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Registration No. 333-39332
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Amendment No. 1
to
FORM S-4
Registration Statement
Under
THE SECURITIES ACT OF 1933
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CONCORD EFS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 6099 04-2462252
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation or Classification Code
Organization) Number)
2525 Horizon Lake Drive
Suite 120
Memphis, Tennessee 38133
(901) 371-8000
(Address and telephone number of Registrant's principal executive offices)
Edward T. Haslam
Chief Financial Officer
Concord EFS, Inc.
2525 Horizon Lake Drive
Suite 120
Memphis, Tennessee 38133
(901) 371-8000
(Name, address and telephone number of agent for service)
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Copies to:
Imad I. Qasim William R. Kunkel
Sidley & Austin Skadden, Arps, Slate, Meagher & Flom
Bank One Plaza (Illinois)
10 South Dearborn Street 333 W. Wacker Drive
Chicago, Illinois 60603 Suite 2100
Chicago, Illinois 60606
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Approximate date of commencement of proposed sale to the public: As promptly
as practicable after this Registration Statement becomes effective and the
effective time of the proposed merger of SWCI Acquisition Corp., a wholly owned
subsidiary of the Registrant, with and into Cash Station, Inc., as described
herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CASH STATION, INC.
200 South Wacker Drive
Suite 1000
Chicago, Illinois 60606
June 27, 2000
Dear Stockholder:
You are cordially invited to attend the special meeting of stockholders of
Cash Station, Inc., to be held on Wednesday, July 19, 2000, at 10:00 a.m. at
the offices of Cash Station at 200 South Wacker Drive, Suite 1000, Chicago,
Illinois 60606.
Cash Station, Inc. and Concord EFS, Inc. entered into a merger agreement
dated as of April 12, 2000. Under that agreement, a newly formed subsidiary of
Concord will be merged with and into Cash Station, and Cash Station will
survive as a direct wholly owned subsidiary of Concord. Your Board of Directors
is giving this proxy statement and prospectus to you to solicit your proxy to
vote for approval and adoption of the merger agreement, for exempting the
transactions contemplated thereby from Article VIII of Cash Station's by-laws
and for approval of the grants of certain executive cash awards.
If we complete the merger, each share of Cash Station common stock that you
own will be converted into shares of Concord common stock, unless you exercise
appraisal rights under Delaware law. We will determine the number of shares of
Concord common stock into which each share of Cash Station common stock will be
converted immediately prior to completion of the merger according to formulas
specified in the merger agreement and described in the attached materials. If
the merger agreement is approved and all other conditions described in the
merger agreement have been met or, where permissible, waived, the merger is
expected to occur as soon as possible after the special meeting. There is no
public trading market for Cash Station common stock. Concord common stock is
quoted on the Nasdaq National Market System under the symbol "CEFT."
After careful consideration, your Board of Directors has unanimously
determined that the merger is fair to and in the best interests of Cash Station
and its stockholders and unanimously recommends that Cash Station stockholders
vote to approve and adopt the merger agreement, to exempt the transactions
contemplated thereby from Article VIII of Cash Station's by-laws and to approve
the grants of the executive cash awards.
The accompanying proxy statement and prospectus describes the terms and
conditions of the merger agreement and includes, as Annex A, the complete text
of the merger agreement. I urge you to read the enclosed materials carefully
for a complete description of the merger. Whether or not you plan to attend the
special meeting in person and regardless of the number of shares you own,
please complete, sign, date and return the enclosed proxy card as promptly as
possible. I look forward to seeing you at the special meeting.
Sincerely,
Stephen S. Cole
President and Chief Executive
Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the shares of Concord common stock to be
issued under this proxy statement and prospectus or passed upon the adequacy or
accuracy of this proxy statement and prospectus. Any representation to the
contrary is a criminal offense.
This proxy statement and prospectus is dated June 27, 2000, and is first
being mailed to Cash Station stockholders on or about June 28, 2000.
<PAGE>
CASH STATION, INC.
200 South Wacker Drive
Suite 1000
Chicago, Illinois 60606
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 19, 2000
TO THE STOCKHOLDERS OF CASH STATION, INC.:
A special meeting of stockholders of Cash Station, Inc. will be held on
Wednesday, July 19, 2000, at the offices of Cash Station at 200 South Wacker
Drive, Suite 1000, Chicago, Illinois 60606, commencing at 10:00 a.m., for the
following purposes:
(1) To consider and vote on a proposal to approve and adopt the
Agreement and Plan of Merger dated as of April 12, 2000, among Cash
Station, Concord EFS, Inc., and SWCI Acquisition Corp., a direct wholly
owned subsidiary of Concord, a copy of which is attached as Annex A to the
proxy statement and prospectus accompanying this notice.
(2) To consider and vote on a proposal to exempt the transactions
contemplated by the Agreement and Plan of Merger from Article VIII of Cash
Station's by-laws.
(3) To consider and vote on a proposal to approve the grants of certain
executive cash awards.
(4) To consider and transact such other business as may properly be
brought before the special meeting or any adjournment thereof.
After careful consideration, your Board of Directors has unanimously
declared that the merger agreement and the merger are advisable and fair to and
in the best interests of Cash Station and its stockholders. THE CASH STATION
BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, FOR AN
EXEMPTION TO ARTICLE VIII OF CASH STATION'S BY-LAWS FOR THE TRANSACTIONS
CONTEMPLATED THEREBY AND FOR APPROVAL OF THE GRANTS OF THE EXECUTIVE CASH
AWARDS. We urge you to read the accompanying proxy statement and prospectus
carefully for a description of the merger agreement.
Stockholders of Cash Station beneficially holding, as of the record date, in
the aggregate approximately 69% of the outstanding shares of Cash Station
common stock have agreed to vote all of their shares in favor of the approval
and adoption of the merger agreement. Consequently, approval and adoption of
the merger agreement by Cash Station stockholders is assured.
Pursuant to the merger agreement, holders of Cash Station common stock are
entitled to appraisal rights in connection with the merger, in accordance with
Delaware law.
The record date for determining the stockholders who will receive notice of
and be entitled to vote at the special meeting is June 22, 2000. You may
examine a list of the Cash Station stockholders who are entitled to vote at the
special meeting during ordinary business hours at Cash Station's principal
offices for the ten days prior to the special meeting.
By Order of the Board of Directors,
James H. Hayes
Assistant Secretary
Chicago, Illinois
June 27, 2000
Whether or not you plan to attend the special meeting, please complete,
sign, date and return the enclosed proxy card promptly in the enclosed postage-
paid envelope. Stockholders who attend the special meeting may revoke their
proxies and vote in person if they desire. PLEASE DO NOT SEND YOUR STOCK
CERTIFICATES WITH YOUR PROXY CARDS AT THIS TIME. Do not send in your stock
certificates until you receive a letter of transmittal.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY............................... 1
The Companies........................ 1
What You Will Receive in the Merger.. 2
The Special Meeting.................. 2
Stockholder Agreements............... 2
Cash Station's Reasons for the
Merger.............................. 3
Interests of Certain Persons in the
Merger.............................. 3
Regulatory Approvals................. 4
Conditions to the Merger............. 4
Termination of the Merger Agreement.. 5
No Solicitation of Competing
Transactions........................ 5
Appraisal Rights..................... 5
Certain United States Federal Income
Tax Consequences.................... 6
Accounting Treatment................. 6
Forward-Looking Statements May Prove
Inaccurate; Risk Factors............ 6
Certain United States Federal Income
Tax Consequences................... 20
Accounting Treatment................ 21
Federal Securities Law Consequences. 21
Certain Other Effects of the Merger. 21
Forward-Looking Statements May Prove
Inaccurate; Risk Factors........... 22
THE MERGER AGREEMENT................. 22
The Merger.......................... 22
Structure of the Merger............. 22
Conversion and Exchange of
Securities......................... 23
Effective Time...................... 23
Representations and Warranties...... 23
Business of Cash Station Pending the
Merger and Other Agreements........ 25
No Solicitation by Cash Station..... 26
Additional Agreements of Concord and
Cash Station....................... 27
Fees and Expenses; Termination Fee.. 27
Employee Benefit Plans.............. 28
Directors' and Officers' Insurance
and Indemnification................ 28
MAC Advisory Committees............. 28
What Is Needed to Complete the
Merger............................. 29
Termination of the Merger Agreement. 30
Waiver and Amendment of the Merger
Agreement.......................... 31
SUMMARY SELECTED FINANCIAL DATA....... 8
Selected Historical Financial Data of
Cash Station........................ 8
Selected Historical Consolidated
Financial Data of Concord........... 9
Comparative Per Share Data........... 10
Comparative Market Price Data........ 11
THE SPECIAL MEETING................... 12
General.............................. 12
Matters to Be Considered at the
Special Meeting..................... 12
Record Date.......................... 12
Quorum............................... 12
Required Vote........................ 12
Proxies.............................. 13
Solicitation of Proxies.............. 13
STOCKHOLDER AGREEMENTS............... 32
REGULATORY MATTERS................... 33
THE MERGER............................ 14
Background of the Merger............. 14
Cash Station's Reasons for the
Merger; Recommendation of the Cash
Station Board of Directors.......... 15
Executive Cash Awards................ 17
Interests of Certain Persons in the
Merger; Conflicts of Interest....... 17
Form of the Merger................... 18
Merger Consideration................. 19
Procedures for Exchange of Cash
Station Common Stock Certificates... 19
BUSINESS OF CONCORD.................. 33
RECENT DEVELOPMENTS.................. 33
INFORMATION ABOUT CASH STATION....... 34
Business of Cash Station............ 34
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 34
Results of Operations............... 34
Liquidity and Capital Resources..... 36
Quantitative and Qualitative
Disclosures About Market Risk...... 36
Voting Securities and Principal
Holders Thereof.................... 36
DESCRIPTION OF CONCORD CAPITAL STOCK. 37
</TABLE>
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<TABLE>
<S> <C>
COMPARISON OF RIGHTS OF CASH STATION
STOCKHOLDERS AND CONCORD
STOCKHOLDERS........................ 39
Size of the Board and Qualifications
of Directors....................... 39
Board Meetings...................... 39
Removal of Directors................ 39
Action by Committees................ 39
Amendments to the Charter........... 39
Amendments to the By-laws........... 40
Restrictions on Adoption of a Plan
of Merger.......................... 40
Restrictions on Eligibility to be a
Stockholder........................ 40
Restrictions on Special Meetings of
the Stockholders................... 40
Notice of Meetings.................. 40
Membership.......................... 40
Transfer Restrictions............... 41
Transactions with Interested
Stockholders....................... 41
APPRAISAL RIGHTS OF DISSENTING
STOCKHOLDERS OF CASH STATION........ 42
EXPERTS.............................. 44
LEGAL OPINIONS....................... 44
WHERE YOU CAN FIND MORE INFORMATION.. 44
Concord SEC Filings (File No. 0-
13848)............................. 45
CASH STATION FINANCIAL STATEMENTS.... F-1
Annex A Agreement and Plan of Merger
Annex B Form of Stockholder Agreement
Annex C Section 262 of the Delaware
General Corporation Law
Annex D Fairness Opinion of First
Annapolis Capital, Inc.
</TABLE>
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SUMMARY
This Summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the documents to
which we have referred. See "Where You Can Find More Information" (page 44). We
have included page references parenthetically to direct you to more complete
descriptions of the topics presented in this Summary.
In the merger, SWCI Acquisition Corp., a newly formed subsidiary of Concord,
will merge with and into Cash Station. Cash Station will be the surviving
corporation in the merger and will become a direct wholly owned subsidiary of
Concord. You will receive Concord common stock in exchange for your shares of
Cash Station common stock.
The merger agreement is attached as Annex A to this document. We encourage
you to read the merger agreement, as it is the legal document that governs the
merger.
The Companies
Cash Station, Inc.
200 South Wacker Drive
Suite 1000
Chicago, Illinois 60606
(312) 977-1150
Cash Station is a member-owned electronic funds transfer network and full
service provider of a variety of electronic delivery products and electronic
funds transfer (EFT) processing services. Cash Station operates the Cash
Station(R) Network, a regional online debit network providing cardholder access
to automated teller machines (ATMs) and point of sale (POS) terminals at
financial institutions and retail locations throughout the Chicago metropolitan
area and greater Illinois.
Cash Station, which is headquartered in Chicago, Illinois, was founded in
1981 as a Delaware not-for-profit corporation, and in 1993 was converted into a
Delaware stock corporation. For further information concerning Cash Station,
see "--Selected Historical Financial Data of Cash Station" and "INFORMATION
ABOUT CASH STATION."
Concord EFS, Inc.
2525 Horizon Lake Drive
Suite 120
Memphis, Tennessee 38133
(901) 371-8000
Concord is a fully integrated leading provider of electronic transaction
authorization, processing, settlement and funds transfer services on a
nationwide basis. Concord focuses on marketing its services to supermarket
chains and multiple lane retailers, financial institutions, petroleum and
convenience stores, grocery stores, the trucking industry and other retailers.
Its primary activity is merchant card services, in which Concord provides
integrated electronic transaction services for credit card, debit card and
electronic benefits transfer (EBT) card transactions. These transaction
services include data capture, authorization and settlement services for over
400,000 point-of-sale terminals. Concord also provides ATM services, consisting
of owning and operating the MAC(R)-branded EFT network and processing for
approximately 39,000 ATMs nationwide, of which it owns approximately 1,000.
For further information concerning Concord, see "--Selected Historical
Consolidated Financial Data of Concord," "BUSINESS OF CONCORD," and "WHERE YOU
CAN FIND MORE INFORMATION."
SWCI Acquisition Corp.
2525 Horizon Lake Drive
Suite 120
Memphis, Tennessee 38133
(901) 371-8000
SWCI Acquisition Corp. is a company formed by Concord on February 28, 2000
solely for use in the merger.
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What You Will Receive in the Merger (page 19)
As a result of the merger, unless you exercise appraisal rights under
Delaware law, each share of Cash Station common stock that you own will be
converted into the number of shares of Concord common stock determined in
accordance with the merger agreement.
Holders of Cash Station common stock can generally expect to receive
approximately 2.6982 shares of Concord common stock for each share of Cash
Station common stock held. Therefore, if the merger had closed on June 26, 2000
and you owned 100 shares of Cash Station common stock, then you would receive
the following:
Example of Exchange Values:
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<S> <C> <C>
If you own 100 You would receive You would receive
shares of Cash this many shares of this amount of cash in
Station Concord Common lieu of fractional
Common Stock Stock shares
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269 $22.55
</TABLE>
The example above has been calculated on a fully-diluted basis based upon
926,546 shares of Cash Station common stock being exchanged in the merger. If
the total amount of Cash Station stock outstanding as of the merger is greater
than 926,546, on a fully-diluted basis, the exchange ratio will be reduced
accordingly. In addition, subject to the next sentence, if Concord's average
price over a specified period of time prior to the closing of the merger is
less than $22.40, then the exchange ratio will be adjusted such that the number
of shares of Concord common stock issued will have an aggregate value of $56
million. If Concord's average price over that period of time is less than
$20.00, then (i) the exchange ratio will be adjusted so that a total of 2.8
million shares of Concord common stock are issued, and (ii) Cash Station will
have the right to terminate the merger agreement instead of accepting the 2.8
million shares.
The cash in lieu of fractional share amount listed in the previous table is
only an example, as this number will be based on the per share Concord closing
price on the date on which the merger occurs.
The Special Meeting (page 12)
At the special meeting, the holders of Cash Station common stock will be
asked to approve and adopt the merger agreement, to exempt the transactions
contemplated thereby from Article VIII of Cash Station's by-laws and to approve
the grants of the executive cash awards described in this proxy statement. The
close of business on June 22, 2000 is the record date for determining whether
you are entitled to vote at the special meeting. At that date, there were
926,546 shares of Cash Station common stock outstanding. Each share is entitled
to one vote at the special meeting.
The vote of two-thirds of the outstanding shares of Cash Station common
stock is required to approve and adopt the merger agreement. The vote of two-
thirds of the outstanding shares of Cash Station common stock represented at
the meeting is required to exempt the transactions contemplated by the merger
agreement from Article VIII of Cash Station's by-laws. The vote of 75% of the
outstanding shares of Cash Station common stock is required to approve the
grants of the executive cash awards.
Stockholder Agreements (page 32)
As a condition to Concord's willingness to enter into the merger agreement,
Concord has entered into separate stockholder agreements with certain of Cash
Station's stockholders. These stockholders have agreed, without any additional
consideration being paid to them, to vote all of their shares in favor of the
merger. Stockholders owning, as of the record date, 635,018 shares of Cash
Station common stock, representing approximately 69% of the shares of common
stock then outstanding, have entered into such voting agreements with Concord.
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT BY THE CASH STATION
STOCKHOLDERS IS THEREFORE ASSURED. HOWEVER, BECAUSE THERE ARE OTHER CONDITIONS
TO CLOSING THAT HAVE NOT YET BEEN FULFILLED, CLOSING OF THE MERGER IS NOT
ASSURED.
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Cash Station's Reasons for the Merger (page 15)
The Cash Station Board unanimously approved the merger agreement and the
merger and recommends that you vote to approve and adopt the merger agreement.
The Cash Station Board believes that the merger is fair to and in the best
interests of Cash Station and its stockholders. In reaching its decision, the
Cash Station Board considered a number of factors, including the following:
. trend of consolidation among regional EFT networks which result in
competitive efficiencies and the Board's belief in the necessity of Cash
Station's participating in this consolidation;
. the ability of the merger to provide Cash Station with extensive
geographic coverage and the financial reources for extensive research and
development of new products;
. the ability of the merger to provide Cash Station with the human
resources necessary to continue to provide high quality customer service
at competitive prices;
. the ability of Cash Station members to obtain guarantees that certain
network fees will not, on a per transaction basis assuming current
volume, be increased for three years;
. the change in Cash Station's business model from a financial institution
participant-owned organization to an investor-owned corporation in which
Cash Station's stockholders as a group would own, immediately following
the merger, less than 1.5% of the outstanding stock of Concord;
. the consideration to be received by Cash Station stockholders; and
. the fact that no other party had submitted to Cash Station a proposal as
attractive as the transaction proposed by Concord, either as to price or
as to other terms and conditions.
To review Cash Station's reasons for the merger in greater detail, see "THE
MERGER--Cash Station's Reasons for the Merger; Recommendation of the Cash
Station Board of Directors."
Interests of Certain Persons in the Merger (page 17)
In considering the recommendation of the Cash Station Board regarding the
merger, you should be aware of the interests that certain officers and
directors of Cash Station have in the merger that are different from your and
their interests as stockholders.
The current officers and directors of Cash Station will be indemnified by
Concord with respect to acts or omissions occurring at or prior to the time of
the merger, to the same extent as such persons are presently indemnified.
Cash Station's change of control/employment agreements with Stephen S. Cole,
its President and Chief Executive Officer, James H. Hayes, its Executive Vice
President and General Counsel, and G. Kirk Ergang, Jr., its Senior Vice
President of Systems and Operations, have provisions that obligate Cash Station
to provide them with certain benefits and change of control compensation as a
result of the merger. Under these agreements, the foregoing individuals will
receive in the aggregate $1,117,960 at closing and an additional $833,260 one
year from closing (or earlier if Concord terminates the executives' employment
without cause). The amounts to be paid at closing include the aggregate amount
of approximately $356,000 payable under Cash Station's deferred compensation
plan as a result of the change of control associated with the merger. The
foregoing members of the Cash Station management team will also receive options
to acquire an aggregate of 85,000 shares of Concord common stock under existing
Concord stock option plans.
Cash Station's change of control/employment agreements with Kate Coleman,
its Senior Vice President of Planning, Marketing and Sales, and Stephen M.
Fluegge, its Vice President of Finance, have provisions that obligate Cash
Station to provide them with certain benefits and change of control
compensation if they are terminated other than for cause or resign from their
positions following assignment to them of duties inconsistent with the duties
provided in those agreements or following an unreasonable diminution in such
duties.
The Board of Directors of Cash Station has authorized and approved cash
awards in the aggregate amount of $2 million to Messrs. Cole, Hayes and Ergang
and Ms. Coleman in connection with the merger. Such cash awards were made
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expressly contingent on the closing of the merger and the approval of such
awards by holders of not less than 75% of the outstanding shares of Cash
Station common stock as required to avoid the negative tax consequences of
Section 280G of the Internal Revenue Code. The payment or non-payment of the
cash awards will not affect the consideration to be received by Cash Station's
stockholders.
Additionally, the five foregoing individuals will remain officers of the new
company.
The Cash Station Board recognized all the interests described above and
concluded that these interests did not detract from the fairness of the merger
to the Cash Station stockholders. Please refer to page 17 for more information
concerning the interests of Cash Station's directors and officers. See "THE
MERGER--Interests of Certain Persons in the Merger; Conflicts of Interest."
Regulatory Approvals (page 33)
In order to consummate the merger, regulatory approval under the Bank
Holding Company Act of 1956 must be obtained, the waiting period applicable to
the consummation of the merger under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 must be terminated or expired and Cash Station must
have received confirmation from certain regulatory agencies regarding the
ability of Cash Station's national bank stockholders and Illinois state bank
stockholders to acquire Concord's common stock in connection with the merger.
In addition, the parties must comply with applicable Federal and state
securities and corporate laws.
Conditions to the Merger (page 29)
Concord and Cash Station are not obligated to complete the merger unless a
number of conditions are satisfied or waived by them. These include the
following:
. the holders of two-thirds of the outstanding shares of Cash Station
common stock must vote to approve and adopt the merger agreement and to
exempt the transactions contemplated thereby from Article VIII of Cash
Station's by-laws;
. the relevant governmental authorities and other third parties must
approve the merger;
. there must be no law, injunction or order that prohibits the merger;
. Cash Station, Concord and SWCI Acquisition Corp. must perform, in all
material respects, all of their obligations under the merger agreement;
. with certain exceptions, Concord and Cash Station must each certify to
the other that its representations and warranties contained in the merger
agreement are true and correct, in all material respects;
. a registration statement on Form S-4 regarding the shares of Concord
common stock to be issued in the merger shall be declared effective (Cash
Station may waive this condition after October 31, 2000 only in certain
limited circumstances);
. the shares of Concord common stock to be issued in the merger and not
previously listed must be authorized for quotation on the Nasdaq National
Market System (Nasdaq);
. Concord and Cash Station must each receive an opinion from its respective
tax counsel that, among other things, the merger will qualify for U.S.
federal income tax purposes as a tax-free reorganization;
. Concord and Cash Station must each receive a pooling letter from its
independent auditors that it is eligible to be a party to a business
combination accounted for as a pooling of interests and that, in the case
of Concord, the merger will qualify for pooling of interests accounting;
. no more than 5% of the holders of shares of Cash Station common stock
must have exercised appraisal rights;
. certain executives shall be employed by Cash Station at the closing under
negotiated employment agreements;
. Cash Station must certify to Concord that it has not received notice of
termination (or experienced actual termination) of
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participation agreements from participants who accounted for $100,000 or
more of Cash Station's February 2000 network revenue; and
. other customary contractual conditions specified in the merger agreement
must be satisfied.
The party entitled to the benefit of some of these conditions may waive these
conditions. Neither Concord nor Cash Station can make assurances that the
conditions will be satisfied or waived or that the merger will occur. See "THE
MERGER--What is Needed to Complete the Merger."
Termination of the Merger Agreement (page 30)
Cash Station and Concord can agree at any time to terminate the merger
agreement without completing the merger, and the merger agreement may be
terminated by either company if any of the following occurs:
. either party materially breaches any of its representations, warranties
or obligations under the merger agreement and does not cure such breach
within 30 business days of receiving notice of it;
. the merger is not completed by October 31, 2000, except that if the
required regulatory approvals are not obtained by this date, then either
party may extend the date to April 11, 2001; or
. a court or other governmental authority permanently prohibits the merger.
Cash Station may also terminate the merger agreement if, after all of the
closing conditions have been satisfied or waived, Concord's average price over
a specified period of time prior to the closing of the merger is less than $20.
