================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
----------
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to(section)240.14a-11(c) or (section)240.14a-12
BANCTEC, INC.
(Name of Registrant as Specified in its Charter)
----------------
(Name of Person Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
(1) Title of each class of securities to which the transaction applies: Common
Stock ("BancTec Common Stock"), par value $0.01 per share, of BancTec,
Inc.
(2) Aggregate number of securities to which transaction applies: (i)
19,472,846 shares of BancTec Common Stock and (ii) "in-the-money" options
to purchase 1,731,537 shares of BancTec Common Stock.
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): $18.50 per share in cash-out
merger plus the difference between $18.50 and the weighted average
exercise price of $13.15 for each share subject to an "in the money"
option.
(4) Proposed maximum aggregate value of the transaction: 19,472,846 shares of
BancTec Common Stock x $18.50 per share = $360,247,651 $9,263,723 to be
paid to option holders Total proposed maximum aggregate value of the
transaction: $369,511,374
(5) Total fee paid: $73,902.28 ($73,675.49 wired to Mellon Bank, N.A. on May
18, 1999, and $226.79 wired to Mellon Bank, N.A. on June 21, 1999).
[ ] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $73,675.49
(2) Form Schedule or Registration No.: Schedule 14A
(3) Filing Party: BancTec, Inc.
(4) Date Filed: May 19, 1999
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[BANCTEC GRAPHIC OMITTED]
4851 LBJ FREEWAY, SUITE 1100
DALLAS, TEXAS 75244
(972) 341-4000
June 23, 1999
Dear Stockholders:
We invite you to attend a Special Meeting of Stockholders of BancTec,
Inc. to be held on July 21, 1999, at 10:00 a.m., local time, at Chase Tower,
2200 Ross Avenue, 7th Floor, Dallas, Texas 75201. The purpose of the special
meeting is for you to vote upon a merger that, if consummated, will result in
your receiving $18.50 in cash per share for your shares of BancTec common stock,
subject to your appraisal rights under Delaware law.
If you approve the merger, Colonial Acquisition Corp., a newly formed
Delaware corporation, will be merged with and into BancTec with BancTec being
the surviving corporation in the merger. Colonial was created only to engage in
the merger and was organized and is owned by Welsh, Carson, Anderson & Stowe
VIII, L.P., a private investment partnership. Convergent Equity Partners, L.P.
has agreed to purchase approximately 6.5% of Colonial's capital stock prior to
the merger.
In connection with the merger, Goldman, Sachs & Co., BancTec's financial
advisor, delivered to the Board of Directors an opinion that, as of the date of
that opinion, the consideration to be received by the holders of BancTec common
stock in the merger was fair from a financial point of view to these holders.
The written opinion of Goldman, Sachs & Co. dated June 17, 1999 is attached as
Appendix A to the enclosed proxy statement, and you should read it carefully in
its entirety.
THE BOARD HAS DETERMINED THAT THE MERGER IS ADVISABLE AND FAIR TO YOU
AND IN YOUR BEST INTEREST. THE BOARD THEREFORE RECOMMENDS THAT YOU APPROVE AND
ADOPT THE MERGER AGREEMENT.
We cannot complete the merger unless we obtain the necessary government
approvals and unless the stockholders approve it. The accompanying proxy
statement provides detailed information on the proposed merger, and it includes
a copy of the merger agreement attached as Appendix B.
Please give all of this information your careful attention. Approval of
the merger at the special meeting will require the affirmative vote of holders
of a majority of the outstanding shares of BancTec common stock entitled to vote
at the special meeting. Whether or not you plan to attend, it is important that
your shares are represented at the special meeting. A failure to vote will count
as a vote against the merger. Accordingly, you are requested to promptly
complete, sign and date the enclosed proxy card and return it in the envelope
provided, whether or not you plan to attend. This will not prevent you from
voting your shares in person if you later choose to attend the special meeting.
If the merger is approved by the stockholders, you will receive instructions for
surrendering your BancTec share certificates and a letter of transmittal to be
used for this purpose. You should not submit your share certificates for
exchange until you have received the instructions and the letter of transmittal.
Sincerely,
/s/ Grahame N. Clark, Jr.
Grahame N. Clark, Jr.,
Chairman of the Board, President
and Chief Executive Officer
This proxy statement is dated June 23, 1999 and is first being mailed to BancTec
stockholders on or about June 23, 1999.
<PAGE>
[BANCTEC GRAPHIC OMITTED]
4851 LBJ FREEWAY, SUITE 1100
DALLAS, TEXAS 75244
(972) 341-4000
--------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 21, 1999
To the Stockholders of BancTec, Inc.:
This is a notice that a Special Meeting of Stockholders of BancTec, Inc., a
Delaware corporation, will be held on July 21, 1999 at 10:00 a.m., local time,
at Chase Tower, 2200 Ross Avenue, 7th Floor, Dallas, Texas 75201. The purpose of
this meeting is for you to:
1. Consider and vote upon a proposal to approve and adopt an Amended and
Restated Agreement and Plan of Merger, dated as of June 17, 1999.
Pursuant to the merger agreement, Colonial Acquisition Corp., a newly
formed Delaware corporation, will be merged with and into BancTec.
Each outstanding share of BancTec common stock will be converted into
the right to receive $18.50 in cash, without interest, other than
shares held by BancTec stockholders who are entitled to and have
perfected their dissenters appraisal rights. Shares held by BancTec,
its subsidiaries or Colonial will be canceled in the merger. A copy of
the merger agreement is attached as Appendix B to and is described in
the accompanying proxy statement.
2. Consider and act upon any other matters as may properly come before
the special meeting or any adjournments or postponements of the
special meeting.
BancTec's Board of Directors has determined that only holders of shares of
BancTec common stock at the close of business on June 16, 1999, will be entitled
to notice of, and to vote at, the special meeting or any adjournments or
postponements of the special meeting. A form of proxy and a proxy statement
containing more detailed information with respect to the matters to be
considered at the special meeting accompany and form a part of this notice.
By order of the Board of Directors,
/s/ Tod V. Mongan
Tod V. Mongan
Secretary
Dallas, Texas
June 23, 1999 ---------
WHETHER OR NOT YOU ARE ABLE TO ATTEND THE SPECIAL MEETING, PLEASE SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. PLEASE DO NOT SEND IN
ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME. YOU MAY REVOKE YOUR PROXY AND
VOTE IN PERSON IF YOU DECIDE TO ATTEND THE MEETING.
THE MERGER HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF THE MERGER OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
You have the right to dissent from the merger and to receive payment of the
"fair value" of your shares. To do so, you must comply with the procedures set
forth in Section 262 of the Delaware General Corporation Law. See "Rights of
Dissenting Stockholders" in the proxy statement that accompanies this notice and
the full text of Section 262 of the Delaware General Corporation Law, which is
attached as Appendix C and is described in the accompanying proxy statement.
<PAGE>
TABLE OF CONTENTS
PAGE
-----
QUESTIONS AND ANSWERS ABOUT
THE MERGER ................................ 1
SUMMARY ...................................... 3
The Companies ............................. 3
The Special Meeting ....................... 3
Record Date; Voting Power ................. 3
Recommendations ........................... 3
Opinion of BancTec's Financial Advisor..... 3
Terms of the Merger Agreement ............. 4
Accounting Treatment ...................... 5
Federal Income Tax Consequences ........... 5
Treatment of BancTec Stock Options
and Restricted Stock ................... 5
Interests that Differ from Your
Interests .............................. 5
Regulatory Approvals ...................... 5
Dissenters' Appraisal Rights .............. 5
Historical Market Information ............. 6
Selected Historical Consolidated
Financial Data ......................... 7
Certain Projections ....................... 8
Cautionary Statement Concerning
Forward-looking Information ............ 8
THE SPECIAL MEETING .......................... 9
Date, Time and Place of the Special
Meeting ................................ 9
Matters to be Considered at the Special
Meeting ................................ 9
Proxy Solicitation ........................ 9
Record Date and Quorum Requirement......... 9
Voting Procedures ......................... 9
Voting and Revocation of Proxies .......... 10
Effective Time of the Merger and
Payment for Shares ..................... 10
Other Matters to Be Considered ............ 11
THE COMPANIES ................................ 11
BancTec ................................... 11
Colonial .................................. 11
THE MERGER ................................... 12
General Description ....................... 12
Background of the Merger .................. 12
Reasons for the Merger;
Recommendation of the Board of
Directors .............................. 16
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PAGE
----
Opinion of BancTec's Financial Advisor..... 17
Interests of Certain Persons in the
Merger ................................. 23
Material Federal Income Tax
Consequences ........................... 24
Anticipated Accounting Treatment .......... 25
Governmental Approvals .................... 25
Litigation Relating to the Merger ......... 25
CERTAIN TERMS OF THE MERGER
AGREEMENT ................................. 26
Effective Time of the Merger .............. 26
General ................................... 26
Surrender and Exchange Of Stock
Certificates ........................... 26
Stock Plans and Employee Benefit
Matters ................................ 27
Financing ................................. 27
Rights Agreement Amendments ............... 27
Representations and Warranties ............ 27
Conduct of Business Prior to the
Merger ................................. 29
No Solicitation ........................... 32
Conditions Precedent ...................... 33
Termination ............................... 34
Termination Fees and Expenses ............. 35
Indemnification ........................... 36
Amendment ................................. 36
RIGHTS OF DISSENTING
STOCKHOLDERS .............................. 36
INDEPENDENT AUDITORS ......................... 38
STOCKHOLDER PROPOSALS ........................ 38
OTHER MATTERS ................................ 38
WHERE YOU CAN FIND MORE
INFORMATION ............................... 38
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE .................... 39
Appendices:
A -- Opinion of Goldman, Sachs & Co.
B -- Amended and Restated Merger Agreement
C -- Section 262 of the Delaware General Corporation Law
i
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BANCTEC, INC.
4851 LBJ FREEWAY, SUITE 1100
DALLAS, TEXAS 75244
(972) 341-4000
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
To Be Held On July 21, 1999
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL HAPPEN IN THE MERGER?
A: In the merger, Colonial will be merged with and into BancTec with
BancTec being the surviving corporation. If you are a stockholder of
BancTec at the time of the merger, you will receive an $18.50 cash
payment for each of your outstanding shares of BancTec common stock,
unless you exercise and perfect your dissenters' appraisal rights.
Shares held by BancTec, its subsidiaries or Colonial will be canceled
in the merger. After the merger, BancTec will be owned by the
stockholders of Colonial and you will no longer own an equity interest
in BancTec. To review the structure of the merger in greater detail,
see pages 12 through 25.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: You will receive $18.50 in cash, without interest, for each share of
BancTec common stock that you own. This is the "merger consideration."
For example: If you own 100 shares of BancTec common stock, you will
receive $1,850.00 in cash upon completion of the merger.
Q: WHY IS BANCTEC BEING MERGED?
A: BancTec's board of directors believes that the merger and the
consideration you will receive in the merger are fair and are in your
best interest. The board made this determination after exploring
strategic alternatives and a number of third party proposals to
acquire BancTec. To review the background and reasons for the merger
in greater detail, see pages 12 through 17.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger during the third quarter of
1999.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: Your receipt of the merger consideration will be a taxable transaction
for federal income tax purposes. To review the federal income tax
consequences to you in greater detail, see pages 24 and 25.
Your tax consequences will depend on your personal situation. You
should consult your tax advisors for a full understanding of the tax
consequences of the merger to you.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to approve and adopt the merger agreement, which
provides for the merger of Colonial into BancTec.
THE BOARD HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT.
ACCORDINGLY, THE BOARD RECOMMENDS VOTING FOR THE PROPOSED MERGER.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign, date
and mail it in the enclosed envelope as
1
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soon as possible so that your shares will be represented at the
special meeting. Approval of the merger requires the affirmative vote
of a majority of the outstanding shares of BancTec common stock
entitled to vote on the proposal.
Q: WHAT HAPPENS IF I DON'T RETURN A PROXY CARD?
A: The failure to return your proxy card will have the same effect as
voting against the merger.
Q: MAY I VOTE IN PERSON?
A: Yes. You may attend the special meeting and vote your shares in
person, rather than signing and mailing your proxy card.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You may change your vote at any time before your proxy is voted
at the special meeting by following the instructions on page 10.
Before your proxy is voted, you may submit a new proxy or you may
attend the special meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your shares of common stock only if you provide
instructions on how to vote. You should instruct your broker how to
vote your shares, following the directions your broker provides. If
you do not provide instructions to your broker, your shares will not
be voted and they will be counted as votes against the proposal to
approve and adopt the merger agreement.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed we will send you written
instructions for exchanging your BancTec common stock certificates for
the merger consideration.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have additional questions about the merger, you should contact:
Susan Seiter
Director, Investor Relations
BancTec, Inc.
4851 LBJ Freeway, Suite 1100
Dallas, Texas 75244
Telephone: (972) 341-4904
or
D.F. King & Company, Inc.
the proxy solicitor who may be called
toll-free at 1-800-829-6554.
2
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SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. For a more complete
understanding of the merger and for a more complete description of the legal
terms of the merger, you should read carefully this entire document and the
other available information referred to in "Where You Can Find More Information"
on pages 38 and 39.
THE COMPANIES
BANCTEC, INC.
4851 LBJ Freeway, Suite 1100
Dallas, Texas 75244
(972) 341-4000
BancTec is a worldwide systems integration and services company with a
27-year history of innovation in document imaging technology, financial
transaction processing and workflow productivity improvement. Serving a variety
of industries, including banking, financial services, insurance, healthcare,
government agencies and others, BancTec offers a comprehensive portfolio of
payment and document processing systems and services, workflow and image
management software products, and computer and network support services.
COLONIAL ACQUISITION CORP.
c/o Welsh, Carson, Anderson
& Stowe
320 Park Avenue, Suite 2500
New York, New York 10022-6815
(212) 893-9500
Colonial was organized and is owned by Welsh, Carson, Anderson & Stowe
VIII, L.P. Convergent Equity Partners, L.P. has agreed to acquire approximately
6.5% of Colonial's outstanding capital stock prior to the merger. Colonial is a
newly formed corporation created only to enter into the merger agreement and to
complete the merger and related transactions, and Colonial has not otherwise
conducted any business or operations.
None of Colonial, Welsh, Carson, Anderson & Stowe VIII, L.P. or
Convergent Equity Partners, L.P. are affiliates of BancTec.
THE SPECIAL MEETING
The special meeting will be held on July 21, 1999, at 10:00 a.m., local
time, at Chase Tower, 2200 Ross Avenue, 7th Floor, Dallas, Texas 75201. At the
special meeting, you will be asked to consider and vote upon a proposal to
approve and adopt the merger agreement.
RECORD DATE; VOTING POWER
Holders of record of BancTec common stock at the close of business on
June 16, 1999 are entitled to notice of and to vote at the special meeting. As
of that date, there were 19,472,846 shares of BancTec common stock issued and
outstanding held by approximately 2,407 holders of record. If you held BancTec
common stock at the close of business on the record date, you are entitled to
one vote per share on any matter that may properly come before the special
meeting.
RECOMMENDATIONS
The board has determined that the merger, the merger agreement and the
transactions contemplated thereby are advisable and fair to you and in your best
interest. THE BOARD RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT. You also should refer to the reasons that the board
considered in determining whether to approve and adopt the merger agreement
beginning on page 16.
OPINION OF BANCTEC'S FINANCIAL ADVISOR
The board has received the opinion of BancTec's financial advisor,
Goldman, Sachs & Co., that, as of the date of that opinion, the consideration to
be received by the holders of BancTec's common stock in the merger was fair from
a financial point of view to those holders. The full text of the written opinion
of Goldman, Sachs & Co. dated June 17, 1999 is attached to this proxy statement
as Appendix A, and you should read it carefully in its entirety. THE OPINION OF
GOLDMAN, SACHS & CO. IS DIRECTED TO THE BOARD AND IS NOT A
3
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RECOMMENDATION TO YOU AS TO HOW YOU SHOULD VOTE WITH RESPECT TO MATTERS RELATING
TO THE PROPOSED MERGER.
TERMS OF THE MERGER AGREEMENT
The merger agreement is attached to this proxy statement as Appendix B.
You should read the merger agreement in its entirety. It is the legal document
that governs the merger.
GENERAL. The merger agreement provides that Colonial will be merged with
and into BancTec, with BancTec being the surviving corporation. As a result of
the merger, you will receive $18.50 in cash for each share of BancTec common
stock that you own, unless you exercise and perfect your dissenters' appraisal
rights. Shares held by BancTec, its subsidiaries or Colonial will be canceled in
the merger.
CONDITIONS TO THE MERGER. The completion of the merger depends upon the
satisfaction of a number of conditions, including:
o the continued accuracy of each party's representations and
warranties and the fulfillment of each party's promises contained
in the merger agreement;
o the adoption of the merger agreement by the affirmative vote of the
holders of a majority of the outstanding shares of BancTec common
stock;
o the absence of any order or regulation of any court or governmental
entity preventing or prohibiting the merger;
o the absence of any pending suit, action or proceeding brought by
any governmental entity seeking to prohibit or limit in any
material respect the ownership or operation of BancTec;
o the receipt of necessary governmental approvals and the termination
or expiration of any applicable regulatory waiting periods;
o Colonial's arrangement of financing to consummate the merger; and
o the board's receipt from a valuation firm of a solvency letter
addressed to the board as to the solvency of the surviving
corporation after giving effect to the merger and Colonial's
contemplated merger financing arrangements.
Each party may, at its option, waive the satisfaction of any condition to that
party's obligations under the merger agreement. EVEN IF THE STOCKHOLDERS APPROVE
THE MERGER, THERE CAN BE NO ASSURANCE THAT THE MERGER WILL BE CONSUMMATED.
TERMINATION. Either BancTec or Colonial may terminate the merger
agreement under certain circumstances, including if:
o the merger has not been completed by September 15, 1999, unless the
failure to complete the merger is the result of a material breach
of any obligation under the merger agreement by the party seeking
to terminate;
o BancTec fails to obtain the required stockholder approval at the
special meeting; or
o any court in the United States or other governmental entity has
issued a final and non-appealable order or other action that in any
way prohibits the merger.
The merger agreement can be terminated under other circumstances which
are described on pages 34 and 35.
FEES AND EXPENSES. BancTec will be required to pay Colonial a
termination fee of $12.0 million if:
o the merger agreement is terminated by BancTec because in the good
faith judgment of the board as to its fiduciary duties, as advised
by outside counsel, the board determines that termination is
required because of a third party's acquisition proposal;
o the merger agreement is terminated by Colonial because the board
has withdrawn or modified, in a manner adverse to Colonial, the
board's recommendation or approval of the merger agreement or
approved or recommended any third party's acquisition proposal; or
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o BancTec enters into, agrees to enter into or completes a
transaction in specific circumstances involving a third party
within one year after the merger agreement is terminated for
specified reasons, and the transaction involving the third party
was publicly announced or submitted to BancTec prior to the
termination of the merger agreement.
ACCOUNTING TREATMENT
The merger will be accounted for as a recapitalization for accounting
purposes. Accordingly, the historical basis of BancTec's assets and liabilities
will not be affected by the merger.
FEDERAL INCOME TAX CONSEQUENCES
Each stockholder will recognize capital gain or loss equal, in each case,
to the difference between the cash proceeds received pursuant to the merger and
the stockholder's adjusted tax basis in the shares of BancTec common stock
surrendered in exchange for the cash proceeds.
TREATMENT OF BANCTEC STOCK OPTIONS AND RESTRICTED STOCK
Upon the merger, each outstanding stock option will be canceled in
exchange for cash equal to the difference between $18.50 and the exercise price
per share of that stock option. Each share of restricted stock will be canceled
in exchange for a cash payment of $18.50.
INTERESTS THAT DIFFER FROM YOUR INTERESTS
Certain members of management have interests in the merger that are
different from, or in addition to, yours as a BancTec stockholder. Eight of
BancTec's executives (one of whom is also a director) have employment agreements
with severance arrangements. The total amount that may be payable to BancTec's
executives in connection with the merger due to these severance arrangements is
approximately $5,502,414. In addition, certain members of management will
receive a maximum aggregate cash payment of approximately $6,044,286, and
directors will receive a maximum aggregate cash payment of approximately
$318,250, for restricted stock and options that they hold based on a price of
$18.50 per share of restricted stock and the excess of $18.50 over the exercise
price per share of the options. Upon the merger, certain members of management
also will become fully vested in employer contributions under BancTec's deferred
compensation plan and will receive distributions in an aggregate amount of
approximately $589,163 in contributions made by BancTec under this plan.
Furthermore, BancTec will continue certain indemnification arrangements and
directors' and officers' liability insurance for existing directors and officers
of BancTec after the merger.
REGULATORY APPROVALS
BancTec is required to make filings with or obtain approvals from certain
regulatory authorities in connection with the merger. These consents and
approvals include the termination or expiration of a waiting period with regard
to filings with the Federal Trade Commission and the Department of Justice under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. An
application and notice was filed with the Federal Trade Commission and the
Department of Justice on June 16, 1999.
BancTec cannot predict whether or when it will obtain all required
regulatory approvals or the timing of these approvals.
DISSENTERS' APPRAISAL RIGHTS
If you do not vote in favor of the proposal to approve and adopt the
merger agreement and you comply strictly with the applicable provisions of
Section 262 of the Delaware General Corporation Law, you have the right to
dissent and be paid cash for the "fair value" for your shares of BancTec common
stock. This payment may be more than, the same as, or less than the merger
consideration of $18.50 a share. To perfect these appraisal rights with respect
to the merger, you must follow the required procedures precisely. The applicable
provisions of Section 262 of the Delaware General Corporation Law are attached
to this proxy statement as Appendix C.
5
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HISTORICAL MARKET INFORMATION
BancTec's common stock is traded on the New York Stock Exchange under the
symbol "BTC." The following table sets forth, for the periods indicated, the
high and low sales prices per share as reported on the New York Stock Exchange.
HIGH LOW
---- ---
1997
First Quarter ................. $26 1/8 $19 1/8
Second Quarter ................ 27 5/8 22 1/4
Third Quarter ................. 27 22 3/4
Fourth Quarter ................ 28 3/4 20 3/4
1998
First Quarter ................. $28 3/8 $23 1/2
Second Quarter ................ 26 1/16 21 1/2
Third Quarter ................. 23 3/8 12 1/2
Fourth Quarter ................ 15 1/4 11 3/8
1999
First Quarter ................. $17 1/2 $11 7/8
On April 1, 1999, the last trading day prior to announcement of the
execution of the merger agreement, the high sale price per share of BancTec
common stock was $13 3/8, and the low sale price per share was $12 5/16, as
reported on the New York Stock Exchange. On June 16, 1999, BancTec common stock
closed at $16 11/16 per share.
Since its inception, BancTec has not paid any cash dividends on its common
stock. Under the merger agreement, BancTec has agreed not to pay any dividends
on BancTec common stock prior to the closing of the merger.
6
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The table below presents selected consolidated historical financial data
that have been derived from BancTec's consolidated financial statements. You
should read the selected financial data in conjunction with BancTec's separate
historical consolidated financial statements, related notes and other financial
information incorporated by reference into this proxy statement.
<TABLE>
<CAPTION>
RESTATED NINE
FISCAL YEAR MONTHS TWELVE MONTHS
ENDED(A) ENDED ENDED
------------- ------------ -----------------------------------------
MARCH DECEMBER DECEMBER DECEMBER DECEMBER
26, 1995 31, 1995 31, 1996 31, 1997 31, 1998
------------- ------------ ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Revenue ............................. $ 516,932 $ 383,984 $ 554,002 $ 603,534 $ 597,920
Income (loss) before
extraordinary item ................. (15,608) (53,481) 37,101 42,614 4,813
Net income (loss) ................... (15,608) (53,481) 37,101 42,152 4,813
Basic income (loss) per share
before extraordinary item .......... (0.80) (2.71) 1.82 2.00 0.24
Basic income (loss) per share ....... (0.80) (2.75) 1.82 1.97 0.24
Diluted income (loss) per share
before extraordinary item .......... (0.80) (2.71) 1.76 1.92 0.24
Diluted income (loss) per share ..... (0.80) (2.71) 1.76 1.90 0.24
AT PERIOD END:
Total assets ........................ $ 501,758 $ 440,348 $ 467,295 $ 504,853 $ 530,205
Working capital (b) ................. 90,140 42,598 87,803 69,941 163,378
Long-term debt, less current
maturities ......................... 94,181 82,972 65,891 11,854 150,352
Stockholders' equity ................ 206,743 156,201 204,720 260,523 220,081
Basic weighted average shares ....... 19,484 19,753 20,341 21,359 20,394
Diluted weighted average shares...... 19,484 19,753 22,317 23,203 20,435
<CAPTION>
THREE MONTHS
ENDED
---------------------------
MARCH MARCH
31, 1998 31, 1999
------------- -------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
FOR THE PERIOD:
Revenue ............................. $ 142,382 $ 148,825
Income (loss) before
extraordinary item ................. 10,061 4,818
Net income (loss) ................... 10,061 4,818
Basic income (loss) per share
before extraordinary item .......... 0.47 0.25
Basic income (loss) per share ....... 0.47 0.25
Diluted income (loss) per share
before extraordinary item .......... 0.46 0.25
Diluted income (loss) per share ..... 0.46 0.25
AT PERIOD END:
Total assets ........................ $ 502,752 $ 535,522
Working capital (b) ................. 57,128 163,288
Long-term debt, less current
maturities ......................... 8,871 150,142
Stockholders' equity ................ 264,459 224,437
Basic weighted average shares ....... 21,541 19,353
Diluted weighted average shares...... 21,789 19,449
</TABLE>
- -----------
(a) BancTec's financial statements have been restated for fiscal year 1995, due
to a change in the reporting entity to reflect its merger with Recognition
International Inc. under the pooling of interests method of accounting.
Prior to the merger, Recognition had a fiscal year-end of October 31, and
BancTec had a fiscal year-end of on or about March 31. Since the merger was
accounted for as a pooling, combined results of the two companies are
presented for all periods disclosed.
(b) Working capital is defined as current assets less current liabilities.
Recognition International Inc. merged with and into BancTec in 1995. In
December 1995, BancTec changed its fiscal year end from a 52/53 week year, which
ended on or about March 31, to a calendar year-end of December 31. This resulted
in a nine month transitional period for December 31, 1995.
The consolidated balance sheet data as of December 31, 1998, 1997 and 1996,
are those of BancTec and Recognition on a combined basis. The consolidated
balance sheet for fiscal year 1995 includes BancTec as of March 26, 1995
combined with the consolidated balance sheet data of Recognition as of March 26,
1995. The consolidated statement of operations for the twelve months ended
December 31, 1998, 1997 and 1996 are those of the combined company. The
consolidated statement of operations data for the nine months ended December 31,
1995, includes BancTec's results for the nine months ended December 31, 1995,
combined with Recognition's results for the nine months ended December 31, 1995.
The consolidated statement of operations data for the fiscal year ended 1995
includes BancTec's fiscal year ended March 26, 1995 combined with Recognition's
fiscal year ended October 31, 1994.
7
<PAGE>
CERTAIN PROJECTIONS
In connection with WCAS's and Convergent Equity Partner's review of BancTec
and in the course of the negotiations between BancTec, WCAS and Convergent
Equity Partners described in "The Merger -- Background of the Merger," BancTec
provided WCAS and Convergent Equity Partners with non-public business and
financial information. The non-public information BancTec provided included
projections of BancTec's future operating performance. These projections do not
give effect to the merger or the financing of the merger.
BancTec does not, as a matter of course, publicly disclose projections of
future revenues or earnings. The projections were not prepared with a view to
public disclosure and are included in this proxy statement only because such
information was made available to Welsh Carson and Convergent Equity Partners in
connection with their due diligence investigation of BancTec. The projections
were not prepared with a view to compliance with the published guidelines of the
Securities and Exchange Commission regarding projections, nor were they prepared
in accordance with the guidelines established by the American Institute of
Certified Public Accountants for preparation and presentation of financial
projections. While presented with numerical specificity, these projections
reflect numerous assumptions made by BancTec's management. In addition, factors
such as industry performance and general business, economic, regulatory, market
and financial conditions, all of which are difficult to predict and beyond the
control of BancTec's management, may cause the projections or the underlying
assumptions to be inaccurate. Accordingly, there can be no assurance that the
projections will be realized, and actual results may be materially greater or
less than those contained in the projections.
