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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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LCS INDUSTRIES, INC.
(Name of Subject Company)
LCS INDUSTRIES, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
501822 20 9
(CUSIP Number of Class of Securities)
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WILLIAM RELLA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LCS INDUSTRIES, INC.
120 BRIGHTON ROAD
CLIFTON, NEW JERSEY 07012-1694
(973) 778-5588
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person Filing Statement)
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With a copy to:
PETER B. HIRSHFIELD, ESQ.
KIRKPATRICK & LOCKHART LLP
1251 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 536-3900
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is LCS Industries, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 120 Brighton Road, Clifton, New Jersey 07012-1694. This
Solicitation/Recommendation-Statement on Schedule 14D-9 (this "Statement")
relates to the Company's common stock, par value $.01 per share (the "Common
Stock").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer by Catalog Acquisition Co., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of CustomerONE
Holding Corporation, a Delaware corporation ("Parent"), described in the Tender
Offer Statement on Schedule 14D-1 filed on December 23, 1998 (the "Schedule
14D-1"), to purchase all outstanding shares (the "Shares") of Common Stock at a
price of $17.50 per Share, net to the seller in cash (the "Offer Price"), upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
December 23, 1998 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with the Offer to Purchase and all amendments and
supplements thereto, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 17, 1998 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. The Merger Agreement provides, among other things, that as soon
as practicable after the purchase of Shares pursuant to the Offer and the
satisfaction or waiver of the other conditions set forth in the Merger
Agreement, in accordance with the relevant provisions of the Delaware General
Corporation Law (the "DGCL"), Purchaser will be merged with and into the Company
(the "Merger"). Following consummation of the Merger, the Company will continue
as the surviving corporation (the "Surviving Corporation") and will be a wholly
owned subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held in the treasury of the Company or owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or
the Company, which shall be canceled with no payment being made with respect
thereto, and other than Shares, if any, held by any stockholder who properly
demands to receive payment of the fair value of such stockholder's Shares in
accordance with the DGCL) will be canceled and converted automatically into the
right to receive $17.50 in cash or any higher price paid per Share in the Offer
(the "Merger Consideration"), without interest thereon. A copy of the Merger
Agreement is filed herewith as Exhibit (c)(1) and is incorporated herein by
reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Purchaser and Parent are located at 8117 Preston Road, Dallas, Texas 75225.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above, which information is
incorporated herein by reference.
(b) Except as described in this Item 3(b), there are no material contracts,
agreements, arrangements or understandings nor any actual or potential conflicts
of interest, as of the date hereof, between the Company or its affiliates and
(i) the Company's executive officers, directors or affiliates or (ii) Parent,
Purchaser or their respective executive officers, directors or affiliates.
GENERAL INFORMATION ABOUT THE BOARD OF DIRECTORS OF THE COMPANY
Each director of the Company who is not an officer of the Company receives
a $10,000 annual director's fee and a $1,000 fee for each meeting of the
Company's Board of Directors (the "Board of Directors") he attends. Directors
who are officers of the Company do not receive any additional compensation for
service as directors. In addition, pursuant to the terms of the Company's 1996
Non-Employee Directors Stock Option Plan (the "Directors Plan"), on the fifth
business day following the public release of the Company's annual earnings for
any fiscal year in which the sales and net earnings per Share increases by more
than 5% over the prior fiscal year's (subject to antidilution adjustments), each
non-employee director, who has been a non-
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employee director at all times during the fiscal year, would be granted a
non-qualified option to purchase 11,000 Shares. Each such option would become
exercisable pro rata over the five-year period following, and have an exercise
price per Share equal to the fair market value of the Shares on, the date of
grant. The Directors Plan provides for the granting of options covering up to
250,000 Shares.
1983 AND 1993 INCENTIVE STOCK OPTION PLANS
The Company has an Incentive Stock Option Plan (the "1993 Option Plan")
which was adopted and became effective in May 1993. The 1993 Option Plan permits
the granting of incentive stock options to certain officers and other employees
to purchase Shares. Any such options would be exercisable at a price not less
than the fair market value of the Shares on the date such options are granted.
The aggregate number of Shares which may be issued under the 1993 Option Plan is
2,200,000. The Company's 1983 Incentive Stock Option Plan (the "1983 Option
Plan") expired on May 24, 1993. Both the 1983 Option Plan and the 1993 Option
Plan are qualified under Section 422 of the Internal Revenue Code of 1986, as
amended.
OTHER OPTIONS
Non-employee directors have been granted non-qualified options, with an
exercise price equal to the fair market value on the date of grant, to purchase
48,000 Shares. An officer has been granted non-qualified options, with an
exercise price of $5.75 per Share to purchase 25,000 Shares. These options were
not granted under any of the plans described above.
OPTIONS HELD UNDER THE 1983 OPTION PLAN, 1993 OPTION PLAN AND DIRECTORS PLAN.
<TABLE>
<CAPTION>
TOTAL
OPTIONS OUTSTANDING OPTIONS OUTSTANDING NUMBER
AS OF 9/30/98 UNDER AS OF 9/30/98 UNDER OPTIONS OUTSTANDING OF
THE 1983 THE 1993 AS OF 9/30/98 UNDER OPTIONS RANGE OF OPTION
NAME OPTION PLAN OPTION PLAN THE DIRECTORS PLAN HELD PRICES (1)
---- ------------------- ------------------- ------------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
William Rella........ 88,000 80,000 n/a 168,000 $ 2.61 - $15.00
Lon Mandel........... 0 0 n/a 0 n/a
Marvin Cohen......... 0 61,000 n/a 61,000(2) $ 3.25 - $16.85
Pat Frustaci......... 0 54,000 n/a 54,000 $ 3.86 - $14.00
James Quinlan........ 0 9,500 n/a 9,500 $12.75 - $15.50
Joseph Barbaro....... n/a n/a 11,000 11,000(3) $ 15.00
Bernard Ouziel....... n/a n/a 22,600 22,600(4) $ 3.53 - $16.00
Total................ 88,000 204,500 33,600 530,600
</TABLE>
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(1) Prices are rounded to the nearest cent.
(2) Mr. Cohen also has other non-plan options to purchase 25,000 Shares at an
exercise price of $5.75 per Share.
(3) Mr. Barbaro also has other non-plan options to purchase 4,000 Shares at an
exercise price of $5.38 per Share.
(4) Mr. Ouziel also has other non-plan options to purchase 44,000 Shares at an
exercise price of $2.05 per Share.
EMPLOYMENT AGREEMENTS
The Company has entered into a one-year employment agreement with the Vice
President-Finance, Pat Frustaci, pursuant to which the Company will pay a base
salary of $165,000 to Mr. Frustaci for fiscal year 1999 and awarded him a bonus
of $50,000 for fiscal year 1998. This agreement expires in August 1999 but may
be renewed by the Company on December 31, 1998. If it is not renewed, Mr.
Frustaci will receive six months severance pay following its expiration in
August 1999.
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The Company has entered into an employment agreement with Mr. Mandel
pursuant to which the Company pays him an annual base salary of $180,000 and
awards him a bonus equal to 25% of the pre-tax profits of The SpeciaLISTS Ltd.
The Company has entered into an incentive compensation arrangement with Mr.
Rella pursuant to which Mr. Rella is entitled to a bonus equal to 33% of the
first $1,000,000 of pre-tax profits of the fulfillment division of the Company
and 25% of all said pre-tax profits in excess of $1,000,000, with a maximum
bonus payable equal to $640,000.
The Company has an arrangement with Mr. Cohen pursuant to which Mr. Cohen
is entitled to a bonus equal to 2% of the pre-tax profits of the international
communications division of the Company.
RETENTION BONUS ARRANGEMENTS
The Company has entered into agreements with Messrs. Frustaci and Mandel
pursuant to which the Company will pay $75,000 to each such individual if he
remains an employee until the Merger or a similar transaction is consummated.
The Company has entered into an agreement with Mr. Quinlan pursuant to
which the Company will pay $15,000 to him if he remains an employee until the
Merger or a similar transaction is consummated.
DEFERRED COMPENSATION PLAN
Messrs. Rella, Mandel, Cohen and Frustaci all participate in an executive
deferred compensation plan established by the Company whereby each such
individual may contribute up to $30,000 per calendar year to a trust invested
for his benefit. The Company will match 30% of each such individual's
contribution per calendar year.
Mr. Quinlan participates in a management deferred compensation plan
established by the Company pursuant to which he may contribute up to $10,000 per
calendar year to a trust invested for his benefit. The Company will match 20% of
his contribution per calendar year.
CERTAIN RELATIONSHIPS
Mr. Ouizel performed legal services for the Company during the fiscal year
ended September 30, 1998. The firm of Phillips Gold and Company, LLP, of which
Mr. Barbaro is a partner, performed accounting, tax and other consulting
services during the fiscal year ended September 30, 1998 for the Company.
THE MERGER AGREEMENT
The following summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed herewith as
Exhibit (c)(1) and is incorporated herein by reference.
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of Purchaser to, and Parent to cause Purchaser to, commence the Offer
and accept for payment, and pay for, any and all Shares tendered pursuant to the
Offer is conditioned upon, among other things, (i) there being validly tendered
and not withdrawn prior to the expiration of the Offer a number of Shares which,
together with any Shares then beneficially owned by Purchaser and Parent, would
represent at least a majority of the Shares outstanding on a fully-diluted basis
(or, at the option of Parent, a lesser number equaling a majority of the Shares
on an issued and outstanding basis ) (the "Minimum Condition") and (ii) any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the regulations thereunder (the "HSR Act") having
expired or been terminated; provided, however, that Purchaser may not, without
the Company's written consent, waive the Minimum Condition. Purchaser expressly
reserves the right to modify the terms of the Offer; provided that, without the
Company's written consent, Purchaser may not (i) reduce the number of Shares
which Purchaser is offering to purchase in the Offer, (ii) reduce the Offer
Price, (iii) modify or add to the conditions set forth in the Merger Agreement,
(iv) change the form of consideration payable in the Offer or (v) otherwise
amend or modify the Offer in any manner adverse to the
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holders of the Shares. Notwithstanding the foregoing, if on any scheduled
Expiration Date (as defined in the Merger Agreement) the number of Shares that
have been physically tendered and not withdrawn are more than 50% of the Shares
outstanding on a fully-diluted basis but less than 90% of the outstanding shares
of each class of capital stock of the Company on a fully-diluted basis,
Purchaser may extend the Offer for up to 10 additional business days from the
date that all conditions to the Offer (other than the Minimum Condition) shall
first have been satisfied, so long as Purchaser irrevocably waives the
satisfaction of any condition which relates to the occurrence of a Material
Adverse Effect (as defined in the Merger Agreement) on the Company. Further,
Purchaser may extend the Offer beyond any scheduled Expiration Date up to
February 24, 1999 if, at the initial Expiration Date of the Offer or any
extension thereof, certain conditions are not satisfied or waived.
Recommendation. The Company approves of and consents to the Offer and
represents that the Board of Directors, at a meeting duly called and held, has
with the affirmative vote of at least a majority of the members of the Board of
Directors (i) determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are fair and in the
best interests of the holders of the Shares and approved the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
which approvals constitute approval of the Merger Agreement, the Offer and the
Merger for purposes of Section 203 of the DGCL, and (ii) resolved to recommend
that the stockholders of the Company accept the Offer, tender their Shares
thereunder to Purchaser and, if required, approve and adopt the Merger Agreement
and the Merger, which recommendation may not be withdrawn, modified or amended
except as permitted by certain provisions in the Merger Agreement.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, at the time at which the Company and Purchaser file a
certificate of merger with the Secretary of State of the State of Delaware (the
"Certificate of Merger") and make all other filings or recordings required by
the DGCL in connection with the Merger, Purchaser shall be merged with and into
the Company in accordance with the DGCL, whereupon the separate existence of
Purchaser shall cease. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware or such date as is agreed between the parties and is specified in the
Certificate of Merger (the "Effective Time"). As a result of the Merger, the
separate corporate existence of Purchaser will cease and the Company will be the
Surviving Corporation. The Merger shall have the effects set forth in the DGCL.
In the event that Parent, Purchaser or any other subsidiary of Parent shall
acquire at least 90% of the outstanding shares of each class of capital stock of
the Company, Parent, Purchaser and the Company have agreed to take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of the stockholders, in
accordance with Section 253 of the DGCL.
At the Effective Time, (i) each share of the common stock of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common stock
of the Surviving Corporation and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation; (ii) any Shares held by the Company
as treasury stock and any Shares owned by Parent, Purchaser or any other wholly
owned subsidiary of Parent immediately prior to the Effective Time shall be
canceled and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor; and (iii) each Share issued and outstanding
immediately prior to the Effective Time (other than Shares to be canceled in
accordance with (ii) hereof and any Shares as to which appraisal rights have
been perfected pursuant to Section 262 of the DGCL) shall be converted into the
right to receive $17.50 in cash, without interest.
Company Option Plans and Employee Stock Purchase Plan. Immediately prior to
the Effective Time, each then outstanding option (collectively, the "Options")
to purchase or acquire Shares under the Company's 1983 Qualified Stock Option
Plan, the Company's 1993 Qualified Stock Option Plan, the Company's 1993
Non-Qualified Non-Employee Directors Stock Option Plan and the Company's 1996
Non-Qualified Non-Employee Directors Stock Option Plan (collectively, the
"Option Plans"), whether or not then exercisable or vested, shall be canceled,
and each holder of any such Option shall be paid at the Effective Time for each
such Option an amount determined by multiplying (i) the excess, if any, of
$17.50 per Share over the applicable exercise price of such Option by (ii) the
number of Shares such holder could have
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purchased (assuming full vesting of all options) had such holder exercised such
Option in full immediately prior to the Effective Time. Prior to the Effective
Time, the Company shall use its best efforts (i) to obtain any consents from
holders of Options and (ii) make any amendments to the terms of the Option Plans
or compensation plans or arrangements, to the extent such consents or amendments
are necessary to give effect to the transactions contemplated by the Merger
Agreement. Notwithstanding any other provision of this paragraph, payment may be
withheld in respect of any such Options until necessary consents are obtained.
The Company shall also promptly amend the 1994 Employee Stock Purchase Plan to
provide for (i) the suspension of participation during any offering periods
commencing subsequent to the date of the Merger Agreement for the pendency of
the Merger and subject to the successful completion of the Merger and (ii) the
termination of the 1994 Employee Stock Purchase Plan as of the Effective Time.
Board of Directors. The Merger Agreement provides that promptly upon the
acceptance for payment of Shares by Parent or any of its subsidiaries which
represent at least a majority of the outstanding Shares, Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product of
(i) the total number of directors on the Company's Board of Directors (giving
effect to the election of any additional directors pursuant to this paragraph)
and (ii) the percentage that the aggregate number of Shares beneficially owned
by Purchaser, Parent and any of their affiliates (including Shares accepted for
payment pursuant to the Offer) bears to the total number of Shares then
outstanding. The Company shall take all action necessary to cause Purchaser's
designees to be elected or appointed to the Company's Board of Directors,
including, without limitation, increasing the number of directors and seeking
and accepting resignations of incumbent directors. At such times, the Company
will use its reasonable best efforts to cause individuals designated by
Purchaser to constitute the same percentage as such individuals represent on the
Company's Board of Directors of each Committee of the Board of Directors (other
than a Committee established to take action under the Merger Agreement), each
Board of Directors of any subsidiary of the Company (individually, a
"Subsidiary" and collectively, the "Subsidiaries") and each Committee of each
such board. Notwithstanding the foregoing, until the Effective Time, the Company
shall retain as members of its Board of Directors at least two directors who are
directors of the Company on the date hereof.
From and after the time, if any, that Parent's designees constitute a
majority of the Company's Board of Directors, (i) any amendment of the Merger
Agreement or the Certificate of Incorporation or ByLaws of the Company, (ii) any
termination of the Merger Agreement by the Company, (iii) any extension of time
for performance of any of the obligations of Parent or Purchaser thereunder,
(iv) any waiver of any condition to the obligations of the Company or of the
Company's rights thereunder, (v) any amendment or change to the policies of
directors' and officers' liability insurance maintained by the Company and its
Subsidiaries on the date of the Merger Agreement, (vi) any amendment or change
to, or decision in connection with, the indemnification of the individuals who
on or prior to the Effective Time, were officers, directors, employees or agents
of the Company or any of its Subsidiaries under the certificate of incorporation
or bylaws of the Company, the certificate or bylaws of any Subsidiary, or any
existing agreement between such person or persons and the Company or a
Subsidiary of the Company and (vii) any amendment or change to any Option Plan
or modifications to existing compensation policies or severance obligations may
be effected only with the concurrence of a majority of the directors of the
Company then in office who were directors of the Company on the date of the
Merger Agreement.
Company Stockholder Meeting. Pursuant to the Merger Agreement, in the event
that the affirmative vote of the stockholders is required to approve the Merger
under the DGCL, the Company shall cause a meeting of its stockholders (the
"Company Stockholder Meeting") to be duly called and held as soon as practicable
following the acceptance for payment and purchase of Shares by Purchaser
pursuant to the Offer for the purpose of voting on the approval and adoption of
the Merger Agreement.
