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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
LCS INDUSTRIES, INC.
(Name of Subject Company)
CATALOG ACQUISITION CO.
(Bidder)
CUSTOMERONE HOLDING CORPORATION
(Co-Bidder)
COMMON STOCK, $0.01 PAR VALUE PER SHARE
(Title of Class of Securities)
501822 20 9
(CUSIP number)
THOMAS O. HARBISON
CATALOG ACQUISITION CO.
C/O CUSTOMERONE HOLDING CORPORATION
8117 PRESTON ROAD, SUITE 205
DALLAS, TEXAS 75225
TELEPHONE: (214) 696-8787
(Name, Address and Telephone Number
Person Authorized to Receive Notices
and Communications on Behalf of Bidder)
COPIES TO:
MARY R. KORBY
WEIL, GOTSHAL & MANGES LLP
100 CRESCENT COURT, SUITE 1300
DALLAS, TEXAS 75201
TELEPHONE: (214) 746-7700
CALCULATION OF FILING FEE
Transaction valuation* Amount of filing fee
$ 97,256,197.50 $ 19,460
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*The transaction value equals the sum of 5,557,497 (the number of shares of
Common Stock of the subject company outstanding plus shares of Common Stock
issuable pursuant to exercisable options) multiplied by $17.50.
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[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.
Amount Previously Paid: Not applicable.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
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Item 1. Security and Subject Company
(a) The name of the subject company is LCS Industries, Inc., a
Delaware corporation (the "Company"), and the address of its principal executive
offices is set forth in Section 7 "Certain Information Concerning the Company"
of the Offer to Purchase, which is incorporated herein by reference.
(b) This Statement relates to the offer by Catalog Acquisition Co., a
Delaware corporation ("Purchaser")and a wholly-owned subsidiary of CustomerONE
Holding Corporation, a Delaware corporation ("Parent"), to purchase all
outstanding shares of Common Stock, $0.01 par value per share (the "Shares"), of
the Company at $17.50 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase and in the related
Letter of Transmittal, respectively, copies of which are attached hereto as
Exhibits (a)(1) and (a)(2) (which, together with any supplements or amendments,
are herein collectively referred to as the "Offer"). As of December 16, 1998,
there were 4,898,447 Shares outstanding. The bidder is Purchaser and co-bidder
is Parent.
(c) The information set forth in Section 6 "Price Range of Shares;
Dividends" of the Offer to Purchase is incorporated herein by reference.
Item 2. Identity and Background.
(a)-(d),(g) This Statement is filed by Purchaser and Parent. The
information set forth in the Introduction, Section 8 "Certain Information
Concerning Purchaser and Parent" and Schedule A of the Offer to Purchase is
incorporated herein by reference.
(e)-(f) Neither Purchaser nor Parent, to the best knowledge of
Purchaser, any of the persons listed in Schedule A of the Offer to Purchase, has
during the last five years (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations with the
Subject Company.
(a)-(b) The information set forth in the Introduction and Section 10
"Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company" of the Offer to Purchase is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a)-(b) The information set forth in Section 9 "Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the
Bidder.
(a)-(e) The information set forth in the Introduction and Section 12
"Purpose of the Offer; Plans for the Company" of the Offer to Purchase is
incorporated herein by reference.
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(f)-(g) The information set forth in Section 13 "Effect of the Offer
on the Market for the Shares; Stock Exchange Listing; Registration Under the
Exchange Act" of the Offer to Purchase is incorporated herein by reference.
Item 6. Interest in Securities of the Subject Company.
(a)-(b) The information set forth in the Introduction, Section 8
"Certain Information Concerning Parent and Purchaser" and Schedule A of the
Offer to Purchase is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships
with Respect to the Subject Company's Securities.
The information set forth in the Introduction, Section 8 "Certain
Information Concerning Purchaser and Parent," Section 9 "Source and Amount of
Funds", Section 11 "The Merger Agreement and the Confidentiality Agreement" and
Schedule A of the Offer to Purchase is incorporated herein by reference.
Item 8. Persons Retained, Employed or to be Compensated.
The information set forth in Section 18 "Fees and Expenses" of the
Offer to Purchase is incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders.
Not applicable.
Item 10. Additional Information.
(a) The information set forth in the Introduction, Section 10
"Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company" and Section 11 "The Merger Agreement and the Confidentiality Agreement"
of the Offer to Purchase is incorporated herein by reference.
(b)-(c) The information set forth in Section 17 "Certain Legal
Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein
by reference.
(d) The information set forth in Section 13 "Effect of the Offer
on the Market for the Shares; Stock Exchange Listing; Registration Under the
Exchange Act" of the Offer to Purchase is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase and the
Letter of Transmittal is incorporated herein by reference in its entirety.
Item 11. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase, dated December 23, 1998.
(a)(2) Letter of Transmittal (including Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9).
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(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Text of press release issued by Parent and Purchaser dated
December 17, 1998.
(a)(7) Form of summary advertisement dated December 23, 1998.
(b)(1) Letter dated as of December 11, 1998 from Toronto Dominion to
Parent.
(b)(2) Letter dated as of December 16, 1998 from Onex Corporation to
Parent.
(c)(1) Agreement and Plan of Merger dated as of December 17, 1998,
by and among Parent, Purchaser and the Company.
(c)(2) Confidentiality Agreement dated as of July 14, 1998 between
the Company and Parent.
(d) None.
(e) Not applicable.
(f) None.
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SIGNATURE
After due 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.
Dated: December 23, 1998
CATALOG ACQUISITION CO.
By: /s/ THOMAS O. HARBISON
------------------------------------
Name: Thomas O. Harbison
Title: Chief Executive Officer
CUSTOMERONE HOLDING CORPORATION
By: /s/ THOMAS O. HARBISON
------------------------------------
Name: Thomas O. Harbison
Title: Chief Executive Officer
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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
LCS INDUSTRIES, INC.
AT
$17.50 NET PER COMMON SHARE
BY
CATALOG ACQUISITION CO.
A WHOLLY-OWNED SUBSIDIARY OF
CUSTOMERONE HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 22, 1999, UNLESS THE OFFER IS EXTENDED.
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 OF COMMON STOCK, PAR VALUE $0.01 PER SHARE (THE "SHARES"), OF LCS
INDUSTRIES, INC. (THE "COMPANY"), WHICH, TOGETHER WITH ANY SHARES THEN
BENEFICIALLY OWNED BY CATALOG ACQUISITION CO. AND CUSTOMERONE HOLDING
CORPORATION ("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) AND
(II) ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER HAVING
EXPIRED OR BEEN TERMINATED. CERTAIN OTHER CONDITIONS TO CONSUMMATION OF THE
OFFER ARE DESCRIBED IN SECTION 16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE MERGER AGREEMENT,
THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS
OF SHARES AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
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IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should (i) complete and sign the Letter of Transmittal (or facsimile
thereof) in accordance with the instructions in the Letter of Transmittal and
deliver it with the certificate(s) representing tendered Shares and all other
required documents to the Depositary, (ii) tender such Shares pursuant to the
procedures for book-entry transfer set forth in Section 3 of this Offer to
Purchase or (iii) request his or her broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for him or her. A stockholder
having Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such person if he or she desires to tender
such Shares.
Any stockholder who desires to tender Shares and cannot deliver such Shares
and all other required documents to the Depositary by the expiration of the
Offer or who cannot comply with the procedures for book-entry transfer on a
timely basis must tender such Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of this Offer to Purchase.
Questions and requests for assistance may be directed to the Information
Agent at its respective address and telephone number set forth on the back cover
of this Offer to Purchase. Requests for additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be
directed to the Information Agent, or to brokers, dealers, commercial banks or
trust companies.
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December 23, 1998
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
INTRODUCTION..................................................... 1
1. TERMS OF THE OFFER; EXPIRATION DATE......................... 2
2. ACCEPTANCE FOR PAYMENT AND PAYMENT.......................... 2
3. PROCEDURE FOR TENDERING SHARES.............................. 3
4. WITHDRAWAL RIGHTS........................................... 5
5. CERTAIN TAX CONSIDERATIONS.................................. 6
6. PRICE RANGE OF SHARES; DIVIDENDS............................ 6
7. CERTAIN INFORMATION CONCERNING THE COMPANY.................. 7
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT......... 9
9. SOURCE AND AMOUNT OF FUNDS.................................. 10
10. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR
NEGOTIATIONS WITH THE COMPANY............................... 10
11. THE MERGER AGREEMENT AND THE CONFIDENTIALITY AGREEMENT...... 11
12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY................. 17
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK
EXCHANGE LISTING; REGISTRATION UNDER THE EXCHANGE ACT....... 19
14. DISTRIBUTIONS............................................... 19
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.......... 20
16. CERTAIN CONDITIONS OF THE OFFER............................. 21
17. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS................. 22
18. FEES AND EXPENSES........................................... 24
19. MISCELLANEOUS............................................... 24
Schedule A -- Directors and Executive Officers of Parent and A-1
Purchaser......................................................
Schedule B -- Agreement and Plan of Merger....................... B-1
</TABLE>
(i)
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To the Holders of Common Stock
of LCS INDUSTRIES, INC.:
INTRODUCTION
Catalog Acquisition Co., a Delaware corporation ("Purchaser") and a
wholly-owned subsidiary of CustomerONE Holding Corporation, a Delaware
corporation ("Parent"), hereby offers to purchase all outstanding shares of
Common Stock, $0.01 par value per share (the "Shares"), of LCS Industries, Inc.,
a Delaware corporation (the "Company"), at $17.50 per Share, net to the seller
in cash (the "Offer Price"), upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal (which,
together with any amendments or supplements, constitute the "Offer"). Tendering
stockholders will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares pursuant to the Offer. Stockholders who hold
Shares through a bank or broker should consult with such institution as to
whether they charge any service fees, which will be the responsibility of the
stockholder. Purchaser will pay all charges and expenses of American Securities
Transfer & Trust Inc. (the "Depositary") and D.F. King & Co., Inc. (the
"Information Agent") incurred in connection with the Offer. See Section 18.
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. CERTAIN OTHER CONDITIONS TO
CONSUMMATION OF THE OFFER ARE DESCRIBED IN SECTION 16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT (AS DEFINED), THE OFFER AND THE MERGER (AS DEFINED) AND DETERMINED
THAT THE MERGER AGREEMENT, THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE HOLDERS OF SHARES AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE COMPANY HAS ADVISED PARENT AND PURCHASER THAT DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION ("DLJ"), FINANCIAL ADVISOR TO THE COMPANY, HAS
DELIVERED TO THE BOARD OF DIRECTORS OF THE COMPANY ITS WRITTEN OPINION TO THE
EFFECT THAT, AS OF THE DATE OF THE MERGER AGREEMENT, THE CONSIDERATION TO BE
RECEIVED BY THE HOLDERS OF SHARES PURSUANT TO THE MERGER AGREEMENT IS FAIR FROM
A FINANCIAL POINT OF VIEW TO SUCH HOLDERS. THE FULL TEXT OF THE WRITTEN OPINION
OF DLJ CONTAINING THE ASSUMPTIONS MADE, THE MATTERS CONSIDERED AND THE
LIMITATIONS OF THE REVIEW UNDERTAKEN IN RENDERING SUCH OPINION IS INCLUDED WITH
THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9, WHICH HAS
BEEN FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") AND IS BEING MAILED TO STOCKHOLDERS CONCURRENTLY HEREWITH.
STOCKHOLDERS ARE URGED TO AND SHOULD READ THE FULL TEXT OF SUCH OPINION IN
CONJUNCTION WITH THIS OFFER.
According to the Company, as of December 16, 1998, (i) 4,898,447 shares
were issued and outstanding, (ii) 659,050 shares were issuable pursuant to the
exercise of outstanding stock options granted and remaining unexercised pursuant
to the Option Plans (as defined) and (iii) 133,871 shares were issuable pursuant
to certain obligations of the Company. Based upon the foregoing, there were
approximately 5,691,368 shares outstanding on a fully-diluted basis.
Accordingly, Purchaser believes that the Minimum Condition would be satisfied if
at least 2,851,376 shares are validly tendered pursuant to the Offer and not
withdrawn. However, at the option of Parent, the Minimum Condition may be
satisfied if a number of Shares equaling a majority of the Shares on an issued
and outstanding basis are validly tendered and not withdrawn prior to the
Expiration Date (as defined). As of December 16, 1998, 4,898,447 shares were
issued and outstanding. Accordingly, the Minimum Condition may be satisfied at
the option of Parent if at least 2,454,122 shares are validly tendered and not
withdrawn.
<PAGE> 4
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of December 17, 1998 (the "Merger Agreement") among the Company, Parent and
Purchaser. The Merger Agreement provides, among other things, that as soon as
practicable after the consummation of the Offer, Purchaser will be merged with
and into the Company (the "Merger"), with the Company continuing as the
surviving corporation (the "Surviving Corporation"). Pursuant to the Merger,
each outstanding Share (other than Shares held by Parent, Purchaser or any other
subsidiary of Parent and Shares held by stockholders properly exercising
appraisal rights under the General Corporation Law of the State of Delaware (the
"DGCL")) will be converted into the right to receive $17.50 in cash, without
interest. The Merger Agreement requires that Purchaser obtain the written
consent of the Company prior to (i) reducing the number of Shares which
Purchaser is offering to purchase in the Offer, (ii) reducing the Offer Price,
(iii) modifying or adding to the conditions to the Offer, (iv) changing the form
of consideration payable in the Offer or (v) otherwise amending or modifying the
Offer in any manner adverse to the holders of the Shares. For a discussion of
the treatment of stock options in the Merger, see Section 11.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions set forth in the Offer,
Purchaser will accept for payment and pay for all Shares that are validly
tendered on or prior to the Expiration Date and not withdrawn as provided in
Section 4. The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on Friday, January 22, 1999, unless Purchaser shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended by
Purchaser, shall expire.
The Offer is subject to certain conditions set forth in Section 16,
including satisfaction of the Minimum Condition and the expiration or
termination of the waiting period applicable to Purchaser's acquisition of
Shares pursuant to the Offer under the HSR Act. If such conditions are not
satisfied prior to the Expiration Date, Parent and Purchaser reserve the right,
subject to the terms of the Merger Agreement and subject to complying with any
applicable rules and regulations of the Commission, to (i) delay acceptance for
payment of, or, regardless of whether such Shares were theretofore validly
tendered, payment for any Shares, (ii) terminate the Offer and not accept for
payment validly tendered Shares or (iii) waive any condition or otherwise amend
the Offer in any respect by giving notice of such delay, termination, waiver or
amendment to the Depositary and making a public announcement thereof. The Merger
Agreement provides that, without the Company's consent, Parent and Purchaser
shall 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 above and 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 holders of the Shares. During any extension, all
Shares previously tendered and not withdrawn will remain subject to the Offer,
subject to the rights of a tendering stockholder to withdraw Shares. For a
description of the conditions to the Offer, see Section 16.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the materials for
the Offer to holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished to
brokers, banks and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer, Purchaser will
accept for payment and pay for all Shares validly tendered on or prior to the
Expiration Date and not withdrawn as soon as practicable after
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the later of the Expiration Date and the satisfaction or waiver of the
conditions set forth in Section 16; provided that Purchaser may extend the Offer
for 10 additional business days from the date that all conditions to the Offer
have been satisfied or waived if the number of Shares that have been tendered on
or prior to the Expiration Date and not withdrawn represents more than 50% but
less than 90% of the Shares outstanding on a fully-diluted basis. See Section
11. For a description of Purchaser's right to terminate the Offer and not accept
for payment or pay for Shares or to delay acceptance for payment or payment for
Shares, see Sections 15 and 16.