In addition, Concord may terminate the merger agreement if any of the
following occurs:
. Cash Station stockholders do not approve the merger;
. the Cash Station Board fails to recommend or modifies or withdraws its
recommendation in favor of the merger or its declaration that the merger
is fair to and in the best interest of Cash Station's stockholders;
. if prior to Cash Station's stockholder meeting any other person or entity
becomes the beneficial owner of 10% or more of the shares of Cash Station
common stock unless all shares held by such person are or become subject
to a stockholder agreement; or
. if the Cash Station Board recommends in favor of any acquisition proposal
other than the merger with Concord or resolves to do so.
If Concord terminates the merger agreement for any of these reasons, Cash
Station has agreed to reimburse Concord for all reasonable out-of-pocket fees
and expenses, up to an aggregate amount of $500,000. In addition, Cash Station
has agreed to pay a termination fee of 3% of the aggregate value of the shares
of Concord common stock to be provided to stockholders of Cash Station,
promptly following the termination, if Concord terminates the merger agreement
(i) for the first reason specified above and an acquisition proposal from any
third party existed between the date of the merger agreement with Concord and
the date of Cash Station's stockholder meeting and, within twelve months after
the termination an acquisition event occurs with a third party or Cash Station
enters into a letter of intent, agreement in principle, acquisition agreement
or other similar agreement with respect to an acquisition event with a third
party, or (ii) for any of the other reasons specified above. See "THE MERGER
AGREEMENT--Fees and Expenses; Termination Fee." (page 27)
No Solicitation of Competing Transactions (page 26)
The merger agreement restricts Cash Station's ability to solicit, encourage
or enter into any alternative acquisition transactions with third parties. Cash
Station must promptly notify Concord if it receives offers or proposals for any
such alternative transactions.
Appraisal Rights (page 42)
IF YOU OBJECT TO THE MERGER, DELAWARE LAW PERMITS YOU TO SEEK RELIEF AS A
DISSENTING STOCKHOLDER
5
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AND HAVE THE "FAIR VALUE" OF YOUR SHARES OF CASH STATION COMMON STOCK
DETERMINED BY A COURT AND PAID TO YOU IN CASH.
If you are a Cash Station stockholder and wish to dissent, you must deliver
to Cash Station, prior to the taking of the vote on the merger at the special
meeting, a written demand for appraisal of your shares. A proxy or vote against
the merger is not sufficient to make this demand. You also must not vote in
favor of the merger agreement. To not vote in favor of the merger agreement,
you can do any of the following:
. vote "no" at the special meeting, either in person or by proxy;
. abstain from voting;
. fail to vote; or
. revoke a duly executed proxy that contains a vote in favor of the merger
or contains no voting instructions.
The provisions of Delaware law relating to the exercise of appraisal rights are
complicated and failure to strictly adhere to such provisions may terminate or
waive your appraisal rights. Therefore, if you decide to exercise your
appraisal rights to obtain an appraisal of the fair value of your shares, you
may wish to consult with a qualified attorney.
A copy of Section 262 of the Delaware General Corporation Law, which governs
this process, is attached as Annex C to this proxy statement and prospectus.
Certain United States Federal Income Tax Consequences (page 20)
It is a condition to complete the merger that Cash Station and Concord each
receive an opinion of its respective tax counsel. The opinion of tax counsel
must conclude, based on certain assumptions and representations of the parties
regarding the facts existing at the effective time of the merger, that the
merger will constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code.
Tax matters are very complicated and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your tax
advisor to understand fully the tax consequences of the merger to you. See "THE
MERGER--Certain United States Federal Income Tax Consequences." (page 20)
Accounting Treatment (page 21)
Concord expects to account for the merger as a pooling of interests.
Forward-Looking Statements May Prove Inaccurate; Risk Factors (page 22)
Concord and Cash Station have made forward-looking statements in this
document and in documents to which we have referred you. These statements are
subject to risks and uncertainties, and we cannot assure you that such
statements will prove to be correct. Forward-looking statements include
assumptions as to how Concord and Cash Station may perform in the future. You
will find many of these statements in the following sections:
. ""THE MERGER--Cash Station's Reasons for the Merger; Recommendation of
the Cash Station Board of Directors." (page 15)
. ""INFORMATION ABOUT CASH STATION--Management's Discussion and Analysis of
Financial Condition and Results of Operations." (page 34)
Also, when we use words like "believes," "expects," "anticipates," "intends,"
"plans," "estimates," "likely," "will," "should" or similar expressions, we are
making forward-looking statements. For these statements, Concord and Cash
Station claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. You should
understand that some important factors, in addition to those discussed
elsewhere in this document and in the documents which we incorporate by
reference, could affect the future results of Concord and Cash Station and
could cause those results to differ materially from those expressed in our
forward-looking statements. These factors include: the loss of key personnel or
inability
6
<PAGE>
to attract additional qualified personnel; changes in card association rules or
fees; restrictions on surcharging or a decline in the deployment of ATMs;
dependence on VISA and MasterCard registrations; the credit risk of merchant
customers; susceptibility to fraud at the merchant level; receiving lower price
volumes from higher volume merchants; increasing competition; the loss of key
customers; continued consolidation in the banking and retail industries; risks
related to acquisitions; changes in rules and regulations governing financial
institutions; the inability to remain current with rapid technological change;
dependence on third-party vendors; the imposition of additional state taxes;
volatility of Concord's stock price; and a significant delay in the expected
completion of the merger. We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
7
<PAGE>
SUMMARY SELECTED FINANCIAL DATA
Selected Historical Financial Data of Cash Station
(In thousands, except per share data)
Cash Station is providing the following financial information to help you in
your analysis of the financial aspects of the merger. The annual selected
historical financial data presented below for fiscal years 1995, 1996, 1997,
1998 and 1999 have been derived from Cash Station's audited financial
statements. The interim selected historical financial data presented below have
been derived from Cash Station's unaudited financial statements. As this
information is only a summary, it should be read in conjunction with Cash
Station's historical financial statements (and related notes). See "CASH
STATION FINANCIAL STATEMENTS" on page F-1.
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
-------------------------------------- ---------------
1995 1996 1997 1998 1999 1999 2000
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue................. $8,259 $10,889 $13,845 $16,121 $17,974 $ 4,279 $ 4,676
Cost of operations...... 3,258 4,024 5,684 6,916 7,801 1,889 2,236
Operating expenses...... 3,932 4,948 6,006 7,144 7,720 2,136 2,074
------ ------- ------- ------- ------- ------- -------
Operating income........ 1,069 1,917 2,155 2,061 2,453 254 366
Other income............ 88 88 376 161 582 34 147
Other expenses.......... 442 22 277 393 708 67 288
------ ------- ------- ------- ------- ------- -------
Income before taxes..... 715 1,983 2,254 1,829 2,327 221 225
Income taxes............ 319 784 903 777 1,104 82 95
------ ------- ------- ------- ------- ------- -------
Net income.............. $ 396 $ 1,199 $ 1,351 $ 1,052 $ 1,223 $ 139 $ 130
====== ======= ======= ======= ======= ======= =======
Basic earnings per
share.................. $ 0.41 $ 1.24 $ 1.40 $ 1.11 $ 1.30 $ 0.15 $ 0.14
====== ======= ======= ======= ======= ======= =======
Weighted average shares. 973 971 965 951 943 951 927
====== ======= ======= ======= ======= ======= =======
Balance Sheet Data:
Working capital......... $ 719 $ 1,751 $ 2,843 $ 4,010 $ 5,213 $ 4,072 $ 5,339
Total assets............ 3,405 4,617 6,721 7,991 8,763 7,260 9,418
Long-term debt.......... -- -- -- -- -- -- --
Total stockholders'
equity................. 1,555 2,751 4,046 5,098 6,201 5,237 6,327
</TABLE>
8
<PAGE>
Selected Historical Consolidated Financial Data of Concord
(In thousands, except per share data)
Concord is providing the following financial information to help you in your
analysis of the financial aspects of the merger. The annual selected historical
consolidated financial data presented below have been derived from Concord's
audited consolidated financial statements. The interim selected historical
consolidated financial data presented below have been derived from Concord's
unaudited consolidated financial statements. As this information is only a
summary, it should be read in conjunction with Concord's historical
consolidated financial statements (and related notes) contained in the annual
report and other information that Concord has filed with the Securities and
Exchange Commission (SEC), which are incorporated by reference into this proxy
statement and prospectus.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue................. $295,552 $355,459 $493,969 $650,426 $ 871,968 $178,046 $ 257,768
Cost of operations...... 197,394 241,273 344,457 459,291 623,589 126,535 193,263
Selling, general and
administrative
expenses............... 47,907 42,811 50,540 52,925 53,606 12,805 12,524
Acquisition and
restructuring charges.. -- -- -- -- 36,189 34,810 776
-------- -------- -------- -------- ---------- -------- ----------
Operating income........ 50,251 71,375 98,972 138,210 158,584 3,896 51,205
Interest income
(expense), net......... (13,766) (10,296) (1,789) 3,712 16,096 1,732 7,081
-------- -------- -------- -------- ---------- -------- ----------
Income before taxes..... 36,485 61,079 97,183 141,922 174,680 5,628 58,286
Income taxes............ 15,627 23,347 37,771 51,918 65,932 6,969 20,697
-------- -------- -------- -------- ---------- -------- ----------
Net income (loss)....... $ 20,858 $ 37,732 $ 59,412 $ 90,004 $ 108,748 $ (1,341) $ 37,589
======== ======== ======== ======== ========== ======== ==========
Basic earnings (loss)
per share.............. $ 0.12 $ 0.21 $ 0.30 $ 0.46 $ 0.53 $ (0.01) $ 0.18
======== ======== ======== ======== ========== ======== ==========
Diluted earnings (loss)
per share.............. $ 0.12 $ 0.21 $ 0.30 $ 0.44 $ 0.51 $ (0.01) $ 0.17
======== ======== ======== ======== ========== ======== ==========
Net income (loss)....... $ 20,858 $ 37,732 $ 59,412 $ 90,004 $ 108,748 $ (1,341) $ 37,589
======== ======== ======== ======== ========== ======== ==========
Pro forma provision
(benefit) for
CPS income taxes....... -- -- (98) 458 2,484 519 260
-------- -------- -------- -------- ---------- -------- ----------
Pro forma net income
(loss)................. $ 20,858 $ 37,732 $ 59,510 $ 89,546 $ 106,264 $ (1,860) $ 37,329
======== ======== ======== ======== ========== ======== ==========
Pro forma basic earnings
(loss) per share....... $ 0.12 $ 0.21 $ 0.30 $ 0.45 $ 0.52 $ (0.01) $ 0.18
======== ======== ======== ======== ========== ======== ==========
Pro forma diluted
earnings (loss) per
share.................. $ 0.12 $ 0.21 $ 0.30 $ 0.44 $ 0.50 $ (0.01) $ 0.17
======== ======== ======== ======== ========== ======== ==========
Weighted average shares. 169,622 174,437 196,113 197,764 205,372 198,246 212,165
======== ======== ======== ======== ========== ======== ==========
Adjusted weighted
average shares and
assumed conversions.... 175,281 180,284 201,131 204,146 212,617 205,850 217,498
Balance Sheet Data:
Working capital......... $ 32,911 $ 69,860 $148,987 $271,546 $ 511,536 $290,236 $ 535,295
Total assets............ 396,144 554,462 619,196 785,209 1,102,881 821,099 1,114,512
Long-term debt, less
current maturities..... 175,978 150,561 153,329 173,000 75,000 173,750 75,000
Total stockholders'
equity................. 45,339 182,126 260,544 360,567 705,149 363,257 774,760
</TABLE>
The selected historical consolidated financial data has been restated for
1997, 1998 and 1999 to reflect the business combination of Concord and Card
Payment Systems, Inc. (CPS) on January 31, 2000, which was accounted for as a
pooling of interests; periods prior to 1997 were not restated as CPS was
organized in 1997. CPS was an S-Corporation for tax purposes prior to its
merger with Concord. As such, the former owners of CPS rather than CPS were
responsible for income taxes for the periods prior to the merger. The results
of operations include pro forma income taxes that would have been required if
CPS had been a C-Corporation. Net income per share has been restated for all
periods presented to reflect all stock splits.
9
<PAGE>
Comparative Per Share Data
The following table presents historical and pro forma per share data of Cash
Station and Concord. The data presented below should be read in conjunction
with the historical consolidated financial statements of Concord, which are
incorporated by reference in this document, and of Cash Station, which are
provided under "CASH STATION FINANCIAL STATEMENTS" on page F-1. Earnings per
share data are calculated using the diluted weighted average of shares
outstanding, while book value per share is calculated using the outstanding
shares at period end. Using the reference average Concord closing price of
$27.50 per share of Concord common stock and assuming the exchange of 926,546
shares of Cash Station common stock in the merger, approximately 2.5 million
shares of Concord common stock will be issuable in the merger resulting in an
exchange ratio of 2.6982 shares of Concord common stock for each share of Cash
Station common stock in the merger. The Concord pro forma combined per share
data assume the exchange of shares of Cash Station common stock into shares of
Concord common stock in the merger at an exchange ratio of 2.6982. The Cash
Station pro forma equivalent per share data is calculated by multiplying the
reference Concord pro forma combined per share data by the hypothetical
exchange ratio of 2.6982.
<TABLE>
<CAPTION>
Three
Year Ended Months
December 31,(1) Ended
----------------- March 31,
1997 1998 1999 2000
----- ----- ----- ---------
<S> <C> <C> <C> <C>
Concord Historical:
Earnings per common share, assuming dilution,
including pro forma taxes for CPS................. $0.30 $0.44 $0.50 $0.17
Dividends per common share, net.................... -- -- -- --
Cash Station Historical:
Earnings per common share, assuming dilution....... 1.40 1.11 1.30 0.14
Dividends per common share, net.................... -- -- -- --
Concord Pro Forma Combined (2):
Earnings per common share, assuming dilution....... 0.30 0.44 0.50 0.17
Dividends per common share, net.................... -- -- -- --
Cash Station Pro Forma Equivalent:
Earnings per common share, assuming dilution....... 0.81 1.19 1.35 0.46
Dividends per common share, net.................... -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
As of As of
December 31, March 31,
1999 2000
------------ ---------
<S> <C> <C>
Book Value Per Share
Concord Historical....................................... $3.32 $3.42
Cash Station Historical.................................. $6.68 $6.83
Concord Pro Forma Combined(2)............................ $3.31 $3.41
Cash Station Pro Forma Equivalent........................ $8.93 $9.20
</TABLE>
--------
(1) Per share data of Concord have been restated to reflect all stock splits.
(2) The pro forma combined net earnings per share for the three months in the
period ended March 31, 2000 and for each of the years ended December 31,
1997, 1998, and 1999, respectively, illustrates the results as if the
merger had occurred on the first day of each fiscal period. The pro forma
combined per share data have been included for illustrative purposes only
and do not reflect any cost savings and other synergies anticipated by
Concord's management as a result of the merger. The pro forma combined per
share data are not necessarily indicative of the results of operations or
financial position that would have occurred had the merger been consummated
at the dates indicated, nor are they necessarily indicative of future
results of operations or financial position of the merged companies.
10
<PAGE>
Comparative Market Price Data
Concord. Concord common stock is traded on Nasdaq under the symbol "CEFT."
Concord has never paid cash dividends and has no plans to do so in the future.
The following table presents certain historical trading and dividend
declaration information for Concord common stock.
<TABLE>
<CAPTION>
Concord
Common Stock
(1)
-------------
High Low
------ ------
<S> <C> <C>
Year Ended December 31, 2000
Second Quarter (through June 26, 2000)........................... $28.38 $18.94
First Quarter.................................................... 27.00 16.25
Year Ended December 31, 1999
Fourth Quarter................................................... $33.00 $20.06
Third Quarter.................................................... 27.38 20.25
Second Quarter................................................... 28.21 19.08
First Quarter.................................................... 27.25 17.00
Year Ended December 31, 1998
Fourth Quarter................................................... $28.25 $12.67
Third Quarter.................................................... 18.83 12.92
Second Quarter................................................... 17.67 12.67
First Quarter.................................................... 15.63 8.87
</TABLE>
--------
(1) The common stock prices have been restated to reflect all stock splits.
On April 12, 2000, the last trading day prior to the public announcement of
the merger agreement, the last sale price of Concord common stock, as reported
by Nasdaq, was $21.06. On June 26, 2000, the last trading date prior to the
date of this proxy statement and prospectus, the last sale price of Concord
common stock, as reported by Nasdaq, was $27.50.
THE MARKET PRICE OF CONCORD COMMON STOCK FLUCTUATES AND YOU ARE ADVISED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR CONCORD COMMON STOCK.
Cash Station. Because there is no established trading market for shares of
any class of Cash Station stock, information with respect to market prices of
Cash Station stock and the equivalent per share market prices of Concord common
stock have been omitted.
11
<PAGE>
THE SPECIAL MEETING
General
This proxy statement and prospectus is being furnished in connection with
the solicitation of proxies by the Board of Directors of Cash Station, Inc. for
use at the special meeting of holders of Cash Station common stock. This proxy
statement and prospectus, the attached Notice of Special Meeting of
Stockholders and the enclosed form of proxy are first being mailed to
stockholders of Cash Station on or about June 28, 2000.
Matters to Be Considered at the Special Meeting
At the Cash Station special meeting, holders of Cash Station common stock
will be asked to consider and vote on (i) a proposal to approve and adopt the
merger and the merger agreement, (ii) a proposal to exempt the transactions
contemplated by the merger agreement from Article VIII of Cash Station's by-
laws and (iii) a proposal to approve the grants of executive cash awards made
by the Board of Directors in connection with the transaction.
After careful consideration, the Cash Station Board has unanimously declared
that the merger agreement and the merger are advisable and fair to and in the
best interests of Cash Station and its stockholders. THE CASH STATION BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT
HOLDERS OF CASH STATION COMMON STOCK VOTE TO (i) APPROVE AND ADOPT THE MERGER
AGREEMENT, (ii) EXEMPT THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT
FROM ARTICLE VIII OF CASH STATION'S BY-LAWS, AND (iii) APPROVE THE GRANTS OF
THE EXECUTIVE CASH AWARDS MADE BY THE BOARD OF DIRECTORS IN CONNECTION WITH THE
TRANSACTION.
Record Date
The Cash Station Board has fixed the close of business on June 22, 2000 as
the record date for the determination of the stockholders entitled to notice of
and to vote at the special meeting. As of the close of business on the record
date, there were 926,546 shares of Cash Station common stock outstanding. No
other voting securities of Cash Station are outstanding. Each holder of Cash
Station common stock is entitled to one vote for each share of Cash Station
common stock held as of the record date.
As of the record date, none of the individual directors or executive
officers of Cash Station beneficially owned any outstanding shares of Cash
Station common stock. The directors as of the time the merger agreement was
approved were employees of stockholders of Cash Station owning in the aggregate
approximately 69% of the shares of common stock then outstanding.
Quorum
The presence at the special meeting, in person or by proxy, of the holders
of the majority of outstanding shares of Cash Station common stock constitutes
a quorum for the transaction of business at the special meeting. Abstentions
and non-votes will be considered present at the special meeting for the purpose
of determining the presence of a quorum. If a quorum should not be present, the
special meeting may be adjourned from time to time until a quorum is obtained.
Required Vote
Assuming a quorum is present, the affirmative vote of the holders of two-
thirds of the outstanding shares of Cash Station common stock is required to
approve and adopt the merger agreement. Assuming a quorum is present, the
affirmative vote of the holders of two-thirds of the outstanding shares of Cash
Station common stock represented at the meeting is required to exempt the
transactions contemplated by the merger agreement from Article VIII of Cash
Station's by-laws. Assuming a quorum is present, the affirmative vote of the
holders
12
<PAGE>
of 75% of the outstanding shares of Cash Station common stock is required to
approve the grants of the executive cash awards. Abstentions and non-votes will
have the same effect as a vote against the approval and adoption of the merger
agreement, against exemption of the transactions contemplated by the merger
agreement from Article VIII of Cash Station's by-laws and against approval of
the grants of the executive cash awards.
As a condition of Concord's willingness to enter into the merger agreement,
certain stockholders of Cash Station have entered into stockholder agreements
with Concord, each dated as of April 12, 2000. Under the stockholder
agreements, each of these stockholders has agreed, without any additional
consideration being paid to it, to vote all of the shares of Cash Station
common stock held by it in favor of approving and adopting the merger
agreement. As of the record date, these stockholders in the aggregate
beneficially held 635,018 (approximately 69%) of the outstanding shares of Cash
Station common stock.
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT BY THE CASH STATION
STOCKHOLDERS IS THEREFORE ASSURED. HOWEVER, BECAUSE THERE ARE OTHER CONDITIONS
TO CLOSING THAT HAVE NOT YET BEEN FULFILLED, CLOSING OF THE MERGER IS NOT
ASSURED.
ALTHOUGH APPROVAL OF THE MERGER AGREEMENT IS ASSURED, YOUR VOTE IS VERY
IMPORTANT FOR APPROVAL OF THE GRANTS OF THE EXECUTIVE CASH AWARDS.
Proxies
This proxy statement and prospectus is accompanied by a form of proxy to be
used at the Cash Station special meeting. Cash Station stockholders are
requested to complete, sign and date the accompanying proxy and promptly return
it in the enclosed envelope or otherwise mail it to Cash Station.
Shares of Cash Station common stock represented by properly executed proxies
will, unless revoked, be voted in accordance with the instructions indicated
or, if no instructions are indicated, will be voted for approval and adoption
of the merger agreement, for exemption of the transactions contemplated by the
merger agreement from Article VIII of Cash Station's by-laws and for approval
of the grants of the executive cash awards, and in the best judgment of the
individuals named in the proxy on any other matters which may properly come
before the special meeting.
You may revoke any proxy you have given at any time prior to its being voted
by filing a notice of revocation or a duly executed proxy bearing a later date
with the Secretary of Cash Station. You may also revoke your proxy by attending
the special meeting and voting in person.
You may abstain from voting by properly marking the "ABSTAIN" box on the
proposal from which you wish to abstain. Your abstention will be counted as
present for the purpose of determining the existence of a quorum. Abstentions
will have the same effect as a vote against the approval and adoption of the
merger agreement, against exemption of the transactions contemplated by the
merger agreement from Article VIII of Cash Station's by-laws and against
approval of the grants of the executive cash awards.
Solicitation of Proxies
Proxies are being solicited by and on behalf of the Cash Station Board. It
is estimated that less than $10,000 will be spent in connection with the
solicitation of Cash Station's stockholders. Cash Station will bear the cost of
the solicitation of proxies from its stockholders. Concord and Cash Station
will share equally all expenses related to printing and filing this proxy
statement and prospectus and all the SEC and other regulatory filing fees
incurred in connection with this proxy statement and prospectus. See "THE
MERGER AGREEMENT -- Fees and Expenses; Termination Fee." In addition to
soliciting proxies by mail, officers, directors and employees of Cash Station,
without receiving additional compensation, may solicit proxies by telephone, in
person or by other means.
13
<PAGE>
THE MERGER
Background of the Merger
The past several years have been a period of substantial and rapid change in
the electronic funds transfer (EFT) industry, characterized by, among other
things, intensifying competition and increased consolidation. During this
period, the Board of Directors of Cash Station has periodically reviewed its
strategic alternatives and taken various steps to maintain and enhance its long
term competitive position and profitability in the face of these changing
regulatory and market conditions.
During the late summer and fall of 1999, the Cash Station Board began a
series of discussions concerning strategic alternatives available to Cash
Station in light of the trends and developments in the industry and Cash
Station's market. The Cash Station Board determined that it would be in the
best interest of Cash Station stockholders to actively explore strategic
alternatives. In this regard, the Cash Station Board retained First Annapolis
Capital, Inc. as its financial advisor to explore strategic alternatives,
including, to solicit the interest of potential partners with suitable
financial strength, stock price performance, prospects, industry experience and
reputation, service quality, geographical location and other factors, in
entering into a business combination with Cash Station. First Annapolis
prepared a Confidential Offering Memorandum to use in the process of soliciting
expressions of interest from electronic funds transfer companies and other
potential candidates with respect to a possible strategic alliance with Cash
Station.