If a Company Stockholder Meeting is required, the Merger Agreement provides
that the Company will promptly prepare and file with the Commission a
preliminary proxy or information statement (the "Proxy Statement") relating to
the Merger and the Merger Agreement. The Company has agreed, subject to the
fiduciary duties of its Board of Directors as advised by counsel, to include in
the Proxy Statement the recommendation of the Board of Directors that the
stockholders approve and vote in favor of the adoption of
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the Merger Agreement and the Merger. Parent has agreed to vote or cause to be
voted all Shares then owned by it, Purchaser or any of its other subsidiaries
and affiliates, in favor of approval of the Merger and the adoption of the
Merger Agreement. In the event that Purchaser acquires at least 90% of the
outstanding shares of each class of capital stock of the Company, pursuant to
the Offer or otherwise, the parties to the Merger Agreement agree to take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after such acquisition, without a meeting of stockholders of the
Company.
Covenants of the Company. From the date of the Merger Agreement until the
Effective Time, the Company and its Subsidiaries have agreed to conduct their
business in the ordinary course, consistent with past practices, and have agreed
to use their best commercially reasonable efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their present officers, employees and business
associates. Without limiting the generality of the foregoing, other than (i) in
the ordinary course of business consistent with past practices, (ii) as set
forth on the Company Disclosure Schedule (as defined in the Merger Agreement),
(iii) as specifically contemplated by Merger Agreement or (iv) with the written
consent of Parent or Purchaser (such consent which shall not be unreasonably
withheld), from the date hereof until the Effective Time, the Company will not:
(a) declare, set aside or pay any dividend (other than regular
quarterly dividends) or other distribution with respect to any shares of
capital stock of the Company, or any repurchase, redemption or other
acquisition by the Company or any Subsidiary of the Company of any
outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any Subsidiary of the Company;
(b) issue or sell any additional shares of, or securities convertible
into or exchangeable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of capital stock of any class of
the Company or any Subsidiary of the Company, other than issuances pursuant
to the exercise of options outstanding on the date hereof and disclosed on
the Company Disclosure Schedule;
(c) amend any material term of the certificate of incorporation,
by-laws or any outstanding security of the Company or any Subsidiary of the
Company;
(d) split, combine or reclassify its outstanding capital stock;
(e) incur, assume or guarantee by the Company or any Subsidiary of the
Company of any indebtedness for borrowed money;
(f) make any loan, advance or capital contribution to or invest in any
Person;
(g) cause or willfully permit any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the business
or assets of the Company or any Subsidiary of the Company which has had or
could reasonably be expected to have a Material Adverse Effect;
(h) enter into any transaction, commitment, contract or agreement by
the Company or any Subsidiary of the Company relating to their assets or
business (including the acquisition or disposition of any assets) or
relinquish any contract or other right, in either case, that have had or
could reasonably be expected to have a Material Adverse Effect, other than
those contemplated by the Merger Agreement;
(i) neither the Company nor any Subsidiary of the Company shall pay,
discharge, or satisfy any material claims, liabilities or other obligations
(whether absolute, accrued, asserted or unasserted, contingent or
otherwise) other than the payment, discharge or satisfaction in the
ordinary course of business, consistent with past practices, of liabilities
reflected or reserved against in the consolidated financial statements of
the Company or incurred since the most recent date thereof pursuant to an
agreement or transaction described in the Merger Agreement or incurred in
the ordinary course of business, consistent with past practices;
(j) neither the Company nor any Subsidiary of the Company will amend
or modify any existing Affiliate Transaction (as defined in the Merger
Agreement) or enter into any new Affiliate Transaction other than with the
prior written consent of Parent;
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(k) change any method of accounting or accounting practice by the
Company or any Subsidiary of the Company, except for any such change
required by reason of a concurrent change in United States generally
accepted accounting principles;
(l) (1) grant any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary of the Company, (2)
enter into any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any director,
officer or employee of the Company or any Subsidiary of the Company, (3)
increase the benefits payable under any existing severance or termination
pay policies or employment agreements or (4) increase the compensation,
bonus or other benefits payable to any director, officer or employee of the
Company or any Subsidiary of the Company; or
(m) authorize any of, or commit or agree to take any of, the foregoing
actions except as otherwise permitted by the Merger Agreement.
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that, from and after the date of the Merger Agreement, the Company and its
Subsidiaries will not, and the Company will use its reasonable efforts to ensure
that the respective officers, directors, employees, agents, advisors or other
representatives of the Company and its Subsidiaries will not, directly or
indirectly, (i) solicit, initiate or encourage any Acquisition Proposal (as
defined below) or (ii) engage in negotiations or discussions with, or disclose
any nonpublic information relating to the Company or any Subsidiary of the
Company or afford access to the properties, books or records of the Company or
any Subsidiary of the Company to, any Person concerning an Acquisition Proposal;
provided that, if the Board of Directors determines in good faith, after
consultation with outside legal counsel to the Company, that the failure to
engage in such negotiations or discussions or provide such information would
likely be inconsistent with the Board of Directors' fiduciary duties under
applicable law, the Company may in response to an Acquisition Proposal, which
must be a Superior Proposal (as defined below), furnish information with respect
to the Company and its Subsidiaries pursuant to a confidentiality agreement and
participate in negotiations and enter into agreements regarding such Acquisition
Proposal. The Company will promptly inform Parent as to the fact that
information is to be provided and the identity of the third party after receipt
of any Acquisition Proposal and will keep Parent informed of the status and
details of any such Acquisition Proposal, indication or request. For purposes of
the Merger Agreement, "Acquisition Proposal" means any offer or proposal for a
merger or other business combination involving the Company or any Subsidiary of
the Company or the acquisition of any equity interest in, or a substantial
portion of the assets of, the Company or any Subsidiary of the Company, other
than the transactions contemplated by the Merger Agreement. For purposes of the
Merger Agreement, "Superior Proposal" means any bona fide Acquisition Proposal,
which proposal was not solicited by the Company after the date of the Merger
Agreement, made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities (the value of any such
securities to be determined in good faith with the advice of a nationally
recognized investment banking firm) more than a majority of the Shares then
outstanding or all or substantially all of the assets of the Company, and
otherwise on terms which the Board of Directors determines in good faith to be
more favorable to the Company and its stockholders than the Offer and the Merger
(based on advice of the Company's financial advisor that the value of the
consideration provided for in such proposal is superior to the value of the
consideration provided for in the Offer and Merger) and has a reasonable
prospect of being consummated in accordance with its terms. Furthermore, nothing
contained in the Merger Agreement shall prohibit the Company or its Board of
Directors from taking and disclosing to the Company's stockholders a position
with respect to a tender or exchange offer by a third party pursuant to Rules
14d-9 and 14e-2(a) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or from making such disclosure to the Company's
stockholders or making such disclosure as may be required by applicable law.
Director and Officer Insurance. Pursuant to the Merger Agreement, Parent,
Purchaser, and the Company agree that all rights to indemnification and all
limitations on liability existing in favor of any Indemnitees (as defined in the
Merger Agreement) provided in the Company's Certificate of Incorporation, the
Company's By-laws or a Material Contract (as defined in the Merger Agreement) as
in effect as of the date of the Merger Agreement shall survive the Merger and
continue in full force and effect. For five years
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after the Effective Time, Parent will, and will cause the Surviving Corporation
to, provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such person
currently covered by the Company's officers' and directors' liability insurance
policy on terms with respect to coverage and amount no less favorable than those
of such policy in effect on the date hereof. Parent agrees that, should the
Surviving Corporation fail to comply with the obligations of this section,
Parent shall be responsible therefor. It is understood that the Indemnitees will
seek to be reimbursed for any liability or loss from such Indemnitee's liability
insurance policy prior to seeking any other reimbursement provided for herein,
including that referred to in the first sentence of this section.
Employee Benefits. Pursuant to the Merger Agreement, for a period of one
year immediately following the Closing Date (as defined in the Merger
Agreement), Parent agrees to cause the Surviving Corporation and its
subsidiaries to provide to all Continuing Employees (as defined in the Merger
Agreement) coverage under existing benefit plans or arrangements which is no
less favorable than those provided to the employees immediately prior to the
Closing Date. During the second year following the Closing Date, Parent agrees
to cause the Surviving Corporation and its Subsidiaries to provide Continuing
Employees coverage under benefit plans and arrangements no less favorable in the
aggregate than those provided to the employees immediately prior to the Closing
Date. Parent shall, and shall cause its subsidiaries to, honor in accordance
with their terms all agreements, contracts, arrangements, commitments and
understandings described in the Company Disclosure Schedule.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties of the parties thereto including representations
by the Company as to the absence of certain changes or events concerning its
respective business, patents and other proprietary rights, compliance with law,
governmental authorization, non-contravention, litigation, employee benefit
plans, taxes, material contracts, environmental and other matters.
Conditions to Certain Obligations. The obligations of the Company,
Purchaser and Parent to consummate the Merger are subject to the satisfaction on
or prior to the Effective Time of the following conditions, except to the extent
permitted by applicable law, that such conditions may be waived: (i) if required
by the DGCL, the adoption by the stockholders of the Company of the Merger
Agreement in accordance with such law; (ii) any applicable waiting period under
the HSR Act to the Merger shall have expired; (iii) no provision of any
applicable law or regulation and no judgment, injunction, order or decree shall
prohibit the consummation of the Merger; and (iv) Parent or Purchaser shall have
purchased the Shares pursuant to the Offer.
Termination. The Merger Agreement may be terminated and the Merger
contemplated therein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof: (i) by the mutual written
consent of Parent, Purchaser and the Company; (ii) by either the Company or
Parent, if the Offer has not been consummated by February 24, 1999; provided,
however, that the right to terminate the Merger Agreement under this paragraph
shall not be available to any party whose failure to fulfill any obligation
under the Merger Agreement has been the cause of, or resulted in, the failure to
meet the date requirements of this paragraph; (iii) by either the Company or
Parent, if there shall be any law or regulation that makes consummation of the
Merger illegal or if any judgment, injunction, order or decree enjoining Parent
or the Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and nonappealable; (iv) by the
Company, if Parent or Purchaser breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements contained in
the Merger Agreement or breaches its representations and warranties in any
material respect; (v) by Parent, if the Company breaches or fails in any
material respect to perform or comply with any of its material covenants and
agreements contained in the Merger Agreement or breaches its representations and
warranties in any material respect; or (vi) by either the Company or Parent,
upon the Company entering into a definitive agreement in connection with an
Acquisition Proposal that the Board of Directors determines in good faith, after
consultation with its legal counsel is a Superior Proposal. The party desiring
to terminate the Merger Agreement pursuant to clauses (ii), (iii), (iv), (v) or
(vi) shall give written notice of such termination to the other party in
accordance with the notice procedures set forth in the Merger Agreement.
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<PAGE> 10
Effect of Termination. (a) In the event of the termination of the Merger
Agreement as provided above, the Merger Agreement shall become void and of no
effect with no liability on the part of Parent, Purchaser or the Company other
than, with respect to Parent, Purchaser and the Company, the obligations
pursuant to, among others, the Merger Agreement section entitled "Effect of
Termination," sections of the Merger Agreement relating to "Finders Fees" and
"Expenses" and the agreement by Parent to hold confidential any nonpublic
information received in accordance with the provisions of the Confidentiality
Agreement. Nothing contained in the Merger Agreement section entitled "Effect of
Termination" shall relieve Parent, Purchaser or the Company from liability for
willful breach of the Merger Agreement. Furthermore, in the event that the
Merger Agreement is terminated by the Company pursuant to the provision
described in clause (vi) above under "Termination," the Company shall pay to
Parent by wire transfer of immediately available funds to an account designated
by Parent on the next business day following such termination an amount equal to
$3,000,000.
Expenses. All costs and expenses incurred in connection with the Merger
Agreement shall be paid by the party incurring such cost or expense.
Amendments; No Waivers. Except as otherwise provided in the Merger
Agreement, any provision of the Merger Agreement may be amended or waived prior
to the Effective Time if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the Company, Parent and Purchaser or
in the case of a waiver, by the party against whom the waiver is to be
effective; provided that after the adoption of the Merger Agreement by the
stockholders of the Company, no such amendment or waiver shall, without the
further approval of such stockholders: (i) reduce the Offer Price; (ii) alter or
change the Merger Consideration to be received in exchange for the Shares, or
(iii) alter or change any of the terms or conditions of the Merger Agreement if
such alteration or change could adversely affect the holders of any shares of
capital stock of the Company. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
THE CONFIDENTIALITY AGREEMENT
The following is a summary of the Confidentiality Agreement entered into by
Donaldson, Lufkin & Jennette Securities Corporation ("DLJ"), on behalf of the
Company, and Onex Corporation ("Onex"), a corporation organized under the laws
of Canada, on behalf of Parent, Onex's subsidiary.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Onex agreed to keep confidential all nonpublic,
confidential or proprietary information (the "Evaluation Material") furnished to
it by the Company relating to the Company, subject to certain exceptions, and to
use the Evaluation Material solely in connection with evaluating a possible
transaction involving the Company, Onex and one or more of its affiliates and
not in any manner detrimental to the Company. Onex has agreed that, for a period
of eighteen months from the date of the Confidentiality Agreement, unless it
shall have been specifically invited in writing by the Board of Directors of the
Company to do so, none of Onex, its affiliates or its representatives will in
any manner, directly or indirectly, (a) effect or seek, offer or propose
(whether publicly or otherwise) to effect, or cause or participate in or in any
way assist any other person to effect or seek, offer or propose (whether
publicly or otherwise) to effect or participate in, (i) any acquisition of any
securities (or beneficial ownership thereof) or assets of the Company or any of
its subsidiaries; (ii) any tender or exchange offer or merger or other business
combination involving the Company or any of its subsidiaries; (iii) any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company or any of its subsidiaries; or (iv) any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Securities and Exchange Commission) or consents to vote any voting securities of
the Company; (b) form, join or in any way participate in a "group" (as defined
under the Exchange Act) with respect to the Company or any of its subsidiaries
or any of their respective securities or assets; (c) otherwise act, alone or in
concert with others, to seek to control or influence the management, Board of
Directors or policies of the Company; (d) take any action which might force the
Company to make a public announcement regarding any of the types of matters
described in clause (a) above; or (e) enter into any discussions or
10
<PAGE> 11
arrangements with any third party with respect to any of the foregoing. Onex
also agreed that, for a period of eighteen months from the date of the
Confidentiality Agreement, neither it nor any of its affiliates will knowingly,
as a result of information obtained from the Evaluation Material: (i) divert or
attempt to divert any business or customer of the Company or any of its
affiliates, nor (ii) employ or attempt to employ or divert any employee of the
Company or any of its affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
On December 17, 1998, the Board of Directors of the Company unanimously
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, and determined that the Merger Agreement and
the transactions contemplated thereby, including the terms of the Offer and the
Merger, are fair to and in the best interests of the Company's stockholders. The
Board of Directors unanimously recommends that the Company's stockholders accept
the Offer and tender their Shares pursuant to the Offer.
A copy of a letter to all stockholders of the Company communicating the
recommendation of the Board of Directors and a press release announcing the
execution of the Merger Agreement are filed herewith as Exhibits (a)(2) and
(a)(3), respectively, and are incorporated herein by reference.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION OF THE BOARD OF DIRECTORS
The Company, founded in 1969, provides outsourced direct marketing services
and specializes in fulfillment, list marketing and computer services. In July
and August 1997, the Company interviewed several investment banking firms for
the purpose of selecting a firm to advise the Company with respect to its
strategic alternatives for enhancing stockholder value. In September 1997, the
Company retained DLJ for this purpose.
During the fall of 1997, DLJ identified certain potential buyers of the
Company. The Company had preliminary discussions with a potential acquiror which
ended in January 1998 when agreement on basic terms could not be reached.
In March 1998, the Company announced that it had retained DLJ to advise the
Company on its growth strategy, including potential acquisitions, joint ventures
or other opportunities. After such announcement, the Company examined a number
of possible acquisitions and participated in an auction process regarding a
possible acquisition by the Company, including conducting extensive due
diligence, before deciding, based on price considerations, not to make a final
bid.
Throughout 1998, in connection with a possible sale of the Company, 32
potential strategic and financial buyers were contacted by DLJ on behalf of the
Company or contacted DLJ. Nineteen of those contacted signed confidentiality
agreements and received confidential packages concerning the Company. Ten of
those who received those packages submitted preliminary indications of interest.
All but one of those 10 proceeded to a second phase during which the Company and
DLJ distributed additional confidential information regarding the Company's
operations and projected financial performance, conducted management
presentations and facility tours, and followed up on questions by means of
meetings with Company management, as requested. Also distributed was a form of
merger agreement that contemplated a cash tender offer followed by a merger.
During the fall of 1998, five bidders, including Parent, continued in the
process. On September 9, 15, and 18, October 30 and November 19, 1998, the Board
of Directors met to discuss the status of DLJ's efforts and the terms and
structures of the non-binding written proposals it had received from four of
those bidders, excluding Parent. Various formal and informal presentations
concerning the process were made to the Board of Directors by Company management
prior to these meetings.
On December 2, 1998, Parent submitted a non-binding written indication of
interest to purchase the Company at a price equal to $16.75 per Share in cash,
by means of a tender offer and a subsequent merger to acquire the Shares not
purchased in the tender offer. On December 3, 1998, the Board of Directors met
to discuss Parent's proposal. After this Board meeting and following discussions
between DLJ and Parent's
11
<PAGE> 12
chairman, Seth M. Mersky, Parent agreed to increase the purchase price to $17.25
per Share and to make certain other changes, subject to negotiation of a
definitive agreement and completion of its due diligence. After further
discussion with the Board of Directors, DLJ again spoke with Mr. Mersky and,
later in the evening on December 3, 1998, Parent agreed to increase the purchase
price to $17.50, subject to negotiation of a definitive agreement and completion
of its due diligence. On December 3, 1998, Parent and the Company executed a
letter in which the Company agreed to deal exclusively with Parent until
December 15, 1998 plus one five-day extension. Between December 3 and December
17, 1998, Parent and the Company and their respective professional advisors
negotiated the terms and conditions of the Merger Agreement and Parent completed
its legal and financial due diligence. On December 17, 1998, the Board of
Directors authorized William Rella, the Company's President and Chief Executive
Officer, to execute the Merger Agreement, and on that same date the Merger
Agreement was executed and delivered, which was announced publicly before the
Shares opened for trading on that date. The Company's press release announcing
the execution of the Merger Agreement and the terms of the Offer and Merger is
filed as Exhibit(a)(3) hereto and is incorporated herein by reference.