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment tendered Shares when, as and if Purchaser gives oral or written notice
to the Depositary of its acceptance of the tenders of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price with the Depositary, which will act as agent for the tendering
stockholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering stockholders. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates for such Shares (or of a confirmation
of a book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility (as defined)), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other required
documents. For a description of the procedure for tendering Shares pursuant to
the Offer, see Section 3. Accordingly, payment may be made to tendering
stockholders at different times if delivery of the Shares and other required
documents occur at different times.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON THE
CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If Purchaser increases the consideration to be paid for Shares pursuant to
the Offer, Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer.
Parent reserves the right to 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 tendered pursuant to the Offer, but any such
transfer or assignment will not relieve Parent of its obligations under the
Offer or prejudice the rights of tendering stockholders to receive payment for
Shares validly tendered and accepted for payment.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased or untendered Shares will be returned (or, in
the case of Shares tendered by book-entry transfer, such Shares will be credited
to an account maintained at the Book-Entry Transfer Facility), without expense
to the tendering stockholder, as promptly as practicable following the
expiration or termination of the Offer.
3. PROCEDURE FOR TENDERING SHARES.
To tender Shares pursuant to the Offer, either (a) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) and any other
documents required by the Letter of Transmittal must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase and either certificates for the Shares to be tendered must be received
by the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer described below (and a
confirmation of such delivery, including an Agent's Message (as defined), must
be received by the Depositary if the tendering stockholder has not delivered a
Letter of Transmittal), in each case on or prior to the Expiration Date, or (b)
the guaranteed delivery procedure described below must be complied with.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to and received by the Depositary and forming a part of a
book-entry confirmation which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares which are the subject of such book-entry
confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Company may enforce such
agreement against such participant.
Book-Entry Delivery. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two
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<PAGE> 6
business days after the date of this Offer to Purchase, and any financial
institution that is a participant in the system of the Book-Entry Transfer
Facility may make delivery of Shares by causing the Book-Entry Transfer Facility
to transfer such Shares into the Depositary's account in accordance with the
procedures of the Book-Entry Transfer Facility. However, although delivery of
Shares may be effected through book-entry transfer, the Letter of Transmittal
(or facsimile thereof) properly completed and duly executed together with any
required signature guarantees or an Agent's Message and any other required
documents must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase on or prior to
the Expiration Date, or the guaranteed delivery procedure described below must
be complied with.
DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Except as otherwise provided below, all signatures on
a Letter of Transmittal must be guaranteed by a financial institution (including
most banks, savings and loan associations and brokerage houses) which is a
member of a recognized Medallion Program approved by The Securities Transfer
Association Inc., including the Securities Transfer Agents Medallion Program
(STAMP), the Stock Exchange Medallion Program (SEMP) and the New York Stock
Exchange, Inc. Medallion Signature Program (MSP) (an "Eligible Institution").
Signatures on a Letter of Transmittal need not be guaranteed (a) if the Letter
of Transmittal is signed by the registered holder of the Shares tendered
therewith and such holder has not completed the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of an Eligible Institution. See Instructions 1 and 5 of the
Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and cannot deliver such Shares and all other required documents to the
Depositary on or prior to the Expiration Date, or such stockholder cannot
complete the procedure for delivery by book-entry transfer on a timely basis,
such Shares may nevertheless be tendered if all of the following conditions are
met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by Purchaser is received by the
Depositary (as provided below) on or prior to the Expiration Date; and
(iii) the certificates for such Shares (or a confirmation of a
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantee or an Agent's Message and any other documents required
by the Letter of Transmittal, are received by the Depositary within three
New York Stock Exchange, Inc. trading days after the date of execution of
the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF
THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY. IF CERTIFICATES FOR SHARES ARE SENT BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
Under the federal income tax laws, the Depositary will be required to
withhold 31% of the amount of any payments made to certain stockholders pursuant
to the Offer. In order to avoid such backup withholding, each tendering
stockholder, and, if applicable, each other payee, must provide the Depositary
with such stockholder's or payee's correct taxpayer identification number and
certify that such stockholder or payee is not subject to such backup withholding
by completing the Substitute Form W-9 set forth in the Letter of Transmittal. In
general, if a stockholder or payee is an individual, the taxpayer identification
number is the Social Security number of such individual. If the Depositary is
not provided with the correct taxpayer
4
<PAGE> 7
identification number, the stockholder or payee may be subject to a $50 penalty
imposed by the Internal Revenue Service. Certain stockholders or payees
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. In order to
satisfy the Depositary that a foreign individual qualifies as an exempt
recipient, such stockholder or payee must submit a statement (Form W-8,
Certificate of Foreign Status), signed under penalties of perjury, attesting to
that individual's exempt status.
Appointment. By executing a Letter of Transmittal, a tendering stockholder
irrevocably appoints designees of Purchaser as such stockholder's proxies in the
manner set forth in the Letter of Transmittal to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by Purchaser (and any and all other Shares or other
securities issued or issuable in respect of such Shares on or after December 17,
1998). All such proxies shall be irrevocable and coupled with an interest in the
tendered Shares. Such appointment is effective only upon the acceptance for
payment of such Shares by Purchaser. Upon such acceptance for payment, all prior
proxies and consents granted by such stockholder with respect to such Shares and
other securities will, without further action, be revoked, and no subsequent
proxies may be given nor subsequent written consents executed by such
stockholder (and, if given or executed, will not be deemed to be effective).
Such designees of Purchaser will be empowered to exercise all voting and other
rights of such stockholder as they, in their sole discretion, may deem proper at
any annual, special or adjourned meeting of the Company's stockholders, by
written consent or otherwise. Purchaser reserves the right to require that, in
order for Shares to be validly tendered, immediately upon Purchaser's acceptance
for payment of such Shares, Purchaser is able to exercise full voting rights
with respect to such Shares and other securities (including voting at any
meeting of stockholders then scheduled or acting by written consent without a
meeting).
The tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the Offer, as well as
the tendering stockholder's representation and warranty that (a) such
stockholder owns the Shares being tendered within the meaning of Rule 14e-4
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (b) the tender of such Shares complies with Rule 14e-4, and (c) such
stockholder has the full power and authority to tender and assign the Shares
tendered, as specified in the Letter of Transmittal. Purchaser's acceptance for
payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and Purchaser upon the terms and
subject to the conditions of the Offer.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Purchaser, in its sole discretion,
which determination shall be final and binding. Purchaser reserves the absolute
right to reject any or all tenders of Shares determined by it not to be in
proper form or the acceptance for payment of or payment for which may, in the
opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right to waive any defect or irregularity in any tender of Shares. None
of Purchaser, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defect or irregularity in tenders or
incur any liability for failure to give any such notification.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after January 22, 1999 unless theretofore accepted
for payment as provided in this Offer to Purchase. If Purchaser extends the
period of time during which the Offer is open, is delayed in accepting for
payment or paying for Shares or is unable to accept for payment or pay for
Shares pursuant to the Offer for any reason, then, without prejudice to
Purchaser's rights under the Offer, the Depositary may, on behalf of Purchaser,
retain all Shares tendered, and such Shares may not be withdrawn except as
otherwise provided in this Section 4.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and must specify
the name of the person who tendered the Shares to be withdrawn, the number of
Shares to be
5
<PAGE> 8
withdrawn and the name of the registered holder of such Shares, if different
from that of the person who tendered such Shares. If the Shares to be withdrawn
have been delivered to the Depositary, a signed notice of withdrawal with
(except in the case of Shares tendered by an Eligible Institution) signatures
guaranteed by an Eligible Institution must be submitted prior to the release of
such Shares. In addition, such notice must specify, in the case of Shares
tendered by delivery of certificates, the name of the registered holder (if
different from that of the tendering stockholder) and the serial numbers shown
on the particular certificates evidencing the Shares to be withdrawn or, in the
case of Shares tendered by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter
be deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be retendered by again following one of the procedures described in
Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Purchaser, in its sole
discretion, which determination shall be final and binding. None of Purchaser,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defect or irregularity in any notice of withdrawal
or incur any liability for failure to give any such notification.
5. CERTAIN TAX CONSIDERATIONS.
The receipt of cash pursuant to the Offer or the Merger will constitute a
taxable transaction for federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code"), and may also constitute a taxable
transaction under applicable state, local, foreign and other tax laws. As a
result, a tendering stockholder will generally recognize gain or loss for
federal income tax purposes in an amount equal to the difference between the
amount of cash received by the stockholder pursuant to the Offer or the Merger
and such stockholder's aggregate adjusted tax basis in the Shares tendered and
purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain or
loss will be calculated separately for each block of Shares tendered and
purchased pursuant to the Offer (or canceled pursuant to the Merger). If
tendered Shares are held by a tendering stockholder as capital assets (within
the meaning of Section 1221 of the Code), any gain or loss recognized by the
tendering stockholder will constitute capital gain or loss, and will constitute
long-term capital gain or loss if the tendering stockholder held the underlying
Shares for more than 12 months as of the date of disposition.
Under the Internal Revenue Service Restructuring and Reform Act of 1998, in
the case of noncorporate stockholders, if the underlying Shares have been held
for more than 12 months as of the date of disposition, any long-term capital
gain recognized by a noncorporate stockholder generally will be subject to
federal income tax at a maximum rate of 20%. There are limits on the
deductibility of capital losses.
The foregoing discussion may not be applicable with respect to Shares
received pursuant to the exercise of stock options or otherwise as compensation
or with respect to holders of Shares who are subject to special tax treatment
under the Code, such as non-U.S. persons, life insurance companies, tax-exempt
organizations and financial institutions, and may not apply to a holder of
Shares in light of its individual circumstances.
THE SUMMARY OF TAX CONSEQUENCES SET FORTH ABOVE IS FOR GENERAL INFORMATION
ONLY AND IS BASED ON TAX LAWS AS CURRENTLY IN EFFECT. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Common Shares are listed and principally traded on the Nasdaq National
Market under the symbol "LCSI." The following table sets forth for the periods
indicated the high and low sales prices per Share on the Nasdaq National Market,
as reported in the Company's Annual Report on Form 10-K for the fiscal year
6
<PAGE> 9
ended September 30, 1997 (the "Company 1997 10-K") with respect to the years
1996 and 1997, and thereafter as reported in published financial sources.
According to the Company, dividends have been declared as follows.
Commencing in the second quarter of fiscal 1995, regular quarterly dividends of
$0.0375 per Share were paid and continued through the first quarter of fiscal
1996. Commencing in the second quarter of fiscal 1996, subsequent to the two for
one stock split paid as a 100% stock dividend on October 25, 1995, regularly
quarterly dividends of $0.025 per Share were paid. Effective with the second
quarter of fiscal 1997, regular quarterly dividends of $0.0375 per Share were
paid. Dividends of $0.0375 per Share were paid or declared for fiscal 1998 and
the first quarter of fiscal 1999. Pursuant to the Merger Agreement, the company
is prohibited from declaring, setting aside or paying any dividends from
December 17, 1998, other than regular quarterly dividends.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1996
First Quarter............................................. $19 3/4 $13
Second Quarter............................................ 28 12 3/8
Third Quarter............................................. 27 10 1/4
Fourth Quarter............................................ 15 3/4 9 1/2
FISCAL YEAR ENDED SEPTEMBER 30, 1997
First Quarter............................................. 15 1/2 12 1/2
Second Quarter............................................ 16 1/8 13 1/2
Third Quarter............................................. 17 1/4 13 3/4
Fourth Quarter............................................ 20 14
FISCAL YEAR ENDED SEPTEMBER 30, 1998
First Quarter............................................. 21 3/4 14
Second Quarter............................................ 18 12 3/8
Third Quarter............................................. 17 1/8 13 1/4
Fourth Quarter............................................ 18 11 3/4
</TABLE>
On December 16, 1998, the last full day of trading prior to the
announcement of the Offer and of the execution of the Merger Agreement, the
reported closing sales price per Share on the Nasdaq National Market was $15.50.
On December 22, 1998, the last full day of trading prior to the commencement of
the Offer, the reported closing sales price per Share on the Nasdaq National
Market was $17.25.
STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THE COMMON SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
General. The information concerning the Company contained herein has been
furnished by the Company for inclusion herein or has been taken from or is based
upon reports and other documents on file with the Commission or otherwise
publicly available. Parent and Purchaser do not take any responsibility for the
accuracy or completeness of the information contained in such reports and other
documents or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information.
The Company is a Delaware corporation with its principal executive offices
located at 120 Brighton Road, Clifton, New Jersey 07012. According to the
Company 1997 10-K, the Company provides outsourced direct marketing services and
specializes in fulfillment, list marketing and computer services. The Company
was founded in 1969 by Arnold Scheine and Marvin Cohen and made its initial
public offering shortly thereafter in 1973. The Company conducts it operations
out of various facilities in Delaware, Florida, New Jersey and Virginia.
7
<PAGE> 10
Selected Financial Information. The following selected consolidated
financial data relating to the Company and its subsidiaries has been taken or
derived from the audited financial statements contained in the Company 1997
10-K, the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996 (together with the Company 1997 10-K, the "Company 10-Ks")
and the unaudited financial statements contained in the Company's quarterly
reports on Form 10-Q for its fiscal quarters ended June 30, 1998 and June 30,
1997 (the "Company 10-Qs"), respectively. More comprehensive financial
information is included in such Company 10-Ks and Company 10-Qs and the other
documents filed by the Company with the Commission, and the financial data set
forth below is qualified in its entirety by reference to such reports and other
documents including the financial statements contained therein. Such reports and
other documents may be examined and copies may be obtained from the offices of
the Commission in the manner set forth below.
