of any
Subsidiary of the Company, or obligating the Company or any Subsidiary of the
Company to grant, extend or
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enter into any such option, warrant, call, right, commitment or agreement.
Since September 30, 1996, the Company has not (i) granted any options, warrants
or rights to purchase shares of Company Common Stock (except for the potential
issuance of options to purchase up to 75,000 Shares that may be granted in
connection with an offer of employment outstanding on the date of this
Agreement), or (ii) amended or repriced any Option or Stock Option Plans, and
set forth on Schedule 4.1(b) is a list of all outstanding options, warrants and
rights to purchase shares of Company Common Stock and the exercise prices
relating thereto. Except for the Stockholders Agreement and the Unit Purchase
Agreement, dated as of July 7, 1992, between the Company, Richard C. Blum &
Associates, Inc., and certain investors, as amended by the First Amendment to
Unit Purchase Agreement, dated as of August 3, 1992, and the Exchange Agreement
and Second Amendment to Unit Purchase Agreement, dated as of March 31, 1995,
there are not as of the date hereof and there will not be at the Effective Time
any 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
of any shares of the capital stock of the Company which will limit in any way
the solicitation of proxies by or on behalf of the Company from, or the casting
of votes by, the stockholders of the Company with respect to the Merger. There
are no restrictions on the Company to vote the stock of any of its
Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to the Company Stockholder
Approval (as defined in Section 4.1(c)(iii)), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject, if
required with respect to consummation of the Merger, to the Company Stockholder
Approval. This Agreement has been duly executed and delivered by the Company
and, subject, if required with respect to consummation of the Merger, to the
Company Stockholder Approval, and assuming that this Agreement constitutes the
valid and binding agreement of Parent and Sub, constitutes a valid and binding
obligation of the Company enforceable in accordance with its terms except that
the enforcement hereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(ii) Except as set forth on Schedule 4.1(c)(ii), the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Company will not
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conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration (including pursuant to any put right)
of any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest or other encumbrance on assets or property, or
right of first refusal with respect to any asset or property (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss, creation or right of first refusal, a "Violation"),
pursuant to (A) any provision of the Certificate of Incorporation or Bylaws of
the Company or any of its Subsidiaries or (B) except as to which requisite
waivers or consents have been obtained and assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in paragraph
(iii) of this Section 4.1(c) are duly and timely obtained or made and, if
required, the Company Stockholder Approval has been obtained, result in any
Violation of (1) any loan or credit agreement, note, mortgage, deed of trust,
indenture, lease, Company Employee Benefit Plan (as defined in Section 4.1(i)),
Company Permit (as defined in Section 4.1(f)), or any other agreement,
obligation, instrument, concession, franchise, or license, except for any
Violations that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company and except that each
holder of the Company's 12.25% Senior Notes due 1999 shall have the right, at
such holder's option and in the manner provided in the Indenture, dated August
1, 1992, between the Company and Security Pacific National Trust Company (New
York) to require the Company to redeem all or any portion of such holder's
Senior Notes and except that no representation is made as to that certain
Revolving Credit Loan Agreement, dated as of June 30, 1992, by and between the
Company and Comerica Bank-California, as amended to date, and that certain
First Deed of Trust and Assignment of Rents, Security Agreement and Fixture
Filing, dated August 23, 1988, by 3055 Triad Dr. Corp. and Mason-McDuffie
Financial Corporation, as Trustee, for the benefit of The Variable Annuity Life
Insurance Company, or (2) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or any of its Subsidiaries or
their respective properties or assets (collectively, "Laws"). The Board of
Directors of the Company has taken all actions necessary under the DGCL,
including approving the transactions contemplated by this Agreement and the
Stockholders Agreement, to ensure that Section 203 of the DGCL does not, and
will not, apply to the transactions contemplated in this Agreement or the
Stockholders Agreement.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to, or permit from any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required by
or with respect to the Company or any of its domestic Subsidiaries, and to the
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best knowledge of either of the Company's Chief Executive Officer and the
Company's Chief Financial Officer (the "Designated Officers") with respect to
any of the Company's foreign Subsidiaries, in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, except for: (A) the filing of a
premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and the expiration or termination of the applicable waiting period
thereunder; (B) the filing with the SEC of (x) a proxy statement (if required
by applicable law) in definitive form relating to a meeting of the holders of
Company Common Stock to approve the Merger (such proxy statement as amended or
supplemented from time to time being hereinafter referred to as the "Proxy
Statement"), (y) the Schedule 14D-9 in connection with the Offer, and (z) such
reports under and such other compliance with the Exchange Act and the rules and
regulations thereunder as may be required in connection with this Agreement and
the transactions contemplated hereby; (C) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware; (D) such filings
and approvals as may be required by any applicable state securities, "blue sky"
or takeover laws; (E) such filings and approvals as may be required by any
foreign pre-merger notification, securities, corporate or other law, rule or
regulation; (F) such filings in connection with any state or local tax which is
attributable to the beneficial ownership of the Company's or its Subsidiaries'
real property, if any (collectively, the "Gains and Transfer Taxes"); (G) such
other such filings and consents as may be required under any environmental,
health or safety law or regulation pertaining to any notification, disclosure
or required approval necessitated by the Merger or the transactions
contemplated by this Agreement; and (H) the approval of this Agreement and the
Merger by the holders of a majority of the outstanding Shares ("Company
Stockholder Approval") .
(d) SEC Documents. The Company has made available to Parent a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC since January 1,
1993 and prior to the date of this Agreement (the "Company SEC Documents"),
which are all the documents (other than preliminary material) that the Company
was required to file with the SEC since such date. As of their respective
dates, the Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such Company SEC Documents, and none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in
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the Company SEC Documents complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Rule 10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, which will not be material,
either individually or in the aggregate) the consolidated financial position of
the Company and its consolidated Subsidiaries as of their respective dates and
the consolidated results of operations and the consolidated cash flows of the
Company and its consolidated Subsidiaries for the periods presented therein.
(e) Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in
(i) any of the Offer Documents will, at the time the Offer Documents are first
published, sent or given to holders of Company Common Stock, and at any time
they are amended or supplemented, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, and (ii) the Proxy Statement will, on the
date it is first mailed to the holders of the Company Common Stock or at the
time of the Company's Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior
to the expiration date of the Offer or the Effective Time any event with
respect to the Company or any of its Subsidiaries, or with respect to other
information supplied by the Company for inclusion in the Offer Documents or the
Proxy Statement, shall occur which is required to be described in an amendment
of, or a supplement to, the Offer Documents or the Proxy Statement, as the case
may be, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the stockholders of the Company. The Proxy Statement, insofar as it relates to
the Company or its Subsidiaries or other information supplied by the Company
for inclusion therein will comply as to form, in all material respects, with
the provisions of the Exchange Act or the rules and regulations thereunder.
(f) Compliance with Applicable Laws. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Company Permits"), except where
the failure to hold any such Company Permits could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company. The Company and its Subsidiaries are in compliance with the terms of
the Company Permits, except where the failure to be in compliance could not
reasonably be expected,
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individually or in the aggregate, to have a Material Adverse Effect on the
Company. Except as disclosed in the Company SEC Documents, the businesses of
the Company and its Subsidiaries are not being conducted in violation of any
law, ordinance or regulation of any Governmental Entity. As of the date of
this Agreement, no investigation or review by any Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or, to the
knowledge of the Company, threatened.
(g) Litigation. Except as disclosed in the Company SEC
Documents, there is no suit, action or proceeding pending or, to the knowledge
of the Company, threatened against or affecting the Company or any Subsidiary
of the Company ("Company Litigation"), nor is there any material judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any Subsidiary of the Company ("Company
Order"). In addition, except as set forth on Schedule 4.1(g), the aggregate
amount of all claims and judgments pending, or to the knowledge of the Company,
threatened pursuant to all Company Litigation and Company Orders, excluding
individual, unrelated claims or judgments of less than $100,000 each, does not
exceed $2,500,000.
(h) Taxes. Except as set forth on Schedule 4.1(h) hereto:
(i) All Tax Returns required to be filed by or with
respect to the Company and each of its Subsidiaries have been duly and
timely filed, and all such Tax Returns are true, correct and complete in
all material respects. The Company and each of its Subsidiaries has
duly and timely paid (or there has been paid on its behalf) all Taxes
that are due, or claimed or asserted by any taxing authority to be due,
from or with respect to it. With respect to any period for which Taxes
are not yet due with respect to the Company or any Subsidiary, the
Company and each of its Subsidiaries has made due and sufficient current
accruals for such Taxes in accordance with GAAP in the most recent
financial statements contained in the Company SEC Documents. The
Company and each of its Subsidiaries has made (or there has been made on
its behalf) all required estimated Tax payments sufficient to avoid any
material underpayment penalties. The Company and each of its
Subsidiaries has withheld and paid all Taxes required by all applicable
laws to be withheld or paid in connection with any amounts paid or owing
to any employee, creditor, independent contractor or other third party.
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<PAGE> 24
(ii) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to
any claim for, or the period for the collection or assessment of,
material Taxes due from or with respect to the Company or any of its
Subsidiaries for any taxable period. No audit or other proceeding by
any court, governmental or regulatory authority, or similar person is
pending or threatened in regard to any Taxes due from or with respect to
the Company or any of the Subsidiaries or any Tax Return filed by or
with respect to the Company or any Subsidiary, other than normal and
routine audits by non-federal governmental authorities. No material
assessment of Taxes is proposed against the Company or any of its
Subsidiaries or any of their assets.
(iii) No election under Section 338 of the Code has been
made or filed by or with respect to the Company or any of its
Subsidiaries. No consent to the application of Section 341(f)(2) of the
Code (or any predecessor provision) has been made or filed by or with
respect to the Company or any of its Subsidiaries or any of their
assets. None of the Company or any of its Subsidiaries has agreed to
make any adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method,
and there is no application pending with any taxing authority requesting
permission for any changes in any accounting method of the Company or
any of its Subsidiaries. None of the assets of the Company or any of
its Subsidiaries is or will be required to be treated as being owned by
any person (other than the Company or its Subsidiaries) pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately before the enactment of the Tax Reform
Act of 1986.
(iv) None of the Company or any of its Subsidiaries is a
party to, is bound by, or has any obligation under, any Tax sharing
agreement, Tax allocation agreement or similar contract.
(v) There is no contract, agreement, plan or
arrangement covering any person that, individually or collectively,
could give rise to the payment of any amount that would not be
deductible by the Company or any of its Subsidiaries by reason of
Section 280G of the Code.
(vi) Schedule 4.1(h) accurately sets forth (i) the
amount of all deferred intercompany gains for purposes of Treasury
Regulation section 1.1502-13 (including any predecessor regulation) with
respect to the Company and its Subsidiaries; and (ii) the amount of any
excess loss account with respect to the stock of each of the
Subsidiaries for
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<PAGE> 25
purposes of Treasury Regulation section 1.1502-19 (including any
predecessor regulation).
(vii) "Code" shall mean the Internal Revenue Code of
1986, as amended. "Taxes" shall mean all taxes, charges, fees, levies,
or other similar assessments or liabilities, including without
limitation (a) income, gross receipts, ad valorem, premium, excise, real
property, personal property, sales, use, transfer, withholding,
employment, payroll, and franchise taxes imposed by the United States of
America, or by any state, local, or foreign government, or any
subdivision, agency, or other similar person of the United States or any
such government; and (b) any interest, fines, penalties, assessments, or
additions to taxes resulting from, attributable to, or incurred in
connection with any Tax or any contest, dispute, or refund thereof.
"Tax Returns" shall mean any report, return, or statement required to be
supplied to a taxing authority in connection with Taxes.
(i) Pension And Benefit Plans; ERISA.
(i) To the best knowledge of the Designated Officers,
Schedule 4.1(i)(i) sets forth a complete and correct list of:
(A) all "employee benefit plans", as defined in Section
3(3) of ERISA, under which Company or any of its
Subsidiaries has any obligation or liability, contingent
or otherwise ("Benefit Plans"); and
(B) all employment or consulting agreements, bonus or
other incentive compensation, deferred compensation,
salary continuation during any absence from active
employment for disability or other reasons, severance,
sick days, stock award, stock option, stock purchase,
tuition assistance, club membership, employee discount,
employee loan, or vacation pay agreements, policies or
arrangements which Company or any of its Subsidiaries
maintains or has any obligation or liability (contingent
or otherwise) with respect to any current officer,
director or employee of Company or any of its Subsidiaries
which individual arrangement has a cost to the Company or
any of its Subsidiaries in excess of $10,000 per year (the
"Employee Arrangements").
(ii) With respect to each Benefit Plan and Employee
Arrangement, a complete and correct copy of each of the following
documents (if applicable) has been provided to Purchaser: (i) the most
recent plan and related trust
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<PAGE> 26
documents, and all amendments thereto; (ii) the most recent summary plan
description, and all related summaries of material modifications
thereto; (iii) the most recent Form 5500 (including schedules and
attachments); (iv) the most recent IRS determination letter; (v) the
most recent actuarial reports (including for purposes of Financial
Accounting Standards Board report no. 87, 106 and 112).
(iii) Company and its Subsidiaries have not during the
preceding six years had any obligation or liability (contingent or
otherwise) with respect to a Benefit Plan which is described in Section
3(37), 4(b)(4), 4063 or 4064 of ERISA.
(iv) To the best knowledge of the Designated Officers,
the Benefit Plans and their related trusts intended to qualify under
Sections 401 and 501(a) of the Code, respectively, are qualified under
such sections. To the best knowledge of the Designated Officers, any
voluntary employee benefit association which provides benefits to
current or former employees of the Company and its Subsidiaries, or
their beneficiaries, is and has been qualified under Section 501(c)(9)
of the Code.
(v) All contributions or other payments required to
have been made by Company and its Subsidiaries to or under any Benefit
Plan or Employee Arrangement by applicable law or the terms of such
Benefit Plan or Employee Arrangement (or any agreement relating thereto)
have been timely and properly made.
(vi) To the best knowledge of the Designated Officers,
the Benefit Plans and Employee Arrangements have been maintained and
administered in all material respects in accordance with their terms and
applicable laws.
(vii) Except as disclosed in Schedule 4.1(i)(vii), there
are no pending or, to the best knowledge of the Designated Officers,
threatened actions, claims or proceedings against or relating to any
Benefit Plan or Employee Arrangement other than routine benefit claims
by persons entitled to benefits thereunder.
(viii) Except as disclosed in Schedule 4.1(i)(viii),
Company and its Subsidiaries do not maintain or have an obligation to
contribute to retiree life or retiree health plans which provide for
continuing benefits or coverage for current or former officers,
directors or employees of the Company or any of its Subsidiaries except
(i) as may be required under Part 6 of Title I of ERISA) and at the sole
expense of the participant or the participant's beneficiary or (ii) a
medical expense reimbursement account plan pursuant to Section 125 of
the Code.
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(ix) Except as disclosed in Schedule 4.1(i)(ix), none of
the assets of any Benefit Plan is stock of the Company or any of its
affiliates, or property leased to or jointly owned by the Company or any
of its affiliates.
(x) Except as disclosed in Schedule 4.1(i)(x) or in
connection with equity compensation, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment becoming due to any employee
(current, former or retired) of Company and its Subsidiaries, (ii)
increase any benefits under any Benefit Plan or Employee Arrangement or
(iii) result in the acceleration of the time of payment of, vesting of
or other rights with respect to any such benefits.
(xi) Company and its Subsidiaries have no liability
(contingent or otherwise) under Section 4069 of ERISA by reason of a
transfer of an underfunded pension plan.
(xii) The representations and warranties set forth in the
immediately preceding clauses (i) through (xi) shall apply to the
Benefit Plans and Employee Arrangements of Computer System Dynamics,
Inc. ("CSD") that were in existence at the time of the acquisition of
CSD by the Company pursuant to that certain Stock Purchase Agreement,
dated June 14, 1996, subject to the following qualifications: (A) each
such representation and warranty that is not otherwise qualified as
being "to the best knowledge of the Designated Officers" shall be deemed
so qualified and (B) each such representation and warranty shall be
subject to the exceptions disclosed with respect to the particular
representation and warranty on Schedule 4.1(i)(xii) hereto.
(xiii) Schedule 4.1(i)(xiii)(a) sets forth a true, correct
and complete copy of certain resolutions of the board of directors of
the Company duly adopted at the meeting thereof held on January 4, 1989
(the "1989 Resolutions"); prior to the adoption of the resolutions
identified in the next sentence, the 1989 Resolutions had not been
amended, modified or repealed in any respect and were in full force and
effect; neither the Company, any of its Subsidiaries, nor any of their
respective employees, agents or representatives, has made any
representation, warranty, covenant or agreement that the 1989
Resolutions would not, or could not, be amended, modified or repealed
solely by the Company; from and after the adoption of the resolutions
referenced in the next succeeding sentence, the 1989 Resolutions have
ceased to be of any force or effect; and no written or oral agreements
have been entered into pursuant to the authority granted in the 1989
Resolutions or
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otherwise evidencing any of the matters referenced in the 1989
Resolutions. The board of directors of the Company has unanimously
adopted resolutions rescinding the 1989 Resolutions, retroactive to the
date of the adoption of the 1989 Resolutions, and adopting a severance
pay policy the terms of which are to consist of the arrangements
described in the 1989 Resolutions, modified as follows:
(A) Employees (other than executive officers) shall be
eligible for severance benefits in accordance with such policy
only if they are involuntarily terminated without cause by the
Company and its subsidiaries within six (6) months following a
change in control (as defined in the 1989 Resolutions).
(B) Executive officers of the Company shall be eligible
for severance benefits in accordance with such policy only if
they are involuntarily terminated by the Company and its
subsidiaries within twelve (12) months following a change in
control (defined as described above) of the Company.
(C) The Board of Directors of the Company shall have the
right to clarify the terms of such severance policy at any time
and from time to time, including, but not limited to, resolving
any ambiguities or supplying any omission in such severance
policy.
(D) The Board of Directors of the Company shall have the
right to amend or terminate such severance policy in its sole
discretion at any time and from time to time, except no such
amendment or termination which materially and adversely affects
the rights of any employee of the Company or any of its
subsidiaries under the severance policy shall be effective with
respect to: (i) any person whose employment with the Company and
its subsidiaries has terminated prior to the date of such
amendment or termination, (ii) any such employee for a period of
six months beginning on the date of a change in control (defined
as described above) of the Company and (iii) any executive
officer of the Company for a period of twelve months beginning on
the date of a change in control (defined as described above).
(E) For all purposes of the severance policy, the date
of a change in control of the Company involving a person or an
affiliated group of persons shall be the date of the earliest to
occur of any of the events defined in the 1989 Resolutions with
respect to such person or affiliated group of persons.
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(j) Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Documents filed after September 30, 1995, as set forth on
Schedule 4.1(j), or as contemplated by this Agreement, since September 30,
1995, the business of the Company and its Subsidiaries has been carried on only
in the ordinary and usual course and there has not been any material adverse
changes (either individually or in the aggregate) in the business, operations
or financial condition of the Company.
(k) No Undisclosed Material Liabilities. To the best
knowledge of the Designated Officers, except as specifically and individually
set forth on Schedule 4.1(k) or the other schedules hereto (specific reference
to which shall be made on Schedule 4.1(k)), there are no liabilities of the
Company or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, that are material to the
Company and its Subsidiaries considered as a whole other than: (i) liabilities
reflected on the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996; and (ii) liabilities under this Agreement.
(l) Opinion of Financial Advisor. The Company has received
the opinion of Hambrecht & Quist LLP, dated October 16, 1996, to the effect
that, as of the date hereof, the Offer Consideration to be received by the
holders of Company Common Stock in the Offer and the Merger Consideration to be
received by the holders of Company Common Stock in the Merger is fair from a
financial point of view to such holders, a signed, true and complete copy of
which opinion shall be delivered to Parent, and such opinion has not been
withdrawn or modified.
(m) Vote Required. In the event that Section 253 of the DGCL
is inapplicable and unavailable to effectuate the Merger, the affirmative vote
of the holders of a majority of the outstanding shares of Company Common Stock
is the only vote of the holders of any class or series of the Company's capital
stock necessary (under applicable law or otherwise) to approve the Merger and
this Agreement and the transactions contemplated hereby.
(n) Labor Matters.
(i) Neither the Company nor any of its Subsidiaries is
a party to any labor or collective bargaining agreement, and no
employees of Company or any of its Subsidiaries are represented by any
labor organization. Within the preceding three years, there have been
no representation or certification proceedings, or petitions seeking a
representation proceeding, pending or, to the knowledge of the Company,
threatened in writing to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal or authority.
Within the preceding three years, to the knowledge of Company, there
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<PAGE> 30
have been no organizing activities involving Company and its
Subsidiaries with respect to any group of employees of Company or any of
its Subsidiaries.
(ii) There are no strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances or other material
labor disputes pending or threatened in writing against or involving
Company or any of its Subsidiaries. There are no unfair labor practice
charges, grievances or complaints pending or, to the knowledge of
Company, threatened in writing by or on behalf of any employee or group
of employees of Company or any of its Subsidiaries.
(iii) There are no complaints, charges or claims against
Company or any of its Subsidiaries pending or, to the knowledge of
Company, threatened to be brought or filed with any governmental
authority, arbitrator or court based on, arising out of, in connection
with, or otherwise relating to the employment or termination of
employment of any individual by Company or any of its Subsidiaries.
(iv) Each of the Company and its Subsidiaries is in
material compliance with all laws, regulations and orders relating to
the employment of labor, including all such laws, regulations and orders
relating to wages, hours, WARN, collective bargaining, discrimination,
civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or social security taxes and
any similar tax except for immaterial non-compliance.
(v) There has been no "mass layoff" or "plant closing"
as defined by the Worker Adjustment Retraining and Notification Act, as
amended, with respect to Company and its Subsidiaries within the six (6)
months prior to Closing.
(o) Intangible Property. To the best knowledge of the
Designated Officers, each of the Company and its Subsidiaries own or have a
right to use each trademark, trade name, patent, service mark, brand mark,
brand name, computer program, database, industrial design and copyright owned,
used or useful in connection with the operation of the businesses of each of
the Company and its Subsidiaries as well as a list of all registrations thereof
and pending applications therefor, and each license or other contract relating
thereto (collectively, the "Company Intangible Property") necessary for the
operation of its respective business, free and clear of any and all liens,
claims or encumbrances, except where the failure to own or have a right to use
such property could not reasonably be expected to have a Material Adverse
Effect on the Company. Except to the extent that such could not reasonably be
expected to have a Material Adverse Effect on the Company, the use of the
Company Intangible Property by the Company or its Subsidiaries does not
conflict
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with, infringe upon, violate or interfere with or constitute an appropriation
of any right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, patent, service mark, brand
mark, brand name, computer program, database, industrial design, copyright or
any pending application therefor of any other person.
(p) Environmental Matters.
(i) For purposes of this Agreement:
(A) "Environmental Costs and Liabilities" means any and
all losses, liabilities, obligations, damages, fines, penalties,
judgments, actions, claims, costs and expenses (including,
without limitation, fees, disbursements and expenses of legal
counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and clean up, remove,
treat, or in any other way address any Hazardous Materials)
arising from or under any Environmental Law.
(B) "Environmental Law" means any applicable law
regulating or prohibiting Releases into any part of the natural
environment, or pertaining to the protection of natural
resources, the environment and public and employee health and
safety including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et
seq.), the Clean Air Act (33 U.S.C. Section 7401 et seq.), the
Toxic Substances Control Act (15 U.S.C. Section 7401 et seq.),
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 et seq.), and the Occupational Safety and Health Act
(29 U.S.C. Section 651 et seq.) ("OSHA") and the regulations
promulgated pursuant thereto, and any such applicable state or
local statutes, including, without limitation, the Industrial
Site Recovery Act ("IRSA"), and the regulations promulgated
pursuant thereto, as such laws have been and may be amended or
supplemented through the Closing Date;
(C) "Hazardous Material" means any substance, material
or waste which is regulated by any public or governmental
authority in the jurisdictions in which the applicable party or
its Subsidiaries conducts business, or the United States,
including, without limitation, any material or substance which is
defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste" or
26
<PAGE> 32
"restricted hazardous waste," "contaminant," "toxic waste" or
"toxic substance" under any provision of Environmental Law and
shall also include, without limitation, petroleum, petroleum
products, asbestos, polychlorinated biphenyls and radioactive
materials;
(D) "Release" means any release, spill, effluent,
emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching, or migration into the indoor or
outdoor environment, or into or out of any property; and
(E) "Remedial Action" means all actions, including,
without limitation, any capital expenditures, required by a
governmental entity or required under any Environmental Law, or
voluntarily undertaken to (I) clean up, remove, treat, or in any
other way ameliorate or address any Hazardous Materials or other
substance in the indoor or outdoor environment; (II) prevent the
Release or threat of Release, or minimize the further Release of
any Hazardous Material so it does not endanger or threaten to
endanger the public health or welfare of the indoor or outdoor
environment; (III) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (IV) bring the applicable party into
compliance with any Environmental Law.