BancTec does not intend to update or otherwise revise the projections to
reflect circumstances existing after the date when made or to reflect the
occurrence of future events even in the event that any or all of the assumptions
underlying the projections are shown to be in error.
The internal management projections BancTec provided to Welsh Carson and
Convergent Equity Partners included estimates of calendar year 1999 revenues,
earnings before interest, taxes, depreciation and amortization and earnings per
share of $628.1 million, $100.6 million, and $1.60, respectively, and estimates
of calendar year 2000 revenues, earnings before interest, taxes, depreciation
and amortization and earnings per share of $688.5 million, $104.8 million and
$1.85, respectively. Welsh Carson and Convergent Equity Partners took this
information, together with their own analyses, into account in determining
whether to invest in BancTec.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This proxy statement, the information incorporated in this proxy statement
by reference and other statements we have made from time to time, contain
statements that may be "forward-looking statements." Those statements including
the projections of future operating performance above, include statements
regarding our intent, belief or current expectations, as well as the assumptions
on which those statements are based. Forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and actual
results may differ materially from those contemplated by forward-looking
statements. Important factors currently known to BancTec's management and
Colonial that could cause actual results to differ materially from those in
forward-looking statements include, but are not limited to, those factors set
forth from time to time in reports BancTec files with the Securities and
Exchange Commission. We undertake no obligation to update or revise
forward-looking statements to reflect changes in assumptions, the occurrence of
unanticipated events or changes to future operating results over time. You are
cautioned not to place too much reliance on such statements.
8
<PAGE>
THE SPECIAL MEETING
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting will be held on July 21, 1999 at 10:00 a.m., local time
at Chase Tower, 2200 Ross Avenue, 7th Floor, Dallas, Texas 75201.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
The purpose of the special meeting is to consider and vote upon a proposal
to approve and adopt the Amended and Restated Agreement and Plan of Merger,
dated as of June 17, 1999, by and between Colonial Acquisition Corp., a
newly-formed Delaware corporation, and BancTec. Pursuant to the merger
agreement, Colonial will be merged with and into BancTec and each outstanding
share of BancTec common stock will be converted into the right to receive $18.50
in cash, without interest, other than shares of BancTec common stock held by
stockholders who are entitled to and have perfected their dissenters' appraisal
rights. Shares held by BancTec, its subsidiaries or Colonial will be canceled in
the merger. Accordingly, upon consummation of the merger, the current shares of
BancTec common stock will cease to represent ownership interests in BancTec.
The board of directors of BancTec (the "Board") has determined that the
merger is fair to, advisable and in the best interests of the stockholders of
BancTec and has approved and adopted the merger agreement. The Board unanimously
recommends that the stockholders of BancTec vote FOR approval and adoption of
the merger agreement.
PROXY SOLICITATION
We are soliciting your proxy pursuant to this proxy statement. We will pay
all expenses incurred in connection with solicitation of the enclosed proxy. Our
officers, directors and regular employees may solicit proxies in person or by
telephone. They will receive no additional compensation for their services. In
addition, we have retained D.F. King & Company, Inc. to solicit proxies for a
fee of $5,500 and $3.50 per telephone contact plus expenses. We have requested
brokers and nominees who hold stock in their names to furnish this proxy
statement to their customers, and we will reimburse these brokers and nominees
for their related out-of-pocket expenses. This proxy statement and the
accompanying proxy card are being mailed to stockholders on or about June 23,
1999.
RECORD DATE AND QUORUM REQUIREMENT
The BancTec common stock is the only outstanding voting security of
BancTec. The Board has fixed the close of business on June 16, 1999 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the special meeting and any adjournments or postponements of the
special meeting. If you hold BancTec common stock at the close of business on
the record date, you will be entitled to one vote for each share you hold on
each matter submitted to a vote of stockholders. At the close of business on the
record date, there were 19,472,846 shares of BancTec common stock issued and
outstanding held by 2,407 holders of record. As of March 31, 1999, our directors
and executive officers beneficially owned an aggregate of 1,019,595 shares of
BancTec common stock, or approximately 5.1% of the outstanding shares of BancTec
common stock entitled to vote on the merger, which requires a majority vote.
The holders of a majority of the outstanding shares entitled to vote at the
special meeting must be present in person or represented by proxy to constitute
a quorum for the transaction of business. Abstentions are counted as present for
purposes of determining the presence or absence of a quorum for the transaction
of business.
VOTING PROCEDURES
Approval of the merger agreement, which is attached as Appendix B, will
require the affirmative vote of the holders of a majority of the outstanding
shares of BancTec common stock entitled to vote at the special meeting. If you
fail to vote, or vote to abstain, it will have the same legal effect as a
9
<PAGE>
vote cast against approval. Your broker and, in many cases, your nominee will
not have discretionary power to vote on the proposal to be presented at the
special meeting. Accordingly, you should instruct your broker or nominee how to
vote. A broker non-vote will have the same effect as a vote against the merger.
If there are insufficient votes to approve the merger agreement at the
special meeting, your proxy may be voted to adjourn the special meeting in order
to solicit additional proxies in favor of approval of the merger agreement if
you voted in favor of the merger agreement or gave no voting instructions. If
the special meeting is adjourned or postponed for any purpose, at any subsequent
reconvening of the special meeting, your proxy will be voted in the same manner
as it would have been voted at the original convening of the meeting unless you
withdraw or revoke your proxy. Your proxy may be voted this way even though it
may have been voted on the same or any other matter at a previous meeting.
Under Delaware law, if you do not vote in favor of the merger agreement and
comply with certain notice requirements and other procedures, you will have the
right to dissent and to be paid cash for the "fair value" of your shares as
finally determined under such procedures. This payment may be more or less than
the consideration to be received by other stockholders of BancTec under the
terms of the merger agreement. If you fail to follow such procedures precisely,
you may lose your appraisal rights. See "Rights of Dissenting Stockholders."
VOTING AND REVOCATION OF PROXIES
You may revoke your proxy at any time before it is exercised by:
o filing with the Secretary of BancTec an instrument revoking it;
o submitting a properly executed proxy bearing a later date; or
o voting in person at the special meeting.
Subject to such revocation, all your shares represented by a properly
executed proxy received by the Secretary of BancTec will be voted in accordance
with your instructions, and if no instructions are indicated, will be voted to
approve and adopt the merger agreement and in such manner as the persons named
on the enclosed proxy card in their discretion determine upon such other
business as may properly come before the special meeting or any adjournment or
postponement of the special meeting.
Your shares will be voted by proxy at the special meeting if your proxy
card is properly signed, dated and received by the Secretary of BancTec prior to
the special meeting.
EFFECTIVE TIME OF THE MERGER AND PAYMENT FOR SHARES
The effective time of the merger will be the date and time of filing of the
certificate of merger with the Secretary of State of the State of Delaware. This
is currently expected to occur as soon as practicable after the special meeting,
subject to approval and adoption of the merger agreement at the special meeting
and satisfaction or waiver of the other terms and conditions of the merger
agreement. Detailed instructions with regard to the surrender of BancTec common
stock certificates, together with a letter of transmittal, will be forwarded to
you by BancTec's exchange agent, American Stock Transfer & Trust Company,
promptly after the effective time. The letter of transmittal will contain
instructions with respect to the surrender of certificates representing shares
of BancTec common stock in exchange for cash. You should not forward stock
certificates to the Exchange Agent until you have received the letter of
transmittal. The exchange agent will send you payment of the merger
consideration as promptly as practicable following receipt by the exchange agent
of your certificates and other required documents. No interest will be paid or
accrued on the cash payable upon the surrender of certificates. You should not
send any certificates at this time. If you hold shares through a brokerage or
similar account, payment of the merger consideration will be paid to the record
holder of your shares (such as your broker), who in turn will be responsible for
payment of the merger consideration to you.
10
<PAGE>
OTHER MATTERS TO BE CONSIDERED
The Board is not aware of any other matter that will be brought before the
special meeting. If, however, other matters are presented, your proxy will be
voted in the discretion of the holder of your proxy.
THE COMPANIES
BANCTEC
BancTec is a worldwide systems integration and services company with a
27-year history of innovation in document imaging technology, financial
transaction processing and workflow productivity improvement. Serving a variety
of industries, including banking, financial services, insurance, healthcare,
government agencies and others, we offer a comprehensive portfolio of payment
and document processing systems and services, workflow and image management
software products, and computer and network support services.
We are a leading provider of software, equipment and ongoing maintenance of
advanced systems used to process high volumes of checks and related payment
documents. Our integrated systems are used by many of the largest credit card
issuers and other high volume payment processors worldwide. Our leadership
extends to an expanding market for servicing personal computers and networks.
Fortune 1000 companies, government agencies and leading personal computer
manufacturers rely on us for premium nationwide service.
Founded in 1972, we operate worldwide (with international sales in 1998
representing approximately 29% of total revenues) and serve over 5,000 customers
in over 50 countries. Our principal executive offices are located at 4851 LBJ
Freeway, Dallas, Texas 75244. The telephone number is (972) 341-4000.
For a more detailed description of our business and properties, see the
descriptions contained in our Annual Report on Form 10-K for the fiscal year
ended December 31, 1998, as amended, which is incorporated by reference into
this proxy statement and prospectus. See "Where You Can Find More Information."
COLONIAL
Colonial is a newly formed Delaware corporation organized and currently
owned by Welsh, Carson, Anderson & Stowe VIII, L.P. ("WCAS") and its affiliates
for the purpose of effecting the merger. The principal executive offices of
Colonial are located at c/o Welsh, Carson, Anderson and Stowe VIII, L.P., 320
Park Avenue, New York, New York 10022. The telephone number is (212) 893-9500.
WCAS is a private investment partnership with over $3.0 billion in
committed capital. As of June 17, 1999, WCAS and its affiliates have organized
and managed eleven limited partnerships with total capital of approximately $7.6
billion. Since 1979, WCAS and its affiliated investment partnerships have
completed over eighty management buyouts concentrated in the healthcare and
information services industries. Its principal executive offices are located at
320 Park Avenue, Suite 2500, New York, New York 10022. The telephone number is
(212) 893-9500. The sole general partner of WCAS is WCAS VIII Associates LLC, a
Delaware limited liability company.
Convergent Equity Partners, L.P., a private investment partnership, has
agreed to acquire approximately 6.5% of Colonial's outstanding capital stock
prior to the merger. None of WCAS, Convergent Equity Partners or Colonial are
affiliates of BancTec. Colonial has not otherwise conducted any business or
operations.
11
<PAGE>
THE MERGER
GENERAL DESCRIPTION
At the effective time of the merger, Colonial will be merged with and into
BancTec. BancTec will be the surviving corporation and will continue under the
name "BancTec, Inc." As a result of the merger, you will receive $18.50 in cash,
without interest, for each share of BancTec common stock that you own unless you
are entitled to and have perfected your dissenters' appraisal rights. Shares
held by BancTec, its subsidiaries or Colonial will be canceled in the merger. In
addition, each outstanding and unexercised vested option to purchase BancTec
common stock will be converted into the right to receive cash for the
difference, if positive, between $18.50 a share and the exercise price of the
option, and each restricted stock award will be converted into the right to
receive $18.50 a share.
BACKGROUND OF THE MERGER
In December 1996, the Board directed management to consider alternatives
for enhancing value for BancTec shareholders. In January 1997, the Board
authorized management to contact Welsh, Carson, Anderson & Stowe to inquire if
Welsh Carson was interested in considering the purchase of BancTec. Robert
Minicucci, a Welsh Carson partner, was familiar with BancTec's business and the
Board believed he might have an interest in pursuing a transaction. Welsh Carson
indicated an interest, executed a confidentiality agreement, reviewed a copy of
BancTec's business plan and met with management to evaluate BancTec. In February
1997, as part of the effort to enhance shareholder value, BancTec engaged
Goldman, Sachs & Co. ("Goldman Sachs") to act as BancTec's financial advisor.
Goldman Sachs presented to the Board possible strategic alternatives including a
sale or other business combinations involving BancTec. The Board authorized
Goldman Sachs to contact, in a controlled process, potential buyers or partners,
financial and strategic, in addition to Welsh Carson and determine the level of
interest for a purchase or other business combination.
Beginning in March 1997, Goldman Sachs contacted nine potential financial
buyers and seven potential strategic merger partners. Subsequently, BancTec
entered into confidentiality and standstill agreements with six of these
financial parties, and provided each party with a confidential memorandum
describing BancTec. During this period, none of the strategic parties expressed
any interest in response to Goldman Sach's inquiries. Of the financial parties
contacted, six indicated in writing their interest in acquiring BancTec, at
preliminary prices ranging from $24 to $33 per share (BancTec's stock price in
March 1997 ranged from a low of $24.13 to a high of $26.50 per share), and
requested the opportunity to conduct further due diligence. Welsh Carson
declined to submit an indication of interest. BancTec and Goldman Sachs
determined to continue discussions with the four firms indicating the highest
preliminary prices. Three of these parties conducted extensive further due
diligence. Of the three parties, one submitted no proposal, one requested a two
month exclusive period to conduct further due diligence and to attempt to secure
financing and one party presented a written proposal for acquiring BancTec,
which, subject to significant conditions, provided for BancTec stockholders to
receive $24 in cash per share plus approximately 25%, in the aggregate, of the
outstanding common stock of the post-transaction company.
The Board considered the written proposal and authorized negotiations with
that party. In response to negotiations, the party proposed to the Board in
August 1997, a transaction that would provide $26.50 in cash per share plus
approximately 23%, in the aggregate, of the outstanding stock of the
post-transaction company. Among other conditions, the proposal was subject to
the party securing financing and to further due diligence review for a period of
up to 30 days. After consultation with Goldman Sachs and outside legal counsel,
the Board approved consideration of this revised proposal and authorized
management and outside counsel to commence negotiations and preparation of the
necessary definitive transaction documents. After conducting further due
diligence concerning BancTec and after further discussions with its potential
financing sources, the potential financial buyer stated to Goldman Sachs that it
was no longer interested in pursuing its proposed purchase of BancTec and
offered no alternative proposal. The Board in September 1997, after
12
<PAGE>
considering the financial advice of Goldman Sachs, concluded that no further
negotiations would be productive and terminated its efforts with this financial
buyer and further efforts to sell or find a merger partner for BancTec.
In October 1997, the Board again discussed and approved alternative plans
designed to enhance shareholder value through a stock purchase program of up to
two million shares, long-term debt refinancing and redemption of BancTec's
subordinated convertible debentures. The Board further approved the offering of
a new class of senior notes.
In December 1997, Goldman Sachs introduced senior BancTec management to a
computer industry party that was interested in exploring a strategic merger with
BancTec. Senior management conducted preliminary discussions concerning a
possible strategic merger of the two companies and reported those discussions to
the Board on December 11, 1997. With the Board's approval, senior management
continued preliminary discussions and, at its regular meeting on January 27,
1998, the Board reviewed the status of those discussions and authorized
management to continue to investigate the potential of a strategic merger and to
secure the services of Goldman Sachs as a financial advisor to assist in those
efforts. The parties continued discussions but could reach no agreement and on
March 17, 1998, discussions were terminated.
In May 1998, in accordance with the Board's decision in October 1997,
BancTec completed its offering of $150,000,000 in principal amount of its 7.5%
Senior Notes due 2008.
In July 1998, BancTec publicly reported that preliminary results of
operations for the second quarter ended June 30, 1998 indicated that financial
results for the quarter would be below expectations of the investment community
and the full year earnings for 1998 were expected to be approximately 15% below
1997 results. In response to the announcement, BancTec's stock price dropped
from a closing high of $23.13 per share on June 30 to a closing high of $16.06
per share on July 31, 1998.
On July 22, 1998, the Board, in an effort to enhance operating results,
retained Booz-Allen and Hamilton ("Booz Allen") to assist BancTec in evaluating
its business strategy. Booz Allen interviewed BancTec's management and developed
its recommendations over the next several months. BancTec's third quarter
results announced on October 26, reflected per share earnings of $0.36 a share
compared with $0.48 a share the prior year. BancTec also announced its
expectations for fourth quarter 1998 earnings per share to be approximately
$0.20 compared with $0.48 for fourth quarter 1997. During October 1998,
BancTec's stock traded at per share prices ranging from $11.50 to $15.25. On
October 22, 1998 Booz Allen recommended to the Board a restructuring of
BancTec's business in certain aspects and the Board instructed management to
begin implementation of those recommendations. On November 17, 1998, BancTec
publicly announced that Grahame Clark was planning to resign as chief executive
officer of BancTec and that a search for his replacement was authorized.
In early December 1998, during a conversation with Paul Ferri, a director
of BancTec, Robert Minicucci of Welsh Carson expressed an interest in pursuing a
potential transaction with BancTec. On December 17, 1998, Mr. Ferri reported to
the Board his conversation with Welsh Carson. The Board authorized BancTec's
management to advise Welsh Carson that the Board would consider an indication of
interest in acquiring BancTec if Welsh Carson would commit to proceed promptly.
The Board further directed BancTec's management to provide such information to
Welsh Carson necessary for its evaluation of BancTec.
In January and February 1999, Welsh Carson conducted its due diligence
evaluation of BancTec with management of BancTec. On Friday, February 26, 1999,
Welsh Carson expressed orally to Mike Stone, a director of BancTec who had been
designated by the board to lead BancTec's negotiations, its interest in
acquiring BancTec for $18.25 cash per share of common stock. Later that day the
Board reviewed the Welsh Carson proposal and conferred with senior management
and outside legal counsel. At this meeting legal counsel apprised the board of
the appropriate process for evaluating the Welsh Carson indication of interest
and the consideration of alternatives. The Board requested management to
reengage Goldman Sachs as financial advisor to assist the Board in evaluating
the proposal. The Board further instructed Mr.
13
<PAGE>
Stone to begin negotiations with Welsh Carson in an effort to increase the price
of Welsh Carson's proposal. The Board also called a meeting for Monday, March 1,
with management and Goldman Sachs participating in order to consider the
proposal further.
Over that weekend Goldman Sachs reviewed the proposal and current
information about BancTec. In addition, Mr. Stone held further discussions with
Welsh Carson in an effort to increase the price of Welsh Carson's proposal.
During the discussions Welsh Carson increased its proposal to $18.75 a share.
At the Board's meeting on March 1, which included senior management,
Goldman Sachs and outside counsel, the Board discussed potential alternatives to
the Welsh Carson proposal including continuing BancTec's current business plans.
The Board directed management to evaluate immediately BancTec's business and
financial conditions and business plan and strategies in light of the Welsh
Carson proposal and to report their findings to the Board. The Board also
instructed Goldman Sachs to meet with BancTec's senior management and
representatives of Booz Allen in order to evaluate the business and financial
plans and projections of BancTec and the Booz Allen recommendations and
proposals, and the status and timetable for implementation of such proposals.
The Board further authorized Mr. Stone to propose a price of $19 per share to
Welsh Carson and to state that the Board would meet on March 5, 1999 to consider
Welsh Carson's current proposal and that Welsh Carson needed to have its best
and final proposal presented for the Board's consideration.
At the March 5 Board meeting, Mr. Stone reported that Welsh Carson
maintained its proposal of $18.75 a share and represented that financing of its
offer was substantially in place and that the offer was not subject to any
further business due diligence review and subject only to further due diligence
concerning BancTec's legal matters. The Board conferred with senior management,
individually and collectively, and with Goldman Sachs concerning its evaluations
of BancTec's business and financial strategies and conditions in light of the
Welsh Carson proposal. The Board also reviewed with Goldman Sachs the likelihood
of obtaining a more favorable proposal from a third party, financial or
strategic. Considering all these issues, and consulting with outside counsel,
the Board determined to commence negotiations concerning agreements and
financing commitments for the Welsh Carson proposal at $18.75 a share.
Welsh Carson and representatives of BancTec negotiated over the next
several days. The agreements as negotiated provided for a transaction whereby
the stockholders of BancTec would receive $18.75 a share for approximately 97%
of the outstanding common stock of BancTec and approximately 6.5% of the common
stock of the post-transaction company for the remaining approximately 3% of the
outstanding common stock of BancTec. Welsh Carson also agreed to use
commercially reasonable efforts to arrange for an independent third party
investor to purchase the approximately 6.5% of the post-merger stock, which
would allow the BancTec shareholders to receive $18.75 a share for 100% of their
common stock. The Board set Sunday, March 14, 1999, for a meeting to further
review and consider approval of the proposed Welsh Carson transaction and the
underlying agreements.
On Friday, March 5, the same day that the Board met to review the Welsh
Carson proposal, Mr. Clark received an unsolicited telephone call from a senior
executive of a major computer industry company expressing an interest in an
unspecified cooperative effort between the two companies including the possible
acquisition of BancTec by the industry party. Mr. Clark advised the Board at its
meeting that day of the telephone call and the Board, after consultation with
its advisors, instructed management, Mr. Stone and Goldman Sachs to attempt to
evaluate the legitimacy of the phone call and, if warranted, to continue
conversations with that party to determine the party's level of interest. During
the weekend of March 6 and 7, Goldman Sachs talked with representatives of the
potential strategic merger partner confirming that the call was authorized, that
the interest in acquiring BancTec was high and that the party could move rapidly
in its further evaluation of BancTec. On Monday, March 8, Goldman Sachs advised
the Board of these developments. The Board authorized commencement of
negotiations with the strategic merger partner and instructed Goldman Sachs to
inform the party that BancTec's management would be available to meet with the
14
<PAGE>
party and would immediately provide information necessary for an evaluation of
BancTec. The Board also instructed Goldman Sachs to inform the potential
strategic merger partner that any acquisition proposal must be presented to the
Board by Friday, March 12, 1999. The industry party on March 9, 10, and 11 sent
a group of its managers and attorneys to BancTec who met with management and
reviewed BancTec's records and plans.
On Friday, March 12, the strategic party delivered to the Board a written
expression of interest in acquiring BancTec in a merger whereby 100% of the
BancTec stockholders, in a tax free transaction, would receive a number of
shares of stock of the strategic party based on a $21 per share valuation of
BancTec's common stock. The expression of interest was subject to several
conditions, including the condition that the parties receive a ruling from the
Securities and Exchange Commission that the proposed combination would be
accounted for as a pooling of interests. The strategic party orally stated that
it had substantially completed its business due diligence and expressed a high
degree of confidence that the conditions to the transaction could be met.
At the Board meeting previously scheduled for review of the Welsh Carson
proposal on Sunday, March 14, the Board considered both the Welsh Carson
proposal and the strategic party's expression of interest. After conferring with
Arthur Andersen, BancTec's independent accountants, Goldman Sachs and outside
legal counsel, and after considering the higher price, the tax free nature of
the transaction and the level of the strategic party's expression of interest,
the Board determined to continue negotiations with the strategic party and to
seek to promptly satisfy the conditions to a transaction with that party. The
Board also directed Mr. Stone to advise Welsh Carson of this new expression of
interest by the strategic party and to communicate to Welsh Carson the Board's
continuing interest in its proposal, considering the conditional nature of the
potential strategic partner's expression of interest. Mr. Stone communicated
that day to Welsh Carson the Board's decision concerning the recent strategic
party proposal and the Board's desire to continue the Welsh Carson discussions.
In response to Mr. Stone, Welsh Carson stated orally, and subsequently confirmed
in writing, that it was terminating its proposal.
During the next several days, BancTec and the strategic party continued
discussions and negotiations concerning the proposed strategic merger and due
diligence. On March 16, 1999, BancTec inquired of the accounting staff of the
Securities and Exchange Commission as to whether the accounting staff would have
any objection to pooling of interests accounting for the proposed transaction.
The inquiry was limited to certain specific matters. On March 19, a member of
the accounting staff responded that the accounting staff would have no objection
to the use of pooling of interests accounting in so far as the specific matters
were concerned. On the morning of March 22, management of the strategic party
continued meetings with BancTec's management. In the afternoon of March 22, the
strategic party informed Goldman Sachs that it was no longer interested in
pursuing a transaction. Management and Goldman Sachs talked further with the
party and were informed that the party was not interested in any further
proposals.
The Board after reviewing these developments directed Mr. Stone and Mr.
Clark to talk with Welsh Carson to attempt to revive its interests in a
transaction. After several discussions, Welsh Carson agreed to reconsider a
transaction and on March 29, communicated with Mr. Stone and Mr. Clark its
interest in proceeding with a merger on substantially the same basis as
previously proposed but at a reduced price of $18.25 a share. The Board reviewed
Welsh Carson's revised merger proposal and instructed Mr. Stone and Mr. Clark to
continue negotiations with Welsh Carson to reinstate its original proposal of
$18.75 per share. On March 30, Welsh Carson refused to reinstate the offer of
$18.75 per share but offered to go forward immediately on the same terms as
previously proposed but at $18.50 per share. The Board met on April 1 to
consider the merger proposal and, after discussions with its senior management
and considering the financial advice of Goldman Sachs and the legal advice of
BancTec's outside counsel, approved consideration of the $18.50 per share
proposal subject to completion and review of definitive agreements and
supporting financing commitments and the evaluation and presentation by Goldman
Sachs of the fairness of the transaction from a financial point of view.
15
<PAGE>
On April 4, 1999 the Board, with senior management and representatives from
Goldman Sachs and BancTec's outside legal counsel, reviewed the status of the
negotiations with Welsh Carson, the price being offered, the terms of the
transaction agreement and the financial commitments, the background of the
proposed merger and the strategic and financial reasons for the merger. Goldman
Sachs reviewed with the Board the financial analysis performed by Goldman Sachs
in its evaluation of the merger consideration and rendered an oral opinion,
subsequently confirmed by delivery of a written opinion, to the effect that, as
of the date of the opinion, and based upon and subject to the matters stated in
the opinion, the merger consideration to be provided in the merger, taken as a
whole, was fair from a financial point of view to the holders of BancTec common
stock. The Board unanimously approved the merger agreement and instructed
BancTec's senior management and legal advisors to execute the merger agreement
on behalf of BancTec.
On Monday, April 5, BancTec and Welsh Carson executed the merger agreement.
The transaction was announced on April 5.
Pursuant to the terms of the merger agreement as executed on April 5,
approximately 97% of BancTec's outstanding common stock would be converted into
the right to receive $18.50 per share, with approximately 3% of BancTec's
outstanding common stock being converted into approximately 6.5% of the
surviving corporation's outstanding common stock. The April 5 merger agreement
also provided Colonial with the right to cause the merger agreement to be
amended so as to provide that all of BancTec's outstanding common stock would be
converted into the right to receive $18.50 per share, with none of the
outstanding shares of BancTec being converted into shares of the surviving
corporation. On June 17, 1999, Colonial exercised its right to amend the April 5
merger agreement, and the amended and restated merger agreement was executed on
that date pursuant to which BancTec stockholders would receive $18.50 per share
for all outstanding shares of BancTec common stock. The amended transaction was
announced on June 18, 1999.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
The Board believes that the terms of the merger agreement and the merger
are fair to and in the best interests of BancTec and its stockholders.
Accordingly, the Board has unanimously approved the merger agreement and the
merger and recommends that you approve and adopt the merger agreement. In
reaching its determination to recommend the merger agreement, the Board
considered a number of factors, including the following:
1. The Board considered the value of the consideration to be received by
BancTec's stockholders in the merger. The Board considered the historical market
prices and trading information for BancTec common stock, the price per share
offered by WCAS, the certainty of value provided by the cash consideration and
the fact that the per share cash merger consideration represents a significant
premium over the market prices at which BancTec's common stock had previously
traded, including, but not limited to, the fact that the $18.50 per share cash
merger consideration represented a 42% premium over the $13 closing price on
April 1, 1999, the last trading day before BancTec announced the proposed
merger.