LCS INDUSTRIES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
FOR THE YEARS ENDED JUNE 30,
SEPTEMBER 30, (UNAUDITED)
-------------------- -----------------
1996 1997 1997 1998
-------- --------- ------- -------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales............................................... $95,570 $100,627 $75,238 $71,654
Income before income taxes.......................... 13,324 12,423 9,876 10,959
Other (income) expense(1)........................... -- 1,914 954 (210)
Net income.......................................... 7,838 6,987 5,488 6,540
Per common and common equivalent share Primary
earnings......................................... 1.81 1.51 1.19 1.36
Diluted.......................................... 1.53 1.37 1.07 1.27
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
AS OF SEPTEMBER 30, (UNAUDITED)
------------------- -----------------
1996 1997 1997 1998
-------- -------- ------- -------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................................... $19,359 $26,799 $25,130 $33,073
Total assets......................................... 64,970 69,509 65,705 65,132
Long-term debt and capital lease obligations, net of
current portion................................... 4,583 3,445 3,541 2,673
Total Stockholders' equity........................... 30,861 38,276 36,843 44,266
</TABLE>
- ---------------
(1) 1997 includes write-off of the Company's investment in McIntyre and King,
Ltd. of $954,000 ($863,000 net of taxes or $.17 per share) and a
non-recurring charge of $960,000 ($570,000 net of taxes or $.11 per share)
related to the death benefits under employment agreements and other
severance amounts due the Company's former Chairman. 1998 includes a
$210,000 recovery related to the McIntyre and King, Ltd. transaction.
Available Information. The Company is subject to the informational
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. The Company is required to
disclose in such proxy statements certain information, as of particular dates,
concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company. Such
reports, proxy statements and other information may be inspected at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional
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<PAGE> 11
offices of the Commission located at Seven World Trade Center, Suite 1300, New
York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661. Copies of such information should be obtainable by mail, upon
payment of the Commission's customary charges, by writing to the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a website on the internet at http://www.sec.gov that
contains reports, proxy statements and other information relating to the Company
which have been filed via the Commission's EDGAR System.
In the course of the discussions between representatives of Parent and the
Company regarding the Offer and the Merger, representatives of Parent were
provided with certain information about the Company and its future financial
performance which is not publicly available. The Company information was not
compiled with a view towards public dissemination, nor was it compiled in
compliance with published guidelines of the Commission or the guidelines
established by the American Institute of Certified Public Accountants concerning
such information.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT.
Purchaser is a Delaware corporation incorporated on December 16, 1998 and
to date has engaged in no activities other than those incident to its formation
and capitalization, the execution and delivery of the Merger Agreement and the
commencement of the Offer. Until immediately prior to the time Purchaser
purchases Shares pursuant to the Offer, it is not anticipated that Purchaser
will have any significant assets or liabilities. Purchaser is a wholly-owned
subsidiary of Parent. The principal executive offices of Purchaser are located
at 8117 Preston Road, Suite 205, Dallas, Texas 75225.
Parent, a Delaware corporation, is a holding corporation that provides
outsourced customer service through its two subsidiaries, CustomerONE
Corporation (formerly known as SOFTBANK Services Group), a Delaware corporation,
and North Direct Response Inc., a corporation organized under the laws of
Canada. The principal executive offices of Parent are located at 8117 Preston
Road, Suite 205, Dallas, Texas 75225. Parent is a subsidiary of Onex
Corporation, a corporation organized under the laws of Canada ("Onex"). Onex is
a diversified company with 1997 consolidated revenues of Cdn. $11 billion,
consolidated assets of Cdn. $6.4 billion Canadian and 43,000 employees. Onex was
ranked as the ninth largest company in Canada in 1997 and its shares are traded
on the Toronto and Montreal exchanges under the stock symbol OCX. Public
information regarding Onex is available through IHS/Micromedia by calling (800)
387-2689 and asking for Document Delivery or by accessing their website on the
internet at http://www.sec.gov.on.ca.
The name, business address, principal occupation or employment, five year
employment history and citizenship of each director and executive officer of
Parent and Purchaser and certain other information are set forth on Schedule A
hereto.
Except as provided in the Merger Agreement, as disclosed in the Schedule
13D to be filed by Parent, and as otherwise described in this Offer to Purchase,
(i) neither Parent nor Purchaser (the "Reporting Persons") nor, to the best of
the knowledge of Purchaser, any of the persons listed in Schedule A hereto, nor
any associate or majority-owned subsidiary of any of the foregoing beneficially
owns, or has any right to acquire, directly or indirectly, any Shares and (ii)
none of the Reporting Persons nor, to the best of their knowledge, any of the
persons or entities referred to above nor any director, executive officer or
subsidiary of any of the foregoing, has effected any transaction in the Shares
during the past 60 days.
Except as described in this Offer to Purchase, none of the Reporting
Persons nor, to the best of the knowledge of Purchaser, any of the persons
listed in Schedule A hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or voting of such securities, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guarantees, division of profits or loss or the giving or withholding of
proxies.
Except as set forth in this Offer to Purchase, since January 1, 1995, none
of the Reporting Persons nor, to the best of the knowledge of Purchaser, any of
the persons listed in Schedule A hereto, has had any business relationship or
transaction with the Company or any of its executive officers, directors, or
affiliates that is
9
<PAGE> 12
required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as set forth in this Offer to Purchase, since
January 1, 1995, there have been no contacts, negotiations or transactions
between the Reporting Persons or any of their subsidiaries or, to the best
knowledge of Purchaser, any of the persons listed in Schedule A hereto, on the
one hand, and the Company or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets.
9. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by Purchaser to purchase Shares pursuant
to the Offer is estimated to be approximately $97.3 million. Depending upon the
decision of Parent and Purchaser as to the most appropriate use of their liquid
assets and borrowing capacity, such funds will be provided to Purchaser by
capital contributions or loans from Parent, through borrowings from banks of the
nature described below or through some combination thereof. Onex has committed
to provide, or otherwise cause to be available, sufficient funds to Parent and
Purchaser to fulfill their obligations under the Merger Agreement.
On the basis of a commitment letter from The Toronto-Dominion Bank ("TD"),
$70.0 million (consisting of a $65 million tender facility and a $5 million
interest carry facility) will be available to Parent for a term of 180 days from
the closing of the loan. Prior to the consummation of the Merger, the loan will
bear interest, at Parent's election, at either (i) LIBOR plus 3% or (ii) the
U.S. Prime Rate plus 2%. Upon completion of the Merger, the loan will bear
interest at Parent's, election at either (i) LIBOR plus 2% or (ii) the U.S.
Prime Rate plus 1%.
Assuming the funding of the loan by TD, TD will have a first priority lien
upon all the assets of Purchaser (including the Shares acquired in the Offer)
and upon consummation of the Merger, a first priority lien upon all of the
assets of the Surviving Corporation and its subsidiaries. Parent will guarantee
the loan supported by (i) a pledge of 100% of the issued and outstanding shares
of Parent and (ii) a second priority lien over all of the issued and outstanding
shares of CustomerONE Corporation.
10. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY.
In July 1998, affiliates of Parent began discussing the possibility of
pursuing a strategic business combination and contacted DLJ regarding the
Company. DLJ informed Parent that the Company was discussing a potential
transaction with other entities and instructed Parent and its affiliates to
proceed quickly if they were interested in the Company. On July 14, 1998, Onex
entered into a confidentiality agreement with DLJ, acting on behalf of the
Company (the "Confidentiality Agreement"). See Section 11 for a description of
the Confidentiality Agreement.
In early August of 1998, Parent contacted DLJ and certain executives of the
Company to schedule due diligence meetings. The meetings were scheduled but
ultimately postponed because Parent was engaged in another acquisition at the
time. Parent and the Company had limited contact until early October. At that
time, representatives of the Parent contacted DLJ and the Company to reschedule
their due diligence meetings.
In November 1998, representatives of Onex and Parent visited the Company to
meet with management and tour the Company's facilities.
On December 2, 1998, Parent submitted a non-binding indication of interest
to purchase the Company at a price of $16.75 per Share in cash to be structured
as a tender offer with a subsequent merger to acquire any Shares not purchased
in the tender offer. Following discussions between the Company, DLJ and
representatives of Parent, Parent ultimately increased the offer to $17.50 per
Share.
On December 3, 1998, Parent submitted its firm bid for the Company to DLJ.
Immediately thereafter, representatives of Parent conducted legal and accounting
due diligence investigations regarding the business and properties of the
Company. During the period from December 3 through December 16, 1998,
representatives of Parent and the Company discussed the terms of a possible
acquisition and began to negotiate the Merger Agreement.
10
<PAGE> 13
On December 17, 1998, the Company agreed to the acquisition by Purchaser of
the Company for a price of $17.50 in cash per Share, following which the Merger
Agreement was executed. Also on December 17, 1998, Parent and the Company
announced, in separate press releases, the signing of the Merger Agreement.
11. THE MERGER AGREEMENT AND THE CONFIDENTIALITY AGREEMENT.
THE MERGER AGREEMENT. The following is a summary of the Merger Agreement, a
copy of which is included as Schedule B hereto. Such summary is qualified in its
entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer. 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 shall be subject to the satisfaction of the Minimum Condition, the other
conditions described in Section 16 hereto and to the terms and conditions of the
Merger Agreement; provided, however, that Purchaser shall 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 shall 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 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, 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 shall not be withdrawn, modified or amended
except as permitted by provisions certain provisions set forth 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 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.
11
<PAGE> 14
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 as described in Section 17)
shall be converted into the right to receive $17.50 in cash, without interest.
Company Option Plans and Employee Stock Purchase Plan. At 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 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 (as defined in the Merger
Agreement) 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 By-Laws 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
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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 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;
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<PAGE> 16
(f) make any loan, advance or capital contribution to or invest in any
Person (as defined in the Merger Agreement);
(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;
(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 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 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
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<PAGE> 17
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 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 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
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) as provided in the Company's Certificate of Incorporation,
Company's By-laws or a Material Contract (as defined in the Merger Agreement) as
in effect as of the date Merger Agreement shall survive the Merger and continue
in full force and effect. For five years 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
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<PAGE> 18
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 February 24, 1998; 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.
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 non-public
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 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 (as defined in the Merger Agreement) 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, a copy of which is filed as an Exhibit to the
Schedule 14D-1. Such summary is qualified in its entirety by reference to the
Confidentiality Agreement.
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The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Onex agreed to keep confidential all nonpublic,
confidential or proprietary information furnished to it by the Company relating
to the Company, subject to certain exceptions (the "Evaluation Material"), 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 such
shall have been specifically invited in writing by the Board of Directors of the
Company, none of Onex, its affiliates or 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)
in 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
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 set forth in
(a) above, or (e) enter into any discussions or arrangements with any third
party with respect to any of the foregoing. Onex further agreed that it will not
use the Evaluation Material in any way directly or indirectly detrimental to the
Company. In particular Onex agreed that for a period of eighteen months from the
date of the Confidentiality Agreement neither it nor its affiliates will
knowingly, as a result of information obtained from the Evaluation Material in
connection with a possible transaction: (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.
12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY.
Purpose. The purpose of the Offer is to acquire control of, and an equity
interest in, the Company. The purpose of the Merger is to acquire all
outstanding Shares not tendered and purchased pursuant to the Offer. The Offer
is being made pursuant to the Merger Agreement and the purchase of the Shares
pursuant to the Offer will increase the likelihood that the Merger will be
effected. If the Offer is successful, the Shares not acquired by Purchaser
pursuant to the Offer will be converted (except with respect to Shares owned by
Parent or any subsidiary of Parent and Shares as to which appraisal rights have
been perfected), subject to the terms of the Merger Agreement, into the right to
receive cash in an amount equal to the price per share paid pursuant to the
Offer.
The Board of Directors of the Company has unanimously approved the Merger
and adopted the Merger Agreement. Depending upon the number of Shares purchased
by Purchaser pursuant to the Offer, the Board of Directors of the Company may be
required to submit this Merger Agreement to the Company's stockholders for
approval at a stockholders' meeting convened for that purpose in accordance with
the DGCL. If stockholder approval is required, the Merger Agreement must be
approved by a majority of all votes entitled to be cast at such meeting.
If the Minimum Condition is satisfied, Purchaser will have sufficient
voting power to approve the Merger Agreement at the stockholders' meeting
without the affirmative vote of any other stockholder.
If Purchaser acquires 90% of the Shares pursuant to the Offer, the Merger
may be consummated without a stockholders' meeting and without the approval of
the Company's stockholders pursuant to Section 253 of the DGCL. The Merger
Agreement provides that Purchaser will be merged with and into the Company
following the consummation of the Offer, and that the certificate of
incorporation of Purchaser will be the certificate of incorporation of the
Surviving Corporation following the Merger.
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Under the DGCL, holders of Shares do not have appraisal rights as a result
of the Offer. In connection with the Merger, however, stockholders of the
Company may have the right to dissent and demand appraisal of their Shares under
the DGCL. Dissenting stockholders who comply with the applicable statutory
procedures under DGCL will be entitled to receive a judicial determination of
the fair value of their Shares (exclusive of any element of value arising from
the accomplishment or expectation of such merger or similar business
combination) and to receive payment of such fair value in cash. Any such
judicial determination of the fair value of the Shares could be based upon
considerations other than or in addition to the price paid in the Merger and the
market value of the Shares. In Weinberger v. UOP, Inc., the Delaware Supreme
Court stated, among other things, that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in an appraisal proceeding.
Stockholders should recognize that the value so determined could be higher or
lower than the price per Share paid pursuant to the Offer or the consideration
per Share paid in such a merger or other similar business combination. Moreover,
Purchaser may argue in an appraisal proceeding that, for purposes of such a
proceeding, the fair value of the Shares is less than the price paid in the
Offer.
In addition, several decisions by Delaware courts have held that, in
certain circumstances a controlling stockholder of a company involved in a
merger has a fiduciary duty to other stockholders which requires that the merger
be fair to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and whether
there was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief may
be available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
If Purchaser purchases Shares pursuant to the Offer and the Merger is
consummated more than one year after the completion of the Offer or if an
alternative merger transaction were to provide for the payment of consideration
less than that paid pursuant to the Offer, compliance by Purchaser with Rule
13e-3 under the Exchange Act would be required, unless the Shares were to be
deregistered under the Exchange Act prior to such transaction. Rule 13e-3
requires, among other things, that certain financial information concerning the
Company and certain information relating to the fairness of the proposed merger
transaction and the consideration offered to minority stockholders therein be
filed with the Commission and disclosed to minority stockholders prior to
consummation of the merger transaction.
Plans for the Company. Except as described below or elsewhere in this Offer
to Purchase, based on its current knowledge of the Company, Purchaser has no
present plans or proposals which relate to or would result in any extraordinary
corporate transaction, such as a merger, reorganization, liquidation, or sale or
transfer of a material amount of assets involving the Company or any of its
subsidiaries, or any material changes in the Company's capitalization, dividend
policy, corporate structure or business or the composition of its board of
directors or business. However, Purchaser is continuing its review of the
Company and its assets, corporate structure, capitalization, operations,
properties, policies, management and personnel. After the completion of such
review, Purchaser may propose or develop alternative plans or proposals,
including mergers, transfers of a material amount of assets or other
transactions or changes of the nature described above. Purchaser reserves the
right to effect any such plans and proposals.