(ii) The operations of the Company and its Subsidiaries
have been and, as of the Closing Date, will be, in compliance in all
material respects with all Environmental Laws;
(iii) The Company and its Subsidiaries have obtained and
will, as of the Closing Date, maintain all permits required under
applicable Environmental Laws for the continued operations of their
respective businesses, except such permits the lack of which would not
materially impair the ability of the Company and its Subsidiaries to
continue operations;
(iv) The Company and its Subsidiaries are not subject to
any outstanding written orders or material contracts with any
Governmental Entity or other person respecting (A) Environmental Laws,
(B) Remedial Action or (C) any Release or threatened Release of a
Hazardous Material;
(v) The Company and its Subsidiaries have not received
any written communication alleging, with respect to any such party, the
violation of or liability under any
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<PAGE> 33
Environmental Law, which violation or liability is outstanding;
(vi) Neither the Company nor any of its Subsidiaries has
any contingent liability in connection with the Release of any Hazardous
Material into the indoor or outdoor environment (whether on-site or
off-site) which would be reasonably likely to result in the Company and
its Subsidiaries incurring Environmental Costs and Liabilities in excess
of $100,000;
(vii) The operations of the Company or its Subsidiaries
do not involve the transportation, treatment, storage or disposal of
hazardous waste, as defined and regulated under 40 C.F.R. Parts 260-270
(in effect as of the date of this Agreement) or any state equivalent;
(viii) There is not now, nor to the knowledge of the
Company has there been in the past, on or in any property of the Company
or its Subsidiaries any of the following: (A) any underground storage
tanks or surface impoundments, (B) any asbestos-containing materials, or
(C) any polychlorinated biphenyls;
(ix) No judicial or administrative proceedings are
pending or, to the knowledge of the Company, threatened against the
Company and its Subsidiaries alleging the violation of or seeking to
impose liability pursuant to any Environmental Law and there are no
investigations pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries under Environmental Laws;
and
(x) None of the exceptions set forth on Schedule 4.1(p)
are reasonably likely to result in the Company and its Subsidiaries
incurring Environmental Costs and Liabilities in excess of $100,000
individually or in the aggregate.
(q) Real Property.
(i) Schedule 4.1(q)(i) sets forth all of the real
property owned in fee by the Company and its Subsidiaries. Each of the
Company and its Subsidiaries has good and marketable title to each
parcel of real property owned by it free and clear of all mortgages,
pledges, liens, encumbrances and security interests, except (1) those
reflected or reserved against in the balance sheet of the Company dated
as of June 30, 1996 and (2) taxes and general and special assessments
not in default and payable without penalty and interest.
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<PAGE> 34
(ii) Each lease, sublease or other agreement
(collectively, the "Real Property Leases") under which the Company or
any of its Subsidiaries uses or occupies or has the right to use or
occupy, now or in the future, any real property is valid, binding and in
full force and effect, all rent and other sums and charges payable by
the Company and its Subsidiaries as tenants thereunder are current, no
termination event or condition or uncured default of a material nature
on the part of the Company or any such Subsidiary or, to the Company's
knowledge, the landlord, exists under any Real Property Lease. Each of
the Company and its Subsidiaries has a good and valid leasehold interest
in each parcel of real property leased by it free and clear of all
mortgages, pledges, liens, encumbrances and security interests, except
(i) those reflected or reserved against in the balance sheet of the
Company dated as of June 30, 1996 and (ii) taxes and general and special
assessments not in default and payable without penalty and interest.
(r) Board Recommendation. The Board of Directors of the
Company, at a meeting duly called and held, has by the vote of those directors
present (who constituted 100% of the directors then in office) (i) determined
that this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, and the execution and delivery of the Stockholders
Agreement and the transactions contemplated thereby, taken together, are fair
to and in the best interests of the stockholders of the Company and has
approved the same, and (ii) resolved to recommend that the holders of the
shares of Company Common Stock approve this Agreement and the transactions
contemplated herein, including the Merger, and accept the Offer and tender
their shares of Company Common Stock pursuant thereto.
(s) Material Contracts. Each contract, agreement or other
document or instrument to which the Company or any of its Subsidiaries is a
party that was required to be filed as an exhibit to the Company's annual
report on Form 10-K for the year ended September 30, 1995 was so filed and,
from and after September 30, 1995, neither the Company nor any of its
Subsidiaries has entered into any contract, agreement or other document or
instrument (other than this Agreement) that is required to be filed with the
SEC that has not been so filed on or before the date of this Agreement or any
amendment, modification or waiver under any contract, agreement or other
document or instrument that was previously so filed, which amendment,
modification or waiver is required to be so filed. Neither the Company nor any
of its Subsidiaries is a party to an employment agreement.
(t) Related Party Transactions. No director, officer,
"affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the
Exchange Act) of the Company or any of its Subsidiaries (i) has borrowed any
monies from or has outstanding
29
<PAGE> 35
any indebtedness or other similar obligations to the Company or any of its
Subsidiaries; (ii) owns any direct or indirect interest of any kind in, or is a
director, officer, employee, partner, affiliate or associate of, or consultant
or lender to, or borrower from, or has the right to participate in the
management, operations or profits of, any person or entity which is (1) a
competitor, supplier, customer, distributor, lessor, tenant, creditor or debtor
of the Company or any of its Subsidiaries, (2) engaged in a business related to
the business of the Company or any of its Subsidiaries or (3) participating in
any transaction to which the Company or any of its Subsidiaries is a party or
(iii) is otherwise a party to any contract, arrangement or understanding with
the Company or any of its Subsidiaries.
(u) Indebtedness. Except as set forth in the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996,
neither the Company nor any of its Subsidiaries has any outstanding
indebtedness for borrowed money or representing the deferred purchase price of
property or services or similar liabilities or obligations, including any
guarantee in respect thereof ("Indebtedness"), or is a party to any agreement,
arrangement or understanding providing for the creation, incurrence or
assumption thereof.
(v) Liens. Except as set forth on Schedule 4.1(v), neither
the Company nor any of its Subsidiaries has granted, created or suffered to
exist with respect to any of its assets, any mortgage, pledge, charge,
hypothecation, collateral assignment, lien (statutory or otherwise),
encumbrance or security agreement of any kind or nature whatsoever.
4.2 Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation or organization, has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good standing to conduct
business in each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect with respect to Parent. Parent and
Sub have heretofore made available to the Company complete and correct copies
of their respective Certificates of Incorporation and Bylaws.
(b) Authority; No Violations; Consents and Approvals.
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(i) Each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of Parent and Sub. This Agreement has been duly executed and delivered
by each of Parent and Sub and assuming this Agreement constitutes the
valid and binding agreement of the Company, constitutes a valid and
binding obligation of Parent and Sub enforceable in accordance with its
terms except that the enforcement hereof may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at
law or in equity).
(ii) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by each of
Parent and Sub will not result in any Violation (as defined in Section
4.1(c)(ii)) pursuant to any provision of the respective Articles or
Certificates of Incorporation or Bylaws of Parent or Sub or, except as
to which requisite waivers or consents have been obtained and assuming
the consents, approvals, authorizations or permits and filings or
notifications referred to in paragraph (iii) of this Section 4.2(b) are
duly and timely obtained or made and, if required, the Company
Stockholder Approval has been obtained, result in any Violation of any
loan or credit agreement, note, mortgage, indenture, lease, or other
agreement, obligation, instrument, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Sub or their respective properties or assets,
which would have a Material Adverse Effect with respect to Parent.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, notice to, or permit from any
Governmental Entity, is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by each of
Parent and Sub or the consummation by each of Parent or Sub of the
transactions contemplated hereby, except for: (A) filings under the HSR
Act; (B) the filing with the SEC of (x) the Schedule 14D-1 in connection
with the commencement and consummation of the Offer and (y) such reports
under and such other compliance with the Exchange Act and the rules and
regulations thereunder, as may be required in connection with this
Agreement and the transactions contemplated hereby; (C) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware; (D) such
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filings and approvals as may be required by any applicable state
securities, "blue sky" or takeover laws; (E) such filings and approvals
as may be required by any foreign pre-merger notification, securities,
corporate or other law, rule or regulation; (F) such filings in
connection with any Gains and Transfer Taxes; and (G) such other such
filings and consents as may be required under any environmental, health
or safety law or regulation pertaining to any notification, disclosure
or required approval necessitated by the Merger or the transactions
contemplated by this Agreement.
(c) Information Supplied. None of the information supplied or
to be supplied by Parent or Sub for inclusion or incorporation by reference in
(i) the Schedule 14D-9 will, at the time the Schedule 14D-9 is filed with the
SEC, and at any time it is amended or supplemented, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and (ii) the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the time of the Company Stockholders Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior
to the Effective Time any event with respect to Parent or Sub, or with respect
to information supplied by Parent or Sub for inclusion in the Schedule 14D-9 or
the Proxy Statement, shall occur which is required to be described in an
amendment of, or a supplement to, such documents, such event shall be so
described to the Company.
(d) Board Recommendation. The Board of Directors of the
Parent, at a meeting duly called and held, has by the vote of those directors
present determined that each of the Offer and the Merger is fair to and in the
best interests of Parent and has approved the same.
(e) Financing. Parent and Sub have delivered to the Company
true and complete copies of commitments obtained by Parent and Sub from
financially responsible third parties in respect of the debt and equity
financing for the transactions contemplated hereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the date
of this Agreement and continuing until the Effective Time, the Company agrees
as to the Company and its Subsidiaries that (except as expressly contemplated
or permitted by this
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Agreement, or to the extent that Parent shall otherwise consent in writing):
(a) Ordinary Course. The Company and its Subsidiaries shall
carry on its businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and shall use all
reasonable efforts to preserve intact its present business organizations, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that its goodwill and ongoing business shall not be impaired
in any material respect at the Effective Time.
(b) Dividends; Changes in Stock. The Company shall not, nor
shall it permit any of its Subsidiaries to: (i) declare or pay any dividends
on or make other distributions in respect of any of its capital stock; (ii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; or (iii) repurchase or otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, any shares
of its capital stock, except as required by the terms of its securities
outstanding on the date hereof, as contemplated by this Agreement or as
contemplated by employee benefit and dividend reinvestment plans as in effect
on the date hereof.
(c) Issuance of Securities. The Company shall not, nor shall
it permit any of its Subsidiaries to, (i) grant any options, warrants or
rights, to purchase shares of Company Common Stock, (ii) amend or reprice any
Option or Stock Option Plan, (iii) amend the 1990 ESPP, permit any person not a
participant in the 1990 ESPP on the date of this Agreement to become a
participant in the 1990 ESPP, or permit any participant in the 1990 ESPP to
increase such participant's current payroll deductions with respect to the 1990
ESPP, or (iv) issue, deliver or sell, or authorize or propose to issue, deliver
or sell, any shares of its capital stock of any class or series, any Company
Voting Debt or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, Company Voting Debt or convertible
securities, other than: (A) the issuance of Shares upon the exercise of
Options granted under Stock Option Plans which are outstanding on the date
hereof, or in satisfaction of stock grants or stock based awards made prior to
the date hereof pursuant to Stock Option Plans or based upon any individual
agreements such as employment agreements or executive termination agreements
(in each such case, as in effect on the date hereof), or the issuance of
Options to purchase up to 75,000 Shares in connection with an offer of
employment outstanding on the date of this Agreement; and (B) issuances by a
wholly-owned Subsidiary of its capital stock to its parent.
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(d) Governing Documents. The Company shall not amend or
propose to amend its Certificate of Incorporation or Bylaws.
(e) No Solicitation. From and after the date hereof until the
termination of this Agreement, neither the Company or any of its Subsidiaries,
nor any of their respective officers, directors, employees, representatives,
agents or affiliates (including, without limitation, any investment banker,
attorney or accountant retained by the Company or any of its Subsidiaries)
(such officers, directors, employees, representatives, agents, affiliates,
investment bankers, attorneys and accountants being referred to herein,
collectively, as "Representatives"), will, directly or indirectly, initiate,
solicit or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal (as defined below), or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal, and neither the Company nor any of its Subsidiaries will
authorize or permit any of its Representatives to take any such action, and the
Company shall notify Parent orally (within one business day) and in writing (as
promptly as practicable) of all of the relevant details relating to, and all
material aspects of, all inquiries and proposals which it or any of its
Subsidiaries or any of their respective Representatives may receive relating to
any of such matters and, if such inquiry or proposal is in writing, the Company
shall deliver to Parent a copy of such inquiry or proposal promptly; provided,
however, that nothing contained in this Section 5.1(e) shall prohibit the Board
of Directors of the Company from:
(i) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited written, bona fide Acquisition Proposal and in respect of
which such person or entity has the necessary funds or commitments
therefor if, and only to the extent that, (A) the Board of Directors of
the Company, after consultation with and based upon the advice of
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel), determines in good faith that such action is
necessary for the Board of Directors of the Company to comply with its
fiduciary duties to stockholders under applicable law, (B) prior to
taking such action, the Company (x) provides reasonable prior notice to
Parent to the effect that it is taking such action and (y) receives from
such person or entity an executed confidentiality agreement in
reasonably customary form, and (C) the Company shall promptly and
continuously advise Parent as to all of the relevant details relating
to, and all material aspects, of any such discussions or negotiations,
or
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(ii) failing to make or withdrawing or modifying its
recommendation referred to in Section 4.1 if there exists an Acquisition
Proposal and the Board of Directors of the Company, after consultation
with and based upon the advice of independent legal counsel (who may be
the Company's regularly engaged independent counsel), determines in good
faith that such action is necessary for the Board of Directors of the
Company to comply with its fiduciary duties to stockholders under
applicable law.
For purposes of this Agreement, "Acquisition Proposal" shall mean any of the
following (other than the transactions between the Company, Parent and Sub
contemplated hereunder) involving the Company or any of its Subsidiaries: (i)
any merger, consolidation, share exchange, recapitalization, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 15% or more of the assets
(other than real property) of the Company and its Subsidiaries, taken as a
whole, in a single transaction or series of transactions; (iii) any tender
offer or exchange offer for 15% or more of the outstanding shares of capital
stock of the Company or the filing of a registration statement under the
Securities Act in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
(f) No Acquisitions. The Company shall not, nor shall it
permit any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof.
(g) No Dispositions. Other than: (i) dispositions of real
property or (ii) dispositions in the ordinary course of business consistent
with past practice which are not material, individually or in the aggregate, to
such party and its Subsidiaries taken as a whole, the Company shall not, nor
shall it permit any of its Subsidiaries to, sell, lease, encumber or otherwise
dispose of, or agree to sell, lease (whether such lease is an operating or
capital lease), encumber or otherwise dispose of, any of its assets.
(h) SEC Filings. The Company shall promptly provide Parent
(or its counsel) with copies of all filings made by the Company with the SEC or
any other state or federal Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
(i) No Dissolution, Etc. Except as otherwise permitted or
contemplated by this Agreement, the Company shall not authorize, recommend,
propose or announce an intention to
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adopt a plan of complete or partial liquidation or dissolution of the Company
or any of its Subsidiaries.
(j) Other Actions. Except as contemplated by this Agreement,
the Company will not nor will it permit any of its Subsidiaries to take or
agree or commit to take any action that is reasonably likely to result in any
of the Company's representations or warranties hereunder being untrue in any
material respect or in any of the Company's covenants hereunder or any of the
conditions to the Merger not being satisfied in all material respects.
(k) Certain Employee Matters. The Company and its
Subsidiaries shall not (without the prior written consent of Parent): (i)
grant any increases in the compensation of any of its directors, officers or
key employees, other than in the ordinary course of business and consistent
with past practice; (ii) pay or agree to pay any pension, retirement allowance
or other employee benefit not required or contemplated by any of the existing
Company Benefit Plans or Company Pension Plans as in effect on the date hereof
to any such director, officer or key employee, whether past or present; (iii)
enter into any new, or materially amend any existing, employment or severance
or termination agreement with any such director, officer or key employee; or
(iv) except as may be required to comply with applicable law, become obligated
under any new Company Employee Benefit Plan or Company Pension Plan, which was
not in existence on the date hereof, or amend any such plan or arrangement in
existence on the date hereof if such amendment would have the effect of
materially enhancing any benefits thereunder. The foregoing shall not prohibit
the Company from lending funds to its respective employees that hold Options to
fund all or a portion of the exercise price under the Options held by such
employees in order that such employees may tender the Shares issuable upon the
exercise of such Options in the Offer. Each such loan shall be limited to an
amount no greater than the aggregate exercise price under such employee's
Options, shall bear interest at the prime rate announced from time to time by
Chase Manhattan Bank, and shall be due and payable upon the consummation of the
Offer.
(l) Indebtedness; Agreements.
(i) Except as set forth on Schedule 5.1(l)(i), the
Company shall not, nor shall the Company permit any of its Subsidiaries
to, assume or incur (which shall not be deemed to include entering into
credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements) any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire any debt securities of
such party or any of its Subsidiaries or guarantee any debt securities
of others or enter into any
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lease (whether such lease is an operating or capital lease) or create
any mortgages, liens, security interests or other encumbrances on the
property of the Company or any of its Subsidiaries in connection with
any indebtedness thereof, or enter into any "keep well" or other
agreement or arrangement to maintain the financial condition of another
person.
(ii) The Company shall not, nor shall the Company permit
any of its Subsidiaries to, enter into any contract, agreement or other
document or instrument that would be required to be filed as an exhibit
to an annual report on Form 10-K for the Company and the Company shall
not, nor shall the Company permit any of its Subsidiaries to, enter into
any amendment, modification or waiver under any contract, agreement or
other document or instrument that was previously filed with the SEC,
which amendment, modification or waiver would be required to be so
filed. The Company shall not, nor shall the Company permit any of its
Subsidiaries to, enter into any employment agreement.
(m) Accounting. The Company shall not take any action, other
than in the ordinary course of business, consistent with past practice or as
required by the SEC or by law, with respect to accounting policies, procedures
and practices.
(n) Capital Expenditures; Product Development Costs. The
Company and its Subsidiaries shall not incur any capital expenditures in excess
of $2,000,000. The Company and its Subsidiaries shall not incur any product or
software development costs in excess of $4,000,000 in the aggregate.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of the Proxy Statement; Company Stockholders
Meeting; Merger without a Company Stockholders Meeting.
(a) As soon as practicable following the date hereof, the
Company and Parent shall prepare and file with the SEC the Proxy Statement.
The Company shall use its best efforts to respond to all SEC comments with
respect to the Proxy Statement and to cause the Proxy Statement to be mailed to
the Company's stockholders at the earliest practicable date.
(b) The Company will, as soon as practicable following the
acceptance for payment of and payment for shares of Company Common Stock by Sub
in the Offer, duly call, give notice of, convene and hold the Company
Stockholders Meeting for the purpose of approving this Agreement and the
transactions contemplated hereby. At the Company Stockholders Meeting, Parent
shall cause all of the shares of Company Common Stock then owned by Parent
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and Sub and any of their Subsidiaries or affiliates to be voted in favor of the
Merger.
(c) Notwithstanding the foregoing clauses (a) and (b), in the
event that Parent or any Subsidiary of Parent shall acquire at least 90% of the
outstanding shares of Company Common Stock in the Offer, the parties hereto
agree, at the request of Sub, to take all necessary and appropriate action to
cause the Merger to become effective, as soon as practicable after the
expiration of the Offer, without a meeting of stockholders of the Company, in
accordance with Section 253 of the DGCL.
(d) Sub shall promptly submit this Agreement and the
transactions contemplated hereby for approval and adoption by its stockholders
by written consent of such stockholders.
6.2 Access to Information. Upon reasonable notice, each of
the Company or Parent, as the case may be, shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other party (including, in the case of Parent and
Sub, potential financing sources and their employees, accountants, counsel and
other representatives), access, during normal business hours during the period
prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, such party shall (and shall
cause each of its Subsidiaries to) furnish promptly to the other party, (a) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to SEC requirements and (b) all
other information concerning its business, properties and personnel as such
other party may reasonably request. The Confidentiality Agreement, dated as of
October 8, 1996, between Parent and the Company (the "Confidentiality
Agreement") shall apply with respect to information furnished thereunder or
hereunder and any other activities contemplated thereby.
6.3 Settlements. Neither the Company nor any of its
Subsidiaries shall effect any settlements of any legal proceedings arising out
of or related to the execution, delivery or performance of this Agreement or
the Stockholders Agreement or the consummation of any of the transactions
contemplated hereby or thereby without the consent of Parent.
6.4 Fees and Expenses. (a) Except as otherwise provided in
this Section 6.4 and except with respect to claims for damages incurred as a
result of the breach of this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense.
(b) The Company agrees to pay Parent a fee in immediately
available funds equal to $4,000,000 upon the
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termination of this Agreement under Section 8.1, if any of the events set forth
below occurs (each, a "Trigger Event"):
(i) the Board of Directors of the Company shall have withdrawn
or adversely modified, or taken a public position materially
inconsistent with, its approval or recommendation of the Offer, the
Merger, this Agreement or the Stockholders Agreement; or
(ii) an Acquisition Proposal has been recommended or accepted
by the Company or the Company shall have entered into an agreement
(other than a confidentiality agreement as contemplated by Section
5.1(e)) with respect to an Acquisition Proposal.
(c) In the event (i) this Agreement shall be terminated in
accordance with its terms, (ii) at or prior to such termination, any person or
group of persons shall have made an Acquisition Proposal (each such person or
member of a group of such persons being referred to herein as a "Designated
Person"), and (iii) either (A) a transaction contemplated by the term
"Acquisition Proposal" shall be consummated, on or before the 90th day
following the termination of this Agreement, with any Designated Person or any
affiliate of any Designated Person or (B) the Company or any of its
Subsidiaries shall enter into an agreement, on or before the 90th day following
the termination of this Agreement, with respect to an Acquisition Proposal with
any Designated Person or any affiliate of any Designated Person and a
transaction contemplated by the term "Acquisition Proposal" shall thereafter be
consummated with such Designated Person or affiliate thereof, then the Company
shall pay to Parent a fee in immediately available funds equal to $4,000,000,
such fee to be paid contemporaneously with the consummation of the contemplated
transaction.
(d) Any amounts due under this Section 6.4 that are not paid
when due shall bear interest at the rate of 9% per annum from the date due
through and including the date paid.
6.5 Brokers or Finders. (a) The Company represents, as to
itself, its Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finders fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except Hambrecht &
Quist LLP, whose fees and expenses will be paid by the Company in accordance
with the Company's agreements with such firm (copies of which have been
delivered by the Company to Parent prior to the date of this Agreement).
(b) Parent represents, as to itself, its Subsidiaries and its
affiliates, that no agent, broker, investment banker, financial advisor or
other firm or person is or will be entitled
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to any broker's or finders fee or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement, except
for affiliates of Parent.
6.6 Indemnification; Directors' and Officers' Insurance.
(a) The Company shall, and from and after the Effective Time, the Surviving
Corporation shall, indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer or director of the Company or any of its
Subsidiaries (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorneys' fees and expenses), liabilities or
judgments or amounts that are paid in settlement with the approval of the
indemnifying party (which approval shall not be unreasonably withheld) of or in
connection with any threatened or actual claim, 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 a director or officer of the Company or
any of its Subsidiaries whether pertaining to any matter existing or occurring
at or prior to the Effective Time and whether asserted or claimed prior to, or
at or after, the Effective Time ("Indemnified Liabilities"), including 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 full extent a corporation is permitted under the
DGCL to indemnify its own directors or officers as the case may be (and Parent
and the Surviving Corporation, as the case may be, will pay expenses in advance
of the final disposition of any such action or proceeding to each Indemnified
Party to the full extent permitted by law). Without limiting the foregoing, in
the event any such claim, action, suit, proceeding or investigation is brought
against any Indemnified Parties (whether arising before or after the Effective
Time), (i) the Indemnified Parties may retain counsel satisfactory to them and
the Company (or them and the Surviving Corporation after the Effective Time)
and the Company (or after the Effective Time, the Surviving Corporation) shall
pay all fees and expenses of such counsel for the Indemnified Parties promptly
as statements therefor are received; and (ii) the Company (or after the
Effective Time, the Surviving Corporation) will use all reasonable efforts to
assist in the vigorous defense of any such matter, provided that neither the
Company nor the Surviving Corporation shall be liable for any settlement
effected without its prior written consent which consent shall not unreasonably
be withheld. Any Indemnified Party wishing to claim indemnification under this
Section 6.6, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify the Company (or after the Effective Time, the
Surviving Corporation) (but the failure so to notify shall not relieve a party
from any liability which it may have under this Section 6.6 except to the
extent such failure prejudices such party), and shall deliver to the Company
(or after the Effective Time, the Surviving Corporation) the
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undertaking contemplated by Section 145(e) of the DGCL. The Indemnified
Parties as a group may retain only one law firm to represent them with respect
to each such matter unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two
or more Indemnified Parties. The Company and Sub agree that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the Indemnified Parties
with respect to matters occurring through the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Indemnified Liabilities asserted or made
within such period shall continue until the disposition of such Indemnified
Liabilities.