2. As described above under "Background of the Merger," the Board noted
that the merger consideration and the ultimate selection of the WCAS proposal
was the result of an extensive process that resulted in discussions with a
substantial number of potential bidders in a process designed to elicit
third-party proposals to acquire BancTec, and that the participants in the
process were afforded ample opportunity to submit proposals to BancTec.
3. The Board considered information concerning BancTec's financial
performance, financial condition, business operations and prospects and the
market price of BancTec's common stock. The Board considered the prospects of
continuing to operate BancTec as an independent public company and the
possibility that BancTec's future performance might not in the foreseeable
future lead to a trading price for BancTec common stock having a higher present
value than the merger consideration.
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<PAGE>
4. The Board considered the terms and conditions of the merger agreement,
including the amount and form of consideration to be received by BancTec's
stockholders, the restrictions relating to solicitation of third party
proposals, the termination provisions and the size, nature and events that would
trigger the payment of the $12 million termination fee contained in the merger
agreement (see "Certain Terms of the Merger Agreement -- Termination Fees and
Expenses"). The Board recognized that the provisions limiting BancTec from
soliciting or encouraging alternative proposals, and the termination fee
provisions, could decrease the likelihood that a third party would offer to
acquire BancTec. Nonetheless, the Board believed that such provisions were in
the best interests of BancTec's stockholders because they enhanced the
likelihood that the merger would be accomplished, thereby providing BancTec's
stockholders with the benefits of the merger consideration. Moreover, in
evaluating the provisions, the Board also took into account that BancTec had
previously contacted a substantial number of potential bidders and afforded them
a full opportunity to submit an offer to acquire BancTec. The Board considered
whether it was in the best interest of BancTec's stockholders to remain an
independent company. The Board decided that the merger best addressed the
interests of BancTec's stockholders because of the amount and nature of the
merger consideration.
5. The Board considered the risk that the merger consideration is fixed and
will not be adjusted in the event of an increase or decrease in the market price
of BancTec's common stock or the value of BancTec's business. The Board
recognized that fixed merger consideration is not unusual in a transaction such
as the merger and that the fixed merger consideration, while creating a risk to
BancTec's stockholders, could also operate to benefit BancTec's stockholders.
6. The Board considered the strong financial condition and business
reputation of WCAS, the experience and high rate of success of WCAS in
structuring and completing transactions similar to the merger, the financing
commitments obtained by WCAS and WCAS's ability to complete the merger in a
timely manner and without substantial additional due diligence.
7. The Board considered the opinion of Goldman Sachs dated April 4, 1999 as
to the fairness, from a financial point of view, of the consideration to be
provided in the merger, taken as a whole, as of the date of the opinion, to the
holders of BancTec's common stock, and further considered the related financial
analyses performed by Goldman Sachs, as described below under "Opinion of
BancTec's Financial Advisor."
The foregoing discussion of factors considered by the Board is not
exhaustive, but BancTec believes it includes the material factors considered by
the Board. The Board did not quantify or otherwise attempt to assign relative
weights to the specific factors the Board considered in reaching its
determination to recommend the merger. Rather, the Board viewed its position and
recommendation as being based on the total information presented to and
considered by the Board.
OPINION OF BANCTEC'S FINANCIAL ADVISOR
On April 4, 1999, Goldman Sachs delivered its opinion, subsequently
confirmed in writing, to the Board that, as of such date, the cash consideration
and stock consideration as contemplated in the April 5 merger agreement to be
received by the holders of BancTec common stock in the merger, taken as a
unitary transaction, were fair from a financial point of view to such holders.
Goldman Sachs has updated its written opinion as of the date of the amended and
restated merger agreement.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED JUNE 17, 1999,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS APPENDIX
A AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF BANCTEC COMMON STOCK ARE
URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
(1) the original merger agreement executed on April 5, 1999, and the
amended and restated merger agreement;
(2) Annual Reports to Stockholders and Annual Reports on Form 10-K of
BancTec for the five years ended December 31, 1998;
17
<PAGE>
(3) certain interim reports to stockholders and Quarterly Reports on Form
10-Q of BancTec;
(4) certain other communications from BancTec to its stockholders; and
(5) certain internal financial analyses and forecasts for BancTec
prepared by its management.
Goldman Sachs also held discussions with members of the senior management
of BancTec regarding the past and current business operations, financial
condition and future prospects of BancTec. In addition, Goldman Sachs reviewed
the reported price and trading activity for shares of BancTec common stock,
compared certain financial and stock market information for BancTec with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the information technology services industry specifically and in other
industries generally and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In that regard, Goldman
Sachs assumed with the consent of BancTec's Board of Directors that the internal
prospective financial information prepared by the management of BancTec had been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the management of BancTec. In addition, Goldman Sachs did not
make an independent evaluation or appraisal of the assets and liabilities of
BancTec or any of its subsidiaries and Goldman Sachs was not furnished with any
such evaluation or appraisal. Goldman Sachs was not requested to solicit, and
did not solicit, interest from other parties with respect to an acquisition of
or other business combination with BancTec. The advisory services and the
opinion of Goldman Sachs expressed in its fairness opinion were provided for the
information and assistance of BancTec's Board of Directors in connection with
its consideration of the transaction contemplated by the merger agreement and
such opinion does not constitute a recommendation as to how any BancTec
stockholder should vote with respect to the merger.
THE FOLLOWING IS A SUMMARY OF THE MATERIAL FINANCIAL ANALYSES USED BY
GOLDMAN SACHS IN CONNECTION WITH PROVIDING ITS OPINION TO BANCTEC'S BOARD OF
DIRECTORS ON APRIL 4, 1999. CERTAIN OF THE SUMMARIES OF FINANCIAL ANALYSES
INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER FULLY TO UNDERSTAND
THE FINANCIAL ANALYSES USED BY GOLDMAN SACHS, THE TABLES MUST BE READ TOGETHER
WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE
DESCRIPTION OF THE FINANCIAL ANALYSES. GOLDMAN SACHS UTILIZED SUBSTANTIALLY THE
SAME TYPE OF FINANCIAL ANALYSIS IN CONNECTION WITH PROVIDING THE WRITTEN OPINION
ATTACHED HERETO AS APPENDIX A.
Selected Companies Analysis. Goldman Sachs reviewed and compared certain
financial information relating to BancTec to corresponding financial
information, ratios and public market multiples for 48 publicly traded
corporations (collectively, the "Selected Companies") in specified sections of
the IT services industry:
o in the contract programming/integration sector:
<TABLE>
<S> <C>
Analysts International Corporation
Ciber, Inc. Keane, Inc.
Complete Business Solutions, Inc. Mastech Corporation
Computer Horizons Corp. Metamor Worldwide, Inc.
Computer Task Group, Incorporated Metro Information Services, Inc.
Data Dimensions, Inc. Renaissance Worldwide, Inc.
Data Processing Resources Corporation Sykes Enterprises, Incorporated
IMRglobal Corp. Syntel, Inc.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
o in the maintenance sector:
BancTec
CompuCom Systems, Inc. Inacom Corp.
DecisionOne Corporation Wang Laboratories, Inc.
o in the government sector:
CACI International, Inc
Litton Industries, Inc. Maximus, Inc.
Lockheed Martin Corporation TRW Inc.
o in the transaction processing sector:
Automatic Data Processing, Inc. Galileo International, Inc.
Ceridian Corporation National Data Corporation
Equifax Inc. Paychex, Inc.
First Data Corporation The SABRE Group Holdings, Inc.
o in the category of full service information
technology companies:
Computer Sciences Corporation
Electronic Data Systems Corporation NCR Corporation
International Business Machines Corporation Unisys Corporation
o and in the systems integration/consulting sector:
American Management Systems, Incorporated
AnswerThink Consulting Group, Inc. International Network Services
Atlantic Data Services, Inc. Tier Technologies, Inc.
Cambridge Technology Partners Technology Solutions Company
(Massachusetts), Inc. Sapient Corporation
Diamond Technology Partners Incorporated Whittman-Hart, Inc.
</TABLE>
The Selected Companies were chosen because they are publicly traded
companies with operations that for purposes of this analysis may be considered
similar to BancTec. Goldman Sachs calculated and compared various financial
multiples and ratios. The multiples and ratios for each of the Selected
Companies were based on the most recent publicly available information and
estimates provided by Goldman Sachs published research and Independent Broker
Estimate Services ("IBES"). IBES estimates were calendarized for companies with
non-December year-end. The following tables present the ranges, the mean and the
median indicated for the Selected Companies of each of: market value as a
percentage of the prior 52-week high; multiples of enterprise value to trailing
twelve months ("LTM") revenue, earnings before income, taxation, depreciation,
and amortization ("EBITDA") and earnings before income and taxation ("EBIT");
and multiples of equity value to estimated calendar year 1999, 2000, and 2001
earnings per share ("EPS"), and the ratio of price/earnings to 5-year IBES
estimated growth ("PEG") for 1999 and 2000.
CONTRACT PROGRAMMING/INTEGRATION
SELECTED COMPANIES
-------------------------------------------
RANGE MEAN MEDIAN
----------------- ---------- ----------
% of 52-Wk High ......... 20.3% -- 100.0% 40.5% 39.6%
Revenue (LTM) ........... .4x -- 3.6x 1.3x 1.2x
EBITDA (LTM) ............ 3.3x -- 17.7x 8.9x 8.3x
EBIT (LTM) .............. 3.6x -- 23.0x 10.0x 9.4x
EPS (CY1999) ............ 4.4x -- 27.4x 13.3x 12.5x
EPS (CY2000) ............ 4.4x -- 21.5x 10.5x 9.7x
EPS (CY2001) ............ 3.1x -- 16.6x 7.9x 7.2x
1999 PEG ................ .1x -- .9x .5x .4x
2000 PEG ................ .1x -- .7x .4x .3x
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<PAGE>
MAINTENANCE
SELECTED COMPANIES
-------------------------------------------
RANGE MEAN MEDIAN
----------------- ---------- ----------
% of 52-Wk High ......... 7.0% -- 62.5% 35.5% 37.3%
Revenue (LTM) ........... .1x -- 1.0x .5x .5x
EBITDA (LTM) ............ 3.3x -- 7.5x 5.1x 4.5x
EBIT (LTM) .............. 6.3x -- 211.6x 66.0x 7.8x
EPS (CY1999) ............ 5.8x -- 20.4x 10.9x 8.6x
EPS (CY2000) ............ 3.5x -- 10.0x 6.4x 6.1x
EPS (CY2001) ............ 2.9x -- 8.1x 5.5x 5.5x
1999 PEG ................ .3x -- 1.2x .7x .7x
2000 PEG ................ .2x -- .7x .4x .5x
GOVERNMENT
SELECTED COMPANIES
-------------------------------------------
RANGE MEAN MEDIAN
----------------- ---------- ----------
% of 52-Wk High ......... 64.1% -- 84.8% 73.7% 75.9%
Revenue (LTM) ........... .7x -- 1.7x 1.0x .8x
EBITDA (LTM) ............ 5.5x -- 14.9x 8.9x 8.2x
EBIT (LTM) .............. 9.0x -- 16.1x 11.5x 10.5x
EPS (CY1999) ............ 10.5x -- 19.2x 13.3x 12.8x
EPS (CY2000) ............ 9.4x -- 14.8x 11.4x 11.4x
EPS (CY2001) ............ 8.5x -- 11.4x 9.8x 9.6x
1999 PEG ................ .6x -- 1.3x 1.0x 1.1x
2000 PEG ................ .5x -- 1.2x .9x .9x
TRANSACTION PROCESSING
SELECTED COMPANIES
------------------------------------------
RANGE MEAN MEDIAN
---------------- ---------- ----------
% of 52-Wk High ......... 74.7% -- 98.6% 89.6% 91.8%
Revenue (LTM) ........... 2.2x -- 7.0x 4.1x 3.8x
EBITDA (LTM) ............ 9.6x -- 41.3x 17.2x 12.3x
EBIT (LTM) .............. 13.8x -- 49.1x 22.4x 17.6x
EPS (CY1999) ............ 18.3x -- 50.7x 28.5x 24.1x
EPS (CY2000) ............ 15.4x -- 40.5x 24.1x 21.1x
EPS (CY2001) ............ 13.0x -- 32.0x 20.3x 18.7x
1999 PEG ................ 1.0x -- 2.3x 1.7x 1.7x
2000 PEG ................ .8x -- 2.0x 1.4x 1.4x
FULL SERVICE IT
SELECTED COMPANIES
------------------------------------------
RANGE MEAN MEDIAN
---------------- ---------- ----------
% of 52-Wk High ......... 73.6% -- 94.3% 86.4% 89.8%
Revenue (LTM) ........... .7x -- 2.4x 1.4x 1.4x
EBITDA (LTM) ............ 8.7x -- 13.5x 10.4x 10.2x
EBIT (LTM) .............. 12.4x -- 30.4x 20.8x 21.0x
EPS (CY1999) ............ 21.8x -- 26.4x 23.7x 23.5x
EPS (CY2000) ............ 17.1x -- 22.2x 19.5x 19.1x
EPS (CY2001) ............ 11.6x -- 19.6x 16.0x 16.0x
1999 PEG ................ 1.2x -- 2.0x 1.5x 1.3x
2000 PEG ................ .9x -- 1.7x 1.3x 1.1x
20
<PAGE>
SYSTEM INTEGRATION/CONSULTING
SELECTED COMPANIES
-------------------------------------------
RANGE MEAN MEDIAN
----------------- ---------- ----------
% of 52-Wk High ......... 16.2% -- 100.0% 61.0% 68.6%
Revenue (LTM) ........... .2x -- 13.0x 4.6x 2.4x
EBITDA (LTM) ............ 1.1x -- 64.9x 23.8x 11.8x
EBIT (LTM) .............. 1.1x -- 74.9x 31.9x 21.5x
EPS (CY1999) ............ 10.1x -- 76.1x 35.8x 27.6x
EPS (CY2000) ............ 7.3x -- 53.6x 24.9x 21.2x
EPS (CY2001) ............ 5.6x -- 36.5x 17.7x 16.5x
1999 PEG ................ .3x -- 1.7x .9x 1.0x
2000 PEG ................ .2x -- 1.2x .7x .7x
Selected Transactions Analysis. Goldman Sachs analyzed certain information
relating to 34 selected merger transactions involving more than $12 billion in
the information technology services industry since 1996 (collectively, the
"Selected Transactions"):
The Continuum Company, Inc./Hogan Systems, Inc.
Interim Services Inc./Brandon Systems Corporation
Medaphis Corporation/BSG Corporation
Amdahl Corporation/Trecom Business Systems, Inc.
Computer Sciences Corporation/The Continuum Company, Inc.
Affiliated Computer Services, Inc./The Genix Group, Inc.
Wang Laboratories, Inc./I-NET, Inc.
The Registry, Inc./Renaissance Solutions, Inc.
Northrop Grumman Corporation/Logicon, Inc.
Sprint Corporation/Paranet, Inc.
CGI Group, Inc./ISI Systems Inc.
Cambridge Technology Partners (Massachusetts),
Inc./Peter Chadwick Holdings Limited
The Registry, Inc./The Hunter Group, Inc.
Affiliated Computer Services, Inc./Computer Data Systems, Inc.
General Dynamics Corporation/Computing Devices International
SunGard Data Systems Inc./Infinity Financial Technology, Inc.
International Telecommunication Data Systems,
Inc./Computer Sciences Corporation's TRIS subsidiary
TRW Inc./BDM International, Inc.
MATRIXX Marketing Inc./AT&T Solutions
Customer Care, Wang Laboratories, Inc./Olsy
(Ing. C. Olivetti & C. S.P.A.)
Accustaff Incorporated/Actium Corporation
Renaissance Worldwide, Inc./Neoglyphics Media Corporation
Computer Horizons Corp./Princeton Softech, Inc.
Ciber, Inc./The Summit Group, Inc.
Xerox Corporation/XLConnect Solutions, Inc.,
Keane, Inc./Bricker & Associates, Inc.
USWeb Corporation/Gray Peak Technologies, Inc.
Cognizant Technology Solutions
Corporation/Walsh International Inc.
Complete Business Solutions, Inc./Claremont
Technology Group, Inc.
USWeb Corporation/CKS Group, Inc.
InaCom Corp./Vanstar Corporation
Cambridge Technology Partners (Massachusetts),
Inc./Excell Data Corporation
Computer Associates International,
Inc./Computer Management Sciences, Inc.
Electronic Data Systems Corporation/MCI
Systemhouse
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The following table presents the ranges, the mean and the median indicated for
the Selected Transactions of each of the premium to the price the day prior to
announcement and the premium to the prior 52-week high price.
SELECTED TRANSACTIONS
------------------------------------------
RANGE MEAN MEDIA
----------------- ---------- ----------
Premiums Over Market .............. (11.1)% -- 42.5% 25.7% 28.6%
Premium Over 52-Week High ......... (52.0)% -- 36.0% (1.9)% 1.1%
Discounted Future Cash Flow Analysis. Goldman Sachs performed a discounted
cash flow analysis based on the financial projections provided by management of
BancTec. The analysis derives a range of present values per share of BancTec
common stock as of January 1, 1999. Goldman Sachs utilized a discount rate range
of 10.0% to 14.0%, and exit valuations based on multiples of terminal year
EBITDA of 4.0x to 6.0x. As determined by Goldman Sachs, the reference range
values were $14.45 to $26.64 per share of BancTec common stock. Goldman Sachs
noted that, given the nature of the information technology services industry,
discounted cash flow valuation ranges are extremely sensitive to changes in both
operating assumptions and revenue assumptions.
With respect to the discounted cash flow analysis, Goldman Sachs noted that
the selection of an appropriate discount rate is an inherently subjective
process, and is affected by such factors as BancTec's cost of capital, the
uncertainty associated with achieving the projections provided by BancTec's
management and transaction risk generally. Goldman Sachs also noted that the
discounted cash flow analysis is a widely used valuation methodology, but that
it relies on numerous assumptions regarding the future performance of a company
and the future economic environment, including earnings growth rates, unlevered
free cash flows, terminal values and discount rates, all of which are inherently
uncertain because they are predicated upon future events and circumstances.
Implied Equity Value Analysis. Goldman Sachs performed an implied equity
value analysis based on the financial projections provided by management of
BancTec. The first part of the analysis used a one year forward earnings
multiple applied to one year forward earnings to find the equity value at the
beginning of each year. This part of the analysis revealed an equity value
consistently rising over time, with the estimated value of the equity by the
year 2006 ranging from approximately $650 million to approximately $950 million,
based on earnings multiples ranging from 10.0x to 14.0x. The second part of the
analysis, which used a 13% discount rate to determine the present value of the
equity, revealed an equity present value ranging from approximately $300 million
to approximately $400 million, based on earnings multiples ranging from 10.0x to
14.0x.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs's opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
BancTec or to the merger. The analyses were prepared solely for purposes of
Goldman Sachs' providing its opinion to the Board as to the fairness from a
financial point of view of the consideration to be received in the merger and do
not purport to be appraisals or necessarily reflect the prices at which business
or securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of BancTec, Goldman Sachs or any other person assumes
responsibility if future results are materially different from those forecast.
As described above, Goldman Sachs's opinion to the Board was one of many factors
taken into consideration by the Board in making its determination to approve the
merger agreement. The foregoing summary describes material financial analyses
used by Goldman Sachs in connection with providing its opinion to the Board on
April 4, 1999, but does not purport to be a complete description of the analysis
performed by Goldman Sachs in connection with such opinion and is qualified by
reference to the written opinion of Goldman Sachs set forth in Appendix A
hereto.
22
<PAGE>
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. BancTec selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in advising on
transactions similar to the merger.
Goldman Sachs has provided certain investment banking services to BancTec
from time to time, including having acted as co-managing underwriter of an
offering of $150 million aggregate principal amount of 7 1/2% Notes due 2000 of
BancTec in May 1998, and as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the merger agreement.
Goldman Sachs also has provided certain investment banking services to WCAS and
its affiliates from time to time, including having provided financing and
advisory services to Welsh Carson and its affiliates, and may provide investment
banking services to Welsh Carson in the future. In addition, certain affiliates
of Goldman Sachs have co-invested with Welsh Carson and its affiliates in
certain transactions sponsored by Welsh Carson or its affiliates. Goldman Sachs
provides a full range of financial advisory and securities services and, in the
course of its normal trading activities, may from time to time effect
transactions in and hold securities, including derivative securities, of BancTec
for its own account and for the accounts of customers.
Pursuant to a letter agreement dated March 4, 1999, BancTec engaged Goldman
Sachs to act as its financial advisor in connection with a potential
transaction. Pursuant to the terms of this engagement letter, BancTec has agreed
to pay Goldman Sachs upon consummation of the merger a transaction fee equal to
.75% of the aggregate consideration paid in the transaction (as though 100% of
the outstanding common stock on a fully diluted basis had been acquired), plus
the principal amount of all indebtedness for borrowed money as set forth on the
most recent consolidated balance sheet of BancTec prior to the consummation of
the merger. This fee would be equal to approximately $3.9 million based on the
$18.50 per share consideration of approximately $370 million and total principal
amount of indebtedness as of March 31, 1999 of approximately $150 million.
BancTec has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket
expenses, including attorney's fees and disbursements plus any sales, use or
similar taxes, and to indemnify Goldman Sachs against certain liabilities,
including certain liabilities arising under the federal securities laws.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the Board, you should be aware that
certain of BancTec's executives (one of whom is also a director) have certain
interests in the merger that are different from, or in addition to, your
interest as a BancTec stockholder generally.
COMMON STOCK. Shares of BancTec common stock held by officers and directors
of BancTec will be converted into the right to receive the same merger
consideration as shares of BancTec held by other stockholders.
EMPLOYMENT AGREEMENTS. Grahame N. Clark, Jr., Donald H. Herbener, Tod V.
Mongan, Raghavan Rajaji, Kevin L. Roper, John A. Torkelson, Scott J. Wilson,
and James R. Wimberly each have entered into employment agreements that
terminate on October 23, 2003. These employment agreements contain severance
provisions which provide that these employees will receive the following
severance payments if their employment is terminated within three years after
the occurrence of specified events, such as the merger: each of Messrs. Clark,
Rajaji and Mongan would receive a severance payment of 2.99 years' annual
compensation, each of Messrs. Herbener and Roper would receive a severance
payment of two years' annual compensation, and each of Messrs. Wimberly, Wilson
and Torkelson would receive a severance payment of one year's annual
compensation.
OFFICERS' AND DIRECTORS' INDEMNIFICATION INSURANCE. The merger agreement
provides that, for a period of six years after the effective time, the surviving
corporation will indemnify the present and former officers, directors, employees
and agents of BancTec and its subsidiaries from liabilities arising
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out of actions or omissions in these capacities prior to the effective time of
the merger, to the full extent permitted under Delaware law or as provided in
BancTec's or its subsidiaries' organizational documents or any written
indemnification agreements. In addition, the surviving entity will maintain
directors' and officers' insurance coverage for six years after the effective
time on terms no less favorable to these indemnified parties than existing
insurance coverage, but the surviving corporation will not be required to pay an
annual premium in excess of 200% of the last premium paid prior to the date of
the merger agreement.
STOCK OPTIONS AND RESTRICTED STOCK. The merger agreement provides that
BancTec will take the necessary actions to provide for the cancellation at the
effective time of the merger of all outstanding options to acquire BancTec
common stock in exchange for a cash payment equal to $18.50 for each share (the
amount that would be payable to that holder had he exercised the option) less
the exercise price per share of the option. In addition, BancTec will cancel all
restricted stock awards in exchange for a cash payment of $18.50 for each share
(the amount that would be payable to that holder had the restrictions on the
stock award lapsed). If all of the options to acquire BancTec common stock or
restricted stock awards were exchanged for cash as described above, certain
members of management of BancTec would be entitled to a maximum aggregate cash
payment of approximately $6,044,286, and the directors of BancTec would be
entitled to a maximum aggregate cash payment of approximately $318,250.
DEFERRED COMPENSATION. BancTec's deferred compensation plan provides that
participants will become fully vested in contributions made by BancTec and will
receive a distribution of their account balances upon the occurrence of the
merger. As a result, certain members of BancTec's management will receive
distributions in an aggregate amount of approximately $589,163 in contributions
by BancTec under this plan.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the merger that are generally applicable to holders
of BancTec common stock. This discussion is based on currently existing
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
existing and proposed Treasury Regulations thereunder and current administrative
rulings and court decisions, all of which are subject to change. Any such
change, which may or may not be retroactive, could alter the tax consequences to
the holders of BancTec common stock as described herein. Special tax
consequences not described below may be applicable to particular classes of
taxpayers, including financial institutions, broker-dealers, persons who are not
citizens or residents of the United States or who are foreign corporations,
foreign partnerships or foreign estates or trusts, persons who will own stock of
BancTec (actually or constructively, under certain constructive ownership rules
in the Code) after the merger, and holders who acquired their stock through the
exercise of an employee stock option or otherwise as compensation.
The receipt of the merger consideration in the merger by holders of BancTec
common stock will be a taxable transaction for federal income tax purposes. Each
holder's gain or loss per share of BancTec common stock will be equal to the
difference between $18.50 and the holder's basis in that particular share of the
BancTec common stock. Such gain or loss generally will be a capital gain or
loss. In the case of individuals, trusts and estates, such capital gain will be
subject to a maximum federal income tax rate of 20% for shares of BancTec common
stock held for more than 12 months prior to the date of disposition.
A holder of BancTec common stock may be subject to backup withholding at
the rate of 31% with respect to merger consideration received pursuant to the
merger, unless the holder (i) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (ii) provides a
correct taxpayer identification number ("TIN"), executes a certification
concerning no loss of exemption from backup withholding and otherwise complies
with applicable requirements of the backup withholding rules. To prevent the
possibility of backup federal income tax withholding on payments made with
respect to shares of BancTec common stock pursuant to the merger, each holder
must provide the exchange agent with his current TIN by completing a Form
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W-9 or Substitute Form W-9. A holder of BancTec common stock who does not
provide BancTec with his or her correct TIN may be subject to penalties imposed
by the Internal Revenue Service (the "IRS"), as well as backup withholding. Any
amount withheld under these rules will be creditable against the holder's
federal income tax liability. BancTec (or its agent) will report to the holders
of BancTec common stock and the IRS the amount of any "reportable payments," as
defined in Section 3406 of the Code, and the amount of tax, if any, withheld
with respect thereto.
THE FOREGOING TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND
IS BASED UPON PRESENT LAW. THE FOREGOING DISCUSSION DOES NOT DISCUSS TAX
CONSEQUENCES UNDER THE LAWS OF STATES OR LOCAL GOVERNMENTS OR ANY OTHER
JURISDICTION OR TAX CONSEQUENCES TO CATEGORIES OF STOCKHOLDERS THAT MAY BE
SUBJECT TO SPECIAL RULES, SUCH AS FOREIGN PERSONS, TAX-EXEMPT ENTITIES,
INSURANCE COMPANIES, FINANCIAL INSTITUTIONS AND DEALERS IN STOCKS AND
SECURITIES. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO A STOCKHOLDER WHO
ACQUIRED HIS OR HER SHARES OF BANCTEC COMMON STOCK PURSUANT TO THE EXERCISE OF
STOCK OPTIONS OR OTHERWISE AS COMPENSATION. EACH HOLDER OF BANCTEC COMMON STOCK
SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR CONCERNING THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO SUCH HOLDER, INCLUDING THE APPLICATION AND EFFECT
OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECT OF CHANGES
IN SUCH TAX LAWS.
ANTICIPATED ACCOUNTING TREATMENT
The merger will be accounted for as a recapitalization for accounting and
financial reporting purposes. Accordingly, the historical basis of BancTec's
assets and liabilities will not be affected by the merger.