Parent expects that following the Effective Time (or at any earlier time
permitted by the Merger Agreement) it will cause its designees to constitute a
majority of the members of the Board of Directors. In the event the Offer is
consummated, Parent may designate a number of directors, rounded up to the next
whole number, to the Company's Board of Directors (as contemplated by the Merger
Agreement), as is equal to the product of (i) the total number of directors on
the Board of Directors (giving effect to the election of any additional
directors) and (ii) the percentage that the aggregate number of shares
beneficially owned by Parent bears to the total number of Shares outstanding;
provided that the Company shall be entitled to retain as members of the Board of
Directors at least two directors who were directors of the Company on the date
of the Merger Agreement. The persons who may be designated by Parent are listed
on Schedule A hereto.
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13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE LISTING;
REGISTRATION UNDER THE EXCHANGE ACT.
Market for Shares. The purchase of Shares pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and may reduce the
number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than Purchaser.
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Shares or whether such reduction
would cause future market prices to be greater or less than the Offer price.
Stock Listing. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the Nasdaq National
Market ("NASDAQ") for continued listing and may, therefore, be delisted from
such exchange. According to the NASDAQ's published guidelines, the NASDAQ would
consider delisting the Shares if, among other things, the number of publicly
held Shares were less than 5,000,000, there were less than 300 round lot holders
(as defined in Section 4200(a)(30) of the NASD Manual -- The NASDAQ Stock
Market) of the Shares or the aggregate market capitalization is less than $35.0
million. If, as a result of the purchase of Shares pursuant to the Offer, the
Shares no longer meet the requirements of the NASDAQ for continued listing and
the listing of Shares is discontinued, the market for the Shares could be
adversely affected.
If the Shares were delisted (which Purchaser intends to cause the Company
to seek if it acquires control of the Company and the Shares no longer meet the
listing requirements), it is possible that the Shares would trade on another
securities exchange or in the over-the-counter market and that price quotations
for the Shares would be reported by such exchange or other sources. The extent
of the public market for the Shares and availability of such quotations would,
however, depend upon such factors as the number of holders and/or the aggregate
market value of the publicly-held Shares at such time, the interest in
maintaining a market in the Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act and other
factors.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares. Depending upon
factors similar to those described above regarding listing and market
quotations, the Shares might no longer constitute "margin securities" for the
purposes of the Federal Reserve Board's margin regulations and, therefore, could
no longer be used as collateral for loans made by brokers.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
the registration of the Shares under the Exchange Act would substantially reduce
the information required to be furnished by the Company to holders of Shares and
to the Commission and would make certain of the provisions of the Exchange Act,
such as the short-swing profit recovery provisions of Section 16(b), the
requirement of furnishing a proxy statement pursuant to Section 14(a) in
connection with a stockholders' meeting and the related requirement of an annual
report to stockholders and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions, no longer applicable to the
Shares. Furthermore, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act of 1933
(the "Securities Act"). If registration of the Shares under the Exchange Act
were terminated, the Shares would no longer be "margin securities" or eligible
for listing or NASDAQ reporting. Purchaser intends to seek to cause the Company
to terminate registration of the Shares under the Exchange Act as soon after
consummation of the Offer as the requirements for termination of registration of
the Shares are met.
14. DISTRIBUTIONS.
Pursuant to the Merger Agreement, after December 17, 1998, the Company
shall not (i) declare, set aside or pay any dividend (other than regular
quarterly dividends) or other distribution with respect to any
19
<PAGE> 22
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; (ii) 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 in the Company Disclosure Schedule; or (iii) split, combine
or reclassify its outstanding capital stock.
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
Purchaser has the right, (i) subject to the Merger Agreement, to extend the
period of time during which the Offer is open by giving oral or written notice
of such extension to the Depositary and by making a public announcement of such
extension or (ii) subject to the Merger Agreement, to amend the Offer in any
respect by making a public announcement of such amendment. There can be no
assurance that Purchaser will exercise its right to extend or amend the Offer.
If Purchaser decreases the percentage of Shares being sought or increases
or decreases the consideration to be paid for Shares pursuant to the Offer and
the Offer is scheduled to expire at any time before the expiration of a period
of 10 business days from, and including, the date that notice of such increase
or decrease is first published, sent or given in the manner specified below, the
Offer will be extended until the expiration of such period of 10 business days.
If Purchaser makes a material change in the terms of the Offer (other than a
change in price or percentage of securities sought) or in the information
concerning the Offer, or waives a material condition of the Offer, Purchaser
will extend the Offer, if required by applicable law, for a period sufficient to
allow stockholders to consider the amended terms of the Offer. In a published
release, the Commission has stated that in its view an offer must remain open
for a minimum period of time following a material change in the terms of such
offer and that the waiver of a condition such as the Minimum Condition is a
material change in the terms of an offer. The release states that an offer
should remain open for a minimum of five business days from the date the
material change is first published, sent or given to securityholders, and that
if material changes are made with respect to information that approaches the
significance of price and share levels, a minimum of 10 business days may be
required to allow adequate dissemination and investor response. The term
"business day" shall mean any day other than Saturday, Sunday or a federal
holiday and shall consist of the time period from 12:01 A.M. through 12:00
Midnight, New York City time.
Purchaser also reserves the right, in its sole discretion, in the event any
of the conditions specified in Section 16 shall not have been satisfied and so
long as Shares have not theretofore been accepted for payment, to delay (except
as otherwise required by applicable law) acceptance for payment of or payment
for Shares or to terminate the Offer and not accept for payment or pay for
Shares.
If Purchaser extends the period of time during which the Offer is open, is
delayed in accepting for payment or paying for Shares or is unable to accept for
payment or pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may, on behalf
of Purchaser, retain all Shares tendered, and such Shares may not be withdrawn
except as otherwise provided in Section 4. The reservation by Purchaser of the
right to delay acceptance for payment of or payment for Shares is subject to
applicable law, which requires that Purchaser pay the consideration offered or
return the Shares deposited by or on behalf of stockholders promptly after the
termination or withdrawal of the Offer.
Any extension, termination or amendment of the Offer will be followed as
promptly as practicable by a public announcement thereof. Without limiting the
manner in which Purchaser may choose to make any public announcement, Purchaser
will have no obligation (except as otherwise required by applicable law) to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service. In the case of an
extension of the Offer, Purchaser will make a public announcement of such
extension no later than 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date.
20
<PAGE> 23
16. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer or the Merger Agreement,
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares promptly after 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) the Minimum Condition has been satisfied 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 the Merger Agreement, Purchaser 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 the Merger 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
Parent, Purchaser or any of their respective subsidiaries which constitutes a
breach of the Merger Agreement):
(a) there shall be instituted and pending by any Governmental Entity
any action or proceeding which seeks to (i) prohibit, or materially limit
Parent's or Purchaser'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 Parent or Purchaser 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 Merger Agreement, (iii) impose material limitations on
the ability of Purchaser or Parent to exercise full rights of ownership of
the Shares, including without limitation, the right to vote the Shares
purchased by Purchaser pursuant to the Offer on all matters properly
presented to the Company's stockholders, or (iv) require material
divestitures by Parent or Purchaser; provided that Parent 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 (as defined in the
Merger Agreement) 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
Merger 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 Purchaser 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 the Merger 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 the Purchaser to consummate the Offer or the Merger;
(e) the Merger 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 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 Parent or Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of
21
<PAGE> 24
the Offer, the Merger 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 Purchaser and Parent
and may be waived by Parent or Purchaser (except for the Minimum Condition), in
whole or in part at any time and from time to time in the sole discretion of
Parent or Purchaser. The failure by Purchaser 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.
17. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Based on its examination of publicly available information filed
by the Company with the Commission and other publicly available information
concerning the Company, Purchaser is not aware of any governmental license or
regulatory permit that appears to be material to the Company's business that
might be adversely affected by Purchaser's acquisition of Shares as contemplated
herein or, except as set forth below, of any approval or other action by any
government or governmental administrative or regulatory authority or agency,
domestic or foreign, that would be required for the acquisition or ownership of
Shares by Purchaser as contemplated herein. Should any such approval or other
action be required, Purchaser currently contemplates that such approval or other
action will be sought. There can be no assurance that any such approval or other
action, if needed, would be obtained or would be obtained without substantial
conditions or that if such approvals were not obtained or such other actions
were not taken adverse consequences might not result to the Company's business
or certain parts of the Company's business might not have to be disposed of, any
of which could cause Purchaser to elect to terminate the Offer without the
purchase of Shares thereunder. Purchaser's obligation under the Offer to accept
for payment and pay for Shares is subject to certain conditions. See Section 16.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The purchase of Shares pursuant to the Offer is subject to such
requirements.
Pursuant to the requirements of the HSR Act, Parent expects to file a
Notification and Report Form with respect to the Offer and Merger with the
Antitrust Division and the FTC on or about December 22, 1998. As a result,
assuming such filing is made on December 22, 1998, the waiting period applicable
to the purchase of Shares pursuant to the Offer is scheduled to expire at 11:59
P.M., New York City time, on Wednesday, January 6, 1999. However, prior to such
time, the Antitrust Division or the FTC may extend the waiting period by
requesting additional information or documentary material related to the Offer
from Parent. If such a request is made, the waiting period will be extended
until 11:59 P.M., New York City time, on the tenth day after substantial
compliance by Parent with such request. Thereafter, such waiting period can be
extended only by court order or agreement by Purchaser and the Company.
A request is being made pursuant to the HSR Act for early termination of
the waiting period applicable to the Offer. There can be no assurance, however,
that the applicable 15-day HSR Act waiting period will be terminated early.
Shares will not be accepted for payment or paid for pursuant to the Offer until
the expiration or earlier termination of the applicable waiting period under the
HSR Act. See Section 16. Any extension of the waiting period will not give rise
to any withdrawal rights not otherwise provided for by applicable law. See
Section 4. If Purchaser's acquisition of Shares is delayed pursuant to a request
by the Antitrust Division or the FTC for additional information or documentary
material pursuant to the HSR Act, Purchaser has agreed to extend the Offer until
the earlier of February 24, 1998 or the date the HSR Act requirements are
satisfied.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after
22
<PAGE> 25
the consummation of any such transactions, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking divestiture of the Shares so acquired or
divestiture of substantial assets of Purchaser or the Company. Private parties
(including individual states) may also bring legal actions under the antitrust
laws. Purchaser does not believe that the consummation of the Offer will result
in a violation of any applicable antitrust laws. However, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made,
or if such a challenge is made, what the result will be. See Section 16 for
certain conditions to the Offer, including conditions with respect to litigation
and certain governmental actions and Section 11 for certain termination rights
in connection with antitrust suits.
Other Governmental Approvals. Based upon Purchaser's examination of
publicly available information concerning the Company, it appears that the
Company and its subsidiaries own property and conduct business in certain
foreign countries. In connection with the acquisition of Shares pursuant to the
Offer, the laws of certain of these foreign countries may require the filing of
information with, or the obtaining of the approval of, governmental authorities
therein. After commencement of the Offer, Purchaser will seek further
information regarding the applicability of any such laws and currently intends
to take such action as they may require, but no assurance can be given that such
approvals will be obtained. If any action is taken prior to completion of the
Offer by any such government or governmental authority, Purchaser may not be
obligated to accept for payment or pay for any tendered Shares. See Section 16.
State Antitakeover Statutes. Section 203 of the DGCL, in general, prohibits
a Delaware corporation, such as the Company, from engaging in a "Business
Combination" (defined as a variety of transactions, including mergers) with an
"Interested Stockholder" (defined generally as a person that is the beneficial
owner of 15% or more of the outstanding voting stock of the subject corporation)
for a period of three years following the date that such person became an
Interested Stockholder unless, prior to the date such person became an
Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction that resulted in the
stockholder becoming an Interested Stockholder. The provisions of Section 203 of
the DGCL are not applicable to any of the transactions contemplated by the
Merger Agreement, since the Merger Agreement and the transactions contemplated
thereby were approved by the Board of Directors of the Company prior to the
execution thereof.
A number of states have adopted laws and regulations that purport to apply
to attempts to acquire corporations that are incorporated in such states, or
whose business operations have substantial economic effects in such states, or
which have substantial assets, security holders, employees, principal executive
offices or principal places of business in such states. In Edgar v. MITE Corp.,
the Supreme Court of the United States (the "Supreme Court") invalidated on
constitutional grounds the Illinois Business Takeover Statute, which, as a
matter of state securities law, made certain corporate acquisitions more
difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the
Supreme Court held that the State of Indiana may, as a matter of corporate law
and, in particular, with respect to those aspects of corporate law concerning
corporate governance, constitutionally disqualify a potential acquiror from
voting on the affairs of the target corporation without the prior approval of
the remaining stockholders. The state law before the Supreme Court was by its
terms applicable only to corporations that had a substantial number of
stockholders in the state and were incorporated there.
Parent and Purchaser do not believe that the antitakeover laws and
regulations of any state other than the State of Delaware will by their terms
apply to the Offer, and, except as set forth with respect to Section 203 of the
DGCL, neither Parent nor Purchaser has attempted to comply with any state
antitakeover statute or regulation. Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly applicable to the
Offer and nothing in this Offer to Purchase or any action taken in connection
with the Offer is intended as a waiver of such right. If it is asserted that any
state antitakeover statute is applicable to the Offer and an appropriate court
does not determine that it is invalid or inapplicable as applied to the Offer,
Purchaser might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the Offer or may be
delayed from consummating the Offer. In such case, Purchaser may not be
obligated to accept for payment, or pay for, any Shares tendered pursuant to the
Offer. See Section 16.
23
<PAGE> 26
Appraisal Rights. If the Merger is consummated, stockholders of the Company
may have the right to dissent and demand appraisal of their Shares under the
DGCL. Under the DGCL, dissenting stockholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) and to receive payment of such fair
value in cash, together with a fair rate of interest, if any. Any such judicial
determination of the fair value of the Shares could be based upon considerations
other than or in addition to the price paid in the Offer, the consideration per
Share to be paid in the Merger and the market value of the Shares, including
asset values and the investment value of the Shares. Stockholders should
recognize that the value so determined could be higher or lower than the price
per Share paid pursuant to the Offer or the consideration per Share to be paid
in the Merger.
18. FEES AND EXPENSES.
Purchaser has retained D. F. King & Co., Inc. to act as the Information
Agent and American Securities Transfer & Trust Inc. to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telegraph and personal interviews and may request
brokers, dealers and other nominee stockholders to forward materials relating to
the Offer to beneficial owners. The Information Agent and the Depositary each
will receive reasonable and customary compensation for their respective
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities in connection therewith,
including certain liabilities under the federal securities laws.
Purchaser will not pay any fees or commissions to any broker or dealer or
any other person (other than the Information Agent and Depositary) for
soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial
banks and trust companies will, upon request, be reimbursed by Purchaser for
reasonable and necessary costs and expenses incurred by them in forwarding
materials to their customers.
19. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, Purchaser may, in its discretion, take such action as it
may deem necessary to make the Offer in any such jurisdiction and extend the
Offer to holders of Shares in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser has filed with the Commission a Tender Offer Statement on
Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 of the General
Rules and Regulations under the Exchange Act, furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from the
offices of the Commission in the manner set forth in Section 7 of this Offer to
Purchase (except that such information will not be available at the regional
offices of the Commission).
CATALOG ACQUISITION CO.
December 23, 1998
24
<PAGE> 27
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The name, business address,
present principal occupation or employment and five-year employment history of
each director and executive officer of Parent and certain other information are
set forth below. Unless otherwise indicated, each occupation set forth opposite
an individual's name refers to employment with Parent. Previous positions during
the last five years with the same organization are not specifically disclosed.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS AGE PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------- --- ---------------------------------------------------------------------------
<S> <C> <C>
Thomas O. Harbison 55 Director and Chief Executive Officer of Parent and Purchaser. Mr. Harbison
8117 Preston Road is also currently managing partner of ECM Partners, L.P. From October of
Suite 205 1995 to April of 1998, he served as President of EDS Customer Solutions.
Dallas, Texas 75225 From October of 1994 to October of 1995, he was the Chief Executive Officer
of Thinc, a consulting firm in the direct marketing industry. Prior to that
time, Mr. Harbison was the Chief Executive Officer of Neodata.
Seth M. Mersky 39 Director of Parent and Purchaser. Since April 1997, Mr. Mersky has been a
161 Bay Street, 49th Floor Vice President of Onex Corporation. From 1993 to 1997, he served as Senior
P.O. Box 700 Vice President of The Bank of Nova Scotia.
Toronto, ON M5J 251
Thomas P. Dea* 33 Director and Secretary of Parent and Purchaser. Mr. Dea has been with Onex
161 Bay Street, 49th Floor Corporation since June of 1995 and is currently a Principal. From 1993 to
P.O. Box 700 1995, he was with CIBC Wood Gundy Capital, now known as CIBC Capital
Toronto, ON M5J 251 Partners.
Mark R. Briggs 42 Director, President and Chief Operating Officer of Parent and Purchaser.
644 Elliott Street Since January of 1997, Mr. Briggs has served as President and Chief
Buffalo, New York 14203 Executive Officer of Softbank Services Group. From 1990 through 1996, he
was President and Chief Executive Officer of The Reseller Network, a
division of Intelligent Electronics.
</TABLE>
- ---------------
* Canadian citizen.
A-1
<PAGE> 28
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The name, business
address, present principal occupation or employment and five-year employment
history of each director and executive officer of Purchaser and certain other
information are set forth below. Unless otherwise indicated, each occupation set
forth opposite an individual's name refers to employment with Purchaser.
Previous positions during the last five years with the same organization are not
specifically disclosed.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS AGE PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------- --- ---------------------------------------------------------------------------
<S> <C> <C>
Thomas O. Harbison 55 See information under "Directors and Executive Officers of Parent."
8117 Preston Road
Suite 205
Dallas, Texas 75225
Seth M. Mersky 39 See information under "Directors and Executive Officers of Parent."
161 Bay Street, 49th Floor
P.O. Box 700
Toronto, ON M5J 251
Thomas P. Dea* 33 See information under "Directors and Executive Officers of Parent."
161 Bay Street, 49th Floor
P.O. Box 700
Toronto, ON M5J 251
Mark R. Briggs 42 See information under "Directors and Executive Officers of Parent."
644 Elliott Street
Buffalo, New York 14203
</TABLE>
- ---------------
* Canadian citizen.
A-2
<PAGE> 29
3. PERSONS WHO MAY BE DESIGNATED BY PARENT TO SERVE AS DIRECTORS ON THE
COMPANY'S BOARD OF DIRECTORS. The name, business address, present principal
occupation or employment, five-year employment history and beneficial ownership
of Shares (if any) of each person who may be designated by Parent to serve as
directors on the Company's Board of Directors is set forth below.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS AGE PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------- --- ---------------------------------------------------------------------------
<S> <C> <C>
Thomas O. Harbison 55 See information under "Directors and Executive Officers of Parent."
8117 Preston Road
Suite 205
Dallas, Texas 75225
Seth M. Mersky 39 See information under "Directors and Executive Officers of Parent."
161 Bay Street, 49th Floor
P.O. Box 700
Toronto, ON M5J 251
Thomas P. Dea* 33 See information under "Directors and Executive Officers of Parent."
161 Bay Street, 49th Floor
P.O. Box 700
Toronto, ON M5J 251
Mark R. Briggs 42 See information under "Directors and Executive Officers of Parent."
644 Elliott Street
Buffalo, New York 14203
Peter Berczi* 30 Mr. Berczi is currently the Executive Vice President, Business Development
3250 Bloor St. West of North Direct Response Inc. From July of 1995 to August of 1996, Mr.
East Tower, 11th Floor Berczi was with the Zehr Berczi Group and from 1993 to 1995 he was with
P.O. Box 19 Bell Canada.
Toronto, ON M8X 2X9
Andrew J. Sheiner* 35 Mr. Sheiner has been with Onex Corporation since 1995. Prior to that time,
161 Bay Street, 49th Floor he was with Sheiner Group, a private investment firm.
P.O. Box 700
Toronto, ON M5J 251
Nigel S. Wright* 35 Mr. Wright has been a principal of Onex Corporation since November of 1997.
161 Bay Street, 49th Floor Prior to that time, he was a partner with the law firm of Davies, Ward &
P.O. Box 700 Beck.
Toronto, ON M5J 251
</TABLE>
- ---------------
* Canadian citizen.
A-3
<PAGE> 30
SCHEDULE B
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> 31
TABLE OF CONTENTS
ARTICLE I
THE OFFER
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
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
</TABLE>
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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
</TABLE>
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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
</TABLE>
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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
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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
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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
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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").
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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
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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.
B-22
<PAGE> 56
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.
B-23
<PAGE> 57
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.
B-24
<PAGE> 58
"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.
B-25
<PAGE> 59
"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
B-26
<PAGE> 60
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.
B-27
<PAGE> 61
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.
B-28
<PAGE> 62
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
B-29
<PAGE> 63
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
B-30
<PAGE> 64
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.
B-31
<PAGE> 65
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent to the Depositary at one of the addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
AMERICAN SECURITIES TRANSFER & TRUST INC.
<TABLE>
<S> <C>
By Mail, Hand Delivery or Facsimile: New York Drop Agent:
American Securities Transfer & Trust Inc. American Securities Transfer & Trust Inc.
938 Quail Street, Suite 101 c/o Bank of Nova Scotia Trust Company New York
Denver, Colorado 80215 One Liberty Plaza, 23rd Floor
Attention: Trust Department New York, New York 10006
Attention: Pat Keane
Facsimile: Facsimile:
(303) 234-5300 (212) 225-5436
Telephone: Telephone:
(303) 234-5340 (212) 225-5427
</TABLE>
Questions or requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth below. You may also contact your broker, dealer, commercial bank or trust
company for assistance concerning the Offer.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 431-9645
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
LCS INDUSTRIES, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 23, 1998
OF
CATALOG ACQUISITION CO.
A WHOLLY-OWNED SUBSIDIARY OF
CUSTOMERONE HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 22, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
AMERICAN SECURITIES TRANSFER & TRUST INC.
<TABLE>
<S> <C>
By Mail, Hand Delivery or Facsimile: New York Drop Agent:
American Securities Transfer & Trust Inc. American Securities Transfer & Trust Inc.
938 Quail Street, Suite 101 c/o Bank of Nova Scotia Trust Company
Denver, Colorado 80215 New York
Attention: Trust Department One Liberty Plaza, 23rd Floor
New York, New York 10006
Facsimile: Attention: Pat Keane
(303) 234-5340
Facsimile:
Phone: (212) 225-5436
(303) 234-5300
Phone:
(212) 225-5427
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THE ONES LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Letter of Transmittal is to be used if certificates are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase) is utilized, if delivery of Shares (as defined) is to be made by
book-entry transfer to the Depositary's account at The Depository Trust Company
(hereinafter referred to as the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in Section 3 of the Offer to Purchase.
Shareholders who cannot deliver their Shares and all other documents
required hereby to the Depositary on or prior to Expiration Date (as defined in
the Offer to Purchase) must tender their Shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2.
<PAGE> 2
DESCRIPTION OF SHARES TENDERED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
---------------- ----------------------- ----------------
<S> <C> <C> <C>
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
Total Shares
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
* Need not be completed by shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented
by any certificates delivered to the Depositary are being tendered. See
Instruction 4.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution
-------------------------------------------------------------------------------
Account No. at The Depository Trust Company
-------------------------------------------------------------
Transaction Code No.
----------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Stockholder(s)
-----------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------------------------------------
Name of Institution which Guaranteed Delivery
-------------------------------------------------------------
If delivery is by book-entry transfer:
Name of Tendering Institution
-------------------------------------------------------------------------------
Account No.
----------------------------------------------------------------------------
Transaction Code No.
----------------------------------------------------------------------------
----------------------------
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Catalog Acquisition Co., a Delaware
corporation ("Purchaser"), and a wholly-owned subsidiary of CustomerONE Holding
Corporation, a Delaware corporation ("Parent"), the above-described shares of
common stock, $0.01 par value per share (the "Shares") of LCS Industries, Inc.,
a Delaware corporation (the "Company"), pursuant to Purchaser's offer to
purchase all outstanding Shares at a price of $17.50 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated December 23, 1998, receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, with any amendments or
supplements, together constitute the "Offer"). Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates the right to purchase Shares tendered pursuant to the Offer.
Upon the terms and subject to the terms and conditions of the Offer and
effective upon acceptance for payment of and payment for the Shares tendered
herewith, the undersigned hereby sells, assigns and transfers to, or upon the
order of, Purchaser all right, title and interest in and to all of the Shares
that are being tendered hereby (and any and all other Shares or other securities
issued or issuable in respect thereof on or after December 17, 1998) and
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and all such other Shares or
securities), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares (and all such other Shares or securities), or
transfer ownership of such Shares (and all such other Shares or securities) on
the account books maintained by the Book-Entry Transfer Facility, together, in
any such case, with all accompanying evidences of transfer and authenticity, to
or upon the order of Purchaser, (b) present such Shares (and all such other
Shares or securities) for transfer on the books of the Company and (c) receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and all such other Shares or securities), all in accordance with the
terms of the Offer.
The undersigned hereby irrevocably appoints Thomas O. Harbison and Thomas
P. Dea and each of them, the attorneys and proxies of the undersigned, each with
full power of substitution, to exercise all voting and other rights of the
undersigned in such manner as each such attorney and proxy or his substitute
shall in his sole discretion deem proper, with respect to all of the Shares
tendered hereby which have been accepted for payment by Purchaser prior to the
time of any vote or other action (and any and all other Shares or other
securities issued or issuable in respect thereof on or after December 17, 1998),
at any meeting of shareholders of the Company (whether annual or special and
whether or not an adjourned meeting), by written consent or otherwise. This
proxy is irrevocable and is granted in consideration of, and is effective upon,
the acceptance for payment of such Shares by Purchaser in accordance with the
terms of the Offer. Such acceptance for payment shall revoke any other proxy or
written consent granted by the undersigned at any time with respect to such
Shares (and all such other Shares or securities), and no subsequent proxies will
be given or written consents will be executed by the undersigned (and if given
or executed, will not be deemed to be effective).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all other Shares or other securities issued or
issuable in respect thereof on or after December 17, 1998) and that when the
same are accepted for payment by Purchaser, Purchaser will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claims. The undersigned will,
upon request, execute and deliver any additional documents deemed by the
Depositary or Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby (and all such other Shares
or securities).
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
<PAGE> 4
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and
Purchaser upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated under "Special Payment Instructions", please
issue the check for the purchase price of any Shares purchased, and return any
Shares not tendered or not purchased, in the name(s) of the undersigned (and, in
the case of Shares tendered by book-entry transfer, by credit to the account at
the Book-Entry Transfer Facility). Similarly, unless otherwise indicated under
"Special Delivery Instructions", please mail the check for the purchase price of
any Shares purchased and any certificates for Shares not tendered or not
purchased (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signature(s). In the event that both
"Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the check for the purchase price of any Shares purchased
and return any Shares not tendered or not purchased in the name(s) of, and mail
said check and any certificates to, the person(s) so indicated. The undersigned
recognizes that Purchaser has no obligation pursuant to the "Special Payment
Instructions" to transfer any Shares from the name of the registered holder(s)
thereof if Purchaser does not accept for payment any of the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 6, 7 AND 8)
To be completed ONLY if the check for the purchase price of Shares purchased
(less the amount of any federal income and backup withholding tax required to be
withheld) or certificates for Shares not tendered or not purchased are to be
issued in the name of someone other than the undersigned.
Mail [ ] check
[ ] certificates to:
Name ..........................................................................
(Please Print)
Address .......................................................................
................................................................................
(Zip Code)
................................................................................
(Taxpayer Identification No.)
(also see substitute form W-9 below)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 6, 7 AND 8)
To be completed ONLY if the check for the Purchase Price of Shares purchased
(less the amount of any federal income and backup withholding tax required to be
withheld) or certificates for Shares not tendered or not purchased are to be
mailed to someone other than the undersigned or to the undersigned at an address
other than that shown below the undersigned's signature(s).
Mail [ ] check
[ ] certificates to:
Name ..........................................................................
(Please Print)
Address .......................................................................
................................................................................
(Zip Code)
<PAGE> 5
---------------------------------------------------------------------
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9
BELOW)
.....................................
.....................................
Signature(s) of Owners
Dated ...................... , 199
Name(s) .............................
.....................................
(Please Print)
Capacity (full title) ...............
Address .............................
.....................................
(Include Zip Code)
Area Code and Telephone Number ......
(Must be signed by registered
holder(s) exactly as name(s) appear(s)
on stock certificate(s) or on a
security position listing or by
person(s) authorized to become
registered holder(s) by certificates
and documents transmitted herewith. If
signature is by a trustee, executor,
administrator, guardian,
attorney-in-fact, agent, officer of a
corporation or other person acting in
a fiduciary or representative
capacity, please set forth full title
and see Instruction 5.)
GUARANTEE OF SIGNATURES(S)
(IF REQUIRED; SEE INSTRUCTIONS 1 AND
5)
Name of Firm ........................
Authorized Signature ................
Dated .................... , 199
---------------------------------------------------------------------
<PAGE> 6
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I TAXPAYER IDENTIFICATION NO. -- FOR ALL ACCOUNTS PART II FOR PAYEES EXEMPT
FORM W-9 ........................................................... FROM BACKUP
DEPARTMENT OF THE Enter your taxpayer ------------------------- WITHHOLDING (SEE
TREASURY identification number in the ------------------------- ENCLOSED
INTERNAL REVENUE SERVICE appropriate box. For most Social Security Number GUIDELINES)
PAYER'S REQUEST FOR individuals and sole OR
TAXPAYER IDENTIFICATION proprietors, this is your -------------------------
NO. Social Security Number. For -------------------------
other entities, it is your Employee Identification
Employer Identification Number
Number. If you do not have a
number, see "How to Obtain a
TIN" in the enclosed
Guidelines.