In approving the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, the Board of Directors considered a
number of factors, including:
1. The Board of Directors' view that a sale of the Company at this time is
in the best interests of the Company and its stockholders in light of: (a) the
prospects for the Company, including uncertainty concerning future levels of
business from several significant customers of the Company and the potential for
increased business from other customers; (b) the concern that the Company lacked
sufficient critical mass to successfully obtain new major client contracts; (c)
the inability of the Company to identify one or more suitable candidates for
acquisition at prices it considered reasonable; and (d) the recent market prices
for the Shares, the nature of the liquidity and trading of the Shares and the
absence of research coverage of the Company.
2. The terms and conditions of the Merger Agreement (including, without
limitation, the $17.50 per Share cash amount to be paid by Parent), which the
Board of Directors views as favorable to the Company's stockholders.
3. The opinion of DLJ presented to the Board of Directors on December 17,
1998 that the Offer Price of $17.50 per Share to be paid in the Offer and the
Merger is fair to the holders of the Shares (other than Parent and Purchaser)
from a financial point of view (the "Fairness Opinion"). In considering such
opinion, the Board of Directors was aware that, upon delivery thereof, DLJ
became entitled to certain fees described in Item 5 in connection with its
engagement by the Company.
4. The presentation by DLJ in connection with rendering such opinion as to
various financial and other considerations deemed relevant to the Board of
Directors' evaluation of the Offer and the Merger including: (i) a review of the
historical financial performance of the Company; (ii) a review and analysis of
the historical and current market prices and trading patterns of the Shares;
(iii) the market price of the Shares in relation to the market prices and
financial data of other companies engaged in similar businesses as the Company;
(iv) a review and analysis of prices and premiums paid in other comparable
recent acquisition transactions; (v) a review and analysis of control premiums
paid in recent acquisitions of comparable size; (vi) a discounted cash flow
analysis of the Company using various financial assumptions provided by
management; and (vii) an analysis of the maximum price a financial buyer would
pay for the Company assuming maximum leverage ratios and minimum return on
equity requirements.
5. The Company's stockholders will realize the entire value of the purchase
price without the risk of post-closing indemnification obligations.
6. The Board of Directors' ability to withdraw or modify its approval or
recommendation of the Offer, the Merger and any of the other transactions
contemplated by the Merger Agreement if necessary to comply with its fiduciary
duties.
7. The Board of Directors' ability to approve and recommend a Superior
Proposal if necessary for the Board of Directors to comply with its fiduciary
duties. In evaluating such ability (as well as the ability to
12
<PAGE> 13
withdraw or modify its recommendation), the Board of Directors also considered
the nature and amount of the termination fee payable to Parent in certain
events.
8. Parent's ability to conclude the transaction expeditiously and without
any financing contingency and an equity commitment letter dated December 16,
1998 from Onex committing to provide or otherwise cause to be available
sufficient funds to Parent and Purchaser to fulfill their obligations under the
Merger Agreement to deliver the aggregate consideration in connection with the
Offer and Merger.
9. The Board of Directors' view of the impact of the transaction on other
constituencies. In this regard, the Board of Directors noted Parent's agreement
to cause the Surviving Corporation and its subsidiaries to provide all active
employees of the Company and its subsidiaries who continue to be employed by the
Company as of the closing date of the Merger ("Continuing Employees") for a
period of one year thereafter coverage under existing benefit plans or
arrangements which is no less favorable than the coverage provided to such
employees at the closing date of the Merger, and to provide to Continuing
Employees during the second year following that closing date coverage under
benefit plans and arrangements which is no less favorable in the aggregate than
the coverage provided to such employees immediately prior to that closing date.
The Board of Directors also determined that the proposed acquisition would
benefit the Company's customers by, among other things, increasing critical mass
and expanding the range of services to be offered.
10. The Board of Directors' view that it is unlikely that there will be,
within the foreseeable future, any proposal to acquire the Company which is
superior to Parent's proposal.
The foregoing discussion of factors considered and given weight by the
Board of Directors is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Offer and the
Merger, the Board of Directors did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determinations and recommendations, although it did consider the
factors described in paragraph 9 as less significant than the other factors. In
addition, individual members of the Board of Directors may have given different
weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to the terms of a letter agreement dated September 2, 1997, as
amended on April 15, 1998 (together, the "Engagement Letter"), the Company
retained DLJ as the Company's exclusive financial advisor with respect to, among
other things, the sale, merger, consolidation or any other business combination,
in one or a series of transactions, involving all or a substantial amount of the
business, securities or assets of the Company (each, a "Transaction").
Under the terms of the Engagement Letter, DLJ is due to receive a retainer
fee of $200,000 (the "Retainer Fee"). Upon delivery of the Fairness Opinion, DLJ
became entitled to a fee of $250,000. Upon consummation of the Transaction
contemplated by the Merger Agreement, DLJ will become entitled to additional
cash compensation of $1,500,000, against which amount $100,000 of the Retainer
Fee and the $250,000 paid upon delivery of the Fairness Opinion will be
credited.
The Company has promised to reimburse DLJ for its reasonable expenses
(including, without limitation, legal fees and disbursements) incurred in
connection with DLJ's engagement by the Company. The Company has agreed to
indemnify DLJ and its controlling persons, affiliates, directors, officers,
employees and agents for certain costs, expenses and liabilities to which DLJ or
any other indemnified person may become subject arising in any manner out of or
in connection with the rendering of services by DLJ pursuant to the Engagement
Letter or upon the request of the Company.
Except as disclosed in this Item 5, neither the Company nor any person
acting on its behalf has employed, retained or compensated any person to make
solicitations or recommendations to the Company's stockholders with respect to
the Offer.
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<PAGE> 14
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the Company's knowledge, by any executive officer,
director, affiliate or subsidiary of the Company.
(b) To the knowledge of the Company, all of its executive officers and
directors currently intend to tender pursuant to the Offer all Shares
beneficially owned by them (other than Shares issuable upon the exercise of
stock options and Shares, if any, which if tendered could cause such persons to
incur liability under the provisions of Section 16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company which relates to or would result in (i) an extraordinary
transaction, such as a merger or reorganization, involving the Company or any
subsidiary of the Company; (ii) a purchase, sale or transfer of a material
amount of assets by the Company or any subsidiary of the Company; (iii) a tender
offer for or other acquisition of securities by or of the Company; or (iv) any
material change in the present capitalization or dividend policy of the Company.
(b) Except as set forth in Item 3(b) and Item 4 of this Statement (which
are hereby incorporated herein by reference), there is no transaction, board
resolution, agreement in principle or signed contract which relates to or would
result in one or more of the matters referred to in paragraph (a) of this Item
7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
(a)(1) -- Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation dated December 17, 1998.*
(a)(2) -- Letter to Stockholders of the Company dated December 23,
1998.*
(a)(3) -- Press Release issued by the Company on December 17, 1998.
(b) -- None.
(c)(1) -- Agreement and Plan of Merger, dated as of December 17,
1998, by and among the Company, Parent and Purchaser.
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
14
<PAGE> 15
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
LCS INDUSTRIES, INC.
/s/ WILLIAM RELLA
William Rella
President and Chief Executive Officer
Dated: December 23, 1998
15
<PAGE> 16
Exhibit (a)(1)
ANNEX I
DLJ LETTERHEAD
December 17, 1998
Board of Directors
LCS Industries, Inc.
120 Brighton Road
Clifton, New Jersey 07012
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of LCS Industries, Inc. (the "Company") of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, dated as of December 17, 1998 (the "Agreement"),
by and among the Company, CustomerONE Holding Corporation ("CustomerONE"), and
Catalog Acquisition Co. ("Catalog"), a wholly owned subsidiary of CustomerONE,
pursuant to which Catalog will be merged (the "Merger") with and into the
Company.
Pursuant to the Agreement, CustomerONE will cause Catalog to commence a
tender offer (the "Tender Offer") for any and all outstanding shares of common
stock, par value $.01 per share ("Company Common Stock"), of the Company at a
price of $17.50 per share in cash (the "Offer Price"). The Tender Offer is to be
followed by the Merger in which the shares of all stockholders who did not
tender would be converted into the right to receive the Offer Price.
In arriving at our opinion, we have reviewed the Agreement, including the
Annex, Schedule and Exhibits thereto. We have also reviewed that certain letter
from Onex Corporation ("Onex"), the indirect parent of CustomerONE, dated
December 16, 1998 committing to provide sufficient funds to CustomerONE to
fulfill CustomerONE's and Catalog's obligation to deliver the consideration in
connection with the Tender Offer and the Merger. We also have reviewed financial
and other information that was publicly available or furnished to us by the
Company, including information provided during discussions with management.
Included in the information provided during discussions with management were
certain financial projections of the Company for the period beginning October 1,
1998 and ending September 30, 2003 prepared by the management of the Company. In
addition, we have compared certain financial and securities data of the Company
with various other companies whose securities are traded in public markets,
reviewed the historical stock prices and trading volumes of Company Common
Stock, reviewed prices and premiums paid in certain other business combinations
and conducted such other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us as set forth in the
preceding paragraph. With respect to the financial projections supplied to us,
we have assumed that they have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the management of the
Company as to the future operating and financial performance of the Company. We
have not assumed any responsibility for making an independent evaluation of any
assets or liabilities or for making any independent verification of any of the
information reviewed by us.
<PAGE> 17
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Tender Offer and Merger and the other business strategies being
considered by the Company's Board of Directors, nor does it address the Board's
decision to proceed with the Tender Offer and Merger. Our opinion does not
constitute a recommendation to any stockholder as to whether such stockholder
should tender into the Tender Offer or how such stockholder should vote on the
proposed Merger in any required vote.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Company and Onex in the past and has been
compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Offer Price to be paid in the Tender Offer and the
Merger is fair to the holders of Company Common Stock (other than CustomerONE
and Catalog) from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
/s/ LOUIS P. FRIEDMAN
Louis P. Friedman
Managing Director
<PAGE> 18
Exhibit (a)(2)
LCS LETTERHEAD TOP
DECEMBER 23, 1998
Dear Stockholder,
We are pleased to inform you that, on December 17, 1998, your Company
entered into an agreement and plan of merger (the "Merger Agreement") with
CustomerONE Holding Corporation ("CustomerONE"), a subsidiary of Onex
Corporation, the ninth largest company in Canada. Pursuant to the Merger
Agreement, CustomerONE, through a wholly owned subsidiary, has commenced a
tender offer (the "Offer") to purchase all of the outstanding shares of the
Company's common stock for $17.50 per share in cash. The Merger Agreement
provides that, subject to the satisfaction of certain conditions, following
consummation of the Offer, the Company will merge with that subsidiary (the
"Merger") and the remaining public holders of shares of the Company's common
stock will, subject to the exercise of their appraisal rights, receive $17.50
per share in cash. The Offer is currently scheduled to expire at 12:00 midnight,
New York City time, on January 22, 1999.
Your Board of Directors has unanimously approved the Merger Agreement and
has determined that the Offer and the Merger are fair to, and in the best
interests of, the Company's stockholders and recommends that the Company's
stockholders tender their shares pursuant to the Offer.
In determining to approve the Merger Agreement and the transactions
contemplated thereby, your Board of Directors gave careful consideration to a
number of factors described in the attached Schedule 14D-9. Among other things,
the Board considered the opinion of Donaldson, Lufkin and Jenrette Securities
Corporation dated December 17, 1998 (a copy of which is included with the
Schedule 14D-9) that the price of $17.50 per share to be paid in the Offer and
the Merger is fair to the holders of the Company's common stock (other than
CustomerONE and its wholly owned subsidiary) from a financial point of view.
The attached Schedule 14D-9 describes your Board's decision and contains
important information relating to such decision. We urge you to read it
carefully.
Accompanying this letter and the Schedule 14D-9 is the Offer to Purchase of
CustomerONE and related materials, including a Letter of Transmittal to be used
for tendering your shares. These documents describe the terms and conditions of
the Offer and provide instructions regarding how to tender your shares. We urge
you to read the enclosed material carefully.
Very truly yours,
/s/ WILLIAM RELLA
William Rella
President and Chief Executive Officer
LCS LETTERHEAD BOTTOM
<PAGE> 19
Exhibit (a)(3)
PRESS RELEASE
-------------
LCS Industries, Inc.
120 Brighton Road
Clifton, NJ 07012
For further information contact:
Pat R. Frustaci, Vice President-Finance, LCSI (973) 778-5588
Steven S. Anreder, Anreder Hirshhorn Silver and Company
(212) 532-3232
LCS Agrees to Merge with CustomerONE
LCS Industries, Inc. (NASDAQ:LCSI) and CustomerONE Holding Corporation, a
subsidiary of Onex Corporation (TOR:OCX), today announced that they have entered
into a definitive merger agreement pursuant to which CustomerONE will acquire
all of the outstanding shares of LCS common stock at a price of $17.50 per share
in cash, representing an aggregate transaction value of approximately $97.3
million. Onex Corporation, the ninth largest company in Canada, is a diversified
company with 1997 consolidated revenues of $11 billion Canadian, consolidated
assets of $6.4 billion Canadian and 43,000 employees.
Pursuant to the merger agreement, Customer ONE will make a cash tender offer for
all of the outstanding common shares of LCS common stock. The tender offer is
expected to commence next week. Consummation of the tender offer is subject to
U.S. antitrust regulatory clearance and other customary closing conditions.
The tender offer is not subject to financing. Onex has agreed to provide
CustomerONE with all necessary funds to affect the merger.
The Board of Directors of LCS has unanimously approved the merger and has
recommended that LCS stockholders accept the tender offer and approve and adopt
the merger agreement.
Commenting on the merger, William Rella, President and Chief Executive Officer
of LCS said, "We are very excited about the merger with CustomerONE. It
represents an opportunity for us to maximize shareholder value, increase
critical mass, as well as expand the range of services we offer our clients."
LCS Industries, Inc., headquartered in Clifton, New Jersey, is a leading
provider of outsourced services for direct marketing companies in the United
States. LCS specializes in catalog fulfillment, list marketing and computer
services.
Headquartered in Buffalo, New York, CustomerONE is an outsourced customer
service and fulfillment provider. CustomerONE owns North Direct Response, Inc.,
a premier teleservices provider, and Softbank Services Group, a leading provider
of outsourced customer service solutions.
<PAGE> 20
EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LCS INDUSTRIES, INC.,
CUSTOMERONE HOLDING CORPORATION
AND
CATALOG ACQUISITION CO.