In early November 1999, First Annapolis contacted Concord and other
companies considered to be potential candidates to discuss a possible business
combination with Cash Station. First Annapolis provided each interested party
that executed a confidentiality agreement with a copy of the Confidential
Offering Memorandum and supplemental materials.
The Cash Station Board met on November 12, 1999, to review the status of the
process and approved the continuation of First Annapolis' efforts. The Cash
Station Board at that time also approved the recommendation of the Compensation
Committee and the Executive Committee to award certain executive cash awards to
management in recognition of the extraordinary value management had created for
Cash Station's stockholders. See "--Executive Cash Awards" below.
Several of the transaction candidates submitted first round bids to Cash
Station on November 22 and 23, 1999. Of the candidates submitting bids, Concord
and three other candidates met with the management of Cash Station and
conducted due diligence. The due diligence was substantially completed on
December 6, 1999.
The Cash Station Board met on December 13, 1999, and, among other things,
reviewed the company's strategic options and discussed the process, potential
strategic partners and related issues. The Cash Station Board also requested
additional information regarding possible strategic partners, particularly with
respect to those indicating a desire to offer stock in their company in
exchange for shares of Cash Station. The Cash Station Board then authorized
management and Cash Station's advisors to proceed with the process of
soliciting definitive offers from the various candidates.
On December 13, 1999, bid instructions and proposed merger agreements were
issued to the remaining candidates. Cash Station received offers from two of
the remaining candidates, including Concord, on or about December 20, 1999.
Another candidate submitted an unsolicited offer several weeks later.
The Cash Station Board met with its advisors and senior management on
December 27, 1999, and, among other things, reviewed the results of the second
round of bids that had been received, including the extent to which such bids
addressed the evaluation criteria for strategic partners previously agreed to
by the Cash Station Board. The Cash Station Board also reviewed the tax,
accounting and holding period implications of the bids, and authorized
management and Cash Station's advisors to proceed with reverse due diligence,
management meetings and negotiations with Concord.
14
<PAGE>
During early January, 2000, management of Concord and Cash Station, and
their respective advisors, met to further discuss the acquisition of Cash
Station by Concord and the terms of Concord's December 20, 1999 offer. Pursuant
thereto, Concord submitted a revised offer to Cash Station on January 7, 2000.
On January 10, 2000, the Cash Station Board and senior management of Cash
Station met and reviewed the discussions that had taken place to date with
Concord and the proposed merger, including the prospects for Concord's future
performance and the advisability of the proposed merger in light of existing
business, economic, competitive and regulatory conditions. Following
discussions between the directors, the Cash Station Board authorized senior
management, with the assistance of Cash Station's advisors, to negotiate a
definitive merger agreement with Concord to present to the Board for approval.
Discussions and negotiations continued to be held by management of Concord
and Cash Station, and their respective advisors, with respect to the terms of
the proposed merger throughout January, February, March and April. The Cash
Station Board met with Cash Station's senior management and advisors at various
times during such negotiations to review the proceedings and advise senior
management on certain terms and issues.
On February 25, 2000, the Cash Station Board, together with its advisors and
senior management, reviewed the discussions which senior management had with
Concord and the proposed terms of the merger agreement. Following such
discussions, First Annapolis delivered its opinion to the Cash Station Board
that the consideration to be received by the Cash Station stockholders as a
result of the merger was fair to such stockholders from a financial point of
view and presented and described the information on which its opinion was
based, which information was sent to the Board in advance. Following the
delivery of such opinion, the Cash Station Board unanimously determined that
the merger was in the best interests of the Cash Station stockholders and
unanimously approved the merger agreement and the other documents contemplated
by the merger agreement.
On April 4, 2000, the Cash Station Board, together with its advisors and
senior management, again met and reviewed the new discussions which senior
management had with Concord and the proposed changes to the structure of the
merger and the terms of the merger agreement. Following such discussions, First
Annapolis rendered its oral opinion to the Cash Station Board that the adjusted
consideration to be received by the Cash Station stockholders as a result of
the merger was fair to such stockholders from a financial point of view.
Following such confirmation, the Cash Station Board unanimously determined that
the revised merger was in the best interests of the Cash Station stockholders
and unanimously approved the revised merger agreement and the other documents
contemplated by the merger agreement.
The merger agreement and other documents contemplated by the merger
agreement were executed by authorized officers of Concord and Cash Station on
April 12, 2000.
On April 12, 2000, Cash Station and Concord entered into agreements with
certain executive officers of Cash Station providing for their continued
employment with Cash Station prior to and following the merger. See "--
Interests of Certain Persons in the Merger; Conflicts of Interest" below.
The execution of the merger agreement was publicly announced on April 13,
2000.
Cash Station's Reasons for the Merger; Recommendation of the Cash Station Board
of Directors
The Cash Station Board believes the merger will be beneficial to Cash
Station and in the best interests of the stockholders and that its stockholders
should vote FOR the merger.
The merger has been recommended by the Board of Directors of Cash Station in
response to several developments with regard to the business environment of
Cash Station. The Cash Station Board believes that the environment for shared
ATM and POS services in the Midwest requires that consolidation occur among
networks such as Cash Station.
15
<PAGE>
The Board has observed a clear trend of consolidation among regional EFT
networks over the past ten years (such as last year's merger of the Star and
Honor networks and last year's acquisition by the NYCE network of the Magic
Line network). Because fixed costs constitute a major part of network costs,
competitive efficiencies on a per-transaction basis can be obtained through
consolidation by increasing the total number of transactions in relation to
such fixed costs. The Board of Directors of Cash Station believes that Cash
Station must participate in this consolidation trend to achieve these economics
of scale.
The Cash Station Board believes that the consolidation of Cash Station and
Concord will provide Cash Station with extensive geographic coverage and
generate the financial resources for extensive research and development of new
products along with the human resources needed to provide high quality customer
service at competitive prices. Furthermore, because fixed costs constitute a
major part of network costs, consolidation is expected to achieve competitive
efficiencies on a per-transaction basis by increasing the total number of
transactions in relation to such fixed costs.
By participating in the consolidation with Concord, Cash Station's
stockholders and members may enhance the ability to ensure continuation of the
basic Cash Station goal of providing highest quality member services at
competitive prices. In addition, Cash Station members are assured, and can sign
processing agreements to guarantee, that certain of their network service fees
will not, on a per transaction basis assuming current volume, be increased for
a period of three years.
In approving the merger, the Board recognized that the merger will result in
a change of Cash Station's business model from a financial institution
participant-owned organization to an investor-owned corporation and that there
is little history or experience of EFT networks being owned by investors other
than participant financial institutions. The Board noted that, immediately
following the merger, Cash Station's stockholders as a group would own less
than 1.5% of the outstanding stock of Concord, and would therefore have
significantly reduced influence over the Cash Station network's operations. In
the Board's view, these risks were outweighed by the benefits of the merger,
including the consideration offered by Concord and the economies of scale and
other benefits to be realized.
In approving the merger, the merger agreement and the other transactions
contemplated thereby with Concord, as opposed to other bidders, the Cash
Station Board also considered other factors including:
. the presentations and views expressed by the management of Cash Station
regarding, among other things: (a) the financial condition, results of
operations, cash flows, business and prospects of Cash Station, including
if Cash Station were to remain independent; (b) the conditions in the EFT
industry and risks and opportunities of operating as an independent
company; (c) the fact that no other party had submitted to Cash Station a
proposal as attractive as the transaction proposed by Concord, either as
to price or as to other terms and conditions; and (d) the recommendation
of the merger by the management of Cash Station;
. the fact that in view of the discussions held with various parties and
the number and identity of parties contacted, First Annapolis and the
management of Cash Station believed it was unlikely that in the near term
any other party would propose an acquisition or strategic business
combination that would be more favorable to Cash Station and its
stockholders than the merger;
. the presentations of First Annapolis at the meetings of the Cash Station
Board held on February 25 and April 4, 2000, and the opinion of First
Annapolis, dated April 12, 2000, to the effect that, as of such date and
based upon and subject to certain matters stated in such opinion, the
consideration to be received by the Cash Station stockholders pursuant to
the merger was fair to such holders from a financial point of view. The
full text of the written opinion of First Annapolis, which sets forth the
assumptions made, matters considered and limitations on the review
undertaken, is included as Annex D to this proxy statement and prospectus
and is incorporated herein by reference. The opinion of First Annapolis
is directed only to the fairness, from a financial point of view, of the
consideration to be
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received in the merger by Cash Station stockholders and is not intended to
constitute, and does not constitute, a recommendation as to whether any
stockholder should vote to approve and adopt the merger agreement. Cash
Station stockholders are urged to read such opinion carefully in its
entirety;
. valuations based on premiums paid in comparable acquisition transactions
and a discounted cash flow analysis of Cash Station's business;
. the extensive arms-length negotiations between Cash Station, and its
advisors on behalf of Cash Station, and Concord leading to the belief of
the Cash Station Board that the exchange ratio represented the highest
price per Cash Station share that could be negotiated with Concord;
. a review of the strategic alternatives available to Cash Station, none of
which the Cash Station Board or management of Cash Station believed to be
as favorable to Cash Station's stockholders as the merger;
. the provisions of the merger agreement;
. the consents and approvals required to consummate the merger and the
favorable prospects for receiving all such consents and approvals; and
. that the consummation of the merger would provide the opportunity for
stockholders to participate in any future growth and profits of Cash
Station through their ownership of Concord common stock.
The foregoing discussion of information and factors considered and given weight
by the Cash Station Board is not intended to be exhaustive, but is believed to
include all of the material factors considered by the Cash Station Board. In
view of the variety of factors considered in connection with its evaluation of
the merger, the Cash Station Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors
considered in reaching its determinations and recommendations. In addition,
individual members of Cash Station's Board may have given different weights to
different factors.
The Cash Station Board has unanimously approved the merger agreement and
unanimously recommends that you vote to approve and adopt the merger agreement
and approve the merger.
Article VIII of Cash Station's by-laws contain certain restrictions on the
transfer and ownership of Cash Station common stock. A condition to the
parties' obligations to effect the merger is that the transactions contemplated
by the merger agreement shall have been exempted from these provisions of Cash
Station's by-laws. The Cash Station Board unanimously recommends that you vote
to exempt the transactions contemplated by the merger agreement from Article
VIII of Cash Station's by-laws.
Executive Cash Awards
At the Cash Station Board meeting on November 12, 1999, the Cash Station
Board approved the recommendation of the Compensation Committee and the
Executive Committee to grant certain members of Cash Station's senior
management cash awards in connection with a sale of Cash Station. The executive
cash awards would be equal, in the aggregate, to $2.0 million and are to be
provided to management in recognition of the extraordinary value management has
created for Cash Station's stockholders. Given that the transaction is
structured as a stock-for-stock exchange, with all cash remaining in Cash
Station and no adjustments based on the amount of such cash, the payment or
non-payment of the executive cash awards will not affect the consideration to
be received by Cash Station's stockholders.
The Cash Station Board unanimously voted to grant the executive cash awards
and unanimously recommends that you vote to approve those awards.
Interests of Certain Persons in the Merger; Conflicts of Interest
In considering the recommendation of the Cash Station Board with respect to
the merger, stockholders of Cash Station should be aware that certain members
of Cash Station's management have certain interests in the
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merger. The Cash Station Board was aware of these possible conflicts of
interest and carefully considered them in reaching its determination that the
merger was fair to the stockholders of Cash Station.
The current officers and directors of Cash Station will be indemnified by
Concord with respect to acts or omissions of these persons occurring at or
prior to the completion of the merger, to the same extent as these persons
presently are indemnified under Cash Station's charter documents.
Cash Station has change of control/employment agreements with Stephen S.
Cole, its President and Chief Executive Officer, James H. Hayes, its Executive
Vice President and General Counsel, and G. Kirk Ergang, Jr., its Senior Vice
President of Operations and Systems, which have provisions that obligate Cash
Station to provide such executives with change of control compensation, equal
to $1,951,220 in the aggregate, as a result of the merger plus certain other
benefits. Under these agreements, these individuals will receive in the
aggregate $1,117,960 at closing and an additional $833,260 in the aggregate one
year from closing (or earlier if Concord terminates the executives' employment
without cause). The amounts to be paid at closing include the aggregate amount
of approximately $356,000 payable under Cash Station's deferred compensation
plan as described below. In connection with the merger, and at the request of
Concord, the foregoing persons agreed to defer a portion of the change of
control payment to which they otherwise may have become entitled and to make
other modifications to their existing contracts, including the addition of non-
competition clauses which will exist for up to 18 months after the closing
date. The foregoing members of the Cash Station management team will also
receive options, which vest over four years, to acquire an aggregate of 85,000
shares of Concord common stock under existing Concord stock option plans after
the completion of the merger.
Cash Station's change of control/employment agreements with Kate Coleman,
its Senior Vice President of Planning, Marketing and Sales, and Stephen M.
Fluegge, its Vice President of Finance, have provisions that obligate Cash
Station to provide certain benefits and change of control compensation if such
executives are terminated other than for cause or resign from their positions
following assignment to the executive of duties inconsistent with the duties
provided in that agreement or following an unreasonable diminution in such
duties.
In addition, the Board of Directors of Cash Station has agreed to make cash
awards in the aggregate amount of $2 million to Messrs. Cole, Hayes and Ergang
and Ms. Coleman in connection with the merger. Such cash awards were made
expressly contingent on the closing of the merger and the approval of such
awards by holders of not less than 75% of the outstanding shares of Cash
Station common stock as required to avoid the negative tax consequences of
Section 280G of the Internal Revenue Code.
The merger agreement provides that the officers of Cash Station immediately
prior to the Effective Time (as defined in the merger agreement), with the
exception of the offices held by non-employee officers (e.g., Chairman of the
Board), will become the officers of the surviving corporation.
Messrs. Cole, Hayes, Ergang and Fluegge and Ms. Coleman are participants in
Cash Station's deferred compensation plan, first adopted with respect to
calendar year 1996. Awards made under the plan but not yet payable will become
payable at closing as a result of the change of control. The amount of such
awards payable to Messrs. Cole, Hayes and Ergang are included in the change of
control payments described above.
Form of the Merger
If the holders of Cash Station common stock approve and adopt the merger
agreement and all other conditions to the merger are satisfied or waived, SWCI
Acquisition Corp. will be merged with and into Cash Station. Cash Station will
be the surviving corporation after the merger and will become a direct wholly
owned subsidiary of Concord. Concord and Cash Station anticipate that the
merger will occur as promptly as practicable after the special meeting, with
the filing of a Certificate of Merger with the Delaware Secretary of State.
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Merger Consideration
The merger agreement provides that, upon consummation of the merger, as
consideration for the merger, each share of Cash Station common stock (other
than shares owned by Cash Station which will be canceled, or any shares for
which appraisal rights have been validly asserted) will be converted into
shares of Concord common stock according to the provisions of the merger
agreement.
The merger consideration is generally intended to provide 2.5 million shares
of Concord common stock to the holders of Cash Station common stock. Based upon
the number of outstanding shares of Cash Station common stock as of the date of
the merger agreement, on a fully-diluted basis, each share of Cash Station
common stock outstanding would be converted into the right to receive 2.6982
shares of Concord common stock. A greater number of shares of Cash Station
common stock outstanding as of the merger will result in a lower exchange
ratio. The merger consideration is also generally intended to provide a minimum
value to holders of Cash Station common stock. This is accomplished through an
adjustment to the exchange ratio set forth above. If Concord's average price
per share is less than $22.40 but at least $20.00, then the exchange ratio will
be adjusted so that the number of shares of Concord common stock to be provided
in the merger will have an aggregate value of $56 million. However, if
Concord's average price is less than $20.00 then, instead of the adjustment
specified in the previous sentence, the exchange ratio will be adjusted so that
a total of 2.8 million shares of Concord common stock will be provided in the
merger. In addition to this adjustment, Cash Station will have the right to
terminate the merger agreement rather than accept the 2.8 million shares.
"Concord's average price" means the weighted average (based upon trading
volumes) of the high and low sales prices reported by Nasdaq for a share of
Concord common stock during the 20 trading day period ending five trading days
prior to the closing date scheduled for the transaction.
If between the date of the merger agreement and the effective time of the
merger Concord changes the outstanding shares of Concord common stock into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination
or exchange of shares, the merger agreement provides that the merger
consideration paid to Cash Station stockholders will be correspondingly
adjusted to the extent appropriate to reflect these changes. In lieu of
fractional shares of Concord common stock, Concord will pay to each holder who
would otherwise be entitled to receive a fractional share an amount in cash
equal to the product of (i) the last reported sale price per share of Concord
common stock, as reported by Nasdaq, on the date of the effective time of the
merger, and (ii) the fractional share interest to which such holder would
otherwise be entitled.
Procedures for Exchange of Cash Station Common Stock Certificates
Concord will authorize its transfer agent to act as exchange agent. Prior to
the effective time of the merger, Concord will deposit with the exchange agent,
into an exchange fund, for the benefit of holders of issued and outstanding
shares of Cash Station common stock, certificates representing the shares of
Concord common stock issuable as a result of the merger and cash required to
make payments in lieu of fractional shares.
As soon as practicable after the effective time of the merger, the exchange
agent will mail a letter of transmittal, together with exchange instructions,
to the holders of record of Cash Station common stock. After receiving the
letter of transmittal the Cash Station stockholders will be able to surrender
their certificates to the exchange agent along with the letter of transmittal,
and will receive in exchange a certificate representing the number of whole
shares of Concord common stock (and cash in lieu of any fractional shares) to
which they are entitled. The letter of transmittal will be accompanied by
instructions specifying other details of the exchange. Cash Station
stockholders should not send in their certificates until they receive a letter
of transmittal.
After the effective time of the merger and until surrendered, each
certificate representing shares of Cash Station common stock will represent
only the right to receive upon surrender a certificate representing shares of
Concord common stock and cash in lieu of fractional shares. No dividends or
other distributions declared or made on Concord common stock with a record date
after the effective time and no payment in lieu of fractional
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shares will be paid to the holder of any unsurrendered Cash Station stock
certificate until the holder of record surrenders its Cash Station stock
certificate. Subject to the effect of applicable laws, after a Cash Station
stockholder surrenders its Cash Station stock certificate, it will be paid,
without interest, (i) at the time of surrender or as promptly as practicable
thereafter, the amount of any cash payable in lieu of fractional shares of
Concord common stock to which it is entitled and the amount of dividends or
other distributions with a record date on or after the effective time of the
merger previously paid with respect to whole shares of its Concord common
stock, and (ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of dividends or other distributions with a record date
on or after the effective time of the merger but prior to surrender and with a
payment date on or after surrender payable with respect to whole shares of its
Concord common stock.
Concord and the exchange agent are entitled to deduct and withhold from the
consideration otherwise payable such amounts as they are required to deduct and
withhold under the Internal Revenue Code of 1986 or any provision of state,
local or foreign tax law. Concord and Cash Station will treat any amounts so
withheld as having been paid to the person in respect of whom such deduction
and withholding was made.
Certain United States Federal Income Tax Consequences
Generally
The following discussion summarizes the material United States federal
income tax consequences of the merger. The discussion that follows is based on
and subject to the Internal Revenue Code, Treasury Regulations under the
Internal Revenue Code, existing administrative interpretations and court
decisions as of the date of this proxy statement and prospectus, all of which
are subject to change (possibly with retroactive effect) and all of which are
subject to differing interpretation. The following discussion does not address
the effects of the merger under any state, local or foreign tax laws.
The tax treatment of a Cash Station stockholder may vary depending upon the
stockholder's particular situation, and certain Cash Station stockholders
(including financial institutions, foreign corporations, foreign partnerships
and foreign trusts) may be subject to special rules not discussed below. Each
Cash Station stockholder is urged to consult its tax advisor with respect to
the specific tax consequences of the merger, including the effect of United
States federal, state and local, and foreign and other tax rules, and the
effect of possible changes in tax laws.
It is a condition to the obligation of Concord to effect the merger that
Concord receive an opinion from its counsel, Sidley & Austin, and it is a
condition to the obligation of Cash Station to effect the merger that Cash
Station receive an opinion from its counsel, Skadden, Arps, Slate, Meagher &
Flom (Illinois), in each case to the effect that the merger constitutes a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code for United States federal income tax purposes. Each of these legal
opinions will be based on certain assumptions, and both Sidley & Austin and
Skadden, Arps, Slate, Meagher & Flom (Illinois) will receive and rely upon
representations, unverified by counsel, contained in certificates of Concord,
Cash Station and possibly others. The inaccuracy of any of those assumptions or
representations might jeopardize the validity of the opinions rendered.
Assuming that the merger constitutes such a reorganization, the federal
income tax consequences of the merger will be as follows:
Tax Consequences to Concord, SWCI Acquisition and Cash Station. For
federal income tax purposes, no gain or loss will be recognized by Concord,
SWCI Acquisition or Cash Station as a result of the merger.
Tax Consequences to Cash Station Stockholders. For federal income tax
purposes, (i) no gain or loss will be recognized by the stockholders of
Cash Station upon the conversion of their shares of Cash Station stock into
shares of Concord common stock pursuant to the merger, except with respect
to cash, if any, received in lieu of fractional shares of Concord common
stock, (ii) the aggregate tax basis of the shares of
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Concord common stock received in exchange for shares of Cash Station stock
pursuant to the merger (including a fractional share of Concord common
stock for which cash is received) will be the same as the aggregate tax
basis of the shares of Cash Station stock exchanged therefor, (iii) the
holding period for shares of Concord common stock received in exchange for
shares of Cash Station stock will include the holder's holding period for
the shares of Cash Station stock exchanged therefor, provided that the
shares of Cash Station stock were held as capital assets by the holder at
the effective time of the merger, and (iv) a stockholder of Cash Station
who receives cash in lieu of a fractional share of Concord common stock
will recognize gain or loss equal to the difference, if any, between that
stockholder's tax basis in the fractional share (determined under clause
(ii) above) and the amount of cash received.
The opinions of counsel described above will neither bind the Internal
Revenue Service nor preclude the Internal Revenue Service from adopting
positions contrary to those expressed above, and no assurance can be given that
contrary positions will not be asserted successfully by the Internal Revenue
Service or adopted by a court if the issues are litigated. Neither Concord nor
Cash Station intends to obtain a ruling from the Internal Revenue Service with
respect to the tax consequences of the merger.
Dissenting Cash Station Stockholders
A Cash Station stockholder who receives cash upon valid exercise of
dissenters' rights generally will recognize gain or loss, if any, equal to the
difference between the amount of cash received and its tax basis in the shares
of Cash Station stock exchanged therefor. It is possible, however, under
certain circumstances for such a Cash Station stockholder to recognize ordinary
income equal to the amount of cash received.
We intend this discussion to provide only a summary of the material United
States federal income tax consequences of the merger. We do not intend that it
be a complete analysis or description of all potential federal income tax
consequences of the merger. In addition, as noted above, we do not address tax
consequences that may vary with, or are contingent upon, individual
circumstances. We strongly urge you to consult your tax advisor to determine
your particular United States federal, state, local or foreign income or other
tax consequences resulting from the merger, in light of your individual
circumstances.
Accounting Treatment
It is anticipated that the merger will be accounted for by Concord under the
"pooling of interests" method of accounting in accordance with generally
accepted accounting principles. Consummation of the merger is conditioned upon
receipt at the closing of the merger by Concord and Cash Station of pooling
letters from their respective independent auditors that each is eligible to be
a party to a business combination accounted for as a pooling of interests. In
addition, the pooling letter from Concord's independent auditors must also
state that the merger will qualify for pooling of interests accounting.