(b) For a period of three years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by the
Company and its Subsidiaries (provided that Parent may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous in any material respect to the
Indemnified Parties) with respect to matters arising before the Effective Time,
provided that Parent shall not be required to pay an annual premium for such
insurance in excess of 175% of the last annual premium paid by the Company
prior to the date hereof, but in such case shall purchase as much coverage as
possible for such amount. The last annual premium paid by the Company was
$169,100.
(c) The provisions of this Section 6.6 shall be in addition
to, and shall not limit, the indemnification agreements entered into between an
indemnified party and the Company prior to the date hereof, all of which
agreements are identified on Schedule 6.6 hereof and true and correct copies of
which have previously been delivered to Parent. The provisions of this Section
6.6 are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party, his heirs and his personal representatives and shall be
binding on all successors and assigns of Sub, the Company and the Surviving
Corporation.
6.7 Best Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Stockholders Agreement, subject, as applicable, to the Company
Stockholder Approval, including cooperating fully with the other party,
including by provision of information and making of all necessary filings in
connection with, among other things, approvals under the HSR Act. In case at
any time after the
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Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
either of the Constituent Corporations, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
6.8 Conduct of Business of Sub. During the period of time
from the date of this Agreement to the Effective Time, Sub shall not engage in
any activities of any nature except as provided in or contemplated by this
Agreement.
6.9 Publicity. The parties will consult with each other and
will mutually agree upon any press release or public announcement pertaining to
the Offer and the Merger and shall not issue any such press release or make any
such public announcement prior to such consultation and agreement, except as
may be required by applicable law or by obligations arising under the Company's
listing agreement with Nasdaq, in which case the party proposing to issue such
press release or make such public announcement shall use reasonable efforts to
consult in good faith with the other party before issuing any such press
release or making any such public announcement.
6.10 Spin-Off of Certain Real Estate. Immediately prior to the
acceptance of Shares in the Offer, the Company shall declare a dividend,
payable to then record holders of Shares, consisting of ownership interests in
an entity ("Spinco") that will own, directly or indirectly, the assets
specified on Schedule 6.10(a) hereto (the "Designated Assets"), the payment of
such dividend to be contingent upon the consummation of the Offer and subject
to compliance with all applicable laws. The form of entity that will be used
for Spinco, all transactions related to such dividend (including, without
limitation, any intercompany transfers) and all documents, agreements and
instruments related to such dividend and related transactions (including,
without limitation, any agreements between Spinco and the Company or any of its
Subsidiaries providing for the allocation of expenses or liabilities and
indemnification) (the "Spin-Off Documents"), shall be in form and substance
reasonably acceptable to Parent and the Company. Notwithstanding the
foregoing, it is agreed that (i) all indebtedness of the Company or any of its
Subsidiaries (other than the Company's Revolving Credit Loan Agreement with
Comerica Bank-California) secured, in whole or in part, by any of the
Designated Assets shall be assumed by Spinco and shall be paid, when due, by
Spinco and the Company shall be released from any liability with respect
thereto, (ii) all costs and expenses solely attributable to the transactions
related to such dividend (including, without limitation, any necessary and
reasonable fees and expenses of counsel, accountants and advisors and any
filing fees), whether before or after the consummation of the Offer, shall be
paid by Spinco when such amounts are due, (iii) Spinco shall indemnify and hold
the Company and its
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<PAGE> 48
Subsidiaries harmless from and against any loss, cost, damage or expense
(including, without limitation, the reasonable fees and expenses of counsel)
arising out of or related to any failure of Spinco to discharge the obligations
specified in clause (i) or clause (ii), (iv) Spinco shall indemnify and hold
Parent, the Company and its Subsidiaries harmless from and against any Taxes
(and any fees, costs and expenses with respect to such Taxes or any dispute
thereof) attributable to, arising out of or relating to (a) Spinco, (b) the
formation of Spinco, (c) the transfer of the Designated Assets to Spinco by the
Company or any of its Subsidiaries, (d) the assumption or refinancing of any
liabilities with respect to the Designated Assets, (e) the sale, exchange,
distribution, dividend or other distribution of any assets by Spinco, (f) the
sale, exchange, distribution, dividend or other disposition of interests in
Spinco by the Company or any of its Subsidiaries, and (g) any steps which are
attendant to or necessary in connection with any of the foregoing transactions,
which indemnification obligations shall survive until sixty days after the
expiration of the applicable statute of limitations with respect to the
assessment of Taxes relating to the foregoing transactions, and which
indemnification obligations shall be due and payable at such times as Taxes
(including estimated Taxes) become due and payable (plus interest from the date
of unreimbursed payment by the Company at a rate of 9% per annum) (with the
filing of Tax Returns and calculation of the "Estimated Tax Amount" being based
upon an appraisal of the Designated Assets by an independent appraiser mutually
acceptable to Parent and the Company and a certification of the adjusted bases
of the Designated Assets provided by Price Waterhouse & Co. or such other "big
six" accounting firm as may be agreed to by Parent and the Company, the costs
of which appraisal and certification will be paid by Spinco) and at such time
as there is a final determination of a deficiency with respect to such reported
Taxes (plus interest from the date of unreimbursed payment by the Company at a
rate of 9% per annum), (v) with respect to the Taxes identified in the
immediately preceding clause (iv), the Company will not agree, without Spinco's
consent, to any extension of the applicable statute of limitations, which
consent will not be unreasonably withheld, and such consent will not be
required if the failure to agree to such extension may reasonably be expected
to result in the proposed assessment of a deficiency for material Taxes
unrelated to Spinco or in liability for indemnified Taxes which exceeds
Spinco's cash, notes receivable from real property sales and cash equivalent
assets at such time, and (vi) any indemnification under this Section 6.10 shall
be made on an after-tax basis and shall be adjusted to take into account any
Tax benefits and Tax detriments attributable to the indemnified loss and to the
receipt or accrual of an indemnification payment hereunder (including any
additional payments pursuant to this clause (vi)). The Company will use its
best efforts to facilitate the dividend and shall seek all consents necessary
(including, without limitation, the consent of the Company's lenders) to
consummate the dividend and related transactions.
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It is understood and agreed that prior to payment of the
dividend, the current lease agreement with respect to the home office building
will be amended to provide for (1) continuation of the current rent for two
years; (2) adjustment of the rental for the succeeding three years at the
current market rental rate at the beginning of such succeeding three years; and
(3) adjustment of the term of the lease to five years with a five year option
to renew at a rental equal to the current market rental rate at the beginning
of such renewal term. It is understood and agreed that the "current market
rental rate" shall be determined by the Company and Spinco, each selecting an
appraiser to make such determination, and that if such appraisers cannot agree,
then they shall select a third appraiser whose determination shall be final and
binding on all parties. Each party shall bear the cost of its appraiser and
the cost of the third appraiser, if necessary, shall be split evenly between
the parties. Finally, under no circumstances shall the rental rate referred to
in (2) above be less than the rental rate in effect prior to such adjustment or
more than 1.2 multiplied by the rental rate in effect prior to such adjustment.
In addition, the lease agreement shall be amended to provide that the Company
may sublease the property with the consent of the landlord, which consent will
not be unreasonably withheld, and that in the event the Company shall sublease
the property and shall receive in rent thereunder an amount in excess of the
rent payable under the lease, such excess shall be paid to the landlord.
In order to facilitate the orderly management of Spinco,
following payment of the dividend for a period of one year Company will provide
(at no cost to Spinco) at least two cubicles of office space, telephone and
secretarial support to two employees of Spinco and will give such Spinco
employees reasonable access to such other office equipment as is reasonable and
necessary. Furthermore, at the time of payment of the dividend, Spinco shall
have at least $100,000 in cash or cash equivalent assets available to it (any
such amounts that do not represent proceeds from the sale of Designated Assets
shall be subject to repayment by Spinco). All funds received in respect of
sales of Designated Assets from the date hereof through the date of the payment
of the dividend shall be credited to the account of Spinco, but shall be
available to satisfy the obligations of Spinco to Company hereunder.
Company shall not be required to pay the dividend until such time
as Spinco has either (i) paid all amounts owed by it to Company with respect to
the Estimated Tax Amount, third party costs related to the dividend or related
transactions or similar matters for which Spinco has agreed to pay or for which
there are existing indemnity claims which it has agreed to indemnify the
Company or (ii) have made adequate and commercially reasonable provision for
the prompt payment of any such amounts from time to time in the future as such
amounts are paid or become due and payable by the Company. The parties
understand and agree that
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terms and provisions with respect to the dividend and related transactions, in
addition to those set forth herein, will be necessary and appropriate in
connection with the transactions contemplated by this Section 6.10. Such
additional terms and provisions, when negotiated by the parties, shall,
together with the provisions of this Section 6.10, be set forth in customary
documentation with respect to spin-off transactions, all of which shall be
finalized by the parties prior to the closing of the Offer.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote of the holders of a
majority of the Shares entitled to vote thereon if such vote is required by
applicable law; provided that the Parent and Sub shall vote all Shares
purchased pursuant to the Offer or the Stockholders Agreement in favor of the
Merger.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect;
provided, however, that prior to invoking this condition, each party shall use
all commercially reasonable efforts to have any such decree, ruling, injunction
or order vacated.
(d) Statutes; Consents. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any government or
governmental agency or authority which prohibits the consummation of the
Merger.
(e) Payment for Shares. Sub shall have accepted for payment
and paid for the shares of Company Common Stock tendered in the Offer such
that, after such acceptance and payment, Parent and its affiliates shall own,
at consummation of the Offer, a majority of the outstanding shares of the
Company Common Stock; provided that this condition shall be deemed to have been
satisfied if Sub fails to accept for payment and pay for Shares pursuant to the
Offer in violation of the terms and conditions of the Offer.
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 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 of the matters presented in connection with the Merger by the
stockholders of the Company or Parent:
(a) by mutual written consent of the Company and Parent, or by
mutual action of their respective Boards of Directors;
(b) by either the Company or Parent (i) prior to the
consummation of the Offer if there has been a breach of any representation,
warranty, covenant or agreement on the part of the other set forth in this
Agreement which breach has not been cured within three business days following
receipt by the breaching party of notice of such breach, or (ii) if any
permanent injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have become final and
non-appealable;
(c) by either the Company or Parent, so long as such party has
not breached its obligations hereunder, if the Merger shall not have been
consummated on or before February 18, 1997; provided, that the right to
terminate this Agreement under this Section 8.1(c) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Merger to occur on or before
such date;
(d) by Parent or Company in the event that a Trigger Event has
occurred under Section 6.4(b);
(e) by Parent in the event an Acquisition Proposal has been
made to the Company and the Company shall fail to reaffirm its approval or
recommendation of the Offer, the Merger, this Agreement and the Stockholders
Agreement on or before the fifth business day following the date on which such
Acquisition Proposal shall have been made;
(f) by Parent, if the Offer terminates, is withdrawn,
abandoned or expires by reason of the failure to satisfy any condition set
forth in Exhibit A hereto; or
(g) by the Company, if the Offer shall have expired or have
been withdrawn, abandoned or terminated without any shares of Company Common
Stock being purchased by Sub thereunder on or prior to the 90th day after the
date of commencement of the Offer pursuant to Section 1.2 hereof.
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<PAGE> 52
8.2 Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
affiliates, officers, directors or shareholders except (i) with respect to this
Section 8.2, the second sentence of Section 6.2, and Section 6.4, and (ii) to
the extent that such termination results from the material breach by a party
hereto of any of its representations or warranties, or of any of its covenants
or agreements, in each case, as set forth in this Agreement except as provided
in Section 9.7.
8.3 Amendment. Subject to applicable law, this Agreement may
be amended, modified or supplemented only by written agreement of Parent, Sub
and the Company at any time prior to the Effective Date with respect to any of
the terms contained herein; provided, however, that, after this Agreement is
approved by the Company's stockholders, no such amendment or modification shall
reduce the amount or change the form of consideration to be delivered to the
stockholders of the Company.
8.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed: (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto; and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument 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 IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Article III, and Section 6.6
hereof. The Confidentiality Agreement shall survive the execution and delivery
of this Agreement, and the provisions of the Confidentiality Agreement shall
apply to all information and material delivered by any party hereunder.
9.2 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or
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registered mail, postage prepaid, and shall be deemed to be given, dated and
received when so delivered personally, telegraphed or telecopied or, if mailed,
five business days after the date of mailing to the following address or
telecopy number, or to such other address or addresses as such person may
subsequently designate by notice given hereunder:
(a) if to Parent or Sub, to:
Cooperative Computing, Inc. or
CCI Acquisition Corp.
6207 Bee Cave Road
Austin, Texas 78746-5146
Attn: Glenn Staats
Telephone: (512) 328-2300
Telecopy: (512) 329-6461
with a copy to:
Weil, Gotshal & Manges
100 Crescent Court
Suite 1300
Dallas, Texas 75201-6950
Attn: Thomas A. Roberts
Telephone: (214) 746-7748
Telecopy: (214) 746-7777
and
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201-6950
Attn: Lawrence D. Stuart, Jr.
Telephone: (214) 740-7365
Telecopy: (214) 740-7313
(b) if to the Company, to:
Triad Systems Corporation
3055 Triad Drive
Livermore, California 94550
Attn: James Porter
Telephone: (510) 449-0606
Telecopy: (510) 455-6917
with copies to:
McCutchen, Doyle, Brown & Enersen, LLP
55 South Market Street
Suite 1500
San Jose, California 95113-2373
Attn: Daniel Cooperman
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<PAGE> 54
Telephone: (408) 947-8400
Telecopy: (408) 947-4750
9.3 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents, glossary of defined terms
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the word "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available.
9.4 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
9.5 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (together with the Confidentiality Agreement, the
Stockholders Agreement and any other documents and instruments referred to
herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter hereto and, except as provided in Section 6.6, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
9.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
9.7 No Remedy in Certain Circumstances. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take an action consistent
herewith or required hereby, the validity, legality and enforceability of the
remaining provisions and obligations contained or set forth herein shall not in
any way be affected or impaired thereby, unless the foregoing inconsistent
action or the failure to take an action constitutes a material breach of this
Agreement or makes the Agreement impossible to perform in which case this
Agreement shall terminate pursuant to Article VIII hereof. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an
action inconsistent
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<PAGE> 55
herewith or failed to take action consistent herewith or required hereby
pursuant to an order or judgment of a court or other competent authority, such
party shall incur no liability or obligation unless such party did not in good
faith seek to resist or object to the imposition or entering of such order or
judgment.
9.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
any newly-formed direct wholly-owned Subsidiary of Parent. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
COOPERATIVE COMPUTING, INC.
By: /s/ GLENN E. STAATS
--------------------------------
Name: Glenn E. Staats
------------------------------
Title: President
-----------------------------
CCI ACQUISITION CORP.
By: /s/ PATRICK K. MCGEE
--------------------------------
Name: Patrick K. McGee
------------------------------
Title: Vice President
-----------------------------
TRIAD SYSTEMS CORPORATION
By: /s/ JAMES R. PORTER
--------------------------------
Name: James R. Porter
------------------------------
Title: President and Chief
-----------------------------
Executive Officer
-----------------------------
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EXHIBIT A
The capitalized terms used in this Exhibit A shall have the
respective meanings given to such terms in the Agreement and Plan of Merger,
dated as of October 17, 1996, among Cooperative Computing, Inc. ("Parent"), CCI
Acquisition Corp. ("Sub") and Triad Systems Corporation ("Company") (the
"Merger Agreement") to which this Exhibit A is attached.
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Sub shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares promptly
after expiration or termination of the Offer), to pay for any Shares tendered,
and may postpone the acceptance for payment or, subject to the restriction
referred to above, payment for any Shares tendered, and may amend or terminate
the Offer (whether or not any Shares have theretofore been purchased or paid
for), if (i) there have not been validly tendered and not withdrawn prior to
the time the Offer shall otherwise expire a number of Shares which constitutes
51% of the Shares outstanding on a fully-diluted basis on the date of purchase
("on a fully-diluted basis" having the following meaning, as of any date: the
number of Shares outstanding, together with Shares the Company may be required
to issue pursuant to obligations outstanding at that date under employee stock
option or other benefit plans, or otherwise); (ii) any applicable waiting
periods under the HSR Act shall not have expired or been terminated prior to
the expiration of the Offer; (iii) the debt financing sources for Sub shall not
have provided the applicable debt financing to Sub pursuant to the financing
commitment with respect thereto previously delivered to the Company by Sub; or
(iv) at any time on or after the date of the Merger Agreement and before
acceptance for payment of, or payment for, such Shares any of the following
events shall occur or shall reasonably be deemed by Sub to have occurred:
(A) there shall have been any statute, rule or regulation
enacted, entered or enforced or deemed applicable, or any decree, order
or injunction entered or enforced by any government or governmental
authority in the United States or by any court in the United States
that: (1) restrains or prohibits the making or consummation of the
Offer or the Merger, (2) makes the purchase of or payment for some or
all of the Shares pursuant to the Offer or the Merger illegal, (3)
imposes material limitations on the ability of Sub, the Company or any
of their respective
A-1
<PAGE> 58
affiliates or Subsidiaries effectively to acquire or hold, or requiring
Sub, the Company or any of their respective affiliates or Subsidiaries
to dispose of or hold separate, any material portion of the assets or
the business of the Company and its Subsidiaries taken as a whole, or
imposes limitations on the ability of Sub, the Company or any of their
respective affiliates or Subsidiaries to continue to conduct, own or
operate, as heretofore conducted, owned or operated, all or any material
portion of the businesses or assets of the Company and its Subsidiaries
taken as a whole, (4) imposes or results in material limitations on the
ability of Sub or any of its affiliates to exercise full rights of
ownership of the Shares purchased by them, including, without
limitation, the right to vote the Shares purchased by them on all
matters properly presented to the stockholders of the Company; or (5)
prohibits or restricts in a material manner the financing of the Offer;
(B) any change (or any condition, event or development involving
a prospective change) shall have occurred in the business, operations,
assets or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole;
(C) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States for a period in excess of five hours, (2) the declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States, (3) any material adverse change in United States
currency exchange rates or a suspension of, or a limitation on, the
markets therefor, (4) the commencement of a war, armed hostilities or
other international or national calamity, directly or indirectly
involving the United States, (5) any limitations (whether or not
mandatory) imposed by any governmental authority on the nature or
extension of credit or further extension of credit by banks or other
lending institutions, or (6) in the case of any of the foregoing, a
material acceleration or worsening thereof;
(D) the representations and warranties of the Company contained
in the Merger Agreement (without giving effect to any "Material Adverse
Effect", "materiality" or similar qualifications contained therein)
shall not be true and correct in all material respects as of the date of
A-2
<PAGE> 59
consummation of the Offer as though made on and as of such date except
(1) for changes specifically permitted by the Merger Agreement and (2)
that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date;
(E) the obligations of the Company contained in the Merger
Agreement (without giving effect to any "Material Adverse Effect",
"materiality" or similar qualifications contained therein) shall not
have been performed or complied with in all material respects by the
Company;
(F) the Merger Agreement shall have been terminated in
accordance with its terms;
(G) prior to the purchase of Shares pursuant to the Offer, an
Acquisition Proposal for the Company exists and the Board shall have
withdrawn or materially modified or changed (including by amendment of
the Schedule 14D-9) in a manner adverse to Sub its recommendation of
the Offer, the Merger Agreement or the Merger; or
(H) Parent, Sub and the Company shall not have reached
agreement as to the documents and transactions described in Section 6.10
in accordance with such Section 6.10.
The foregoing conditions are for the sole benefit of Sub and its
affiliates and may be asserted by Sub regardless of the circumstances
(including, without limitation, any action or inaction by Sub or any of its
affiliates) giving rise to any such condition or may be waived by Sub, in whole
or in part, from time to time in its sole discretion, except as otherwise
provided in the Agreement. The failure by Sub at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right and may be asserted at any time and
from time to time. Any determination by Sub concerning any of the events
described herein shall be final and binding.
A-3
<PAGE> 1
Exhibit (c)(2)
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT, dated as of October 17, 1996, is
made and entered into by Cooperative Computing, Inc., a Texas corporation
("Parent"), CCI Acquisition Corp., a Delaware corporation ("Sub"), and the
other parties signatory hereto (each a "Stockholder", and collectively, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, Sub and Triad Systems
Corporation, a Delaware corporation (the "Company"), are entering into an
Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement),
pursuant to which Sub will be merged with and into the Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company
desire that, as soon as practicable (and not later than five business days)
after the execution and delivery of the Merger Agreement, Sub commence a cash
tender offer to purchase all outstanding shares of Company Common Stock (as
defined in Section 1), including all of the Shares (as defined in Section 2)
owned beneficially by the Stockholders; and
WHEREAS, the holders of the issued and outstanding common stock
of Sub will contribute that stock to Parent prior to the consummation of the
Offer, as a result of which, Sub will become a wholly-owned subsidiary of
Parent;
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person shall include
1
<PAGE> 2
securities Beneficially Owned by all other Persons with whom such Person would
constitute a "group" as within the meanings of Section 13(d)(3) of the Exchange
Act.
(b) "Company Common Stock" shall mean at any time the common
stock, $.001 par value, of the Company.
(c) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
2. Tender of Shares.
(a) Each Stockholder hereby agrees to validly tender (and not
to withdraw) pursuant to and in accordance with the terms of the Offer, not
later than the fifth business day after commencement of the Offer pursuant to
Section 1.1 of the Merger Agreement and Rule 14d-2 under the Exchange Act, the
number of shares of Company Common Stock set forth opposite such Stockholder's
name on Schedule I hereto (the "Existing Shares", and together with any shares
of Company Common Stock acquired by such Stockholder after the date hereof and
prior to the termination of this Agreement whether upon the exercise of
options, warrants or rights, the conversion or exchange of convertible or
exchangeable securities, or by means of purchase, dividend, distribution or
otherwise, the "Shares"), Beneficially Owned by him or it. Each Stockholder
hereby acknowledges and agrees that the Parent's obligation to accept for
payment and pay for Shares in the Offer, including the Shares Beneficially
Owned by such Stockholder, is subject to the terms and conditions of the Offer.
(b) The transfer by each Stockholder of his or its Shares to
Sub in the Offer shall pass to and unconditionally vest in Sub good and valid
title to the number of Shares set forth opposite such Stockholder's name on
Schedule I hereto, free and clear of all claims, liens, restrictions, security
interests, pledges, limitations and encumbrances whatsoever.
(c) Each Stockholder hereby agrees to permit Parent and Sub to
publish and disclose in the Offer Documents and, if Company Stockholder
Approval is required under applicable law, the Proxy Statement (including all
documents and schedules filed with the SEC) his or its identity and ownership
of Company Common Stock and the nature of his or its commitments, arrangements
and understandings under this Agreement.
(d) Parent and Sub acknowledge that the Company may, in order
to assist Stockholders who are also employees of the Company in complying with
their obligations to tender Shares hereunder, lend funds to such Stockholders
upon the terms specified in the Merger Agreement in order to fund all or a
portion of the exercise price under the Options held by such
2
<PAGE> 3
Stockholders. The failure of the Company to supply such funds shall not
relieve any such Stockholder of his obligations hereunder.