DATED AS OF
DECEMBER 17, 1998
<PAGE> 21
TABLE OF CONTENTS
ARTICLE I
THE OFFER
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SECTION 1.1 The Offer................................................... 1
SECTION 1.2 Company Actions............................................. 2
SECTION 1.3 Directors................................................... 3
ARTICLE II
The Merger
SECTION 2.1 The Merger.................................................. 4
SECTION 2.2 Effect on Shares............................................ 4
SECTION 2.3 Surrender and Payment....................................... 5
SECTION 2.4 Dissenting Shares........................................... 5
SECTION 2.5 Stock Options............................................... 6
SECTION 2.6 Merger Without Meeting of Stockholders...................... 6
SECTION 2.7 Closing..................................................... 6
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1 Certificate of Incorporation................................ 6
SECTION 3.2 Bylaws...................................................... 6
SECTION 3.3 Directors and Officers...................................... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1 Corporate Existence and Power............................... 7
SECTION 4.2 Corporate Authorization..................................... 7
SECTION 4.3 Governmental Authorization.................................. 7
SECTION 4.4 Non-Contravention........................................... 8
SECTION 4.5 Capitalization.............................................. 8
SECTION 4.6 Subsidiaries................................................ 9
SECTION 4.7 SEC Documents............................................... 9
SECTION 4.8 Financial Statements; No Undisclosed Liabilities............ 9
SECTION 4.9 Disclosure Documents........................................ 10
SECTION 4.10 Absence of Certain Changes.................................. 10
SECTION 4.11 Litigation.................................................. 11
SECTION 4.12 Taxes....................................................... 11
SECTION 4.13 Employee Plans.............................................. 12
SECTION 4.14 Labor Matters............................................... 13
SECTION 4.15 Compliance with Laws........................................ 13
SECTION 4.16 Finders' Fees............................................... 13
SECTION 4.17 Environmental Matters....................................... 13
SECTION 4.18 Property.................................................... 14
SECTION 4.19 Trademarks.................................................. 14
SECTION 4.20 Material Contracts.......................................... 15
SECTION 4.21 Insurance................................................... 15
SECTION 4.22 Year 2000 Compliance........................................ 15
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY
SECTION 5.1 Corporate Existence and Power............................... 16
SECTION 5.2 Corporate Authorization..................................... 16
SECTION 5.3 Governmental Authorization.................................. 16
SECTION 5.4 Non-Contravention........................................... 16
SECTION 5.5 Disclosure Documents........................................ 16
SECTION 5.6 Finders' Fees............................................... 17
SECTION 5.7 Financing................................................... 17
SECTION 5.8 Solvency.................................................... 17
SECTION 5.9 Share Ownership............................................. 17
SECTION 5.10 Merger Subsidiary's Operations.............................. 17
ARTICLE VI
COVENANTS OF THE COMPANY
SECTION 6.1 Conduct of the Company...................................... 18
SECTION 6.2 Stockholder Meeting; Proxy Material......................... 19
SECTION 6.3 Access to Information; Confidentiality Agreement............ 19
SECTION 6.4 No Solicitation............................................. 19
SECTION 6.5 Conveyance Taxes............................................ 20
SECTION 6.6 Directors Stock Plan........................................ 20
ARTICLE VII
COVENANTS OF BUYER
SECTION 7.1 Obligations of Merger Subsidiary............................ 20
SECTION 7.2 Voting of Shares............................................ 21
SECTION 7.3 Director and Officer Insurance.............................. 21
SECTION 7.4 Investment Banking Fees..................................... 21
ARTICLE VIII
COVENANTS OF BUYER AND THE COMPANY
SECTION 8.1 Reasonable Efforts.......................................... 21
SECTION 8.2 Certain Filings............................................. 21
SECTION 8.3 Public Announcements........................................ 22
SECTION 8.4 Conveyance Taxes............................................ 22
SECTION 8.5 Further Assurances.......................................... 22
SECTION 8.6 Employee Matters............................................ 22
SECTION 8.7 Stockholder Litigation...................................... 22
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.1 Conditions to the Obligations of Each Party................. 22
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ARTICLE X
TERMINATION
SECTION 10.1 Termination................................................. 23
SECTION 10.2 Effect of Termination....................................... 23
ARTICLE XI
DEFINED TERMS............... 24
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Notices..................................................... 26
SECTION 12.2 Nonsurvival of Representations and Warranties............... 27
SECTION 12.3 Amendments; No Waivers...................................... 27
SECTION 12.4 Expenses.................................................... 27
SECTION 12.5 Successors and Assigns...................................... 27
SECTION 12.6 Governing Law............................................... 28
SECTION 12.7 Severability................................................ 28
SECTION 12.8 Third Party Beneficiaries................................... 28
SECTION 12.9 Entire Agreement............................................ 28
SECTION 12.10 Counterparts; Effectiveness................................. 28
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<PAGE> 24
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 17, 1998 (this
"Agreement"), by and among LCS Industries, Inc., a Delaware corporation (the
"Company"), CustomerONE Holding Corporation, a Delaware corporation ("Buyer"),
and Catalog Acquisition Co., a Delaware corporation and a wholly owned
subsidiary of Buyer ("Merger Subsidiary").
WHEREAS, the respective Boards of Directors of Buyer, Merger Subsidiary and
the Company have determined that it is fair to, and in the best interests of
their respective stockholders to consummate the acquisition of the Company by
Buyer upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, Buyer will cause Merger
Subsidiary to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "Offer") to purchase all of the issued and
outstanding shares of Common Stock, par value $.01 per share, of the Company
(the "Shares") for $17.50 per Share, net to the seller in cash (the "Offer
Price"), upon the terms and subject to the conditions of this Agreement and the
Offer; and
WHEREAS, the Board of Directors of the Company has approved the Offer and
resolved and agreed to recommend that holders of Shares tender their Shares
pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the respective Boards of
Directors of Buyer, Merger Subsidiary and the Company have approved the merger
of Merger Subsidiary with and into the Company in accordance with the Delaware
General Corporation Law (the "DGCL") whereby each issued and outstanding Share
(other than Shares held by the Company as treasury stock or owned by Buyer,
Merger Subsidiary or any other subsidiary of Buyer immediately prior to the
Effective Time and other than Dissenting Shares (as defined in Section 2.4
hereof)), will be converted into the right to receive the Offer Price;
WHEREAS, Buyer, Merger Subsidiary and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger (as defined in Section 2.1) and also to prescribe various
conditions to the Offer and the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Subject to the provisions of this Agreement, as
promptly as practicable, but in no event later than five business days after the
initial public announcement of the Offer, Merger Subsidiary shall, and Buyer
shall cause Merger Subsidiary to, commence (as defined in Rule 14d-2 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) the
Offer. The obligation of Merger Subsidiary to, and Buyer to cause Merger
Subsidiary to, commence the Offer and accept for payment, and pay for, any and
all Shares tendered pursuant to the Offer shall be subject only to the
conditions set forth in Annex I hereto and to the terms and conditions of this
Agreement; provided, however, that Merger Subsidiary shall not, without the
Company's written consent, waive the Minimum Condition (as defined in Annex I
hereto). Merger Subsidiary expressly reserves the right to modify the terms of
the Offer; provided that, without the Company's written consent, Merger
Subsidiary shall not (i) reduce the number of Shares which Merger Subsidiary is
offering to purchase in the Offer, (ii) reduce the Offer Price, (iii) modify or
add to the conditions set forth in Annex I hereto, (iv) change the form of
consideration payable in the Offer or (v) otherwise amend or modify the Offer in
any manner adverse to the holders of the Shares. Notwithstanding the foregoing,
if on any scheduled expiration date the number of Shares that have been
physically tendered and not withdrawn are more than 50% of the Shares
outstanding on a fully diluted basis but less than 90% of the outstanding shares
of each class of capital stock of the Company on a fully diluted basis, Merger
Subsidiary may extend the Offer for up to 10 additional business days from the
date that all conditions to the Offer (other than the Minimum Condition) shall
first have been satisfied, so long as Merger Subsidiary irrevocably waives the
satisfaction of any condition set forth in Annex A which relates to the
1
<PAGE> 25
occurrence of a Material Adverse Effect on the Company (as defined in Section
4.1). Further, Merger Subsidiary may extend the Offer beyond any scheduled
expiration date up to the Outside Termination Date (as defined in Section 10.1)
if at the initial expiration date of the Offer, or any extension thereof, the
conditions in clauses (a) and (b) to Annex I hereto are not satisfied or waived.
Subject to the terms and conditions of the Offer, Merger Subsidiary shall, and
Buyer shall cause Merger Subsidiary to, pay, as promptly as practicable after
expiration of the Offer, for all Shares validly tendered and not withdrawn.
(b) On the date of commencement of the Offer, Buyer and Merger Subsidiary
shall file with the Securities and Exchange Commission (the "SEC"), a Tender
Offer Statement on Schedule 14D-1 with respect to the Offer which shall contain
an offer to purchase and form of the related letter of transmittal and summary
advertisement (together with any supplements or amendments thereto,
collectively, the "Offer Documents") and promptly thereafter shall disseminate
the Offer Documents to the stockholders of the Company. Buyer, Merger Subsidiary
and the Company each agrees promptly to correct any information provided by it
for use in the Offer Documents if and to the extent that it shall have become
false or misleading in any material respect; and each of Buyer and Merger
Subsidiary further agrees to take all steps necessary to amend or supplement the
Offer Documents and to cause the Offer Documents as so amended or supplemented
to be filed with the SEC and to be disseminated to the Company's stockholders,
in each case as and to the extent required by applicable federal securities
laws. The Company and its counsel shall be given a reasonable opportunity to
review and comment on the Offer Documents prior to their being filed with the
applicable authorities or disseminated to the Company's stockholders. Buyer and
Merger Subsidiary agree to provide the Company and its counsel any comments
Buyer, Merger Subsidiary or their counsel may receive from the SEC or its staff
with respect to the Offer Documents promptly after the receipt of such comments
and shall provide the Company and its counsel an opportunity to participate,
including by way of discussion with the SEC or its staff, in the response of
Buyer and/or Merger Subsidiary to such comments.
(c) Buyer shall provide or cause to be provided to Merger Subsidiary on a
timely basis the funds necessary to accept for payment, and pay for, any Shares
that Merger Subsidiary becomes obligated to pay for pursuant to the Offer or the
Merger.
SECTION 1.2 Company Actions. (a) The Company hereby consents to the Offer
and represents that its Board of Directors, at a meeting duly called and held on
December 17, 1998, has (i) determined that this Agreement and the transactions
contemplated hereby, including the terms of the Offer and the Merger, are fair
to and in the best interests of the Company's stockholders, (ii) approved this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, and (iii) resolved to recommend acceptance of the Offer and approval and
adoption of this Agreement and the Merger by its stockholders; provided however,
that prior to the purchase by Merger Subsidiary of Shares pursuant to the Offer,
the Company may modify, withdraw or change such recommendation to the extent
that the Board of Directors of the Company determines, after consultation with
outside legal counsel to the Company, that the failure to so withdraw, modify or
change such recommendation would likely be inconsistent with the fiduciary
duties of the Board of Directors of the Company under applicable laws.
(b) The Board of Directors of the Company has received the written opinion
of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") to the effect
that, as of such date, the Merger Consideration (as defined in Section 2.2(c))
to be received by holders of Shares pursuant to the Offer and the Merger, taken
together, is fair from a financial point of view to such holders. The Company
has provided a copy of such opinion to the Buyer.
(c) In connection with the Offer, if requested by Merger Subsidiary, the
Company shall furnish or shall cause to be furnished to Merger Subsidiary
mailing labels and any available listing or computer file containing the names
and addresses of all holders of record of Shares and lists of securities
positions of Shares held in stock depositories, in each case as of a recent
date, and shall provide to Merger Subsidiary such additional information
(including, without limitation, updated lists of stockholders, mailing labels
and lists of securities positions) and such other assistance as Buyer or Merger
Subsidiary may reasonably request in connection with the Offer. Except for such
steps as are necessary to disseminate the Offer Documents, Buyer and Merger
Subsidiary shall hold in confidence the information contained in any of such
labels and lists and the additional
2
<PAGE> 26
information referred to in the preceding sentence, will use such information
only in connection with the Offer, and, if this Agreement is terminated, will
upon request of the Company deliver or cause to be delivered to the Company all
copies of such information then in its possession or the possession of its
agents or representatives.
(d) As soon as practicable after the filing of the Offer Documents with the
SEC, the Company shall file with the SEC a Solicitation/Recommendation Statement
on Schedule 14D-9 (such Schedule 14D-9, as amended or supplemented from time to
time, the "Schedule 14D-9") which shall, subject to the fiduciary duties of the
Company's Board of Directors under applicable laws and the provisions of this
Agreement, reflect the recommendation of the Company's Board of Directors
described in Section 1.2(a) hereof, and disseminate the Schedule 14D-9 to the
stockholders of the Company. Buyer, Merger Subsidiary and the Company each
agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that such Schedule 14D-9 shall have become
false or misleading in any material respect; and the Company further agrees to
take all steps necessary to amend or supplement the Schedule 14D-9 and to cause
the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and to
be disseminated to the Company's stockholders, in each case as and to the extent
required by applicable federal securities laws. Buyer and Merger Subsidiary and
their counsel shall be given a reasonable opportunity to review and comment on
the Schedule 14D-9 prior to its being filed with the applicable authorities or
disseminated to the Company's stockholders. The Company agrees to provide Buyer
and Merger Subsidiary and their counsel any comments the Company or its counsel
may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments and shall provide Buyer and Merger
Subsidiary and their counsel an opportunity to participate, including by way of
discussion with the SEC or its staff, in the response of the Company to such
comments.
SECTION 1.3 Directors. (a) Subject to paragraph (b) below, promptly upon
the acceptance for payment by Merger Subsidiary of any Shares pursuant to the
Offer, Buyer shall be entitled to designate such number of directors, rounded up
to the next whole number, on the Company's Board of Directors as is equal to the
product of (i) the total number of directors on the Company's Board of Directors
(giving effect to the election of any additional directors pursuant to this
sentence) and (ii) the percentage that the aggregate number of Shares
beneficially owned by Merger Subsidiary (including Shares accepted for payment
pursuant to the Offer) bears to the total number of Shares outstanding. The
Company shall take all action necessary to cause Merger Subsidiary's designees
to be elected or appointed to the Company's Board of Directors, including,
without limitation, increasing the number of directors and seeking and accepting
resignations of incumbent directors. At such times, the Company will use its
reasonable best efforts to cause individuals designated by Buyer to constitute
the same percentage as such individuals represent on the Company's Board of
Directors of each Committee of the Board of Directors (other than a Committee
established to take action under this Agreement), each Board of Directors of any
Subsidiary of the Company and each Committee of each such board. Notwithstanding
the foregoing, until the Effective Time (as defined in Section 2.1(b)), the
Company shall retain as members of its Board of Directors at least two directors
who are directors of the Company on the date hereof (the "Continuing
Directors").
(b) The Company's obligations to appoint designees to the Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions required
pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under this Section 1.3(b) and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 1.3. Buyer and Merger Subsidiary shall supply in writing and be
solely responsible to the Company for any information with respect to themselves
and their nominees, officers, directors and affiliates required by Section 14(f)
and Rule 14f-1.
(c) From and after the time, if any, that Buyer's designees constitute a
majority of the Company's Board of Directors and prior to the Effective Time,
(i) any amendment of this Agreement, the Company Certificate of Incorporation or
the Company By-Laws or any of its Subsidiaries, (ii) any termination of this
Agreement by the Company, (iii) any extension of time for performance of any of
the obligations of Buyer or Merger Subsidiary hereunder, (iv) any waiver of any
condition to the obligations of the Company or any of the Company's rights
hereunder and any termination pursuant to Section 10.1(i) hereof, (v) any
amendment or
3
<PAGE> 27
change to the policies of directors' and officers' liability insurance
maintained by the Company and its Subsidiaries on the date hereof, (vi) any
amendment or change to, or decision in connection with, the indemnification of
the individuals who on or prior to the Effective Time were officers, directors,
employees or agents of the Company or any of its Subsidiaries under the Company
Certificate of Incorporation or Company By-laws, the certificate of
incorporation or by-laws of any Subsidiary of the Company, or under any existing
agreement between such person or persons and the Company or a Subsidiary of the
Company and (vii) any amendment or change to any Plan (as defined in Section
4.13(a) hereof) or modifications to existing compensation policies or severance
obligations (including those agreements or obligations referenced in Section
4.13 hereof or set forth on Schedule 4.13 of the disclosure schedule delivered
by the Company in connection herewith and attached hereto (the "Company
Disclosure Schedule")) may be effected only by the action of a majority of the
directors of the Company then in office who are Continuing Directors, which
action shall be deemed to constitute the action of a committee specifically
designated by the Board of Directors to approve the actions and transactions
contemplated hereby; provided, that if there shall be no Continuing Directors,
such actions may be effected by majority vote of the entire Board of Directors
of the Company. Any actions with respect to the enforcement of this Agreement by
the Company shall be effected only by the action of a majority of the Continuing
Directors.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. (a) Subject to the terms and conditions of this
Agreement, and in accordance with the DGCL, at the Effective Time, Merger
Subsidiary shall be merged (the "Merger") with and into the Company, whereupon
the separate existence of Merger Subsidiary shall cease, and the Company shall
be the surviving corporation (the "Surviving Corporation") and shall continue to
be governed by the laws of the State of Delaware.
(b) The Company, Buyer and Merger Subsidiary will cause a certificate of
merger (the "Certificate of Merger") with respect to the Merger to be executed
and filed with the Secretary of State of the State of Delaware (the "Secretary
of State") as provided in the DGCL. The Merger shall become effective on the
date the Certificate of Merger has been duly filed with the Secretary of State
or at such date as is agreed between the parties specified in the Certificate of
Merger, and such time is hereinafter referred to as the "Effective Time."
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities, liabilities and duties of the Company and
Merger Subsidiary.
SECTION 2.2 Effect on Shares. At the Effective Time:
(a) Cancellation of Certain Stock. Each Share held by the Company as
treasury stock or owned by Buyer, Merger Subsidiary or any other Subsidiary
of Buyer and the Dissenting Shares (defined in Section 2.4 hereof, but
except as provided in Section 2.4 hereof) immediately prior to the
Effective Time shall automatically be canceled and retired and cease to
exist, and no payment shall be made with respect thereto.
(b) Capital Stock of Merger Subsidiary. Each share of common stock of
Merger Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and become one fully paid and non-assessable
share of common stock, par value $0.01, of the Surviving Corporation with
the same rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
(c) Conversion of Shares. Each Share issued and outstanding
immediately prior to the Effective Time shall, except as otherwise provided
in Section 2.2(a) hereof, be converted into the right to receive the Offer
Price, without interest (the "Merger Consideration").
4
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SECTION 2.3 Surrender and Payment. (a) Prior to the Effective Time, Buyer
shall appoint a depositary (the "Depositary") for the purpose of exchanging
certificates representing Shares for the Merger Consideration. The Depositary
shall at all times be a commercial bank having a combined capital and surplus of
at least $500,000,000. Buyer will pay to the Depositary immediately prior to the
Effective Time, the Merger Consideration to be paid in respect of the Shares.
For purposes of determining the Merger Consideration to be so paid, Buyer shall
assume that no holder of Shares will perfect his right to appraisal of his
Shares. Promptly after the Effective Time, Buyer will send, or will cause the
Depositary to send, but in no event later than three business days after the
Effective Time, to each holder of Shares at the Effective Time a letter of
transmittal for use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the certificates representing Shares to the Depositary) and
instructions for use in effecting the surrender of Shares in exchange for the
Merger Consideration.