Federal Securities Law Consequences
Cash Station stockholders who are not affiliates of Cash Station before the
merger will receive freely transferable shares of Concord common stock in the
merger. However, shares of Concord common stock received by persons who are
affiliates of Cash Station before the merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 under the
Securities Act of 1933, as amended (the Securities Act) or Rule 144 under the
Securities Act in the case of those persons who become affiliates of Concord
after the merger, or as otherwise permitted by the Securities Act.
Certain Other Effects of the Merger
After the merger, stockholders of Cash Station will become stockholders of
Concord. Upon consummation of the merger, the rights of all former stockholders
of Cash Station will be governed by the certificate of incorporation and by-
laws of Concord, in addition to the applicable provisions of Delaware law. For
a description of the differences between the rights of Concord and Cash Station
stockholders, see "COMPARISON OF RIGHTS OF CASH STATION STOCKHOLDERS AND
CONCORD STOCKHOLDERS."
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Forward-Looking Statements May Prove Inaccurate; Risk Factors
Concord and Cash Station have made forward-looking statements, as such term
is used in the Private Securities Litigation Reform Act of 1995, in this
document and those documents to which we have referred you. Such statements are
not guarantees of future performance and are subject to risks and
uncertainties. Forward-looking statements include the information concerning
possible or assumed future results of operations of Concord and Cash Station
set forth under "--Cash Station's Reasons for the Merger; Recommendation of the
Cash Station Board of Directors," and "INFORMATION ABOUT CASH STATION --
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and those preceded by, followed by or that include the words
"believes," "expects," "anticipates," "intends," "plans," "estimates,"
"likely," "will," "should" or similar expressions. For those statements,
Concord and Cash Station claim the protection of the safe harbor for forward-
looking statements contained in the Private Securities Litigation Reform Act of
1995. You should understand that the following important factors, in addition
to those discussed elsewhere in this document and in the documents which are
incorporated by reference, could affect the future results of Cash Station and
Concord, and could cause those results to differ materially from those
expressed in the forward-looking statements of Cash Station and Concord: the
loss of key personnel or inability to attract additional qualified personnel;
changes in card association rules or fees; restrictions on surcharging or a
decline in the deployment of ATMs; dependence on VISA and MasterCard
registrations; the credit risk of merchant customers; susceptibility to fraud
at the merchant level; receiving lower price volumes from higher volume
merchants; increasing competition; the loss of key customers; continued
consolidation in the banking and retail industries; risks related to
acquisitions; changes in rules and regulations governing financial
institutions; the inability to remain current with rapid technological change;
dependence on third-party vendors; the imposition of additional state taxes;
the volatility of Concord's stock price; and a significant delay in the
expected completion of the merger. We undertake no obligation to update or
revise any forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future results over time.
THE MERGER AGREEMENT
This section of the proxy statement and prospectus describes aspects of the
merger, including the material provisions of the merger agreement. The
following summary of the material terms and provisions of the merger agreement
is qualified in its entirety by reference to the merger agreement. The merger
agreement is attached as Annex A to this proxy statement and prospectus and is
incorporated herein by reference. You are encouraged to read the merger
agreement in its entirety for a fuller description of the merger.
The Merger
The merger agreement provides that SWCI Acquisition Corp., a direct wholly
owned subsidiary of Concord, will be merged with and into Cash Station at the
effective time of the merger. Pursuant to the merger agreement, Cash Station
will be the surviving corporation and will become a direct wholly owned
subsidiary of Concord. The Cash Station Board of Directors has unanimously
approved the merger agreement and the merger.
Structure of the Merger
According to the terms and conditions of the merger agreement and the
Delaware corporation laws, at the effective time of the merger, SWCI
Acquisition will merge with and into Cash Station. Cash Station will continue
to exist as the surviving corporation under the laws of the State of Delaware.
At the effective time of the merger, SWCI Acquisition will no longer exist as a
separate corporation. At the effective time of the merger, the fourth Article
of the amended and restated certificate of incorporation, as amended, of Cash
Station will be amended to authorize the issuance of a total of 1,000 shares of
all classes of common stock, no par value. After such amendment, the
certificate of incorporation of Cash Station will become the certificate of
incorporation of the surviving corporation. The by-laws of SWCI Acquisition
will become the by-laws of the surviving corporation at the effective time of
the merger.
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Conversion and Exchange of Securities
At the effective time of the merger, each issued and outstanding share of
SWCI Acquisition common stock will be converted into one share of common stock
of the surviving corporation.
At the effective time of the merger, each issued and outstanding share of
Cash Station common stock (other than any shares owned by Cash Station, which
will be canceled, or any shares for which appraisal rights have been validly
exercised), will be converted into shares of Concord common stock according to
the exchange ratio described under "THE MERGER--Merger Consideration" and cash,
without interest, in lieu of fractional shares of Concord common stock.
Effective Time
The merger will occur after all of the conditions in Article VI of the
merger agreement have been fulfilled or, if permissible, waived. No later than
the fifth business day after the satisfaction or waiver of the conditions in
Article VI of the merger agreement, or such other date as Concord and Cash
Station may agree, the parties will hold a scheduled closing. On the day the
merger occurs, a certificate of merger will be filed with the Secretary of
State of the State of Delaware. The effective time of the merger will be the
date and time of the filing, unless both SWCI Acquisition and Cash Station
mutually agree to designate a later date of effectiveness of the merger not
more than 30 days after the date the certificate of merger is filed, in which
case the later date designated in the certificate of merger will be the
effective time.
Concord and Cash Station each anticipate that, if the merger is approved at
the special meeting of Cash Station stockholders, it will be consummated
shortly thereafter. However, if any of the conditions required to be met prior
to consummation of the merger have not been so met, the closing may be delayed.
There can be no assurances as to if or when the conditions required to
consummate the merger will be met or that the merger will be consummated.
Representations and Warranties
The merger agreement contains various representations of Concord, SWCI
Acquisition and Cash Station. Concord and SWCI Acquisition have made
representations and warranties to Cash Station regarding, among other things,
the following:
. the due organization, valid existence and good standing of Concord and
SWCI Acquisition;
.the capital structure of Concord;
. the authorization, execution, delivery and enforceability of the merger
agreement and related matters;
. the compliance of the merger agreement with (1) Concord's certificate of
incorporation and by-laws and the certificate of incorporation and by-
laws of SWCI Acquisition, (2) the comparable organizational documents of
any of Concord's other subsidiaries, (3) certain material agreements of
Concord or any of its subsidiaries, and (4) any judgment, rule or
regulation applicable to Concord or any of its subsidiaries;
. the required governmental filings;
. SEC documents filed since January 1, 1999, including that such filings
did not, at the time they were filed, contain material misstatements or
omissions;
. the accuracy of information contained in the registration statement, of
which this proxy statement and prospectus is a part, including the
absence of any untrue statement of material fact or the omission of a
material fact such that the statements are not misleading;
. with certain exceptions, the absence of any material adverse changes or
material losses with respect to Concord since December 31, 1999;
. the possession and validity of all required licenses and governmental
authorizations to own and operate Concord's and its subsidiaries'
properties and to conduct its business as currently conducted;
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. the filing and accuracy of Concord's and its subsidiaries' tax returns;
. with certain exceptions, the absence of any material judgments or
material legal or administrative proceedings or investigations
outstanding or threatened against Concord or any of its subsidiaries;
. the absence of any material contracts not disclosed by Concord in its SEC
filings;
. the validity of the material contracts disclosed by Concord in its SEC
filings;
. compliance of certain of Concord's benefit plans with applicable law;
. compliance with worker safety and environmental laws;
. the absence of any collective bargaining agreement or labor contract and
the absence of any unfair labor practice or material dispute with
employees;
. ownership or licensing of the intellectual property rights necessary to
conduct Concord's or its subsidiaries' business as currently conducted;
. the absence of any vote of the security holders of Concord being required
by law or Concord's certificate of incorporation or by-laws;
. the lack of any knowledge as to actions by Concord or its subsidiaries
that would jeopardize the treatment of the merger as a pooling of
interests for accounting purposes;
. the lack of any knowledge as to actions by Concord or its subsidiaries
that would prevent the merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code;
. the absence of any broker's or finder's fee, except as disclosed by
Concord;
. the formation and operations of SWCI Acquisition;
. Concord's acquisition of the Cash Station common stock for investment
purposes; and
. Concord's business activities.
Cash Station has made representations and warranties to Concord and SWCI
Acquisition regarding, among other things, the following:
. the due organization, valid existence and good standing of Cash Station;
. the absence of any subsidiaries of Cash Station and, except as disclosed
by Cash Station, the absence of any joint ventures of Cash Station;
. the capital structure of Cash Station;
. the authorization, execution, delivery and enforceability of the merger
agreement and related matters;
. the compliance of the merger agreement with (1) Cash Station's amended
and restated certificate of incorporation and by-laws, (2) certain
material agreements of Cash Station, and (3) any judgment, rule or
regulation applicable to Cash Station;
. the required governmental filings and other approvals;
. Cash Station's financial statements, including that the financial
statements have been prepared in conformity with generally accepted
accounting principles and fairly present in all material respects the
financial position and results of operation and cash flows of Cash
Station;
. the accuracy of information contained in the registration statement of
which this proxy statement and prospectus is a part, including the
absence of any untrue statement of material fact or the omission of a
material fact such that the statements are not misleading;
. since December 31, 1998, except as disclosed by Cash Station, the absence
of any material adverse changes, material losses, changes in capital
stock, dividends or distributions, grants of compensation increases,
grants of increased severance or termination benefits, or entry into any
severance, employment or termination agreement with respect to Cash
Station;
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. the possession and validity of all required licenses and governmental
authorizations to own and operate Cash Station's properties and to
conduct its business as currently conducted;
. the filing and accuracy of Cash Station's tax returns;
. the absence of any material judgments or material legal or administrative
proceedings or investigations outstanding or threatened against Cash
Station, except as disclosed;
. the existence and validity of Cash Station's material contracts;
. Cash Station's employee benefit plans and related matters, including that
each such plan has been operated and administered in accordance with
applicable law;
. the absence of changes in certain benefit plans as a result of the
merger, except as disclosed;
. compliance with worker safety laws and environmental laws;
. the absence of any collective bargaining agreement or labor contract and
the absence of any unfair labor practice or material dispute with
employees;
. ownership or licensing of the intellectual property rights necessary to
conduct Cash Station's business as currently conducted and validity of
material intellectual property rights;
. the receipt by Cash Station of a fairness opinion in connection with the
merger consideration;
. action taken under Cash Station's by-law provisions applicable to the
merger, the merger agreement and related matters;
. the vote of Cash Station stockholders required to adopt the merger
agreement;
. the lack of any knowledge as to actions by Cash Station that would
jeopardize the treatment of the merger as a pooling of interests for
accounting purposes;
. the lack of any knowledge as to actions by Cash Station that would
prevent the merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code;
. the absence of any broker's or finder's fee, except as disclosed by Cash
Station;
. the grant of cash awards to certain executives in connection with the
merger;
. Cash Station's repurchase of shares of Cash Station common stock since
January 1, 1999; and
. a breakdown of Cash Station's February 2000 revenue under its
participation agreements.
All of the representations and warranties of the parties will terminate as
of the effective time of the merger.
Business of Cash Station Pending the Merger and Other Agreements
Under the terms of the merger agreement, Cash Station has agreed in all
material respects to carry on its business in the ordinary course as currently
conducted, to use reasonable efforts to keep its current business organization
intact, to keep available the services of its current officers and employees,
and to preserve its relationships with customers and suppliers. From the date
of signing the merger agreement until closing, unless Concord otherwise gives
its written approval, Cash Station may not:
. declare, set aside or pay any dividend or other distribution with respect
to any of its capital stock;
. split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of its capital
stock;
. purchase, redeem or otherwise acquire, shares of capital stock of Cash
Station or any rights, warrants or options to acquire any such shares;
. issue, deliver, sell, pledge, dispose of or otherwise encumber any shares
of its capital stock or equity equivalents, or any rights, warrants or
options to acquire any such shares or equity equivalents;
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. amend its charter or by-laws (except to exempt the transactions
contemplated by the merger agreement from Article VIII of the by-laws);
. acquire or agree to acquire, by merger, consolidation or acquisition of
stock or assets, any business organization or any division of such entity
or any assets outside of the ordinary course inconsistent with past
practice;
. sell or otherwise dispose of its assets outside the ordinary course of
business inconsistent with past practice;
. incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions, other
than indebtedness not exceeding $25,000 in the aggregate and cash
management activities in the ordinary course of business consistent with
past practice;
. alter its corporate structure or ownership;
. increase the compensation payable to its directors, officers or employees
or grant any severance or termination pay to, or enter into or amend any
employment or severance agreement with any of its directors or officers
or amend or accelerate benefits under any bonus, compensation or other
benefit plan with certain exceptions, including, in the case of employees
other than officers, increases in compensation not to exceed 5% in the
aggregate;
. knowingly violate or fail to perform any obligation or duty imposed upon
it by any applicable material federal, state or local law, rule or
regulation;
. make any change to accounting policies or procedures, other than actions
required to be taken by generally accepted accounting principles;
. prepare or file any tax return or make any tax election inconsistent with
past practice unless required by applicable law;
. settle or compromise any material federal, state, local or foreign income
tax liability;
. with certain exceptions, enter into, amend or terminate (i) any
noncompetition agreement, or (ii) any agreement giving exclusive rights
to third parties;
. make or agree to make any new capital expenditure which, individually, is
in excess of $50,000 or, in the aggregate, are in excess of $250,000;
. enter into or agree to enter into any material contract;
. enter into or agree to enter into any participation or processing
agreement not in the ordinary course of business consistent with past
practice;
. amend any participation agreement;
. materially amend any processing agreement or Cash Station's Operating
Rules;
. waive or release any material right or claim, or pay, discharge or
satisfy any material claims, liabilities or obligations, other than in
the ordinary course of business consistent with past practice;
. initiate any litigation or arbitration proceeding or settle or compromise
any material litigation or arbitration proceeding or any claim involving
intellectual property; or
. authorize, recommend, propose or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
No Solicitation by Cash Station
Under the terms of the merger agreement, Cash Station may not, and it will
cause any officers, directors, employees, and investment bankers, attorneys or
other agents retained by Cash Station not to:
. directly or indirectly solicit, initiate or knowingly encourage or take
any other action knowingly to facilitate any inquiries or the making of
any acquisition proposal;
. enter into any agreement with respect to any acquisition proposal; or
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. subject to the exceptions described below, engage in negotiations or
discussions with, or furnish to any person any information relating to,
or that may reasonably be expected to lead to, any acquisition proposal.
Notwithstanding the above statement, Cash Station and its officers,
directors, investment bankers, attorneys or agents may:
. participate in discussions or negotiations with or furnish information to
a third party making an unsolicited acquisition proposal if (A) the Cash
Station Board reasonably determines in good faith, after consultation
with its financial advisor, that such third party has submitted an
acquisition proposal that is a superior proposal, and (B) the Cash
Station Board determines in good faith, based upon advice of outside
legal counsel, that the failure to participate in such discussions or
negotiations or to furnish information would be inconsistent with the
Board's fiduciary duties; or
. following receipt of an acquisition proposal, make such disclosures as
are required or contemplated by applicable law relating to such
acquisition proposal.
Cash Station must promptly advise Concord of any acquisition proposal or
inquiries with respect to any acquisition proposal and disclose the terms of
such acquisition proposal and the identity of the person making any such
acquisition proposal. Cash Station must also keep Concord informed of the
status and details of any acquisition proposal or inquiry. "Acquisition
proposal" means any bona fide proposal or offer, or any expression of interest,
by any person or entity other than Concord or SWCI Acquisition relating to Cash
Station's willingness or ability to receive or discuss a proposal or offer for
a merger, consolidation or other business combination, sale of shares of
capital stock, tender offer or exchange offer or similar transaction involving
Cash Station or any proposal or offer to acquire in any manner, directly or
indirectly, a substantial part of the business or assets or any equity interest
in, or voting securities of Cash Station. "Superior proposal" means any
unsolicited acquisition proposal in writing which Cash Station's Board
reasonably determines in its good faith judgment, after consultation with its
financial advisor, provides greater value from a financial point of view to
Cash Station's stockholders, in their capacity as stockholders, than the
transactions contemplated by the merger agreement.
Additional Agreements of Concord and Cash Station
Under the terms of the merger agreement, Concord and Cash Station have also
agreed to use their reasonable best efforts to take all actions necessary,
proper or advisable to consummate and make effective in the most expeditious
manner practicable the merger and the other transactions contemplated by the
merger agreement.
Fees and Expenses; Termination Fee
Under the merger agreement, each party is generally responsible for its own
costs and expenses incurred in connection with the transactions contemplated by
the merger agreement. However, if the merger agreement is terminated by Concord
because:
. the stockholders of Cash Station do not approve the merger agreement;
. the Cash Station Board has not recommended or has qualified, modified or
withdrawn its recommendation of the merger or declaration that the merger
is advisable to and in the best interests of Cash Station and its
stockholders, or has resolved to do so;
. prior to Cash Station's special meeting a person (other than Concord or
its affiliates) has become the beneficial owner of 10% or more of Cash
Station common stock unless such person is subject to, or at least 30
days prior to the closing of the merger executes, a stockholder agreement
with respect to all of the shares of Cash Station common stock then owned
by such person; or
. the Cash Station Board has recommended to the stockholders of Cash
Station any acquisition proposal other than the merger with Concord or
has resolved to do so;
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then Cash Station has agreed to reimburse Concord upon demand for all of its
reasonable out-of-pocket fees and expenses in connection with the merger
agreement, including fees and expenses of counsel, investment banking firms,
accountants and consultants, up to an aggregate amount of $500,000.
In addition, if the merger agreement is terminated by Concord because:
. the stockholders of Cash Station do not approve the merger agreement and
any acquisition proposal existed between the date of the merger agreement
and the date of Cash Station's stockholder meeting and, concurrently with
or within twelve months after any such termination a third party
acquisition event occurs or Cash Station shall enter into any letter of
intent, agreement in principle, acquisition agreement or other similar
agreement with respect to a third party acquisition event; or
. for any of the reasons specified in the second, third or fourth bullet
above;
then Cash Station has agreed to pay a termination fee of 3% of the aggregate
value of the shares of Concord common stock to be provided in the merger to
Concord promptly following the termination of the merger agreement (or, in the
case of the first situation described above, the later of such third party
acquisition event and the termination of the merger agreement). "Third party
acquisition event" means (i) a transaction or series of transactions pursuant
to which any third party would acquire more than 10% of the equity securities
or voting power of Cash Station pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger, consolidation, share exchange or other business
combination involving Cash Station pursuant to which any third party would
acquire ownership of more than 10% of the outstanding equity securities or
voting power of Cash Station or of the entity surviving such transaction, (iii)
any other transaction or series of transactions pursuant to which any third
party would acquire control of more than 10% of the assets of Cash Station, or
(iv) any transaction or series of transactions pursuant to which any third
party would acquire control of Cash Station's Board or by which nominees of any
third party would be elected or appointed to a majority of the seats on Cash
Station's Board.
Employee Benefit Plans
Concord has agreed to, or to cause the surviving corporation to, comply with
the terms of Cash Station's employee benefit plans; provided, however, that
nothing in the merger agreement limits the power of Concord or the surviving
corporation to amend or terminate any such employee benefit plan in accordance
with its terms. To the extent any Concord employee benefit plans are made
applicable to any Cash Station employee, such employee will be given credit for
service with Cash Station for the purposes of determining eligibility to
participate in such plan, the employee's nonforfeitable interest in benefits
thereunder and for purposes of calculating benefits thereunder. Concord will
also waive any pre-existing condition limitations unless they are not so waived
under Cash Station's equivalent plan, and will recognize the dollar amount of
all expenses incurred by employees during the calendar year in which the merger
becomes effective for purposes of the deductions and co-payment limitations for
that year.
Directors' and Officers' Insurance and Indemnification
For a period of six years after the effective time of the merger, Concord
must indemnify all past and present officers, directors, employees or agents of
Cash Station to the fullest extent permitted by law, any outstanding
indemnification agreements disclosed by Cash Station or Cash Station's amended
and restated certificate of incorporation or by-laws as of the date of the
merger agreement.
MAC Advisory Committees
As soon as practicable after the date the merger becomes effective, Concord
will cause five individuals selected by Cash Station to be selected as members
of each of the Advisory Council and the Operations and Technical Committee of
MONEY ACCESS SERVICE INC. (MAC).
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What Is Needed to Complete the Merger
Conditions Precedent to Each Party's Obligation to Effect the Merger. The
following conditions must be satisfied before the merger can become effective:
. the merger agreement must be approved and the transactions contemplated
thereby shall have been duly exempted from Article VIII of Cash Station's
by-laws, in each case by the requisite vote of stockholders of Cash
Station;
. all approvals to be obtained by Concord, SWCI Acquisition or Cash Station
required under the Bank Holding Company Act of 1956 shall have been
received and the waiting period applicable to the consummation of the
merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
shall have expired or been terminated;
. Concord and Cash Station must have obtained all authorizations, consents,
orders, declarations or approvals of, or filings with, or terminations or
expirations of waiting periods imposed by, any governmental entity, which
the failure to obtain, make or occur would have the effect of making the
merger or any of the transactions contemplated by the merger agreement a
violation of law by Concord, SWCI Acquisition or Cash Station or would
have a material adverse effect on Concord (assuming the merger had taken
place);
. no restraining order, injunction, or other order must have been enacted
or issued which has the effect of making the merger or any of the
transactions contemplated by the merger agreement illegal;
. no governmental entity must have instituted any suit relating to the
merger agreement and related documents which would have a material
adverse effect on Cash Station or Concord; and
. Cash Station shall have received confirmation from the Office of the
Comptroller of the Currency that it will not object to Cash Station's
national bank stockholders acquiring Concord common stock in accordance
with the merger agreement, and from the Illinois Bureau of Banks and
Trust Companies that it will not object to Cash Station's Illinois state
bank stockholders acquiring Concord common stock in accordance with the
merger agreement.
Conditions Precedent to the Obligations of Cash Station. Cash Station's
obligations to effect the merger depend upon the fulfillment, prior to or at
the effective time of the merger, of the following additional conditions:
. Concord and SWCI Acquisition must have performed in all material respects
each of their agreements contained in the merger agreement;
. each of Concord's and SWCI Acquisition's representations and warranties
contained in the merger agreement must be true and correct in all
material respects;
. the Form S-4 registration statement of which this proxy statement and
prospectus is a part must have become effective under the Securities Act,
and there must be no stop order or threat of proceedings by the
Securities and Exchange Commission to suspend the effectiveness of such
registration statement; provided that Cash Station may waive this
condition only after October 31, 2000 and then only if (i) Concord is
reasonably satisfied that the consummation of the merger without having
the registration statement being declared effective would not violate any
applicable securities or Blue Sky laws, and (ii) Cash Station shall have
delivered to Concord subscription agreements, in form and substance
reasonably acceptable to Concord, executed by each stockholder of Cash
Station which subscription agreement shall (A) confirm that such
stockholder is an "accredited investor" as such term is defined in the
securities laws, (B) acknowledge that the Concord common stock to be
delivered by Concord is restricted stock that is not publicly registered,
(C) acknowledge that the stock certificates to be issued to such
stockholder will bear an appropriate restrictive legend, and (D) restrict
such stockholder from transferring any Concord common stock received from
Concord unless (x) an exemption from the securities laws applies to such
transfer transaction, as confirmed by an opinion of outside legal
counsel, and (y) prior to the transfer the proposed transferee signs an
agreement containing all of the same provisions;
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. the shares of Concord common stock issuable in the merger must have been
approval for listing on Nasdaq; and
. Cash Station must have received a tax opinion of Skadden, Arps, Slate,
Meagher & Flom (Illinois), counsel to Cash Station, dated the closing
date of the merger, to the effect that the merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
Conditions Precedent to the Obligations of Concord and SWCI Acquisition.