Note: If the account is in
more than one name, see the
chart on page 2 of the
enclosed Guidelines to
determine what number to
enter.
- ------------------------------------------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number or I am waiting for a number to be
issued to me and either (a) I have mailed or delivered an application to receive a taxpayer identification
number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I
intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer
identification number within (60) days, 31% of all reportable payments made to me thereafter will be withheld
until I provide a number;
(2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, or (b) I have
not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding; and
(3) Any information provided on this form is true, correct and complete.
- ------------------------------------------------------------------------------------------------------------------
SIGNATURE -------------------------------------------------- DATE
---------------------------------, 199
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm that is a
participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution"). Signatures on this Letter
of Transmittal need not be guaranteed (a) if this Letter of Transmittal is
signed by the registered holder(s) of the Shares (which term, for purposes of
this document, shall include any participant in the Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares)
tendered herewith and such holder(s) have not completed the instruction entitled
"Special Payment Instructions" on this Letter of Transmittal or (b) if such
Shares are tendered for the account of an Eligible Institution. See Instruction
5.
2. Delivery of Letter of Transmittal and Shares. This Letter of
Transmittal is to be used either if certificates are to be forwarded herewith
or, unless an Agent's Message is utilized, if delivery of Shares is to be made
by book-entry transfer pursuant to the procedures set forth in Section 3 of the
Offer to Purchase. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of all Shares delivered electronically, as well as
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof or, in the case of a book-entry transfer, an Agent's Message) and any
other documents required by this Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the front page of this Letter of
Transmittal on or prior to the Expiration Date. Shareholders who cannot deliver
their Shares and all other required documents to the Depositary on or prior to
the Expiration Date must tender their Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such
procedure: (a) such tender must be made by or through an Eligible Institution,
(b) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by Purchaser must be received by the
Depositary on or prior to the Expiration Date and (c) the certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares delivered
electronically, as well as a properly completed and duly executed Letter of
Transmittal (or facsimile thereof or, in the case of a book-entry delivery, an
Agent's Message) and any other documents required by this Letter of Transmittal,
must be received by the Depositary within three New York Stock Exchange, Inc.
trading days after the date of execution of such Notice of Guaranteed Delivery,
all as provided in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF CERTIFICATES FOR SHARES ARE
SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal (or
facsimile thereof), the tendering shareholder waives any right to receive any
notice of the acceptance for payment of the Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (not applicable to shareholders who tender by
book-entry transfer). If fewer than all the Shares represented by any
certificate delivered to the Depositary are to be tendered, fill in the number
of Shares which are to be tendered in the box entitled "Number of Shares
Tendered". In such case, a new certificate for the remainder of the Shares
represented by the old certificate will be sent to the person(s) signing this
Letter of Transmittal, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificates without alteration, enlargement or any change
whatsoever.
<PAGE> 8
If any of the Shares tendered hereby is held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment of the purchase price is to be made, or Shares not
tendered or not purchased are to be returned, in the name of any person other
than the registered holder(s). Signatures on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
Purchaser of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. Purchaser will pay any stock transfer taxes with
respect to the sale and transfer of any Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or
Shares not tendered or not purchased are to be returned in the name of, any
person other than the registered holder(s), or if a transfer tax is imposed for
any reason other than the sale or transfer of Shares to Purchaser pursuant to
the Offer, then the amount of any stock transfer taxes (whether imposed on the
registered holder(s), such other person or otherwise) will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes, or
exemption therefrom, is submitted herewith.
7. Special Payment and Delivery Instructions. If the check for the
purchase price of any Shares purchased is to be issued, or any Shares not
tendered or not purchased are to be returned, in the name of a person other than
the person(s) signing this Letter of Transmittal or if the check or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Stockholders tendering Shares by book-entry transfer may request that Shares not
purchased be credited to such account at the Book-Entry Transfer Facility as
such stockholder may designate under "Special Payment Instructions". If no such
instructions are given, any such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated above.
8. Substitute Form W-9. Under the federal income tax laws, the Depositary
will be required to withhold 31% of the amount of any payments made to certain
shareholders pursuant to the Offer. In order to avoid such backup withholding,
each tendering stockholder, and, if applicable, each other payee, must provide
the Depositary with such stockholder's or payee's correct taxpayer
identification number and certify that such stockholder or payee is not subject
to such backup withholding by completing the Substitute Form W-9 set forth
above. In general, if a stockholder or payee is an individual, the taxpayer
identification number is the Social Security number of such individual. If the
Depositary is not provided with the correct taxpayer identification number, the
stockholder or payee may be subject to a $50 penalty imposed by the Internal
Revenue Service. Certain shareholders or payees (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order to satisfy the Depositary that
a foreign individual qualifies as an exempt recipient, such stockholder or payee
must submit a statement, signed under penalties of perjury, attesting to that
individual's exempt status. Such statements (Form W-8, Certificate of Foreign
Status) can be obtained from the Depositary. For further information concerning
backup withholding and instructions for completing the Substitute Form W-9
(including how to obtain a taxpayer identification number if you do not have one
and how to complete the
<PAGE> 9
Substitute Form W-9 if Shares are held in more than one name), consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Shares to be deemed invalidly tendered, but may require the Depositary to
withhold 31% of the amount of any payments made pursuant to the Offer. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained provided that the required information is furnished to
the Internal Revenue Service. NOTE: FAILURE TO COMPLETE AND RETURN THE
SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE
TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
9. Requests for Assistance or Additional Copies. Requests for assistance
or additional copies of the Offer to Purchase and this Letter of Transmittal may
be obtained from the Information Agent at the address or telephone numbers set
forth below.
<PAGE> 10
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
ALL OTHERS CALL TOLL FREE: (800) 431-9645
<PAGE> 11
GUIDELINES FOR CERTIFICATE OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
- ---------------------------------------------------------------
---------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- --------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- --------------------------------------------------------------
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the
account) account or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent person(3)
ward, minor, or incompetent
person
7. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is
also a trustee) The actual owner(1)
b. So-called trust account that
is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate or Legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization
account
12. Partnership account held in the The partnership
name of the business
13. Association, club or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district or prison) that
receives agricultural program
payments
</TABLE>
- ---------------------------------------------------------------
---------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's Social Security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
Note:If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 12
GUIDELINES FOR CERTIFICATE OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7), if the
account satisfies the requirements of section 401(f)(2).
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid to you.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FORM, AND RETURN IT TO THE PAYER.
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6019 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
LCS INDUSTRIES, INC.
TO
CATALOG ACQUISITION CO.,
A WHOLLY-OWNED SUBSIDIARY OF
CUSTOMERONE HOLDING CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 22, 1999, UNLESS THE OFFER IS EXTENDED.
This Notice of Guaranteed Delivery, or a form substantially equivalent
hereto, must be used to accept the Offer (as defined) (i) if certificates
representing shares of common stock, par value $0.01 per share (the "Shares") of
LCS Industries, Inc., a Delaware corporation (the "Company"), are not
immediately available, (ii) if the procedure for book-entry transfer cannot be
completed prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase), or (iii) if time will not permit all required documents to reach the
Depositary prior to the Expiration Date. Such form may be delivered by hand,
transmitted by facsimile transmission or mailed to the Depositary. See Section 3
of the Offer to Purchase.
The Depositary for the Offer is:
AMERICAN SECURITIES TRANSFER & TRUST INC.
<TABLE>
<S> <C>
By Mail, Hand Delivery or Facsimile: New York Drop Agent:
American Securities Transfer & Trust Inc. American Securities Transfer & Trust Inc.
938 Quail Street, Suite 101 c/o Bank of Nova Scotia Trust Company
Denver, Colorado 80215 New York
Attention: Trust Department One Liberty Plaza, 23rd Floor
New York, New York 10006
Facsimile: Attention: Pat Keane
(303) 234-5340
Facsimile:
Phone: (212) 225-5436
(303) 234-5300
Phone:
(212) 225-5427
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Catalog Acquisition Co., a Delaware
corporation ("Purchaser") and a wholly-owned subsidiary of CustomerONE Holding
Corporation, a Delaware corporation ("Parent"), upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated December 23, 1998 (the
"Offer to Purchase"), and the related Letter of Transmittal (which, together
with any amendments or supplements thereto, constitute the "Offer"), receipt of
which is hereby acknowledged, the number of shares set forth below of common
stock, par value $0.01 per share (the "Shares") of LCS Industries, Inc., a
Delaware corporation (the "Company"), pursuant to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
Number of Common Shares:
- ----------------------
Certificate Nos. (if available):
- ------------------------------------------------------
- ------------------------------------------------------
Check box if Shares will be tendered by book-entry transfer: [ ]
Account Number:
- ----------------------------------
Dated:
- ---------------------------------------, 199
Name(s) of Record Holder(s):
- -------------------
- ------------------------------------------------------
- ------------------------------------------------------
PLEASE PRINT
Address(es):
- ---------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
ZIP CODE
Area Code and Tel. No.:
- --------------------------
(AREA CODE) (TELEPHONE NO.)
Signature(s):
- ---------------------------------------
- ------------------------------------------------------
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, guarantees to deliver to the Depositary
either certificates representing the Shares tendered hereby, in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, in each case with delivery
of a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message, and any
other documents required by the Letter of Transmittal, within three New York
Stock Exchange, Inc. trading days (as defined in the Offer to Purchase) after
the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
<TABLE>
<S> <C>
Name of Firm:
--------------------------------- -----------------------------------------
AUTHORIZED SIGNATURE
Address:
---------------------------------------- Name:
----------------------------------------
--------------------------------------- PLEASE PRINT
ZIP CODE
Title:
Area Code & Tel. No.: -----------------------------------------
------------------------
Date:
-----------------------------------, 199
</TABLE>
DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD BE
SENT ONLY WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
D.F. KING & CO., INC.
77 WATER STREET
NEW YORK, NEW YORK 10005
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
LCS INDUSTRIES, INC.
AT
$17.50 NET PER SHARE IN CASH
(AS DESCRIBED IN THE OFFER TO PURCHASE REFERRED TO HEREIN)
BY
CATALOG ACQUISITION CO.,
A WHOLLY-OWNED SUBSIDIARY
OF
CUSTOMERONE HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 22, 1999, UNLESS THE OFFER IS EXTENDED.
December 23, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged by Catalog Acquisition Co., a Delaware corporation
("Purchaser") and wholly-owned subsidiary of CustomerONE Holding Corporation, a
Delaware corporation ("Parent"), to act as Information Agent in connection with
Purchaser's offer to purchase all of the outstanding shares of common stock, par
value $0.01 per share (the "Shares") of LCS Industries, Inc., a Delaware
corporation (the "Company"), at a price of $17.50 per Share, net to the seller
in cash, without interest, 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 any
amendments or supplements thereto, constitute the "Offer") enclosed herewith.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the Offer
to Purchase) that number of Shares which, when added to the Shares beneficially
owned by Parent, Purchaser or any of their affiliates (if any), constitutes more
than 50% of the then outstanding Shares on the date Shares are accepted for
payment. The Offer is also subject to the other conditions set forth in the
Offer to Purchase. See the Introduction and Section 16 of the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated December 23, 1998;
2. Letter of Transmittal for your use in accepting the Offer and
tendering Shares and for the information of your clients;
<PAGE> 2
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares and all other required documents cannot be
delivered to the Depositary, or if the procedures for book-entry transfer
cannot be completed, by the Expiration Date (as defined in the Offer to
Purchase);
4. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
5. A letter to shareholders of the Company from William Rella, the
Chairman of the Board and Chief Executive Officer of the Company, together
with a Solicitation/Recommendation Statement on Schedule 14D-9 dated
December 23, 1998, which has been filed by the Company with the Securities
and Exchange Commission;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to American Securities Transfer & Trust
Inc., 938 Quail Street, Suite 101, Denver, Colorado 80215, Attn: Trust
Department (the "Depositary").
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for Shares which are
validly tendered prior to the Expiration Date and not theretofore properly
withdrawn when, as and if Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment pursuant to the
Offer. Payment for Shares purchased pursuant to the Offer will, in all cases, be
made only after timely receipt by the Depositary of (i) certificates for such
Shares, or timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, pursuant to the procedures
described in Section 3 of the Offer to Purchase, (ii) a properly completed and
duly executed Letter of Transmittal (or a properly completed and manually signed
facsimile thereof) or an Agent's Message (as defined in the Offer to Purchase)
in connection with a book-entry transfer and (iii) all other documents required
by the Letter of Transmittal.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Depositary and the Information Agent as described
in the Offer to Purchase) for soliciting tenders of Shares pursuant to the
Offer. Purchaser will, however, upon request, reimburse brokers, dealers,
commercial banks and trust companies for customary mailing and handling costs
incurred by them in forwarding the enclosed materials to their customers.
Purchaser will pay or cause to be paid all stock transfer taxes applicable
to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the
Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 22, 1999, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer of Shares, and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and in
the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedures for delivery by book-entry transfer prior to the expiration of the
Offer, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
2
<PAGE> 3
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
Information Agent at the address and telephone numbers set forth on the back
cover of the Offer to Purchase.
Very truly yours,
D.F. KING & CO., INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF PURCHASER, PARENT, THE COMPANY, THE INFORMATION AGENT, THE DEPOSITARY,
OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON
TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION
WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS
CONTAINED THEREIN.
3
<PAGE> 1
OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
LCS INDUSTRIES, INC.
AT
$17.50 NET PER SHARE IN CASH
(AS DESCRIBED IN THE OFFER TO PURCHASE REFERRED TO HEREIN)
BY
CATALOG ACQUISITION CO.,
A WHOLLY-OWNED SUBSIDIARY
OF
CUSTOMERONE HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 22, 1999, UNLESS THE OFFER IS EXTENDED.
December 23, 1998
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated December
23, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer") in connection with the offer by Catalog Acquisition Co.,
a Delaware corporation ("Purchaser") and wholly-owned subsidiary of CustomerONE
Holding Corporation, a Delaware corporation ("Parent"), to purchase for cash all
outstanding shares of common stock, par value $0.01 per share (the "Shares") of
LCS Industries, Inc., a Delaware corporation (the "Company"), at a purchase
price of $17.50 per Share, net to you in cash. WE ARE THE HOLDER OF RECORD OF
SHARES HELD FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS
THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE ENCLOSED LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY
YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Your attention is invited to the following:
1. The offer price is $17.50 per Share, net to you in cash, without
interest.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement (as defined in the Offer to Purchase) and the transactions
contemplated thereby, including the Offer and the Merger (each as defined in the
Offer to Purchase), and has unanimously determined that the Offer and the Merger
are fair to, and in the best interests of, the Company's shareholders and
unanimously recommends that the shareholders accept the Offer and tender their
Shares pursuant to the Offer.