3. Provisions Concerning Company Common Stock.
(a) Each Stockholder hereby agrees that during the period
commencing on the date hereof and continuing until the first to occur of the
Effective Time or termination of the Merger Agreement in accordance with its
terms, at any meeting of the holders of Company Common Stock, however called,
or in connection with any written consent of the holders of Company Common
Stock, such Stockholder shall vote (or cause to be voted) the Shares held of
record or Beneficially Owned by such Stockholder, whether issued, heretofore
owned or hereafter acquired, (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval of the terms
thereof and each of the other actions contemplated by the Merger Agreement and
this Agreement and any actions required in furtherance thereof and hereof; (ii)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement
of the Company under the Merger Agreement or this Agreement; and (iii) except
as otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement): (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or its
Subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
the Company or its Subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its Subsidiaries; (C) (1) any
change in a majority of the persons who constitute the board of directors of
the Company; (2) any change in the present capitalization of the Company or any
amendment of the Company's Certificate of Incorporation or Bylaws; (3) any
other material change in the Company's corporate structure or business; or (4)
any other action which, in the case of each of the matters referred to in
clauses C (1), (2), (3) or (4), is intended, or could reasonably be expected,
to impede, interfere with, delay, postpone, or materially adversely affect the
Merger and the transactions contemplated by this Agreement and the Merger
Agreement. Such Stockholder shall not enter into any agreement or
understanding with any person or entity the effect of which would be
inconsistent or violative of the provisions and agreements contained in this
Section 3.
(b) Each Stockholder hereby grants to Parent a proxy to vote
the Shares of such Stockholder as indicated in Section 3(a). Each Stockholder
intends such proxy to be irrevocable and coupled with an interest and will take
such further action or execute such other instruments as may be necessary to
effectuate the intent of this proxy and hereby revokes any proxy previously
granted by Stockholder with respect to such Shares.
3
<PAGE> 4
4. Other Covenants, Representations and Warranties. Each
Stockholder hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. Such Stockholder is either (i) the
record and Beneficial Owner of, or (ii) the Beneficial Owner but not the record
holder of, the number of Shares set forth opposite such Stockholder's name on
Schedule I hereto. On the date hereof, the Existing Shares set forth opposite
such Stockholder's name on Schedule I hereto constitute all of the Shares owned
of record or Beneficially Owned by such Stockholder. Such Stockholder has sole
voting power and sole power to issue instructions with respect to the matters
set forth in Sections 2 and 3 hereof, sole power of disposition, sole power of
conversion, sole power to demand appraisal rights and sole power to agree to
all of the matters set forth in this Agreement, in each case with respect to
all of the Existing Shares set forth opposite such Stockholder's name on
Schedule I hereto, with no limitations, qualifications or restrictions on such
rights, subject to applicable securities laws and the terms of this Agreement.
(b) Power; Binding Agreement. Such Stockholder has the legal
capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by such Stockholder will not violate any other
agreement to which such Stockholder is a party including, without limitation,
any voting agreement, stockholders agreement or voting trust. This Agreement
has been duly and validly executed and delivered by such Stockholder and
constitutes a valid and binding agreement of such Stockholder, enforceable
against such Stockholder in accordance with its terms. There is no beneficiary
or holder of a voting trust certificate or other interest of any trust of which
such Stockholder is trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such stockholder of the
transactions contemplated hereby. If such Stockholder is married and such
Stockholder's Shares constitute community property, this Agreement has been
duly authorized, executed and delivered by, and constitutes a valid and binding
agreement of, such Stockholder's spouse, enforceable against such person in
accordance with its terms.
(c) No Conflicts. Except for (i) filings under the HSR Act,
if applicable, (A) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by such Stockholder and the consummation by such
Stockholder of the transactions contemplated hereby and (B) none of the
execution and delivery of this Agreement by such Stockholder, the consummation
by such Stockholder of the transactions contemplated hereby or compliance by
such Stockholder with any of the provisions hereof shall (1) conflict
4
<PAGE> 5
with or result in any breach of any applicable organizational documents
applicable to such Stockholder, (2) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which such Stockholder is a party or by which such Stockholder or any
of such Stockholder's properties or assets may be bound, or (3) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to such Stockholder or any of such Stockholder's properties or
assets.
(d) No Encumbrances. Except as required by Section 2 and for
the proxy granted under Section 3(b), such Stockholder's Shares and the
certificates representing such Shares are now, and at all times during the term
hereof will be, held by such Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever.
(e) No Finder's Fees. No broker, investment banker, financial
adviser or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf
of such Stockholder.
(f) No Solicitation. No Stockholder shall, in his or its
capacity as such, directly or indirectly, solicit (including by way of
furnishing information) or respond to any inquiries or the making of any
proposal by any person or entity (other than Parent or any affiliate of Parent)
with respect to the Company that constitutes an Acquisition Proposal, except as
permitted by Section 5.1(e) of the Merger Agreement. If any Stockholder
receives any such inquiry or proposal, then such Stockholder shall promptly
inform Parent of the terms and conditions, if any, of such inquiry or proposal
and the identity of the person making such proposal. Each Stockholder will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
(g) Restriction on Transfer, Proxies and Non-Interference.
Except as required by Section 2 or Section 3(b), no Stockholder shall, directly
or indirectly: (i) offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for sale,
sale, transfer, tender, pledge, encumbrance, assignment or other disposition
of, any or all of such
5
<PAGE> 6
Stockholder's Shares or any interest therein; (ii) grant any proxies or powers
of attorney, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares; or (iii) take any action that would make
any representation or warranty of such Stockholder contained herein untrue or
incorrect or have the effect of preventing or disabling such Stockholder from
performing such Stockholder's obligations under this Agreement.
(h) Waiver of Appraisal Rights. Each Stockholder hereby
waives any rights of appraisal or rights to dissent from the Merger that such
Stockholder may have.
(i) Reliance by Parent. Such Stockholder understands and
acknowledges that Parent and Sub are entering into the Merger Agreement in
reliance upon such Stockholder's execution and delivery of this Agreement.
(j) Further Assurances. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further action
as may be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
5. Stop Transfer. Each Stockholder agrees with, and
covenants to, Parent that such Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Stockholder's Shares, unless
such transfer is made in compliance with this Agreement (including the
provisions of Section 2 hereof). In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall be deemed to refer to and include the Shares as
well as all such stock dividends and distributions and any shares into which or
for which any or all of the Shares may be changed or exchanged.
6. Termination. Except as otherwise provided herein, the
covenants and agreements contained herein with respect to the Shares shall
terminate upon the termination of the Merger Agreement in accordance with its
terms by Parent.
7. Stockholder Capacity. No person executing this Agreement
who is or becomes during the term hereof a director of the Company makes any
agreement or understanding herein in his or her capacity as such director.
Each Stockholder signs solely in his or her capacity as the record and
beneficial owner of, or the trustee of a trust whose beneficiaries are the
beneficial owners of, such Stockholder's Shares.
6
<PAGE> 7
8. Confidentiality. The Stockholders recognize that
successful consummation of the transactions contemplated by this Agreement may
be dependent upon confidentiality with respect to the matters referred to
herein. In this connection, pending public disclosure thereof, each
Stockholder hereby agrees not to disclose or discuss such matters with anyone
not a party to this Agreement (other than such Stockholder's counsel and
advisors, if any) without the prior written consent of Parent, except for
filings required pursuant to the Exchange Act and the rules and regulations
thereunder or disclosures such Stockholder's counsel advises are necessary in
order to fulfill such Stockholder's obligations imposed by law, in which event
such Stockholder shall give notice of such disclosure to Parent as promptly as
practicable so as to enable Parent to seek a protective order from a court of
competent jurisdiction with respect thereto.
9. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof.
(b) Certain Events. Each Stockholder agrees that this
Agreement and the obligations hereunder shall attach to such Stockholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, such Stockholder's heirs, guardians,
administrators or successors. Notwithstanding any transfer of Shares, the
transferor shall remain liable for the performance of all obligations under
this Agreement of the transferor.
(c) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
party, provided that Parent may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Parent of its obligations
hereunder if such assignee does not perform such obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
with respect to any one or more Stockholders, except upon the execution and
delivery of a written agreement executed by the relevant parties hereto;
provided that Schedule I hereto may be supplemented by Parent by adding the
name and other relevant information concerning any stockholder of the Company
who agrees to be bound by the terms of this Agreement without the agreement of
any other party hereto, and thereafter such added stockholder shall be treated
as a "Stockholder" for all purposes of this Agreement.
7
<PAGE> 8
(e) 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 received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered
to the respective parties at the following addresses:
If to Stockholder: At the addresses set forth on Schedule I hereto.
If to Parent or Sub: Cooperative Computing, Inc. or
CCI Acquisition Corp.
6207 Bee Cave Road
Austin, Texas 78746-5146
Attn: Glenn Staats
Telephone: (512) 328-2300
Telecopy: (512) 329-6461
copies to: Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Telephone: (214) 740-7365
Telecopy: (214) 740-7313
Attention: Lawrence D. Stuart, Jr.
Weil, Gotshal & Manges
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Telephone: (214) 746-7748
Telecopy: (214) 746-7777
Attention: Thomas A. Roberts
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.
(f) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
8
<PAGE> 9
(g) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such
breach the aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or
in equity.
(h) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance
by any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
(j) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
(l) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
(m) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same Agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, Parent, Sub and each Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
COOPERATIVE COMPUTING, INC.
By: /s/ MATTHEW HALE
----------------------------------------------
Name: Matthew Hale
--------------------------------------------
Title: Vice President and Chief Financial Officer
-------------------------------------------
CCI ACQUISITION CORP.
By: /s/ PATRICK K. MCGEE
----------------------------------------------
Name: Patrick K. McGee
--------------------------------------------
Title: Vice President
-------------------------------------------
STOCKHOLDERS:
THE COMMON FUND FOR NONPROFIT ORGANIZATIONS
By: Richard C. Blum & Associates,
L.P., investment manager
By: /s/ ALEXANDER L. DEAN, JR.
--------------------------------------
Name: Alexander L. Dean, Jr.
------------------------------------
Title: Managing Director
-----------------------------------
BK CAPITAL PARTNERS IV, LIMITED PARTNERSHIP
By: Richard C. Blum & Associates,
L.P., general partner
By: /s/ ALEXANDER L. DEAN, JR.
--------------------------------------
Name: Alexander L. Dean, Jr.
------------------------------------
Title: Managing Director
-----------------------------------
10
<PAGE> 11
BK CAPITAL PARTNERS III, LIMITED PARTNERSHIP
By: Richard C. Blum & Associates,
L.P., general partner
By: /s/ ALEXANDER L. DEAN, JR.
----------------------------------------
Name: Alexander L. Dean, Jr.
--------------------------------------
Title: Managing Director
-------------------------------------
BK CAPITAL PARTNERS II, A CALIFORNIA
LIMITED PARTNERSHIP
By: Richard C. Blum & Associates,
L.P., general partner
By: /s/ ALEXANDER L. DEAN, JR.
----------------------------------------
Name: Alexander L. Dean, Jr.
--------------------------------------
Title: Managing Director
-------------------------------------
/s/ RICHARD C. BLUM*
-------------------------------------------
Richard C. Blum
/s/ JAMES R. PORTER
-------------------------------------------
James R. Porter
/s/ WILLIAM W. STEVENS
-------------------------------------------
William W. Stevens
/s/ HENRY M. GAY
-------------------------------------------
Henry M. Gay
/s/ GEORGE O. HARMON
-------------------------------------------
George O. Harmon
AGREED TO AND ACKNOWLEDGED
(with respect to Section 5):
*By: /s/ JOHN H. STEINHART
---------------------------------
TRIAD SYSTEMS CORPORATION Name: John H. Steinhart
-------------------------------
By: /s/ JAMES R. PORTER Attorney-in-Fact
-------------------------------
Name: James R. Porter
Title: President and Chief
Executive Officer
11
<PAGE> 12
SCHEDULE 1 TO
STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
================================================================================
Name and Address
of Stockholder Number of Shares Owned
================================================================================
<S> <C>
The Common Fund for Nonprofit Organizations
c/o Richard C. Blum & Associates, L.P.
909 Montgomery Street
San Francisco, California 94113 1,111,111
- --------------------------------------------------------------------------------
BK Capital Partners IV, L.P.
c/o Richard C. Blum & Associates, L.P.
909 Montgomery Street
San Francisco, California 94113 275,936
- --------------------------------------------------------------------------------
BK Capital Partners III, L.P.
c/o Richard C. Blum & Associates, L.P.
909 Montgomery Street
San Francisco, California 94113 500,000
- --------------------------------------------------------------------------------
BK Capital Partners II, L.P.
c/o Richard C. Blum & Associates, L.P.
909 Montgomery Street
San Francisco, California 94113 111,111
- --------------------------------------------------------------------------------
Richard C. Blum
909 Montgomery Street
San Francisco, California 94113 12,000
- --------------------------------------------------------------------------------
James R. Porter
3055 Triad Drive
Livermore, California 94550 958,200
- --------------------------------------------------------------------------------
William W. Stevens
3055 Triad Drive
Livermore, California 94550 430,340
- --------------------------------------------------------------------------------
Henry M. Gay
3055 Triad Drive
Livermore, California 94550 94,396
- --------------------------------------------------------------------------------
George O. Harmon
3055 Triad Drive
Livermore, California 94550 44,000
TOTAL 3,537,094
================================================================================
</TABLE>
12
<PAGE> 1
Exhibit (c)(3)
SECURITIES PURCHASE AGREEMENT
DATED AS OF OCTOBER 16, 1996
BY AND AMONG
HICKS, MUSE, TATE & FURST EQUITY FUND III, L.P.,
COOPERATIVE COMPUTING, INC.
APPLIED DATA SPECIALTY, INC.
CANADIAN AFTERMARKET NETWORK, INC.
AND
CCI ACQUISITION CORP.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. Commitments to Purchase and Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Representations and Warranties of the Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.1. Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.2. Authorization of Agreement; Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.3. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1.4. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1.5. No Restrictions; Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.7. Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1.8. Books; Records and Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1.9. Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1.10. Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1.11. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1.12. Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.13. Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.14. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.15. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.16. Conduct of the Business Since the Interim Balance Sheet Date . . . . . . . . . . . . . . . 12
2.1.17. Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.18. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.19. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1.20. Litigation; Decrees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1.21. Compliance With Law; Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.1.22. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.1.23. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.1.24. Commissions or Finders Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.1.25. Certain Business Practices and Regulations; Potential Conflicts of Interest . . . . . . . . 22
2.1.26. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.2. Representations of the Existing Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2.1. Ownership of CCI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2.2. Authorization and Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2.3. No Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
2.3. Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.3.1. Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.3.2. Authorization and Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.3.3. No Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3.4. Litigation; Decrees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3.5. Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3.6. Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.3.7. Commissions or Finders Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.4. Representations and Warranties of Acquisition Company . . . . . . . . . . . . . . . . . . . . . . . . 26
2.4.1. Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.4.2. Authorization and Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.4.3. No Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.4.4. Litigation; Decrees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE III. PRE-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.1. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.2. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.3. Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.4. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.5. No Inconsistent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.6. Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.7. Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.8. Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.9. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.10. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.11. Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.12. Covenant of Existing Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.13. Efforts of the Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.14. Covenant Relating to Target Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.15. Merger of CCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.16. Delivery of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.17. Contribution of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.18. Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.19. Authorization of CCI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.20. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.21. Efforts of the Acquisition Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.22. Exercise of Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE IV. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.1. Conditions Precedent to Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.1.1. Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 36
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4.1.2. Consents or Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1.3. Tender Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1.4. HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1.5. No Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1.6. Mitchells Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1.7. Contribution of Acquisition Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.2. Conditions Precedent to Obligations of CCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.2.1. No Material Misrepresentation or Breach . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.2.2. Consents or Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.2.3. HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.2.4. No Adverse Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.2.5. Tender Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V. DOCUMENTS TO BE DELIVERED AT THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.1. Documents to be Delivered by the Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.1.1. Certified Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.1.2. Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.1.3. Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.1.4. Good Standing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.1.5. Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2. Documents to be Delivered by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2.1. Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.2.2. Good Standing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.2.3. Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VI. POST-CLOSING COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.1. Distribution of Taxable Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VII. SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.1. Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . 39
7.2. Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.3. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.4. Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE IX. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.1. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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9.4. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.5. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.6. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.7. Amendments and Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.8. Rights of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.9. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.10. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.13. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.14. Titles and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.15. Certain Interpretive Matters and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.16. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.17. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.18. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.19. Recovery Under Target Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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Exhibits
Exhibit A Form of Agreement and Plan of Merger
Exhibit B Form of Stockholders Agreement
Exhibit C Form of the Company's Counsel Opinion
Exhibit D Form of Purchaser's Counsel Opinion
Schedules
Schedule 1.2.4 Discharge of Obligations
Schedule 2.2.1(a) Articles of Incorporation and Bylaws
Schedule 2.1.1(b) Foreign Qualifications
Schedule 2.1.3 Capitalization
Schedule 2.1.4 Subsidiaries
Schedule 2.1.5 Consents Required from Governmental Entities
Schedule 2.1.6 Financial Statements
Schedule 2.1.7 Absence of Undisclosed Liabilities
Schedule 2.1.9(a) Contracts and Commitments
Schedule 2.1.9(b) Third Party Consents
Schedule 2.1.10 Title to Assets
Schedule 2.1.11 Intellectual Property
Schedule 2.1.12 Pending Litigation
Schedule 2.1.13(a) Conditions of Assets
Schedule 2.1.13(b) Assets Held by Existing Stockholders
Schedule 2.1.13(c) Assets of Third Parties
Schedule 2.1.14 Owned Real Property
Schedule 2.1.15 Insurance
Schedule 2.1.17 Customers and Suppliers
Schedule 2.1.18(a) Labor Agreement
Schedule 2.1.18(d) Personnel Matters
Schedule 2.1.19(a) Employee Benefit Plans
Schedule 2.1.19(g) Plan Claims
Schedule 2.1.19(h) Retiree Medical
Schedule 2.1.19(i) Employers Securities
Schedule 2.1.19(j) Change of Control
Schedule 2.1.20(a) Litigation
Schedule 2.1.20(b) Products Claims
Schedule 2.1.21 Permits
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Schedule 2.1.22 Environmental Matters
Schedule 2.1.23 Taxes
Schedule 2.2.1 Ownership of CCI Common Stock
Schedule 2.2.3 No Restrictions of Existing Stockholders
Schedule 2.3.3 No Restrictions of Purchaser
Schedule 3.2 Conduct of Business
Schedule 3.13 Acquisition Proposals
Schedule 4.1.13 Contribution of Assets
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<TABLE>
<CAPTION>
Section
-------
<S> <C>
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Interim Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Interim Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Environmental Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Environmental Costs and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Environmental Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Remedial Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Indemnity Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Indemnitee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Indemnifiable Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Direct Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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Defined Terms
<TABLE>
<CAPTION>
Section
-------
<S> <C>
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.11
ADS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.15(a)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
CAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
CCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
CCI Bridge Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
CCI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
CCI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2.1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2.1
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.23(v)
Company or Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Company Topping Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.17(a)
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.19(c)
Employee Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.19(a)
Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.19(a)
Environmental Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.22(j)
Environmental Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.22(j)
Environmental Costs and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.22(j)
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.22(j)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.18(d)
Existing Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.6
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.22(j)
Hicks Muse Topping Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.17(a)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.5
Indemnifiable Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.2(a)
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.2(a)
Indemnitee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.2(a)
Indemnity Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.2(a)
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section
Interim Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.6
Interim Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.6
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.18(d)
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.7(c)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.10
Target Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Owned Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.14
</TABLE>
viii
<PAGE> 10
<TABLE>
<S> <C>
Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.10
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Rejected Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.17(b)
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.22(j)
Remedial Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.22(j)
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.3.5(b)
Subsidiary or Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.15(a)
Triad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Target Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Target Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.23(v)
Tax or Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.23(v)
Tender Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.2(a)
</TABLE>
ix
<PAGE> 11
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of the 16th day of October, 1996, by and among Cooperative
Computing, Inc., a Texas corporation ("CCI"), Applied Data Specialty, Inc., a
Texas corporation ("ADS"), Canadian Aftermarket Network, Inc., a Texas
corporation ("CAN" and together with CCI and ADS, the "Companies" and each a
"Company"), CCI Acquisition Corp., a Delaware corporation (the "Acquisition
Company"), Hicks, Muse, Tate & Furst Equity Fund III, L.P., a Delaware limited
partnership (the "Purchaser"), and the stockholders of the Companies
signatories hereto (the "Existing Stockholders").
RECITALS:
WHEREAS, CCI, the Acquisition Company and Triad Systems Corporation, a
Delaware corporation ("Triad"), have entered into an agreement and plan of
merger (the "Target Merger Agreement") pursuant to which CCI has agreed to
cause the Acquisition Company to commence a cash tender offer (the "Tender
Offer") for all the outstanding common stock, par value $.001 per share, of
Triad (the "Target Common Stock") and to cause the Acquisition Company to be
merged into Triad, subject to the satisfaction of certain conditions specified
in the Target Merger Agreement;
WHEREAS, in connection with the consummation of the acquisition
contemplated by the Tender Offer (the "Target Acquisition"), it is contemplated
that CAN and ADS will be merged (the "CCI Merger") with and into CCI with CCI
surviving, all in accordance with the agreement and plan of merger attached
hereto as Exhibit A (the "CCI Merger Agreement");
WHEREAS, in connection with the consummation of the Triad Acquisition,
it is contemplated that all the capital stock of the Acquisition Company will
be contributed to CCI, and it shall become a wholly-owned subsidiary of CCI;
and
WHEREAS, to facilitate the financing of the Target Acquisition, CCI,
desires to sell, and the Purchaser desires to buy, shares of the common stock,
par value $1.00 per share, of CCI (the "CCI Common Stock"), upon the conditions
and subject to the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
<PAGE> 12
ARTICLE I. PURCHASE OF SHARES
1.1. Commitments to Purchase and Sell. CCI agrees to sell and,
subject to the terms and conditions set forth herein and in reliance on the
representations and warranties of the Companies and the Existing Stockholders
contained herein, the Purchaser agrees to purchase a number of shares of CCI
Common Stock equal to the HM Percentage of the fully diluted CCI Common Stock
(after giving effect to such purchase), where the "HM Percentage" is equal to
the amount of the investment by Purchaser in the CCI Common Stock (the
"Purchase Price") divided by the sum of the Purchase Price plus $80,000,000.
1.2. Closing.
1.2.1. The purchase and sale of the CCI Common Stock will
take place, subject to the satisfaction or waiver of the conditions set forth
in Article IV, at a closing (the "Closing") at the offices of Weil, Gotshal &
Manges, 767 Fifth Avenue, New York, New York 10153, simultaneously with the
closing of the Tender Offer or on such other date as is agreed to by CCI and
the Purchaser. The date on which the Closing is effected is referred to in this
Agreement as the "Closing Date."
1.2.2. At the Closing, CCI shall deliver to the Purchaser,
against payment of the Purchase Price, certificates for the shares of CCI
Common Stock. Each share of CCI Common Stock purchased shall be registered in
the name of the Purchaser or such other Person or Persons (each as defined in
Section 9.15) as the Purchaser may designate (provided each other Person shall
have provided CCI with a certificate reasonably satisfactory to CCI containing
the representations in Section 2.3.5 hereof). Each share of CCI Common Stock
purchased by the Purchaser shall when issued and paid for in accordance with
the terms of this Agreement, be duly authorized, validly issued, fully paid and
nonassessable and shall not be issued in violation of any preemptive right.
1.2.3. At the Closing, the Purchaser shall pay the Purchase
Price by wire transfer of immediately available funds to such bank account of
CCI as it may designate in writing to the Purchaser not less than three days
prior to Closing.
1.2.4. At the Closing, CCI shall pay $4,420,315.00 to Mr.
Glenn E. Staats and $848,063.00 to Preston W. Staats, which payments the
parties agree will be in discharge of all indebtedness of the Companies to the
Existing Stockholders
1.2.5. Provided that all conditions to the purchase of the
Target Common Stock have been met to the reasonable satisfaction of CCI, at the
Closing, the Acquisition Company shall cause the shares of Target Common Stock
tendered and accepted in the Tender Offer to be purchased in accordance with
the terms of the Tender Offer.
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<PAGE> 13
1.2.6. At Closing, CCI and each Subsidiary thereof so
requested by the Purchaser shall execute and deliver a Monitoring and Oversight
Agreement and a Financial Advisory Agreement, each in a form mutually
satisfactory to the parties hereto, and the Purchaser, CCI and the Existing
Stockholders shall execute a Stockholders Agreement in substantially the form
of Exhibit B hereto.
1.2.7. At the Closing, the parties shall also execute and
deliver, as applicable, the documents referred to in Article V hereof.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Companies. Each of the
Companies, jointly and severally, makes the following representations and
warranties to the Purchaser, each of which is true and correct as of the date
hereof and shall be true and correct as of the Closing Date (except
representations as to the Companies shall refer only to CCI on the Closing Date
assuming the consummation of the CCI Merger) and shall be unaffected by any
investigation heretofore or hereafter made by Purchaser.