Concord's and SWCI Acquisition's obligations to effect the merger depend upon
the fulfillment, prior to or at the effective time of the merger, of the
following additional conditions:
. Cash Station must have performed in all material respects each of its
agreements contained in the merger agreement;
. each of Cash Station's representations and warranties contained in the
merger agreement must be true and correct in all material respects;
. Concord must have received a tax opinion of Sidley & Austin, counsel to
Concord, dated as of the closing date of the merger, to the effect that
the merger will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code;
. Cash Station must have received the written letter, dated as of the
effective time of the merger, of its independent auditors stating that
they concur with management's conclusion that Cash Station is eligible to
be a party to a business combination accounted for as a pooling of
interests in accordance with generally accepted accounting principles;
. Concord must have received the written letter, dated as of the effective
time of the merger, of its independent auditors stating that they concur
with management's conclusion that Concord is eligible to be a party to a
business combination accounted for as a pooling of interests in
accordance with generally accepted accounting principles and that the
merger will qualify for pooling of interests accounting;
. the stock of those stockholders of Cash Station validly exercising their
appraisal rights must not include more than five percent (5%) of the
shares of Cash Station common stock outstanding immediately prior to the
effective time of the merger;
. the executives who are parties to the second amended and restated change
of control agreements executed on the date of the merger agreement shall
still be employed by Cash Station, unless their employment has been
terminated as a result of such executive's death or disability;
. the second amended and restated change of control agreements executed on
the date of the merger agreement shall not have been further amended and
shall be in full force and effect;
. there shall have been no assertion by any of the executives of Cash
Station that any of the second amended and restated change of control
agreements executed on the date of the merger agreement, in whole or in
part, is not effective or is in breach; and
. the network participants (other than those that have joined or agreed to
join the MAC network in Illinois or Indiana) who, between the date of the
merger agreement and the closing date of the merger, (i) cease
participating in Cash Station's network, (ii) terminate (without
subsequently rescinding) their participation agreements with Cash
Station, or (iii) notify Cash Station that they will cease participating
in Cash Station's network or will terminate their participation agreement
with Cash Station, shall have accounted for, in the aggregate, less than
$100,000 of Cash Station's February 2000 network revenue.
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the effective
time of the merger:
. by the mutual written consent of Concord and Cash Station;
. by either Concord or Cash Station if the other party has failed to comply
in any material respect with any of its material covenants or agreements
contained in the merger agreement and has not cured such failure within
30 business days of receiving notice of it;
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. by either Concord or Cash Station if the other party has materially
breached any of its representations or warranties which has the effect of
making such representation and warranty not true and correct in all
material respects and has not cured such breach within 30 business days
of receiving notice of it;
. by either Concord or Cash Station if the merger has not been effected on
or prior to October 31, 2000, provided that either party may extend this
date to April 11, 2001 if the failure of the merger to be effected on or
before October 31, 2000 results from (i) the failure of the parties to
obtain all required approvals under the Bank Holding Company Act of 1956,
(ii) the waiting period applicable to the consummation of the merger
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 not having
expired or been terminated, or (iii) the failure of the parties to obtain
all authorizations, consents, orders, declarations or approvals of, or
filings with, or terminations or expirations of waiting periods imposed
by, any governmental entity, which the failure to obtain, make or occur
would have the effect of making the merger or any of the transactions
contemplated by the merger agreement a violation of law by Concord, SWCI
Acquisition or Cash Station or would have a material adverse effect on
Concord (assuming the merger had taken place); provided, further, that no
party may terminate pursuant to this provision of the merger agreement
whose failure to fulfill any of its obligations contained in the merger
agreement resulted in the failure of the merger to occur prior to October
31, 2000;
. by either Concord or Cash Station if any court or governmental entity has
issued an order restraining or otherwise prohibiting the transactions
contemplated by the merger agreement;
. by Concord if the stockholders of Cash Station do not approve the merger
agreement;
. by Concord if the Cash Station Board has not recommended or has
qualified, modified or withdrawn its recommendation of the merger or
declaration that the merger is advisable and fair to and in the best
interests of Cash Station and its stockholders, or has resolved to do so;
. by Concord if, prior to Cash Station's stockholder meeting, any person
(other than Concord or its affiliates) becomes the owner of 10% or more
of Cash Station's outstanding common stock, unless such person is either
subject to, or at least 30 days prior to the closing date of the merger,
executes a stockholder agreement with respect to all of the shares of
Cash Station common stock held by such person;
. by Concord if the Cash Station Board has recommended to the stockholders
of Cash Station any acquisition proposal, or has resolved to do so; or
. by Cash Station if Concord's average price (as defined above in "THE
MERGER--Merger Consideration") is less than $20; provided that Cash
Station may not exercise this right to terminate until after all of the
closing conditions set forth in the merger agreement are satisfied or
waived.
In the event of termination of the merger agreement by either Concord or
Cash Station, the merger agreement will become void and there will be no
liability under the merger agreement on the part of Cash Station, Concord or
SWCI Acquisition or their respective officers or directors, except that there
may still be liability if there is a willful breach of a representation or
warranty or the breach of any covenant. In addition, if the merger is
terminated by Concord under certain circumstances, the merger agreement
obligates Cash Station to pay to Concord a termination fee of equal to 3% of
the aggregate value of the shares of Concord common stock to be provided as
merger consideration and, in certain circumstances, to reimburse Concord for
its out-of-pocket fees and expenses incurred, up to the amount of $500,000. See
"-- Fees and Expenses; Termination Fee."
Waiver and Amendment of the Merger Agreement
The merger agreement may be amended by the parties to the agreement at any
time, but after the stockholders of Cash Station have approved any matters in
connection with the merger agreement, no amendment may be made which by law
requires further approval by such stockholders without such further approval.
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At any time prior to the effective time of the merger, Concord, Cash
Station, and SWCI Acquisition may, if signed in writing by such party:
. extend the time for the performance of any of the obligations or other
acts of the other parties to the merger agreement;
. waive any inaccuracies in the representations and warranties contained in
the merger agreement or any document delivered pursuant to the merger
agreement; or
. waive compliance with any of the agreements or conditions contained in
the merger agreement which may be legally waived.
STOCKHOLDER AGREEMENTS
The following is a summary of certain provisions of the form of stockholder
agreement entered into between Concord and certain stockholders of Cash
Station, a copy of which is attached to this proxy statement and prospectus as
Annex B and is incorporated by reference into this proxy statement and
prospectus. This summary is qualified in its entirety by reference to the
stockholder agreement. Stockholders of Cash Station are urged to read the form
of stockholder agreement in its entirety.
Stockholders of Cash Station owning approximately 69% of the common stock
have signed voting agreements with Concord.
The stockholder agreements provide, among other things, that each stockholder
will:
. at the special meeting, or in any other circumstance upon which approval
of the merger or the merger agreement is sought, vote (or cause to be
voted) its shares of Cash Station common stock in favor of the merger,
the adoption of the merger agreement, the approval of its terms, and each
of the other transactions contemplated by the merger agreement;
. not (nor permit any affiliate, director, officer, employee or other
representative to) directly or indirectly (i) solicit, initiate or
knowingly encourage anyone to submit an acquisition proposal (as defined
above under "THE MERGER AGREEMENT--No Solicitation by Cash Station") or
(ii) except as expressly permitted by the merger agreement, directly or
indirectly participate in any discussions or negotiations regarding, or
furnish anyone with information with respect to, or take any other action
to facilitate any inquiries or the making of any acquisition proposal;
and
. cooperate with Concord to support and to consummate and make effective,
in the most expeditious manner practicable, the merger and the other
transactions contemplated by the merger agreement.
Any successor, assignee or transferee of the stockholder's shares of Cash
Station common stock will be bound by the terms of the stockholder agreement.
Each stockholder's obligations under the stockholder agreement will
terminate upon the earliest of the termination of the merger agreement, the
effective time of the merger, or an amendment to the merger agreement that
results in a change in the merger consideration that is materially adverse to
such stockholder. However, if the merger agreement is terminated by Concord
because of a material and willful breach by Cash Station of any of its
representations or warranties, because of a failure of Cash Station to comply
in any material respect with any of its material covenants or agreements
contained in the merger agreement, because of a failure of Cash Station's
stockholders to approve the merger agreement, because the Cash Station Board
did not recommend or qualified, modified or withdrew its recommendation of the
merger or declaration that the merger is advisable and fair to and in the best
interests of Cash Station and its stockholders or resolves to do so, because
another person becomes the owner of 10% or more of Cash Station's outstanding
common stock, or because the Cash Station Board recommends an acquisition
proposal to the Cash Station stockholders, then the obligations of each
stockholder under the stockholder agreement will not terminate until the first
anniversary of such termination of the merger agreement.
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REGULATORY MATTERS
In order to consummate the merger, regulatory approval under the Bank
Holding Company Act of 1956 must be obtained, the waiting period applicable to
the consummation of the merger under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 must be terminated or expire and Cash Station must
have received confirmation from certain regulatory agencies regarding the
ability of Cash Station's national bank stockholders and Illinois state bank
stockholders to acquire Concord's common stock in connection with the merger.
In addition, the parties must comply with applicable federal and state
securities and corporate laws.
BUSINESS OF CONCORD
Concord is a fully integrated leading provider of electronic transaction
authorization, processing, settlement and funds transfer services on a
nationwide basis. Concord focuses on marketing its services to supermarket
chains and multiple lane retailers, financial institutions, petroleum and
convenience stores, grocery stores, the trucking industry and other retailers.
Concord's primary activity is merchant card services, in which it provides
integrated electronic transaction services for credit card, debit card and
electronic benefits transfer (EBT) card transactions. These transaction
services include data capture, authorization and settlement services for over
400,000 POS terminals. Concord also provides ATM services, consisting of owning
and operating the MAC(R)-branded EFT network and processing for approximately
39,000 ATMs nationwide, of which Concord owns approximately 1,000.
. Concord has a bank subsidiary, EFS National Bank, which provides it with
a number of competitive advantages.
. Concord is a member of the credit and debit card associations and
therefore does not have to pay another financial institution to sponsor
it.
. Concord settles its transactions directly and thus does not have to pay a
third-party vendor.
. Concord performs services such as automated clearing house (ACH) and wire
transfer internally and therefore does not have to pay another financial
institution for such services.
Concord's principal executive offices are located at 2525 Horizon Lake
Drive, Suite 120, Memphis, Tennessee 38133 and its telephone number is (901)
371-8000. For further information concerning Concord, see "SUMMARY SELECTED
FINANCIAL DATA--Selected Historical Consolidated Financial Data of Concord" and
"WHERE YOU CAN FIND MORE INFORMATION."
RECENT DEVELOPMENTS
On February 1, 2000, Concord announced completion of the acquisition of Card
Payment Systems, a New York-based reseller of payment processing services. The
acquisition was accounted for as a pooling of interests transaction in which
Concord issued 6.2 million shares of its common stock. Card Payment Systems
provides card-based payment processing services to independent sales
organizations, which in turn sell those services to retailers. The acquisition
costs related to this transaction were incurred during the first quarter of
2000, and the impact of the acquisition upon the results of operations of
Concord is not expected to be significant.
On February 7, 2000, Concord announced completion of its acquisition of
Virtual Cyber Systems, Inc., an internet software development company. The
acquisition of Virtual Cyber Systems, for which Concord paid approximately $2
million, was accounted for as a purchase transaction and has an immaterial
impact on the financial statements of Concord.
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INFORMATION ABOUT CASH STATION
Business of Cash Station
Cash Station, a Delaware corporation based in Chicago, Illinois, owns and
operates the Cash Station(R) EFT network. Cash Station's stockholders include
192 registered stockholders comprising approximately 150 financial
institutions and financial institution holding company groups. The ten largest
stockholders collectively own over 70% of the outstanding shares of common
stock of Cash Station. All stockholders participate as members of the Cash
Station network.
The Cash Station network provides cardholder access to ATM and POS
terminals at financial institution and retail locations in several states but
primarily in the Chicago metropolitan area. The Cash Station network has
approximately 645 financial institution members with more than 7,000 ATMs and
6 million debit cards carrying the Cash Station brand. Cash Station processes
more than 15 million transactions per month and drives over 1,600 ATMs for its
members.
Cash Station provides two general types of transaction processing services
to its members and customers:
. Branded network services, which are composed of on-line ATM and POS
switching, authorization and settlement for cardholder-initiated
transactions at terminals branded with the Cash Station mark; and
. Unbranded processing services including ATM terminal driving, card
authorization services, gateway services, off-line debit card transaction
processing, neural network services and Internet banking and bill payment
services.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
1999 Compared to 1998
Total revenue in 1999 increased by $1,853,000 (11%) from 1998. Revenue from
network services (ATM and POS transactions) increased by $479,000 (5%).
Network services revenue reflects an 8% decrease in ATM transactions and a 47%
increase in POS transactions. ATM transaction volume decreased due to
increased numbers of network ATMs that impose surcharges and bank
consolidations within the network, which result in shared transactions
formerly processed by the Cash Station network to become "on-us" transactions
processed by a single institution. POS transactions increased due to an
increase in the number of merchants that accept POS transactions, increased
consumer adoption of on-line POS, and cardholders' ability to receive cash
back from merchants without incurring surcharge fees.
Processing services revenue (terminal driving, gateway access, internet
banking and off-line debit) increased by $1,374,000 (20%). The number of ATMs
driven by the Cash Station Network increased by 150 (10%) from December 31,
1998 to December 31, 1999. Terminal driving and related revenues (gateway
access, on-us transactions, surcharged transactions) increased by $728,000
(36%) from 1998 to 1999. Additional off-line debit customers increased
transaction volume by 100% from 12 million transactions in 1998 to 24 million
transactions in 1999.
Net income of $1,223,000 in 1999 increased approximately $171,000 (16%)
from 1998 net income of $1,052,000. This increase resulted from increased
revenue and reduced marketing expenditures in 1999 compared to 1998. Net
income as a percentage of revenue increased to 6.8% in 1999 from 6.5% in 1998.
This increase occurred despite an increase in Cash Station's effective tax
rate to 47.5% in 1999 from 42.5% in 1998. The increase in the tax rate was due
to nondeductible merger-related costs incurred in 1999. Other income also
increased primarily due to a $91,000 (68%) increase in interest income and
other non-recurring income items.
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Network and processing expenses increased $885,000 (13%) from 1998 to 1999
due to increased revenue and recognition of a full year of POS issuer rebates
in 1999 as compared to seven months in 1998, when the rebates were instituted.
Cash Station also increased the POS issuer rebate from $0.02 to $0.04 per POS
transaction in July of 1999. These increases were offset by a one-time $573,000
credit received from a third party vendor. In 1999, gross margin percent
declined to 56.6% from 57.1% in 1998.
Operating expenses increased to $7,720,000 in 1999 from $7,144,000 in 1998.
This $576,000 (8%) increase was attributable to an $811,000 increase in
personnel related costs offset by a $178,000 decrease in discretionary
marketing expenses. The increase in personnel costs was due to the recognition
of a complete year of salaries, bonuses, and benefits for those employees hired
in 1998 and customary salary and bonus increases for employees in 1999. The
increase in salaries resulted in an expected incremental increase in profit
sharing, payroll taxes, and employee benefits expenses.
In 1999 Cash Station incurred $364,000 in expenses related to its planned
merger with Concord. Compared to 1998, in 1999 Cash Station had a $314,000
increase in contract termination income and a $50,000 reduction in cost of
services from Card Alert Services. Contract termination fees result when a
financial institution in the Cash Station network is purchased by a financial
institution using another provider and the combined entity continues services
with the acquiring institution's provider. Compared to 1998, Cash Station in
1999 had a $91,000 increase in interest income and a $15,000 increase in other
miscellaneous income.
1998 Compared to 1997
Total revenue in 1998 increased by $2,276,000 (16%) from 1997. Network ATM
switch revenue declined in 1998 from 1997 by $307,000 (4%) due to a 3.7 million
(4%) decline in ATM transaction volume. ATM transaction volume decreased due to
increased numbers of network ATMs that imposed surcharges and bank
consolidations within the network, which resulted in shared transactions
formerly processed by the Cash Station network to become "on-us" transactions
processed by a single institution. POS revenue increased by $579,000 (30%) as
transaction volume increased by 7.6 million (44%) over the 1997 level. In 1998,
the Cash Station network instituted POS issuer rebates (recognized in cost of
sales) which accounts for the difference between the POS revenue percentage
increase and the POS transaction volume percentage increase.
Processing services revenue increased by $2,005,000 (40%) in 1998 from 1997
revenue of $4,970,000. This increase was due to a 23% increase in the number of
financial institutions that purchased processing services from the Cash Station
network. The number of ATMs driven by the Cash Station network increased by
144%, which caused ATM and ATM-related revenues to increase by 93% from 1997 to
1998.
Net income of $1,052,000 in 1998 decreased $299,000 (22%) from 1997 net
income of $1,351,000. This decrease was due to increased marketing expenses
(35%), personnel related expense increases (21%), and a $331,000 increase in
other net expense items. Cash Station's effective tax rate increased to 42.5%
in 1998 from 40.1% in 1997.
Network and processing expenses increased by $1,232,000 (22%) from 1997 to
1998 due to the 16% increase in revenues in 1998 and the Cash Station network's
decision to adopt POS issuer rebates in June of 1998. As a result of this
change, Cash Station recognized $318,000 of additional costs in 1998.
Operating expenses increased to $7,144,000 in 1998 from $6,006,000 in 1997.
This $1,138,000 (19%) increase was due to a $666,000 increase in personnel
costs and a $331,000 increase in marketing expenses. The personnel expense
increase was the result of the addition of four people in 1998 and a full year
expense recognition of 1997 personnel additions. Marketing expenses increased
due to a campaign to increase brand awareness specifically related to POS usage
within the Cash Station network.
In 1998, other expenses increased by $116,000 (42%) due to a 100% write down
of Cash Station's $101,000 investment in Card Alert Services. Other income in
1998 decreased by $215,000 (57%) from 1997 as contract termination and sanction
fees decreased by $240,000.
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First Quarter 2000 Compared to First Quarter 1999
First quarter revenue in 2000 exceeded 1999 first quarter revenue by
$397,000 (9%). Network ATM transaction volume in the first quarter 2000 was
down 7% from the same period last year, but network POS transaction volume
increased 39.5% from 1999. Processing services revenue (terminal driving,
gateway access, off line debit and internet banking) was $182,000 (9%) greater
in the first quarter 2000 as compared to first quarter 1999. Revenue gains in
terminal driving, gateway transactions, and off line debit services were offset
by a $177,000 reduction in internet banking revenue due to the loss of a
significant internet banking customer.
Net income of $130,000 in the first quarter of 2000 was down 7% from 1999
first quarter net income. Although operating income in the first quarter of
2000 exceeded 1999 first quarter operating income by $112,000 (44%), net other
expense was $108,000 greater in the 2000 first quarter as compared to the first
quarter of 1999. Merger related expenses of $216,000 exceeded increases in
contract termination revenue ($74,000) and interest income ($48,000). The
effective tax rate increased to 42.2% in the first quarter of 2000 from 37.0%
in the first quarter of 1999 primarily due to the non-deductibility of the
merger expenses in the first quarter of 2000.
Network and processing expenses increased by $347,000 (18%) from the first
quarter of 1999 to the first quarter of 2000. First quarter 2000 POS cost of
sales exceeded first quarter 1999 POS cost of sales by $346,000 due to a 39%
volume increase and an increase in the issuer rebate from $.02 to $.04 per
transaction. ATM transaction cost of sales decreased by 13% due to lower volume
in the first quarter of 2000. Processing cost of sales increased by 4% as ATM
terminal and related revenue and off line debit revenue increased while
internet banking costs was reduced due to the loss of a significant customer.
Operating expenses decreased by $62,000 from the first quarter of 2000 as
compared to the first quarter of 1999. Discretionary marketing expenses
decreased by $188,000 (43%) from first quarter 1999 to first quarter 2000.
Increases in personnel related expenses from first quarter 1999 to first
quarter 2000 were $123,000 (10%).
Liquidity and Capital Resources
Cash Station generates sufficient cash flow from its operations to meet its
obligations. Cash in excess of current requirements is invested in short-term
certificates of deposit and short-term corporate bonds. Cash Station had a $2.5
million line of credit at December 31, 1999. At December 31st of each of 1999,
1998 and 1997, there were no outstanding loan obligations. Cash Station has not
made any material capital expenditures within the past three years and there
are no material capital expenditures anticipated for the current year.
At the closing of the merger of Concord and Cash Station, assuming that the
stockholders approve the executive cash awards, Cash Station will make payments
totaling $3.1 million to executive management personnel. These payments will be
made from the current cash position of Cash Station at the time of closing.
Quantitative and Qualitative Disclosures About Market Risk
As of December 31,1999, Cash Station held investment grade corporate bonds
totaling $1,992,000 with a market valuation of $1,988,000 and an unrealized
loss of $4,000. All bonds had short-term maturities and Cash Station expects to
hold all bonds to maturity. Cash Station purchases investment grade corporate
bonds solely to maximize its interest income. Cash Station does not purchase
bonds or securities for trading purposes.
Voting Securities and Principal Holders Thereof
As of June 27, 2000, a total of 926,546 shares of Cash Station common stock
were outstanding. The following table shows the beneficial ownership of shares
of the principal stockholders of Cash Station common stock as of June 27, 2000,
by each entity (including any holding company or other group of affiliated
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<PAGE>
institutions) known to Cash Station to own beneficially more than five percent
(5%) of the common stock of Cash Station. The entities listed have, to Cash
Station's knowledge, sale, voting and investment power with respect to all
shares of Cash Station common stock beneficially owned by them. No individual,
including any director or executive officer, owns shares of Cash Station common
stock. Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Principal Stockholders Approximate Percent
(Aggregated by Holding Company Number of Shares of Total Shares
Group) Beneficially Owned Outstanding
------------------------------ ------------------ -------------------
<S> <C> <C>
Bank One Corporation............ 322,710 34.8%
Harris Bankcorp, Inc............ 93,575 10.1
LaSalle Bank NA................. 88,544 9.6
------- ----
All stockholders holding 5% or
more
of the outstanding shares...... 504,829 54.5%
======= ====
</TABLE>
DESCRIPTION OF CONCORD CAPITAL STOCK
The following summary description of the capital stock of Concord does not
purport to be complete and is qualified in its entirety by the provisions of
Concord's restated certificate of incorporation, as amended (Concord Charter),
and Concord's by-laws and by the applicable provisions of Delaware corporate
law. For information on how to obtain copies of the Concord Charter and by-
laws, see "WHERE YOU CAN FIND MORE INFORMATION."
Capital Stock
Under the Concord Charter, the Concord Board has the authority to issue a
maximum of 500,000,000 shares of Concord common stock, par value $0.33 1/3 per
share. As of June 26, 2000, there were issued and outstanding 212,437,660
shares of Concord common stock.
Dividend Rights
Holders of Concord common stock are entitled to receive such dividends as
may be declared from time to time by the Board of Directors out of funds
legally available therefor. Although the Concord Board may declare dividends on
Concord common stock, Concord has never paid cash dividends and currently has
no plans to pay cash dividends in the future. See "SUMMARY SELECTED FINANCIAL
DATA--Comparative Market Price Data."
Voting Rights
Each holder of Concord common stock is entitled to one vote for each share
held on any matter submitted to a vote of Concord stockholders, including the
election of directors. Concord stockholders do not have cumulative voting
rights for the election of directors. All elections and matters submitted to a
vote of Concord stockholders are decided by the affirmative vote of a majority
of the shares present (in person or by proxy) and entitled to vote, provided
that a quorum is present, except as otherwise required by Delaware corporate
law or the Concord Charter.
Under Delaware law, a corporation's certificate of incorporation may be
amended by the affirmative vote of a majority of its outstanding shares
entitled to vote upon the amendment, unless the corporation's certificate of
incorporation or by-laws specifies a higher percentage. The Concord Charter
does not provide for an affirmative vote differing from the statutory
requirements.
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Change of Control
The Delaware corporation statute, the Concord Charter and the Concord by-
laws contain provisions that could discourage or make more difficult a change
of control of Concord.