GOVERNMENTAL APPROVALS
Transactions such as the merger are subject to review by the Department of
Justice and the Federal Trade Commission to determine whether they comply with
applicable antitrust laws. Under the provisions of the HSR Act, the merger may
not be consummated until the 30-day waiting period requirement of the HSR Act
has been satisfied unless the Department of Justice or the Federal Trade
Commission formally requests additional information or grants early termination
of the waiting period. BancTec and WCAS filed notification reports, together
with a request for early termination of the waiting period, with the Department
of Justice and the Federal Trade Commission under the HSR Act on June 16, 1999.
LITIGATION RELATING TO THE MERGER
As of the date of this proxy statement, BancTec is aware of four lawsuits
that have been filed by alleged stockholders of BancTec relating to the merger.
All four lawsuits were filed in the Chancery Court for New Castle County,
Delaware. Each of the lawsuits names BancTec, its directors and Colonial as
defendants. The plaintiff in each lawsuit seeks to represent a purported class
of all public holders of BancTec common stock. BancTec expects the lawsuits to
be consolidated into a single action.
The lawsuits allege, among other things, that the directors of BancTec
breached their fiduciary duties to BancTec's stockholders by approving the
merger. In particular, the lawsuits allege that the directors allowed the stock
price to be capped, depriving the plaintiffs of an opportunity to realize an
increase in the value of BancTec common stock, that the terms of the transaction
were not the result of an auction process or "active market check" and that the
merger consideration is inadequate. The lawsuits seek, among other things,
preliminary and permanent injunctive relief prohibiting consummation of the
merger, unspecified damages, attorneys' fees and other relief. BancTec expects
that these four lawsuits will be consolidated into a single action. BancTec
intends to contest these lawsuits vigorously.
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CERTAIN TERMS OF THE MERGER AGREEMENT
The following description of the merger agreement describes the material
terms of the merger agreement. The full text of the merger agreement is attached
to this proxy statement as Appendix B and is incorporated herein by reference.
BancTec encourages you to read the entire merger agreement.
EFFECTIVE TIME OF THE MERGER
The merger agreement provides that the closing of the merger will take
place no later than the second business day after the satisfaction or waiver of
the conditions to the merger. At the closing, BancTec will file the necessary
documents with public officials to complete the merger. BancTec expects that, if
all conditions to the merger have been satisfied or waived, the effective time
will occur on the date of the special meeting or as soon thereafter as
practicable.
GENERAL
The merger agreement provides that, subject to satisfaction of certain
conditions, Colonial will be merged with and into BancTec and that, following
the merger, the separate existence of Colonial will cease and BancTec will
continue as the surviving corporation. At the effective time, and subject to the
terms and conditions set forth in the merger agreement:
o the stockholders of BancTec will receive $18.50 in cash, without
interest, for each share of BancTec common stock that they own, other
than shares held by stockholders who are entitled to and have perfected
their dissenters' appraisal rights. These shares will be cancelled in the
merger. Shares held by BancTec, its subsidiaries or Colonial will be
cancelled in the merger, and no cash payment will be made to these
stockholders in exchange for this cancellation.
o the outstanding shares of common stock of Colonial will be converted into
shares of common stock of the surviving corporation.
As a result of the merger, the BancTec common stock will no longer be
publicly traded.
SURRENDER AND EXCHANGE OF STOCK CERTIFICATES
As of the effective time of the merger, the surviving corporation will
deposit with American Stock Transfer & Trust Company, the exchange agent, an
amount of cash equal to the aggregate amount of merger consideration to be paid
to holders of BancTec common stock. The exchange agent will as promptly as
practicable send payment of the merger consideration in exchange for surrendered
BancTec common stock certificates.
Promptly after the effective time of the merger, the exchange agent will
send to each holder of BancTec common stock certificates a letter of transmittal
containing instructions for exchanging the holder's BancTec common stock
certificates for the merger consideration payable to that holder. Upon surrender
to the exchange agent of an outstanding certificate or certificates which
represented BancTec common stock and acceptance of that certificate by the
exchange agent, the exchange agent will deliver to the holder of that
certificate the amount of merger consideration owed to the holder pursuant to
the merger agreement. No interest will be paid or accrue on any cash payable to
any holder of BancTec common stock certificates.
Any portion of the merger consideration payable to holders of BancTec
common stock certificates which remains undistributed for more than six months
after the effective time will be delivered to the surviving corporation. Any
holder of BancTec common stock certificates who has not previously exchanged his
certificates may thereafter only look to the surviving corporation and only as
one of its general creditors for payment of that portion of the merger
consideration owed to the holder pursuant to the merger agreement.
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If you do not have your BancTec common stock certificate, you may make an
affidavit of that fact. In addition, the surviving corporation may require that
you post a bond in a reasonable amount determined by the surviving corporation
with respect to the missing stock certificate. Upon receipt of the affidavit and
any required bond, the exchange agent will issue the merger consideration
payable to you in exchange for your BancTec common stock certificate.
STOCK PLANS AND EMPLOYEE BENEFIT MATTERS
BancTec has agreed to take all actions necessary to provide for the
cancellation at the effective time of all outstanding options to acquire BancTec
common stock in exchange for a cash payment to each holder of options equal to
the merger consideration that would be payable to that holder had he exercised
the option less the exercise price per share of that option. BancTec has also
agreed to take all actions necessary to provide for the cancellation of all
restricted stock grants in exchange for a cash payment equal to the merger
consideration per share that would be payable at the time the restrictions on
the stock would otherwise lapse.
Colonial has agreed in the merger agreement that the surviving corporation,
for a period of one year after the merger, will provide employees of BancTec and
its subsidiaries with cash compensation, employee benefit and incentive
compensation and similar plans and programs (other than equity-based
compensation plans and programs) that will provide compensation and benefits
which in the aggregate are at least as favorable as those provided to these
employees as of the date of the merger agreement.
FINANCING
WCAS has received a written commitment, dated April 5, 1999, from Chase
Securities Inc. and Chase Bank of Texas, N.A. to provide up to $125 million of
financing under senior secured credit facilities, and WCAS has received written
commitments, dated April 5, 1999, from WCAS Capital Partners III, L.P. to
provide up to $160 million of senior subordinated financing and from WCAS to
provide Colonial with up to $145 million in equity (collectively, the
"Commitment Letters").
RIGHTS AGREEMENT AMENDMENTS
Effective as of May 26, 1998, BancTec has amended and restated the Rights
Agreement dated as of May 26, 1998, between BancTec and American Stock Transfer
& Trust Company. In addition, BancTec has entered into an amendment to this
First Amended and Restated Rights Agreement under which (i) the execution of the
merger agreement and the consummation of the merger will not result in a
"Distribution Date" under the rights agreement, (ii) the execution of the merger
agreement and the consummation of the merger will not result in Colonial or its
affiliates being an "Acquiring Person" under the rights agreement and (iii) the
rights agreement will be terminated immediately prior to the effective time of
the merger.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties of
BancTec relating to various aspects of its businesses and financial statements
and other matters, including among other things:
o its organization, standing and corporate power,
o its organizational documents,
o its capital stock and securities owned by it,
o its authority to enter into and the validity and enforceability of the
merger agreement,
o the absence of conflicts, breaches, violations, defaults or
terminations, accelerations or creation of liens under its certificate
of incorporation, bylaws and certain other agreements,
o required consents and approvals of, and registrations or filings with,
certain governmental entities relating to the merger,
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o its capital structure,
o its subsidiaries,
o stockholder agreements, voting trusts or other agreements or
arrangements relating to the voting of any shares,
o the documents and reports filed with the Securities and Exchange
Commission (the "SEC") and the accuracy and completeness of the
information contained in these documents and reports, and its financial
statements,
o this proxy statement and the accuracy and completeness of the
information contained in this proxy statement,
o the absence of certain changes or events such as events with a material
adverse effect on BancTec; amendments of terms of securities;
declarations of dividends or distributions; incurrence, assumption or
guarantee of debt; creation or assumption of liens, making of loans,
advances or capital contributions; damage, destruction or casualty loss;
agreements relating to its assets or business; grants of severance pay,
entering into employment of compensation agreements or increases in
compensation or benefits; labor disputes; and cancellation of licenses
and permits,
o the absence of undisclosed material liabilities,
o compliance with applicable laws,
o litigation,
o taxes,
o pension and benefit plans and other matters relating to the Employee
Retirement Income Security Act of 1974,
o environmental matters,
o intellectual property,
o real property,
o personal property,
o insurance,
o material contracts,
o labor matters,
o transactions with affiliates,
o effect of possible Year 2000 problems on BancTec,
o the amendment of the rights agreement,
o the opinion of its financial advisor,
o the absence of broker fees other than for its financial advisor,
o the Board's resolution to recommend the merger to the stockholders,
o the stockholder vote required to consummate the merger,
o the inapplicability of the Delaware takeover statute, and
o the vesting of stock options and restricted stock awards.
The merger agreement also contains customary representations and warranties
of Colonial relating to various aspects of its business, including among other
things:
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o its organization, standing and corporate power,
o its capital structure,
o its authority to enter into and the validity and enforceability of the
merger agreement,
o the absence of conflicts, breaches, violations, defaults or
terminations, accelerations or creation of liens under its certificate
of incorporation, bylaws and certain other agreements,
o required consents and approvals of, and registrations or filings with,
certain governmental entities relating to the merger,
o the documents and reports filed with the SEC and the accuracy and
completeness of the information contained in these documents and
reports,
o this proxy statement and the accuracy and completeness of the
information contained in this proxy statement,
o the absence of any subsidiaries,
o its lack of status as an interested stockholder,
o the interim operations of Colonial,
o the absence of broker fees other than for Chase Securities Inc. and as
set forth in the Commitment Letters; and
o financing.
The representations and warranties expire at the effective time of the
merger.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
BancTec has agreed that prior to the merger it will operate its business in
the ordinary course consistent with past practice and will use its best efforts
to preserve intact its businesses, maintain its rights and licenses, keep
available the services of its current officers and key employees and preserve
its relationships with customers and suppliers. In addition, BancTec and
Colonial have agreed to advise each other of any change or event that is or
would cause a material breach of any of their representations or warranties
contained in the merger agreement. BancTec will file all reports required to be
filed by it with the SEC or the New York Stock Exchange between the date of the
merger agreement and the effective time of the merger and will deliver to
Colonial copies of these reports promptly after they are filed. BancTec has
agreed that none of these reports will contain, as of the date of its filing,
any untrue statement of a material fact or omit to state a material fact
required to be stated in order to make the statements in the report, in light of
the circumstances under which they were made, not misleading.
In addition, except as expressly permitted by the merger agreement or
previously disclosed to Colonial in the merger agreement, the merger agreement
places specific restrictions on the ability of BancTec and its subsidiaries to:
o enter into any new line of business or incur any capital expenditures
(other than capital expenditures contemplated in its capital budget or
not in excess of $5,000,000, individually or in the aggregate);
o declare, set aside or pay any dividends on or make other distributions
in respect of any of its capital stock (except for cash dividends paid
to BancTec and its wholly-owned subsidiaries with regard to its
subsidiaries' capital stock);
o adjust, split, combine or reclassify any of its capital stock, or issue,
authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for, capital stock;
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o repurchase, redeem or otherwise acquire, or permit any subsidiary to
purchase or otherwise acquire, any shares of capital stock, or any debt
securities, warrants or options, in each case issued by BancTec or its
subsidiaries;
o grant any options, warrants or other rights to purchase shares of
capital stock;
o amend the terms of or reprice any BancTec stock option or restricted
stock award outstanding on the date of the merger agreement or amend the
terms of any current BancTec stock option plan;
o issue, deliver or sell, or authorize or propose the issuance, delivery
or sale of, any shares of its or its subsidiaries' capital stock, or any
securities convertible into or exchangeable for, or any rights, warrants
or options to acquire, any of the foregoing, or any securities or equity
equivalents (including stock appreciation rights), except for shares
issuable upon the exercise of stock options and restricted stock awards
outstanding on the date of the merger agreement and issuances of capital
stock of BancTec's subsidiaries to BancTec or to a wholly-owned
subsidiary of BancTec;
o amend or propose to amend its certificate of incorporation or bylaws (or
other organizational documents);
o merge or consolidate with, or acquire any equity interest in, any
corporation, partnership, association or other business organization, or
enter into an agreement with respect thereto, except for:
o a merger of a wholly-owned subsidiary with or into BancTec or another
wholly-owned subsidiary of BancTec, or
o the creation of a wholly-owned subsidiary in the ordinary course of
business.
o acquire or agree to acquire a substantial portion of the assets of any
corporation, partnership, association or other business organization or
any division or business thereof;
o sell, lease, mortgage, encumber or otherwise dispose of, any material
assets other than sales or leases in the ordinary course of business
consistent with past practice;
o enter into, adopt, amend or terminate any employee benefit plan or any
existing, employment, severance or termination agreement with any
director, officer or employee (except as may be required by applicable
law);
o increase in any manner the compensation (including, without limitation,
salary, bonus or other benefits) of any of its directors, officers or
employees or provide any other benefit not required by any plan and
arrangement as in effect as of the date of the merger agreement (except
for increases made with respect to employees other than executive
officers in the ordinary course of business and consistent with past
practice);
o assume or incur any indebtedness for borrowed money (except for lease
obligations incurred in the ordinary course of business and consistent
with past practice or drawdowns under its existing revolving credit
facility or uncommitted lines of credit, if any, made in the ordinary
course of business consistent with past practice or as contemplated in
BancTec's capital budget);
o issue or sell any debt securities or warrants or rights to acquire any
debt securities;
o guarantee any debt obligations of any other person;
o change its fiscal year or make any material changes with respect to
accounting methods, principles or practices in effect as of December 31,
1998, except as required by the SEC, applicable law or generally
accepted accounting principles;
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o pay, discharge, or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), except for the payment,
discharge or satisfaction of liabilities or obligations in the ordinary
course of business consistent with past practice;
o waive, release, grant or transfer any rights of material value or modify
or change in any material respect rights of material value (including,
without limitation, the waiver or release of any rights under
confidentiality or standstill agreements);
o settle or compromise any litigation (whether or not commenced prior to
the date of the merger agreement), other than settlements or compromises
of litigation where the amount paid (after giving effect to insurance
proceeds actually received) in settlement or compromise does not exceed
$3,500,000, but the aggregate amount paid in connection with the
settlement or compromise of all these litigation matters may not exceed
$10,000,000;
o enter into or commit to enter into, or assume, any operating or capital
lease, other than any operating or capital lease contemplated by
BancTec's capital budget or operating budget;
o authorize, recommend, propose or announce an intention to adopt a plan
of complete or partial liquidation or dissolution;
o enter into any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization,
except as may be required by applicable law;
o enter into any agreement, contract, commitment, transaction or
understanding with any officer, director, employee or affiliate of
BancTec, any subsidiary or any individual related by blood, marriage or
adoption to any such individual or any entity in which any such person
or individual owns any beneficial interest that would be required to be
disclosed under Item 404 of Regulation S-K under the Exchange Act.
o make any material tax election, or take any tax position or amend in any
material respect any tax return, except in the ordinary course of
business consistent with past practice;
o enter into any license with respect to any intellectual property unless
such license is non-exclusive and entered into in the ordinary course
consistent with past practice;
o fail to keep in full force and effect insurance comparable in amount and
scope of coverage to insurance now carried by it;
o agree to or make any commitment to take or take any action that would
result in any of the representations and warranties of BancTec set forth
in the merger agreement that are qualified as to materiality being
untrue, any of these representations and warranties that are not
qualified as to materiality being untrue in any material respect or any
of the conditions to the merger set forth in the merger agreement not
being satisfied, in each case as of any time prior to the effective time
of the merger, or any action prohibited by the merger agreement; or
o fail to take any action necessary to prevent any representation or
warranty of BancTec set forth in the merger agreement from being
inaccurate (in the case of representations and warranties that are
qualified as to materiality) or inaccurate in any material respect (in
the case of representations and warranties that are not qualified as to
materiality) as of any time prior to the effective time of the merger.
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NO SOLICITATION
In the merger agreement, BancTec has agreed that:
o it will not, nor will it permit any of its subsidiaries to, nor will it
authorize or permit any officer, director or employee of, or any
investment bank, attorney or other advisor or representative of, BancTec
or any of its subsidiaries to, directly or indirectly, solicit,
initiate, encourage or knowingly facilitate the submission of any
Acquisition Proposal (as defined below) or enter into or participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, any Acquisition Proposal;
o it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations conducted prior to the date of
the merger agreement with respect to an Acquisition Proposal; and
o it will promptly advise Colonial orally and in writing of any
Acquisition Proposal, the material terms and conditions of the
Acquisition Proposal and the identity of the person making the
Acquisition Proposal and any determination by the Board with respect to
the Acquisition Proposal. BancTec will keep Colonial informed, as
promptly as reasonably practicable, about the status of any actions,
including any discussions, taken pursuant to an Acquisition Proposal.
However, the merger agreement does not prohibit:
o BancTec's Board from taking and disclosing to the stockholders of
BancTec a position contemplated by Rules 14d-9 and 14e-2(a) promulgated
under the Securities Exchange Act of 1934; and
o following receipt from a third party, without any solicitation,
initiation or encouragement, directly or indirectly, by BancTec or any
representative of BancTec, of a bona fide Acquisition Proposal (but only
to the extent that the Board shall conclude in good faith, after
consultation with its outside counsel, that any of the following actions
are required in order for the Board to act in a manner that is
consistent with its fiduciary duties under applicable law):
o BancTec from engaging in discussions or negotiations with that third
party and furnishing that third party information concerning it and its
business, properties and assets if the third party executes a
confidentiality agreement no less favorable to BancTec than the existing
confidentiality agreement between BancTec and WCAS (except that the
third party confidentiality agreement need not require approval or
request of BancTec's Board prior to the making of an offer or proposal
to the Board); and
o the Board from withdrawing, modifying, refusing to recommend or
terminating the merger agreement in accordance with the terms of the
merger agreement (or taking any combination of these actions).
The term "Acquisition Proposal" means:
o any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of assets or a business that
constitutes 20% or more of the net revenues, net income or assets of
BancTec and its subsidiaries, taken as a whole, or 20% or more of the
outstanding BancTec common stock,
o any tender offer or exchange offer (including by BancTec or any of its
subsidiaries) that if consummated would result in any person
beneficially owning 20% or more of the outstanding BancTec common stock,
or
o any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving BancTec or any
of its subsidiaries, other than the transactions contemplated by the
merger agreement.
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CONDITIONS PRECEDENT
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
The respective obligations of each party to complete the merger are subject
to the satisfaction or waiver prior to the effective time of the following
conditions:
o adoption of the merger agreement by the affirmative vote of the holders
of a majority of the outstanding shares of BancTec common stock entitled
to vote thereon;
o expiration or termination of the applicable waiting period under the HSR
Act;
o no temporary restraining order, preliminary or permanent injunction or
other order or decree issued by any governmental entity of competent
jurisdiction enjoining or otherwise preventing the consummation of the
merger will be in effect; and
o no statute, rule, regulation or other law will have been enacted,
promulgated or otherwise issued by any governmental entity that
prohibits the consummation of the merger.
CONDITIONS TO OBLIGATIONS OF COLONIAL
The obligation of Colonial to effect the merger is subject to the
satisfaction of the following conditions:
o the representations and warranties of BancTec set forth in the merger
agreement to the extent qualified by materiality or material adverse
effect qualifiers, will be true and correct and, to the extent not
qualified by materiality or material adverse effect qualifiers, will be
true and correct in all material respects, in each case as of the date
of the merger agreement and as of the effective time of the merger as
though made on and as of the effective time, except as contemplated or
permitted by the merger agreement and, to the extent that these
representations and warranties will have been expressly made as of an
earlier date, they will have been true and correct as of that earlier
date, and Colonial will have received a certificate to this effect
signed on behalf of BancTec by its chief executive officer or its chief
financial officer;
o BancTec will have performed or complied with in all material respects
all material obligations required to be performed or complied with by it
under the merger agreement at or prior to the effective time of the
merger, and Colonial will have received a certificate to this effect
signed on behalf of BancTec by its chief executive officer or its chief
financial officer;
o Colonial will have arranged the financing required to complete the
merger substantially on the terms contemplated by the Commitment Letters
or alternative financing on terms no less favorable than those set forth
in the Commitment Letters, unless the failure to arrange the financing
was the result of a failure by Colonial to perform any covenant or
condition contained therein or in the merger agreement, a failure by
WCAS or Convergent Equity Partners, L.P. or their respective affiliates
to perform their respective obligations contained in the Commitment
Letters or in the merger agreement or the inaccuracy of any
representation or warranty of Colonial;
o Colonial will have received evidence, in form and substance reasonably
satisfactory to it, that the consents, approvals, authorizations,
qualifications and orders of governmental entities and other third
parties as are necessary in connection with the transactions
contemplated by the merger agreement have been obtained, other than
those the failure of which to be obtained, individually or in the
aggregate, would not have a material adverse effect on BancTec; and
o There will not be pending any suit, action or proceeding brought any
governmental entity seeking to prohibit or limit in any material respect
the ownership or operation by BancTec, Colonial or any of their
respective affiliates of a substantial portion of the business or assets
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of BancTec and its subsidiaries, taken as a whole, or to require any of
these persons to dispose of or hold separate any material portion of the
business or assets of BancTec and its subsidiaries, taken as a whole, as
a result of the merger or any of the other transactions contemplated by
the merger agreement or seeking to impose limitations on the ability of
WCAS or any of its affiliates or Convergent Equity Partners to acquire
or hold, or exercise full rights of ownership of, any shares of BancTec
common stock, including, without limitation, the right to vote the
BancTec common stock on all matters properly presented to the
stockholders of BancTec or seeking to prohibit WCAS or any of its
affiliates or any such investor from effectively controlling in any
material respect a substantial portion of the business or operations of
BancTec or its subsidiaries, in each case after giving effect to any
actions required to be taken pursuant to the obligations of the parties
to use reasonable best efforts to consummate the merger and the other
transactions contemplated by the merger agreement.
CONDITIONS TO OBLIGATION OF BANCTEC
The obligation of BancTec to effect the merger is subject to the
satisfaction of the following conditions:
o The representations and warranties of Colonial set forth in the merger
agreement to the extent qualified by materiality or material adverse
effect qualifiers, will be true and correct and, to the extent not
qualified by materiality or material adverse effect qualifiers, will be
true and correct in all material respects, in each case as of the date
of the merger agreement and as of the effective time of the merger as
though made on and as of the effective time, except as contemplated or
permitted by the merger agreement and, to the extent that these
representations or warranties will have been expressly made as of an
earlier date, they will have been true and correct as of that earlier
date, and BancTec will have received a certificate to this effect signed
on behalf of Colonial by a director of Colonial who will also be a
managing member of the sole general partner of WCAS;
o Colonial will have performed or complied with in all material respects
all material obligations required to be performed or complied with by it
under the merger agreement at or prior to the effective time of the
merger, and BancTec will have received a certificate to this effect
signed on behalf of Colonial by a director of Colonial who will also be
a managing member of the sole general partners of WCAS;
o Colonial will have arranged the financing substantially on the terms
contemplated by the Commitment Letters or alternative financing on terms
no less favorable than those set forth in the Commitment Letters, unless
the failure to arrange the financing was the result of a failure by
BancTec to perform any covenant or condition contained in the merger
agreement or the inaccuracy of any representation or warranty of
BancTec; and
o Colonial will have caused the valuation firm which has delivered a
solvency letter to the financial institutions providing the debt
financing for the merger (or, if no letter has been provided to these
financial institutions, a valuation firm reasonably acceptable to
BancTec) to have delivered to BancTec, a letter addressed to its Board
in form and substance reasonably satisfactory to the Board as to the
solvency of BancTec and its subsidiaries after giving effect to the
merger, the financing arrangements contemplated by Colonial with respect
to the merger and the other transactions contemplated by the merger
agreement.
TERMINATION
The merger agreement may be terminated at any time prior to the effective
time as follows:
o by mutual written consent of BancTec and Colonial;
o by either Colonial or BancTec, upon written notice to the other party,
if any governmental entity of competent jurisdiction shall have issued a
final and non-appealable permanent injunction or other order or decree
enjoining or otherwise preventing the merger, but the
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party seeking to terminate the merger agreement pursuant to this
provision must have used its reasonable best efforts to prevent or
contest the imposition of, or seek the lifting or stay of, that
injunction, order or decree;
o by either Colonial or BancTec, unless the party seeking to terminate the
merger agreement is in material breach of its obligations under the
merger agreement, if BancTec or Colonial breaches or fails to perform
any of its representations, warranties, covenants or other agreements
under the merger agreement, and that breach or failure to perform would
give rise to the failure of a condition to Colonial's obligation to
effect the merger, in the case of a breach or failure to perform on the
part of BancTec, or to BancTec's obligation to effect the merger, in the
case of a breach or failure to perform on the part of Colonial, and that
breach or failure to perform is incapable of being cured by the party so
breaching or failing to perform or is not cured within 10 days after the
terminating party gives written notice of the breach to the other party
and no cure is effected during that period;
o by either Colonial or BancTec, if the merger will not have been
consummated on or before September 15, 1999, unless the failure to
consummate the merger is the result of a material breach of the merger
agreement by the party seeking to terminate the merger agreement;
o by either Colonial or BancTec, if, upon a vote at a duly held meeting of
BancTec's stockholders or any adjournment of such a meeting, BancTec
stockholder approval will not have been obtained;
o by Colonial, upon written notice to BancTec if the Board of BancTec or
any committee of the Board has withdrawn or modified in a manner adverse
to Colonial its approval or recommendation of the merger or the merger
agreement, approved or recommended any Acquisition Proposal or resolved
to do any of the foregoing; or
o by BancTec, if the Board of BancTec determines, in the exercise of its
good faith judgment as to fiduciary duties to its stockholders imposed
by law, after consultation with outside counsel, that termination is
required by reason of an Acquisition Proposal being made in order for
BancTec's Board to act in a manner consistent with its fiduciary duties
under applicable law, but BancTec must notify Colonial promptly of its
intention to terminate the merger agreement or enter into a definitive
agreement with respect to any Acquisition Proposal.
TERMINATION FEES AND EXPENSES
The merger agreement provides that all costs and expenses incurred in
connection with the merger and the merger agreement will be paid by the party
incurring the expenses.
BancTec will pay Colonial a termination fee equal to $12,000,000, if:
o the merger agreement is terminated by Colonial because the Board of
BancTec has withdrawn or modified in a manner adverse to Colonial its
approval or recommendation of the merger or the merger agreement,
approved or recommended any Acquisition Proposal or resolved to do any
of the foregoing;
o the merger agreement is terminated by BancTec because in the exercise of
its good faith judgment as to its fiduciary duties to its stockholders
imposed by law, after consultation with outside counsel, the Board of
BancTec determines that termination is required by reason of an
Acquisition Proposal being made in order for the Board to act in a
manner consistent with its fiduciary duties under applicable law; or
o BancTec enters into, agrees to enter into or consummates a transaction
within one year after the date of termination of the merger agreement
that is the subject of an inquiry, proposal or offer that is an
Acquisition Proposal that was publicly announced or submitted to BancTec
prior to the termination of the merger agreement (unless the termination
is by mutual written consent of Colonial and BancTec or a result of a
governmental entity of
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competent jurisdiction having issued a final, non-appealable injunction
or other order or decree enjoining or otherwise preventing the
consummation of the merger or by reason of Colonial's failure to comply
with or perform, or Colonial's breach of, in any material respect, any
of its covenants or agreements contained in the merger agreement).
BancTec has agreed to pay any termination fee owed by it to Colonial within
two business days following the occurrence of one of the events described above.