(b) Each holder of Shares that has been converted into a right to receive
the Merger Consideration, upon surrender to the Depositary of a certificate or
certificates properly representing such Shares, together with a properly
completed letter of transmittal covering such Shares, will be entitled to
receive the Merger Consideration payable in respect of such Shares less any
amounts required to be withheld under applicable federal, state, local or
foreign income tax regulations. Until so surrendered, each such certificate
shall, after the Effective Time, represent for all purposes, only the right to
receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the registered holder of the Shares represented by the certificate or
certificates surrendered in exchange therefor, it shall be a condition to such
payment that the certificate or certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the Person
requesting such payment shall pay to the Depositary any transfer or other taxes
required as a result of such payment to a Person other than the registered
holder of such Shares or establish to the satisfaction of the Depositary that
such tax has been paid or is not payable. For purposes of this Agreement,
"Person" means an individual, a corporation, limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
(d) After the Effective Time, the stock transfer books of the Company shall
be closed and thereafter there shall be no further registration of transfers of
Shares. If, after the Effective Time, certificates representing Shares are
presented to the Surviving Corporation, they shall be canceled and exchanged for
the consideration provided for, and in accordance with the procedures set forth,
in this Article II.
(e) Any portion of the Merger Consideration paid to the Depositary pursuant
to Section 2.3(a) that remains unclaimed by the holders of Shares one year after
the Effective Time shall be returned to Surviving Corporation, upon demand, and
any such holder who has not exchanged his Shares for the Merger Consideration in
accordance with this Section 2.3 prior to that time shall thereafter look only
to the Surviving Corporation for payment of the Merger Consideration in respect
of his Shares, without any interest thereon. Notwithstanding the foregoing,
Buyer, Merger Subsidiary and the Surviving Corporation shall not be liable to
any holder of Shares for any amount paid to a public official pursuant to
applicable abandoned property laws. Any amounts remaining unclaimed by holders
of Shares on the day immediately prior to such time as such amounts would
otherwise escheat to or become property of any governmental entity shall, to the
extent permitted by applicable law, become the property of Buyer free and clear
of any claims or interest of any Person previously entitled thereto.
(f) Any portion of the Merger Consideration paid to the Depositary pursuant
to Section 2.3(a) hereof to pay for Shares for which appraisal rights have been
perfected shall be returned to Surviving Corporation upon demand.
SECTION 2.4 Dissenting Shares. Notwithstanding Section 2.2 hereof, Shares
issued and outstanding immediately prior to the Effective Time and held by a
holder who has properly exercised and perfected appraisal rights under Section
262 of the DGCL (the "Dissenting Shares"), shall not be converted into the right
to receive the Merger Consideration, but the holders of Dissenting Shares shall
be entitled to receive such consideration as shall be determined pursuant to
Section 262 of the DGCL; provided, however, that if any such holder shall have
failed to perfect or shall withdraw or lose his right to appraisal and payment
under
5
<PAGE> 29
the DGCL, such holder's Shares shall thereupon be deemed to have been converted
as of the Effective Time into the right to receive the Merger Consideration,
without any interest thereon, and such Shares shall no longer be Dissenting
Shares. The Company shall give Buyer (i) prompt notice of any written demands
for appraisal, withdrawals of demands for appraisal and any other instruments
served pursuant to the DGCL received by the Company and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. The Company will not voluntarily make any payment with respect
to any demands for appraisal and will not, except with the prior written consent
of Buyer, settle or offer to settle any such demands.
SECTION 2.5 Stock Options. (a) Immediately prior to the Effective Time,
each outstanding employee or director stock option (an "Option") to purchase
Shares granted under the 1983 Incentive Stock Option Plan, the 1993 Incentive
Stock Option Plan, the 1993 Non-Employee Directors Stock Option Plan or the 1996
Non-Employee Directors Stock Option Plan (collectively, the "Option Plans") or
any other compensation plan or arrangement of the Company shall be canceled, and
each holder of any such Option, whether or not then vested or exercisable, shall
be paid by the Company at the Effective Time for each such Option an amount
determined by multiplying (i) the excess, if any, of the Merger Consideration
over the applicable exercise price of such Option by (ii) the number of Shares
such holder could have purchased (assuming full vesting of all Options) had such
holder exercised such Option in full immediately prior to the Effective Time.
(b) Prior to the Effective Time, the Company shall use its best efforts (i)
to obtain any consents from holders of Options and (ii) make any amendments to
the terms of the Option Plans or compensation plans or arrangements, to the
extent such consents or amendments are necessary to give effect to the
transactions contemplated by Section 2.5(a). Notwithstanding any other provision
of this Section 2.5, payment may be withheld in respect of any Option until
necessary consents are obtained.
(c) The Company shall promptly amend the 1994 Employee Stock Purchase Plan
to provide for (i) the suspension of participation during any offering periods
commencing subsequent to the date of this agreement for the pendency of the
Merger and subject to the successful consummation of the Merger and (ii) the
termination of the 1994 Employee Stock Purchase Plan as of the Effective Time.
SECTION 2.6 Merger Without Meeting of Stockholders. Notwithstanding
Section 6.2 hereof, in the event that Buyer, Merger Subsidiary or any other
subsidiary of Buyer shall acquire at least 90% of the outstanding shares of each
class of capital stock of the Company, pursuant to the Offer or otherwise, the
parties hereto agree to take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after such acquisition,
without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.
SECTION 2.7 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., New York City time, on a date to be specified by the
parties hereto, which shall be no later than the third business day after
satisfaction or waiver of all of the conditions set forth in Article IX hereof
(the "Closing Date"), at the offices of Weil, Gotshal & Manges LLP in New York,
New York unless another time, date or place is agreed to in writing by the
parties hereto.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1 Certificate of Incorporation. The certificate of incorporation
of Merger Subsidiary in effect at the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable law or such certificate of incorporation.
SECTION 3.2 Bylaws. The by-laws of Merger Subsidiary in effect at the
Effective Time shall be the by-laws of the Surviving Corporation until
thereafter amended in accordance with applicable law, the certificate of
incorporation or such by-laws.
SECTION 3.3 Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, the directors of Merger Subsidiary at the
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Effective Time shall be the initial directors of the Surviving Corporation and
the officers of Merger Subsidiary at the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected and appointed or qualified.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Buyer and Merger Subsidiary that:
SECTION 4.1 Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and except as set forth on Schedule 4.1 of the Company
Disclosure Schedule, has all corporate powers and all governmental licenses,
authorizations, consents and approvals (collectively, "Licenses") required to
carry on its business as now conducted except where the failure to have any such
License, individually or in the aggregate, would not have a Material Adverse
Effect (as defined below). The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified, individually or in the aggregate, would not have a
Material Adverse Effect. As used herein, the term "Material Adverse Effect"
means a material adverse effect on the condition (financial or otherwise),
business, assets, prospects or results of operations of the Company and its
Subsidiaries (as defined in Section 4.6) taken as a whole, or the Buyer and the
Merger Subsidiary, as the case may be, that is not a result of general changes
in the economy or the industries in which such entities operate, provided,
however, that "prospects" shall not include the prospects of the Company's IT
and Consultancy Services businesses. The Company has heretofore delivered or
made available to Buyer true and complete copies of the Company Certificate of
Incorporation and Company By-laws as currently in effect. In all material
respects, the minute books of the Company contain accurate records of all
meetings and accurately reflect all other actions taken by the stockholders, the
board of directors and all committees of the board of directors of the Company.
Complete and accurate copies of all such minute books and of the stock register
of the Company have been made available by the Company to Buyer.
SECTION 4.2 Corporate Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except for any required approval by the Company's stockholders in
connection with the consummation of the Merger, have been duly authorized by all
necessary corporate action. This Agreement, assuming due and valid
authorization, execution and delivery by the other parties hereto, constitutes a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except that (i) enforcement may be subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, affecting creditors' rights generally,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
SECTION 4.3 Governmental Authorization. Except as set forth in Schedule
4.3 of the Company Disclosure Schedule, the execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any governmental body, agency, official or authority (each, a
"Governmental Entity") other than: (i) the filing of a certificate of merger in
accordance with the DGCL; (ii) compliance with any applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"); (iii)
compliance with any applicable requirements of the Exchange Act; (iv) compliance
with the applicable requirements of state blue sky laws; (v) compliance with the
applicable requirements of any applicable takeover laws and (vi) such other
actions by or in respect of, or filings with, the failure of which to obtain or
make, individually or in the aggregate, would not have a Material Adverse Effect
and which would not materially impair the ability of the Company to consummate
the transactions contemplated hereby.
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SECTION 4.4 Non-Contravention. The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) contravene or conflict
with the Certificate of Incorporation or By-laws of the Company or any
Subsidiary, (ii) except as set forth in Schedule 4.4 of the Company Disclosure
Schedule and assuming compliance with the matters referred to in Section 4.3
hereof, contravene or conflict with or constitute a violation of any provision
of any law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company or any Subsidiary of the Company, (iii) except as set
forth in Schedule 4.4 of the Company Disclosure Schedule, with or without the
giving of notice or passage of time or both, constitute a material default under
or give rise to a right of termination, cancellation or acceleration of any
right or obligation of the Company or any Subsidiary of the Company or to a
material loss of any benefit to which the Company or any Subsidiary of the
Company is entitled under any provision of any agreement, contract or other
instrument binding upon the Company or any Subsidiary of the Company or any
license, franchise, permit or other similar authorization held by the Company or
any Subsidiary of the Company, or (iv) result in the creation or imposition of
any Lien (as defined below) on any asset of the Company or any Subsidiary of the
Company, excluding from the foregoing clauses (ii), (iii) or (iv), such
violations, breaches, defaults or Liens, individually or in the aggregate, which
would not have a Material Adverse Effect. For purposes of this Agreement, "Lien"
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset.
SECTION 4.5 Capitalization. The authorized capital stock of the Company
consists of 15,000,000 Shares and 1,000,000 Shares of preferred stock (the
"Preferred Stock"). As of December 16, 1998, there were (i) 4,898,447 Shares
issued and outstanding; (ii) 214,663 Shares held in the Company's treasury; and
(iii) no shares of Preferred Stock issued and outstanding. As of December 16,
1998, there were (i) options outstanding pursuant to the 1996 Non-Qualified
Non-Employee Directors Stock Option Plan ("the 1996 Plan") to acquire an
aggregate of 22,000 Shares, at an exercise price of $15.00; (ii) options
outstanding pursuant to the 1993 Non-Qualified Non-Employee Directors Stock
Option Plan ("the 1993 Plan") to acquire an aggregate of 11,600 Shares, with an
exercise price range of a minimum exercise price of $3.53 and a maximum exercise
price of $16.00; additional options outstanding granted to non-employee
directors to acquire an aggregate of 48,000 shares, with an exercise price range
of a minimum exercise price of $2.05 and a maximum exercise price of $5.38; and
additional options outstanding granted to certain officers of the Company to
acquire an aggregate of 25,000 Shares, with an exercise price of $5.75. Schedule
4.5 of the Company Disclosure Schedule accurately sets forth information
regarding the exercise price, date of grant and number of granted options for
each holder of options pursuant to the 1993 Qualified Stock Option Plan and the
1983 Qualified Stock Option Plan (the "Qualified Plans"). As of December 16,
1998, there were options outstanding pursuant to the Qualified Plans to acquire
an aggregate of 552,450 Shares for a total of 659,050 Shares under all plans.
All outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. Except as set forth in
this Section 4.5, and except for changes since December 16, 1998 resulting from
the exercise of employee options outstanding on such date, there are outstanding
(i) no shares of capital stock or other voting securities of the Company, (ii)
no securities of the Company or of any Subsidiary of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company, (iii) except as set forth on Schedule 4.5 of the Company Disclosure
Schedule, no options, warrants, calls, subscriptions or other rights to acquire
from the Company, and no obligation of the Company to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company, (iv) no outstanding contractual
obligations or commitments of any character restricting the transfer of, or
requiring the registration for sale of, any capital stock of the Company, (v) no
outstanding contractual obligations or commitments of any character granting any
preemptive or antidilutive right with respect to, any capital stock of the
Company and (vi) no voting trusts or similar agreements to which the Company is
a party with respect to the voting of the capital stock of the Company (the
items in clauses (i), (ii) and (iii) being referred to collectively as the
"Company Securities"). There are no outstanding obligations of the Company or
any Subsidiary of the Company to repurchase, redeem or otherwise acquire any
Company Securities. Neither the Company nor any Subsidiary of the Company has
issued any stock appreciation right or similar payment obligation based on the
value of the Company's common equity.
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SECTION 4.6 Subsidiaries. (a) Each Subsidiary of the Company (a
"Subsidiary") (i) is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation, (ii) except
as set forth in Schedule 4.6(a) of the Company Disclosure Schedule, has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted and
(iii) except as set forth in Schedule 4.6(a) of the Company Disclosure Schedule,
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except in each case to the extent the failure of this representation and
warranty to be true would not have a Material Adverse Effect. The Company has
heretofore delivered or made available to Buyer a complete and correct copy of
the charter and bylaws of each Subsidiary of the Company, as currently in
effect. In all material respects, the minute books of each Subsidiary of the
Company contain accurate records of all meetings and accurately reflect all
other actions taken by the stockholders, the boards of directors and all
committees of the boards of directors of each Subsidiary of the Company.
Complete and accurate copies of all such minute books and of the stock register
of each Subsidiary of the Company have been made available to the Buyer. For
purposes of this Agreement, "Subsidiary" means with respect to any Person, any
corporation or other legal entity of which such Person owns, directly or
indirectly, more than 50% of the outstanding stock or other equity interests,
the holders of which are entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity. All
Subsidiaries and their respective jurisdictions of incorporation are identified
on Schedule 4.6 of the Company Disclosure Schedule.
(b) Each outstanding share of capital stock of each Subsidiary of the
Company has been duly and validly authorized and issued and is fully paid and
nonassessable. Except as set forth in Schedule 4.6(b) each outstanding share of
capital stock of each Subsidiary is owned by the Company and/or one or more of
its Subsidiaries and such shares are owned free and clear of any Liens. There
are no subscriptions, options, warrants, calls, rights, convertible securities
or other agreements or commitments of any character relating to the issuance,
transfer, sale, delivery, voting or redemption (including any rights of
conversion or exchange under any outstanding security or other instrument) for,
any of the capital stock or other equity interests of any of such Subsidiaries.
There are no agreements requiring the Company or any of its Subsidiaries to make
contributions to the capital of, or lend or advance funds to, any Subsidiaries
of the Company.
SECTION 4.7 SEC Documents. The Company has filed all required reports,
proxy statements, forms and other documents with the SEC since October 1, 1996
("Company SEC Documents"). As of their respective dates, to the knowledge of the
Company, (i) the Company SEC Documents complied in all material respects with
the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such SEC Documents, and (ii) none
of the Company SEC Documents contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 4.8 Financial Statements; No Undisclosed Liabilities. The
financial statements of the Company included in the Company SEC Documents (i)
comply as to form in all material respects with all applicable requirements of
the Securities Act and the Exchange Act, (ii) are in conformity with United
States generally accepted accounting principles ("GAAP"), applied on a
consistent basis (except in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) during the periods involved (except as may be indicated in
the related notes and schedules thereto) and (iii) fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in Schedule 4.8 of the Company Disclosure Schedule and except as set
forth in the Company SEC Documents filed and publicly available prior to the
date of this Agreement, and except for liabilities and obligations incurred in
the ordinary course of business consistent with past practices since the date of
the most recent consolidated balance sheet included in the Company SEC Documents
filed and publicly available prior to the date of this Agreement, neither the
Company nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether
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accrued, absolute, contingent or otherwise) required by GAAP to be set forth on
a consolidated balance sheet of the Company and its consolidated Subsidiaries or
in the notes thereto. To the knowledge of the Company the books and records of
the Company and its Subsidiaries have been, and are being, maintained, in all
material respects, in accordance with GAAP and any other applicable legal and
accounting requirements.
SECTION 4.9 Disclosure Documents. (a) 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 Schedule 14D-9 will, when filed, comply as to form in all
material respects with the applicable requirements of applicable law, including
without limitation, the Exchange Act. The Company Disclosure Documents will not
at the time of the filing thereof, at the time of any distribution thereof or at
the time of consummation of the Offer, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading; provided that this representation and warranty will not
apply to statements or omissions in the Company Disclosure Documents based upon
information furnished to the Company in writing by Buyer and Merger Subsidiary
specifically for use therein.
(b) The information with respect to the Company or any Subsidiary of the
Company that the Company furnishes to Buyer and Merger Subsidiary in writing
specifically for use in the Offer Documents will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made not misleading in the case of any of the Offer
Documents, at the time of the filing thereof and at the time of any distribution
thereof.