4. The Offer and withdrawal rights expire at 12:00 Midnight, New York City
time, on Friday, January 22, 1999, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the Offer
to Purchase) that number of Shares which, when added to the Shares beneficially
owned by Parent, Purchaser or any of their affiliates (if any), constitutes more
than 50% of the then outstanding Shares on the date Shares are accepted for
payment. The Offer is also subject to
<PAGE> 2
the other conditions set forth in the Offer to Purchase. See the Introduction
and Section 16 of the Offer to Purchase.
6. Any stock transfer taxes applicable to the sale of Shares to Purchaser
pursuant to the Offer will be paid by Purchaser, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Except as disclosed in the Offer to Purchase, Purchaser is not aware of any
state in which the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. In any jurisdiction in
which the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form set forth
on the reverse side of this letter. An envelope to return your instructions to
us is enclosed. If you authorize the tender of your Shares, all such Shares will
be tendered unless otherwise specified on the reverse side of this letter. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf prior to the expiration of the Offer.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
LCS INDUSTRIES, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated December 23, 1998 and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer") in connection with the offer by Catalog Acquisition Co.,
a Delaware corporation and wholly-owned subsidiary of CustomerONE Holding
Corporation, a Delaware corporation, to purchase all outstanding shares of
common stock, par value $0.01 per share (the "Shares") of LCS Industries, Inc.,
a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
Number of Common Shares to be Tendered:
- ---------------------
------------------------------------
------------------------------------
Signature(s)
------------------------------------
Print Name(s)
------------------------------------
------------------------------------
Address(es)
------------------------------------
Area Code and Telephone Number
------------------------------------
Tax ID or Social Security Number
Dated: , 199
3
<PAGE> 1
EXHIBIT (a)(6)
LCS INDUSTRIES, INC. AGREES TO BE ACQUIRED BY CUSTOMERONE
HOLDING CORPORATION
DECEMBER 17, 1998
CustomerONE Holding Corporation today announced that it has entered into a
definitive merger agreement with LCS Industries, Inc. (Nasdaq: LCSI) 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 $97.25 million.
Pursuant to the merger agreement, CustomerONE will make a cash tender offer for
all of the outstanding shares of LCS common stock. The tender offer will
commence as soon as possible. Consummation of the tender offer is subject to
U.S. antitrust regulatory clearance and other customary closing conditions.
The Board of Directors of LCS has unanimously approved the acquisition and has
recommended that LCS stockholders accept the tender offer and approve and adopt
the merger agreement.
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 provider. CustomerONE is a subsidiary of Onex Corporation, a
diversified company with 1997 consolidated revenues of $11 billion,
consolidated assets of $6.4 billion and 43,000 employees. Onex was ranked the
9th largest company in Canada in 1997. It operates through autonomous
subsidiaries that are leaders in their industries. They include LSG Sky Chefs,
Celestica Inc., Lantic Sugar Limited, Dura Automotive Systems, Inc., Tower
Automotive, Inc., SOFTBANK Services Group, North Direct Response Inc., Phoenix
Pictures Inc. and Vencap, Inc. Onex shares trade on the Toronto and Montreal
exchanges under the stock symbol OCX.
FOR FURTHER INFORMATION: JOANNE BILTEKOFF; (716) 871-6400
<PAGE> 1
EXHIBIT (a)(7)
This announcement is not an offer to purchase nor a solicitation of an offer to
sell Shares (as defined). The Offer (as defined) is made solely by the Offer
to Purchase dated December 23, 1998 and the related Letter of Transmittal
and is not being made to, nor will tenders be accepted from or on behalf
of, holders of Shares in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the laws
of such jurisdiction. In those jurisdictions where the applicable
laws require that the Offer be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of
Catalog Acquisition Co. by one or more registered
brokers or dealers licensed under the laws of
such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
LCS INDUSTRIES, INC.
AT
$17.50 NET PER COMMON SHARE
BY
CATALOG ACQUISITION CO.
A WHOLLY-OWNED SUBSIDIARY OF
CUSTOMERONE HOLDING CORPORATION
<PAGE> 2
Catalog Acquisition Co., a Delaware corporation ("Purchaser"), that is a
wholly-owned subsidiary of CustomerONE Holding Corporation, a Delaware
corporation ("Parent"), and an indirect subsidiary of Onex Corporation, a
corporation organized under the laws of Canada, hereby offers to purchase all
outstanding shares of Common Stock, $0.01 par value per share (the "Shares"), of
LCS Industries, Inc., a Delaware corporation (the "Company"), at $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 and in the related Letter of Transmittal (which, together with any
amendments or supplements, constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JANUARY 22, 1999, OR SUCH LATER DATE
TO WHICH THE OFFER IS EXTENDED (THE "EXPIRATION DATE").
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 THE PARENT, A LESSER NUMBER EQUALING A
MAJORITY OF THE SHARES ON AN ISSUED AND OUTSTANDING BASIS) (THE "MINIMUM
CONDITION"), (ii) ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, HAVING EXPIRED OR BEEN
TERMINATED AND (iii) CERTAIN OTHER TERMS AND CONDITIONS SET FORTH IN THE OFFER
AND THE MERGER AGREEMENT (AS DEFINED).
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE MERGER AGREEMENT,
THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS
OF SHARES AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of December 17, 1998 (the "Merger Agreement") among the Company, Parent and
Purchaser. The Merger Agreement provides, among other things, that as soon as
practicable after the consummation of the Offer, Purchaser will be merged with
and into the Company (the "Merger"), with the Company continuing as the
surviving corporation (the "Surviving Corporation"). Pursuant to the Merger,
each outstanding Share (other than Shares held by Parent, Purchaser or any
other subsidiary of Parent and Shares held by stockholders properly exercising
appraisal rights under Delaware law) will be converted into the right to
receive the Offer Price, without interest.
Purchaser expressly reserves the right to modify the terms of the Offer,
provided that, without the Company's written consent, Purchaser shall 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 above, (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
represents more than 50% of the Shares outstanding on a fully-diluted basis
but less than 90% 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 all conditions to the Offer (other than the Minimum
Condition) shall first have been satisfied. Further, Purchaser may extend the
Offer beyond the Expiration Date up to February 24, 1999 if at the Expiration
Date certain conditions set forth in the Merger Agreement are not satisfied
or waived. Any such extension will be followed as promptly as practicable by
public announcement thereof.
<PAGE> 3
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment tendered Shares when, as and if Purchaser gives oral or written notice
to American Securities Transfer & Trust Inc. (the "Depositary") of its
acceptance of the tenders of such Shares. Payment for Shares accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares, into the Depositary's account at the Book-Entry
Transfer Facility (as defined in the Offer to Purchase)), a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) and any other
required documents.
Tenders of Shares made pursuant to the Offer may be withdrawn any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after January 22, 1999 unless theretofore accepted
for payment as provided in the Offer to Purchase. To be effective, a written,
telegraphic, telex or facsimile transmission notice of withdrawal must be timely
received by the Depositary at one of its addresses set forth in the Offer to
Purchase and must specify the name of the person who tendered the Shares to be
withdrawn and the number of Shares to be withdrawn. If the Shares to be
withdrawn have been delivered to the Depositary, a signed notice of withdrawal
with (except in the case of Shares tendered by an Eligible Institution (as
defined in the Offer to Purchase)) signatures guaranteed by an Eligible
Institution must be submitted prior to the release of such Shares. In addition,
such notice must specify, in the case of Shares tendered by delivery of
certificates, the name of the registered holder (if different from that of the
tendering stockholder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares.
The information required to be disclosed by paragraph (e)(1)(vii) of
Rule 14d-6 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended, is contained in the Offer to Purchase and is
incorporated herein by reference. The Company has provided Purchaser with the
Company's stockholder list and security position listings for the purpose of
disseminating the Offer to holders of Shares. The Offer to Purchase and the
related Letter of Transmittal will be mailed to record holders of Shares and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the stockholder list or, if applicable, who
are listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO
THE OFFER. REQUESTS FOR COPIES OF THE OFFER TO PURCHASE AND THE RELATED LETTER
OF TRANSMITTAL AND ANY OTHER TENDER OFFER MATERIALS MAY BE DIRECTED TO THE
INFORMATION AGENT AS SET FORTH BELOW, AND COPIES WILL BE FURNISHED PROMPTLY AT
PURCHASER'S EXPENSE.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
ALL OTHERS CALL TOLL FREE: (800) 431-9645
December 23, 1998
<PAGE> 1
EXHIBIT (b)(1)
[TD BANK FINANCIAL GROUP LETTERHEAD]
December 11, 1998
CustomerONE Holdings Corporation
699 Hertel Ave.
Buffalo, NY
14207
Attention: Mr. Gary Crosby
Executive Vice President
Dear Sirs:
You have advised The Toronto-Dominion Bank (the "Bank") that CustomerOne
Holdings Corporation is interested in acquiring an entity you have identified
in writing to the Bank (the "Acquired Company"). We understand that such
acquisition (the "Acquisition") would be accomplished by means of a public
takeover bid made to all shareholders of the Acquired Company with a view to
acquiring no less than 50.1% of the outstanding shares of the Acquired Company.
As consideration for the Acquisition, the shareholders of the Acquired Company
will receive cash. In that connection, you have requested that the Bank agree
to structure, arrange and syndicate senior secured credit facilities to be made
available to the Borrower in an aggregate amount of up to US$70,000,000 (the
"Facilities") and that the Bank commit to provide the entire amount of the
Facilities and to serve as administrative agent (the "Agent") for the
Facilities.
The Bank is pleased to advise you that it is willing to act as exclusive
advisor and arranger for the Facilities. Furthermore, the Bank is pleased to
advise you of its commitment to provide the entire amount of the Facilities
upon the terms and subject to the conditions set forth or referred to in this
commitment letter (the "Commitment Letter"), in the Summary of Terms and
Conditions attached hereto as Exhibit A (the "Term Sheet"), as well as Exhibit
B.
It is agreed that the Bank will act as the sole and exclusive Agent, and as the
sole and exclusive advisor and arranger, for the Facilities, and will, in such
capacities, perform the duties and exercise the authority customarily performed
and exercised by it in such roles. You agree that no other agents, co-agents or
arrangers will be appointed, no other titles will be awarded and no
compensation (other than that expressly contemplated by Exhibit B) will be paid
in connection with the Facilities unless you and we shall so agree.
The Bank intends to syndicate the Facilities (including, in its discretion, all
or part of the Bank's commitment hereunder) to a group of financial institutions
(together with the Bank, the "Lenders") identified by us in consultation with
you. The Bank intends to commence syndication efforts to The Bank of Nova Scotia
("BNS") promptly upon execution of this Commitment Letter; you agree to actively
assist the Bank in completing a syndication satisfactory to it. Such assistance
shall include, if deemed necessary by the Bank, (a) your using commercially
reasonable efforts to ensure that the syndication efforts benefit materially
from the Borrower's existing lending relationships and, to the extent
practicable, the existing lending relationships of the Acquired Company, (b)
direct contact between senior management and advisors of the Borrower and the
proposed Lenders, (c) assistance in the preparation of a Confidential
Information Memorandum and other marketing materials to be used in connection
with the syndication and (d) the hosting, with the Bank, of one or more meetings
of prospective Lenders.
<PAGE> 2
The Bank will manage all aspects of the syndication, including decisions as to
selection of institutions to be approached and when they will be approached,
when their commitments will be accepted, which institutions will participate,
the allocations of the commitments among the Lenders and the amount and
distribution of fees among the Lenders. To assist the Bank in its syndication
efforts, you agree promptly to prepare and provide to the Bank all information
with respect to the Borrower, the Acquired Company, the Acquisition and the
other transactions contemplated hereby, including all financial information and
projections, as the Bank may reasonably request in connection with the
arrangement and syndication of the Facilities. You understand that in arranging
and syndicating the Facilities we may use and rely on such information and
projections without independent verification thereof.
As consideration for the Bank's commitment hereunder and the Bank's agreement
to perform the services described herein, you agree to pay to the Bank the
non-refundable fees set forth in Exhibit B attached.
The Bank's commitment hereunder and its agreement to perform the services
described herein are subject to (a) the Bank not becoming aware after the date
hereof of any information or other matter affecting the Borrower, the Acquired
Company, or the transactions contemplated hereby which is inconsistent in a
material and adverse manner with any such information or other matter disclosed
to the Bank by you prior to the date hereof, (b) the Bank's satisfaction that
prior to and during the syndication of the Facilities there shall be no
competing offering, placement or arrangement of any debt securities or bank
financing by or on behalf of the Borrower or any affiliate thereof without prior
consultation with and consent of the Bank and (c) the other conditions set forth
or referred to in the Term Sheet.
If BNS does not commit to one half of the Facilities and in the event the
Facilities are syndicated to any Bank other than BNS, the Bank shall be
entitled, with the Borrower's consent (which shall not be unreasonably
withheld), to change the structure, terms, pricing or amount of the Facilities
if the Bank determines that such changes are advisable in order to ensure a
successful syndication or an optimal credit structure and if the aggregate
amount of the Facilities shall remain unchanged.
If BNS does not commit to one half of the Facilities and in the event of a
material adverse change in or disruption of financial, banking or capital market
conditions that in the judgement of the Bank would adversely affect the
satisfactory completion of the syndication of the Facilities to any Bank other
than BNS, the Bank in its sole discretion shall be entitled to change the
structure, terms, pricing or amount of the Facilities if the Bank determines
that such changes are advisable in order to ensure a successful syndication or
an optimal credit structure and if the aggregate amount of the Facilities shall
remain unchanged.
The Bank's commitment hereunder is further subject to: (i) satisfactory
completion of due diligence; (ii) the truth and accuracy in all material
respects of the financial statements and other information provided to the Bank
by the Borrower; (iii) the absence of any material adverse change in either the
business, assets, liabilities, financial condition, prospects or results of
operations of the Borrower and its affiliates, or the Acquired Company and its
affiliates; and (iv) if the BNS does not commit to one half of the Facilities,
the satisfaction of the Bank that clear market conditions exist and will exist
prior to and during the syndication to any Bank other than BNS for obligations
of the Facilities.
You agree to indemnify and hold harmless each Lender, its affiliates and their
respective officers, directors, employees, advisors, and agents (each, an
"indemnified person") from and against any and all losses, claims, damages and
liabilities to which any such indemnified person may become subject arising out
of or in connection with this Commitment Letter, the Facilities, the use of the
proceeds thereof, the Acquisition or any related transaction or any claim,
litigation, investigation or proceeding relating to any of the foregoing,
regardless of whether any indemnified person is a party thereto, and to
reimburse each indemnified person upon demand for any legal or other expenses
incurred in connection with investigating or defending any of the foregoing,
provided that the foregoing indemnity will not, as to any indemnified person,
apply to losses, claims, damages, liabilities or related expenses to the extent
they arise from the willful misconduct or gross negligence of such indemnified
person or the breach of this commitment by such indemnified person. No
indemnified person shall be liable for any indirect or consequential damages in
connection with its activities related to the Facilities. You further agree
that, insofar as this paragraph is concerned, the Bank is contracting as agent
and trustee on behalf of each indemnified person.