INDEMNIFICATION
The merger agreement provides that, for a period of six years after the
effective time, the surviving corporation will indemnify the present and former
officers, directors, employees and agents of BancTec and its subsidiaries from
liabilities arising out of actions or omissions in these capacities at or prior
to the effective time of the merger, to the full extent permitted under Delaware
law or as provided in BancTec's or its subsidiaries' organizational documents or
any existing indemnification agreements or arrangements. In addition, the
surviving entity will maintain the current policies of directors' and officers'
insurance coverage maintained by BancTec for six years after the effective time,
but the surviving entity may substitute policies of at least the same coverage
containing terms and conditions which are on terms no less advantageous. In
addition, the surviving entity will not be required to pay an annual premium in
excess of 200% of the last premium paid prior to the date of the merger
agreement, and if the surviving entity is unable to obtain the insurance
required by this provision, it will obtain as much comparable insurance as
possible for an annual premium equal to this maximum amount.
AMENDMENT
The merger agreement may be amended, modified or supplemented only by
written agreement of Colonial and BancTec at any time before the effective time.
After receipt of the BancTec stockholder approval, however, no amendment will be
made which by law requires further approval by the stockholders of BancTec
without obtaining this further stockholder approval.
RIGHTS OF DISSENTING STOCKHOLDERS
You are entitled to appraisal rights under Section 262 of the Delaware
General Corporation Law (the "DGCL"). Section 262 of the DGCL is reprinted in
its entirety as Appendix C to this proxy statement. All references in Section
262 of DGCL and in this summary to a "stockholder" are to the record holder of
shares of BancTec common stock as to which appraisal rights are asserted. If you
have a beneficial interest in shares of BancTec common stock that are held of
record in the name of another person, such as a broker or nominee, you must act
promptly to cause the record holder to properly follow the steps summarized
below in a timely manner to perfect whatever appraisal rights you may have.
The following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to Appendix C. IF
YOU WISH TO EXERCISE STATUTORY APPRAISAL RIGHTS OR PRESERVE YOUR RIGHT TO DO SO,
YOU SHOULD REVIEW THIS DISCUSSION AND APPENDIX C CAREFULLY TO COMPLY STRICTLY
WITH THE PROCEDURES SET FORTH HEREIN AND THEREIN, OR YOU MAY LOSE YOUR APPRAISAL
RIGHTS.
If you elect to demand the appraisal of your shares you must deliver to
BancTec a written demand for appraisal of your shares of BancTec common stock
before the taking of the vote on the merger at the special meeting. The demand
must reasonably inform BancTec of your identity and that you intend to demand
the appraisal of your shares of BancTec common stock. This written demand for
appraisal of the shares of BancTec common stock must be in addition to and
separate from your proxy or vote against the merger. Voting against, abstaining
from voting, or failing to vote on the merger will not constitute a demand for
appraisal within the meaning of Section 262. If you elect to demand appraisal
rights, you will not be granted appraisal rights under Section 262 if you have
either voted in favor of the merger or consented to the merger in writing
(including by granting the proxy solicited by this proxy statement or by
returning a signed proxy without specifying a vote
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against the merger or a direction to abstain from the vote). Additionally,
appraisal rights will not be granted under Section 262 if you do not
continuously hold through the effective time of the merger your shares of
BancTec common stock with respect to which you demand appraisal.
You must fully and correctly execute a demand for appraisal as your name
appears on the certificate or certificates representing your shares of BancTec
common stock. If your shares of BancTec common stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, the fiduciary
must execute the demand. If the shares of BancTec common stock are owned of
record by more than one person, as in a joint tenancy or tenancy in common, all
joint owners must execute the demand. An authorized agent, including an agent
for two or more joint owners, may execute your demand for appraisal; however,
the agent must identify you as the record owner and expressly disclose the fact
that, in exercising the demand, this person is acting as your agent.
If you elect to exercise your appraisal rights, you must mail or deliver
your written demand to the Secretary of BancTec at 4851 LBJ Freeway, Suite 1100,
Dallas, Texas 75244. The written demand for appraisal must specify your name and
mailing address, the number of shares of BancTec common stock you own, and that
you are thereby demanding appraisal of your shares. Within ten days after the
effective time of the merger, BancTec must provide notice of the effective time
to all stockholders who have complied with Section 262 and who have not voted
for or consented to adoption of the merger agreement.
Within 120 days after the effective time, either BancTec or any stockholder
who has complied with the required conditions of Section 262 may file a petition
in the Delaware Court of Chancery (the "Delaware Chancery Court") demanding a
determination of the value of the shares of BancTec common stock of the
dissenting stockholders. If a petition for an appraisal is timely filed, after a
hearing on the petition, the Delaware Chancery Court will determine which
stockholders are entitled to appraisal rights and will appraise the shares of
BancTec common stock owned by these stockholders, determining the fair value of
these shares of BancTec common stock, exclusive of any element of value arising
from the accomplishment or expectation of the merger, together with a fair rate
of interest to be paid, if any, upon the amount determined to be the fair value.
In determining this fair value, the Delaware Chancery Court is to take into
account all relevant factors.
The Delaware Supreme Court has discussed the factors that can be considered
in determining fair value in an appraisal proceeding, stating that "proof of
value by any techniques or methods which are generally considered acceptable in
the financial community and otherwise admissible in court" should be considered,
and that "fair price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court has stated that,
in making this determination of fair value, the court must consider market
value, asset value, dividends, earnings prospects, the nature of the enterprise
and any other facts which could be ascertained as of the date of the merger that
throw any light on future prospects of the merged corporation. The Delaware
Supreme Court has also stated that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the date
of the merger and not the product of speculation, may be considered."
If you seek appraisal you should know that the "fair value" of your shares
of BancTec common stock determined under Section 262 could be more than, the
same as, or less than the merger consideration you will receive in the merger,
and that the opinion of Goldman, Sachs & Co. as to fairness, from a financial
point of view, is not an opinion as to fair value under Section 262. The cost of
the appraisal proceeding may be determined by the Delaware Chancery Court and
taxed against the parties as the Delaware Chancery Court deems equitable in the
circumstances. Upon application of a dissenting stockholder, the Delaware
Chancery Court may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all shares of BancTec common
stock entitled to appraisal.
If you have duly demanded appraisal in compliance with Section 262, you
will not, from and after the effective time of the merger, be entitled to vote
for any purpose the shares of BancTec
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common stock subject to your demand or to receive payment of dividends or other
distributions on your shares of BancTec common stock, except for dividends or
distributions payable to stockholders of record at a date prior to the effective
time.
At any time within 60 days after the effective time, you shall have the
right to withdraw your demand for appraisal and to accept the terms offered in
the merger. After this period, you may withdraw your demand for appraisal only
with the consent of BancTec. If no petition for appraisal is filed with the
Delaware Chancery Court within 120 days after the effective time, stockholders'
rights to appraisal shall cease, and all holders of shares of BancTec common
stock will be entitled to receive the merger consideration as provided for in
the merger agreement. Inasmuch as BancTec has no obligation to file such a
petition, and has no present intention to do so, any stockholder who desires
such a petition to be filed is advised to file it on a timely basis. However, no
petition timely filed in the Delaware Chancery Court demanding appraisal will be
dismissed as to any stockholder without the approval of the Delaware Chancery
Court, and this approval may be conditioned upon such terms as the Delaware
Chancery Court deems just.
INDEPENDENT AUDITORS
The consolidated balance sheets of BancTec as of December 31, 1997 and
December 31, 1998, and the related consolidated statements of operation,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998, incorporated by reference in this proxy statement have
been audited by Arthur Andersen LLP, as stated in their report. A representative
of Arthur Andersen LLP will be at the special meeting to answer appropriate
questions from stockholders and will have the opportunity to make a statement if
so desired.
STOCKHOLDER PROPOSALS
Any proposals of holders of BancTec common stock intended to be presented
at the annual meeting of stockholders of BancTec to be held in 1999 must have
been received by BancTec no later than January 1, 1999, to be included in
BancTec's proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
As of the date of this proxy statement, the Board knows of no other
business to be presented at the special meeting. If other matters do properly
come before the meeting, or any adjournments or postponements thereof, it is the
intention of the persons named in the proxy to vote on such matters in their
sole discretion.
WHERE YOU CAN FIND MORE INFORMATION
BancTec is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy and information statements or prospectuses and other information with the
Securities and Exchange Commission. Reports, proxy and information statements or
prospectuses and other information filed by BancTec with the SEC can be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the web site (http://www.sec.gov) maintained by the SEC, or at its regional
offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of this
material can be obtained from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Shares of
BancTec common stock are listed on the New York Stock Exchange and are traded
under the symbol "BTC." Reports and other information concerning BancTec can
also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
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The SEC allows BancTec to "incorporate by reference" information into this
document, which means that BancTec can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be a part of this document, except for
any information superseded by information contained directly in this document.
This document incorporates by reference certain documents that BancTec has
previously filed with the SEC. These documents contain important business
information about BancTec and its financial condition.
BancTec may have sent to you some of the documents incorporated by
reference, but you can obtain any of them through BancTec, the SEC or the SEC's
Internet World Wide Web site described above. Documents incorporated by
reference are available from BancTec without charge, excluding exhibits unless
specifically incorporated by reference as an exhibit to this document.
Stockholders may obtain documents incorporated by reference in this document by
requesting them in writing or by telephone at the following address and
telephone number:
BANCTEC, INC.
4851 LBJ Freeway, Suite 1100
Dallas, Texas 75244
(972) 341-4904
Attention: Susan Seiter
Director, Investor Relations
Statements contained in this proxy statement or in any document
incorporated in this proxy statement by reference as to the contents of any
contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to that contract or other
document filed as an exhibit to that other document, and each such statement
shall be deemed qualified in its entirety by such reference.
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM BANCTEC, PLEASE DO SO AT LEAST FIVE
BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING IN ORDER TO RECEIVE TIMELY
DELIVERY OF SUCH DOCUMENTS PRIOR TO THE SPECIAL MEETING.
You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the special meeting. BancTec
has not authorized anyone to provide you with information that is different from
what is contained in this document. This document is dated June 23, 1999. You
should not assume that the information contained in this document is accurate as
of any date other than that date, and the mailing of this document to
stockholders does not create any implication to the contrary. This proxy
statement does not constitute a solicitation of a proxy in any jurisdiction
where, or to or from any person to whom, it is unlawful to make such proxy
solicitation in such jurisdiction.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the SEC by BancTec are
incorporated by reference in this proxy statement:
(i) BancTec's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, as amended by Form 10-K/A filed April 29, 1999;
(ii) BancTec's Current Report on Form 8-K filed on April 7, 1999;
(iii) BancTec's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1999; and
(iv) BancTec's Current Report on Form 8-K filed on June 21, 1999.
All documents field by BancTec with the SEC pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934 after the date of
this proxy statement and prior to the date of the special meeting shall be
deemed to be incorporated by reference herein and shall be a part of this
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proxy statement from the date of filing of such documents. Any statements
contained in a document incorporated by reference herein or contained in this
proxy statement shall be deemed to be modified or superseded for purposes of
this proxy statement to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part of this proxy statement
except as so modified or superseded.
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APPENDIX A
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
- -------------------------
June 17, 1999
Board of Directors
BancTec, Inc.
4851 LBJ Freeway, 12th Floor
Dallas, Texas 75244
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of Common Stock, par value $.01 per
share (the "Company Common Stock"), of BancTec, Inc. (the "Company") of the
Consideration (as defined below) to be received by such holders in the Merger
(as defined below) pursuant to the Amended and Restated Agreement and Plan of
Merger, dated as of June 17, 1999, between Colonial Acquisition Corp.
("Acquisition"), a corporation formed at the direction of Welsh, Carson,
Anderson & Stowe VIII, L.P. ("WCAS VIII"), an affiliate of Welsh, Carson,
Anderson & Stowe, L.P. ("Welsh Carson"), and the Company (the "Agreement"). The
Agreement provides that Acquisition will be merged with and into the Company
(the "Merger") and each outstanding share of Company Common Stock will be
converted into $18.50 per share in cash (the "Consideration").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
from time to time, including having acted as co-managing underwriter of an
offering of $150 million aggregate principal amount of 7 1/2% Notes due 2000 of
the Company in May 1998, and as its financial advisor in connection with, and
having participated in certain of the negotiations leading to, the Agreement. We
also have provided certain investment banking services to Welsh Carson and its
affiliates from time to time, including having provided financing and advisory
services to Welsh Carson and its affiliates, and may provide investment banking
services to Welsh Carson in the future. In addition, certain affiliates of
Goldman, Sachs & Co. have co-invested with Welsh Carson and its affiliates in
certain transactions sponsored by Welsh Carson or its affiliates. Goldman, Sachs
& Co. provides a full range of financial advisory and securities services and,
in the course of its normal trading activities, may from time to time effect
transactions and hold securities, including derivative securities, of the
Company for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things: the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five years ended December 31, 1998; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management. We
also have held discussions with members of the senior management of the Company
regarding its past and current business operations, financial condition and
future prospects. In addition, we have reviewed the reported price and trading
activity for the Company Common Stock, compared certain financial and stock
market information for the Company with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the information technology
services industry specifically and in other industries generally and performed
such other studies and analyses as we considered appropriate.
A-1
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We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of the Company
or any of its subsidiaries and we have not been furnished with any such
evaluation or appraisal. We were not requested to solicit, and did not solicit,
interest from other parties with respect to an acquisition of or other business
combination with the Company. Our advisory services and the opinion expressed
herein are provided for the information and assistance of the Board of Directors
of the Company in connection with its consideration of the transaction
contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Company Common Stock should vote with
respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the
Consideration to be received by the holders of Company Common Stock in the
Merger pursuant to the Agreement is fair from a financial point of view to such
holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
- ----------------------------------------
GOLDMAN, SACHS & CO.
A-2
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APPENDIX B
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
dated as of
June 17, 1999
by and between
BANCTEC, INC.
and
COLONIAL ACQUISITION CORP.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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PAGE
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ARTICLE I
THE MERGER
<S> <C>
Section 1.01. The Merger ......................................................... 1
Section 1.02. Closing ............................................................ 1
Section 1.03. Effective Time ..................................................... 2
Section 1.04. Effects of the Merger .............................................. 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 2.01. Effect on Capital Stock............................................. 2
(a) Cancellation of Certain Stock.............................................. 2
(b) Conversion of Company Common Stock......................................... 2
(c) Cancellation and Retirement of Company Common Stock........................ 2
(d) Dissenting Shares.......................................................... 2
(e) Acquisiton Common Stock.................................................... 3
Section 2.02. Exchange of Certificates ........................................... 3
(a) Exchange Agent............................................................. 3
(b) Exchange Procedures........................................................ 3
(c) No Further Ownership Rights in Company Common
Stock Exchanged For Cash................................................... 4
(d) Termination of Exchange Fund............................................... 4
(e) No Liability............................................................... 4
(f) Investment of Exchange Fund................................................ 4
(g) Lost Certificates.......................................................... 4
(h) Withholding Rights......................................................... 4
Section 2.03. Stock Plans ........................................................ 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company....................... 5
(a) Organization, Qualifications and Corporate
Power; Materiality......................................................... 5
(b) Organization Documents; Capital Stock and Securities Owned................. 5
(c) Authorization of Agrement, Non-Contavention, Etc........................... 5
(d) Capital Structure.......................................................... 6
(e) Subsidiaries............................................................... 7
(f) Voting of Shares........................................................... 7
(g) SEC Documents; Financial Statements........................................ 7
(h) Disclosure Documents; Information Supplied................................. 8
(i) Absence of Certain Changes or Events....................................... 8
(j) No Undisclosed Material Liabilities........................................ 9
(k) Compliance with Law; Litigation............................................ 9
(l) Taxes...................................................................... 9
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(m) Pension and Benefit Plans; ERISA ......................................... 10
(n) Environmental Matters .................................................... 11
(o) Intellectual Property ........................ ........................... 11
(p) Real Properties .......................................................... 12
(q) Tangible Personal Property ............................................... 12
(r) Insurance ................................................................ 13
(s) Contracts ................................................................ 13
(t) Labor Matters ............................................................ 13
(u) Transactions with Affiliates ............................................. 14
(v) Year 2000 ................................................................ 14
(w) Rights Agreement ......................................................... 14
(x) Opinion of Financial Advisor ............................................. 14
(y) Brokers .................................................................. 14
(z) Board Recommendation ..................................................... 14
(aa) Vote Required ............................................................ 14
(bb) State Takeover Statute Inapplicable ...................................... 15
(cc) Stock Plans .............................................................. 15
Section 3.02. Representations and Warranties of Acquisition ......... ........... 15
(a) Organization, Qualifications and Corporate Power ......................... 15
(b) Capital Structure ........................................................ 15
(c) Authorization of Agreement, Non-Contravention, Etc ....................... 15
(d) Information Supplied ..................................................... 16
(e) Subsidiaries ............................................................. 16
(f) Acquisition Not an Interested Stockholder ................................ 16
(g) Interim Operations of Acquisition ........................................ 16
(h) Brokers .................................................................. 16
(i) Financing ................................................................ 16
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ARTICLE IV
COVENANTS RELATING TO
CONDUCT OF BUSINESS
Section 4.01. Covenants of the Company ........................................... 17
(a) Ordinary Course ........................................................... 17
(b) Dividends; Change in Stock ................................................ 17
(c) Issuance of Securities .................................................... 17
(d) Governing Documents ....................................................... 17
(e) No Acquisitions ........................................................... 17
(f) No Dispositions ........................................................... 17
(g) Indebtedness .............................................................. 18
(h) Accounting Matters ........................................................ 18
(i) Advice of Changes; Filings ................................................ 18
(j) Compensation; Benefit Plans ............................................... 18
(k) Discharges or Waiver of Claims ............................................ 18
(l) Leases and Lease Commitments .............................................. 18
(m) Liquidation Plan, Etc ..................................................... 18
(n) Collective Bargaining Agreements .......................................... 18
(o) Transactions with Affiliates .............................................. 18
(p) Tax Matters ............................................................... 19
(q) Intellectual Property ..................................................... 19
(r) Insurance ................................................................. 19
(s) Other Actions ............................................................. 19
Section 4.02. Covenants of Acquisition ........................................... 19
(a) Other Actions ............................................................. 19
(b) Advice of Changes ......................................................... 19
ARTICLE V
OTHER AGREEMENTS
Section 5.01. No Solicitation ..................................................... 19
Section 5.02. Recapitalization .................................................... 20
Section 5.03. Preparation of the Proxy Statement .................................. 20
Section 5.04. Company Stockholder Meeting ......................................... 21
Section 5.05. Access to Information ............................................... 21
Section 5.06. Reasonable Best Efforts ............................................. 21
Section 5.07. Indemnification and Insurance ....................................... 22
Section 5.08. Benefits Matters .................................................... 23
Section 5.09. Resignations of Directors ........................................... 24
Section 5.10. Solvency at Closing ................................................. 24
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ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01. Conditions to Each Party's Obligation to Effect the Merger ......... 24
(a) Company Stockholder Approval ................................................ 24
(b) HSR Act and Other Approvals ................................................. 24
(c) No Injunctions or Restraints; Illegality .................................... 24
Section 6.02. Conditions to the Obligations of Acquisition to Effect the Merger .. 24
(a) Representations and Warranties .............................................. 24
(b) Performance of Obligations of the Company ................................... 25
(c) Consents, Etc ............................................................... 25
(d) No Litigation................................................................ 25
(e) Financing.................................................................... 25
Section 6.03. Conditions to the Obligations of the Company to Effect the Merger .. 25
(a) Representations and Warranties .............................................. 25
(b) Performance of Obligations of Acquisition ................................... 25
(c) Financing.................................................................... 26
(d) Solvency Letter ............................................................. 26
Section 6.04. Frustration of Closing Conditions .................................. 26
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.01. Termination ........................................................ 27
Section 7.02. Effect of Termination .............................................. 27
Section 7.03. Fees and Expenses .................................................. 27
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Nonsurvival of Representations and Warranties....................... 28
Section 8.02. Confidentiality Agreement........................................... 28
Section 8.03. Publicity........................................................... 28
Section 8.04. Amendment........................................................... 29
Section 8.05. Extension; Waiver................................................... 29
Section 8.06. Notices............................................................. 29
Section 8.07. Counterparts........................................................ 29
Section 8.08. Entire Agreement; No Third-Party Beneficiaries; Rights of Ownership. 29
Section 8.09. Governing Law....................................................... 29
Section 8.10. Successors and Assigns.............................................. 29
Section 8.11. Jurisdiction........................................................ 29
Section 8.12. Headings; Interpretation............................................ 29
Section 8.13. Severability........................................................ 29
Section 8.14. WAIVER OF JURY TRIAL................................................ 30
Section 8.15. Reference; No Waiver................................................ 30
</TABLE>
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DISCLOSURE SCHEDULE
Section 2.05 Stock Plans
Section 3.01(b) Shares of Capital Stock and Securities Owned
Section 3.01(c) Approvals and Consents Required
Section 3.01(e) Subsidiaries
Section 3.01(f) Registration Rights, Stockholder and Voting
Agreements
Section 3.01(i)(1) Certain Changes or Events
Section 3.01(i)(6) Loans and Investments
Section 3.01(i)(8) Transactions, Commitments, Contracts or Agreements
Section 3.01(i)(10) Compensation and Benefits
Section 3.01(i)(10) Employment and Compensation Arrangements
Section 3.01(j) Material Liabilities
Section 3.01(l) Taxes
Section 3.01(m)(1) Pension and Benefit Plans; ERISA
Section 3.01(m)(5) Increases in Compensation
Section 3.01(n) Environmental Matters
Section 3.01(o) Intellectual Property
Section 3.01(p)(i) Owned Properties
Section 3.01(p)(ii) Leased Properties
Section 3.01(r) Insurance
Section 3.01(s) Contracts
Section 3.01(t) Labor Matters
Section 3.01(u) Transactions with Affiliates
Section 4.01(e) Mergers, Acquisitions, Etc.
Section 4.01(m) Liquidation Plan, Etc.
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of June 17,
1999 (the "Agreement"), by and between BancTec, Inc., a Delaware corporation
(the "COMPANY"), and Colonial Acquisition Corp., a Delaware corporation
("ACQUISITION").
W I T N E S S E T H :
WHEREAS, the Company and Acquisition have entered into that certain
Agreement and Plan of Merger dated as of April 5, 1999 (the "Original Merger
Agreement");
WHEREAS, subsequent to the date of the Original Merger Agreement, the
Company and Acquisition have each determined that it is in the best interests of
each of the foregoing entities and their respective stockholders to enter into
this Agreement, which amends and restates the Original Merger Agreement.
WHEREAS, the Boards of Directors of each of Acquisition and the Company
have unanimously deemed it advisable and in the best interests of their
respective stockholders for Acquisition to merge with and into the Company (the
"MERGER") pursuant to Section 251 of the Delaware General Corporation Law upon
the terms and subject to the conditions set forth herein;
WHEREAS, the Boards of Directors of each of Acquisition and the Company
have unanimously adopted resolutions approving and declaring advisable this
Agreement and the Merger;
WHEREAS, Welsh, Carson, Anderson & Stowe VIII, L.P. ("WCAS VIII"), as the
holder of all the issued and outstanding capital stock of Acquisition has
approved and adopted this Agreement, the Merger and the transactions
contemplated hereby;
WHEREAS, the Merger requires the approval of this Agreement by the
affirmative vote of the holders of a majority of the outstanding shares of
common stock, $.01 par value per share, of the Company (the "COMPANY COMMON
STOCK");
WHEREAS, it is intended that the Merger be recorded as a recapitalization
for financial reporting purposes and each of the parties, after discussion with
their respective auditors, believe that the Merger is eligible for such
accounting treatment; and
WHEREAS, each of Acquisition and the Company desires to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions for the Merger;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Acquisition shall be merged with and into the Company at the
Effective Time (as defined in Section 1.03). Following the Merger, the separate
corporate existence of Acquisition shall cease and the Company shall continue as
the surviving corporation (the "SURVIVING CORPORATION") and shall succeed to and
assume all the rights and obligations of Acquisition in accordance with the
DGCL.
Section 1.02. Closing. Unless this Agreement shall have been terminated and
the transactions contemplated herein abandoned pursuant to Section 7.01, and
subject to the satisfaction or waiver of the conditions set forth in Article VI,
the closing of the Merger (the "CLOSING") will take place at 10:00 a.m. on a
date to be specified by the parties, which shall be no later than the second
business
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day following the satisfaction or waiver of all the conditions set forth in
Article VI (the "CLOSING DATE"), at the offices of Reboul, MacMurray, Hewitt,
Maynard & Kristol, 45 Rockefeller Plaza, New York, New York 10111, unless
another time, date or place is agreed to by the parties hereto.
Section 1.03. Effective Time. 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") in accordance with the
relevant provisions of the DGCL with the Secretary of State of the State of
Delaware. The Merger shall become effective upon the completion of the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
or at such time thereafter as is provided in the Certificate of Merger (the time
the Merger becomes effective being hereinafter referred to as the "EFFECTIVE
TIME").
Section 1.04. 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 Acquisition 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, respectively, 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 Acquisition, as amended pursuant to
the Certificate of Merger relating thereto, shall be the Certificate of
Incorporation of the Surviving Corporation following the Merger until thereafter
changed or amended as provided therein or by applicable law.
(d) The Bylaws of Acquisition as in effect at the Effective Time shall be
the Bylaws of the Surviving Corporation following the Merger until thereafter
changed or amended as provided therein or by the Certificate of Incorporation of
the Surviving Corporation or applicable law.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 2.01. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the Company, Acquisition or
the holders of Company Common Stock or of any shares of capital stock of
Acquisition:
(a) Cancellation of Certain Stock. Each share of Company Common Stock that
is owned by Acquisition or by the Company or any of its subsidiaries (other than
those held in connection with the Stock Plans (as defined in Section 2.05))
shall automatically be canceled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(b) Conversion of Company Common Stock. Except as otherwise provided in
Section 2.01(a) or as provided in 2.01(d) with respect to shares of Company
Common Stock as to which appraisal rights have been exercised, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive from the Surviving Corporation
following the Merger an amount in cash equal to $18.50 (the "Merger
Consideration").
(c) Cancellation and Retirement of Company Common Stock. Except as
provided in Section 2.01(d), all shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares referred
to in Section 2.01(a), which shall be canceled and retired in accordance
therewith) shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to have any rights with respect thereto except the
right to receive the Merger Consideration, without interest thereon.
(d) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are outstanding immediately prior
to the Effective Time and held by a holder who has not voted in favor of the
Merger or consented thereto in writing and who has validly
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demanded appraisal for such shares in accordance with Section 262 of the DGCL
("Dissenting Shares") shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or withdraws or otherwise
loses its right to appraisal. If after the Effective Time, any such holder fails
to perfect or withdraws or loses its right to appraisal, such Dissenting Shares
shall be treated as if they had been converted as of the Effective Time into the
right to receive the Merger Consideration to which such holder is entitled,
without interest thereon. The Company shall give prompt notice to Acquisition of
any demands, attempted withdrawals of such demands and any other instruments
served pursuant to applicable law received by the Company for appraisal of
shares of Company Common Stock, and, prior to the Effective Time, Acquisition
shall have the right to direct all negotiations and proceedings with respect to
such demands. The Company shall not, except with the prior written consent of
Acquisition, make any payment with respect to, or settle, offer to settle or
approve any withdrawal of any such demands.
(e) Acquisition Common Stock. Each share of common stock, par value $.01
per share, of Acquisition (the "Acquisition Common Stock") 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 as of the Effective Time. Each share of
Class A Common Stock, par value $.01 per share, of Acquisition (the "Acquisition
Class A Common Stock") issued and outstanding immediately prior to the Effective
Time shall be converted into and become one fully paid and nonassessable share
of Class A Common Stock, par value $.01 per share, of the Surviving Corporation.
Section 2.02. Exchange of Certificates. (a) Exchange Agent. Prior to the
Effective Time, Acquisition shall appoint a bank or trust company that is
reasonably satisfactory to the Company to act as exchange and paying agent (the
"EXCHANGE AGENT") for the payment of the Merger Consideration. As of the
Effective Time, the Surviving Corporation shall deposit with the Exchange Agent,
for the benefit of the holders of shares of Company Common Stock, cash in an
amount sufficient to pay the aggregate Merger Consideration required to be paid
pursuant to Section 2.01 in exchange for outstanding shares of Company Common
Stock (such cash being hereinafter referred to as the "EXCHANGE FUND").