SECTION 4.10 Absence of Certain Changes. Except as disclosed in the
Company SEC Documents filed by the Company and as set forth in Schedule 4.10 of
the Company Disclosure Schedule, the Company and its Subsidiaries have conducted
their business in the ordinary course of business and there has not been since
December 31, 1997:
(a) any event, occurrence or facts (whether or not in the ordinary
course of business) which, individually or in the aggregate, has had or
reasonably could be expected to have a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend (other
than regular quarterly dividends) or other distribution with respect to any
shares of capital stock of the Company, or any repurchase, redemption or
other acquisition by the Company or any Subsidiary of the Company of any
outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any Subsidiary of the Company;
(c) any amendment of any material term of any outstanding security of
the Company or any Subsidiary of the Company;
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of the Company of any indebtedness for borrowed money other than
in the ordinary course of business;
(e) any creation or assumption by the Company or any Subsidiary of the
Company of any Lien on any asset other than in the ordinary course of
business and other than Liens which do not have and could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect;
(f) any making of any loan, advance or capital contributions to or
investment in any Person other than advances to employees in the ordinary
course of business not in excess of customary amounts and loans, advances
or capital contributions to or investments in wholly-owned Subsidiaries of
the Company made in the ordinary course of business;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or
any Subsidiary of the Company which individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect;
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(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary of the Company relating to
its assets or business (including the acquisition or disposition of any
assets) or any relinquishment by the Company or any Subsidiary of the
Company of any contract or other right, in either case, that have had or
could reasonably be expected individually or in the aggregate, to have a
Material Adverse Effect, other than transactions and commitments in the
ordinary course of business and those contemplated by this Agreement;
(i) any change in any method of accounting or accounting practice by
the Company or any Subsidiary of the Company, except for any such change
required by reason of a concurrent change in GAAP;
(j) any transaction, agreement or understanding between the Company or
any Subsidiary of the Company on the one hand and any current director or
officer of the Company or any Subsidiary of the Company or any transaction
which would be subject to proxy statement disclosure under the Exchange Act
pursuant to the requirements of Item 404 of Regulation S-K (an "Affiliate
Transaction");
(k) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary of the Company, (ii)
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company or any Subsidiary of the Company entered into,
(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 of the Company, in each case,
other than in the ordinary course of business not in excess of customary
amounts; or
(l) authorization of, or committing or agreeing to take any of, the
foregoing actions except as otherwise permitted by this Agreement.
SECTION 4.11 Litigation. Except as set forth in either the Company SEC
Documents or in Schedule 4.11 of the Company Disclosure Schedule, there is no
action, suit, investigation or proceeding pending against, or to the knowledge
of the Company, threatened against, the Company or any Subsidiary of the Company
or any of their respective properties before any court or arbitrator or any
Governmental Entity which, if determined or resolved adversely to the Company or
any Subsidiary of the Company in accordance with the plaintiff's demands, could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Except as set forth in either the Company SEC documents or in
Schedule 4.11 of the Company Disclosure Schedule, neither the Company nor any
Subsidiary of the Company is subject to any outstanding order, writ, injunction
or decree which has had or, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
SECTION 4.12 Taxes. (a) Except as set forth on Schedule 4.12: (i) the
Company and each of its Subsidiaries has properly prepared and filed or has had
properly prepared and filed on its behalf in a timely manner (within any
applicable extension periods) with the appropriate Governmental Entity all Tax
Returns with respect to Taxes of the Company or any of its Subsidiaries, or with
respect to any Taxes for which the Company or any such Subsidiary may be liable,
other than those Tax Returns the failure of which to file, individually or in
the aggregate, would not have a Material Adverse Effect; (ii) all Taxes shown to
be due and payable on all filed Tax Returns of or with respect to the Company or
any of its Subsidiaries have been paid in full or have been properly provided
for in the SEC Documents in accordance with GAAP; (iii) there are no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any federal, state, local or foreign income or other material Tax Returns
required to be filed by or with respect to the Company and its Subsidiaries;
(iv) none of the Tax Returns of or with respect to the Company or any of its
Subsidiaries is currently being audited or examined by any Governmental Entity;
and (v) no deficiency for any income Taxes has been assessed with respect to the
Company or any of its Subsidiaries which has not been abated or paid in full.
(b) For purposes of this Agreement, (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, sales, use, ad valorem, goods and services,
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capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority and (ii) "Tax Return"
shall mean any report, return, documents, declaration or other information or
filing required to be supplied to any taxing authority or jurisdiction with
respect to Taxes.
SECTION 4.13 Employee Plans. (a) Schedule 4.13(a) of the Company
Disclosure Schedule lists all "employee benefit plans," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all other employee benefit plans or other benefit arrangements,
including but not limited to all employment and consulting agreements and all
bonus and other incentive compensation, deferred compensation, disability,
severance, retention, salary continuation, vacation, stock award, stock option,
stock purchase, collective bargaining or workers' compensation agreements,
plans, policies and arrangements which the Company or any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within the meaning of Section
4001(b) of ERISA, maintains, is a party to, has contributed to or has any
obligation to or liability for current or former employees and directors of the
Company (each an "Employee Benefit Plan" and collectively, the "Employee Benefit
Plans"). Schedule 4.13(a) separately identifies each of such plans and
arrangements Employee Benefit Plan subject to Title IV of ERISA.
(b) True, correct and complete copies of the following documents with
respect to each of the Employee Benefit Plans (as applicable) have been
delivered or made available to Buyer: (i) the most recent plan, document or
agreement, related trust documents and all amendments thereto, (ii) the most
recent summary plan description and all related summaries of material
modifications, (iii) the annual report on Form 5500 and attached schedules filed
with the Internal Revenue Service in the last three years, (iv) the most recent
actuarial report, (v) the most recent Internal Revenue Service determination
letter, and (vi) a description of any non-written Employee Benefit Plan.
(c) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, (i) all payments required to be made by or under
any Employee Benefit Plan, any related trusts, or any collective bargaining
agreement have been timely made; (ii) the Company and its ERISA Affiliates have
performed all material obligations required to be performed by them under any
Employee Benefit Plan; (iii) the Employee Benefit Plans comply in all respects
and have been maintained in compliance with their terms and the requirements of
ERISA, the Code and other applicable laws; and (iv) there are no actions, suits,
arbitrations or claims (other than routine claims for benefits) pending or, to
the knowledge of the Company, threatened with respect to any Employee Benefit
Plan.
(d) The Company and its ERISA Affiliates have not incurred any unsatisfied
withdrawal liability with respect to any "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
(e) Each Employee Benefit Plan and its related trust which are intended to
be "qualified" within the meaning of Sections 401(a) and 501(a) of the Internal
Revenue Code of 1986, as from time to time amended (the "Code"), respectively,
have been determined by the Internal Revenue Service to be so "qualified" under
such Sections, as amended by the Tax Reform Act of 1986, and the Company knows
of no fact which would adversely affect the qualified status of any such
Employee Benefit Plan and its related trust.
(f) Except as set forth on Schedule 4.13(f) of the Company Disclosure
Schedule, or as contemplated by this Agreement, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment becoming due, or increase the amount of
compensation due, to any current or former employee or director of the Company
or any of its subsidiaries; (ii) increase any benefits otherwise payable under
any Employment Benefit Plan; or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
(g) No Employee Benefit Plan has an "accumulated funding deficiency" within
the meaning of Section 302 of ERISA or Section 412 of the Code, nor has any
waiver of the minimum funding standards of Section 302 of ERISA and Section 412
of the Code been requested of or granted by the Internal Revenue
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Service with respect to any Employee Benefit Plan, nor has any lien in favor of
any such plan arisen under Section 412(n) of the Code or Section 302(f) of
ERISA.
(h) The "benefits liabilities," as defined in Section 4001(a)(16) of ERISA,
of each of the Employee Benefit Plans subject to Title IV of ERISA using the
actuarial assumptions that were used in the most recent actuarial valuation (a
true and complete copy of which has been provided to Buyer) in the event it
terminated each such plan, do not exceed the fair market value of the assets of
each such plan.
(i) No stock or other security issued by the Company forms or has formed a
material part of the assets of any Employee Benefit Plan.
(j) No Employee Benefit Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for current or former
employees or directors of the Company or any of its ERISA Affiliates for periods
extending beyond their retirement or other termination of service, other than
(i) coverage mandated by applicable Laws, (ii) death benefits under any "pension
plan" as defined in Section 3(2) of ERISA, or (iii) benefits, the full cost of
which is borne by such current or former employee or director (or his or her
beneficiary).
SECTION 4.14 Labor Matters. Except to the extent set forth in Schedule
4.14 of the Disclosure Schedule (i) there is no labor strike, dispute, slowdown,
stoppage or lockout actually pending or threatened, to the knowledge of the
Company, against the Company or any Subsidiary of the Company and during the
past three years there has not been any such action; (ii) to the knowledge of
the Company, there is no current union organizing activities among the employees
of the Company or any Subsidiary of the Company nor does any question concerning
representation exist concerning such employees; (iii) there is no unfair labor
practice charge or complaint against the Company or any Subsidiary of the
Company pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency; (iv)
there is no grievance pending relating to any collective bargaining agreement or
other grievance procedure; (v) to the knowledge of the Company, no charges with
respect to or relating to the Company or any Subsidiary of the Company are
pending before the Equal Employment Opportunity Commission or any other agency
responsible for the prevention of unlawful employment practices; and (vi) there
are no collective bargaining agreements, employment contracts or severance
agreements with any union or any employees of the Company or any Subsidiary of
the Company.
SECTION 4.15 Compliance with Laws. Except as set forth in Schedule 4.11
(as applicable) and Schedule 4.15 of the Company Disclosure Schedule, the
Company and its Subsidiaries are in compliance in all material respects with all
laws, statutes, ordinances or regulations except where such violations,
individually or in the aggregate, would not have a Material Adverse Effect.
SECTION 4.16 Finders' Fees. Except for DLJ, there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf, of the Company or any Subsidiary of the Company who would be
entitled to any fee or commission from the Company, any Subsidiary of the
Company, Buyer or any of Buyer's affiliates upon consummation of the
transactions contemplated by this Agreement. Other than the fee payable to DLJ
pursuant to the agreement between DLJ and the Company dated September 2, 1997,
as amended April 15, 1998 (the "DLJ Letter"), the Company has no obligations or
Commitments to any investment banker or financial advisor in connection with any
future transactions that may be considered or entered into by the Company after
the Effective Time.
SECTION 4.17 Environmental Matters. (a) Except as set forth in the Company
SEC Documents or in Schedule 4.17 of the Company Disclosure Schedule:
(i) to the Company's knowledge, the Company is and for the past five
years has been in material compliance with Environmental Laws and possesses
all permits, authorizations, licenses or approvals required by
Environmental Laws and necessary for the operation of the Company and each
of its Subsidiaries;
(ii) the Company has not received any written communication from any
person or entity (including any Governmental Entity) stating or alleging
that the Company or any of its Subsidiaries is in violation of
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or may have liability under Environmental Law (as defined in Section
4.17(c) hereof) with respect to any actual or alleged environmental
contamination, which if adversely determined could reasonably be expected
to result in the Company or any of its Subsidiaries incurring material
liability under Environmental Laws; neither the Company nor its
Subsidiaries nor, to the Company's knowledge, any Governmental Entity is
conducting or has conducted any environmental remediation or environmental
investigation which could reasonably be expected to result in liability for
the Company or its Subsidiaries under Environmental Law; and the Company
and its Subsidiaries have not received any request for information under
Environmental Law from any Governmental Entity with respect to any actual
or alleged environmental contamination, except, in each case, for
communications, environmental remediation and investigations and requests
for information which would not, individually or in the aggregate,
reasonably be expected to result in the Company or any of its Subsidiaries
incurring material liability under Environmental Laws;
(iii) since January 1, 1998, the Company and its Subsidiaries have not
received any written communication from any person or entity (including any
Governmental Entity) stating or alleging that the Company or its
Subsidiaries may have violated any Environmental Law, or that the Company
or its Subsidiaries has caused or contributed to any environmental
contamination that has caused any property damage or personal injury under
Environmental Law, except, in each case, for statements and allegations of
violations and statements and allegations of responsibility for property
damage and personal injury which would not, individually or in the
aggregate, result in the Company or any of its Subsidiaries incurring
material liability under Environmental Laws;
(iv) the Company and its Subsidiaries are not aware of any facts,
circumstances or conditions arising out of or related to the Company or its
Subsidiaries or to any real property currently or formerly owned, operated
or leased by or for the Company or its Subsidiaries, which could reasonably
be expected to result in the Company or its Subsidiaries incurring material
liability under Environmental Laws; and
(v) to the knowledge of the Company, the transactions contemplated by
this Agreement do not trigger the New Jersey Industrial Site Recovery Act
or any similar environmental property transfer law;
(b) (i) The Company has provided Buyer with true and correct copies of any
and all material environmental investigation, study, audit, test, review and
other analysis in the possession of the Company or its Subsidiaries conducted in
relation to the business of the Company or any property or facility now or
previously owned, operated or leased by the Company or any Subsidiary; and (ii)
the Company has not knowingly withheld from Buyer any consent decree, consent
order or similar document in force and to which it is a party relating to any
property currently owned, leased or operated by the Company or its Subsidiaries.
(c) For purposes of this Section 4.17, "Environmental Law" means all
applicable state, federal and local laws, regulations and rules, including
common law, judgments, decrees and orders relating to pollution, the
preservation of the environment, and the release of material into the
environment.
SECTION 4.18 Property. The Company and its Subsidiaries, as the case may
be, have good and valid title to, or in the case of leased property, have valid
leasehold interests in all properties and assets necessary to conduct the
business of the Company as currently conducted, free and clear of all Liens or
encumbrances of any nature whatsoever, except (i) any Lien for current Taxes,
payments of which are not yet delinquent, (ii) such imperfections in title,
easements and encumbrances, if any, as are not substantial in character, amount
or extent and do not materially detract from the value, or interfere with the
present use of the property subject thereto or affected thereby, or otherwise
materially impair the Company's business operations or (iii) as disclosed in the
Company SEC Documents. There are no developments affecting any of such
properties or assets pending or, to the knowledge of the Company threatened,
which, could reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 4.19 Trademarks. (a) The Company and its Subsidiaries own or
possess adequate licenses or other valid rights to use all trademarks, trademark
rights, copyrights, patents, software, trade names and trade name rights which
are material to the Company's business and operations (collectively, "Material
Trademarks") used or held for use in connection with the business of the Company
and the Subsidiaries as
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currently conducted in all material respects. Except set forth in Schedule
4.19(a), all Material Trademarks are validly registered or registrations have
been applied for.
(b) The Company, except as set forth in Schedule 4.19(b) of the Company
Disclosure Schedule, is unaware of any assertion or claim challenging the
validity of any Material Trademark. Except as set forth in Schedule 4.19(b) of
the Company Disclosure Schedule, the conduct of the business of the Company and
its Subsidiaries as currently conducted does not conflict with any trademark,
trademark right, copyright, patent, software license, trade name or trade name
right of any third party in a manner that could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. To the
knowledge of the Company, there are no material infringements of any Material
Trademarks.
SECTION 4.20 Material Contracts. Except as set forth on Schedule 4.20 of
the Company Disclosure Schedule, the Company SEC Documents list all Material
Contracts (as defined below) of the Company, and except as set forth on Schedule
4.20 of the Company Disclosure Schedule or in the Company SEC Documents, to the
knowledge of the Company, each Material Contract is valid, binding and
enforceable and in full force and effect; except where such failure to be valid,
binding and enforceable and in full force and effect, individually or in the
aggregate, would not have a Material Adverse Effect, and there are no defaults
thereunder, except those defaults that, individually or in the aggregate, would
not have a Material Adverse Effect. For purposes of this Agreement, "Material
Contracts" shall mean (i) all contracts, agreements or understandings with
customers of the Company and its Subsidiaries in the last fiscal year where each
customers' contracts, agreements or understandings in the aggregate account for
more than $3 million of the Company's annual revenues; (ii) all acquisition,
merger, asset purchase or sale agreements entered into and not rescinded by the
Company in the last two fiscal years with a transaction value in excess of $3
million; and (iii) any other agreement within the meaning set forth in Item
601(b)(10) Regulation S-K of Title 17, Part 229 of the Code of Federal
Regulations. The Company has previously made available to the Buyer true and
correct copies of the Material Contracts.
SECTION 4.21 Insurance. Schedule 4.21 of the Company Disclosure Schedule
sets forth the insurance policies and programs maintained by the Company.
SECTION 4.22 Year 2000 Compliance. As set forth on Schedule 4.22 of the
Company Disclosure Schedule, the Company has a remediation program which it
presently believes will result in all Date Data and Date Sensitive Systems of
the Company and each Subsidiary of the Company being Year 2000 Compliant prior
to December 31, 1999. "Date Data" means any data of any type that includes date
information or which is otherwise derived from, dependent on or related to date
information. "Date-Sensitive System" means any software, microcode or hardware
system or component, including any electric or electronically controlled system
or component, that processes any Date Data and that is installed, in development
or on order by the Company or any Subsidiary of the Company for their internal
use, or which the Company or any Subsidiary of the Company sells, leases,
licenses, assigns or otherwise provides, or the provision or operation of which
the Company and any Subsidiary of the Company provides the benefit, to its
customers, vendors, suppliers, affiliates or any other third party. "Year 2000
Compliant" means (i) with respect to Date Data, that such data is in proper
format and accurate for all dates in the twentieth and twenty-first centuries,
and (ii) with respect to Date-Sensitive Systems, that each such system
accurately processes all Date Data, including for the twentieth and twenty-first
centuries, without loss of any functionality or performance, including but not
limited to calculating, comparing, sequencing, storing and displaying such Date
Data (including all leap year considerations), when used as a stand-alone system
or in combination with other software or hardware.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER AND MERGER SUBSIDIARY
Buyer and Merger Subsidiary represent and warrant to the Company that:
SECTION 5.1 Corporate Existence and Power. Each of Buyer and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and except as set
forth on Schedule 5.1 of the disclosure schedule delivered by Buyer and Merger
Subsidiary attached hereto (the "Buyer Disclosure Schedule"), has all corporate
powers and all Licenses required to carry on its business as now conducted
except where the failure to have any such License would not, individually or in
the aggregate, have a Material Adverse Effect. Each of Buyer and Merger
Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Each of Buyer
and Merger Subsidiary has heretofore delivered or made available to the Company
true and complete copies of the Buyer's and Merger Subsidiary's Certificate of
Incorporation and By-laws as currently in effect.