2.1.1. Organization and Good Standing. Each of the Companies
and the Subsidiaries (as defined in Section 9.15) thereof is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Each of the Companies and the Subsidiaries thereof has the requisite
corporate power and authority to own, lease or otherwise hold the assets owned,
leased or otherwise held by it and to carry on its business as presently
conducted by it. Each of the Companies and the Subsidiaries thereof is in good
standing and duly qualified to conduct business as a foreign corporation in
every state of the United States in which its ownership or lease of property or
conduct of its business makes such qualification necessary. Attached hereto as
Schedule 2.1.1(a) are true, complete and correct copies of each of the
Companies' and each of their Subsidiaries' articles of incorporation and bylaws
as currently in effect. Schedule 2.1.1(b) sets forth a list of all
jurisdictions in which each of the Companies and each of their respective
Subsidiaries is qualified or licensed to do business as a foreign corporation.
2.1.2. Authorization of Agreement; Binding Obligation. Each
of the Companies has the requisite corporate power to execute and to deliver
this Agreement and to perform the transactions contemplated hereby (including
without limitation the Tender Offer, the Target Acquisition, the Target Merger
and the CCI Merger) to be performed by it. The execution and delivery by each
of the Companies of this Agreement and the performance by them of the
transactions contemplated hereby (including without limitation the Tender
Offer, the Target Acquisition, the Target Merger and the CCI Merger) to be
performed by them have been duly authorized by all necessary corporate and
shareholder action on the part of
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<PAGE> 14
each of the Companies. This Agreement has been duly executed and delivered by
duly authorized officers of each of the Companies and, assuming the due
execution and delivery of this Agreement by Purchaser and the Existing
Stockholders, constitutes the valid and binding obligation of each of the
Companies enforceable against each of them in accordance with its terms, except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights in general
and subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
2.1.3. Capitalization. Schedule 2.1.3 sets forth a true,
correct and complete list of all of the authorized, issued and outstanding
shares of capital stock of each of the Companies. All of the outstanding
shares of capital stock of each of the Companies have been duly authorized and
validly issued, are fully paid and non-assessable, have not been issued in
violation of any preemptive rights and are owned of record and beneficially by
the Existing Stockholders, free and clear of any Liens (as defined in Section
2.1.10). There are no options, warrants, calls, subscriptions, conversion or
other rights, agreements or commitments obligating any Company to issue any
additional shares of capital stock or other securities convertible into shares
of capital stock of any Company or any other securities convertible into,
exchangeable or exercisable for or evidencing the right to subscribe for any
shares of capital stock of any Company.
2.1.4. Subsidiaries.
(a) Schedule 2.1.4 sets forth (i) the name of
each Subsidiary of each of the Companies; and (ii) in the case of each such
Subsidiary of (A) the jurisdiction of incorporation and (B) the capitalization
thereof and the percentage of each class of voting stock owned by each of the
Companies and the Subsidiaries thereof.
(b) All of the outstanding shares of capital
stock of each direct or indirect Subsidiary of each Company have been duly
authorized and validly issued, are fully paid and non-assessable, have not been
issued in violation of any preemptive rights, and are owned of record and
beneficially, directly or indirectly, by the Companies or their Subsidiaries,
as the case may be, free and clear of any Liens.
(c) There are no options, warrants, calls,
subscriptions, conversion or other rights, agreements or commitments obligating
any Subsidiary of any Company or any Subsidiary thereof to issue any additional
shares of capital stock of such Subsidiary or any other securities convertible
into, exchangeable or exercisable for or evidencing the right to subscribe for
any shares of such capital stock.
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<PAGE> 15
(d) No Company or any Subsidiary of any Company
has any capital investment in or controls, directly or indirectly, any other
corporation, partnership, joint venture, association or other entity or
business concern other than the Subsidiaries and partnerships set forth in
Schedule 2.1.4.
2.1.5. No Restrictions; Required Consents. The execution and
delivery of this Agreement by the Companies does not, and the performance by
the Companies of the transactions contemplated hereby (including without
limitation the Tender Offer, the Target Acquisition, the Target Merger and the
CCI Merger) to be performed by them will not (a) conflict with their or their
Subsidiaries' respective articles of incorporation or by-laws, (b) conflict
with, or result in any violation of, or constitute a default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any debt or obligation or
constitute a breach of, create a loss of a material benefit under, any
contract, mortgage, indenture, lease, agreement or other instrument or any
permit, order, judgment or decree to which any Company or any Subsidiary
thereof is a party or by which any of their properties are bound, (c)
constitute a violation of any law or regulation applicable to any Company or
any Subsidiary thereof, or (d) result in the creation of any lien, charge or
encumbrance upon any of their respective assets. No consent, approval, order
or authorization of, or registration, declaration or filing with, any domestic
or foreign court, government, governmental agency, authority, entity or
instrumentality (a "Governmental Entity") is required to be obtained or made by
or with respect to any Company or any Subsidiary thereof in connection with the
execution and delivery of this Agreement by any Company or the performance by
any Company of the transactions contemplated hereby to be performed by it,
except for such of the foregoing as are listed or described on Schedule 2.1.5
and (i) any filings required with the Federal Trade Commission and Department
of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), in respect of the purchase of the CCI Common
Stock by the Purchaser, if any, (ii) the filing of a certificate of merger with
Secretary of State of Texas for the CCI Merger, and (iii) any filings specified
in Section 4.1(c)(A)-(H) of the Target Merger Agreement.
2.1.6. Financial Statements. The Companies have previously
delivered to Purchaser true, correct and complete copies of the unaudited
balance sheets of the Companies and their Subsidiaries (on a combined basis)
dated as of November 30, 1992, 1993, 1994 and 1995 and August 31, 1996 and the
related unaudited statement of income and statement of cash flow for the
respective twelve-month periods (or, in the case of the August 31, 1996 balance
sheet, the nine-month period) then ended (the "Financial Statements"), all of
which have been prepared in accordance with generally accepted accounting
principles consistently applied with prior periods ("GAAP"). Such balance
sheets fairly present the financial position, assets and liabilities (whether
accrued, absolute, contingent or otherwise) of the Companies and their
consolidated Subsidiaries at the dates indicated and such statements of
5
<PAGE> 16
income and statement of cash flow fairly present the results of operations and
cash flows of the Companies and their consolidated Subsidiaries for the periods
indicated. References in this Agreement to the "Interim Balance Sheet" shall
mean the balance sheet of the Companies as of August 31, 1996 referred to
above; and references in this Agreement to the "Interim Balance Sheet Date"
shall be deemed to refer to August 31, 1996.
2.1.7. Absence of Undisclosed Liabilities. None of the
Companies nor any of their Subsidiaries has any material liabilities of the
nature required to be reflected on the Interim Balance in accordance with GAAP,
either direct or indirect, matured or unmatured or absolute, contingent or
otherwise, except (a) those liabilities set forth on the Interim Balance Sheet
and not heretofore paid or discharged or (b) those liabilities or obligations
incurred, consistent with past business practice, in or as a result of the
normal and ordinary course of business since the Interim Balance Sheet Date and
(c) those set forth in Schedule 2.1.7 hereto.
For purposes of this Agreement, the term "liabilities" shall
include, without limitation, any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense or obligation,
whether fixed or contingent, known or unknown, asserted or unasserted, choate
or inchoate, liquidated or unliquidated, secured or unsecured.
2.1.8. Books; Records and Accounts. The financial books,
records and accounts of each of the Companies and the Subsidiaries thereof
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of each such Company and Subsidiary. No Company has
engaged in any transaction, maintained any bank account or used any of its
funds except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the business. The
minute books and other similar records of each of the Companies and the
Subsidiaries thereof contain a true and complete record, in all material
respects, of all actions taken since December 1, 1991 at all meetings and by
all written consents in lieu of meetings of each of the Company's and their
Subsidiaries' stockholders, boards of directors, and committees thereof. Such
books and records have been maintained, in all material respects, in accordance
with good business and bookkeeping practices.
2.1.9. Contracts and Commitments. (a) The Companies have
previously furnished a true, correct and complete list of each of the
agreements, contracts, commitments or instruments described below and, to the
extent indicated on such list, true, correct and complete copies of the
indicated agreements, contracts, commitments or instruments (or, in the case of
an oral agreement, contract or commitment, a written description thereof)
described below to which any Company or any Subsidiary thereof is a party:
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<PAGE> 17
(i) agreement, contract, commitment or instrument
which is material to its operations, business or financial condition or which
by the terms of such agreement, contract, commitment or instrument can
reasonably be expected to require future payment or receipt (other than those
described in Section 2.1.9(iii)) by any Company or Subsidiary thereof, or of
any of them collectively, of $100,000 or more;
(ii) agreement, contract or commitment with any
distributor, dealer, manufacturer's representative, sales representative,
service or warranty representative and other person, firm or corporation
engaged in the sale, distribution, service or repair of its products;
(iii) agreement, contract or commitment to sell or
supply products or to perform services involving receipt of payments of
$100,000 in any one year other than those agreements, contracts or commitments
to which any Company or any Subsidiary of any Company is a party which are on
one of the Companies standard form contracts without any material alteration or
deviation to such form and in which event a copy of the particular standard
form contract has been provided to Purchaser;
(iv) lease under which any Company or any
Subsidiary thereof is either lessor or lessee;
(v) note, debenture, bond, equipment trust
agreement, letter of credit agreement, loan agreement or other contract or
commitment for the borrowing or lending of money or agreement or arrangement
for a line of credit or guarantee, pledge or undertaking of the indebtedness of
any other person;
(vi) agreement, contract or commitment for any
charitable or political contribution;
(vii) commitment or agreement for any capital
expenditure or leasehold improvement in excess of $150,000;
(viii) agreement, contract or commitment limiting or
restraining it, or any successor thereto from engaging or competing in any
manner or in any business, nor, to its knowledge, is any employee of it subject
to any such agreement, contract or commitment;
(ix) license, franchise, distributorship or other
agreement which relates in whole or in part to any Intellectual Property (as
defined in Section 2.1.11) of or used by any Company or any Subsidiary thereof
which are or could reasonably be considered material to the business of any
Company or any Subsidiary thereof;
7
<PAGE> 18
(x) joint venture, partnership or similar
agreement to which it is a party in any way providing for the manufacture,
marketing or sale of any products of any Company or any Subsidiary thereof;
(xi) agreement, contract or commitment granting
registration rights to any person with regard to any capital stock or any
option, warrant or other similar right or any other security; and
(xii) material agreement, contract or commitment
not made in the ordinary course of business.
(b) Each of the agreements, contracts, commitments,
leases, plans and other instruments, documents and undertakings (the
"Contracts") listed or required to be listed on Schedule 2.1.9(a) or not
required to be listed therein because of the amount thereof is valid and
enforceable in accordance with its terms; each Company and Subsidiary thereof
is, and to the Companies' knowledge all other parties thereto are, in
compliance with the provisions thereof; no Company or Subsidiary thereof is,
and to the Companies' knowledge no other party thereto is, in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained therein except where such defaults (individually or in the aggregate)
do not have and could not reasonably be expected to have a material adverse
effect on the Company or Subsidiary involved; and no event has occurred which
with or without the giving of notice or lapse of time, or both, would be
reasonably likely to constitute a default thereunder. Furthermore, no such
agreement, contract, commitment, lease, plan or other instrument, document or
undertaking, in the reasonable opinion of the Companies, contains any
contractual requirement with which there is a reasonable likelihood that the
Companies or any other party thereto will be unable to comply except where such
failures (individually or in the aggregate) to be in compliance could not
reasonably be expected to have a material adverse effect on the Company or
Subsidiary involved. Except as listed on Schedule 2.1.9(b), no written or oral
Contract described or required to be described on Schedule 2.1.9(a) requires
the consent of any party in connection with the transactions contemplated
hereby.
2.1.10. Title to Assets. Except as listed or described on
Schedule 2.1.10, each of the Companies and the Subsidiaries thereof has good,
valid and marketable title to its assets free and clear of all title defects or
objections, mortgages, liens, claims, charges, pledges, or other encumbrances
of any nature whatsoever, including without limitation licenses, leases,
chattel or other mortgages, collateral security arrangements, pledges, title
imperfections, defect or objection liens, security interests, conditional and
installment sales agreements, charges, easements, encroachments or
restrictions, of any kind and other title or interest retention arrangements,
reservations or limitations of any nature (collectively, "Liens"), other than
(a) those reflected or reserved against in the Interim Balance Sheet and
8
<PAGE> 19
(b) Liens for Taxes (as defined in Section 2.1.22), assessments and other
governmental charges which are not due and payable or which may thereafter be
paid without penalty. (The items referred to in the exception to the
immediately preceding sentence are hereinafter referred to as "Permitted
Liens".)
2.1.11. Intellectual Property. (a) Schedule 2.1.11 contains
a true and complete list of all Intellectual Property (as hereinafter defined)
owned by any Company or any Subsidiary thereof which is used in the operation
of its business (the "Owned Intellectual Property"). Except as set forth on
Schedule 2.1.11, the Companies and their Subsidiaries own the entire right,
title and interest in and to the Intellectual Property (including, without
limitation, the right to use and license the same) free and clear of any and
all liens, claims, charges and encumbrances. No party other than the Companies
and their Subsidiaries has any interest in the Owned Intellectual Property,
including, without limitation, any security interest, contingent interest or
otherwise. No Company or any Subsidiary thereof has failed to enforce its
rights in any Owned Intellectual Property or otherwise taken, or omitted to
take, any actions that would result in the abandonment, relinquishment,
cancellation or unenforceability of any of the Company Intellectual Property.
(b) Schedule 2.1.11 also lists all pending and, to the knowledge of
the Companies, threatened actions of any nature affecting the Owned
Intellectual Property owned or used by the Company. Except as set forth on
Schedule 2.1.11, to the knowledge of the Companies, no Person is infringing or
misappropriating any Owned Intellectual Property.
(c) Schedule 2.1.11 also lists all notices or claims currently
pending or received by any Companies or any Subsidiary of any Company that
claim infringement of any third party rights by the development, use, sale or
exploitation of the Owned Intellectual Property owned or used by the Company.
Except as set forth on Schedule 2.1.11, there is, to the knowledge of the
Companies, no reasonable basis upon which any such claim may be asserted
against them or their Subsidiaries.
(d) To the Companies' knowledge, all letters patent, registrations
and certificates issued by any Governmental Entity relating to any of the
Company Intellectual Property, and all licenses and other agreements pursuant
to which the Companies or their Subsidiaries use or license others to use any
Owned Intellectual Property (including, without limitation, patent licenses,
software licenses and know-how licenses) are valid, subsisting and enforceable
according to their terms, have been properly maintained, and no Company, any
Subsidiary thereof, or, to the best knowledge of the Companies, any other
Person, is in default or violation thereunder, except as described on Schedule
2.1.11.
(e) "Intellectual Property," as used herein, shall mean any domestic
and foreign letters patent, patents, trade names, trademarks and the goodwill
associated therewith, service
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<PAGE> 20
marks, copyrights, registrations and applications for any of the foregoing,
Software (as defined below), databases, and trade secrets, all similar
intellectual property, and all rights associated with any of the foregoing.
2.1.12. Software. (a) Performance. The computer software
programs included in the Owned Intellectual Property (the "Software")
essentially perform in accordance with the specifications, documentation and
other written materials used in connection with the Software and are
operational in the business environment, are in machine readable form, contain
all current revisions of such Software, and include all computer software
programs, tapes, object and source codes.
(b) Enhancements; New Products. Neither the Companies,
their Subsidiaries nor, to the Companies' knowledge, any employee or agent of
any Company or any Subsidiary of any Company has developed or assisted in the
enhancement of the Software except for enhancements which are owned or licensed
by the Companies and their Subsidiaries.
(c) Development. No employee of any Company or
Subsidiary thereof is, or is now expected to be, in default under any term of
any employment contract, agreement or arrangement relating to the Software or
any noncompetition arrangement, or any other Contract or any restrictive
covenant relating to the Software or its development or exploitation. The
Software was developed entirely by the employees of the Companies during the
time they were employees only of the Companies or their Subsidiaries and such
Software does not include any inventions of the employees made prior to the
time such employees became employees of the Companies nor any Intellectual
Property of any previous employer of such employee.
(d) Royalties. The Companies do not have any obligation
to compensate any Person for the development, use, sale or exploitation of the
Software nor have the Companies granted to any other person or entity any
license, option or other rights to develop, use, sell or exploit in any manner
the Software whether requiring the payment of royalties or not.
(e) Protection of Proprietary Nature of Software. The
Companies have taken appropriate measures to protect the confidential and
proprietary nature of the Software. Except as disclosed on Schedule 2.1.11,
there have been no patents applied for and no copyrights registered for any
part of the Software. There are no trademark rights of any person or entity
(other than the Companies) with respect to any of the Software owned by the
Companies.
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2.1.13. Condition of Assets. All the assets of each of the
Companies and the Subsidiaries thereof are in good operating condition and
repair in all material respects, subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and conform to all
applicable domestic or foreign statutes, laws, ordinances, rules or regulations
("Laws") and all licenses, permits, authorizations and approvals (collectively,
"Permits") relating to their construction, use and operation. Each of the
Companies and the Subsidiaries thereof owns, leases, or otherwise lawfully
holds all the assets and rights necessary to operate its business, except as
set forth on 2.1.13(a). Schedule 2.1.13(b) sets forth a true and complete list
of all the property and assets owned by the Existing Stockholders necessary to
the operation of the business of the Companies and the Subsidiaries as
currently conducted and as currently contemplated to be conducted.
2.1.14. Real Property. Except as set forth in Schedule
2.1.14, the title of each of the Companies and the Subsidiaries thereof in its
Owned Real Property is good and marketable, fee simple absolute, free clear of
all Liens, excepting only the Permitted Liens and such easements, restrictions
and covenants presently of record which will not, in Purchaser's sole judgment,
(i) interfere with or impair the Companies' or their Subsidiaries' intended use
of the Owned Real Property, (ii) reduce the value of any of the Owned Real
Property, or (iii) prevent the Companies from obtaining financing of the Target
Acquisition. At Closing, title to the Owned Real Property shall be insurable by
any title insurance company selected by Purchaser, at such company's regular
rates pursuant to an ALTA 1987 owner's form of policy, free of all exceptions
except the aforesaid easements, restrictions and covenants which are not
objectionable to Purchaser. "Owned Real Property" means the real property
owned by any Company or any Subsidiary of any Company in fee, together with all
appurtenant easements thereto and all structures, fixtures and improvements
located thereon.
2.1.15. Insurance. Each of the Companies and the
Subsidiaries thereof has insurance policies in full force and effect for such
amounts as are sufficient for material compliance with all requirements of law
and of all agreements that specify the necessity of insurance to which it is a
party or by which it is bound. Set forth in Schedule 2.1.15 is a list of all
fire, liability and other forms of insurance and all fidelity bonds held by or
applicable to the Companies or their businesses or assets, setting forth, in
respect of each such policy, the policy name, policy number, carrier, term,
deductible, co-payments, type of coverage and annual premium. Except as set
forth in Schedule 2.1.15, no event relating to the Companies or their
businesses or assets has occurred which can reasonably be expected to result in
a retroactive upward adjustment in premiums under any such insurance policies
or which is likely to result in a prospective upward adjustment in such
premiums. Excluding insurance policies that have expired and been replaced in
the ordinary course of business, no insurance policy has been cancelled within
the last two years and, to the Companies' knowledge, no threat has been made to
cancel any insurance policy of any Company during such period. Except as noted
on Schedule 2.1.15, all such insurance will remain in full
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force and effect with respect to periods before the Closing. No event has
occurred, including, without limitation, the failure by any Company to give any
notice or information or any Company giving any inaccurate or erroneous notice
or information, which limits or impairs the rights of such Company under any
such insurance policies.
2.1.16. Conduct of the Business Since the Interim Balance
Sheet Date. Except as disclosed in Schedule 2.1.16 or contemplated hereby,
since the Interim Balance Sheet Date, each Company and each Subsidiary thereof
has conducted its business in the ordinary course and has not:
(a) incurred any liabilities, other than liabilities
incurred in the ordinary course of business consistent with past practice, or
discharged or satisfied any lien or encumbrance, or paid any liabilities, other
than in the ordinary course of business consistent with past practice, or
failed to pay or discharge when due any liabilities of which the failure to pay
or discharge has caused or will cause any material damage or risk of material
loss to it or any of its assets or properties;
(b) sold, encumbered, assigned or transferred any of
their assets or properties, except for the sale of inventory in the ordinary
course of business consistent with past practice;
(c) created, incurred, assumed or guaranteed any
indebtedness for money borrowed, or mortgaged, pledged or subjected any of its
assets to any mortgage, lien, pledge, security interest, conditional sales
contract or other encumbrance of any nature whatsoever, except for Permitted
Liens;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or cancelled, modified or waived any substantial debts
or claims held by it or waived any rights of substantial value, whether or not
in the ordinary course of business;
(e) declared, set aside or paid any dividend or made or
agreed to make any other distribution or payment in respect of its capital
shares or redeemed, purchased or otherwise acquired or agreed to redeem,
purchase or acquire any of its capital shares;
(f) suffered any damage, destruction or loss, whether or
not covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items
carried on its books of account individually or in the aggregate at more than
$50,000, or suffered any repeated, recurring or prolonged shortage, cessation
or interruption of supplies or utility or other services required to conduct
its business and operations;
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(g) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its
business, operations, assets, properties or prospects;
(h) made commitments or agreement for capital
expenditures or capital additions or betterments exceeding in the aggregate
$150,000 except such as may be involved in ordinary repair, maintenance or
replacement of its assets;
(i) increased the salaries or other compensation of, or
made any advance (excluding advances for ordinary and necessary business
expenses) or loan to, any of its employees or made any increase in, or any
addition to, other benefits to which any of its employees may be entitled,
except salary increases in the ordinary course consistent with past practices
to their existing employees in an aggregate amount of up to six percent (6%) of
such employees aggregate current salaries;
(j) changed any of the accounting, tax or financial
reporting principles or practices followed by it or the methods of applying
such principles;
(k) suffered or experienced any related or unrelated
events which individually or in the aggregate have had or could reasonably be
expected to have a material adverse effect on the business, operations, assets,
properties, prospects or condition (financial or otherwise);
(l) disposed of or permitted to lapse any rights to use
any of its Intellectual Property or disclosed any proprietary information not
theretofore a matter of public knowledge;
(m) amended any Employee Plan (as defined in Section
2.1.19); or
(n) agreed to do any of the foregoing.
2.1.17. Customers and Suppliers. The Companies have
delivered true, complete and correct copies of (a) a list of (i) the ten
largest customers of the Companies based on sales during the fiscal year ended
November 30, 1995 and (ii) the ten largest customers of the Companies during
the nine months ended August 31, 1996, showing the approximate total sales by
the Companies to each such customer during the fiscal year ended November 30,
1995 and the nine months ended August 31, 1996, respectively, (b) a list of (i)
the ten largest suppliers of the Companies based on purchases during the fiscal
year ended November 30, 1995, and (ii) the ten largest suppliers of the
Companies based on purchases during the nine months ended August 31, 1996,
showing the approximate total purchases by the Companies from each such
supplier during the fiscal year ended November 30, 1995, and
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the nine months ended August 31, 1996, respectively. Except as described on
Schedule 2.1.17, there has not been any adverse change in the business
relationship of any Company with any customer or supplier named in Schedule
2.1.17, and the Companies have no reason to believe that there will be any such
adverse change in the future either as a result of the consummation of the
transactions contemplated by this Agreement or otherwise.
2.1.18. Labor Matters.
(a) The Companies have no reason to believe that any
employee material to the Companies' business will terminate his or her
employment as a result of the consummation of the transactions contemplated by
this Agreement or otherwise.
(b) No Company nor any Subsidiary of any Company is a
party to any labor or collective bargaining agreement, and no employees of any
Company or any Subsidiary of any Company are represented by any labor
organization. Within the preceding three years, there have been no
representation or certification proceedings, or petitions seeking a
representation proceeding, pending or, to the knowledge of any Company,
threatened in writing to be brought or filed with the National Labor Relations
Board or any other labor relations tribunal or authority. Except as set forth
in Schedule 2.1.18(b), within the preceding three years, to the knowledge of
any Company, there have been no organizing activities involving any Company or
any Subsidiary of any Company with respect to any group of employees of any
Company or any Subsidiary of any Company.
(c) There are no strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances or other material labor
disputes pending or threatened in writing against or involving any Company or
any Subsidiary of any Company. There are no unfair labor practice charges,
grievances or complaints pending or, to the knowledge of any Company,
threatened in writing by or on behalf of any employee or group of employees of
any Company or any Subsidiary of any Company.
(d) Except as set forth in Schedule 2.1.18(d), there are
no complaints, charges or claims against any Company or any Subsidiary of any
Company pending or, to the knowledge of any Company, threatened to be brought
or filed with any governmental authority, arbitrator or court based on, arising
out of, in connection with, or otherwise relating to the employment or
termination of employment of any individual by any Company or any Subsidiary of
any Company that are or would reasonably be expected to be material to such
Company or Subsidiary.