(b) Exchange Procedures. As soon as reasonably practicable (and in any
event no later than ten days) after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail or deliver to each person who
was, immediately prior to the Effective Time, a holder of record of Company
Common Stock that was converted into the right to receive the Merger
Consideration pursuant to Section 2.01(b), (i) a letter of transmittal in
customary form and containing customary provisions and (ii) instructions for use
in effecting the surrender of certificates representing such person's shares of
Company Common Stock in exchange for the Merger Consideration. Promptly after
the Effective Time, each holder of record of an outstanding certificate or
certificates which prior thereto represented shares of Company Common Stock (the
"CERTIFICATES") shall, upon surrender to the Exchange Agent of such Certificates
or, if such shares are held in book-entry or other uncertificated form, upon the
entry through a book-entry transfer agent of the surrender of such shares of
Company Common Stock on a book-entry account statement (any references herein to
Certificates shall be deemed to include references to book-entry account
statements relating to the ownership of Company Common Stock), and acceptance
thereof by the Exchange Agent, be entitled to receive in exchange therefor an
amount of cash equal to the Merger Consideration per share multiplied by the
number of shares represented by such Certificates and the Certificates so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Company Common Stock that is not registered in the transfer records of the
Company, the payment of the Merger Consideration may be made to a person other
than the person in whose name the Certificate so surrendered is registered if,
and only if, such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of such Certificate
or establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.02, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to
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receive upon such surrender the Merger Consideration which the holder thereof
has the right to receive in respect of such Certificate pursuant to this Article
II. No interest shall be paid or will accrue on any cash payable as Merger
Consideration pursuant to this Article II.
(c) No Further Ownership Rights in Company Common Stock Exchanged For
Cash. All cash paid upon the surrender therefor of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock
exchanged for cash theretofore represented by such Certificates, and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time and which have been
converted, in whole or in part, pursuant to this Agreement into the right to
receive the Merger Consideration, and if after the Effective Time such
Certificates are presented to the Company for transfer, they shall be canceled
against delivery of the Merger Consideration.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for more than six
months after the Effective Time shall be delivered to the Surviving Corporation,
upon demand, and any holders of the Certificates who have not theretofore
complied with this Article II shall thereafter look only to the Surviving
Corporation (as general creditors thereof) for payment of their claim for Merger
Consideration.
(e) No Liability. None of the Company, Acquisition, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect of
any cash or other property from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificate shall not have been surrendered prior to two years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.01(c)), any such Merger
Consideration shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(f) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund as directed by the Surviving Corporation. Any
interest and other income resulting from investments shall be paid to the
Surviving Corporation.
(g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
and customary amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent shall deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect thereto pursuant to
this Agreement.
(h) Withholding Rights. The Surviving Corporation shall be entitled to
deduct and withhold from consideration otherwise payable to any holder of
Company Common Stock or Company Stock Options (as defined in Section 2.03)
pursuant to this Agreement such amounts as may be required to be deducted and
withheld with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "CODE"), or under any provision of state, local or
foreign tax law.
Section 2.03. Stock Plans. Each of the Company's stock option or stock
purchase plans (the "COMPANY STOCK PLANS") and options to acquire shares of
Company Common Stock or shares of restricted stock of the Company outstanding on
the date hereof (the "COMPANY STOCK OPTIONS"), including without limitation
information concerning the date of vesting of such options or the lapse of
restrictions on such restricted stock and the acceleration of such vesting or
restrictions by virtue of the Merger or the transactions contemplated hereby, is
as previously delivered to Acquisition and listed in Section 2.03 of the
Disclosure Schedule. The Company shall take all actions necessary to provide
that, as of the Effective Time, (i) each Company Stock Option so surrendered for
cash shall be canceled, and (ii) in consideration for such cancellation, the
Company shall pay to each such holder of Company Stock Options an amount in cash
equal to the product of (1) the excess, if any, of
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the Merger Consideration over the per-share exercise price thereof and (2) the
number of shares of Company Common Stock subject thereto immediately prior to
the Effective Time (the "EXCESS OPTION PAYMENT AMOUNT").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company. The Company
represents and warrants as of the date hereof (or such other date as shall be
expressly specified) to Acquisition as follows:
(a) Organization, Qualifications and Corporate Power; Materiality. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and is duly licensed or
qualified to do business as a foreign corporation and is in good standing in
each other jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such licensing or qualification necessary and
where the failure to so qualify would in the aggregate have a material adverse
effect (as defined) on the Company. As used in this Agreement, "MATERIAL ADVERSE
EFFECT" means, when used in connection with the Company, any change, effect,
event, occurrence or development that is, or is reasonably likely to be,
materially adverse to the business, results of operations or condition
(financial or other) of the Company and its Subsidiaries (as defined in Section
3.01(e)(i)), taken as a whole; "material adverse effect" means, when used in
connection with Acquisition, any change, effect, event, occurrence or
development that is materially adverse to Acquisition's ability to consummate
the transactions contemplated hereby.
(b) Organizational Documents; Capital Stock and Securities Owned. The
Company has made available to Acquisition complete and correct copies of its
charter and bylaws and the charter and bylaws (or other organizational
documents) of each of its Subsidiaries, in each case as amended to the date of
this Agreement. The Company has the corporate power and authority to own and
hold its properties and to carry on its business as currently conducted. Except
as set forth in Section 3.01(b) of the Disclosure Schedule, the Company does not
own of record or beneficially, directly or indirectly, (i) any shares of
outstanding capital stock or securities convertible into capital stock of any
other corporation or (ii) any participating interest in any partnership, joint
venture or other non-corporate business enterprises.
(c) Authorization of Agreement, Non-Contravention, Etc. The Company has
all requisite corporate power and authority to enter into this Agreement and,
subject to obtaining the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock (the "COMPANY STOCKHOLDER APPROVAL")
with respect to the Merger, 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 to obtaining the Company
Stockholder Approval with respect to the Merger. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Acquisition, constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby will not, conflict with, or result in any
breach or violation of, or result in the termination of, or accelerate the
performance required by, or give right to a right of termination, cancellation
or acceleration of any obligation under, or the creation of a Lien (as defined
in 3.01(d)) pursuant to (i) any provision of the charter (or similar
organizational documents) or bylaws of the Company or any Subsidiary of the
Company or (ii) subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in the
following sentence, any loan or credit agreement, note, mortgage, indenture,
lease, Company Benefit Plan (as defined in Section 3.01(m)) or other agreement,
obligation, instrument, permit, concession, franchise, license, or any judgment,
order,
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decree, statute, law, ordinance, rule or regulation (collectively "LAWS")
applicable to the Company or any Subsidiary or their respective properties or
assets, in any case under this clause (ii) which would, individually or in the
aggregate, have a material adverse effect on the Company except as set forth in
Section 3.01(c) of the Disclosure Schedule. Except as set forth in Section
3.01(c) of the Disclosure Schedule, no consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality (a
"GOVERNMENTAL ENTITY") is required by or with respect to the Company or any
Subsidiary in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
hereby, the failure of which to be obtained or made would, individually or in
the aggregate, have a material adverse effect on the Company or would prevent or
materially delay the consummation of the transactions contemplated hereby,
except for (A) the filing with the Securities and Exchange Commission ("SEC") of
(i) a proxy statement in definitive form prepared in accordance with Regulation
14A promulgated under the Exchange Act (such proxy statement as amended or
supplemented from time to time being hereinafter referred to as the "PROXY
STATEMENT") relating to the consideration of the Company Stockholder Approval at
a meeting (the "COMPANY STOCKHOLDER MEETING") of the stockholders of the Company
duly called and convened to consider the approval of this Agreement and (ii)
such reports under the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the "EXCHANGE ACT"), as may be
required in connection with this Agreement, the Merger and the other
transactions contemplated hereby, (B) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, (C) filings required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR ACT"), (D) filings necessary to satisfy the applicable
requirements of state securities or "blue sky" laws and (E) those required under
the rules and regulations of the New York Stock Exchange, Inc. ("NYSE")
(collectively, the "REQUIRED FILINGS").
(d) Capital Structure. The authorized capital stock of the Company
consists of 45,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock, $.01 par value, of the Company ("COMPANY PREFERRED STOCK" and,
together with the Company Common Stock, the "COMPANY CAPITAL STOCK"). At the
close of business on March 29, 1999, (A) 19,461,601 shares of Company Common
Stock were outstanding, (B) no shares of Company Preferred Stock were
outstanding, (C) options to acquire 2,918,406 shares of Company Common Stock
from the Company pursuant to the Company Stock Plans were outstanding, and (D)
common stock purchase rights ("PURCHASE RIGHTS") to acquire certain shares of
Company Common Stock from the Company pursuant to the Rights Agreement (as
defined in Section 3.01(w)) were outstanding. Other than as set forth above, at
the close of business on March 9, 1999, there were outstanding no shares of
Company Capital Stock or options, warrants or other rights to acquire Company
Capital Stock from the Company. Since March 9, 1999, (x) there have been no
issuances by the Company of shares of Company Capital Stock other than issuances
of shares of Company Common Stock pursuant to the exercise of Company Stock
Options outstanding as of March 9, 1999 and (y) there have been no issuances by
the Company of options, warrants or other rights to acquire capital stock from
the Company except as expressly permitted by this Agreement. No bonds,
debentures, notes or other indebtedness having the right to vote (or convertible
into or exchangeable for securities having the right to vote) on any matters on
which stockholders of the Company may vote are issued or outstanding. All
outstanding shares of Company Common Stock are, and any shares of Company Common
Stock that may be issued upon the exercise of Company Stock Options when issued
will be, duly authorized, validly issued, fully paid and nonassessable, and will
be delivered free and clear of all claims, liens, mortgages, encumbrances,
pledges or security interests (collectively, "LIENS") and not subject to
preemptive rights. Other than as set forth above, and except for this Agreement,
the Stock Option Agreement, the Company Stock Plans, the Company Stock Options
and the Purchase Rights, there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements or undertakings of any kind to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
is bound obligating the Company or any Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other equity or voting securities of the Company or of any
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Subsidiary or obligating the Company or any Subsidiary to issue, grant, extend
or enter into any such security, option, warrant, call, right, commitment,
agreement or undertaking. There are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries.
(e) Subsidiaries. (i) Each Subsidiary that is a corporation is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and is duly licensed or qualified to do business
as a foreign corporation and is in good standing in each other jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such licensing or qualification necessary and where the failure to so
qualify would in the aggregate have a material adverse effect on the Company.
For purposes of this Agreement, "SUBSIDIARY" means any corporation or other
entity (including any partnership referred to in Section 3.01(e)(ii) below) of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are directly or indirectly owned by the Company. All Subsidiaries and
their respective jurisdictions of incorporation are identified in Section
3.01(e) of the Disclosure Schedule.
(ii) Each partnership (whether or not limited partnership) and each limited
liability company in which the Company directly or indirectly owns a partnership
interest or membership interest, as the case may be, entitling it to 50% or more
of the voting interest therein, and each limited partnership for which the
Company or a Subsidiary is a general partner, has been duly organized and is in
good standing under the laws of its jurisdiction of organization, and is duly
licensed or qualified to do business and is in good standing in each other
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such licensing or qualification necessary and where the
failure to so qualify would in the aggregate have a material adverse effect on
the Company. The Company has previously delivered to Acquisition a list of all
such partnerships and limited liability companies.
(iii) Except as set forth in Section 3.01(e) of the Disclosure Schedule,
all of the outstanding capital stock of, or other ownership interests in, each
Subsidiary is owned by the Company, directly or indirectly, free and clear of
any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests).
(f) Voting of Shares. As of the date hereof, there are not 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 Company. All registration rights agreements, stockholder agreements and
voting agreements to which the Company or any of its Subsidiaries is a party are
identified in Section 3.01(f) of the Disclosure Schedule.
(g) SEC Documents; Financial Statements. The Company has filed and made
available to Acquisition a correct and complete copy of each report, schedule,
registration statement and definitive proxy statement required to be filed by
the Company with the SEC since January 1, 1996 (the "COMPANY SEC DOCUMENTS"). 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, or the
Exchange Act, as the case may be, applicable to such Company SEC Documents. None
of the Company SEC Documents when filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited interim
financial statements, as permitted by Form 10-Q, or for normal year-end
adjustments that are not, in the aggregate, material) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
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(h) Disclosure Documents; Information Supplied. Each document required to
be filed by the Company with the SEC in connection with the transactions
contemplated by this Agreement (the "COMPANY DISCLOSURE DOCUMENTS"), including
without limitation the the Proxy Statement and any amendments or supplements
thereto, will comply as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations thereunder, and each such document required to be filed with any
Governmental Entity other than the SEC will comply in all material respects with
the provisions of applicable law as to the information required to be contained
therein. At the date the Proxy Statement is first mailed to the stockholders of
the Company or at the time of the Company Stockholder Meeting, the Proxy
Statement will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. At the time of the filing of any Company Disclosure
Document other than the Proxy Statement and at the time of any distribution
thereof, such Company Disclosure Document will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 3.01(h) do not apply to statements or
omissions included or incorporated by reference in the Company Disclosure
Documents based upon information supplied to the Company by Acquisition
specifically in writing for inclusion or incorporation by reference therein.
(i) Absence of Certain Changes or Events. Since December 31, 1998, the
Company and its Subsidiaries have conducted their businesses only in the
ordinary course of business and in a manner consistent with past practice
(except in connection with the negotiation, execution and delivery of this
Agreement) and there has not been:
(1) any event, occurrence or development of a state of circumstances or
facts which has had a material adverse effect except as set forth in Section
3.01(i)(1) of the Disclosure Schedule;
(2) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of Company Capital Stock, or any
repurchase, redemption or other acquisition by the Company or any Subsidiary of
any outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any Subsidiary;
(3) any amendment of any material term of any outstanding security of the
Company or any Subsidiary;
(4) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent with past practice,
but in any event not in excess of $1,000,000 individually or $5,000,000 in the
aggregate;
(5) any creation or assumption by the Company or any Subsidiary of any Lien
on any material asset other than in the ordinary course of business consistent
with past practices, but in any event not securing any obligation in excess of
$5,000,000;
(6) any making of any loan, advance or capital contributions to or
investment in any person other than loans, advances or capital contributions to
or investments in wholly-owned Subsidiaries made in the ordinary course of
business consistent with past practice except as set forth in Section 3.01(i)(6)
of the Disclosure Schedule;
(7) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company or any Subsidiary
which, individually or in the aggregate, has had or would reasonably be expected
to have a material adverse effect;
(8) except as set forth in Section 3.01(i)(8) of the Disclosure Schedule,
any transaction or commitment made, or any contract or agreement entered into,
by the Company or any Subsidiary relating to its assets or business (including
the acquisition or disposition of any assets) or any
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relinquishment by the Company or any Subsidiary of any contract or other right,
in either case, material to the Company and its Subsidiaries taken as a whole,
other than transactions and commitments in the ordinary course of business
consistent with past practice and those contemplated by this Agreement;
(9) any change in any method of accounting or accounting practice by the
Company or any Subsidiary, except for any such change required by reason of a
concurrent change in GAAP;
(10) except as set forth in Section 3.01(i)(10) of the Disclosure Schedule,
any (i) grant of any severance or termination pay to any director, officer or
employee of the Company or any Subsidiary, (ii) entering into of any employment,
deferred compensation or similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company or any
Subsidiary, other than, with respect to employees other than executive officers
only, in the ordinary course of business consistent with past practice, (iii)
increase in benefits payable under any existing severance or termination pay
policies or employment agreements or (iv) increase in compensation, bonus or
other benefits payable to directors, officers or employees of the Company or any
Subsidiary, other than, with respect to employees other than executive officers
only, in the ordinary course of business consistent with past practice, in each
case except as set forth in Section 3.01(i)(10) of the Disclosure Schedule;
(11) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any Subsidiary, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to such
employees; or
(12) any cancellation of any licenses, sublicenses, franchises, permits or
agreements to which the Company or any Subsidiary is a party, or any
notification to the Company or any Subsidiary that any party to any such
arrangements intends to cancel or not to renew such arrangements beyond its
expiration date as in effect on the date hereof, which cancellation or
notification, individually or in the aggregate, has had or reasonably could be
expected to have a material adverse effect.
(j) No Undisclosed Material Liabilities. There are no liabilities of the
Company or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, that could reasonably be
expected to have, individually or in the aggregate, a material adverse effect,
other than (i) liabilities reflected in the Company's financial statements
(together with the related notes thereto) filed with the Company's annual report
on Form 10-K for the year ended December 31, 1998, (ii) liabilities incurred in
the ordinary course of business consistent with past practice since December 31,
1998, which in the aggregate would not have a material adverse effect upon the
Company and its Subsidiaries, taken as a whole; (iii) liabilities under this
Agreement or for professional fees and expenses in connection with the
transactions contemplated hereby; and (iv) as previously disclosed and as set
forth in Section 3.01(j) of the Disclosure Schedule.
(k) Compliance with Law; Litigation. The Company and its Subsidiaries hold
all permits, licenses, variances, exemptions, authorizations, orders and
approvals of all Governmental Entities (the "COMPANY PERMITS") that are required
for them to own, lease or operate their properties and assets and to carry on
their businesses as presently conducted, and there has occurred no default under
any such Company Permit, except for the lack of any Company Permit or for
defaults under any Company Permit which lack or default would not have,
individually or in the aggregate, a material adverse effect on the Company. The
conduct by the Company and its Subsidiaries of their respective businesses has
been in compliance with all Laws, with such exceptions as would not have,
individually or in the aggregate, a material adverse effect on the Company. As
of the date hereof, there is no claim, suit, action or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries that could reasonably be expected, individually or in the
aggregate, to have a material adverse effect on the Company, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any Subsidiary that would have,
individually or in the aggregate, a material adverse effect on the Company.
(l) Taxes. (i) Each of the Company, its Subsidiaries and any affiliated,
combined or unitary group of which any such corporation or other entity is or
was a member (A) have duly and timely filed, or have caused to be filed on their
behalf, all material tax returns, reports, declarations, estimates,
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information returns and statements required to be filed by them (collectively,
"TAX RETURNS"), or requests for extensions to file such Tax Returns have been
timely filed and granted and have not expired, and as of the time of filing,
such Tax Returns are correct and complete in all material respects; (B) have
duly and timely paid in full (or the Company has paid on its behalf) or made
adequate provision in the Company's accounting records for all material Taxes
for all past and current periods for which the Company or any of its
Subsidiaries is liable; and (C) has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and has in all material respects timely withheld from employee wages
and paid over to the proper governmental authorities all amounts required to be
so withheld and paid over. The most recent financial statements contained in the
Company SEC Documents reflect adequate accruals for all Taxes payable by the
Company and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements. Section 3.01(l) of the
Disclosure Schedule sets forth the last taxable period through which the federal
income tax returns of the Company and any of its Subsidiaries have been examined
by the Internal Revenue Service or otherwise closed. All deficiencies asserted
as a result of any such examinations and any examination by any applicable
state, local or foreign taxing authority which have not been or will not be
appealed or contested in a timely manner have been paid, fully settled or
adequately provided for in the most recent financial statements contained in the
Company SEC Documents. Except as set forth in Section 3.01(l) of the Disclosure
Schedule, no federal, state, local or foreign tax audits or other administrative
proceedings or court proceedings are currently pending with regard to any
federal, state, local or foreign Taxes for which the Company or any of its
Subsidiaries would be liable, and no deficiencies for any such Taxes have been
proposed, asserted or assessed or, to the best knowledge of the Company,
threatened against the Company or any of its Subsidiaries pursuant to such
examination of the Company or any of its Subsidiaries by such federal, state,
local or foreign taxing authority with respect to any period. Except as set
forth in Section 3.01(l) of the Disclosure Schedule, no requests for waivers of
the time to assess any Taxes against the Company or any of its Subsidiaries have
been granted or are pending, and neither the Company nor any of its Subsidiaries
has executed (or will execute prior to the Effective Time) any closing agreement
pursuant to Section 7121 of the Code, or any predecessor provision thereof or
any similar provision of state, local or foreign income tax law that relates to
the assets or operations of the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries is a party to any agreement providing for
the allocation or sharing of liability for any Taxes. The Company has made
available to Acquisition complete and accurate copies of all income and
franchise Tax Returns and all other material Tax Returns filed by or on behalf
of the Company or any of its Subsidiaries for the taxable years ending on or
prior to December 31, 1997. Except as set forth in Schedule 3.01(l) of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries has made
any payments subject to Section 280G of the Code, or is obligated to make any
such payments that will not be deductible under Section 280G of the Code, or is
a party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Section 280G of the Code.
Neither the Company nor any of its Subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
As used in this Agreement, the terms "TAX" and "TAXES" include all federal,
state, local or foreign income, franchise, property, sales, use, ad valorem,
payroll, social security, unemployment, assets, value added, withholding,
excise, severance, transfer, employment, alternative or add-on minimum and other
taxes, charges, fees, levies, licenses or other assessments, including without
limitation obligations for withholding taxes from payments due or made to any
other person, together with any interest, penalties, additions to tax or
additional amounts imposed by any taxing authority.
(m) Pension and Benefit Plans; ERISA. Except as otherwise set forth in
Section 3.01(m) of the Disclosure Schedule:
(1) Section 3.01(m)(1) of the Disclosure Schedule lists each "employee
benefit plan" (as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) maintained by the
Company or any Subsidiary or to which the Company or any Subsidiary contributes
or is required to contribute or in which any employee or former employee of
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the Company or any Subsidiary participates or is otherwise covered (a "COMPANY
BENEFIT PLAN"). The only Company Benefit Plans that individually or collectively
would constitute an "employee pension benefit plan" as defined in Section 3(2)
of ERISA are identified as such in the list described above. The Company and
each Subsidiary have complied and currently are in compliance, both as to form
and operation in all material respects, with the applicable provisions of ERISA
and the Code, respectively, with respect to each Company Benefit Plan.
(2) Each of the Company Benefit Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the Code does so qualify and is exempt
from taxation pursuant to Section 501(a) of the Code where the failure to so
qualify would have a material adverse effect on the Company.
(3) Neither the Company nor any Subsidiary has maintained, contributed to
or been required to contribute to a "multiemployer plan" (as defined in Section
3(37) of ERISA). No amount is due or owing from the Company or any Subsidiary on
account of a "multiemployer plan" (as defined in Section 3(37) of ERISA) or on
account of any withdrawal therefrom.
(4) Other than normal claims for benefits, there is no claim pending
against the Company or any Subsidiary under the Code, ERISA or other applicable
law with respect to any of the Company Benefit Plans. Full payment has been
made, or will be made in accordance with Section 404(a)(6) of the Code, of all
amounts that are required to be paid under Section 412 of the Code and the terms
of each Company Benefit Plan that is intended to be qualified under Section
401(a) of the Code; and none of the Company Benefit Plans nor any trust
established thereunder has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code) whether or not
waived. The Company and the Subsidiaries have no current liability for plan
termination or withdrawal under Title IV of ERISA.
(5) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or officer of the Company or
any Subsidiary to severance pay, unemployment compensation or any other payment
or (ii) accelerate the time of payment or vesting (except as provided in Section
2.03), or increase the amount of compensation due any such employee or officer
except as disclosed in Section 3.01(m)(5) of the Disclosure Schedule.
(6) The Company has provided (or made available to) Acquisition with
correct and complete copies of (i) written plans and summary plan descriptions
for each of the Company Benefit Plans; (ii) each trust agreement, insurance
policy or other instrument relating to the funding of each of the Company
Benefit Plans; (iii) the two most recent Annual Reports (Form 5500 series) and
accompanying schedules filed with the Internal Revenue Service or United States
Department of Labor with respect to each of the Company Benefit Plans and (iv)
the most recent audited financial statement for each of the Company Benefit
Plans.
(n) Environmental Matters. Except as set forth in Section 3.01(n) of the
Disclosure Schedule, (i) the Company and its Subsidiaries operate their assets,
properties, businesses and operations in material compliance with all applicable
environmental laws, ordinances and regulations, (ii) neither the Company nor any
Subsidiary has knowledge of or has received written notice of any claim, action,
suit, proceeding, hearing or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, or hazardous or
toxic material or waste (collectively, an "ENVIRONMENTAL EVENT") relating to
their assets, properties, businesses and operations and (iii) to the knowledge
of the Company, no notice of any Environmental Event was given to any person or
entity that occupied the offices of the Company and its Subsidiaries prior to
the date such offices were occupied or used in their business. Without limiting
the generality of the foregoing, to the knowledge of the Company, neither the
Company nor any Subsidiary has disposed of or placed on or in such offices any
waste materials, hazardous materials or hazardous substances in violation of
law.
(o) Intellectual Property. Except as set forth in Section 3.01(o) of the
Disclosure Schedule, each of the Company and its Subsidiaries owns or has a
valid right to use each trademark, trade name, patent, service mark, brand mark,
brand name, computer program, database, industrial design and
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copyright required, owned or used in connection with the operation of its
businesses, including any registrations thereof and pending applications
therefor, and each license or other contract relating thereto that is material
to the conduct of its businesses (collectively, the "COMPANY INTELLECTUAL
PROPERTY"), except where the failure to own or have a right to use such property
would not have, individually or in the aggregate, a material adverse effect on
the Company. All material Company Intellectual Property (other than computer
programs, databases and commercially available software) is set forth in Section
3.01(o) of the Disclosure Schedule. Except as set forth in Section 3.01(o) of
the Disclosure Schedule, the use of the Company Intellectual Property by the
Company or its Subsidiaries does not conflict with, infringe upon, violate or
interfere with or constitute an appropriation of any right, title, interest or
goodwill, including without limitation any 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, which
in any case could result in a material adverse effect on the Company. Except as
set forth in Section 3.01(o) of the Disclosure Schedule, the Company's rights to
the use of all Company Intellectual Property will not be adversely affected by
the transactions contemplated in this Agreement. The Company has taken all
reasonable precautions to prevent disclosure of any confidential Company
Intellectual Property.
(p) Real Properties.
(i) Except as otherwise disclosed in the Company SEC Documents, Section
3.01(p)(i) of the Disclosure Schedule sets forth a list of all material real
property owned in fee by the Company or any of its Subsidiaries (individually,
an "OWNED PROPERTY" and, collectively, the "OWNED PROPERTIES"). To the best
knowledge of the Company, the Company has good and marketable fee title to each
Owned Property, including the buildings, structures and other improvements
located thereon, in each case free and clear of all Liens, except (i) Liens
which, individually or in the aggregate, would not reasonably be expected to
have a material adverse effect on the Company and (ii) Liens for Taxes and other
governmental charges which are not yet due and payable. There are no
condemnations or eminent domain (which term, as used herein, shall include other
compulsory acquisitions or takings by Governmental Entities) proceedings pending
or threatened against any Owned Property or any material portion thereof. The
Company has not received any notice from any city, village or other Governmental
Entity of any zoning, ordinance, land use, building, fire or health code or
other legal violation in respect of any Owned Property, other than violations
which have been corrected or which, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the Company.
(ii) Except as otherwise disclosed in the Company SEC Documents, Section
3.01(p)(ii) of the Disclosure Schedule sets forth a list of all material real
property (including land and buildings) that is leased by the Company or any of
its Subsidiaries as lessee or sublessee (the "LEASED REAL ESTATE"). The Company
has delivered or caused to be delivered to Acquisition complete and accurate
copies of the written lease and subleases that are described in Section
3.01(p)(ii) of the Disclosure Schedule or otherwise disclosed in the Company SEC
Documents. There are no condemnations or eminent domain proceedings pending or
threatened against any Leased Real Estate or any material portion thereof. The
Company has not received any notice from any city, village or other Governmental
Entity of any zoning, ordinance, land use, building, fire or health code or
other legal violation in respect of any Leased Real Estate, other than
violations which have been corrected or which, individually or in the aggregate,
would not reasonably be expected to have a material adverse effect on the
Company.