SECTION 5.2 Corporate Authorization. The execution, delivery and
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Buyer and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement, assuming
due and valid authorization, execution and delivery by the other parties hereto,
constitutes a valid and binding agreement of each of Buyer and Merger Subsidiary
except that (i) enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 5.3 Governmental Authorization. The execution, delivery and
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated by
this Agreement require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than (i) the filing of a
certificate of merger in accordance with the DGCL; (ii) compliance with any
applicable requirements of the HSR Act; and (iii) compliance with any applicable
requirements of the Exchange Act.
SECTION 5.4 Non-Contravention. The execution, delivery and performance by
Buyer and Merger Subsidiary of this Agreement and the consummation by Buyer and
Merger Subsidiary of the transactions contemplated hereby do not and will not
(i) contravene or conflict with the certificate of incorporation or by-laws of
Merger Subsidiary or Buyer, (ii) assuming compliance with the matters referred
to in Section 5.3 hereof, contravene or conflict or constitute a violation of
any provision of law, regulation, judgment, injunction, order or decree binding
upon or applicable to Buyer or Merger Subsidiary, or (iii) with or without the
giving of notice or passage of time or both, constitute a material default under
or give rise to a right of termination, cancellation or acceleration of any
right or obligation of Buyer or Merger Subsidiary or to a material loss of any
benefit to which Buyer or Merger Subsidiary or any license, franchise, permit or
other similar authorization held by Buyer or Merger Subsidiary, or (iv) result
in the creation or imposition of any Lien on any asset of Buyer or Merger
Subsidiary excluding from the foregoing clauses (ii), (iii) or (iv) such
violations, breaches, defaults or Liens which would not have a Material Adverse
Effect, and which will not materially impair the ability of Buyer and Merger
Subsidiary to consummate the transactions contemplated hereby.
SECTION 5.5 Disclosure Documents. (a) The information with respect to
Buyer and its Subsidiaries and Merger Subsidiary that Buyer and Merger
Subsidiary furnish to the Company in writing specifically for use in any Company
Disclosure Document will not contain, any untrue statement of a material fact or
omit to
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state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading (i)
in the case of the Company Proxy Statement (defined in Section 6.2 herein), at
the time the Company Proxy Statement or any amendment or supplement thereto is
first mailed to stockholders of the Company, at the time the stockholders vote
on adoption of this Agreement and at the Effective Time, and (ii) in the case of
any Company Disclosure Document other than the Company Proxy Statement, at the
time of the filing thereof, at the consummation of the Offer and at the time of
any distribution thereof.
(b) The Offer Documents, when filed, will comply as to form in all material
respects with the applicable requirements of the Exchange Act. The Offer
Documents will not at the time of the filing thereof, at the time of any
distribution, publication or any mailing thereof or at the time of consummation
of the Offer, contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading; provided that this
representation and warranty will not apply to statements or omissions in the
Offer Documents based upon information furnished to Buyer or Merger Subsidiary
in writing by the Company specifically for use therein.
SECTION 5.6 Finders' Fees. There is no investment banker, broker, finder
or other intermediary who might be entitled to any fee or commission in
connection with or upon consummation of the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Buyer or Merger
Subsidiary.
SECTION 5.7 Financing. Buyer has provided to the Company copies of an
equity commitment letter from Onex Corporation satisfactory to the Company.
Buyer and Merger Subsidiary have or will have, prior to the expiration of the
Offer and prior to the Effective Time, sufficient funds available to purchase
all of the Shares outstanding on a fully diluted basis and to pay all related
fees and expenses pursuant to the Offer and the Merger and this Agreement.
SECTION 5.8 Solvency. At and following the expiration date of the Offer
and at the Closing Date, each of Buyer and Merger Subsidiary, in each case
together with their respective Subsidiaries, will be, on a consolidated basis,
Solvent after giving effect to the purchase and sale of the Shares and any other
transactions contemplated hereby or by Merger Subsidiary or any of its
affiliates on such date or which would be otherwise taken into account in
determining whether the purchase and sale of the Shares or any of the
transactions contemplated hereby were a fraudulent conveyance or impermissible
dividend under applicable law. For the purpose of the representation and
warranty contained in this Section, Buyer shall be entitled to assume that the
representations and warranties of the Company regarding its liabilities on a
consolidated basis are true and correct in all material respects.
SECTION 5.9 Share Ownership. As of the date hereof, Buyer and Merger
Subsidiary do not own any Shares.
SECTION 5.10 Merger Subsidiary's Operations. Merger Subsidiary was formed
solely for the purpose of engaging in the transactions contemplated hereby and
has not engaged in any business activities or conducted any operations other
than in connection with the transactions contemplated hereby.
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ARTICLE VI
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.1 Conduct of the Company. From the date hereof until the
Effective Time, the Company and its Subsidiaries shall conduct their business in
the ordinary course, consistent with past practices, and shall use their best
commercially reasonable efforts to preserve intact their business organizations
and relationships with third parties and to keep available the services of their
present officers, employees and business associates. Without limiting the
generality of the foregoing, other than (i) in the ordinary course of business
consistent with past practices, (ii) as set forth on Schedule 6.1 of the Company
Disclosure Schedule, (iii) as specifically contemplated by this Agreement or
(iv) with the written consent of Buyer or Merger Subsidiary (such consent which
shall not be unreasonably withheld), from the date hereof until the Effective
Time, the Company will not:
(a) declare, set aside or pay any dividend (other than regular
quarterly dividends) or other distribution with respect to any shares of
capital stock of the Company, or any repurchase, redemption or other
acquisition by the Company or any Subsidiary of the Company of any
outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any Subsidiary of the Company;
(b) issue or sell any additional shares of, or securities convertible
into or exchangeable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of capital stock of any class of
the Company or any Subsidiary of the Company, other than issuances pursuant
to the exercise of options outstanding on the date hereof and disclosed on
Schedule 4.5 of the Company Disclosure Schedule;
(c) amend any material term of the certificate of incorporation,
by-laws or any outstanding security of the Company or any Subsidiary of the
Company;
(d) split, combine or reclassify its outstanding capital stock;
(e) incur, assume or guarantee by the Company or any Subsidiary of the
Company of any indebtedness for borrowed money;
(f) make any loan, advance or capital contribution to or invest in any
Person;
(g) cause or willfully permit any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the business
or assets of the Company or any Subsidiary of the Company which has had or
could reasonably be expected to have a Material Adverse Effect;
(h) enter into any transaction, commitment, contract or agreement by
the Company or any Subsidiary of the Company relating to their assets or
business (including the acquisition or disposition of any assets) or
relinquish any contract or other right, in either case, that have had or
could reasonably be expected to have a Material Adverse Effect, other than
those contemplated by this Agreement;
(i) neither the Company nor any Subsidiary of the Company shall pay,
discharge, or satisfy any material claims, liabilities or other obligations
(whether absolute, accrued, asserted or unasserted, contingent or
otherwise) other than the payment, discharge or satisfaction in the
ordinary course of business, consistent with past practices, of liabilities
reflected or reserved against in the consolidated financial statements of
the Company or incurred since the most recent date thereof pursuant to an
agreement or transaction described in this Agreement or incurred in the
ordinary course of business, consistent with past practices;
(j) neither the Company nor any Subsidiary of the Company will amend
or modify any existing Affiliate Transaction or enter into any new
Affiliate Transaction other than with the prior written consent of the
Buyer;
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(k) change any method of accounting or accounting practice by the
Company or any Subsidiary of the Company, except for any such change
required by reason of a concurrent change in GAAP;
(l) (A) grant any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary of the Company, (B)
enter into any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any director,
officer or employee of the Company or any Subsidiary of the Company, (C)
increase the benefits payable under any existing severance or termination
pay policies or employment agreements or (D) increase the compensation,
bonus or other benefits payable to any director, officer or employee of the
Company or any Subsidiary of the Company; or
(m) authorize any of, or commit or agree to take any of, the foregoing
actions except as otherwise permitted by this Agreement.
SECTION 6.2 Stockholder Meeting; Proxy Material. The Company shall cause a
meeting of its stockholders (the "Company Stockholder Meeting") to be duly
called and held as soon as reasonably practicable for the purpose of voting on
the approval and adoption of this Agreement and the Merger. The Board of
Directors of the Company shall recommend approval and adoption of this Agreement
and the Merger by the Company's stockholders; provided that the Company's Board
of Directors may withdraw, modify or change such recommendation if it has
determined, after consultation with outside legal counsel to the Company, that
such recommendation would likely be inconsistent with the Board of Directors'
fiduciary duties under applicable law. In connection with such meeting, the
Company (i) will promptly, after the consummation of the Offer, prepare and file
with the SEC, will use its reasonable efforts to have cleared by the SEC and
will thereafter mail to its stockholders as promptly as practicable a proxy
statement and all other proxy materials for such meeting (the "Company Proxy
Statement"), (ii) will use its reasonable efforts to obtain the necessary
approvals by its stockholders of this Agreement and the transactions
contemplated hereby and (iii) will otherwise comply in all material respects
with all legal requirements applicable to such meeting.
SECTION 6.3 Access to Information; Confidentiality Agreement. (a) From the
date hereof until the Effective Time, the Company will give Buyer, its counsel,
financial advisors, auditors and other authorized representatives reasonable
access during normal business hours to the offices, properties, books and
records of the Company and the Subsidiaries of the Company, will furnish to
Buyer, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and will instruct the Company's employees,
counsel, financial advisors and independent auditors to cooperate with Buyer in
its investigation of the business of the Company and the Subsidiaries of the
Company; provided that all requests for information, to visit plants or
facilities or to interview the Company's employees or agents should be directed
to and coordinated with an executive officer of the Company; and provided
further that any information received by Buyer or its representatives shall
remain subject to the Confidentiality Agreement dated December 3, 1998 between
Buyer and the Company (the "Confidentiality Agreement").
(b) The Company shall confer on a regular and frequent basis with one or
more designated representatives of Buyer to report operational matters of
materiality, the general status of ongoing operations and such other matters as
Buyer may reasonably request.
(c) The parties hereto agree that the Confidentiality Agreement shall be
hereby amended to provide that any provision therein which in any manner limits,
restricts or prohibits the voting or acquisition of Shares by Buyer or any of
its affiliates or the representation of Buyer's designees on the Company's Board
of Directors or which in any manner would be inconsistent with this Agreement or
the transactions contemplated hereby shall be amended as of the date hereof to
permit the acquisition of Shares pursuant to the Offer and the Merger, the
voting of Shares at the Company Stockholder Meeting or to otherwise affect the
transactions contemplated hereby. The Confidentiality Agreement shall otherwise
remain in full force and effect.
SECTION 6.4 No Solicitation. From the date of this Agreement until the
termination of this Agreement, the Company and its Subsidiaries will not, and
the Company will use its reasonable efforts to ensure that the respective
officers, directors, employees, agents, advisors or other representatives of the
Company and
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its Subsidiaries will not, directly or indirectly (i) solicit, initiate or
encourage any Acquisition Proposal (as defined below) or (ii) engage in
negotiations or discussions with, or disclose any nonpublic information relating
to the Company or any Subsidiary of the Company or afford access to the
properties, books or records of the Company or any Subsidiary of the Company to,
any Person concerning an Acquisition Proposal; provided that, if the Company's
Board of Directors determines in good faith, after consultation with outside
legal counsel to the Company, that the failure to engage in such negotiations or
discussions or provide such information would likely be inconsistent with the
Board of Directors' fiduciary duties under applicable law, the Company may in
response to an Acquisition Proposal, which must be a Superior Proposal (as
defined below), furnish information with respect to the Company and its
Subsidiaries pursuant to a confidentiality agreement and participate in
negotiations and enter into agreements regarding such Acquisition Proposal. The
Company will promptly inform Buyer as to the fact that information is to be
provided and the identity of the third party after receipt of any Acquisition
Proposal and will keep Buyer informed of the status and details of any such
Acquisition Proposal, indication or request. For purposes of this Agreement,
"Acquisition Proposal" means any offer or proposal for a merger or other
business combination involving the Company or any Subsidiary of the Company or
the acquisition of any equity interest in, or a substantial portion of the
assets of, the Company or any Subsidiary of the Company, other than the
transactions contemplated by this Agreement. For purposes of this Agreement,
"Superior Proposal" means any bona fide Acquisition Proposal, which proposal was
not solicited by the Company after the date of this Agreement, made by a third
party to acquire, directly or indirectly, for consideration consisting of cash
and/or securities (the value of any such securities to be determined in good
faith with the advice of a nationally recognized investment banking firm) more
than a majority of the Shares then outstanding or all or substantially all of
the assets of the Company, and otherwise on terms which the Board of Directors
of the Company determines in good faith to be more favorable to the Company and
its stockholders than the Offer and the Merger (based on advice of the Company's
financial advisor that the value of the consideration provided for in such
proposal is superior to the value of the consideration provided for in the Offer
and Merger) and has a reasonable prospect of being consummated in accordance
with its terms. Furthermore, nothing contained in this Section 6.4 shall
prohibit the Company or its Board of Directors from taking and disclosing to the
Company's stockholders a position with respect to a tender or exchange offer by
a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act or from making such disclosure to the Company's stockholders or
making such disclosure as may be required by applicable law.
SECTION 6.5 Conveyance Taxes. The Company shall timely pay any real
property transfer or gains, sales, use, transfer, value added, stock transfer
and stamp taxes, any transfer, recording, registration and other fees, and any
similar taxes (collectively, the "Conveyance Taxes") which become payable prior
to the Effective Time in connection with the transactions contemplated hereunder
that are required to be paid in connection therewith.
SECTION 6.6 Directors Stock Plan. Immediately prior to the acceptance for
payment by Merger Subsidiary of any Shares tendered pursuant to the Offer, the
Company shall amend the Company's 1996 Non-Qualified Non-Employee Directors
Stock Option Plan to provide that the Merger Subsidiary's designees elected or
appointed pursuant to Section 1.3 hereof shall not be entitled to receive any of
the Company's capital stock or other benefits under the Company's Directors
Stock Plan.
ARTICLE VII
COVENANTS OF BUYER
Buyer agrees that:
SECTION 7.1 Obligations of Merger Subsidiary. Buyer will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Offer and the Merger on the terms and conditions
set forth in this Agreement.
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SECTION 7.2 Voting of Shares. Merger Subsidiary shall and Buyer shall
cause Merger Subsidiary to vote all Shares beneficially owned by Merger
Subsidiary or its affiliates in favor of adoption and approval of the Merger and
this Agreement at the Company Stockholder Meeting.
SECTION 7.3 Director and Officer Insurance. (a) Buyer, Merger Subsidiary
and the Company agree that all rights to indemnification and all limitations on
liability existing in favor of any officer, director, employee or agent of the
Company and any of its subsidiaries (the "Indemnitees") as provided in the
Company Certificate of Incorporation, Company By-laws or a Material Contract as
in effect as of the date hereof shall survive the Merger and continue in full
force and effect. For five years after the Effective Time, Buyer will, and will
cause the Surviving Corporation to, provide officers' and directors' liability
insurance in respect of acts or omissions occurring prior to the Effective Time
covering each such Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date hereof.
Buyer agrees that, should the Surviving Corporation fail to comply with the
obligations of this Section 7.3, Buyer shall be responsible therefor. It is
understood that the Indemnitees will seek to be reimbursed for any liability or
loss from such Indemnitee's liability insurance policy prior to seeking any
other reimbursement provided for herein, including that referred to in the first
sentence of this section.
(b) In the event the Company or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person or entity or (ii) transfers all or substantially all of its properties or
assets to any Person, then, and in each case, proper provision shall be made so
that successors and assigns of the Company or the Surviving Corporation, as the
case may be, honor the obligations set forth in this Section 7.3 and the
agreements set forth in Section 8.6(b) hereof.
(c) The obligations of the Company, the Surviving Corporation, and Buyer
under this Section 7.3 and Section 8.6 hereof shall not be terminated or
modified in such a manner as to adversely affect any Person to whom this Section
7.3 or Section 8.6 hereof applies without the consent of such affected Person
(it being expressly agreed that the Persons to whom this Section 7.3 and Section
8.6(b) hereof applies shall be third party beneficiaries of this Section 7.3 and
Section 8.6(b) hereof).
SECTION 7.4 Investment Banking Fees. The Company has provided to Buyer a
copy of the DLJ Letter.
ARTICLE VIII
COVENANTS OF BUYER
AND THE COMPANY
The parties hereto agree that:
SECTION 8.1 Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each party will use its reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, and to consummate the Merger by
April 30, 1999. Nothing in this Section 8.1 or otherwise in this Agreement shall
prevent or restrict the Company from entering into a definitive agreement with a
third party in connection with an Acquisition Proposal that the Board of
Directors determines in good faith, after Consultation with its legal counsel,
is a Superior Proposal.
SECTION 8.2 Certain Filings. The Company and Buyer shall cooperate with
one another and use their best commercially reasonable efforts (a) in connection
with the preparation of the Company Disclosure Documents and the Offer
Documents, and (b) in determining whether any action by or in respect of, or
filing with, any Governmental Entity is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement and (c) in seeking promptly any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith or with the Company Disclosure Documents or the Offer
Documents and seeking timely to obtain any such actions, consents, approvals or
waivers.
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SECTION 8.3 Public Announcements. The initial press releases with respect
to the execution of this Agreement shall be approved in advance by both Buyer
and the Company. Buyer and the Company will consult with each other before
issuing any press release or making any public statement with respect to this
Agreement and the transactions contemplated hereby and, except as may be
required by applicable law or any listing agreement with any national securities
exchange or foreign securities exchange, will not issue any such press release
or make any such public statement prior to such consultation.