Concord Charter and By-laws. Under the Concord by-laws, special meetings of
the stockholders may only be called by the Board, the Chairman of the Board,
the President or any Vice President. Concord stockholders are not entitled to
request a special meeting.
Delaware General Corporation Law. As a Delaware corporation, Concord is
subject to the provisions of Section 203 of the Delaware corporation statute.
Generally, this statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" (as defined in the statute) with an
"interested stockholder" (as defined in the statute) for a period of three
years after the time that such stockholder became an interested stockholder,
unless:
. prior to that time the corporation's board of directors has approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder,
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction was commenced (excluding certain specified shares), or
. at or after the time the stockholder became an interested stockholder,
the business combination is approved by the corporation's board of
directors and authorized by the affirmative vote at an annual or special
meeting and not by written consent, of at least 66 2/3% of the
outstanding voting stock of the corporation (excluding the stock owned by
the interested stockholder).
The statute generally defines a "business combination" to include a merger,
asset sale or other transaction resulting in a financial benefit to the
interested stockholder. The statute generally defines an "interested
stockholder" as a person or entity, other than the corporation and any direct
or indirect majority owned subsidiary of the corporation, who (i) owns 15% or
more of a corporation's voting stock or (ii) is an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the prior three-year period, and
the affiliates or associates of such person. Section 203 expressly exempts from
the requirements described above any business combination by a corporation with
an interested stockholder who becomes an interested stockholder in a
transaction approved by that corporation's board of directors.
Liquidation Rights
In the event of liquidation, dissolution or winding up of Concord, the
holders of Concord common stock are entitled to share ratably in all assets of
Concord available for distribution to such holders after the payment of all
liabilities.
Preemption, Conversion and Redemption
The holders of Concord common stock have no preemptive rights to purchase
additional securities issued by Concord or any conversion rights and the
Concord common stock is not subject to calls or further assessments by Concord.
The Concord stockholders have no rights to have their shares redeemed by
Concord.
Miscellaneous
The outstanding shares of Concord common stock are, and the shares of
Concord common stock to be delivered pursuant to the merger upon delivery will
be, duly authorized, validly issued, fully paid and nonassessable. The
outstanding shares of Concord common stock are, and the shares of Concord
common stock to be delivered pursuant to the merger upon notice of issuance
will be, listed on Nasdaq. State Street Bank & Trust operating through
Equiserve Limited Partnership, its service agent, is the transfer agent and
registrar for Concord common stock.
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COMPARISON OF RIGHTS OF CASH STATION STOCKHOLDERS
AND CONCORD STOCKHOLDERS
After consummation of the merger, the holders of Cash Station common stock
who receive Concord common stock under the terms of the merger agreement will
become stockholders of Concord. Because Cash Station and Concord are both
Delaware corporations, the rights of Cash Station stockholders will continue to
be governed by the Delaware corporation statute. Additionally, the rights of
stockholders of Cash Station are presently governed by its amended and restated
certificate of incorporation, as amended (Cash Station Charter) and the Cash
Station by-laws. As stockholders of Concord, their rights following the
consummation of the merger will instead be governed by the Concord certificate
of incorporation, as amended (Concord Charter), and the Concord by-laws.
Certain differences between the rights of Concord stockholders and Cash Station
stockholders, under their respective charters, are summarized below. This
summary does not purport to be complete, and is qualified in its entirety by
reference to the Concord Charter, and by-laws, the Cash Station Charter, and
by-laws, and the Delaware corporation statute.
Size of the Board and Qualifications of Directors
Under the Cash Station by-laws, there are to be no fewer than 12, but no
more than 25 directors. Only the President of Cash Station or officers of
stockholders or stockholder affiliates may be directors of Cash Station. No
stockholder of Cash Station may have more than one employee acting as director
at any time.
Under the Concord by-laws, there are to be no fewer than one, but no more
than 13 directors. There are no restrictions on Board composition, or on Board
member eligibility.
Board Meetings
Under the Cash Station by-laws, regular meetings of the Board may be held
anywhere, while special meetings of the Board must be held in the County of
Cook, State of Illinois. Special meetings may be called by the Chairman of the
Board, the Vice Chairman, the President or any other director, and require
three days notice. Under the Concord by-laws there are no location restrictions
on any meetings of the Board, regular or special. Special meetings may be
called by the Chairman or the President, or by the Secretary after receiving a
written request from two or more Board members, and require two days notice.
Removal of Directors
Under the Cash Station by-laws, directors may be removed with or without
cause by the holders of two-thirds of the Cash Station shares represented at a
meeting at which a quorum is present. Under the Concord by-laws, only a
majority of the holders of Concord shares entitled to elect directors is
required.
Action by Committees
Under the Cash Station by-laws, any committees of the Board of Cash Station
may take any action which the Board could otherwise take, to the extent
permitted under the Delaware corporation statute. Under Delaware law, no
committee may have the power or authority to amend the corporation's
certificate of incorporation, adopt an agreement of merger or consolidation,
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommend to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amend the by-laws of the corporation. Concord's by-laws specifically contain
these statutory restrictions on committee action.
Amendments to the Charter
Unless a higher vote is required by a corporation's charter or by-laws,
Delaware law requires that a proposed charter amendment be approved by a
majority of the outstanding stock entitled to vote upon the amendment and,
under certain circumstances, a majority of the outstanding stock of each class
entitled to vote thereon. Under the Cash Station Charter, any amendment to the
Charter that conflicts with or contravenes any
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provision of Cash Station's by-laws that, pursuant to its by-laws, may not be
amended without the affirmative vote of two-thirds of the outstanding shares of
Cash Station common stock, must be approved by an affirmative vote of two-
thirds of the outstanding shares of Cash Station common stock. The Concord
Charter and by-laws do not provide for an affirmative vote differing from the
statutory requirements.
Amendments to the By-laws
Under the Cash Station by-laws, any amendment to the by-laws generally
requires a vote of two-thirds of the directors present at a meeting (or, in
certain circumstances two-thirds of all the directors then in office) or a vote
of the stockholders and, in certain circumstances, approval of the amendment by
two-thirds of the stockholders represented at the meeting at which the
amendment is considered. Under the Concord by-laws, any amendment to the by-
laws may be made by a majority of either the Board or the stockholders entitled
to vote thereon.
Restrictions on Adoption of a Plan of Merger
Under the Cash Station Charter and by-laws, a vote of two-thirds of the
outstanding shares of Cash Station common stock is required to adopt a plan of
merger. The Concord Charter and by-laws do not contain a similar restriction.
Restrictions on Eligibility to be a Stockholder
Under the Cash Station by-laws, only certain corporate entities are
qualified to become stockholders of Cash Station. The Concord by-laws contain
no such restriction.
Restrictions on Special Meetings of the Stockholders
Under the Cash Station by-laws, special meetings of the stockholders may be
called by the Chairman of the Board, the Vice Chairman of the Board, the
President, the Board, or by the holders of not less than one-fifth of the
outstanding shares of Cash Station common stock. Under the Concord by-laws,
special meetings may only be called by the Board, the Chairman of the Board,
the President or any Vice President. Cash Station stockholders will thus lose
their ability to call special meetings if they approve the merger.
Also, under the Cash Station by-laws, a special meeting of the stockholders
other than one called by the Board must occur in the County of Cook in the
State of Illinois. Unless otherwise determined by the Board of Directors of
Concord, under the Concord by-laws all meetings must occur in the State of
Tennessee.
Notice of Meetings
Under the Cash Station by-laws, stockholders are to receive notice no fewer
than 20 days in advance of a meeting whereat a merger proposal will be
considered, and no fewer than 10 days in advance of all other meetings. Under
the Concord by-laws, stockholders may receive notice no fewer than 10 days in
advance of any meeting.
Membership
Cash Station is a membership organization. Only entities satisfying the
membership requirements of the by-laws may become members of Cash Station, and
only members satisfying the eligibility requirements may become stockholders in
Cash Station. Membership requirements include dues-paying obligations and
geographic restrictions. There are no such membership requirements in the
Concord by-laws.
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<PAGE>
Transfer Restrictions
Under the Cash Station by-laws there are numerous restrictions on the
transfer of stock in Cash Station, including a requirement that stock be
transferred only to other members. Concord's by-laws contain no transfer
restrictions. However, see "--Transactions with Interested Stockholders" below.
Transactions with Interested Stockholders
As a publicly held corporation, Concord is subject to Section 203 of the
Delaware corporation statute. For more information on Section 203 of the
Delaware Corporation Statute see "DESCRIPTION OF CONCORD CAPITAL STOCK--Change
of Control."
Cash Station is not publicly held and accordingly is not subject to Section
203 of the Delaware corporation statute.
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<PAGE>
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS OF CASH STATION
If the merger is consummated, a holder of record of Cash Station common
stock on the date of making a demand for appraisal, as described below, will be
entitled to have those shares appraised by the Delaware Court of Chancery under
Section 262 of the Delaware corporation statute and to receive payment for the
"fair value" of those shares instead of the consideration provided for in the
merger agreement. In order to be eligible to receive this payment, however, a
stockholder must (1) continue to hold its shares through the effective date of
the merger; (2) strictly comply with the procedures discussed under Section
262; and (3) not vote in favor of the merger. Shares of Cash Station common
stock outstanding immediately prior to the effective time of the merger, with
respect to which appraisal shall have been properly demanded in accordance with
Section 262, will not be converted into the right to receive shares of Concord
common stock in the merger at or after the effective time of the merger unless
and until the holder of such shares withdraws its demand for such appraisal or
becomes ineligible for such appraisal.
Holders of Concord common stock outstanding at the effective time of the
merger are not entitled to appraisal rights in connection with the merger.
This proxy statement and prospectus is being sent to all holders of record
of Cash Station common stock on the record date for the Cash Station special
meeting and constitutes notice of the appraisal rights available to those
holders under Section 262. THE STATUTORY RIGHT OF APPRAISAL GRANTED BY SECTION
262 IS COMPLEX AND REQUIRES STRICT COMPLIANCE WITH THE PROCEDURES IN SECTION
262. FAILURE TO FOLLOW ANY OF THESE PROCEDURES MAY RESULT IN A TERMINATION OR
WAIVER OF DISSENTERS' RIGHTS UNDER SECTION 262. THE FOLLOWING IS A SUMMARY OF
THE PRINCIPAL PROVISIONS OF SECTION 262.
The following summary is not a complete statement of Section 262 of the
Delaware corporation statute, and is qualified in its entirety by reference to
Section 262 which is incorporated herein by reference, together with any
amendments to the laws that may be adopted after the date of this proxy
statement and prospectus. A copy of Section 262 is attached as Annex C to this
proxy statement and prospectus.
A holder of Cash Station common stock who elects to exercise appraisal
rights under Section 262 must deliver a written demand for appraisal of its
shares of Cash Station common stock prior to the vote on the merger. The
written demand must identify the stockholder of record and state the
stockholder's intention to demand appraisal of its shares. Voting against
approval of the merger, abstaining from voting or failing to vote with respect
to approval of the merger will not constitute a demand for appraisal within the
meaning of Section 262. All demands should be delivered to: President, Cash
Station, Inc., 200 South Wacker Drive, Suite 1000, Chicago, Illinois 60606.
Only a holder of shares of Cash Station common stock on the date of making a
written demand for appraisal who continuously holds those shares through the
effective date of the merger is entitled to seek appraisal. Demand for
appraisal must be executed by or for the holder of record, fully and correctly,
as that holder's name appears on the holder's stock certificates representing
shares of Cash Station common stock.
BENEFICIAL OWNERS WHO ARE NOT RECORD OWNERS AND WHO INTEND TO EXERCISE
APPRAISAL RIGHTS SHOULD INSTRUCT THE RECORD OWNER TO COMPLY WITH THE STATUTORY
REQUIREMENTS WITH RESPECT TO THE EXERCISE OF APPRAISAL RIGHTS BEFORE THE DATE
OF THE CASH STATION SPECIAL MEETING.
Within 10 days after the merger, the surviving corporation in the merger is
required to send notice of the effectiveness of the merger to each stockholder
who prior to the time of the merger has complied with the requirements of
Section 262.
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Within 120 days after the effective date of the merger, the surviving
corporation in the merger or any stockholder who has complied with the
requirements of Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the shares of Cash
Station common stock held by all stockholders seeking appraisal. A dissenting
stockholder must serve a copy of the petition on Cash Station, as the surviving
corporation in the merger. If no petition is filed by either Concord or any
dissenting stockholder within the 120-day period, the rights of all dissenting
stockholders to appraisal will cease. Stockholders seeking to exercise
appraisal rights should not assume that the surviving corporation will file a
petition with respect to the appraisal of the fair value of their shares or
that the surviving corporation will initiate any negotiations with respect to
the fair value of those shares. The surviving corporation is under no
obligation to and has no present intention to take any action in this regard.
Accordingly, stockholders who wish to seek appraisal of their shares should
initiate all necessary action with respect to the perfection of their appraisal
rights within the time periods and in the manner prescribed in Section 262.
FAILURE TO FILE THE PETITION ON A TIMELY BASIS WILL CAUSE THE STOCKHOLDER'S
RIGHT TO AN APPRAISAL TO CEASE.
Within 120 days after the time of the merger, any stockholder who has
complied with subsections (a) and (d) of Section 262 is entitled, upon written
request, to receive from the surviving corporation in the merger a statement
setting forth the total number of shares of Cash Station common stock not voted
in favor of the merger with respect to which demands for appraisal have been
received and the number of holders of those shares. The statement must be
mailed within 10 days after Cash Station has received the written request or
within 10 days after the time for delivery of demands for appraisal under
subsection (d) of Section 262 has expired, whichever is later.
If a petition for an appraisal is filed in a timely manner, at the hearing
on that petition the Delaware Court of Chancery will determine which
stockholders are entitled to appraisal rights and will appraise the shares of
Cash Station common stock owned by those stockholders. The court will determine
the fair value of those shares, exclusive of any element of value arising from
the accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the fair value. The Delaware Court of
Chancery may require the stockholders who have demanded appraisal rights for
their shares of Cash Station common stock and who hold certificates
representing such shares to submit such certificates to the Register in
Chancery for notation thereon of the tendency of the appraisal proceedings. The
Court of Chancery may dismiss the proceedings as to any stockholder who fails
to comply with any such directions.
Stockholders who consider seeking appraisal should consider that the fair
value of their shares under Section 262 could be more than, the same as, or
less than, the value of the consideration provided for in the merger agreement
without the exercise of appraisal rights. The Court of Chancery may determine
the cost of the appraisal proceeding and assess it against the parties as the
Court deems equitable. Upon application of a dissenting stockholder, the Court
may order that all or a portion of the expenses incurred by any dissenting
stockholder in connection with the appraisal proceeding (including, without
limitation, reasonable attorney's fees and the fees and expenses of experts) be
charged pro rata against the value of all shares of Cash Station common stock
entitled to appraisal. In the absence of a court determination or assessment,
each party bears its own expenses.
Any stockholder who has demanded appraisal in compliance with Section 262
will not, after the effective date of the merger, be entitled to vote such
stock for any purpose or receive payment of dividends or other distributions,
if any, on the Cash Station common stock, except for dividends or
distributions, if any, payable to stockholders of record at a date prior to the
effective date of the merger.
A stockholder may withdraw a demand for appraisal and accept the Concord
common stock at any time within 60 days after the effective date of merger, or
thereafter may withdraw a demand for appraisal with the written approval of the
surviving corporation in the merger. If an appraisal proceeding is properly
instituted, it may not be dismissed as to any stockholder without the approval
of the Delaware Court of Chancery, and any
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<PAGE>
such approval may be conditioned on the Court of Chancery's deeming the terms
to be just. If, after the merger, a holder of Cash Station common stock who had
demanded appraisal for its shares fails to perfect or loses its right to
appraisal, those shares will be treated under the merger agreement as if they
were converted into Concord common stock at the time of the merger.
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF THE DELAWARE CORPORATION
STATUTE, ANY CASH STATION STOCKHOLDER WHO IS CONSIDERING EXERCISING APPRAISAL
RIGHTS SHOULD CONSULT A LEGAL ADVISOR.
EXPERTS
Ernst & Young LLP, independent auditors, have audited Concord's consolidated
financial statements included in Concord's Annual Report on Form 10-K for the
year ended December 31, 1999, as set forth in their report, which is
incorporated by reference in this proxy statement and prospectus and elsewhere
in the registration statement. Concord's financial statements are incorporated
by reference in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
The financial statements of Cash Station as of December 31, 1999 and 1998
and for each of the three years in the period ended December 31, 1999, included
in this registration statement, of which this proxy statement and prospectus
are a part, have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report appearing herein, and are included in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
Representatives of Deloitte & Touche LLP are expected to be present at the
Cash Station special meeting, will have the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
LEGAL OPINIONS
The validly of the shares of Concord common stock being offered hereby is
being passed upon for Concord by Sidley & Austin, Chicago, Illinois.
It is a condition to the consummation of the merger that Sidley & Austin,
counsel to Concord, and Skadden, Arps, Slate, Meagher & Flom (Illinois),
counsel to Cash Station, each deliver opinions concerning certain federal
income tax consequences of the merger, dated as of the closing date of the
merger.
WHERE YOU CAN FIND MORE INFORMATION
Concord files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (SEC). Cash
Station is not required to file annual, quarterly or other reports with the
SEC. You may read and copy any reports, statements or other information filed
by Concord at the public reference facilities of the SEC in Washington D.C.,
Chicago, Illinois and New York, New York. The SEC's Public Reference in
Washington D.C. is located at 450 Fifth Street, N.W., Washington D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. Concord's SEC filings are also available to the
public from commercial document retrieval services. The SEC maintains an
Internet site that contains reports, proxy and information statements and other
information regarding issuers, like Concord, that file electronically with the
SEC. The website maintained by the SEC is "http://www.sec.gov". You may also
access certain of Concord's SEC filings through the website maintained by
Concord, which is "http://www.concordefs.com". Concord's common stock is listed
on Nasdaq, and you can read and inspect Concord's filings at the offices of the
National Association of Securities Dealers, Inc. at 1735 K Street, Washington,
D.C. 20006.
44
<PAGE>
Concord has filed with the SEC a registration statement on Form S-4 to
register the Concord common stock to be issued pursuant to the merger
agreement. This proxy statement and prospectus is a part of that registration
statement and constitutes a prospectus of Concord in addition to being a proxy
statement of Cash Station for the special meeting. As allowed by SEC rules,
this proxy statement and prospectus does not contain all the information you
can find in the registration statement and the exhibits to the registration
statement.
The SEC allows Concord to "incorporate by reference" information into this
proxy statement and prospectus, which means that Concord can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
proxy statement and prospectus, except for any information superseded by
information in this proxy statement and prospectus. This proxy statement and
prospectus incorporates by reference the documents set forth below that Concord
has previously filed with the SEC. These documents contain important business
and financial information about Concord that is not included in this proxy
statement and prospectus.
Concord SEC Filings (File No. 0-13848)
. Annual Report on Form 10-K (including the Annual Report to Stockholders
attached thereto as Exhibit 13) for the year ended December 31, 1999.
. Definitive Proxy Statement on Form 14A filed on April 7, 2000.
. Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
We have enclosed copies of the Concord documents referred to above with this
proxy statement and prospectus. Concord also hereby incorporates by reference
all additional documents that Concord files with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this proxy
statement and prospectus and the date of the special meeting.
If you are a stockholder of Concord, Concord may have sent you the documents
incorporated by reference, but you can obtain any of them through Concord or
the SEC. Documents incorporated by reference are available from Concord without
charge, excluding all exhibits unless such exhibits have been specifically
incorporated by reference in this proxy statement and prospectus. Stockholders
may obtain documents incorporated by reference in this proxy statement and
prospectus by requesting them in writing or by telephone from Concord at the
following address:
Concord EFS, Inc.
Attention: Thomas J. Dowling
2525 Horizon Lake Drive
Suite 120
Memphis, Tennessee 38133
(901) 380-8300
email: [email protected]
If you would like to request documents from Concord, please do so by July
12, 2000 to receive them before the special meeting.
The Board of Directors of Cash Station does not intend to bring any other
matters, and does not know of any other matters to be brought, before the
special meeting.
This proxy statement and prospectus does not constitute an offer to sell, or
a solicitation of an offer to buy, any securities, or the solicitation of a
proxy, in any jurisdiction to or from any person to whom it is not lawful to
make any such offer or solicitation in such jurisdiction. By delivering this
proxy statement and prospectus or distributing any securities pursuant to it,
neither Concord nor Cash Station intends to create any implication that there
have been no changes in their respective affairs since the date of this proxy
statement and prospectus or that the information contained in it is correct as
of any subsequent date.
45
<PAGE>
You should rely solely on the information contained or incorporated by
reference in this proxy statement and prospectus. Neither Concord nor Cash
Station has authorized anyone to provide you with information that is different
from what is contained in this proxy statement and prospectus. All information
contained in this proxy statement and prospectus with respect to Cash Station
has been provided by Cash Station, and all information contained (or
incorporated by reference) in this proxy statement and prospectus with respect
to Concord and its subsidiaries has been provided by Concord. Neither Concord
nor Cash Station warrants the accuracy of information relating to the other
party. This proxy statement and prospectus is dated June 27, 2000.
46
<PAGE>
CASH STATION FINANCIAL STATEMENTS
CASH STATION, INC.
Financial Statements for the
Years Ended December 31, 1999, 1998 and 1997
and Independent Auditors' Report
Three Months Ended March 31, 2000 and 1999 UNAUDITED
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Cash Station, Inc.:
We have audited the accompanying balance sheets of Cash Station, Inc. as of
December 31, 1999 and 1998, and the related statements of operations, changes
in stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of Cash Station, Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Cash Station, Inc. at December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
March 17, 2000
(April 12, 2000 as to Note 9)
F-1
<PAGE>
CASH STATION, INC.
BALANCE SHEETS
December 31, 1999 and 1998 and March 31, 2000 Unaudited
<TABLE>
<CAPTION>
2000 1999 1998
---------- ---------- ----------
Unaudited
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................... $ 380,795 $1,503,046 $1,784,397
Certificates of deposit..................... 1,463,091 2,437,682
Investment securities held-to-maturity...... 3,969,139 1,991,834
Accounts and other receivables.............. 3,989,773 2,620,008 2,356,825
Income taxes receivable..................... 92,356
Prepaid expenses............................ 90,525 197,150 231,901
---------- ---------- ----------
Total current assets...................... 8,430,232 7,775,129 6,903,161
OFFICE FURNITURE AND EQUIPMENT--
Net of accumulated depreciation of $737,941
and $942,917 in 1999 and 1998,
respectively............................... 296,239 339,766 438,694
EQUITY INVESTMENTS--At cost................... 500,000 500,000 500,000
DEFERRED INCOME TAXES......................... 127,016 127,016 95,225
OTHER ASSETS.................................. 64,409 21,510 53,648
---------- ---------- ----------
TOTAL ASSETS.................................. $9,417,896 $8,763,421 $7,990,728
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................ $2,078,699 $1,630,789 $2,054,567
Accrued expenses............................ 941,546 710,555 838,226
Income taxes payable........................ 70,589 220,989
---------- ---------- ----------
Total current liabilities................. 3,090,834 2,562,333 2,892,793
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 500,000
shares authorized; none outstanding........