(iii) The Owned Properties and the Leased Real Estate constitute, in the
aggregate, all of the material real property used to conduct the business of the
Company and its Subsidiaries in the manner in which such business was conducted
during the fiscal year ended December 31, 1998.
(q) Tangible Personal Property. The Company and its Subsidiaries (A) have
good and valid title to all the tangible personal property material to the
operation of the business conducted by the Company and its Subsidiaries taken as
a whole and reflected in the latest audited financial statements included in the
Company SEC Documents as being owned by the Company and its Subsidiaries or
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acquired after the date thereof (except properties sold or otherwise disposed of
in the ordinary course of business since the date thereof), free and clear of
all Liens except (1) statutory Liens securing payments not yet due and (2) such
imperfections and irregularities of title or Liens as do not affect the use of
the properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties, in either case in such
a manner as to have, individually or in the aggregate, a material adverse effect
on the Company, and (B) are collectively the lessee of all tangible personal
property material to the operation of the business conducted by the Company and
its Subsidiaries and reflected as leased in the latest audited financial
statements included in the Company SEC Documents (or on the books and records of
the Company as of the date thereof) or acquired after the date thereof (except
for leases that have expired by their terms) and are in possession of the
properties purported to be leased thereunder, and each such leases is valid and
in full force and effect without default thereunder by the lessee or the lessor,
other than defaults that would not, individually or in the aggregate, have a
material adverse effect on the Company. Each of the Company and its Subsidiaries
enjoys peaceful and undisturbed possession under all such leases. Such owned and
leased tangible personal property is in good working order, reasonable wear and
tear excepted, and is suitable for the use for which it is intended, except
that, which would not, individually or in the aggregate, have a material adverse
effect on the Company.
(r) Insurance. The Company and its Subsidiaries are covered by valid and
currently effective insurance policies issued in favor of the Company or its
Subsidiaries that are customary for companies of similar size and financial
condition. Except as set forth in Section 3.01(r) of the Disclosure Schedule,
all such policies are in full force and effect, all premiums due thereon have
been paid and the Company has complied with the provisions of such policies. All
such policies will remain in full force and effect after giving effect to this
Agreement and the transactions contemplated hereby. Except as set forth in
Section 3.01(r) of the Disclosure Schedule, the Company has not been advised of
any defense to coverage in connection with any claim to coverage asserted or
noticed by the Company under or in connection with any of its extant insurance
policies. The Company has not received any written notice from or on behalf of
any insurance carrier issuing policies or binders relating to or covering the
Company and its Subsidiaries that there will be a cancellation or non-renewal of
existing policies or binders, or that alteration of any equipment or any
improvements to real estate occupied by or leased to or by the Company or its
Subsidiaries, purchase of additional equipment, or material modification of any
of the methods of doing business, will be required.
(s) Contracts. Except as set forth in Section 3.01(s) of the Disclosure
Schedule, and except for matters that would not, individually or in the
aggregate, have a material adverse effect on the Company, (i) the Company and
any of its Subsidiaries are not party to or bound by any agreement that
materially limits the ability of the Company, the Surviving Corporation, or any
of their Subsidiaries to compete in any line of business in any geographic area;
(ii) neither the Company nor any of its Subsidiaries is (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect under any agreement; (iii) to the best knowledge of the
Company, none of the other parties to any agreement is (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect under any contract and (iv) neither the Company nor any of its
Subsidiaries has received any written notice of the intention of any party to
terminate any agreement whether as a termination for convenience or for default
of the Company or any of its Subsidiaries thereunder.
(t) Labor Matters. Except as set forth in Section 3.01(t) of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to, or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is the
Company or any of its Subsidiaries currently the subject of a proceeding
asserting that it or any such Subsidiary has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to compel it
or such Subsidiaries to bargain with any labor organization as to wages and
conditions of employment. There is (i) no strike, labor dispute, slowdown or
stoppage pending or threatened against the Company or any of its Subsidiaries
and (iii) no union representation question existing with respect to the
employees of the Company or any of its Subsidiaries.
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(u) Transactions with Affiliates. Except as set forth in the Company SEC
Documents or Section 3.01(u) of the Disclosure Schedule, neither the Company nor
any officer, director, employee or affiliate of the Company, any Subsidiary or
any individual related by blood, marriage or adoption to any such individual or
any entity in which any such person or individual owns any beneficial interest,
is a party to any agreement, contract, commitment, transaction or understanding
with or binding upon the Company or any of its Subsidiaries or any of their
respective assets or has any material interest in any material property owned by
the Company or its Subsidiaries or has engaged in any transaction with any of
the foregoing within the last twelve months.
(v) Year 2000. The Company has reviewed its operations and has inquired of
third parties with which the Company and its Subsidiaries have a material
relationship to evaluate the extent to which the business or operations of the
Company and its Subsidiaries will be affected by the Year 2000 Problem. As a
result of such review and inquiries, the Company has no reason to believe, and
does not believe, the Year 2000 Problem will have a material adverse effect on
the Company and its Subsidiaries, taken as a whole, or result in any material
loss or interference with any of the business or operations of the Company and
its Subsidiaries, taken as a whole. The "YEAR 2000 PROBLEM" as used herein means
any significant risk that computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval, retransmission or
other utilization of data or in the operation of mechanical or electrical
systems of any kind will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively as in the case of
dates or time periods occurring prior to January 1, 2000.
(w) Rights Agreement. Subject to the terms and conditions of this
Agreement, the Company has duly entered into an amendment to the First Amended
and Restated Rights Agreement dated as of May 26, 1998 (the "RIGHTS AGREEMENT")
between the Company and American Stock Transfer & Trust Company, as Rights
Agent, pursuant to which the Rights Agreement and the Rights will not be
applicable to the Merger, and the execution of this Agreement and the
consummation of the Merger shall not result in a "Distribution Date" under the
Rights Agreement and the consummation of the Merger shall not result in
Acquisition or its affiliates being an "Acquiring Person," result in the
occurrence of an event described in Section 11(a)(ii) or Section 13 of the
Rights Agreement or otherwise result in the ability of any person to exercise
any Purchase Rights under Rights Agreement or require the Purchase Rights to
separate from the shares of Company Common Stock to which they are attached. A
correct and complete copy of the Rights Agreement has been provided to
Acquisition.
(x) Opinion of Financial Advisor. The Board of Directors of the Company
has received the oral opinion of Goldman, Sachs & Co. (the "FINANCIAL ADVISOR")
to the effect that, as of such date, 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, and such opinion has not been withdrawn or materially
and adversely modified. The Financial Advisor has represented to the Company
that it will promptly deliver to the Company a written opinion confirming in
writing the oral opinion described above.
(y) Brokers. No broker, investment banker, financial advisor or other
person, other than the Financial Advisor, the fees and expenses of which will be
paid by the Company, is entitled any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of the Company.
The Company's arrangements with the Financial Advisor have been fully disclosed
to Acquisition prior to the date hereof.
(z) Board Recommendation. As of the date hereof, the Board of Directors of
the Company, at a meeting duly called and held, by the unanimous vote of the
directors present at such meeting, (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are advisable, fair to
and in the best interests of the stockholders of the Company and has approved
the same and (ii) resolved to recommend, subject to their fiduciary duties under
applicable Law and Section 5.01, that the holders of shares of Company Common
Stock approve and adopt this Agreement.
(aa) Vote Required. 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
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capital stock necessary (under applicable Law or otherwise) to approve this
Agreement and the transactions contemplated hereby.
(bb) State Takeover Statute Inapplicable. The Board of Directors of the
Company has approved this Agreement, the Merger and the transactions
contemplated hereby and such approval, assuming the accuracy of Acquisition's
representation in Section 3.02(f) hereof, is sufficient to render the provisions
of Section 203 of the DGCL inapplicable to the Merger, this Agreement and the
transactions contemplated hereby.
(cc) Stock Plans. All of the outstanding Company Stock Options shall have
vested pursuant to their terms at the Effective Time and shall not be
exercisable after the Effective Time.
Section 3.02. Representations and Warranties of Acquisition. Acquisition
represents and warrants as of the date hereof (or such other date as shall be
expressly specified) to the Company as follows:
(a) Organization, Qualifications and Corporate Power. Acquisition is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and is duly licensed or qualified to do business
as a foreign corporation and is in good standing in each other jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such licensing or qualification necessary and where the failure to so
qualify would in the aggregate have a material adverse effect. Acquisition has
the corporate power and authority to own and hold its properties and to carry on
its business as currently conducted.
(b) Capital Structure. As of the date of this Agreement, the authorized
capital stock of Acquisition consists of 1,000 shares of Acquistion Common
Stock, 1,000 shares of which have been validly issued and are fully paid,
nonassessable and owned of record and beneficially by WCAS VIII or its
affiliates. Immediately prior to the Closing, the authorized capital stock of
Acquisition will consist of (i) 30,000,000 shares of Acquisition Common Stock,
(ii) 1,000,000 shares of Acquisition Class A Common Stock, and (iii) 1,000,000
shares of preferred stock, par value $.01 per share ("Acquisition Preferred
Stock"). No shares of Acquisition Class A Common Stock or Acquisition Preferred
Stock are issued and outstanding.
(c) Authorization of Agreement, Non-Contravention, Etc. Acquisition 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 and stockholder action on the
part of Acquisition. This Agreement has been duly executed and delivered by
Acquisition and constitutes a valid and binding obligation of Acquisition,
enforceable against Acquisition in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
hereby will not, conflict with, or result in any breach or violation of, or
result in the termination of, or accelerate the performance required by, or give
right to a right of termination, cancellation or acceleration of any obligation
under, or the creation of a Lien pursuant to (i) any provision of the charter
(or similar organizational documents) or bylaws of Acquisition or (ii) subject
to obtaining or making the Required Filings, any loan or credit agreement, note,
mortgage, indenture, lease or other agreement, obligation, instrument, permit,
concession, franchise, license, or any Laws applicable to Acquisition or its
properties or assets, in any case under this clause (ii) which would,
individually or in the aggregate, have a material adverse effect on Acquisition.
No consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to
Acquisition in connection with the execution and delivery of this Agreement by
Acquisition or the consummation by Acquisition of the transactions contemplated
hereby, the failure of which to be obtained or made would, individually or in
the aggregate, have a material adverse effect on Acquisition or would prevent or
materially delay the consummation of the transactions contemplated hereby,
except for the Required Filings.
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(d) Information Supplied. The information supplied or to be supplied by
Acquisition for inclusion or incorporation by reference in any Company
Disclosure Document will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading (i) in the case of the Proxy Statement, at the
date the Proxy Statement is first mailed to the stockholders of the Company or
at the time of the Company Stockholder Meeting, or (ii) in the case of any
Company Disclosure Document other than the Proxy Statement, at the time of the
filing of such Company Disclosure Document and at the time of any distribution
thereof. The representations and warranties contained in this Section 3.02(d) do
not apply to statements or omissions included or incorporated by reference in
the Company Disclosure Documents based upon information supplied to Acquisition
by the Company specifically in writing for inclusion or incorporation by
reference therein. Any document required to be filed by Acquisition or its
affiliates with any Governmental Entity other than the SEC will comply in all
material respects with the provisions of applicable law as to the information
required to be contained therein.
(e) Subsidiaries. Acquisition does not own, directly or indirectly, any
capital stock or other ownership interest in any person.
(f) Acquisition Not an Interested Stockholder. As of the date of this
Agreement, neither Acquisition, Convergent Equity Partners L.P. nor any of their
respective affiliates or associates (as such terms are defined under the
Exchange Act) is an "interested stockholder" as such term is defined in Section
203 of the DGCL.
(g) Interim Operations of Acquisition. Acquisition was formed on March 8,
1999 solely for the purpose of engaging in the transaction contemplated hereby,
has engaged in no other business activities and has conducted its operations
only as contemplated hereby. Except for (i) obligations or liabilities incurred
in connection with its incorporation or organization and the transactions
contemplated hereby and (ii) this Agreement and any other agreements or
arrangements contemplated by this Agreement or in furtherance of the
transactions contemplated hereby, Acquisition has not incurred, directly or
indirectly, any obligations or liabilities or engaged in any business activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any person.
(h) Brokers. No broker, investment banker, financial advisor or other
person, other than Chase Securities Inc., and except as contemplated by the
Commitment Letters (as defined in Section 3.02(i)), the fees and expenses of
which in each case will be paid by Acquisition or, if the Merger is consummated,
the Surviving Corporation, is entitled any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquisition.
(i) Financing. Acquisition (or WCAS VIII in the case of clause (i) below)
has received and executed commitment letters, each dated as of the date hereof
(the "COMMITMENT LETTERS"), from (i) Chase Securities Inc. and Chase Bank of
Texas, N.A. (collectively, "CHASE"), pursuant to which Chase has committed,
subject to the terms and conditions set forth therein, to provide the Surviving
Corporation with up to $120.0 million of financing under available senior
secured credit facilities; (ii) WCAS VIII and Convergent Equity Partners L.P.,
pursuant to which such entities have committed, subject to the terms and
conditions set forth therein, to provide to Acquisition up to $145.0 million in
equity; and (iii) WCAS Capital Partners III, L.P. or an affiliate thereof,
pursuant to which it has committed to provide up to $160.0 million of senior
subordinated financing (the financings referred to in clauses (i), (ii) and
(iii) above being collectively referred to as the "FINANCING"). Such Financing
is adequate to pay in full in cash at closing the Merger Consideration, together
with all fees and expenses of Acquisition and the Surviving Corporation
associated with the transactions contemplated hereby, and to make any other
payments necessary to consummate the transactions contemplated hereby. True and
complete copies of the Commitment Letters have been furnished to the Company.
WCAS VIII or Acquisition has fully paid any and all commitment fees or other
fees required by such Commitment Letters to be paid as of the date hereof (and
will duly pay any such fees after the date
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hereof); provided that, if the Merger is consummated, the Surviving Corporation
will reimburse WCAS VIII for such commitment fees or other fees required by such
Commitment Letters. The Commitment Letters are valid and in full force and
effect and no event has occurred which (with or without notice, lapse of time or
both) would constitute a default thereunder on the part of Acquisition, WCAS
VIII, Convergent Equity Partners L.P. or their respective affiliates or would
adversely affect the probability that such Financing will actually be funded.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.01. Covenants of the Company. During the period from the date of
this Agreement until the Effective Time, the Company agrees as to itself and its
Subsidiaries that (expressly as expressly contemplated, required or permitted by
this Agreement or as set forth in the Disclosure Schedule):
(a) Ordinary Course. The Company and its Subsidiaries shall carry on their
respective businesses only in the ordinary course consistent with past practice
in all material respects and use their best efforts to preserve intact their
present businesses, maintain their rights and licenses, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers and others having business dealings with
them. The Company shall not, nor shall it permit any of its Subsidiaries to,
enter into any new line of business, or incur or commit to any capital
expenditures, other than capital expenditures and obligations or liabilities
incurred or committed to that are either (i) contemplated in the Company's
current capital budget, a copy of which has been furnished to Acquisition prior
to the date hereof (the "CAPITAL BUDGET"), or (ii) not in excess of $5,000,000
individually or in the aggregate.
(b) Dividends; Change in Stock. The Company shall not, nor shall it permit
any of its Subsidiaries to, nor shall it propose to (i) declare, set aside or
pay any dividends on or make other distributions in respect of any capital stock
(except for cash dividends paid to the Company and its wholly-owned Subsidiaries
with regard to the Company's Subsidiaries' capital stock), (ii) adjust, split,
combine or reclassify any capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for capital stock or (iii) repurchase, redeem or otherwise acquire, or permit
any Subsidiary to purchase or otherwise acquire, any shares of capital stock or
any debt securities, warrants or options, in each case issued by the Company or
any of its Subsidiaries.
(c) Issuance of Securities. The Company shall not, nor shall it permit any
of its Subsidiaries to, (i) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its or any of its Subsidiaries'
capital stock of any class or any securities convertible into or exchange for,
or any rights, warrants or options to acquire, any of the foregoing, or any
other securities or equity equivalents (including stock appreciation rights),
except for (x) shares issuable upon the exercise of Company Stock Options
outstanding as of the date hereof and (y) issuances of capital stock of the
Subsidiaries to the Company or to a wholly owned Subsidiary of the Company; (ii)
amend the terms of or reprice any Company Stock Option outstanding on the date
of this Agreement or amend the terms of any Stock Option Plan in effect as of
the date hereof.
(d) Governing Documents. The Company shall not, nor shall it permit any of
its Subsidiaries to, amend or propose to amend its certificate of incorporation
or bylaws (or other organizational documents).
(e) No Acquisitions. Except as set forth in Section 4.01(e) of the
Disclosure Schedule, the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) merge or consolidate with, or acquire any equity interest
in, or enter into an agreement with respect to the foregoing, except for (A) a
merger of a wholly-owned Subsidiary with or into the Company or another
wholly-owned Subsidiary or (B) the creation of a wholly-owned Subsidiary of the
Company in the ordinary course of business; or (ii) acquire or agree to acquire
a substantial portion of the assets of, any corporation, partnership,
association or other business organization or any division or business thereof.
(f) No Dispositions. The Company shall not, nor shall it permit any of its
Subsidiaries to, sell, lease, mortgage, encumber or otherwise dispose of, any
material assets (including, without limitation, capital stock or other ownership
interest in any Subsidiary), other than sales or leases in the ordinary course
of business consistent with past practice.
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(g) Indebtedness. The Company shall not, nor shall it permit any of its
Subsidiaries to, (i) assume or incur any indebtedness for borrowed money (except
for lease obligations incurred in the ordinary course of business and consistent
with past practice or drawdowns by the Company under its existing revolving
credit facility or uncommitted lines of credit, if any, made in the ordinary
course of business consistent with past practice or as contemplated by the
Capital Budget), (ii) issue or sell any debt securities or warrants or rights to
acquire any debt securities or (iii) guarantee any debt obligations of any other
person.
(h) Accounting Matters. The Company shall not, nor shall it permit any of
its Subsidiaries to, change its fiscal year or make any material changes with
respect to its accounting methods, principles or practices in effect as of
December 31, 1998, except as required by the SEC, applicable Law or GAAP.
(i) Advice of Changes; Filings. The Company shall advise Acquisition of
any change or event that would cause or constitute a material breach of any of
its representations or warranties contained herein The Company shall file all
reports required to be filed by it with the SEC or NYSE between the date of this
Agreement and the Effective Time and shall deliver to Acquisition copies of all
such reports promptly after the same are filed. Any such report shall not
contain, as of the date of its filing, any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(j) Compensation; Benefit Plans. The Company shall not, nor shall it
permit any of its Subsidiaries to, (i) enter into, adopt, amend or terminate any
Company Benefit Plan, any other employee benefit plan, any existing employment,
severance or termination agreement with any director, officer or employee,
except as may be required by applicable Law, or (ii) increase in any manner the
compensation (including, without limitation, salary, bonus or other benefits) of
any of its directors, officers or employees or provide any other benefit not
required by any plan and arrangement as in effect as of the date hereof, except
for increases made, with respect to employees other than executive officers, in
the ordinary course of business and consistent with past practice.
(k) Discharges or Waiver of Claims. The Company shall not, nor shall it
permit any of its Subsidiaries to, (i) pay, discharge, or satisfy any claims
(including claims of stockholders), liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), except for the
payment, discharge or satisfaction of liabilities or obligations in the ordinary
course of business consistent with past practice; (ii) waive, release, grant or
transfer any rights of material value or modify or change in any material
respect rights of material value (including, without limitation, the waiver or
release of any rights under confidentiality or standstill agreements), or (iii)
settle or compromise any litigation (whether or not commenced prior to the date
of this Agreement), other than settlements or compromises of litigation where
the amount paid (after giving effect to insurance proceeds actually received) in
settlement or compromise does not exceed $3,500,000, provided that the aggregate
amount paid in connection with the settlement or compromise of all such
litigation matters shall not exceed $10,000,000.
(l) Leases and Lease Commitments. The Company shall not, nor shall it
permit any of its Subsidiaries to, enter into or commit to enter into, or
assume, any operating or capital lease, other than any such lease contemplated
by the Capital Budget or the Company's operating budget, a copy of which has
been provided to Acquisition prior to the date hereof.
(m) Liquidation Plan, Etc. Except as set forth in Section 4.01(m) of the
Disclosure Schedule, the Company shall not, nor shall it permit any of its
Subsidiaries to, authorize, recommend, propose or announce an intention to adopt
a plan of complete or partial liquidation or dissolution.
(n) Collective Bargaining Agreements. The Company shall not, nor shall it
permit any of its Subsidiaries to, enter into any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, except as may be required by applicable law.
(o) Transactions with Affiliates. The Company shall not, nor shall it
permit any of its Subsidiaries to, enter into any agreement, contract,
commitment, transaction or understanding with any officer,
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director, employee or affiliate of the Company, any Subsidiary or any individual
related by blood, marriage or adoption to any such individual or any entity in
which any such person or individual owns any beneficial interest that would be
required to be disclosed under Item 404 of Regulation S-K under the Exchange
Act.
(p) Tax Matters. The Company shall not, nor shall it permit any of its
Subsidiaries to, make any material Tax election, take any Tax position or amend
in a material respect any Tax Return, except in the ordinary course of business
consistent with past practice.
(q) Intellectual Property. The Company shall not, nor shall it permit any
of its Subsidiaries to, enter into any license with respect to Company
Intellectual Property unless such license is non-exclusive and entered into in
the ordinary course consistent with past practice.
(r) Insurance. The Company shall not, nor shall it permit any of its
Subsidiaries to, fail to keep in full force and effect insurance comparable in
amount and scope of coverage to insurance now carried by it.
(s) Other Actions. The Company shall not, nor shall it permit any of its
Subsidiaries to, agree to take, make any commitment (whether orally or in
writing) to take or take (i) any action that would result in any of the
representations and warranties of the Company set forth in this Agreement that
are qualified as to materiality being untrue, any of such representations and
warranties that are not so qualified being untrue in any material respect or any
of the conditions to the Merger set forth in Article VI not being satisfied, in
each case as of any time prior to the Effective Time, or (ii) any action
prohibited by this Agreement. The Company shall not, nor shall it permit any of
its Subsidiaries to, fail to take any action necessary to prevent any such
representation or warranty from being inaccurate (in the case of representations
and warranties that are qualified as to materiality) or inaccurate in any
material respect (in the case of representations and warranties that are not so
qualified) as of any time prior to the Effective Time.
Section 4.02. Covenants of Acquisition. During the period from the date of
this Agreement until the Effective Time, Acquisition agrees that:
(a) Other Actions. Acquisition shall not agree to take, make any
commitment (whether orally or in writing) to take or take (i) any action that
would result in any of its representations and warranties set forth in this
Agreement that are qualified as to materiality being untrue, any of such
representations and warranties that are not so qualified being untrue in any
material respect or any of the conditions to the Merger set forth in Article VI
not being satisfied, in each case as of any time prior to the Effective Time, or
(ii) any action prohibited by this Agreement. Acquisition shall not fail to take
any action necessary to prevent any such representations or warranty from being
inaccurate (in the case of representations and warranties that are qualified as
to materiality) or inaccurate in any material respect (in the case of
representations and warranties that are not so qualified) as of any time prior
to the Effective Time.
(b) Advice of Changes. Acquisition shall advise the Company of any change
or event that would cause or constitute a material breach of any of its
representations or warranties contained herein or which it believes will result
in any of the debt or equity financing necessary for the consummation of the
Merger and the other transactions contemplated hereby not being available to it
on terms no less favorable than those set forth in the Commitment Letters.
ARTICLE V
OTHER AGREEMENTS
Section 5.01. No Solicitation. (a) The Company shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its Subsidiaries (collectively,
"COMPANY REPRESENTATIVES") to, directly or indirectly, (i) solicit, initiate,
encourage or knowingly facilitate the submission of any Acquisition Proposal (as
defined in Section 5.01(d)) or (ii) enter into or participate in any discussions
or negotiations regarding, or furnish to any
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person any information with respect to, any Acquisition Proposal; provided,
however, that notwithstanding any other provision of this Agreement, (A) the
Company's Board of Directors may take and disclose to the stockholders of the
Company a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act and (B) following receipt from a third party, without any
solicitation, initiation or encouragement, directly or indirectly, by the
Company or any Company Representative, of a bona fide Acquisition Proposal, (w)
the Company may engage in discussions or negotiations with such third party and
may furnish such third party information concerning it, and its business,
properties and assets if such third party executes a confidentiality agreement
no less favorable to the Company than the existing confidentiality agreement
between the Company and WCAS VIII (the "CONFIDENTIALITY AGREEMENT") (except that
such third party confidentiality agreement need not require approval or request
of the Company's Board of Directors prior to the making of an offer or proposal
to such Board of Directors), (x) the Board of Directors of the Company may
withdraw, modify or not make its recommendation referred to in Section 3.01(z),
(y) terminate this Agreement in accordance with Article VII or (z) take any
combination of the actions described in clauses (w), (x) and (y) above, but in
each case referred to in clauses (A) and (B) only to the extent that the
Company's Board of Directors shall conclude in good faith, after consultation
with the Company's outside counsel, that such action is required in order for
the Company's Board of Directors to act in a manner consistent with its
fiduciary duties under applicable Law.
(b) The Company will immediately cease and cause to be terminated any
existing activities, discussions and negotiations conducted heretofore with
respect to an Acquisition Proposal.
(c) The Company will promptly advise Acquisition orally and in writing of
any Acquisition Proposal, the material terms and conditions of such Acquisition
Proposal and the identity of the person making any such Acquisition Proposal and
any determination by the Board of Directors of the Company pursuant to the last
proviso of Section 5.01(a) with respect to an Acquisition Proposal. The Company
will keep Acquisition informed, as promptly as reasonably practicable, as to the
status of any actions, including any discussions, taken pursuant to such
Acquisition Proposal.
(d) As used in this Agreement, "ACQUISITION PROPOSAL" means any inquiry,
proposal or offer from any person relating to (i) any direct or indirect
acquisition or purchase of assets or a business that constitutes 20% or more of
the net revenues, net income or assets of the Company and its Subsidiaries,
taken as a whole, or 20% or more of the outstanding Company Common Stock, (ii)
any tender offer or exchange offer (including by the Company or any of its
Subsidiaries) that if consummated would result in any person beneficially owning
20% or more of the outstanding Company Common Stock, or (iii) any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any of its Subsidiaries, other
than the transactions contemplated by this Agreement.
Section 5.02. Recapitalization. Each of the Company and Acquisition shall
use all reasonable best efforts to cause the transactions contemplated by this
Agreement, including the Merger, to be accounted for as a recapitalization and
such accounting treatment to be accepted by their respective accountants and the
SEC, and neither the Company nor Acquisition shall take any action that would be
reasonably likely to cause such accounting treatment not to be obtained. In the
event that Acquisition reasonably determines that it will not be permitted to
account for the transactions contemplated by this Agreement as a
recapitalization, the parties shall take all commercially reasonable actions to
amend this Agreement to cause the transactions contemplated hereby to be
accounted for as a recapitalization; provided that no such amendment may be
implemented if such amendment would reasonably be expected to (i) cause the
consideration to be received by the holders of Company Common Stock or options
under the Company Stock Plans to be less than the consideration that such
holders would have been entitled to receive under the Original Merger Agreement,
or (ii) result in the parties hereto being unable, after using reasonable best
efforts, to cause a Closing to occur on or prior to the date set forth in
Section 7.01(b)(iii).