(e) Each Company and each Subsidiary thereof is in
material compliance with the Workers Adjustment and Retraining Notification Act
and all other Laws relating to the employment of labor, including all such Laws
relating to wagers, hours, collective
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bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar tax except for immaterial non-compliance.
(f) There has been no "mass layoff" or "plant closing" as
defined by WARN with respect to any Company or any Subsidiary of any Company
within six (6) months prior to Closing.
2.1.19. Employee Benefit Plans. (a) Schedule 2.1.19 sets
forth a complete and correct list of (i) all "employee benefit plans" as
defined in Section 3(3) of ERISA, for which any Company or any Subsidiary has
any obligation or liability, contingent or otherwise ("Employee Plans") and
(ii) all employment or consulting agreements, bonus or other incentive
compensation, deferred compensation, salary continuation during any absence
from active employment for disability or other reasons, severance, sick days,
stock award, stock option, stock purchase, tuition assistance, club membership,
employee discount, employee loan, or vacation pay agreements, policies or
arrangements which any Company or any Subsidiary maintains or has any
obligation or liability (contingent or otherwise) with respect to any current
or former officer, director or employee of any Company or any Subsidiary (the
"Employee Arrangements").
(b) With respect to each Employee Plan and Employee
Arrangement, a complete and correct copy of each of the following documents (if
applicable) has been provided to Purchaser: (i) the most recent plan and
related trust documents, and all amendments thereto; (ii) the most recent
summary plan description, and all related summaries of material modifications
thereto; (iii) the most recent Form 5500 (including schedules and attachments);
(iv) the most recent Internal Revenue Service determination letter; (v) the
most recent actuarial reports (including for purposes of Financial Accounting
Standards Board report no. 87, 106 and 112) and (vi) each written employment,
consulting or individual severance or other compensation agreement, and all
amendments thereto.
(c) No Company nor Subsidiary of any Company has during
the preceding six years had any obligation or liability (contingent or
otherwise) with respect to an Employee Plan which is described in Section
3(37), 4(b)(4), 4063 or 4064 of ERISA.
(d) The Employee Plans and their related trusts intended
to qualify under Sections 401 and 501(a) of the Code, respectively, so qualify.
Any voluntary employee benefit association which provides benefits to current
or former employees of any Company and any Subsidiary of any Company, or their
beneficiaries, is and has been qualified under Section 501(c)(9) of the Code.
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(e) All contributions or other payments required to have
been made by any Company or any Subsidiary of any Company to or under any
Employee Plan or Employee Arrangement by applicable law or the terms of such
Employee Plan or Employee Arrangement (or any agreement relating thereto) have
been timely and properly made.
(f) The Employee Plans and Employee Arrangements have
been maintained and administered in all material respects in accordance with
their terms and applicable laws.
(g) Except as disclosed in Schedule 2.1.19(g) there are
no pending or, to the knowledge of any Company, threatened actions, claims or
proceedings against or relating to any Employee Plan or Employee Arrangement
other than routine benefit claims by persons entitled to benefits thereunder.
(h) Except as disclosed in Schedule 2.1.19(h) no Company
nor any Subsidiary of any Company maintains or has an obligation to contribute
to retiree life or retiree health plans which provide for continuing benefits
or coverage for current or former officers, directors or employees of any
Company or any Subsidiary of any Company except (i) as may be required under
Part 6 of Title I of ERISA and at the sole expense of the participant or the
participant's beneficiary or (ii) a medical expense reimbursement account plan
pursuant to Section 125 of the Code.
(i) Except as disclosed in Schedule 2.1.19(i), none of
the assets of any Employee Plan is stock of any Company or any of its
Affiliates, or property leased to or jointly owned by any Company or any of its
Affiliates.
(j) Except as disclosed in Schedule 2.1.19(j) or in
connection with equity compensation, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment becoming due to any employee (current, former or retired)
of any Company or any Subsidiary of any Company, (ii) increase any benefits
under any Employee Plan or Employee Arrangement or (iii) result in the
acceleration of the time of payment of, vesting of or other rights with respect
to any such benefits.
(k) No Company nor any Subsidiary of any Company has any
liability (contingent or otherwise) under Section 4069 of ERISA by reason of a
transfer of an underfunded pension plan.
2.1.20. Litigation; Decrees. There are no judicial or
administrative actions, proceedings or investigations pending or, to the
Companies' knowledge, threatened that question the validity or enforceability
of this Agreement or any action taken or to be taken by
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the Companies in connection with this Agreement. Except as listed or described
on Schedules 2.1.19(b) or 2.1.20, there are no (i) lawsuits, claims,
administrative or other proceedings or investigations pending or, to the
Companies' knowledge, threatened by, against or affecting any Company or any
Affiliate thereof or (ii) judgments, orders or decrees of any Governmental
Entity binding on any of the Companies or any of their respective properties
and assets.
2.1.21. Compliance With Law; Permits. Each of the Companies
has complied with each Law, judgment, order and decree of any Governmental
Entity to which it or its business, operations, assets or properties is subject
and is not currently in violation of any of the foregoing. Each of the
Companies owns, holds, possesses or lawfully uses in the operation of its
business all Permits which are in any manner necessary for it to conduct its
business as now or previously conducted or for the ownership and use of its
assets, free and clear of all liens, charges, restrictions and encumbrances and
in compliance with all Laws. All such Permits are listed and described on
Schedule 2.1.21. No Company is in default, nor has it received any notice of
any claim of default, with respect to any such Permits. All such Permits are
renewable by their terms or in the ordinary course of business without the need
to comply with any special qualification procedures or to pay any amounts other
than routine filing fees. None of such Permits will be adversely affected by
consummation of the transactions contemplated hereby. No shareholder,
director, officer, employee or former employee of any Company or any Affiliates
of any Company, or any other person, firm or corporation owns or has any
proprietary, financial or other interest (direct or indirect) in any Permits
which any Company owns, possesses or uses in the operation of its business as
now or previously conducted.
2.1.22. Environmental Matters. Except as set forth in
Schedule 2.1.22:
(a) the operation of the business of each of the
Companies and its Subsidiaries is in compliance with all applicable
Environmental Laws;
(b) (i) Each of the Companies and the Subsidiaries
thereof has obtained and currently maintains all Environmental Permits
necessary for its operations and is in compliance with such Environmental
Permits, (ii) there are no judicial or administrative actions, proceedings or
investigations pending or, to the Companies' knowledge, threatened to revoke
such Environmental Permits, and (iii) no Company or any Subsidiary of any
Company has received any notice from any Governmental Entity or written notice
from any person to the effect that there is lacking any Environmental Permit
required for the current use or operation of any property owned, operated or
leased by such Company or Subsidiary;
(c) there are no judicial or administrative actions,
proceedings or investigations pending or, to the Companies' knowledge,
threatened against any Company or
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any Subsidiary of any Company alleging the violation of any Environmental Law
or Environmental Permit;
(d) none of the Companies or the Subsidiaries of the
Companies, any predecessor of any of them, or any current or former owner or
operator of premises currently leased or operated by any of them has filed any
notice under any Environmental Law indicating past or present treatment,
storage, or disposal of or reporting a Release or threatened Release of
Hazardous Material into the environment;
(e) no Company or any Subsidiary of any Company or any of
their past or current facilities and operations, or any predecessor of any of
them, is subject to any outstanding written order, injunction, judgment,
decree, ruling, assessment or arbitration award or any agreement with any
Governmental Entity or other person, or to any federal, state, local or foreign
investigation respecting (i) Environmental Laws, (ii) Remedial Action, (iii)
any Environmental Claim or (iv) the Release or threatened Release of any
Hazardous Material;
(f) all the Owned Real Property and all real property
formerly owned, operated or leased by any Company or any Subsidiary of any
Company or any predecessor of any of them and, to the Companies' knowledge, all
property adjacent to the Owned Real Property, is free of contamination by or
from any Hazardous Materials;
(g) none of the operations of any Company or any
Subsidiary of any Company or any predecessor of any of them or of any owner or
operator of premises currently leased or operated by any of them involves or
previously involved the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any
state, local or foreign equivalent;
(h) there is not now, nor (to the Companies' knowledge
for all periods prior to their ownership, lease or operation of such real
property) has there been in the past, on, in or under the Owned Real Property
or any other real property currently or formerly owned, leased or operated by
any Company or any Subsidiary of any Company or any predecessor of any of them
(i) any underground storage tanks, above-ground storage tanks, dikes or
impoundments, (ii) any asbestos-containing materials, (iii) any polychlorinated
biphenyls or (iv) any radioactive substances; and
(i) No Company or any Subsidiary of any Company is
subject to Environmental Costs and Liabilities with respect to Hazardous
Materials, and no facts or circumstances exist which could give rise to
Environmental Costs and Liabilities with respect to compliance with
Environmental Laws applicable to Hazardous Materials.
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(j) The Companies have provided Purchaser with copies of
all environmentally related audits, assessments, studies, reports, analyses,
and results of investigations of the Owned Real Property that are in the
possession, custody or control of the Companies and their Subsidiaries.
(k) For purposes of the foregoing Section 2.1.22:
"Environmental Claim" means any accusation, allegation, notice
of violation, action, claim, lien, demand, abatement or other order or
directive (conditional or otherwise) by any Governmental Entity or any
other person (including any employee or former employee of any
contractor or subcontractor of any Company or any Subsidiary of any
Company) for personal injury (including sickness, disease or death),
tangible or intangible property damage, damage to the environmental
(including natural resources), nuisance, pollution, contamination,
trespass or other adverse effects on the environment, or for fines,
penalties or restrictions resulting from or based upon (i) the
existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden accidental or
non-accidental Releases) of, or exposure to, any Hazardous Material,
odor or audible noise in, into or onto the environment (including,
without limitation, the air, soil, surface water or ground water) at,
in, by, from or related to the Owned Real Property or any other
property currently or formerly owned, operated or leased by any
Company or any Subsidiary of any Company or any activities or
operations thereof; (ii) the transportation, storage, treatment or
disposal of Hazardous Materials in connection with the Owned Real
Property or any other property currently or formerly owned, operated
or leased by any Company or any Subsidiary of any Company; or (iii)
the violation, or alleged violation, of any Environmental Laws or
Environmental Permits relating to environmental matters connected with
the Owned Real Property or any other property currently or formerly
owned, operated or leased by any Company or any Subsidiary of any
Company.
"Environmental Costs and Liabilities" shall mean any and all
losses, liabilities, obligations, damages, fines, penalties,
judgments, actions, claims, costs and expenses (including fees,
disbursements and expenses of legal counsel, experts, engineers and
consultants and the costs of investigation and feasibility studies,
remedial or removal actions and cleanup activities) arising from or
under any Environmental Law or Environmental Claim or any order or
agreement now in effect with any Governmental Entity or other person.
"Environmental Law" means any applicable federal, state, local
or foreign law (including common law), statute, code, ordinance, rule,
regulation or other requirement relating to the environment, natural
resources, or public and employee
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health and safety and includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section 9601, et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the
Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act,
33 U.S.C. Section 2601, et seq., the Toxic Substances Control Act, 15
U.S.C. Section 2601, et seq., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. Section 136, et seq., the Oil Pollution Act
of 1990, 33 U.S.C. Section 2701, et seq., the Federal Safe Drinking
Water Act, 42 U.S.C. Section 300F, et seq., and the Occupational
Safety and Health Act, 29 U.S.C. Section 651, et, seq., as such laws
have been amended or supplemented, and the regulations promulgated
pursuant thereto, and all analogous state or local statutes.
"Environmental Permit" means any permit, approval,
authorization, license, variance, registration, or permission required
under any applicable Environmental Law.
"Hazardous Material" means any substance, material or waste
which is regulated by any Governmental Entity, including, without
limitation, any material, substance or waste which is defined as a
"hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous substance," "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision
of Environmental Law, which includes, but is not limited to,
petroleum, petroleum products (including crude oil and any fraction
thereof), asbestos, asbestos-containing materials, urea formaldehyde
and polychlorinated biphenyls.
"Release" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, injection, deposit, disposal,
discharge, dispersal, leaching, or migration on or into the indoor or
outdoor environment or into or out of any property.
"Remedial Action" means all actions, including, without
limitation, any capital expenditures, required or voluntarily taken to
(i) clean up remove, treat, or in any other way address any Hazardous
Material or other substance; (ii) prevent the Release or threat of
Release, or minimize the further Release, of any Hazardous Material so
it does not migrate or endanger or threaten to endanger public health
or welfare or the indoor or outdoor environmental; (iii) perform
pre-remedial studies and investigations or post-remedial monitoring
and care; or (iv) bring facilities on any property owned, operated or
leased by any Company or any Subsidiary thereof and the facilities
located and operations conducted thereon into compliance with all
Environmental Laws and Environmental Permits.
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2.1.23. Taxes. Except as set forth on Schedule 2.1.23 of the
hereto:
(i) All Tax Returns required to be filed by or with
respect to each of the Companies have been duly and timely filed, and all such
Tax Returns are true, correct and complete in all material respects. Each of
the Companies has duly and timely paid all Taxes that are due, or claimed or
asserted by any taxing authority to be due, from or with respect to it. With
respect to any period for which Taxes are not yet due with respect to any
Company, each of the respective Companies has made due and sufficient current
accruals for such Taxes in its Financial Statements. Each of the Companies has
made all required estimated Tax payments sufficient to avoid any underpayment
penalties. Each of the Companies has withheld and paid all Taxes required by
all applicable laws to be withheld or paid in connection with any amounts paid
or owing to any employee, creditor, independent contractor or other third
party.
(ii) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, Taxes due from or
with respect to any Company for any taxable period. No audit or other
proceeding by any court, governmental or regulatory authority, or similar
person is pending or threatened in regard to any Taxes due from or with respect
to any Company or any Tax Return filed by or with respect to any Company. No
assessment of Taxes is proposed against any Company or any of their assets.
(iii) No consent to the application of Section 341(f)(2) of
the Code (or any predecessor provision) has been made or filed by or with
respect to any Company or any of its assets. No Company has agreed to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor
provision) by reason of any change in any accounting method, and there is no
application pending with any taxing authority requesting permission for any
changes in any accounting method of any Company. None of the assets of any
Company is or will be required to be treated as being owned by any Person
(other than any Company) pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986.
(iv) At all times since 1990 and through the Closing Date,
each of the Companies has qualified as an S corporation within the meaning of
Section 1361(a)(1) of the Code (and any predecessor provision).
(v) "Code" shall mean the Internal Revenue Code of 1986,
as amended. "Taxes" shall mean all taxes, charges, fees, levies, or other
similar assessments or liabilities, including without limitation (a) income,
gross receipts, ad valorem, premium, excise, real property, personal property,
sales, use, transfer, withholding, employment, payroll, and franchise taxes
imposed by the United States of America, or by any state, local, or foreign
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government, or any subdivision, agency, or other similar person of the United
States or any such government; and (b) any interest, fines, penalties,
assessments, or additions to taxes resulting from, attributable to, or incurred
in connection with any Tax or any contest, dispute, or refund thereof. "Tax
Returns" shall mean any report, return, or statement required to be supplied to
a taxing authority in connection with Taxes.
2.1.24. Commissions or Finders Fees. Except as expressly
contemplated in this Agreement, no Company nor any Subsidiary of any Company
nor any person or entity acting on the behalf of any Company or any Subsidiary
thereof has agreed to pay a commission, finder's fee or similar payment in
connection with this Agreement or any matter related hereto to any person or
entity.
2.1.25. Certain Business Practices and Regulations; Potential
Conflicts of Interest. (a) No Company nor any Subsidiary of any Company nor
any directors, officers, agents or employees of any Company or any Subsidiary
thereof has (i) used any corporate 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 from
corporate funds or violated any provision of the Foreign Corrupt Practices Act
of 1977, as amended, or (iii) to their knowledge made any other unlawful
payment.
(b) Except as set forth on Schedule 2.1.25(b), none of
the stockholders, officers or directors of any Company or any Subsidiary
thereof or any entity controlled by any of the foregoing (i) owns, directly or
indirectly, any significant interest in, or is a director, officer, employee,
consultant or agent of, any Person which is a competitor, lessor, lessee or
customer of, or supplier of goods or services to, the Company, (ii) owns,
directly or indirectly, in whole or in part, any real property, leasehold
interests or other property with a fair market value of at least $25,000 in the
aggregate the use of which is necessary to any Company, (iii) has any cause of
action or other suit, action or claim whatsoever against, or owes any amount to
any Company or any Subsidiary thereof other than claims in the ordinary course
of business, (iv) has sold to, or purchased from, any Company or any Subsidiary
thereof any assets or property for aggregate consideration in excess of $25,000
since January 1, 1992, or (v) is a party to any contract or participates in any
arrangement, written or oral, pursuant to which any Company or any Subsidiary
thereof provides services of any nature to any such individual or entity,
except to such individual in his capacity as an employee of the Companies.
2.1.26. Disclosure. No representation or warranty by the
Companies or the Existing Stockholders contained in this Agreement, and no
statement contained in any document (including without limitation the financial
statements referenced in Section 2.1.6., the closing documents delivered
pursuant to Article V and the Schedules hereto), list,
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certificate or other instrument furnished or to be furnished by or on behalf of
the Companies or any Affiliate thereof to Purchaser or any of its
representatives in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading or necessary in order fully and fairly to provide the
information required to be provided in any such document, list, certificate or
other instrument. The Companies and Existing Stockholders have not failed to
disclose to Purchaser any fact which would reasonably be determined to have a
material adverse effect on the business, financial condition, results of
operations or prospects of any Company, or which is otherwise material to any
Company. Each schedule, report, and statement filed by any Company or any
Subsidiary thereof (the "Company SEC Documents") with the Securities Exchange
Commission (the "SEC") in connection with the Tender Offer (including the
Schedule 14D-1 (the "Schedule 14D") contemplated by the Merger Agreement) or
otherwise used in the Tender Offer shall comply in all material respects with
the requirements of the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Documents, and none of the Company SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.2. Representations of the Existing Stockholders. Each of the
Existing Stockholders makes the following representations and warranties to the
Purchaser, each of which is true and correct as of the date hereof and shall be
true and correct as of the Closing Date and shall be unaffected by any
investigation heretofore or hereafter made by the Purchaser.
2.2.1. Ownership of CCI Common Stock. Each Existing
Stockholder is the holder of record and owns beneficially that number of shares
of CCI Common Stock set forth opposite his, her or its name on Schedule 2.2.1;
provided, prior to Closing the Existing Stockholders may transfer up to 22% of
such Existing Stockholders' share of the CCI Common Stock on a fully diluted
basis, to certain members of CCI's management and certain customers of the
Companies who agree to be bound by the terms of this Agreement as Existing
Stockholders and execute a signature page hereto. None of the Existing
Stockholders is a party to any voting trust, proxy or other agreement with
respect to the voting of any of such shares which will remain in force or
effect after the Closing.
2.2.2. Authorization and Effect of Agreement. This Agreement
has been and the Stockholders Agreement will be duly executed and delivered by
each Existing Stockholder and, assuming the due execution and delivery of this
Agreement and the Stockholders Agreement by the other parties hereto and
thereto, this Agreement constitutes and the Stockholders Agreement will
constitute the valid and binding obligations of each
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Existing Stockholder enforceable against such stockholder in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
in general and subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
2.2.3. No Restrictions. The execution and delivery of this
Agreement does not and the Stockholder Agreement by the Existing Stockholders
will not, and the performance by each of the Existing Stockholders of the
transactions contemplated hereby and thereby to be performed by it will not (a)
conflict with, or result in any violation of, or constitute a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any debt or obligation or
constitute a breach of, create a loss of a material benefit under, any
contract, mortgage, indenture, lease, agreement or other instrument or any
permit, order, judgment or decree to which any Existing Stockholder is a party
or by which any is bound, or (b) constitute a violation of any law or
regulation applicable to any Existing Stockholder. No consent, approval, order
or authorization of, or registration, declaration or filing with any
Governmental Entity is required to be obtained or made by or with respect to
any Existing Stockholder in connection with its execution and delivery of this
Agreement or the Stockholders Agreement or the consummation by it of the
transactions contemplated hereby and thereby to be consummated by it, except as
listed or described on Schedule 2.2.3.
2.3. Representations and Warranties of Purchaser. Purchaser makes the
following representations and warranties to the Existing Stockholders, each of
which is true and correct as of the date hereof and shall be true and correct
as of the Closing Date and shall be unaffected by any investigation heretofore
or hereafter made by the Existing Stockholders.
2.3.1. Corporate Organization. Purchaser is duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority to own, lease or otherwise hold its
properties and assets and to carry on its business as presently conducted.
Purchaser is in good standing and duly qualified as a foreign limited
partnership in the State of Texas.
2.3.2. Authorization and Effect of Agreement. Purchaser has
the requisite power to execute and deliver this Agreement and to consummate the
transactions contemplated hereby to be consummated by it. The execution and
delivery by Purchaser of this Agreement and the Stockholders Agreement and the
consummation by it of the transactions contemplated hereby and thereby to be
consummated by it have been duly authorized by all necessary corporate action
on the part of the ultimate general partner of the Purchaser. This Agreement
has been and the Stockholders Agreement will be duly executed and delivered by
Purchaser and, assuming the due execution and delivery of this Agreement
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<PAGE> 35
and the Stockholders Agreement by the other parties hereto and thereto, this
Agreement constitutes and the Stockholders Agreement will constitute the valid
and binding obligations of Purchaser enforceable against the Purchaser in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
2.3.3. No Restrictions. The execution and delivery of this
Agreement by Purchaser does not, and the Stockholders will not, and the
performance by Purchaser of the transactions contemplated hereby and thereby to
be performed by it will not (a) conflict with the organizational documents of
Purchaser, (b) conflict with, or result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any debt or
obligation or constitute a breach of, create a loss of a material benefit
under, any contract, mortgage, indenture, lease, agreement or other instrument
or any permit, order, judgment or decree to which Purchaser is a party or by
which it is bound, or (c) constitute a violation of any law or regulation
applicable to Purchaser. Except for any applicable requirements of the HSR
Act, no consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained
or made by or with respect to Purchaser in connection with the execution and
delivery of this Agreement or the Stockholders Agreement by Purchaser or the
consummation by it of the transactions contemplated hereby and thereby to be
consummated by it, except as listed or described on Schedule 2.3.3.
2.3.4. Litigation; Decrees. There are no judicial or
administrative actions, proceedings or investigations pending or, to
Purchaser's knowledge, threatened that question the validity or enforceability
of this Agreement or any action taken or to be taken by Purchaser in connection
with this Agreement. There are no lawsuits, claims, administrative or other
proceedings or investigations pending or, to the Purchaser's knowledge,
threatened by, against or affecting the Purchaser in connection with this
Agreement.
2.3.5. Purchase of Shares. The Purchaser represents and
warrants to CCI that:
(a) the CCI Common Stock to be acquired by it
pursuant to this Agreement is being acquired for its own account, not
as a nominee or agent for any other Person and without a view to the
distribution of such securities or any interest therein in violation
of the Securities Act;
(b) Purchaser is an "accredited investor" within
the meaning of Rule 501(a) under Regulation D promulgated under the
Securities Act of 1933, as amended
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(the "Securities Act"), and has such knowledge and experience in
financial and business matters so as to be capable of evaluating the
merits and risks of its investment in the CCI Common Stock, and
Purchaser is capable of bearing the economic risks of such investment
and is able to bear the complete loss of its investment in the CCI
Common Stock; and
(c) Purchaser acknowledges that the CCI Common
Stock has not been registered under the Securities Act and understands
that the CCI Common Stock must be held indefinitely unless it is
subsequently registered under the Securities Act or such sale is
permitted pursuant to an available exemption from such registration
requirement.
2.3.6. Information Supplied. None of the information
supplied or to be supplied by Purchaser for inclusion or incorporation by
reference in (i) the Schedule 14D will, at the time the Schedule 14D is filed
with the Securities Exchange Commission, and at any time it is amended or
supplemented, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made,
not misleading, and (ii) the Proxy Statement (as defined in the Target Merger
Agreement) will, at the date it is first mailed to Triad's stockholders or at
the time of the Company Stockholders Meeting (as defined in the Target Merger
Agreement), 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. If at any time prior to the Effective Time (as defined
in the Target Merger Agreement) any event with respect to Purchaser, or with
respect to information supplied by Purchaser for inclusion in the Schedule 14D
or the Proxy Statement, shall occur which is required to be described in an
amendment of, or a supplement to, such documents, such event shall be so
described to CCI.