SECTION 8.4 Conveyance Taxes. Buyer and the Company shall cooperate in the
preparation, execution and filing of all Tax Returns, questionnaires,
applications, or other documents regarding any Conveyance Taxes which become
payable in connection with the transactions contemplated hereunder that are
required or permitted to be filed on or before the Effective Time.
SECTION 8.5 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
SECTION 8.6 Employee Matters. (a) For a period of one year immediately
following the Closing Date Buyer agrees to cause the Surviving Corporation and
its Subsidiaries to provide to all active employees of the Company who continue
to be employed by the Company as of the Effective Time ("Continuing Employees")
coverage under existing benefit plans or arrangements which is no less favorable
than those provided to the employees immediately prior to the Closing Date.
During the second year following the Closing Date, Buyer agrees to cause the
Surviving Corporation and its Subsidiaries to provide Continuing Employees
coverage under benefit plans and arrangements no less favorable in the aggregate
than those provided to the employees immediately prior to the Closing Date.
(b) Buyer shall, and shall cause its Subsidiaries to, honor in accordance
with their terms all agreements, contracts, arrangements, commitments and
understandings described in Schedule 8.6 of the Company Disclosure Schedule.
SECTION 8.7 Stockholder Litigation. The Company and the Buyer agree that
in connection with any litigation which may be brought against the Company or
its directors relating to the transactions contemplated hereby, the Company will
keep Buyer, and any counsel which Buyer may retain, informed of the course of
such litigation, to the extent Buyer is not otherwise a party thereto, and the
Company agrees that it will consult with Buyer prior to entering into any
settlement or compromise of any such stockholder litigation; provided that no
such settlement or compromise will be entered into without Buyer's prior written
consent, which consent shall not be unreasonably withheld.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.1 Conditions to the Obligations of Each Party. The obligations
of the Company, Buyer and Merger Subsidiary to consummate the Merger are subject
to the satisfaction on or prior to the Effective Time of the following
conditions, except to the extent permitted by applicable law, that such
conditions may be waived:
(i) if required by the DGCL, this Agreement shall have been adopted by
the stockholders of the Company in accordance with such Law;
(ii) any applicable waiting period under the HSR Act relating to the
Merger shall have expired;
(iii) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of
the Merger; and
(iv) Buyer or Merger Subsidiary shall have purchased the Shares
pursuant to the Offer.
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ARTICLE X
TERMINATION
SECTION 10.1 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company):
(i) by mutual written consent of the Company and Buyer;
(ii) by either the Company or Buyer, if the Offer has not been
consummated within 45 business days after the date of execution of this
Agreement (as such date may be extended pursuant to the proviso to this
sentence, the "Outside Termination Date"); provided, however, that the
right to terminate this Agreement under this paragraph shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure to meet the
date requirements of this paragraph;
(iii) by either the Company or Buyer, if there shall be any law or
regulation that makes consummation of the Merger illegal or if any
judgment, injunction, order or decree enjoining Buyer or the Company from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable;
(iv) by the Company, if Buyer or Merger Subsidiary breaches or fails
in any material respect to perform or comply with any of its material
covenants and agreements contained herein or breaches its representations
and warranties in any material respect;
(v) by Buyer, if the Company breaches or fails in any material respect
to perform or comply with any of its material covenants and agreements
contained herein or breaches its representations and warranties in any
material respect; or
(vi) by either the Company or Buyer, upon the Company entering into a
definitive agreement in connection with an Acquisition Proposal that the
Board of Directors determines in good faith, after consultation with its
legal counsel is a Superior Proposal.
The party desiring to terminate this Agreement pursuant to clauses (ii),
(iii), (iv) or (v) shall give written notice of such termination to the other
party in accordance with the notice procedures set forth in Section 12.1.
SECTION 10.2 Effect of Termination. (a) If this Agreement is terminated
pursuant to Section 10.1 hereof, this Agreement shall become void and of no
effect with no liability on the part of any party hereto; provided that the
agreements contained in Sections 4.16, 10.2 and 12.4 hereof shall survive the
termination hereof; and provided, further that the Confidentiality Agreement
shall remain in full force and effect and Section 6.3(b) hereof shall have no
binding effect whatsoever.
(b) In the event that this Agreement is terminated by the Company pursuant
to Section 10.1(vi) hereof, the Company shall pay to Buyer by wire transfer of
immediately available funds to an account designated by Buyer on the next
business day following such termination, an amount equal to $3,000,000.
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ARTICLE XI
DEFINED TERMS
For the purposes of this Agreement, the following terms shall have the
following respective meanings:
"Acquisition Proposal" shall have the meaning set forth in Section 6.4.
"Affiliate Transaction" shall have the meaning set forth in Section 4.10
(j).
"Agreement" shall have the meaning set forth in the Introduction.
"Buyer" shall have the meaning set forth in Introduction.
"Buyer Disclosure Schedule" shall have the meaning set forth in Section
5.1.
"Certificate of Merger" shall have the meaning set forth in Section 2.1(b).
"Closing" shall have the meaning set forth in Section 2.7.
"Closing Date" shall have the meaning set forth in Section 2.7.
"Code" shall have the meaning set forth in Section 4.13(e).
"Company" shall have the meaning set forth in the Introduction.
"Company By-laws" means the by-laws of the Company as in effect on the date
of this Agreement.
"Company Certificate of Incorporation" means the certificate of
incorporation of the Company as in effect on the date of this Agreement.
"Company Disclosure Documents" shall have the meaning set forth in Section
4.9.
"Company Disclosure Schedule" shall have the meaning set forth in Section
1.3(c).
"Company Proxy Statement" shall have the meaning set forth in Section 6.2.
"Company SEC Documents" shall have the meaning set forth in Section 4.7.
"Company Securities" shall have the meaning set forth in Section 4.5.
"Company Stockholder Meeting" shall have the meaning set forth in Section
6.2.
"Confidentiality Agreement" shall have the meaning set forth in Section
6.3.
"Continuing Directors" shall have the meaning set forth in Section 1.3(a).
"Continuing Employees" shall have the meaning set forth in Section 8.6(a).
"Conveyance Taxes" shall have the meaning set forth in Section 6.5.
"Date Data" shall have the meaning set forth in Section 4.22.
"Date-Sensitive System" shall have the meaning set forth in Section 4.22.
"Depositary" shall have the meaning set forth in Section 2.3(a).
"DGCL" shall have the meaning set forth in the Introduction.
"Dissenting Shares" shall have the meaning set forth in Section 2.4.
"DLJ" shall have the meaning set forth in Section 1.2 (b).
"Effective Time" shall have the meaning set forth in Section 2.1(b).
"Employee Benefit Plans" shall have the meaning set forth in Section
4.13(a).
"Environmental Law" shall have the meaning set forth in Section 4.17(c).
"ERISA" shall have the meaning set forth in Section 4.13.
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"ERISA Affiliate" shall have the meaning set forth in Section 4.13(a).
"Exchange Act" shall have the meaning set forth in Section 1.1(a).
"GAAP" shall have the meaning set forth in Section 4.8.
"Group" shall have the meaning set forth in Annex I.
"Governmental Entity" shall have the meaning set forth in Section 4.3.
"HSR Act" shall have the meaning set forth in Section 4.3.
"Indemnitees" shall have the meaning set forth in Section 7.3.
"Knowledge" or "knowledge" means, with respect to the Company and/or any
Subsidiary thereof, knowledge of the current President, Chief Financial Officer
and Executive Vice President of the Company after reasonable investigation and
inquiry commensurate with that of a reasonable person holding such a position
with a public company.
"Licenses" shall have the meaning set forth in Section 4.1.
"Lien" shall have the meaning set forth in Section 4.4.
"Material Adverse Effect" shall have the meaning set forth in Section 4.1.
"Material Contracts" shall have the meaning set forth in Section 4.20.
"Material Trademarks" shall have the meaning set forth in Section 4.19(a).
"Merger" shall have the meaning set forth in Section 2.1(a).
"Merger Consideration" shall have the meaning set forth in Section 2.2(c).
"Merger Subsidiary" shall have the meaning set forth in the Introduction.
"Minimum Condition" shall have the meaning set forth in Annex I.
"Offer" shall have the meaning set forth in the Introduction.
"Offer Documents" shall have the meaning set forth in Section 1.1(b).
"Offer Price" shall have the meaning set forth in the Introduction.
"Option" shall have the meaning set forth in Section 2.5(a).
"Option Plans" shall have the meaning set forth in Section 2.5(a).
"Outside Termination Date" shall have the meaning set forth in Section
10.1(ii).
"PBGC" shall have the meaning set forth in Section 4.13(c).
"Person" shall have the meaning set forth in Section 2.3(c).
"Plans" shall have the meaning set forth in Section 4.13(a).
"Preferred Stock" shall have the meaning set forth in Section 4.5.
"Qualified Plans" shall have the meaning set forth in Section 4.5.
"Schedule 14D-9" shall have the meaning set forth in Section 1.2(d).
"SEC" shall have the meaning set forth in Section 1.1(b).
"Secretary of State" shall have the meaning set forth in Section 2.1(b).
"Securities Act" shall have the meaning set forth in Section 4.7.
"Shares" shall have the meaning set forth in Introduction.
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"single employer" shall have the meaning set forth in Section 4.13(a).
"Solvent" shall mean, with respect to any Person, that (a) the fair
saleable value of the property of such Person is, on the date of determination,
greater than the total amount of liabilities (including contingent and
unliquidated liabilities) of such Person as of such date, (b) as of such date,
such Person is able to pay all of its liabilities as such liabilities mature,
(c) such Person does not have unreasonably small capital for conducting the
business theretofore or proposed to be conducted by such Person and its
Subsidiaries, and (d) such Person has not incurred nor does it plan to incur
debts beyond its ability to pay as they mature. The amount of any contingent or
unliquidated liability at any time will be computed as the amount which, in
light of all the facts and circumstances existing at such time, can reasonably
be expected to become an actual or matured liability.
"Subsidiary" shall have the meaning set forth in Section 4.6.
"Superior Proposal" shall have the meaning set forth in Section 6.4.
"Surviving Corporation" shall have the meaning set forth in Section 2.1(a).
"Tax Return" shall have the meaning set forth in Section 4.12(b)(i).
"Taxes" shall have the meaning set forth in Section 4.12(b)(i).
"The 1995 Plan" shall have the meaning set forth in Section 4.5.
"The 1996 Plan" shall have the meaning set forth in Section 4.5.
"Year 2000 Compliant" shall have the meaning set forth in Section 4.22.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given,
if to Buyer or Merger Subsidiary, to:
CustomerONE Holding Corporation
644 Elliott Street
Buffalo, New York 14201
Telecopy: (716) 871-2175
Attention: Mark Briggs
with a copy to:
Mary R. Korby, Esq.
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy: (214) 746-7777
if to the Company, to:
LCS Industries, Inc.
120 Brighton Road
Clifton, New Jersey 07012
Telecopy: (973) 778-7485
Attention: Pat R. Frustaci
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with copies to:
Kirkpatrick & Lockhart, L.L.P.
1251 Avenue of the Americas, 45th Floor
New York, NY 10020-1104
Telecopy: (212) 536-3901
Attention: Peter B. Hirshfield, Esq.
and:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopy: (212) 735-2000
Attention: Thomas H. Kennedy, Esq.
or such other address or telecopy number as such party may hereafter specify for
the purpose of giving notice to the other parties hereto. Each such notice,
request or other communication shall be effective (i) if given by telecopy, when
such telecopy is transmitted to the telecopy number specified in this Section
12.1 and the appropriate telecopy confirmation is received or (ii) if given by
any other means, when delivered at the address specified in this Section 12.1.
SECTION 12.2 Nonsurvival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement. All covenants and agreements contained herein
which by their terms are to be performed in whole or in part subsequent to the
Effective Time shall survive the Merger in accordance with their terms. Nothing
contained in this Section 12.2 shall relieve any party from liability for any
willful breach of this Agreement.
SECTION 12.3 Amendments; No Waivers. (a) Except as may otherwise be
provided herein, any provision of this Agreement may be amended or waived prior
to the Effective Time if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the Company, Buyer and Merger
Subsidiary or in the case of a waiver, by the party against whom the waiver is
to be effective; provided that after the adoption of this Agreement by the
stockholders of the Company, no such amendment or waiver shall, without the
further approval of such stockholders: (i) reduce the Offer Price; (ii) alter or
change the Merger Consideration to be received in exchange for the Shares, or
(iii) alter or change any of the terms or conditions of this Agreement if such
alteration or change could adversely affect the holders of any shares of capital
stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 12.4 Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
SECTION 12.5 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Buyer may transfer
or assign, in whole or from time to time in part, to one or more of its direct
or indirect wholly-owned Subsidiaries, the right to purchase Shares pursuant to
the Offer, but any such transfer or assignment will not relieve Buyer of its
obligations under the Offer or prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
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SECTION 12.6 Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware without regard
to conflicts of laws.
SECTION 12.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated herein is not affected in any manner
materially adverse to any party hereto. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner.
SECTION 12.8 Third Party Beneficiaries. No provision of this Agreement
other than Section 7.3 and Section 8.6 hereof is intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
SECTION 12.9 Entire Agreement. This Agreement, including any exhibits,
annexes or schedules hereto and the Confidentiality Agreement constitutes the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all other prior agreements or undertaking with respect
thereto, both written and oral.
SECTION 12.10 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
LCS INDUSTRIES, INC.
/s/ WILLIAM RELLA
------------------------------------
William Rella
President and Chief Executive
Officer
CUSTOMERONE HOLDING CORPORATION
/s/ MARK R. BRIGGS
------------------------------------
Mark R. Briggs
President
CATALOG ACQUISITION CO.
/s/ MARK R. BRIGGS
------------------------------------
Mark R. Briggs
President
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ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provisions of the Offer or this Agreement, Merger
Subsidiary shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Merger Subsidiary's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), to pay
for and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payments for, any Shares validly tendered pursuant to the
Offer and may terminate the Offer and not accept for payment any tendered
Shares, unless, (i) there shall have been validly tendered and not withdrawn
such number of Shares which would constitute a majority of the outstanding
Shares determined on a fully diluted basis (or, at the option of Buyer, a lesser
number equaling a majority of the Shares on an issued and outstanding basis)
(the "Minimum Condition") and (ii) any waiting period under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall have expired or
been terminated. Furthermore, notwithstanding any other term of the Offer or
this Agreement, Merger Subsidiary shall not be required to accept for payment
or, subject as aforesaid, to pay for any Shares not theretofore accepted for
payment or paid for, and may terminate the Offer if, at any time on or after the
date of this Agreement and before the acceptance of such Shares for payment or
the payment therefor, any of the following conditions exists (other than as a
result of any action or inaction of Buyer, Merger Subsidiary or any of their
respective Subsidiaries which constitutes a breach of this Agreement):
(a) there shall be instituted and pending by any Governmental Entity any
action or proceeding which seeks to (i) prohibit, or materially limit Buyer's or
Merger Subsidiary's ownership or operation of all or a material portion of the
businesses or assets of the Company and its Subsidiaries, taken as a whole, or
compel Buyer or Merger Subsidiary to dispose of or hold separate all or any
material portion of the business or assets of the Company and its Subsidiaries,
taken as a whole, (ii) materially restrict, prevent or prohibit consummation of
the Offer, the Merger or any transaction contemplated by the Agreement, (iii)
impose material limitations on the ability of Merger Subsidiary or Buyer to
exercise full rights of ownership of the Shares, including without limitation,
the right to vote the Shares purchased by Merger Subsidiary pursuant to the
Offer on all matters properly presented to the Company's stockholders, or (iv)
require material divestitures by Buyer or Merger Subsidiary; provided that Buyer
shall have used its commercially reasonable best efforts to cause any such
decree, judgment, injunction or other order to be vacated or lifted;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction promulgated, entered, enforced, enacted, issued or applicable to the
Offer or the Merger by any Governmental Entity that results in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a) above;
(c) the representations and warranties of the Company set forth in the
Agreement shall not be true and correct as of the date of consummation of the
Offer as though made on or as of such date where the failure of such
representations and warranties to be true and correct have, and could reasonably
be expected to have, a Material Adverse Effect on the Company or on the ability
of Merger Subsidiary to consummate the Offer or the Merger;
(d) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any material agreement or
covenant of the Company to be performed or complied with by it under this
Agreement where the failure to so comply could reasonably be expected to have, a
Material Adverse Effect on the Company or on the ability of Merger Subsidiary to
consummate the Offer or the Merger;
(e) the Agreement shall have been terminated in accordance with its terms;
(f) any person, entity or "group" (as defined in Section 13(d)(3) of the
Exchange Act), shall have acquired beneficial ownership (determined pursuant to
Rule 13d-3 promulgated under the Exchange Act) of more than 25% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or the Company
shall have entered into a definitive
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agreement or agreement in principle with any person with respect to an
Acquisition Proposal or similar business combination with the Company;
(g) the Company's Board of Directors shall have withdrawn, or modified or
changed in a manner adverse to Buyer or Merger Subsidiary (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the Agreement,
or the Merger, or recommended an Acquisition Proposal, or shall have resolved to
do any of the foregoing; or
(h) there shall have occurred a Material Adverse Effect.
The foregoing conditions are for the sole benefit of Merger Subsidiary and
Buyer and may be waived by Buyer or Merger Subsidiary (except for the Minimum
Condition), in whole or in part at any time and from time to time in the sole
discretion of Buyer or Merger Subsidiary. The failure by Buyer at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
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