Common stock, $.01 par value; 2,000,000
shares authorized; 927,838 and 950,780
shares issued and outstanding in 1999 and
1998....................................... 9,265 9,278 9,508
Additional paid-in capital.................. 869,888 873,544 992,686
Retained earnings........................... 5,447,909 5,318,266 4,095,741
---------- ---------- ----------
Total stockholders' equity................ 6,327,062 6,201,088 5,097,935
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.... $9,417,896 $8,763,421 $7,990,728
========== ========== ==========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
CASH STATION, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31, 1999, 1998 and 1997 and
Three Months Ended March 31, 2000 and 1999 Unaudited
<TABLE>
<CAPTION>
2000 1999 1999 1998 1997
---------- ---------- ----------- ----------- -----------
Unaudited
<S> <C> <C> <C> <C> <C>
REVENUE:
Network................ $2,477,430 $2,261,696 $ 9,625,518 $ 9,146,659 $ 8,875,036
Processing............. 2,198,876 2,017,342 8,348,272 6,974,661 4,969,888
---------- ---------- ----------- ----------- -----------
Total revenue.......... 4,676,306 4,279,038 17,973,790 16,121,320 13,844,924
NETWORK AND PROCESSING
EXPENSES............... 2,235,875 1,888,965 7,801,104 6,916,176 5,683,860
---------- ---------- ----------- ----------- -----------
Revenue--net........... 2,440,431 2,390,073 10,172,686 9,205,144 8,161,064
OPERATING EXPENSES:
Salaries and employee
benefits.............. 1,300,572 1,177,494 4,680,793 3,869,356 3,203,577
Marketing.............. 249,000 436,750 1,102,906 1,280,732 949,524
General and
administrative........ 363,658 370,009 1,420,114 1,430,404 1,394,584
Occupancy.............. 106,686 71,818 216,620 240,650 233,987
Depreciation and
amortization.......... 54,530 80,110 299,368 323,058 224,808
---------- ---------- ----------- ----------- -----------
Total operating
expenses.............. 2,074,446 2,136,181 7,719,801 7,144,200 6,006,480
---------- ---------- ----------- ----------- -----------
OPERATING INCOME........ 365,985 253,892 2,452,885 2,060,944 2,154,584
OTHER INCOME............ 146,359 34,255 582,367 161,275 376,219
OTHER EXPENSE........... (288,001) (66,750) (708,173) (393,362) (277,053)
---------- ---------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES.................. 224,343 221,397 2,327,079 1,828,857 2,253,750
INCOME TAX PROVISION
(BENEFIT):
Current................ 94,700 81,941 1,136,345 800,537 977,669
Deferred............... (31,791) (23,214) (74,763)
---------- ---------- ----------- ----------- -----------
Total income tax
provision............. 94,700 81,941 1,104,554 777,323 902,906
---------- ---------- ----------- ----------- -----------
NET INCOME.............. $ 129,643 $ 139,456 $ 1,222,525 $ 1,051,534 $ 1,350,844
========== ========== =========== =========== ===========
EARNINGS PER SHARE--
BASIC.................. $ 0.14 $ 0.15 $ 1.30 $ 1.11 $ 1.40
========== ========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
CASH STATION, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1999, 1998 and 1997 and
Three Months Ended March 31, 2000 Unaudited
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997.......... $9,704 $1,048,160 $1,693,363 $2,751,227
Purchase and retirement of
19,636 shares of common stock
for cash....................... (196) (55,474) (55,670)
Net income...................... 1,350,844 1,350,844
------ ---------- ---------- ----------
BALANCE, DECEMBER 31, 1997........ 9,508 992,686 3,044,207 4,046,401
Net income...................... 1,051,534 1,051,534
------ ---------- ---------- ----------
BALANCE, DECEMBER 31, 1998........ 9,508 992,686 4,095,741 5,097,935
Purchase and retirement of
22,980 shares of common stock
for cash....................... (230) (119,142) (119,372)
Net income...................... 1,222,525 1,222,525
------ ---------- ---------- ----------
BALANCE, DECEMBER 31, 1999........ 9,278 873,544 5,318,266 6,201,088
UNAUDITED:
Purchase and retirement of 1,292
shares of common stock for
cash........................... (13) (3,656) (3,669)
Net income...................... 129,643 129,643
------ ---------- ---------- ----------
BALANCE, MARCH 31, 2000 .......... $9,265 $ 869,888 $5,447,909 $6,327,062
====== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
CASH STATION, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997 and
Three Months Ended March 31, 2000 and 1999 Unaudited
<TABLE>
<CAPTION>
2000 1999 1999 1998 1997
----------- ----------- ----------- ----------- -----------
Unaudited
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............ $ 129,643 $ 139,456 $ 1,222,525 $ 1,051,534 $ 1,350,844
Adjustments to
reconcile net income
to net cash flows
from operating
activities:
Depreciation and
amortization......... 54,530 80,110 299,368 323,058 224,808
Amortization of
investment securities
premium.............. 9,013 8,330
Deferred income tax
benefit.............. (31,791) (23,214) (74,763)
Write-down of equity
investment........... 100,793
Loss on sale of office
furniture and
equipment............ 21,046
Changes in:
Accounts and other
receivables......... (1,369,765) (13,554) (263,183) 706,982 (1,609,226)
Income taxes
receivable.......... (20,000) 92,356 (92,356)
Prepaid expenses..... 106,625 18,033 34,751 (99,207) (65,903)
Other assets......... (42,899) 11,740 27,139 (25,931) 17,280
Accounts payable..... 447,910 (1,054,738) (423,778) 222,734 811,348
Accrued expenses..... 230,991 102,388 (127,671) 37,513 368,734
Income taxes
payable............. (150,400) 81,941 220,989 (42,506) (368,192)
----------- ----------- ----------- ----------- -----------
Net cash flows from
operating
activities......... (584,352) (654,624) 1,059,035 2,159,400 675,976
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of
investment securities
held-to-maturity..... (2,986,318) (2,000,164)
Proceeds from
maturities of
investment securities
held to maturity..... 1,000,000
Purchases of office
furniture and
equipment............ (20,443) (56,016) (201,775) (259,333) (341,027)
Disposals of office
furniture and
equipment............ 9,440 6,334 9,070
Redemptions
(purchases) of
certificates of
deposit--net......... 1,463,091 (96,436) 974,591 (2,437,682)
----------- ----------- ----------- ----------- -----------
Net cash flows from
investing
activities......... (534,230) (152,452) (1,221,014) (2,697,015) (331,957)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Purchase and
retirement of common
stock................ (3,669) (119,372) (55,670)
Proceeds from
borrowings under line
of credit............ 500,000 425,000 420,000
Payments of borrowings
under line of
credit............... (500,000) (425,000) (420,000)
----------- ----------- ----------- ----------- -----------
Net cash flows from
financing
activities......... (3,669) (119,372) (55,670)
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS........... (1,122,251) (807,076) (281,351) (537,615) 288,349
CASH AND CASH
EQUIVALENTS--Beginning
of period............. 1,503,046 1,784,397 1,784,397 2,322,012 2,033,663
----------- ----------- ----------- ----------- -----------
CASH AND CASH
EQUIVALENTS--End of
period................ $ 380,795 $ 977,321 $ 1,503,046 $ 1,784,397 $ 2,322,012
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
period for:
Income taxes.......... $ 245,100 $ 20,000 $ 823,000 $ 935,399 $ 1,346,000
=========== =========== =========== =========== ===========
Interest.............. $ $ $ 3,179 $ 1,169 $ 5,007
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
CASH STATION, INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
1. NATURE OF BUSINESS
Cash Station, Inc., a Delaware corporation (the "Corporation"), operates a
shared electronic funds transfer system of interconnecting terminals, utilizing
the "Cash Station" trademark. The Corporation's outstanding common stock is
owned by certain entities participating in its network. The Corporation issues
and repurchases shares to and from stockholders as required for entities that
have joined or left the network.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates--The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
Revenue Recognition--Network revenue represents billings for ATM and point-
of-sale transactions. Processing revenue includes billings for ATM terminal
driving, gateway transactions, off-line debit transactions, and internet
banking-related services. Revenue is recognized in the month services are
provided.
Cash Equivalents--The Corporation considers money market accounts and
certificates of deposit with maturities of three months or less from the date
of purchase to be cash equivalents.
Depreciation--Depreciation of office furniture and equipment is computed
using the straight-line method over the estimated useful lives of the related
assets.
Income Taxes--Deferred income taxes are provided using an asset and
liability approach. Deferred tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted rates and tax laws. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.
Earnings Per Share--Earnings per share is calculated on the basis of the
daily weighted average number of shares outstanding.
Impairment of Long-Lived Assets--The Corporation periodically reviews long-
lived assets for possible impairment. When circumstances indicate that the
carrying amount of such assets may not be recoverable, the carrying amount is
reduced to the estimated recoverable value.
Investment Securities--Investment securities consist of corporate bonds. The
Corporation has the ability and the positive intent to hold these securities to
maturity. Therefore, these securities are classified as held-to-maturity and
are carried at amortized cost.
Recent Accounting Pronouncements--In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
requires recognition of all derivative instruments in the balance sheet as
either assets or liabilities and the measurement of those instruments at fair
value. SFAS 133 also requires changes in the fair value of the derivative
instruments to be recorded each period in current earnings or comprehensive
income depending on the intended use of the derivatives. SFAS 133 is required
to be adopted by the Corporation effective January 1, 2001. The Corporation has
not determined the impact of adoption of SFAS 133 on its financial condition or
results of operations.
F-6
<PAGE>
CASH STATION, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. EQUITY INVESTMENTS--AT COST
In 1996, the Corporation purchased 77 shares of common stock of Card Alert
Services, Inc. ("CAS"), a company that consolidates fraud-related data in the
debit card industry for use by financial institutions, for approximately
$101,000. These shares are nonmarketable and represent an equity interest of
approximately four percent in CAS. The Corporation paid $341,250, $291,000 and
$116,000 in 1999, 1998 and 1997, respectively, to fund the operations of CAS
and this amount is reported in other expense. In 1998, the Corporation
determined that an other than temporary impairment of this investment had
occurred and, accordingly, wrote down its carrying value to zero.
In 1995, the Corporation purchased 50 shares of common stock of Primary
Payment Systems Inc. ("PPS") for $500,000. These shares are nonmarketable and
represent an equity interest of approximately five percent in PPS. PPS provides
early warnings of impending check returns to financial institutions and check
acceptance companies. The principal stockholder of PPS is Star System, Inc., a
California-based regional on-line debit network. This investment is carried at
cost. In 1999, 1998 and 1997, the Corporation received net commissions of
$18,420, $6,637 and $46,000, respectively, relating to PPS's business. These
amounts are reported in other income.
4. INVESTMENT SECURITIES HELD TO MATURITY
Investment securities held to maturity represent corporate bonds which are
scheduled to mature in 2000. These corporate bonds have a fair value of
$1,987,961 and a gross unrealized loss of $3,873 as of December 31, 1999. There
were no sales of investment securities during 1999.
5. INCOME TAXES
The components of the net deferred tax asset as of December 31, 1999 and
1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax asset....................................... $166,142 $162,980
Valuation allowance...................................... (39,126) (39,126)
Deferred tax liability................................... -- (28,629)
-------- --------
Net deferred tax asset................................... $127,016 $ 95,225
======== ========
</TABLE>
At December 31, 1999 and 1998, deferred taxes relate principally to deferred
compensation, depreciation and amortization, the CAS write-down, and other
accruals. The valuation allowance at December 31, 1999 and 1998 relates to the
CAS write-down.
F-7
<PAGE>
CASH STATION, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
A reconciliation of the statutory federal income tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate.......................... 34.0% 34.0% 34.0%
State income tax rate, net of federal income tax effect.... 5.8 5.3 5.0
Increase in taxes resulting from:
Merger related expenses.................................. 6.6
Reserve for CAS.......................................... 1.9
Meals and entertainment.................................. 0.2 0.4 0.4
Other.................................................... 0.9 0.9 0.7
---- ---- ----
Effective income tax rate.................................. 47.5% 42.5% 40.1%
==== ==== ====
</TABLE>
6. PROFIT-SHARING PLAN
The Corporation has a defined contribution profit-sharing plan which is
available to all employees. Eligibility is based on completion of six months of
service and attainment of age 21.
The Corporation's annual contribution is a percentage applied to each
eligible employee's base compensation. Such percentage is at the discretion of
the Corporation's Board of Directors. Contributions to the plan were $290,269,
$218,818 and $183,514 for the years ended December 31, 1999, 1998 and 1997,
respectively.
7. LINE OF CREDIT
The Corporation has a $2,500,000 unsecured line of credit with a bank,
expiring on March 31, 2000. Borrowings under this line of credit bear interest
at the rate of 1.7 percent per annum in excess of the 90-day LIBOR (7.7 percent
as of December 31, 1999). No amounts were outstanding at December 31, 1999.
On December 31, 1998, the Corporation had a $1,500,000 unsecured line of
credit with a bank, which expired on March 31, 1999. Borrowings under this line
of credit bore interest at the rate of lender's prime less .25 percent (7.5
percent as of December 31, 1998). No amounts were outstanding at December 31,
1998.
8. COMMITMENTS
The Corporation has entered into noncancelable operating leases, principally
for the rental of office space. The approximate future minimum annual rental
commitments at December 31, 1999 under these leases are as follows:
<TABLE>
<S> <C>
2000............................................................. $ 571,488
2001............................................................. 611,478
2002............................................................. 566,096
2003............................................................. 498,336
2004............................................................. 508,917
Thereafter....................................................... 1,592,626
----------
Total lease commitments.......................................... 4,348,941
Less rent commitments on subleased property...................... (606,304)
----------
Net lease commitments............................................ $3,742,637
==========
</TABLE>
F-8
<PAGE>
CASH STATION, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Corporation's office space lease provides for additional rent related to
its proportionate share of real estate tax increases. Net rental expense for
the years ended December 31, 1999, 1998 and 1997 was $201,641, $223,400 and
$223,510, respectively.
The Corporation has a five-year agreement, expiring November 1, 2000, with
Electronics Data Systems Corp. ("EDS") whereby EDS provides transaction-
switching services to the Corporation. The Corporation is not subject to any
minimum payment requirements under this agreement.
9. PENDING ACQUISITION
On April 12, 2000, the Corporation entered into an agreement to be acquired
by Concord EFS. The acquisition is subject to stockholder and regulatory
approvals.
F-9
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
CONCORD EFS, INC.
SWCI ACQUISITION CORP.
AND
CASH STATION, INC.
DATED AS OF APRIL 12, 2000
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
<S> <C>
The Merger................................................................. A-1
Section 1.1The Merger.................................................... A-1
Section 1.2Effective Time................................................ A-1
Section 1.3Effects of the Merger......................................... A-1
Section 1.4Charter and Bylaws; Directors and Officers.................... A-2
Section 1.5Conversion of Securities...................................... A-2
Section 1.6Parent to Make Certificates Available......................... A-3
Section 1.7Dividends; Transfer Taxes; Withholding........................ A-3
Section 1.8No Fractional Securities...................................... A-4
Section 1.9Return of Exchange Fund....................................... A-4
Section 1.10Adjustment of Exchange Ratio................................. A-4
Section 1.11No Further Ownership Rights in Company Common Stock.......... A-5
Section 1.12Closing of Company Transfer Books............................ A-5
Section 1.13Lost Certificates............................................ A-5
Section 1.14Further Assurances........................................... A-5
Section 1.15Closing; Closing Deliveries.................................. A-5
ARTICLE II
Representations and Warranties of Parent and Sub........................... A-7
Section 2.1Organization, Standing and Power.............................. A-7
Section 2.2Capital Structure............................................. A-8
Section 2.3Authority..................................................... A-8
Section 2.4Consents and Approvals; No Violation.......................... A-8
Section 2.5SEC Documents and Other Reports............................... A-9
Section 2.6Registration Statement and Proxy Statement.................... A-9
Section 2.7Absence of Certain Changes or Events.......................... A-10
Section 2.8Permits and Compliance; Defaults.............................. A-10
Section 2.9Tax Matters................................................... A-10
Section 2.10Actions and Proceedings...................................... A-11
Section 2.11Certain Agreements........................................... A-11
Section 2.12ERISA........................................................ A-11
Section 2.13Compliance with Worker Safety and Environmental Laws......... A-12
Section 2.14Labor Matters................................................ A-12
Section 2.15Intellectual Property........................................ A-12
Section 2.16Required Vote of Parent...................................... A-13
Section 2.17Pooling of Interests; Reorganization......................... A-13
Section 2.18Brokers...................................................... A-13
Section 2.19Operations of Sub............................................ A-13
Section 2.20Acquisition for Investment................................... A-13
Section 2.21Parent Activities............................................ A-13
</TABLE>
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<TABLE>
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ARTICLE III
<S> <C>
Representations and Warranties of the Company............................. A-13
Section 3.1Organization, Standing and Power............................. A-13
Section 3.2Capital Structure............................................ A-14
Section 3.3Authority.................................................... A-14
Section 3.4Consents and Approvals; No Violation......................... A-14
Section 3.5Financial Statements......................................... A-15
Section 3.6Registration Statement and Proxy Statement................... A-15
Section 3.7Absence of Certain Changes or Events......................... A-15
Section 3.8Permits and Compliance; Defaults............................. A-16
Section 3.9Tax Matters.................................................. A-16
Section 3.10Actions and Proceedings..................................... A-17
Section 3.11Certain Agreements.......................................... A-17
Section 3.12ERISA....................................................... A-17
Section 3.13Compliance with Worker Safety and Environmental Laws........ A-18
Section 3.14Labor Matters............................................... A-19
Section 3.15Intellectual Property....................................... A-19
Section 3.16Opinion of Financial Advisor................................ A-19
Section 3.17Certain Company Bylaw Provisions............................ A-19
Section 3.18Required Vote of Company Stockholders....................... A-20
Section 3.19Pooling of Interests; Reorganization........................ A-20
Section 3.20Brokers..................................................... A-20
Section 3.21Cash Awards................................................. A-20
Section 3.22Repurchased Shares.......................................... A-20
ARTICLE IV
Covenants Relating to Conduct of Business................................. A-21
Section 4.1Conduct of Business Pending the Merger....................... A-21
Section 4.2No Solicitation.............................................. A-22
Section 4.3Pooling of Interests; Reorganization......................... A-23
ARTICLE V
Additional Agreements..................................................... A-23
Section 5.1Stockholder Meeting.......................................... A-24
Section 5.2Preparation of the Registration Statement and the Proxy
Statement.............................................................. A-24
Section 5.3Access to Information........................................ A-24
Section 5.4Compliance with the Securities Act........................... A-24
Section 5.5Listing of Parent Common Stock............................... A-25
Section 5.6Fees and Expenses............................................ A-25
Section 5.7Reasonable Best Efforts...................................... A-26
Section 5.8Public Announcements......................................... A-27
Section 5.9Real Estate Transfer and Gains Tax........................... A-27
Section 5.10State Takeover Laws......................................... A-27
Section 5.11Indemnification; Directors and Officers Insurance........... A-27
Section 5.12Notification of Certain Matters............................. A-28
Section 5.13Employee Matters............................................ A-28
Section 5.14Board of Directors Advisory Committees...................... A-28
Section 5.15Section 368(a).............................................. A-29
Section 5.16EDS Processing Agreement.................................... A-29
</TABLE>
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<TABLE>
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ARTICLE VI
<S> <C>
Conditions Precedent to the Merger........................................ A-29
Section 6.1Conditions to Each Party's Obligation to Effect the Merger... A-29
Section 6.2Conditions to Obligation of the Company to Effect the
Merger................................................................. A-30
Section 6.3Conditions to Obligations of Parent and Sub to Effect the
Merger................................................................. A-30
ARTICLE VII
Termination, Amendment and Waiver......................................... A-32
Section 7.1Termination.................................................. A-32
Section 7.2Effect of Termination........................................ A-33
Section 7.3Amendment.................................................... A-33
Section 7.4Waiver....................................................... A-33
ARTICLE VIII
General Provisions........................................................ A-33
Section 8.1Non-Survival of Representations and Warranties............... A-33
Section 8.2Notices...................................................... A-33
Section 8.3Interpretation............................................... A-34
Section 8.4Counterparts................................................. A-34
Section 8.5Entire Agreement; No Third-Party Beneficiaries............... A-34
Section 8.6Governing Law................................................ A-34
Section 8.7Assignment................................................... A-34
Section 8.8Severability................................................. A-35
</TABLE>
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EXHIBITS
<TABLE>
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<C> <S> <C>
EXHIBIT A Form of Company Voting Agreement.........................
EXHIBIT 5.4(a) Form of Company Affiliate Letter.........................
EXHIBIT C Form of Parent Affiliate Letter..........................
</TABLE>
OTHER ATTACHMENTS
<TABLE>
<S> <C>
Parent Letter...............................................................
Company Letter..............................................................
</TABLE>
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TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Term Section
------------ --------
<S> <C>
Acquisition Proposal................................................... 4.2(b)
Affiliate.............................................................. 5.6(b)
Agreement.............................................................. Forepart
Bank Act............................................................... 2.4
Blue Sky Laws.......................................................... 2.4
Calculation Period..................................................... 1.5(c)
Certificate of Merger.................................................. 1.2
Certificates........................................................... 1.6(b)
Closing................................................................ 1.15(a)
Closing Date........................................................... 1.15(a)
Code................................................................... Recitals
Company................................................................ Forepart
Company Affiliate Letter............................................... 5.4(a)
Company Business Personnel............................................. 3.14
Company Bylaws......................................................... 1.15(d)
Company Charter........................................................ 1.4(a)
Company Common Stock................................................... Recitals
Company Contract....................................................... 3.11
Company Diluted Share Number........................................... 1.5(c)
Company Letter......................................................... 3.1
Company Permits........................................................ 3.8(a)
Company Plan........................................................... 3.12(d)
Company Stockholder Meeting............................................ 5.1
Company Voting Agreement............................................... Recitals
Confidentiality Agreement.............................................. 5.3(c)
Constituent Corporations............................................... Forepart
D&O Insurance.......................................................... 5.11
DGCL................................................................... 1.1
Dissenting Shares...................................................... 1.5(d)
EDS.................................................................... 5.17
Effective Time......................................................... 1.2
Environmental Laws..................................................... 2.13
ERISA.................................................................. 2.12(a)
ERISA Affiliate........................................................ 2.12(c)
Exchange Act........................................................... 2.4
Exchange Agent......................................................... 1.6(a)
Exchange Fund.......................................................... 1.6(a)
Exchange Ratio......................................................... 1.5(c)
Executives............................................................. 3.21
Executives Cash Awards................................................. 3.21
GAAP................................................................... 2.5
Gains Taxes............................................................ 5.9
Governmental Entity.................................................... 2.4
HSR Act................................................................ 2.4
IRS.................................................................... 3.12(a)
Intellectual Property Rights........................................... 2.15(a)
Joint Venture.......................................................... 3.1
Knowledge of Parent.................................................... 2.10
Knowledge of the Company............................................... 3.8
</TABLE>
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<TABLE>
<CAPTION>
Defined Term Section
------------ --------
<S> <C>
Material Adverse Change................................................ 2.1
Material Adverse Effect................................................ 2.1
Merger................................................................. Recitals
Merger Consideration................................................... 1.5(c)
Nasdaq................................................................. 1.5(c)
Parent................................................................. Forepart
Parent Affiliate Letter................................................ 5.4(b)
Parent Average Price................................................... 1.5(c)
Parent Business Personnel.............................................. 2.14
Parent Bylaws.......................................................... 1.15(b)
Parent Charter......................................................... 1.15(b)
Parent Common Stock.................................................... Recitals
Parent Letter.......................................................... 2.2(a)
Parent Multiemployer Plan.............................................. 2.12(c)
Parent Permits......................................................... 2.8(a)
Parent Plan............................................................ 2.12(c)
Parent SEC Documents................................................... 2.5
Parent Stock Options................................................... 2.2(a)
Parent Stock Plans..................................................... 2.2(a)
Pension Plan........................................................... 3.12(b)
Potential Acquiror..................................................... 4.2(a)
Proxy Statement........................................................ 2.6
Registration Statement................................................. 2.6
Repurchased Shares..................................................... 3.22
Rule 145 Affiliates.................................................... 5.4(a)
SEC.................................................................... 2.5
Securities Act......................................................... 2.4
Share Issuance......................................................... 2.3
Skadden, Arps.......................................................... 6.2(d)
State Takeover Approvals............................................... 2.4
Sub.................................................................... Forepart
Sub Bylaws............................................................. 1.4(a)
Sub Charter............................................................ 1.15(c)
Subsidiary............................................................. 2.1
Superior Proposal...................................................... 4.2(c)
Surviving Corporation.................................................. 1.1
Tax Return............................................................. 2.9
Taxes.................................................................. 2.9
Termination Fee........................................................ 5.6(c)
Third Party............................................................ 5.6(c)
Third Party Acquisition Event.......................................... 5.6(c)
Worker Safety Laws..................................................... 2.13
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 12, 2000 (this "Agreement"),
among Concord EFS, Inc., a Delaware corporation ("Parent"), SWCI Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"),
and Cash Station, Inc., a Delaware corporation (the "Company") (Sub and the
Company being hereinafter collectively referred to as the "Constituent
Corporations").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub and the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein,
whereby each issued and outstanding share of common stock, par value $.01 per
share, of the Company ("Company Common Stock") not owned directly or indirectly
by the Company will be converted into shares of Common Stock, par value $0.33
per share, of Parent ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective stockholders;
WHEREAS, in order to induce Parent and Sub to enter into this Agreement,
concurrently herewith Parent and certain of the stockholders of the Company are
entering into a voting agreement dated as of the date hereof (the "Company
Voting Agreement") in the form attached as Exhibit A;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
The Merger
Section 1.1 The Merger. Upon the terms and subject to the conditions hereof,
and in accordance with the Delaware General Corporation Law (the "DGCL"), Sub
shall be merged with and into the Company at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance
with the relevant provisions of the DGCL, is filed with the Secretary of State
of the State of Delaware; provided, however, that, upon mutual written consent
of the Constituent Corporations, the Certificate of Merger may provide for a
later date of effectiveness of the Merger not more than 30 days after the date
the Certificate of Merger is filed. When used in this Agreement, the term
"Effective Time" shall mean the date and time at which the Certificate of
Merger is accepted for recording or such later time established by the
Certificate of Merger. The filing of the Certificate of Merger shall be made on
the date of the Closing (as hereinafter defined).