2.3.7. Commissions or Finders Fees. Neither Purchaser nor
any person or entity acting on the behalf of Purchaser has agreed to pay a
commission, finder's fee or similar payment in connection with this Agreement
or any matter related hereto to any person or entity.
2.4. Representations and Warranties of Acquisition Company.
Acquisition Company makes the following representations and warranties to
Purchaser, each of which is true and correct as of the date hereof and shall be
true and correct as of the Closing Date and shall be unaffected by any
investigation heretofore or hereafter made by the Existing Stockholders.
2.4.1. Corporate Organization. Acquisition Company is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the
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requisite corporate power and authority to own, lease or otherwise hold its
properties and assets and to carry on its business as presently conducted.
2.4.2. Authorization and Effect of Agreement. Acquisition
Company has the requisite power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby to be consummated by it. The
execution and delivery by Acquisition Company of this Agreement and the
consummation by it of the transactions contemplated hereby to be consummated by
it have been duly authorized by all necessary corporate action of the
Acquisition Company. This Agreement has been duly executed and delivered by
the Acquisition Company and, assuming the due execution and delivery of this
Agreement by the other parties hereto, this Agreement constitutes the valid and
binding obligations of Acquisition Company enforceable against the Acquisition
Company in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
2.4.3. No Restrictions. The execution and delivery of this
Agreement by Acquisition Company does not, and the performance by Purchaser of
the transactions contemplated hereby to be performed by it will not (a)
conflict with the organizational documents of Acquisition Company, (b) conflict
with, or result in any violation of, or constitute a default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any debt or obligation or
constitute a breach of, create a loss of a material benefit under, any
contract, mortgage, indenture, lease, agreement or other instrument or any
permit, order, judgment or decree to which Acquisition Company is a party or by
which it is bound, or (c) constitute a violation of any law or regulation
applicable to Acquisition Company. Except for any applicable requirements of
the HSR Act, no consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained
or made by or with respect to Acquisition Company in connection with the
execution and delivery of this Agreement by Acquisition Company or the
consummation by it of the transactions contemplated hereby to be consummated by
it, except as listed or described on Schedule 2.4.3.
2.4.4. Litigation; Decrees. There are no judicial or
administrative actions, proceedings or investigations pending or, to
Acquisition Company's knowledge, threatened that question the validity or
enforceability of this Agreement or any action taken or to be taken by
Acquisition Company in connection with this Agreement. There are no lawsuits,
claims, administrative or other proceedings or investigations pending or, to
the Acquisition Company's knowledge, threatened by, against or affecting the
Acquisition Company in connection with this Agreement.
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ARTICLE III. PRE-CLOSING COVENANTS
3.1. Access to Information. Prior to the Closing, upon reasonable
notice, the Companies and the Acquisition Company will afford to the officers,
attorneys, employees, directors, accountants, financing sources or other
authorized representatives of Purchaser reasonable access during normal
business hours to their respective employees, assets, facilities and books and
records so as to afford Purchaser full opportunity to make such review,
examination and investigation of their respective businesses as Purchaser may
desire to make, including without limitation an environmental evaluation of
such companies. Purchaser will be permitted to make extracts from or to make
copies of such books and records as may be reasonably necessary in connection
therewith. Prior to the Closing, the Acquisition Company and each Company will
promptly furnish or cause to be furnished to Purchaser such financial and
operating data and other information as Purchaser may reasonably request.
3.2. Conduct of Business. Except as set forth on Schedule 3.2, as
contemplated herein or as otherwise consented to by Purchaser in writing (which
consent shall not be unreasonably withheld), during the period from the date of
this Agreement and continuing until the Closing Date, each Company will and
will cause each of its Subsidiaries to:
(a) use its best efforts to (i) carry on its business in
the usual, regular and ordinary course as presently conducted and
consistent with past practice, (ii) keep its business intact, (iii)
keep available the services of its key employees, and (iv) maintain
the goodwill associated with its business, including but not limited
to preserving the relationships of its key customers, suppliers and
others having business dealings with it;
(b) maintain its assets in good condition, and except for
sales in the ordinary course of business, not move any asset to any
location other than the Owned Real Property or real property leased by
any Company or any Subsidiary thereof;
(c) not sell, lease or dispose of, or make any contract
for the sale, lease or disposition of, or subject to Lien, any of its
assets other than sales in the ordinary course of the business;
(d) not incur any indebtedness, liability or other
obligation (absolute, accrued, contingent or otherwise) or assume,
guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other person;
(e) not amend or terminate any Contract or other
agreement or Permit, other than in the ordinary course of business
consistent with past practices;
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(f) not make any change in financial reporting or tax
accounting methods, principles or practices unless required by GAAP or
applicable law;
(g) not extend credit in the sale of products, collection
of receivables or otherwise, other than in the ordinary course of
business consistent with past practices or make any loan to any
person;
(h) maintain its books, accounts and records in the
usual, regular and ordinary manner on a basis consistent with prior
years;
(i) make any change to, or amend in any way, the
contracts, salaries, wages, or other compensation of any officer,
director, employee, agent, or other similar representative of any
Company or any Subsidiary of any Company, except that the Companies
may in the ordinary course consistent with past practice grant salary
increases to their existing employees in an aggregate amount of up to
six percent (6%) of such employees' aggregate current salaries;
(j) not adopt, enter into, amend, alter, or terminate
(partially or completely) any Employee Plan or Employee Arrangement
except to the extent required by applicable Law;
(k) not enter into any contract with an officer,
director, employee, agent, or other similar representative of any
Company or any Subsidiary of any Company that is not terminable,
without penalty or other liability, upon not more than 60 calendar
days' notice.
(l) not enter into any agreement, including an agreement
to purchase or lease assets, which includes an aggregate payment or
commitment on the part of either party of more than $50,000
individually or $250,000 in the aggregate;
(m) not adopt or amend any Employee Plan or collective
bargaining agreements, except as required by Law;
(n) maintain in full force and effect all insurance
described in Schedule 2.1.15;
(o) not declare, set aside or pay any dividend or makes
or agree to make any other distribution or payment in respect of its
capital stock or redeem, purchase or otherwise acquire or agree to
redeem, purchase or acquire any of its capital stock or any option,
warrant or other similar right or any security convertible into or
exchangeable or exercisable for any of its capital stock, except that
each of the
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Companies may pay a dividend to its stockholders in an amount equal to
its previously undistributed Taxable Income (as defined in Article VI)
from December 1, 1995 through the Closing Date;
(p) not take or omit to take any action as a result of
which any representation or warranty of the Companies or and the
Existing Stockholders in Article II would be rendered untrue or
incorrect if such representation or warranty were made immediately
following the taking or failure to take such action;
(q) not to amend its articles of incorporation or bylaws
(other than pursuant to the CCI Merger Agreement);
(r) not to issue or agree to issue any capital stock or
any option, warrant, call, subscription, conversion or other right
obligating it to issue any capital stock or any other securities
convertible into or exchangeable or exercisable for its capital stock;
(s) not split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock;
(t) not acquire any business or any corporation,
partnership, joint venture, association or other business organization
or division thereof;
(u) not pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms;
(v) not merge, amalgamate or consolidate with any other
entity in any transaction in which the Company is not the surviving
corporation, sell all or substantially all of its business or assets,
or acquire all or substantially all of the business or assets of any
other person;
(w) not waive any claims or rights having a value in
excess of $50,000 in the aggregate;
(x) not enter into any agreement, understanding or
commitment that restrains, limits or impedes its ability to compete
with or conduct any business or line of business; or
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(y) not authorize any of, or commit or agree to take any
of, the foregoing actions.
3.3. Notification. (a) The Companies and the Acquisition Company
shall notify Purchaser, and Purchaser shall notify the Companies, of any
litigation, arbitration or administrative proceeding pending or, to its
knowledge, threatened against the Companies, the Acquisition Company or
Purchaser, as the case may be, which challenges the transactions contemplated
hereby.
(b) Purchaser will provide prompt written notice to CCI
of any change in any of the information contained in its representations and
warranties made in Article II hereof or any Exhibits or Schedules referred to
herein or attached hereto and shall promptly furnish any information which CCI
may reasonably request in relation to such change; provided, however, that such
notice shall not operate to cure any breach of the representations and
warranties made in Article II hereof or any Exhibits or Schedules referred to
herein or attached hereto.
(c) Each of the Acquisition Company and the Companies
will provide prompt written notice to Purchaser of any change in any of the
information contained in its representations and warranties made in Article II
hereof or any Exhibits or Schedules referred to herein or attached hereto and
shall promptly furnish any information which Purchaser may reasonably request
in relation to such change; provided, however, that such notice shall not
operate to cure any breach of the representations and warranties made in
Article II hereof or any Exhibits or Schedules referred to herein or attached
hereto.
3.4. Cooperation. The parties hereto shall cooperate fully with each
other in taking any actions, including actions to obtain the required consent
of any Governmental Entity or any third party, necessary or helpful to
accomplish the transactions contemplated by this Agreement; provided, however,
that no party shall be required to take any action which would have a material
adverse effect upon it or any Affiliate.
3.5. No Inconsistent Action. No party hereto shall take any action
which is materially inconsistent with its obligations under this Agreement.
3.6. Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Article IV, prior to the Closing, each of the
parties hereto will use reasonable efforts with due diligence and in good faith
to satisfy promptly all conditions required hereby to be satisfied by such
party in order to expedite the consummation of the transactions contemplated
hereby and the Target Acquisition.
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3.7. Injunctions. Without limiting the generality or effect of any
provision of Section 3.8 or Article IV, if any United States, state or foreign
court having jurisdiction over any party issues or otherwise promulgates any
injunction, decree or similar order prior to the Closing which prohibits the
consummation of the transactions contemplated hereby, the parties hereto will
use their respective reasonable efforts to have such injunction dissolved or
otherwise eliminated as promptly as possible and, prior to or after the
Closing, to pursue the underlying litigation diligently and in good faith.
3.8. Filings. As promptly as practicable after the execution of this
Agreement, each party hereto shall use its reasonable efforts to obtain, and to
cooperate with the other parties hereto in obtaining, all authorizations,
consents, orders and approvals of any Governmental Entity that may be or become
necessary in connection with the consummation of the transactions contemplated
by this Agreement (including without limitation the Tender Offer, the Target
Acquisition, the Target Merger and the CCI Merger), and to take all reasonable
actions to avoid the entry of any order or decree by any Governmental Entity
prohibiting the consummation of the transactions contemplated hereby, including
without limitation, any reports or notifications that may be required to be
filed by it under the HSR Act, and shall furnish to the other all such
information in its possession as may be necessary for the completion of the
reports or notifications to be filed by the other. Purchaser and each of the
Companies agree that any filing fee required to be paid in connection with any
filing under the HSR Act shall be paid one-half by Purchaser and one-half by
the Companies.
3.9. Confidentiality. Each party hereto shall keep confidential all
information obtained by it with respect to the others in connection with this
Agreement and the negotiations preceding this Agreement, and will use such
information solely in connection with the transactions contemplated by this
Agreement, and if the transactions contemplated hereby are not consummated,
each shall return to the others, without retaining a copy thereof, any
schedules, documents or others written information obtained from the other in
connection with this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, no party hereto shall be required to keep
confidential or return any information which (a) is known or available through
other lawful sources, not bound by a confidentiality agreement with the
disclosing party, (b) is or becomes publicly known through no fault of the
receiving party or its agents, (c) is required to be disclosed pursuant to an
order or request of a judicial authority or Governmental Entity (provided the
disclosing party is given reasonable prior notice), or (d) is developed by the
receiving party independently of the disclosure by the disclosing party.
3.10. Publicity. Prior to the Closing, no party hereto will issue or
cause the publication of any press release or other public announcement with
respect to this Agreement or the transactions contemplated hereby without the
prior consent of the other parties hereto, which consent will not be
unreasonably withheld; provided, however, that nothing herein will
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prohibit any party from issuing or causing publication of any such press
release or public announcement to the extent that such party determines such
action to be required by Law, in which event the party making such
determination will, if practicable in the circumstances, use reasonable efforts
to allow the other parties reasonable time to comment on such release or
announcement in advance of its issuance.
3.11. Acquisition Proposals. From and after the date of this
Agreement, neither the Acquisition Company nor any Company shall, nor shall
they authorize or permit any of their respective officers, directors or
employees, or any investment banker, attorney, accountant or other
representative retained by it to, solicit, initiate, encourage or accept
submission of any proposal or offer (including by way of furnishing
information) from any Person which constitutes, or may reasonably be expected
to lead to, any Acquisition Proposal. As used in this Agreement, "Acquisition
Proposal" shall mean any proposal for a merger or other business combination
involving any Company, the Acquisition Company or Triad or any proposal or
offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of any Company or Triad.
3.12. Covenant of Existing Stockholders. Subject to the terms and
conditions herein provided and in the Target Merger Agreement and the Tender
Offer, each of the Existing Stockholders agrees to use its reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done
(including by the Companies and their Subsidiaries and, the Acquisition
Company) as promptly as practicable, all things necessary, proper and advisable
under applicable laws and regulations to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement and the
Target Merger Agreement (including without limitation the Tender Offer, the
Target Acquisition, the Target Merger and the CCI Merger). Further, the
Existing Stockholders shall take all such action necessary to cause the
Companies and the Acquisition Company to comply with their respective covenants
hereunder and to cause the respective representations and warranties of the
Companies, the Acquisition Company and the Existing Stockholders to be true at
all times on or prior to Closing.
3.13. Efforts of the Companies. Upon the terms and subject to the
conditions and other agreements set forth in this Agreement, each of the
Companies agrees to use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including the satisfaction of the
respective conditions set forth in Article IV, including without limitation the
Tender Offer, the Target Acquisition, the Target Merger and the CCI Merger.
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3.14. Covenant Relating to Target Acquisition. (a) In furtherance
and not in limitation of their obligations under Section 3.12 and 3.13, CCI and
the Existing Stockholders, as the case may be, shall and shall cause the
Acquisition Company to take or cause to be taken, all actions, and to do, or
cause to be done, and to assist in doing, all things necessary, proper or
advisable to comply with its obligations under the Merger Agreement and to
commence and consummate the Tender Offer in accordance with the terms thereof,
including filing the Schedule 14D with the SEC. Subject to the satisfaction of
the conditions to the Acquisition Company's obligation to consummate the Tender
Offer, CCI shall cause the Acquisition Company to accept and pay for the shares
of Target Common Stock tendered and otherwise to consummate the Tender Offer.
(b) Without the express written consent of the Purchaser,
neither CCI nor the Acquisition Company shall amend or modify the Target Merger
Agreement or the terms of the Tender Offer (which terms shall be the terms set
forth in Offering Circular first mailed therefor) or waive any condition of or
right under or with respect to the Tender Offer or the Target Merger Agreement.
Each of CCI and the Acquisition Company agrees to exercise its rights under the
Target Merger Agreement in accordance with the reasonable requests of the
Purchaser (without limitation the right to terminate the Target Merger
Agreement in the event it has such right). Each of the Acquisition Company and
CCI will promptly notify and consult with Purchaser before it exercises any
rights under the Target Merger Agreement. Notwithstanding the foregoing,
neither CCI nor the Acquisition Company shall be required to take any action
that would cause it to breach the Merger Agreement. Further, nothing in this
Section 3.14 shall prevent CCI or the Acquisition Company from terminating the
Merger Agreement or the Tender Offer in accordance with their respective terms.
3.15. Merger of CCI. At or prior to Closing, the Companies and the
Existing Stockholders shall cause the CCI Merger to be consummated in
accordance with and subject to the terms of the CCI Merger Agreement.
3.16. Delivery of Financial Statements. The Companies shall deliver
to Purchaser promptly upon their becoming available and in no event later than
20 days from the end of such month, copies of monthly financial statements for
each of the months ended after the date hereof and prior to the Closing. Each
of such monthly financial statements shall be prepared in accordance with GAAP
applied throughout the periods involved, be complete and correct in all
material respects and present fairly the financial condition of the Companies
and their Subsidiaries as at said dates (subject to normal year end
adjustments).
3.17. Contribution of Assets. Except as set forth on Schedule 3.17,
each Existing Stockholder agrees to contribute prior to the Closing any and all
assets and properties owned
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directly or indirectly by it or any entity controlled by it currently used or
necessary to operate the businesses of the Companies and their Subsidiaries.
3.18. Lease. CCI shall have entered into a lease on terms and in a
form reasonably satisfactory to Purchaser with respect to the real property and
appurtenants thereto used as the Companies' headquarters located at 6207 Bee
Cave Road, Austin, Texas.
3.19. Authorization of CCI Common Stock. Prior to the Closing, CCI
and the Existing Stockholders shall cause the articles of incorporation of CCI
to be amended so there is a sufficient number of shares of CCI Common Stock to
consummate the sale of the CCI Common Stock to Purchaser.
3.20. Indebtedness. Prior to Closing each of the Companies and the
Subsidiaries thereof shall cause all of its indebtedness for borrowed money
(other than the shareholder indebtedness and indebtedness incurred in
connection with the Target Acquisition) to be discharged and no such
indebtedness shall be outstanding at Closing.
3.21. Efforts of the Acquisition Company. Upon the terms and subject
to the conditions and other agreements set forth in this Agreement, the
Acquisition Company agrees to use its best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including the satisfaction of the
respective conditions set forth in Article IV, including without limitation the
Tender Offer, the Target Acquisition and the Target Merger.
3.22. Exercise of Waiver. At any time after November 5, 1996 but
prior to the Closing, if so requested by Purchaser, CCI agrees to waive its
rights to terminate the License Agreement for Mechanical Repair Information
Database dated September 12, 1993 between CCI and Mitchell International Repair
Division and the License Agreement for Estimating Database dated September 8,
1996 between CCI and Mitchell International (the "Mitchells Agreements") in
accordance with its terms.
ARTICLE IV. CONDITIONS TO CLOSING
4.1. Conditions Precedent to Obligations of Purchaser. The
obligations of Purchaser under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or prior to
Closing, of all of the following conditions, any one or more of which may be
waived at the option of Purchaser:
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4.1.1. Representations, Warranties and Covenants.
(a) All representations and warranties of the Companies
and the Existing Stockholders made in this Agreement or in any
Exhibit, Schedule or document delivered pursuant hereto, shall be true
and complete in all material respects as of the date hereof without
regard to any schedule updates furnished by any of them after the date
hereof and on and as of the Closing Date as if made on and as of that
date.
(b) All of the terms, covenants and conditions to be
complied with and performed by the Companies and the Existing
Stockholders on or prior to the Closing Date shall have been complied
with or performed.
(c) Purchaser shall have received a certificate, dated as
of the Closing Date, executed on behalf of each of the Companies by
authorized officers thereof, certifying in such detail as Purchaser
may reasonably request that the conditions specified in Sections
4.1.1(a) and (b) hereof have been fulfilled.
4.1.2. Consents or Approvals. Each of the approvals,
consents or waivers listed or which was required to be listed on Schedule 2.1.5
or which is necessary or advisable in connection with the consummation by any
Company or any Subsidiary thereof of the transactions contemplated hereby,
shall have been obtained.
4.1.3. Tender Offer. There shall have been validly tendered
and not withdrawn prior to the time the Tender Offer expires a number of shares
of CCI Common Stock which constitutes at least 51% (the "Minimum Condition") of
the shares of such stock on fully-diluted basis (as defined in the Target
Merger Agreement) and such shares shall have been accepted for payment by the
Acquisition Company in accordance with the terms of the Tender Offer and the
Tender Offer shall have otherwise been consummated.
4.1.4. HSR Act. If applicable, the waiting period under the
HSR Act shall have expired or terminated.
4.1.5. No Adverse Proceedings. No order, decree or judgment
of any court, agency or Governmental Entity shall have been rendered against,
any party hereto which would render it unlawful, as of the Closing Date, to
effect the transactions contemplated by this Agreement in accordance with its
terms (including the Target Acquisition).
4.1.6. Mitchells Agreement. The Mitchells Agreement shall be
in full force and effect if so requested by Purchaser.
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4.1.7. Contribution of Acquisition Company. The Existing
Stockholders shall have contributed as a capital contribution all the issued
and outstanding shares of the capital stock of the Acquisition Company to CCI
free and clear of all Liens.
4.2. Conditions Precedent to Obligations of CCI. The obligations of
CCI under this Agreement to consummate the transactions contemplated hereby
will be subject to the satisfaction, at or prior to the Closing, of all the
following conditions, any one or more of which may be waived at the option of
CCI:
4.2.1. No Material Misrepresentation or Breach.
(a) All representations and warranties of the Purchaser
made in this Agreement or in any Exhibit, Schedule or document
delivered pursuant hereto, shall be true and complete in all material
respects as of the date hereof and on and as of the Closing Date as if
made on and as of that date.
(b) All of the terms, covenants and conditions to be
complied with and performed by the Purchaser on or prior to the
Closing Date shall have been complied with or performed.
(c) The Companies shall have received a certificate,
dated as of the Closing Date, executed on behalf of Purchaser by an
authorized officer thereof, certifying that the conditions specified
in Sections 4.2.1(a) and (b) have been fulfilled.
4.2.2. Consents or Approvals. Each of the approvals,
consents or waivers listed or which was required to be listed on Schedule 2.3.3
or which is necessary or advisable in connection with the consummation by the
Purchaser of the transactions contemplated hereby, shall have been obtained.
4.2.3. HSR Act. If applicable, the waiting period under the
HSR Act shall have expired or terminated.
4.2.4. No Adverse Proceedings. No order, decree or judgment
of any court, agency or other Governmental Entity shall have been rendered
against, any party hereto which would render it unlawful, as of the Closing
Date, to effect the transactions contemplated by this Agreement in accordance
with its terms (including the Target Acquisition, the Target Merger or the CCI
Merger).
4.2.5. Tender Offer. The Minimum Condition for the Tender
Offer shall have been met and the shares of Target Common Stock tendered and
not withdrawn in accordance with the terms of the Tender Offer, and CCI and the
Acquisition Company shall
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be obligated to accept such shares for payment in accordance with the terms of
the Tender Offer.
ARTICLE V. DOCUMENTS TO BE DELIVERED AT THE CLOSING
5.1. Documents to be Delivered by the Companies. At the Closing, CCI
will deliver to Purchaser the following, at the expense of the Companies and in
proper form for recording when appropriate:
5.1.1. Certified Resolutions. Certified resolutions of the
Boards of Directors of the Companies approving the execution and delivery of
this Agreement and each of the other documents delivered by either of them
pursuant thereto and authorizing the consummation of the transactions
contemplated hereby and thereby, including the Merger.
5.1.2. Officer's Certificate. A certificate, dated the
Closing Date, executed on behalf of each Company in the form described in
Section 4.1.1.
5.1.3. Opinion. A written opinion of Edens Snodgrass Nichols
& Breeland, P.C. in substantially the form attached hereto as Exhibit E
attached hereto, dated as of the Closing Date, together with reliance letters
addressed to CCI's financing sources prior to Closing and entitling such
lenders to rely on such opinion to the same extent as if they were an addressee
thereof.
5.1.4. Good Standing Certificates. Governmental certificates
showing that CCI, the Acquisition Company, Triad and each Subsidiary thereof is
duly incorporated and in good standing in the state of its incorporation and in
good standing in each state listed on Schedule 2.1.1 certified as of a date not
more than five (5) days before the Closing Date.
5.1.5. Other Documents. Such additional information and
materials as Purchaser shall reasonably request.
5.2. Documents to be Delivered by Purchaser. At the Closing,
Purchaser will deliver to the Companies, at the expense of Purchaser:
5.2.1. Opinion. A written opinion of Weil, Gotshal & Manges
LLP in substantially the form attached hereto as Exhibit F attached hereto,
dated as of the Closing Date.
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5.2.2. Good Standing Certificates. Governmental certificates
showing that Purchaser is duly organized and in good standing in the state of
its organization certified as of a date not more than five (5) days before the
Closing Date
5.2.3. Other Documents. Such additional information and
materials as the Companies shall reasonably request.