Section 5.03. Preparation of the Proxy Statement. As promptly as
practicable following the date of this Agreement, the Company shall prepare and
file with the SEC the Proxy Statement. Acquisition will cooperate with the
Company in connection with preparation of the Proxy Statement,
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including furnishing to the Company all information regarding Acquisition and
its affiliates as may be required to be disclosed therein. The Company shall use
its best efforts to cause a definitive Proxy Statement to be distributed to its
stockholders as promptly as practicable thereafter. No filing of, or amendment
or supplement to, the Proxy Statement will be made by the Company without
providing Acquisition the opportunity to review and comment thereon and to
approve the same, provided that such approvals shall not be unreasonably
withheld or delayed. The Company will advise Acquisition, promptly after it
receives notice thereof, of any request by the SEC for amendment of the Proxy
Statement or comments thereon and responses thereto or requests by the SEC for
additional information. The Company and Acquisition agree to notify the other
party and to correct any information provided by it that shall have become false
or misleading and an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and, to the extent required by
law, disseminated to the stockholders of the Company.
Section 5.04. Company Stockholder Meeting. As promptly as practicable after
the date hereof, the Company shall, subject to its fiduciary duties and Section
5.01, take all action necessary in accordance with all applicable laws and its
Certificate of Incorporation and By-laws, to duly call, give notice of, convene
and hold the Company Stockholder Meeting to consider and vote upon the approval
and adoption of this Agreement and the Merger and for such other purposes as may
be necessary or desirable. The Board of Directors of the Company has determined
that the Merger is advisable and in the best interests of the stockholders of
the Company and shall, subject to its fiduciary duties and Section 5.01,
recommend that the stockholders of the Company vote to approve and adopt this
Agreement and the Merger and any other matters to be submitted to stockholders
in connection therewith.
Section 5.05. Access to Information. Upon reasonable notice, the Company
shall, and shall cause its Subsidiaries and its and their respective officers,
directors, employees, representatives and agents to afford access to the
officers, employees, accountants, counsel and other representatives of
Acquisition (including financing sources and their employees, accountants,
counsel and other representatives), during normal business hours during the
period prior to the Effective Time, to all of the Company's and its
Subsidiaries' properties, books, leases, contracts, commitments, officers,
employees, accountants, counsel, other representatives and records. Acquisition
will, and will cause its advisors and representatives who receive nonpublic
information regarding the Company to agree to, hold any such information in
confidence to the extent required by, and in accordance with, the terms of the
Confidentiality Agreement.
Section 5.06. Reasonable Best Efforts. (a) Subject to the terms and
conditions herein provided, each of the Company and Acquisition shall, and shall
cause its Subsidiaries to, use all reasonable 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 or make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the formation of subsidiaries and all other actions
necessary or advisable to consummate the Financing, (ii) the obtaining of any
necessary consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and/or any public or private third party which is required
to be obtained by such party or any of its subsidiaries in connection with the
Merger and the other transactions contemplated by this Agreement, and the making
or obtaining of all necessary filing and registrations with respect thereto
(including without limitation filings required under the HSR Act), (iii) the
defending of any lawsuits or other legal proceedings challenging this Agreement
and (iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement.
(b) Acquisition shall not, and shall cause WCAS VIII and their affiliates
not to, terminate, amend or modify in any respect the Commitment Letters in a
manner that could reasonably be expected to adversely affect the probability
that such Financing will actually be funded, or the timing thereof, without
prior written consent of the Company.
(c) The Company agrees to, and to cause its Subsidiaries and its and their
respective officers, directors, employees, advisors and accountants to,
reasonably cooperate with Acquisition in
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connection with the arrangement of any financing to be consummated prior to or
contemporaneously with the closing in respect of the transactions contemplated
by this Agreement, as may be reasonably requested by Acquisition.
Section 5.07. Indemnification and Insurance. (a) Acquisition agrees that
all rights to indemnification now existing in favor of any officers, directors,
employees or agents of the Company or any of its Subsidiaries as provided in
their respective charters or bylaws (or similar organizational documents) and
any existing indemnification agreements or arrangements of the Company or its
Subsidiaries 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 (or such
longer period as may be provided in any existing indemnification agreement
between the Company and any current or former officer or director thereof);
provided that, in the event any claim or claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim or
claims shall continue until final disposition of any and all such claims.
(b) The Company shall, and from and after the Effective Time, the Surviving
Corporation shall, for a period of six years after the Effective Time,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time, an officer, director, employee or agent of the Company or any of its
Subsidiaries (collectively, the "INDEMNIFIED PARTIES") against all losses,
expenses (including attorneys' fees), claims, damages, liabilities or amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of, or otherwise in connection
with, any threatened or actual claim, action, suit, proceeding or investigation
(a "CLAIM"), based in whole or in part on or arising in whole or in part out of
the fact that the Indemnified Party (or the person controlled by the Indemnified
Party) is or was a director, officer, employee or agent (including, without
limitation, a trustee or fiduciary of any Company Benefit Plan) of the Company
or any of its Subsidiaries and pertaining to any matter existing or arising out
of actions or omissions occurring at or prior to the Effective Time (including,
without limitation, any Claim arising out of this Agreement or any of the
transactions contemplated hereby), whether asserted or claimed prior to, at or
after the Effective Time, in each case to the fullest extent permitted under
Delaware law, and shall pay any expenses, as incurred, in advance of the final
disposition of any such action or proceeding to each Indemnified Part to the
fullest extent permitted under Delaware law. In determining whether an
Indemnified Party is entitled to indemnification under this Section 5.07, if
requested by such Indemnified Party, such determination shall be made by
special, independent counsel selected by the Surviving Corporation and approved
by the Indemnified Party (which approval shall not be unreasonably withheld),
and who has not otherwise performed services for the Surviving Corporation or
its affiliates within the last three years (other than in connection with such
matters). 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 the Company's regularly engaged independent legal counsel or
counsel satisfactory to them and reasonably satisfactory to the Company (or
satisfactory to them and reasonably satisfactory to the Surviving Corporation
after the Effective Time), and the Company (or after the Effective Time, the
Surviving Corporation) shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties as 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. In the event
of any Claim, any Indemnified Party wishing to claim indemnification will
promptly notify the Company (or after the Effective Time, the Surviving
Corporation) thereof (provided that failure to so notify the Surviving
Corporation will not affect the obligations of the Surviving Corporation except
to the extent that the Surviving Corporation shall have been prejudiced as a
result of such failure) and shall deliver to the Company (or after the Effective
Time, the Surviving Corporation) the undertaking contemplated by Section 145(e)
of the DGCL, but without any requirement for the posting of a bond. Without
limiting the foregoing, in the event any such Claim is brought against any of
the Indemnified Parties, such
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Indemnified Parties may retain only one law firm (plus one local counsel, if
necessary) to represent them with respect to each such matter unless the use of
counsel chosen to represent the Indemnified Parties would present such counsel
with a conflict of interest, or the representation of all of the Indemnified
Parties by the same counsel would be inappropriate due to actual or potential
differing interests between them, in which case such additional counsel as may
be required (as shall be reasonably determined by the Indemnified Parties and
the Company or the Surviving Corporation, as the case may be) may be retained by
the Indemnified Parties at the cost and expense of the Company (or the Surviving
Corporation) and the Company (or the Surviving Corporation) shall pay all
reasonable fees and expenses of such counsel for such Indemnified Parties. The
Company (or the Surviving Corporation shall use all reasonable efforts to assist
in the vigorous defense of any such Claim, provided that the Company (or the
Surviving Corporation) shall not be liable for any settlement effected without
its written consent, which consent, however, shall not be unreasonably withheld.
Notwithstanding the foregoing, nothing contained in this Section 5.07 shall be
deemed to grant any right to any Indemnified Party which is not permitted to be
granted to an officer, director, employee or agent of the Company under Delaware
law, assuming for such purposes that the Company's certificate of incorporation
and bylaws provide for the maximum indemnification permitted by law.
(c) Acquisition agrees that the Company and, from and after the Effective
Time, the Surviving Corporation shall cause to be maintained in effect for not
less than six years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company; provided
that (i) the Surviving Corporation may substitute therefor policies of at least
the same coverage containing terms and conditions which are no less
advantageous; (ii) such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
(iii) the Surviving Corporation shall not be required to pay an annual premium
in excess of 200% of the last annual premium paid by the Company prior to the
date hereof and if the Surviving Corporation is unable to obtain the insurance
required by this Section 5.07(c) it shall obtain as much comparable insurance as
possible for an annual premium equal to such maximum amount.
(d) Following the Merger, if the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any person or persons, then, and in each such case,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation, and any of their successors and assigns, assume the
obligations of the parties hereto and the Surviving Corporation set forth in
this Section 5.07.
(e) This Section 5.07 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Parties (each of whom may enforce the provisions of this
Section 5.07) and shall be binding on the successors and assigns of the
Surviving Corporation.
Section 5.08. Benefits Matters. (a) Acquisition agrees that the Company
will honor and, from and after the Effective Time, the Surviving Corporation and
its Subsidiaries will honor all obligations under employment agreements, Company
Benefit Plans and all other employee benefit plans, programs, policies and
arrangements of the Company and its Subsidiaries in accordance with the terms
thereof.
(b) Acquisition agrees that the Surviving Corporation will take such
actions as are necessary so that, for a period of at least one year from the
Effective Time, employees of the Company and its Subsidiaries will be provided
cash compensation, employee benefit and incentive compensation and similar plans
and programs (other than equity-based compensation plans and programs) as will
provide compensation and benefits which in the aggregate are no less favorable
than those provided to such employees as of the date hereof.
(c) To the extent permitted under applicable Law, each employee of the
Company or its Subsidiaries shall be given credit for all service with the
Company or its Subsidiaries (or service credited by the Company or its
Subsidiaries) under all employee benefit plans, programs, policies and
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arrangements maintained by the Surviving Corporation in which they participate
or in which they become participants for purposes of eligibility, vesting and
benefit accrual including, without limitation, for purposes of determining (1)
short-term and long-term disability benefits, (2) severance benefits, (3)
vacation benefits and (4) benefits under any retirement plan.
(d) This Section 5.08, which shall survive the consummation of the Merger
at the Effective Time and shall continue without limit except as expressly set
forth herein, is intended to benefit and bind the Company, the Surviving
Corporation and any person referenced in this Section 5.08, each of whom may
enforce the provisions of this Section 5.08 whether or not party to this
Agreement. Except as provided in clause (a) above, nothing contained in this
Section 5.08 shall create any beneficiary rights in any employee or former
employee (including any dependent thereof) of the Company, any of its
Subsidiaries or the Surviving Corporation in respect of continued employment for
any specified period of any nature or kind whatsoever. In addition, nothing in
this Section 5.08 shall be construed to limit the ability of the Surviving
Corporation or any of its Subsidiaries to review Company Benefit Plans and all
other employee benefit plans, programs, policies and arrangements from time to
time and make such changes as it or they deem appropriate.
Section 5.09. Resignations of Directors. Prior to the Effective Time, the
Company shall deliver to Acquisition evidence satisfactory to Acquisition of the
resignation of all directors of the Company, effective at the Effective Time.
Section 5.10. Solvency at Closing. Acquisition agrees for the benefit of
the directors of the Company to take all actions necessary to ensure that,
immediately following the Effective Time, the Surviving Corporation will be
solvent for all purposes under federal bankruptcy and applicable state
fraudulent transfer and fraudulent conveyance laws.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of the parties to effect the Merger shall be subject
to the satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval shall
have been obtained.
(b) HSR Act and Other Approvals. Any waiting period applicable to the
Merger under the HSR Act shall have expired or been terminated and the approvals
listed in Section 3.01(c) of the Disclosure Schedule shall have been obtained.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order or decree issued by
any Governmental Entity of competent jurisdiction enjoining or otherwise
preventing the consummation of the Merger shall be in effect; provided, however,
that each of the parties shall use reasonable best efforts to prevent the entry
of any such injunction or other order or decree and to cause any such injunction
or other order or decree that may be entered to be vacated or otherwise rendered
of no effect. No statute, rule, regulation or other Law shall have been enacted,
promulgated or otherwise issued by any Governmental Entity that prohibits the
consummation of the Merger.
Section 6.02. Conditions to the Obligations of Acquisition to Effect the
Merger. The obligations of Acquisition to effect the Merger shall be subject to
the satisfaction of the following conditions unless waived by Acquisition:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement (i) to the extent qualified by
materiality or material adverse effect qualifiers, shall be true and correct and
(ii) to the extent not qualified by materiality or material adverse effect
qualifiers, shall be true and correct in all material respects, in each of cases
(i) and (ii), as of the date of this Agreement and as of the Effective Time as
though made on and as of the Effective Time,
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except (x) as contemplated or permitted by this Agreement and (y) to the extent
that such representations or warranties shall have been expressly made as of an
earlier date, in which case such representations and warranties shall have been
true and correct as of such earlier date, and Acquisition shall have received a
certificate to such effect signed on behalf of the Company by its Chief
Executive Officer or its Chief Financial Officer.
(b) Performance of Obligations of the Company. The Company shall have
performed or complied with in all material respects all material obligations
required to be performed or complied with by it under this Agreement at or prior
to the Effective Time, and Acquisition shall have received a certificate to such
effect signed on behalf of the Company by its Chief Executive Officer or its
Chief Financial Officer.
(c) Consents, Etc. Acquisition shall have received evidence, in form and
substance reasonably satisfactory to it, that such consents, approvals,
authorizations, qualifications and orders of Governmental Entities and other
third parties as are necessary in connection with the transactions contemplated
hereby have been obtained, other than those the failure of which to be obtained,
individually or in the aggregate, would not have a material adverse effect on
the Company.
(d) No Litigation. There shall not be pending any suit, action or
proceeding brought by any Governmental Entity seeking to prohibit or limit in
any material respect the ownership or operation by the Company, Acquisition or
any of their respective affiliates of a substantial portion of the business or
assets of the Company and its Subsidiaries, taken as a whole, or to require any
such person to dispose of or hold separate any material portion of the business
or assets of the Company and its Subsidiaries, taken as a whole, as a result of
the Merger or any of the other transactions contemplated by this Agreement or
seeking to impose limitations on the ability of WCAS VIII or any of its
affiliates or any third party investor contemplated by Section 5.02 to acquire
or hold, or exercise full rights of ownership of, any shares of Company Common
Stock, including, without limitation, the right to vote the Company Common Stock
on all matters properly presented to the stockholders of the Company or seeking
to prohibit WCAS VIII or any of its affiliates or any such investor from
effectively controlling in any material respect a substantial portion of the
business or operations of the Company or its Subsidiaries, in each case after
giving effect to any actions required to be taken pursuant to Section 5.06.
(e) Financing. Acquisition shall have arranged the Financing substantially
on the terms contemplated by the Commitment Letters or alternative financing on
terms no less favorable than those set forth in the Commitment Letters, unless
the failure to arrange the Financing was the result of a failure by Acquisition
to perform any covenant or condition contained therein or herein, a failure by
either WCAS VIII or Convergent Equity Partners L.P. or their respective
affiliates to perform their respective obligations contained therein or the
inaccuracy of any representation or warranty of Acquisition.
Section 6.03. Conditions to the Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger shall be subject to
the satisfaction of the following conditions unless waived by the Company:
(a) Representations and Warranties. The representations and warranties of
Acquisition set forth in this Agreement (i) to the extent qualified by
materiality or material adverse effect qualifiers, shall be true and correct and
(ii) to the extent not qualified by materiality or material adverse effect
qualifiers, shall be true and correct in all material respects, in each of cases
(i) and (ii), as of the date of this Agreement and as of the Effective Time as
though made on and as of the Effective Time, except (x) as contemplated or
permitted by this Agreement and (y) to the extent that such representations or
warranties shall have been expressly made as of an earlier date, in which case
such representations and warranties shall have been true and correct as of such
earlier date, and the Company shall have received a certificate to such effect
signed on behalf of Acquisition by a director thereof who shall also be a
managing member of the sole general partner of WCAS VIII.
(b) Performance of Obligations of Acquisition. Acquisition shall have
performed or complied with in all material respects all material obligations
required to be performed or complied with by it
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under this Agreement at or prior to the Effective Time, and the Company shall
have received a certificate to such effect signed on behalf of Acquisition by a
director thereof who shall also be a managing member of the sole general partner
of WCAS VIII.
(c) Financing. Acquisition shall have arranged the Financing substantially
on the terms contemplated by the Commitment Letters or alternative financing on
terms no less favorable than those set forth in the Commitment Letters, unless
the failure to arrange the Financing was the result of a failure by the Company
to perform any covenant or condition contained herein or the inaccuracy of any
representation or warranty of the Company.
(d) Solvency Letter. Acquisition shall have caused the valuation firm
which has delivered a solvency letter to the financial institutions providing
the debt financing for the Merger (or, if no such letter has been provided
thereto, a valuation firm reasonably acceptable to the Company) to have
delivered to the Company a letter addressed to its Board of Directors in form
and substance reasonably satisfactory thereto as to the solvency of the Company
and its Subsidiaries after giving effect to the Merger, the financing
arrangements contemplated by Acquisition with respect to the Merger and the
other transactions contemplated hereby.
Section 6.04. Frustration of Closing Conditions. Neither Acquisition nor
the Company may rely on the failure of any condition set forth in Section 6.01,
6.02 or 6.03, as the case may be, to be satisfied if such failure was caused by
such party's failure to use all reasonable best efforts to consummate the Merger
and the other transactions contemplated hereby.
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval is obtained:
(a) by mutual written consent of Acquisition and the Company;
(b) by Acquisition or the Company upon written notice to the other party:
(i) if any Governmental Entity of competent jurisdiction shall have issued
a permanent injunction or other order or decree enjoining or otherwise
preventing the consummation of the Merger and such injunction or other order or
decree shall have become final and nonappealable; provided that the party
seeking to terminate this Agreement pursuant to this clause (i) shall have used
its reasonable best efforts to prevent or contest the imposition of, or seek the
lifting or stay of, such injunction, order or decree;
(ii) unless the party seeking to terminate this Agreement is in material
breach of its obligations hereunder, if the Company or Acquisition breaches or
fails to perform any of its representations, warranties, covenants or other
agreements hereunder, which breach or failure to perform (A) would give rise to
the failure of a condition set forth in Section 6.02, in the case of such a
breach or failure to perform on the part of the Company, or Section 6.03, in the
case of such a breach or failure to perform on the part of Acquisition, and (B)
is incapable of being cured by the party so breaching or failing to perform or
is not cured within 10 days after the terminating party gives written notice of
such breach to the other party and such a cure is not effected during such
period;
(iii) if the Merger shall not have been consummated on or before September
15, 1999, unless the failure to consummate the Merger is the result of a
material breach of this Agreement by the party seeking to terminate this
Agreement; or
(iv) if, upon a vote at a duly held Company Stockholder Meeting or any
adjournment thereof, the Company Stockholder Approval shall not have been
obtained;
(c) by Acquisition upon written notice to the Company if the Board of
Directors of the Company or any committee thereof shall have withdrawn or
modified in a manner adverse to Acquisition its approval or recommendation of
the Merger or this Agreement, approved or recommended any Acquisition Proposal
or resolved to do any of the foregoing; or
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(d) by the Company, if the Board of Directors of the Company determines,
in the exercise of its good faith judgment as to fiduciary duties to its
stockholders imposed by law, after consultation with outside counsel, that such
termination is required by reason of an Acquisition Proposal being made in
order for the Company's Board of Directors to act in a manner consistent with
its fiduciary duties under applicable law; provided that the Company shall
notify Acquisition promptly of its intention to terminate this Agreement or
enter into a definitive agreement with respect to any Acquisition Proposal,
Section 7.02. Effect of Termination. In the event of termination of this
Agreement by either party hereto as provided in Section 7.01, this Agreement
shall forthwith become void and have no effect, and, except to the extent that
such termination results from the willful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in this
Agreement, there shall be no liability or obligation on the part of Acquisition
or the Company, except with respect to Section 3.01(h), Section 3.01(y), Section
3.02 (d), Section 3.02(h), the second sentence of 5.05, this Section 7.02,
Section 7.03 and Article VIII, which provisions shall survive such termination.
Section 7.03. Fees and Expenses. (a) Whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) If a Payment Event (as hereinafter defined) occurs, the Company shall,
within two business days following such Payment Event, pay Acquisition, or its
designee, a termination fee of $12,000,000 in cash. A "PAYMENT EVENT" means (i)
the termination of this Agreement by Acquisition pursuant to Section 7.01(c),
(ii) the termination of this Agreement by the Company pursuant to Section
7.01(d), or (iii) the Company (x) enters into, (y) agrees to enter into or (z)
consummates a transaction within one year after the date of termination of this
Agreement (other than pursuant to Section 7.01(a) or Section 7.01(b)(i), or by
reason of Acquisition's failure to comply with or perform, or breach, in any
material respect, of any of its covenants or agreements contained herein) that
is the subject of an inquiry, proposal or offer that is an Acquisition Proposal
that was publicly announced or submitted to the Company prior to the termination
of this Agreement.
(c) The Company acknowledges that the agreements contained in this Section
7.03 are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Acquisition would not enter into this
Agreement; accordingly, if the Company fails to promptly pay any amount due
pursuant to this Section 7.03, and, in order to obtain such payment, Acquisition
commences a suit which results in a judgment against the Company for the fee set
forth in this Section 7.03, the Company shall also pay to Acquisition its costs
and expenses incurred in connection with such litigation.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant hereto shall survive the Effective Time, provided that this Section
8.01 shall not limit any covenant or agreement of the parties that by its terms
contemplates performance after the Effective Time.
Section 8.02. Confidentiality Agreement. The Confidentiality Agreement
shall survive the execution and delivery of this Agreement or any termination of
this Agreement, and the provisions of the Confidentiality Agreement shall apply
to all information and material delivered by any party hereunder.
Section 8.03. Publicity. The Company and Acquisition agree that they will
not issue any press release or make any other public announcement concerning
this Agreement or the transactions contemplated hereby without the prior consent
of the other party, which consent shall not be unreasonably withheld, except
that the Company or Acquisition may make such public disclosure that it believes
in good faith to be required by law (in which event such party shall consult, to
the extent possible, with the other party prior to making such disclosure).
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Section 8.04. Amendment. This Agreement may be amended, modified or
supplemented only by written agreement by the parties hereto at any time before
the Effective Time; provided that, after receipt of the Company Stockholder
Approval, no amendment shall be made which by law requires further approval by
such stockholders without so obtaining such further approval.
Section 8.05. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations or warranties
contained herein or in any document delivered pursuant hereto and (c) subject to
the provisions of Section 8.04, 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 to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
Section 8.06. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, telecopied (with confirmation) or sent by overnight or
same-day courier (providing proof of delivery) or sent by certified or
registered mail, postage prepaid, to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to the Company, to it at:
4851 LBJ Freeway
Suite 1100
Dallas, Texas 75244
Attention: President
Facsimile: (972) 341-4882
with a copy to:
Jim A. Watson, Esq.
A. Winston Oxley, Esq.
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Facsimile: (214) 999-7716; and
(b) if to Acquisition, to it at:
c/o Welsh, Carson, Anderson & Stowe VIII, L.P.
320 Park Avenue
Suite 2500
New York, New York 10022-6815
Attention: Robert A. Minicucci
Facsimile: (212) 893-9575
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with a copy to:
Robert A. Schwed, Esq.
Karen C. Wiedemann, Esq.
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Facsimile: (212) 841-5725
Section 8.07. Counterparts. This Agreement may be executed in two
counterparts, both of which shall be considered one and the same agreement and
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto.
Section 8.08. Entire Agreement; No Third-Party Beneficiaries; Rights of
Ownership. This Agreement, together with the Confidentiality Agreement, (a)
constitute the entire agreement and supersede all prior agreements with respect
to the subject matter hereof and of the Confidentiality Agreement and (b) other
than Section 5.07, Section 5.08 and Section 5.10 of this Agreement, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 8.09. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware applicable to
agreements entered into and to be performed wholly within such State.
Section 8.10. Successors and Assigns. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or in
part, by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties, and any such assignment
that is not so consented to shall be null and void; provided that Acquisition
may assign its rights hereunder to any of its affiliates, but no such assignment
shall relieve Acquisition of its obligations hereunder. If Acquisition shall
assign its rights under this Agreement, then the parties hereto shall enter into
a reasonable and appropriate amendment to this Agreement to reflect such
assignment and the substitution of the assignee as Acquisition for purposes of
this Agreement. Subject to the first sentence of this Section 8.10, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 8.11. Jurisdiction. Each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in the
State of Delaware or any Delaware state court in the event any dispute arises
out of this Agreement or the transactions contemplated hereby, (b) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a federal or state court sitting in the State of
Delaware.
Section 8.12. Headings; Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. References in this Agreement to
Sections, Schedules, Exhibits or Articles mean a Section, Schedule, Exhibit or
Article of this Agreement or the Disclosure Schedule unless otherwise indicated.
References to this Agreement shall be deemed to include all Exhibits and
Sections of the Disclosure Schedule, unless the context otherwise requires. The
term "PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a governmental entity or an unincorporated
organization.
Section 8.13. Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein shall, for any reason, be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.
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Section 8.14. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND Acquisition
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 8.15. Reference; No Waiver. Any reference in this Agreement to the
"date hereof," the "date of this Agreement" or the "date of execution of this
Agreement" shall be deemed to refer to April 5, 1999, the date of the Original
Merger Agreement, but any reference to the "date of this Amended and Restated
Agreement" or the "date of execution of this Amended and Restated Agreement"
shall refer to the date first written above. The parties' execution and delivery
of this Agreement shall not constitute a waiver of any rights that either of the
parties hereto may have by reason of any event, misrepresentation or breach of
covenant of the Original Merger Agreement having occurred prior to the date of
execution and delivery of this Agreement whether or not known to any or all of
the parties hereto.
IN WITNESS WHEREOF, the parties have executed and delivered this Amended
and Restated Agreement and Plan of Merger as of the day and year first above
written.
BANCTEC, INC.
By /s/ Tod V. Mongan
------------------------------------
Name: Tod V. Mongan
Title: Senior Vice President
COLONIAL ACQUISITION CORP.
By /s/ Anthony J. de Nicola
------------------------------------
Name: Anthony J. de Nicola
Title: Vice President
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<PAGE>
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
(section) 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to (section)
228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (section) 251 (other than a merger effected pursuant to
(section) 251(g) of this title), (section) 252, (section) 254, (section) 257,
(section) 258, (section) 263 or (section) 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of (section) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
(section)(section) 251, 252, 254, 257, 258, 263 and 264 of this title to
accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (section) 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (section)
228 or (section) 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the
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corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may
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<PAGE>
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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<PAGE>
PROXY
BANCTEC, INC.
SPECIAL MEETING OF STOCKHOLDERS o JULY 21, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Grahame N. Clark, Jr. and Tod V. Mongan or
either of them, with full power of substitution in each, proxies ( and if the
undersigned is a proxy, substitute proxies) to vote all Common Stock of the
undersigned in BancTec, Inc. at the Special Meeting of Stockholders to be held
at Chase Tower, 2200 Ross Avenue, 7th Floor, Dallas, Texas 75201, on July 21,
1999 at 10:00 a.m., local time, and at any adjournment and postponement thereof,
as specified on the reverse side of this card. Please sign and date the reverse
side of this proxy).
<PAGE>
A [X] Please mark your
votes [X] as in this
example.
FOR AGAINST ABSTAIN
1. Proposal to approve and adopt the ===== ========= ========
Amended and Restated Agreement [ ] [ ] [ ]
and Plan of Merger dated June 17,
1999 between BancTec, Inc. and
Colonial Acquisition Corp.
2. Discretionary Proxy. In their discretion, the proxies (and if
the undersigned is a proxy, any subsequent proxies) are
authorized to vote upon any other business that may be proposed
to come before the meeting.
This proxy when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction
is given, the proxy will be voted FOR the approval and adoption
of the Amended and Restated Agreement and Plan of Merger.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE
SIGNATURE ----------------------------------- DATE ----------------------------
SIGNATURE (IF HELD JOINTLY) TITLE
NOTE: Please sign your name exactly as it appears on the stock certificate. When
shares are held by joint tenants, both stockholders should sign above. When
signing as attorney, administrator, executor, trustee or guardian, please sign
your title as such. If a corporation, please sign in full corporate name by the
President of the corporation or other authorized officer. If a partnership,
please sign in full partnership name by an authorized person.