2
<PAGE> 3
This Commitment letter shall not be assignable by you without the prior written
consent of the Bank (and any purported assignment without such consent shall be
null and void), is intended to be solely for the benefit of the Borrower and is
not intended to confer any benefits upon, or create any rights in favour of, any
person other than the Borrower. This Commitment Letter may not be amended or
waived except by an instrument in writing signed by both the Borrower and the
Bank. This Commitment Letter may be executed in any number of counterparts, each
of which shall be an original, and all of which, when taken together, shall
constitute one agreement. Delivery of an executed signature page of this
Commitment Letter by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof. This Commitment Letter is the only
agreement that has been entered into among us with respect to the Facilities and
sets forth the entire understanding of the parties with respect thereto. This
Commitment Letter shall be governed by, and construed in accordance with, the
laws of the State of New York.
This Commitment Letter is delivered to you on the understanding that neither
this Commitment Letter (including, for greater certainty, Exhibits B attached)
nor any of its terms or substance shall be disclosed, directly or indirectly,
to any other person except (a) to your officers, agents and advisors who are
directly involved in the consideration of this matter or (b) as may be
compelled in a judicial or administrative proceeding or as otherwise required
by law (in which case you agree to inform us promptly thereof), provided that
the foregoing restrictions shall cease to apply except as regards the fees
described in Exhibit B after this Commitment Letter has been accepted by you.
The compensation, reimbursement, indemnification and confidentiality provisions
contained herein shall remain in full force and effect regardless of whether
definitive financing documentation shall be executed and delivered and
notwithstanding the termination of this Commitment Letter or the Bank's
commitment hereunder.
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof by returning to us executed counterparts hereof,
together with the amounts referred to in Exhibit B to be payable upon the
acceptance hereof, not later than 5:00 p.m., Toronto time, on December 15,
1998. The Bank's commitment and agreements herein will expire at such time in
the event the Bank has not received such executed counterparts and such amounts
in accordance with the immediately preceding sentence.
We are pleased to have been given the opportunity to assist you in connection
with this financing.
Yours very truly,
THE TORONTO-DOMINION BANK
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------------------ --------------------------------
Title: Manager, Communications Finance Title: AVP
--------------------------------- -----------------------------
Accepted and Agreed to this 15th day of December, 1998
CUSTOMERONE HOLDINGS CORPORATION
By: /s/ THOMAS P. DEA
-----------------------------------
THOMAS P. DEA, Secretary
By:
-----------------------------------
cc: Seth Mersky/Thomas P. Dea
Mary Korby
<PAGE> 1
EXHIBIT (b)(2)
[ONEX CORPORATION LETTERHEAD]
December 16, 1998
LCS Industries, Inc.
120 Brighton Road
Clifton, New Jersey 07012
Gentlemen:
Onex Corporation ("Onex") and its affiliates own, directly and indirectly, a
majority equity interest in CustomerOne Holding Corporation, a Delaware
corporation ("CustomerOne"). It is our understanding that substantially
concurrently herewith, CustomerOne has entered into that certain Agreement and
Plan of Merger by and among LCS Industries, Inc., a Delaware corporation (the
"Company"), Catalog Acquisition Co., a Delaware corporation that is a
wholly-owned subsidiary of CustomerOne ("Merger Sub"), and CustomerOne (the
"Merger Agreement"). Capitalized terms not otherwise defined herein shall have
the meanings attributed thereto in the Merger Agreement.
Pursuant to the Merger Agreement, CustomerOne has agreed to cause Merger Sub to
make the Offer at the Offer Price. Further, to the extent that less than all of
the Shares are tendered in the Offer, CustomerOne and Merger Sub have agreed
that Merger Sub shall be merged with and into the Company at the Effective Time
and that the Shares (except as expressly stated in the Merger Agreement) will
be converted into the right to receive the Merger Consideration. Each of the
Offer Price and the Merger Consideration will be payable in cash. It is
anticipated that the aggregate consideration payable to current stockholders of
the Company as a result of the Offer and the Merger will be approximately $98
million U.S. (the "Aggregate Consideration").
<PAGE> 2
2
The purpose of this letter is to confirm that Onex commits to provide, or
otherwise cause to be available, sufficient funds to CustomerOne and Merger Sub
to fulfill their obligation under the Merger Agreement to deliver the Aggregate
Consideration in connection with the Offer and the Merger, whether by capital
contribution or otherwise. Onex acknowledges that the Company is acting in
reliance on this letter in executing and delivering the Merger Agreement.
Yours truly,
/s/ SETH M. MERSKY
<PAGE> 1
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> 2
TABLE OF CONTENTS
ARTICLE I
THE OFFER
<TABLE>
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<S> <C> <C>
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
</TABLE>
i
<PAGE> 3
<TABLE>
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<S> <C> <C>
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
</TABLE>
ii
<PAGE> 4
<TABLE>
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<S> <C> <C>
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
</TABLE>
iii
<PAGE> 5
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> 6
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> 7
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> 8
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
<PAGE> 9
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
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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.
31
<PAGE> 1
EXHIBIT (C)(2)
July 14, 1998
Onex Corporation
161 Bay Street
49th floor
Toronto, Canada
M5J 2S1
Attention: Mr. Seth Mersky
Gentlemen:
In connection with your consideration of a possible negotiated transaction
(a "Transaction") by you or one or more of your affiliates involving LCS
Industries, Inc. (the "Company"), the Company, Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), acting as the Company's exclusive financial
advisor in connection with the proposed Transaction, and their respective
advisors and agents, are prepared to make available to you certain information
which is non-public, confidential or proprietary in nature ("Evaluation
Material").
By Execution of this letter agreement (this "Agreement"), you agree to
treat all Evaluation Material confidentially and to observe the terms and
conditions set forth herein. For purposes of this Agreement, Evaluation Material
shall include all information, regardless of the form in which it is
communicated or maintained (whether prepared by the Company, DLJ or otherwise)
that contains or otherwise reflects information concerning the Company that you
or your Representatives (as defined below) may be provided by or on behalf of
the Company or DLJ in the course of your evaluation of a possible Transaction.
You shall not be required to maintain the confidentiality of those portions of
the Evaluation Material that (i) become generally available to the public other
than as result of a disclosure by you or any of your Representatives, (ii) were
available to you prior to the disclosure of such Evaluation Material to you
pursuant to this Agreement or (iii) become available to you on a
non-confidential basis from a source other than the Company or its agents,
advisors or Representatives provided that the source of such information was not
known by you or any of your Representatives, after reasonable investigation, to
be bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Company or any of its affiliates
with respect to such material.
You agree that you will not use the Evaluation Material for any purposes
other than determining whether you wish to enter into a Transaction. You agree
not to disclose or allow disclosure to others of any Evaluation Material; except
that, you may disclose Evaluation Material to your directors, officers,
employees, partners, affiliates, agents, counsel, accountants, advisors or
representatives (hereinafter, "Representatives"), to the extent necessary to
permit such Representatives to assist you in making the determination referred
to in the prior sentence. However, such Evaluation Material shall not be
distributed to any Representatives until each such Representative has executed a
copy of this Agreement without modification to the terms and conditions hereof.
<PAGE> 2
Mr. Seth Mersky
Onex Corporation
Page 2 July 14, 1998
You agree that you will not use the Evaluation Material in any way
directly or indirectly detrimental to the Company. In particular you agree that
for a period of eighteen months from the date of this Agreement you and your
affiliates will not knowingly, as a result of information obtained from the
Evaluation Material in connection with a possible Transaction: (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.
In addition, you agree that you will not make any disclosure that you are
having or have had discussions concerning a Transaction, that you have received
Evaluation Material or that you are considering a possible Transaction;
provided that you may make such disclosure if you have received the written
opinion of your counsel that such disclosure must be made by you in order that
you not commit a violation of law and, prior to such disclosure, you promptly
advise and consult with the Company and its legal counsel concerning the
information you propose to disclose.
Although the Company and DLJ have endeavored to include in the Evaluation
Material information known to them which they believe to be relevant for the
purpose of your investigation, you understand and agree that none of the
Company, DLJ or any of their affiliates, agents, counsel, accountants, advisors
or representatives (i) have made or make any representation or warranty,
expressed or implied, as to the accuracy or completeness of the Evaluation
Material or (ii) shall have any liability whatsoever to you or your
Representatives relating to or resulting from the use of the Evaluation
Material or any errors therein or omissions therefrom.
In the event that you are requested or required (by deposition,
interrogatories, requests for information or documents in legal proceedings,
subpoenas, civil investigative demand or similar process), in connection with
any proceeding, to disclose any Evaluation Material, you will give the Company
prompt written notice of such request or requirement so that the Company may
seek an appropriate protective order or other remedy and/or waive compliance
with the provisions of this Agreement, and you will cooperate with the Company
to obtain such protective order. In the event that such protective order or
other remedy is not obtained or the Company waives compliance with the relevant
provisions of this Agreement, you (or such other persons to whom such request is
directed) will furnish only that portion of the Evaluation Material which, in
the written opinion of your counsel, is legally required to be disclosed and,
upon the Company's request, use your best efforts to obtain assurances that
confidential treatment will be accorded to such information.
If you decide that you do not wish to proceed with a Transaction, you will
promptly notify DLJ of that decision. In that case, or if the Company shall
elect at any time to terminate further access by you to the Evaluation Material
for any reason, you will, upon written request, within two business days
redeliver to us all copies of the Evaluation Material, destroy all Notes and
deliver to DLJ and the Company a certificate executed by one of your duly
authorized officers indicating that the requirements of this sentence have been
satisfied in full. Notwithstanding the return of all Evaluation Material other
than Notes and the destruction of the Notes, you and your Representatives will
continue to be bound by your obligations of confidentiality and other
obligations hereunder.
You hereby acknowledge that you are aware that the securities laws of the
United States prohibit any person who has material, non-public information
concerning the Company or a possible Transaction
<PAGE> 3
Mr. Seth Mersky
Onex Corporation
Page 3 July 14, 1998
involving the Company from purchasing or selling securities in reliance upon
such information or from communicating such information to any other person or
entity.
You agree that, for a period of eighteen months from the date of this
Agreement, unless such shall have been specifically invited in writing by the
Board of Directors of the Company, none of you, your affiliates or
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 Securities Exchange Act of 1934, as amended),
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 set forth in
(a) above, or (e) enter into any discussions or arrangements with any third
party with respect to any of the foregoing.
You understand that (i) the Company and DLJ shall conduct the process for a
possible Transaction as they in their sole discretion shall determine
(including, without limitation, negotiating with any prospective buyer and
entering into definitive agreements without proper notice to you or any other
person), (ii) any procedures relating to such a Transaction may be changed at
any time without notice to you or any other person, (iii) the Company shall have
the right to reject or accept any potential buyer, proposal or offer, for any
reason whatsoever, in its sole discretion, and (iv) none of you, your affiliates
or Representatives shall have any claims whatsoever against the Company or DLJ
or any of their respective directors, officers, stockholders, owners,
affiliates, counsel, accountants, advisors or agents arising out of or relating
to the Transaction (other than those against the parties to a Definitive
Agreement with you in accordance with the terms thereof). You agree that unless
and until a Definitive Agreement between the Company and you with respect to any
Transaction has been executed and delivered, neither the Company nor you will be
under any legal obligation of any kind whatsoever with respect to such
Transaction.
It is further understood and agreed that DLJ will arrange for appropriate
contacts for due diligence purposes. It is also understood and agreed that all
(i) communications regarding a possible Transaction, (ii) requests for
additional information, (iii) requests for facility tours or management
meetings and (iv) discussions or questions regarding procedures, will be
submitted or directed exclusively to DLJ, and that none of you, your affiliates
or Representatives who are aware of the Evaluation Material and/or the
possibility of a Transaction will initiate or cause to be initiated any
communication with any director, officer or employee of the Company concerning
the Evaluation Material or a Transaction.
You agree that money damages would not be a sufficient remedy for any
breach of this Agreement by you, any of your affiliates or Representatives,
that in addition to all other remedies the Company shall be entitled to
specific performance and injunctive or other equitable relief as a remedy for
<PAGE> 4
Mr. Seth Mersky
Onex Corporation
Page 4
July 14, 1998
any such breach, and you further agree to waive, and to use your best efforts to
cause your Representatives to waive, any requirement for the securing or posting
of any bond in connection with such remedy. In the event of litigation relating
to this Agreement, the prevailing party shall be reimbursed for the reasonable
legal fees and other costs incurred in connection with such litigation,
including any appeal therefrom.
The Company reserves the right to assign its rights, powers and privileges
under this Agreement (including, without limitation, the right to enforce the
terms of this Agreement) to any person who enters into a Transaction.
All modifications of, waivers of and amendments to this Agreement or any
part hereof must be in writing signed on behalf of you and the Company or by
you and DLJ, as agent for the Company. You acknowledge that the Company is
intended to be benefited by this Agreement and that the Company shall be
entitled, either alone or together with DLJ, to enforce this Agreement and to
obtain for itself the benefit of any remedies that may be available for the
breach hereof.
It is further understood and agreed that no failure or delay by the Company
in exercising any right, power or privilege under this Agreement shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise of any right, power or privilege hereunder.
You hereby irrevocably and unconditionally submit to the exclusive
jurisdiction of any State or Federal court sitting in New York City over any
suit, action or proceeding arising out of or relating to this Agreement. You
hereby agree that service of any process, summons, notice or document by U.S.
registered mail addressed to you shall be effective service of process for any
action, suit or proceeding brought against you in any such court. You hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. You agree that a final judgment in any such
suit, action or proceeding brought in any such court shall be conclusive and
binding upon you and may be enforced in any other courts to whose jurisdiction
you are or may be subject, by suit upon such judgment.
In the event that any provision or portion of this Agreement is determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall be unaffected hereby and shall
remain in full force and effect to the fullest extent permitted by applicable
law.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
If you are in agreement with the foregoing, please so indicate by signing,
dating and returning one copy of this Agreement, which will constitute our
agreement with respect to the matters set forth herein.
The terms of this Agreement shall expire eighteen months from the date
hereof.
<PAGE> 5
Mr. Seth Mersky
Onex Corporation
Page 5
July 14, 1998
Very truly yours,
LCS INDUSTRIES, INC.
By: /s/ CHRIS WOFFORD
-----------------------
Chris Wofford
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
as Exclusive Agent
Agreed and Accepted:
ONEX CORPORATION
By: /s/ SETH MERSKY
-----------------------------
Title: Vice President
-------------------------
Date: 7/15/98
-------------------------