ARTICLE VI. POST-CLOSING COVENANT
6.1. Distribution of Taxable Income. Within 90 days after the
Closing Date, CCI shall prepare pro forma federal income Tax Returns setting
forth the aggregate taxable income of the Companies (the "Taxable Income") for
the short period ending the day before the Closing Date and, in the event the
Closing Date occurs after the close of the current taxable year of any of the
Companies, such current tax year (the "Tax Periods") and the amount of
distributions or other payments to the Existing Stockholders by the Companies
during the Tax Periods (the "Distributions"), with taxable income for this
purpose being computed without regard to the Distributions. In the event that
the Existing Stockholders disagree with the computation of Taxable Income, any
such dispute which cannot be resolved by negotiation shall be submitted to
Price Waterhouse, L.L.P. for resolution. Within ten days after the final
resolution of any such dispute with respect to the Taxable Income and not later
than one year after the Closing Date, CCI shall pay to each of the Existing
Stockholders, pursuant to Section 1371(e)(2) of the Code, the excess of their
allocable shares of the Taxable Income as herein determined over the
Distributions to such Existing Stockholder, or each of the Existing
Stockholders shall contribute to the capital of CCI the excess of the
Distributions to such Existing Stockholder over the Taxable Income allocable to
such Existing Stockholder.
ARTICLE VII. SURVIVAL AND INDEMNIFICATION
7.1. Survival of Representations, Warranties and Covenants. (a)
Except as to the representations and warranties contained in Sections 2.1.3,
2.1.4, 2.1.19, and 2.1.23, which shall survive indefinitely, the
representations and warranties of the Companies, the Existing Stockholders and
of Purchaser contained in this Agreement or in any Transfer Document shall
survive the Closing until the expiration of eighteen months from the Closing
Date. Any claim for indemnification with respect to any of such matters which
is not asserted by notice given as herein provided relating thereto within such
specified period of survival may not be pursued and is hereby irrevocably
waived after such time. Any claim for an Indemnifiable Loss (as defined in
Section 7.2) asserted within such period of survival as herein provided will be
timely made for purposes hereof.
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(b) Unless a specified period is set forth in this
Agreement (in which event such specified period will control), the covenants in
this Agreement will survive the Closing and remain in effect indefinitely.
7.2. Limitations on Liability. (a) For purposes of this Agreement,
(i) "Indemnity Payment" means any amount of Indemnifiable Losses required to be
paid pursuant to this Agreement, (ii) "Indemnitee" means any person or entity
entitled to indemnification under this Agreement, (iii) "Indemnifying Party"
means any person or entity required to provide indemnification under this
Agreement, (iv) "Indemnifiable Losses" means any and all damages, losses,
liabilities, obligations, costs and expenses, and any and all claims, demands
or suits (by any person or entity, including without limitation any
Governmental Entity), including without limitation the costs and expenses of
any and all actions, suits, proceedings, demands, assessments, judgments,
settlements and compromises relating thereto and including reasonable
attorneys' fees and expenses in connection therewith, and (v) "Third Party
Claim" means any claim, action or proceeding made or brought by any person or
entity who or which is not a party to this Agreement or an Affiliate of a party
to this Agreement.
(b) Notwithstanding any other provision hereof or of any
applicable Law, no Indemnitee will be entitled to make a claim against an
Indemnifying Party in respect of any breach of a representation or warranty
under Sections 7.3(a)(i) or 7.3(b)(i) (other than the representations and
warranties set forth in Sections 2.1.3, 2.1.4 and 2.1.24) unless and until the
aggregate amount of claims in respect of breaches of representations and
warranties asserted for Indemnifiable Losses under 7.3(a)(i) or 7.3(b)(i), as
applicable, exceeds $900,000, in which event the Indemnitee will be entitled to
make a claim against the Indemnifying Party to the extent of the full amount of
Indemnifiable Losses.
7.3. Indemnification. (a) Subject to Sections 7.1 and 7.2, the
Companies jointly and severally agree to indemnify, defend and hold harmless
Purchaser and its Affiliates and their respective directors, officers,
partners, employees, agents and representatives from and against any and all
Indemnifiable Losses to the extent relating to, resulting from or arising out
of:
(i) any breach of representation or warranty of the
Companies or the Existing Stockholders under the terms of this
Agreement and any certificate or other document delivered pursuant
hereto;
(ii) any breach or nonfulfillment of any agreement or
covenant of the Companies or the Existing Stockholders under the terms
of this Agreement; or
(iii) any Taxes of the Companies (i) with respect to any
taxable period ending on or before the Closing Date or (ii) which are
allocable to the period ending
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immediately before the Closing Date (which Taxes shall be allocated by
closing the books of the Companies immediately before the Closing
Date)
(b) Purchaser agrees to indemnify, defend and hold
harmless the Companies and their respective directors, officers, partners,
employees, agents or representatives from and against any and all Indemnifiable
Losses to the extent relating to, resulting from or arising out of:
(i) any breach of representation or warranty of Purchaser
under the terms of this Agreement and any certificate or other
document delivered pursuant hereto; or
(ii) any breach or nonfulfillment of any agreement or
covenant of Purchaser under the terms of this Agreement.
(c) An Indemnitee under this Section 7.3 shall be
entitled to indemnification for its Indemnifiable Losses hereunder
notwithstanding such Indemnifiable Losses resulted from its negligence to the
extent such Indemnifiable Losses are not found by a final, non-appealable
decision of a court of competent jurisdiction to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
7.4. Defense of Claims. (a) If any Indemnitee receives notice of
assertion or commencement of any Third Party Claim against such Indemnitee with
respect to which an Indemnifying Party is obligated to provide indemnification
under this Agreement, the Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event not later than 30
calendar days after receipt of such notice of such Third Party Claim. Such
notice (the "Third Party Claim Notice") will describe the Third Party Claim in
reasonable detail, will include copies of all material written evidence thereof
and will indicate the estimated amount, if reasonably practicable, of the
Indemnifiable Loss that has been or may be sustained by the Indemnitee. The
Indemnifying Party shall have 14 days from its receipt of a Third Party Claim
Notice (the "Third Party Claim Notice Period") to notify Indemnitee (i) whether
the Indemnifying Party disputes the Indemnitee's right of indemnification with
respect to such Third Party Claim, and (ii) if the Indemnifying Party does not
dispute such right of indemnification, whether or not it desires to defend the
Indemnitee against such Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnitee
within the Third Party Claim Notice Period that (i) the Indemnifying Party does
not dispute the Indemnitee's right of indemnification and (ii) the Indemnifying
Party desires to defend against such Third Party Claim, then the Indemnifying
Party shall have the right to assume and control the defense of such Third
Party Claim by appropriate proceedings with counsel reasonably acceptable to
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Indemnitee at the Indemnifying Party's sole cost and expense. The Indemnitee
may participate in, but not control, any such defense or settlement at its sole
cost and expense.
(c) If the Indemnifying Party (i) disputes the
Indemnitee's right of indemnification with respect to a Third Party Claim, (ii)
does not dispute such right of indemnification but fails to promptly assume and
prosecute the defense of such Third Party Claim, (iii) does not dispute such
right of indemnification but a conflict or potential conflict exists between
the Indemnifying Party and the Indemnitee or (iv) is not entitled to assume
defense of such Third Party Claim under Section 7.4(b), then the Indemnitee
shall be entitled to assume and control the defense of such Third Party Claim
with counsel reasonably acceptable to the Indemnifying Party. If the
Indemnifying Party does not assume the defense of a Third Party Claim for any
reason, it may still participate in, but not control, the defense of such Third
Party Claim at the Indemnifying Party's sole cost and expense.
(d) The party responsible for the defense of any Third
Party Claim (the "Responsible Party") shall, to the extent reasonably requested
by the other party, keep such other party informed as to the status of any
Third Party Claim for which such party is not the Responsible Party, including,
without limitation, all settlement negotiations and offers. With respect to a
Third Party Claim for which the Indemnifying Party is the Responsible Party,
the Indemnitee shall make available to the Indemnifying Party and its
representatives all books and records of the Indemnitees relating to such Third
Party Claim and shall render to the Indemnifying Party such assistance and
access to records and the representatives of the Indemnitee as the Indemnifying
Party and its representatives may reasonably request, except that the
Indemnitee shall not be required to make available to the Indemnifying Party
and its representatives any books, records, documents or other information that
the Indemnitee reasonably determines to be confidential or subject to
attorney-client privilege unless and until the Indemnifying Party shall have
entered into such agreements as the Indemnitee reasonably deem to be necessary
in light of all surrounding circumstances (including, without limitation, the
Indemnifying Party's need for information in connection with the investigation
or defense of a Third Party Claim) to protect such confidentiality or
privilege.
(e) Neither the Indemnifying Party, on the one hand, nor
the Indemnitee, on the other hand, shall enter into any settlement of any Third
Party Claim without the prior written consent of the other party, which consent
shall not be unreasonably withheld. The Responsible Party shall promptly
notify the other party of each settlement offer (including whether or not the
Responsible Party is willing to accept the proposed settlement offer) with
respect to a Third Party Claim. Such other party agrees to notify the
Responsible Party with reasonable promptness whether or not such party is
willing to accept the proposed settlement offer. If an Indemnitee fails to
consent to any settlement offer of a Third Party Claim (whether or not the
Indemnitee is the Responsible Party with respect to such Third Party Claim),
the Indemnitee may continue to contest or defend such Third Party Claim and, in
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such event, the maximum liability of the Indemnifying Party with respect to
such Third Party Claim (including the reasonable costs and expenses of
contesting or defending such Third Party Claim incurred after the Indemnitee
fails to consent to such settlement offer) shall not exceed the full amount of
such settlement offer. If the Indemnifying Party fails to consent to any
settlement offer of a Third Party Claim (whether or not the Indemnifying Party
is the Responsible Party with respect to such Third Party Claim), the
Indemnifying Party may continue to contest or defend such Third Party Claim
and, in such event, the Indemnifying Party shall be liable to the Indemnitee
for the amount of the Indemnification Loss ultimately recovered against
Indemnitee as a result of such Third Party Claim.
(f) A failure to give timely notice or to include any
specified information in any notice as provided in Sections 7.4(a) or 7.4(b)
will not affect the rights or obligations of any party hereunder except and
only to the extent that, as a result of such failure, any party which was
entitled to receive such notice was deprived of its right to recover any
payment under its applicable insurance coverage or was otherwise damaged as a
result of such failure.
(g) The Indemnifying Party will have a period of 30
calendar days within which to respond in writing to any claim by an Indemnitee
on account of an Indemnifiable Loss which does not result from a Third Party
Claim (a "Direct Claim"). If the Indemnifying Party does not so respond within
such 30 calendar day period, the Indemnifying Party will be deemed to have
rejected such claim, in which event the Indemnitee will be free to pursue such
remedies as may be available to the Indemnitee on the terms and subject to the
provisions of this Article VII.
ARTICLE VIII. TERMINATION
8.1. Termination. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated at any time prior
to the Closing, if the party seeking to terminate is not then in material
default or breach of this Agreement:
(a) By the mutual written consent of Purchaser and CCI;
(b) By either Purchaser or CCI if the Closing shall not
have occurred on or before February 1, 1997;
(c) By either Purchaser or CCI if there shall have been
entered a final, nonappealable order or injunction of any Governmental
Entity restraining or prohibiting the consummation of the transactions
contemplated hereby or any material part thereof;
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(d) By either Purchaser or CCI if, prior to the Closing
Date, the Companies or the Existing Stockholders with respect to the
Purchaser, or the Purchaser with respect to CCI, is in material breach
of any representation, warranty, covenant or agreement herein
contained and such breach shall not be cured within fifteen (15) days
of the date of notice of default served by the party claiming such
material default, provided that such terminating party shall not also
be in material breach of this Agreement at the time notice of
termination is delivered;
(e) By either Purchaser or CCI if the Target Merger
Agreement shall have been terminated; or
(f) By Purchaser in the event it shall request CCI to
terminate the Target Merger Agreement or Tender Offer in accordance
with Section 3.14(b) and CCI shall exercise its rights under 3.14(c).
Upon the termination of this Agreement in accordance with this Section 8.1, the
obligations of the parties to effect the transactions contemplated hereby will
terminate, except that the provisions of this Section 8.1 and of Article IX
shall continue to apply and no party shall be relieved of any liability for any
breach of this Agreement prior to the date of termination.
ARTICLE IX. MISCELLANEOUS PROVISIONS
9.1. Specific Performance. The parties recognize that if any of the
Companies or any Existing Stockholder refuses to perform under the provisions
of this Agreement, monetary damages alone will not be adequate to compensate
Purchaser for its injury. Purchaser shall therefore be entitled, in addition
to any other remedies that may be available, to obtain specific performance of
the terms of this Agreement. If any action is brought by Purchaser to enforce
this Agreement, the Companies and the Existing Stockholders shall waive the
defense that there is an adequate remedy at law. In the event of a default by
the Companies and the Existing Stockholders which results in the filing of a
lawsuit for damages, specific performances, or other remedies, Purchaser shall
be entitled to reimbursement by the Companies of reasonable legal fees and
expenses incurred by Purchaser.
9.2. Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
when dispatched by electronic facsimile transfer or one business day after
having been dispatched by a nationally recognized overnight courier service to
the appropriate party at the address specified below:
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(a) If to the Companies, to:
6207 Bee Cave Road
Austin, Texas 78746-5146
Facsimile No.: (512) 328-6461
Attention: Glenn E. Staats
with a copy to:
Edens Snodgrass Nichols & Breeland, P.C.
2800 Franklin Plaza
111 Congress Avenue
Austin, TX 78701
Facsimile No.: (512) 505-5911
Attention: Rod Edens, Jr.
(b) If to the Existing Stockholders, to:
c/o Cooperative Computing, Inc.
6207 Bee Cave Road
Austin, Texas 78746-5146
Facsimile No.: (512) 328-6461
Attention: Glenn E. Staats
with a copy to:
Edens Snodgrass Nichols & Breeland, P.C.
2800 Franklin Plaza
111 Congress Avenue
Austin, TX 78701
Facsimile No.: (512) 505-5911
Attention: Rod Edens, Jr.
(c) If to Purchaser, to:
Hicks, Muse, Tate & Furst Equity Fund III, L.P.
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Facsimile No.: (214) 740-7313
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Attention: Lawrence D. Stuart, Jr.
with a copy to each of:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Facsimile No.: (214) 746-7777
Attention: Thomas A. Roberts, Esq.
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
9.3. Expenses. Except as otherwise expressly provided herein, the
Company agrees to promptly pay or cause to be paid upon receipt of any request
therefore all reasonable accounting, legal, banking and other out-of-pocket
expenses of the Purchaser relating to the transaction contemplated hereby;
provided, however, that in the event the Closing does not occur, the Companies
and the Purchaser shall each pay one-half of the collective reasonable
accounting, legal, banking and other third-party expenses (including any such
expenses incurred in connection with the Target Acquisition and the financing
thereof) and the Purchaser and the Company shall each pay all of their own
out-of-pocket expenses.
9.4. Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but will not be assignable or delegable by any party without
the prior written consent of the other party which shall not be unreasonably
withheld; provided, however, that upon notice to the Companies, Purchaser may
assign or delegate any or all of its rights or obligations under this Agreement
to any Affiliate thereof or to any person or entity that acquires all or
substantially all of the assets or voting stock of Purchaser. Each Company
agree to execute acknowledgements of such assignment(s) and collateral
assignments in such forms as Purchaser may from time to time reasonably
request. In the event of such a proposed assignment by Purchaser, the
provisions of this Agreement shall inure to the benefit of and be binding upon
Purchaser's assigns.
9.5. Waiver. Each party hereto by written notice to the others may
(a) extend the time for performance of any of the obligations of the other
under this Agreement, (b) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any document
delivered in connection herewith, (c) waive compliance with any of the
conditions or covenants of the other contained in this Agreement, or (d) waive
or modify performance of any of the obligations of the other under this
Agreement; provided, however, that no such party may, without the prior written
consent of the other parties, make or grant
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such extension of time, waiver of inaccuracies or compliance or waiver or
modification of performance with respect to its (or any of its Affiliates)
representations, warranties, conditions or covenants hereunder. Except as
provided in the immediately preceding sentence, no action taken pursuant to
this Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties, conditions or covenants contained in this
Agreement and will not operate or be construed as a waiver of any subsequent
breach, whether of a similar or dissimilar nature.
9.6. Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) supersedes any other agreement, whether written or oral, that
may have been made or entered into by any party or any of their respective
Affiliates (or by any director, officer or representative thereof) relating to
the matters contemplated hereby. This Agreement (together with the Exhibits
and Schedules hereto) constitutes the entire agreement by and among the parties
hereto and there are no agreements or commitments by or among such parties or
their Affiliates except as expressly set forth herein.
9.7. Amendments and Supplements. This Agreement may be amended or
supplemented at any time by additional written agreements signed by the parties
hereto.
9.8. Rights of the Parties. Except as provided in Article VII or in
Sections 9.17 and 9.4, nothing expressed or implied in this Agreement is
intended or will be construed to confer upon or give any person or entity other
than the parties hereto and their respective Affiliates any rights or remedies
under or by reason of this Agreement or any transaction contemplated hereby.
9.9. Brokers. Purchaser hereby agrees to indemnify and hold harmless
the Companies, and the Companies hereby agree to indemnify and hold harmless
Purchaser, against any liability, claim, loss, damage or expense incurred by
Purchaser or by the Companies, respectively, relating to any fees or
commissions owed to any broker, finder, or financial advisor as a result of
actions taken by Purchaser or by the Companies, respectively.
9.10. Further Assurances. From time to time, as and when requested
by either party, the other party will execute and deliver, or cause to be
executed and delivered, all such documents and instruments as may be reasonably
necessary to consummate the transactions contemplated by this Agreement.
9.11. Governing Law. This Agreement, including without limitation,
the interpretation, construction and validity hereof, shall be governed by the
Laws of the State of Texas without regard to the conflicts of laws principles
thereof.
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9.12. Severability. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable Law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
9.13. Execution in Counterparts. This Agreement may be executed in
two or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same agreement.
9.14. Titles and Headings. Titles and headings to sections herein
are inserted for convenience of reference only, and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
9.15. Certain Interpretive Matters and Definitions. (a) Unless the
context otherwise requires, (i) all references to Sections, Articles or
Schedules are to Sections, Articles or Schedules of or to this Agreement, (ii)
each term defined in this Agreement has the meaning assigned to it, (iii) each
accounting term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with GAAP, (iv) "or" is disjunctive but not
necessarily exclusive, (v) words in the singular include the plural and vice
versa, (vi) the terms "Subsidiary" and "Affiliate" have the meanings given to
those terms in Rule 12b-2 of Regulation 12B under the Securities Exchange Act
of 1934 Act, as amended, and (vii) "Person" or "person" means any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or other agency or political
subdivision thereof. All references to "$" or dollar amounts will be to lawful
currency of the United States of America.
(b) No provision of this Agreement will be interpreted in
favor of, or against, either of the parties hereto by reason of the extent to
which either such party or its counsel participated in the drafting thereof or
by reason of the extent to which any such provision is inconsistent with any
prior draft hereof or thereof.
9.16. No Recourse. Notwithstanding any of the terms or provisions of
this Agreement, each of the Purchaser and the Companies agree that neither it
nor any person acting on its behalf may assert any claims or cause of action
against any officer, director, partner or stockholder of the other parties
(other than the Existing Stockholders solely in their capacity as signatories
to this Agreement) in connection with or arising out of this Agreement or the
transactions contemplated hereby.
9.17. Fees. (a) In the event the Target Acquisition does not close
and any Company receives any fee from Triad or any of its Affiliates in the
nature of a topping fee,
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bust-up fee or any similar arrangement (the "Company Topping Fee"), such
Company agrees to pay to the Purchaser (immediately upon receipt thereof and in
addition to the reimbursement of expenses set forth in Section 9.3) a fee (the
"Hicks Muse Topping Fee") equal to 50% of the Company Topping Fee after
deduction of any portion of such fee any Company is required to pay to its
financing sources other than CCI and Purchaser and their Affiliates.
(b) In the event the Target Acquisition is not consummated
and this Agreement is terminated, Hicks Muse & Co. Partners, L.P. will be
entitled to the full transaction fee for the transaction contemplated hereby
(including the Target Acquisition) it would have received pursuant to the
Financial Advisory Agreement (less the Hicks Muse Topping Fee, if any) in the
event that any time within 12 months after such termination CCI enters into
negotiations, discussions or an agreement providing, directly or indirectly,
for (i) the Target Acquisition or any other transaction which is designed to
result in a transaction with Triad or (ii) any other acquisition by any Company
(whether by way of merger or stock or asset acquisition) involving any third
party equity investment in CCI or any coinvestment with any third party and
such transaction is consummated; provided, however, that the fee payable
pursuant to the foregoing (ii) shall be payable only in the event (a) the
transaction value of such transaction exceeds $30 million or (b) such
transaction results in the sale, transfer or reduction of direct or indirect
interest of twenty percent (20%) or more of the issued and outstanding common
stock of any Company by Glenn E. Staats, Preston W. Staats, their families or
their Affiliates. Notwithstanding the foregoing, in the event the Companies
terminate this Agreement after providing to the Purchaser a bona fide proposal
to acquire Triad, which proposal is rejected by the Purchaser in writing (a
"Rejected Proposal"), and the Companies, directly or indirectly, consummates an
acquisition or other business combination with Triad or any of its Affiliates
essentially on the general terms contained in the Rejected Proposal, the
Companies shall not owe Hicks Muse & Co. Partners, L.P. the Transaction Fee
contemplated by this section.
9.18. Tax Matters.
(a) With respect to any audit of or other administrative
or judicial proceeding relating to Tax Returns which treat any Company as a
pass through entity for federal, state, local or foreign purposes for taxable
periods ending on or before the Closing Date, the Existing Stockholders shall
control the contest of such audit or other proceeding, at the sole cost and
expense of the Existing Stockholders; provided, however, that no settlement of
such audit or other proceeding shall be made without the prior written consent
(which shall not be unreasonably withheld) of CCI if the result of such
settlement could reasonably be expected to be adverse to CCI, and provided,
further, that in the event such audit or proceeding may reasonably be expected
to have an adverse effect on the liability of CCI for Taxes in a subsequent
taxable period, CCI and the Existing Stockholders shall jointly control
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the contest of such audit or other proceeding and CCI shall pay all the costs
and expenses thereof.
(b) CCI shall take any and all actions necessary to
allocate taxable income for federal income tax purposes for the period which
includes the Closing Date between the S short year and the C short year (as
defined in Section 1362(e)(1) of the Code) on the basis of a closing of the
books of each Company at the close of the day before the Closing Date,
including, to the extent required, by filing (and obtaining the required
shareholder consents to) an election pursuant to Section 1362(e)(3) of the
Code. Any Tax liability owed by the Company as a result of a change in
accounting method for tax purposes made concurrently with or after the Closing
shall be the sole liability of CCI and not the Existing Stockholders, except to
the extent that such change in accounting method corrects an erroneous method
of accounting adopted prior to the Closing.
9.19. Recovery Under Target Merger Agreement. In the event the
Target Merger Agreement shall be terminated as a result of a breach of such
agreement by a party thereto (other than CCI and the Acquisition Company) CCI,
at the request of the Purchaser, shall, and shall cause the Acquisition Company
to, diligently prosecute any claims it may have against such party as a result
of such breach and to pursue such remedies as Purchaser may reasonably request
in connection therewith and Purchaser and CCI shall share the costs of such
prosecution 55% to 45%, respectively. In the event CCI or any of its
Affiliates shall obtain or receive any damages or other award as a result of
such prosecution or otherwise in connection with such breach, CCI shall pay or
cause to be paid to Purchaser an amount in cash equal to 55% of the fair market
value of such damages or award (after expenses) within three days of it or its
Affiliate's receipt thereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COOPERATIVE COMPUTING, INC.
By: /s/ GLEN E. STAATS
-------------------------------------
Name: Glen E. Staats
---------------------------------
Title: President
--------------------------------
APPLIED DATA SPECIALTY, INC.
By: /s/ PRESTON W. STAATS, JR.
-------------------------------------
Name: Preston W. Staats, Jr.
---------------------------------
Title: Executive Vice President
--------------------------------
CANADIAN AFTERMARKET NETWORK, INC.
By: /s/ GLEN E. STAATS
-------------------------------------
Name: Glen E. Staats
---------------------------------
Title: President
--------------------------------
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CCI ACQUISITION CORP.
By: /s/ PATRICK K. MCGEE
-------------------------------------
Name: Patrick K. McGee
---------------------------------
Title: Vice President
--------------------------------
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HICKS, MUSE, TATE & FURST EQUITY FUND III,
L.P.
By: HM3/GP Partners, L.P., its General
Partner
By: Hicks Muse GP Partners III,
L.P., its General Partner
By: Hicks Muse Fund III
Incorporated, its
General Partner
By: /s/ PATRICK K. MCGEE
-------------------------------
Patrick K. McGee
Vice President
EXISTING STOCKHOLDERS:
/s/ GLENN E. STAATS
----------------------------------------
GLENN E. STAATS
/s/ PRESTON W. STAATS
----------------------------------------
PRESTON W. STAATS
53