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
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Section 1.4 Charter and Bylaws; Directors and Officers. (a) At the Effective
Time, the Amended and Restated Certificate of Incorporation, as amended, of the
Company (the "Company Charter"), as in effect immediately prior to the
Effective Time, shall be amended so that Article FOURTH thereof reads in its
entirety as follows: "The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is 1,000 shares of
Common Stock, no par value." As so amended, the Company Charter shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law. At the Effective
Time, the Bylaws of Sub (the "Sub Bylaws"), as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by the Certificate of
Incorporation of the Surviving Corporation.
(b) The directors of Sub at the Effective Time of the Merger shall be the
directors of the Surviving Corporation, until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be. Except for the Chairman of the Board, the officers of the
Company at the Effective Time of the Merger shall be the officers of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company or the
holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par value $.01
per share, of Sub shall be converted into one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock that are held in the treasury of
the Company shall be canceled and no capital stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10 hereof, and
subject to adjustment pursuant hereto, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares (as herein defined) and shares to be canceled in
accordance with Section 1.5(b)) shall be converted into the right to
receive 2.6982 (such number being the "Exchange Ratio") validly issued,
fully paid and nonassessable shares of Parent Common Stock (the Exchange
Ratio being determined by dividing (i) 2.5 million by (ii) the aggregate
number of shares of Company Common Stock outstanding determined on a fully
diluted basis (the "Company Diluted Share Number") as of the date hereof).
In the event the Company Diluted Share Number immediately prior to the
Effective Time shall be greater than 926,546, the Exchange Ratio shall be
proportionately reduced and all references to the Exchange Ratio in this
Agreement shall be deemed to be to the Exchange Ratio, as so reduced. In
the event the Parent Average Price (as defined herein) is less than $22.40,
then the Exchange Ratio shall be automatically increased to the number
obtained by dividing (x) the quotient obtained by dividing $56 million by
the Parent Average Price by (y) the Company Diluted Share Number, and all
references to the Exchange Ratio in this Agreement shall be deemed to be to
the Exchange Ratio as so increased; provided, however, that in the event
the Parent Average Price is less than $20.00, then the Exchange Ratio shall
be the number obtained by dividing (x) 2.8 million by (y) the Company
Diluted Share Number, and all references to the Exchange Ratio in this
Agreement shall be deemed to be to the Exchange Ratio as so adjusted. All
shares of Company Common Stock outstanding immediately prior to the
Effective Time, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive any dividends and other distributions
in accordance with Section 1.7, certificates representing the shares of
Parent Common Stock into which such shares are converted and any cash,
without interest, in lieu of fractional shares to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance
with Section 1.8. The "Parent Average Price" shall equal the quotient
(calculated to the nearest hundredth) of (i) the sum for all trading days
during the Calculation Period (as defined below) of (x) the average of the
high and the low sales price as reported on the Nasdaq National Market
System ("Nasdaq") of a share of Parent Common Stock on each such day,
multiplied by (y) the trading volume as reported on Nasdaq of shares of
Parent Common Stock on each such day,
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<PAGE>
divided by (ii) the sum of the trading volumes as reported on Nasdaq of
shares of Parent Common Stock for all such days during the Calculation
Period. The "Calculation Period" shall be the period of twenty (20)
consecutive trading days ending at the end of the fifth trading day
immediately preceding the scheduled Closing Date. The aggregate shares of
Parent Common Stock issuable pursuant to this Section 1.5(c) shall be the
"Merger Consideration."
(d) Notwithstanding anything in this Agreement to the contrary, shares
of Company Common Stock issued and outstanding immediately prior to the
Effective Time which are held of record by stockholders who shall not have
voted such shares in favor of the Merger and who shall have demanded
properly in writing and perfected appraisal of such shares in accordance
with Section 262 of the DGCL ("Dissenting Shares") shall not be converted
into the right to receive Parent Common Stock and cash as set forth in
Section 1.5(c), but the holders thereof instead shall be entitled to, and
the Dissenting Shares shall only represent the right to receive, payment of
the fair value of such shares in accordance with the provisions of Section
262 of the DGCL; provided, however, that (i) if such a holder fails to
demand properly in writing from the Surviving Corporation the appraisal of
its shares in accordance with Section 262(d) of the DGCL or, after making
such demand, subsequently delivers an effective written withdrawal of such
demand, or fails to establish its entitlement to appraisal rights as
provided in Section 262 of the DGCL, if so required, or (ii) if a court
shall determine that such holder is not entitled to receive payment for its
shares or such holder shall otherwise lose its appraisal rights, then, in
any such case, each share of Company Common Stock held of record by such
holder or holders shall automatically be converted into and represent only
the right to receive Parent Common Stock and cash as set forth in Section
1.5(c), upon surrender of the certificate or certificates representing such
Dissenting Shares.
Section 1.6 Parent to Make Certificates Available. (a) Exchange of
Certificates. Parent shall authorize its transfer agent or such other person or
persons as shall be reasonably acceptable to the Company to act as Exchange
Agent hereunder (the "Exchange Agent"). Prior to the Effective Time, Parent
shall deposit with the Exchange Agent certificates representing the shares of
Parent Common Stock issuable pursuant to Section 1.5(c) for exchange with
outstanding shares of Company Common Stock, and cash as required to make
payments in lieu of any fractional shares pursuant to Section 1.8 (such cash
and shares of Parent Common Stock, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the "Exchange Fund").
The Exchange Agent shall deliver the Parent Common Stock contemplated to be
issued pursuant to Section 1.5(c) out of the Exchange Fund.
(b) Exchange Procedures. Parent shall instruct the Exchange Agent, as soon
as practicable after the Effective Time, to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock converted in the Merger
(the "Certificates") a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon actual delivery of the Certificates to the Exchange Agent, and shall
contain instructions for effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock and cash
in lieu of fractional shares). Upon surrender for cancellation to the Exchange
Agent of all Certificates held by any record holder of a Certificate, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Parent Common Stock into which the shares
represented by the surrendered Certificate shall have been converted at the
Effective Time pursuant to this Article I, cash in lieu of any fractional share
in accordance with Section 1.8 and certain dividends and other distributions in
accordance with Section 1.7, and any Certificate so surrendered shall forthwith
be canceled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the holders of record thereof on or after the
Effective Time, will be paid to any person entitled by reason of the Merger to
receive a certificate representing Parent Common Stock until such person
surrenders the related Certificate or Certificates, as provided in Section 1.6,
and no cash payment in lieu of fractional shares will be paid to any such
person pursuant to Section 1.8 until such person shall so surrender the related
Certificate or Certificates. Subject to the
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<PAGE>
effect of applicable law, there shall be paid to each record holder of a new
certificate representing such Parent Common Stock: (i) at the time of such
surrender or as promptly as practicable thereafter, the amount of any dividends
or other distributions theretofore paid with respect to the shares of Parent
Common Stock represented by such new certificate and having a record date on or
after the Effective Time and a payment date prior to such surrender; (ii) at
the appropriate payment date or as promptly as practicable thereafter, the
amount of any dividends or other distributions payable with respect to such
shares of Parent Common Stock and having a record date on or after the
Effective Time but prior to such surrender and a payment date on or subsequent
to such surrender; and (iii) at the time of such surrender or as promptly as
practicable thereafter, the amount of any cash payable with respect to a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.8. In no event shall the person entitled to receive such
dividends or other distributions or cash in lieu of fractional shares be
entitled to receive interest on such dividends or other distributions or cash
in lieu of fractional shares. If any cash or certificate representing shares of
Parent Common Stock is to be paid to or issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such shares of
Parent Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Parent or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
Section 1.8 No Fractional Securities. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article I, and no Parent dividend or
other distribution or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to any other rights
of a security holder of Parent. In lieu of any such fractional share, each
holder of shares of Company Common Stock who would otherwise have been entitled
to a fraction of a share of Parent Common Stock upon surrender of Certificates
for exchange pursuant to this Article I will be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the last
reported sale price per share of Parent Common Stock on the Nasdaq on the
Closing Date (or, if the shares of Parent Common Stock do not trade on Nasdaq
on such date, the trading day immediately preceding the Closing Date) by (ii)
the fractional interest to which such holder would otherwise be entitled. As
promptly as practicable after the determination of the amount of cash, if any,
to be paid to holders of fractional share interests, the Exchange Agent shall
so notify Parent, and Parent shall deposit such amount with the Exchange Agent
and shall cause the Exchange Agent to forward payments to such holders of
fractional share interests subject to and in accordance with the terms of
Section 1.7 and this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former stockholders of the Company for 180 days
after the Effective Time shall be delivered to Parent, upon demand of Parent,
and any such former stockholders who have not theretofore complied with this
Article I shall thereafter look only to Parent for payment of their claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common Stock.
Neither Parent nor the Surviving Corporation shall be liable to any former
holder of shares of Company Common Stock for any such shares of Parent Common
Stock, cash and dividends and distributions which is delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Section 1.10 Adjustment of Exchange Ratio. In the event of any
reclassification, stock split or stock dividend with respect to Parent Common
Stock or any change or conversion of Parent Common Stock into
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<PAGE>
other securities (or if a record date with respect to any of the foregoing
should occur) prior to the Effective Time, appropriate and proportionate
adjustments, if any, shall be made to the Exchange Ratio, and all references to
the Exchange Ratio in this Agreement shall be deemed to be to the Exchange
Ratio, as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued upon the surrender for exchange of Certificates
in accordance with the terms hereof (including any cash paid pursuant to
Section 1.8) shall be deemed to have been issued in full satisfaction of all
rights pertaining to the shares of Company Common Stock represented by such
Certificates.
Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares
of Company Common Stock shall thereafter be made on the records of the Company.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, the Exchange Agent or Parent, such Certificates shall be canceled
and exchanged as provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent or the Exchange Agent, the posting by such person of a bond, in such
reasonable amount as Parent or the Exchange Agent may direct, as indemnity
against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which the holder thereof is
entitled pursuant to Section 1.8 and any dividends or other distributions to
which the holder thereof is entitled pursuant to Section 1.7.
Section 1.14 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
or their designees shall be authorized to execute and deliver, in the name and
on behalf of either of the Constituent Corporations, all such deeds, bills of
sale, assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
Section 1.15 Closing; Closing Deliveries. (a) The closing of the
transactions contemplated by this Agreement (the "Closing") and all actions
specified in this Agreement to occur at the Closing shall take place at the
offices of Skadden, Arps, Slate, Meagher & Flom (Illinois), 333 West Wacker
Drive, Suite 2100, Chicago, Illinois, at 10:00 a.m., local time, no later than
the fifth business day following the day on which the last of the conditions
set forth in Article VI shall have been fulfilled or waived (if permissible) or
at such other time and place as Parent and the Company shall agree (the date of
the Closing is referred to herein as the "Closing Date").
(b) Subject to fulfillment or waiver of the conditions set forth in Article
VI, at the Closing Parent shall deliver to the Company all of the following:
(i) a copy of the Certificate of Incorporation of Parent (the "Parent
Charter"), certified as of a recent date by the Secretary of State of the
State of Delaware;
(ii) a certificate of good standing of Parent, issued as of a recent
date by the Secretary of State of the State of Delaware;
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(iii) a certificate of the Secretary or an Assistant Secretary of
Parent, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Company, as to (A) no amendments to the Parent Charter
since a specified date; (B) the Bylaws of Parent (the "Parent Bylaws"); (C)
the resolutions of the Board of Directors of Parent; authorizing the
execution and performance of this Agreement and the transactions
contemplated herein; and (D) the incumbency and signatures of the officers
of Parent executing this Agreement;
(iv) the certificate contemplated by Section 6.2(a), duly executed by
the Chief Executive Officer and the Chief Financial Officer of Parent; and
(v) all consents, waivers or approvals obtained by Parent with respect
to the consummation of the transactions contemplated by this Agreement.
(c) Subject to fulfillment or waiver of the conditions set forth in Article
VI, at the Closing Sub shall deliver to the Company all of the following:
(i) a copy of the Certificate of Incorporation of Sub (the "Sub
Charter") certified as of a recent date by the Secretary of State of the
State of Delaware;
(ii) a certificate of good standing of Sub, issued as of a recent date
by the Secretary of State of the State of Delaware; and
(iii) a certificate of the Secretary or an Assistant Secretary of Sub,
dated as of the Closing Date, in form and substance reasonably satisfactory
to the Company, as to (A) no amendments to the Sub Charter since a
specified date; (B) the Sub Bylaws; (C) the resolutions of the Board of
Directors of Sub authorizing the execution and performance of this
Agreement and the transactions contemplated herein and the written consent
of Parent in its capacity as sole stockholder of Sub adopting this
Agreement in accordance with Section 251 of the DGCL; and (D) the
incumbency and signatures of the officers of Sub executing this Agreement.
(d) Subject to fulfillment or waiver of the conditions set forth in Article
VI, at the Closing the Company shall deliver to Parent all of the following:
(i) a copy of the Company Charter, certified as of a recent date by the
Secretary of State of the State of Delaware;
(ii) a certificate of good standing of the Company, issued as of a
recent date by the Secretary of State of the State of Delaware;
(iii) a certificate of the Secretary or an Assistant Secretary of the
Company, dated as of the Closing Date, in form and substance reasonably
satisfactory to Parent, as to (A) no amendments to the Company Charter
since a specified date; (B) the Bylaws of the Company (the "Company
Bylaws"); (C) the resolutions of the Board of Directors of the Company
authorizing the execution and performance of this Agreement and the
transactions contemplated herein and the resolutions of the stockholders of
the Company adopting this Agreement in accordance with Section 251 of the
DGCL; and (D) the incumbency and signatures of the officers of the Company
executing this Agreement;
(iv) all consents, waivers or approvals obtained by the Company with
respect to the consummation of the transactions contemplated by this
Agreement; and
(v) the certificates contemplated by Section 6.3(a) and 6.3(f) duly
executed by the Chief Executive Officer and the Chief Financial Officer of
the Company.
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ARTICLE II
Representations And Warranties Of Parent And Sub
Parent and Sub represent and warrant, jointly and severally, to the Company
as follows:
Section 2.1 Organization, Standing and Power. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of Parent and Sub has the requisite
corporate power and authority to carry on its business as now being conducted.
Each Subsidiary (as hereinafter defined) of Parent is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate power and authority to carry on its
business as now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power or authority would not,
individually or in the aggregate, have a Material Adverse Effect (as
hereinafter defined) on Parent. Parent and Sub are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent. For purposes of this Agreement (a) "Material Adverse Change" or
"Material Adverse Effect" means, when used with respect to Parent or the
Company, as the case may be, any event, change or effect that is, or is
reasonably likely to be, materially adverse to the business, financial
condition or results of operations of Parent and its Subsidiaries, taken as a
whole, or the Company, as the case may be; provided, however, that in
determining whether a Material Adverse Change or Material Adverse Effect has
occurred with respect to either referenced party, any change or effect, to the
extent it is attributable to (A) any change in general economic conditions, (B)
matters generally affecting companies in the same industries in which the
Company or Parent and its Subsidiaries, as the case may be, operate or (C) the
public announcement of this Agreement, shall not be considered when determining
whether a Material Adverse Change or Material Adverse Effect has occurred; and
(b) "Subsidiary" means any corporation, partnership, limited liability company,
joint venture or other legal entity of which Parent or the Company, as the case
may be (either alone or through or together with any other Subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the board
of directors or other governing body of such corporation, partnership, limited
liability company, joint venture or other legal entity.
Section 2.2 Capital Structure. (a) As of the date hereof, the authorized
capital stock of Parent consists of 500,000,000 shares of Parent Common Stock.
As of the close of business on March 7, 2000, (i) 212,197,103 shares of Parent
Common Stock were issued and outstanding, all of which were duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights,
(ii) no shares of Parent Common Stock were held in treasury of Parent or by
Subsidiaries of Parent, and (iii) 34,249,458 shares of Parent Common Stock were
reserved for issuance pursuant to outstanding options ("Parent Stock Options")
to purchase or otherwise acquire shares of Parent Common Stock under Parent's
benefit plans or arrangements or pursuant to any plans assumed by Parent in
connection with any acquisition, business combination or similar transaction,
other than the Merger (collectively, the "Parent Stock Plans"), except as set
forth in Section 2.2 of the letter dated as of the date hereof from Parent to
the Company, which letter relates to this Agreement and is designated therein
as the Parent Letter (the "Parent Letter"). As of the date of this Agreement,
except as set forth in Section 2.2 of the Parent Letter, except as set forth
above and except for the issuance of shares of Parent Common Stock pursuant to
the Parent Stock Plans, no shares of capital stock or other voting securities
of Parent were issued, reserved for issuance or outstanding. All of the shares
of Parent Common Stock issuable in exchange for Company Common Stock at the
Effective Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights. As of the date of this Agreement, except for (i) this Agreement and
(ii) as set forth above or in Section 2.2 of the Parent Letter, there are no
options, warrants, calls, rights, puts, agreements or understandings to which
Parent or any of its Subsidiaries is a party or by which any of them is bound
obligating Parent or any of its Subsidiaries to issue, deliver, sell or redeem,
or cause to be issued, delivered, sold or redeemed, any additional shares of
capital stock
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(or other voting securities or equity equivalents) of Parent or any of its
Subsidiaries or obligating Parent or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, right, put or agreement.
(b) As of the date of this Agreement, each outstanding share of capital
stock (or other voting security or equity equivalent) of each Subsidiary of
Parent is duly authorized, validly issued, fully paid and nonassessable and
each such share (or other voting security or equity equivalent) is owned by
Parent or another Subsidiary of Parent, free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on voting rights, charges and other encumbrances of any
nature whatsoever, except where any failure(s) to be so duly authorized,
validly issued, fully paid and nonassessable or owned would not have,
individually or in the aggregate, a Material Adverse Effect on Parent.
Section 2.3 Authority. On or prior to the date of this Agreement, (i) the
Board of Directors of Sub approved this Agreement and declared this Agreement
and the Merger advisable and fair to and in the best interest of Sub and its
sole stockholder, and (ii) the Board of Directors of Parent approved and
adopted this Agreement and approved the issuance of Parent Common Stock in
connection with the Merger (the "Share Issuance"), both in accordance with the
DGCL. Each of Parent and Sub has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby and Parent has all requisite corporate power and authority to issue the
Parent Common Stock. The execution and delivery of this Agreement by Parent and
Sub and the consummation by Parent and Sub of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and Sub, subject to the filing of appropriate Merger documents as
required by the DGCL. This Agreement and the consummation of the transactions
contemplated hereby have been approved by the sole stockholder of Sub. This
Agreement has been duly executed and delivered by Parent and Sub, and (assuming
the valid authorization, execution and delivery of this Agreement by the
Company and the validity and binding effect of this Agreement on the Company)
this Agreement constitutes the valid and binding obligation of Parent and Sub
enforceable against each of them in accordance with its terms except as may be
limited by (i) applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws from time to time in effect which affect creditors' rights
generally or (ii) legal and equitable limitations on the availability of
specific remedies.
Section 2.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
2.4 have been obtained and all filings and obligations described in this
Section 2.4 have been made, and except as set forth in Section 2.4 of the
Parent Letter, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under, any provision of (i) the Parent Charter or
the Parent Bylaws or the Sub Charter or Sub Bylaws, (ii) any provision of the
comparable charter or organizational documents of any of Parent's Subsidiaries,
(iii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to Parent or any of its Subsidiaries or (iv) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Parent or any
of its Subsidiaries or any of their respective properties or assets, other
than, in the case of clauses (ii), (iii) and (iv), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent, materially impair the ability of Parent or Sub to perform their
respective obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby by Parent or Sub. No filing or registration
with, or authorization, consent or approval of, any domestic (federal and
state), foreign or supranational court, commission, governmental body,
regulatory agency, authority or tribunal (a "Governmental Entity") is required
by or with respect to Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Parent or Sub or is necessary for
the consummation by Parent or Sub of the Merger and the other transactions
contemplated by this Agreement, except for (i) in connection, or in compliance,
with the provisions of the Bank Holding Company Act of 1956, as amended
(together with
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the rules and regulations promulgated thereunder, the "Bank Act"), and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (together with
the rules and regulations promulgated thereunder, the "HSR Act"), the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), and the Securities Exchange Act
of 1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"), (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, (iii) such filings, authorizations, orders and approvals as may
be required by state takeover laws (the "State Takeover Approvals"), (iv) such
filings as may be required in connection with the taxes described in Section
5.9, (v) applicable requirements, if any, of state securities or "blue sky"
laws ("Blue Sky Laws") and Nasdaq and (vi) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect on Parent, materially impair the ability of Parent or
Sub to perform its obligations hereunder or prevent the consummation of any of
the transactions contemplated hereby.
Section 2.5 SEC Documents and Other Reports. Parent has filed all required
documents with the SEC since January 1, 1999 (the "Parent SEC Documents"). As
of their respective dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and, at the respective times they were filed, none of the
Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements (including, in
each case, any notes thereto) of Parent included in the Parent SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Securities Exchange
Commission (the "SEC") with respect thereto, were prepared in accordance with
generally accepted accounting principles ("GAAP") (except, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented, in all material respects
in accordance with GAAP, the consolidated financial position of Parent and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the Parent SEC Documents or as required by generally
accepted accounting principles, Parent has not, since December 31, 1999, made
any change in the accounting practices or policies applied in the preparation
of such financial statements.
Section 2.6 Registration Statement and Proxy Statement. None of the
information to be supplied by Parent or Sub for inclusion or incorporation by
reference in the registration statement on Form S-4 filed with the SEC by
Parent under the Securities Act for the purpose of registering shares of Parent
Common Stock to be issued in the Merger (together with any amendments or
supplements thereto, whether prior to or after the effective date thereof, the
"Registration Statement"), or the proxy statement/prospectus included therein
relating to the Company Stockholder Meeting (as hereinafter defined) (together
with any amendments or supplements thereto, the "Proxy Statement") will (i) in
the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or (ii) in the case of the Proxy Statement, at the time
of the mailing of the Proxy Statement and at the time of the Company
Stockholder Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Company Stockholder Meeting
any event with respect to Parent, its officers and directors or any of its
Subsidiaries shall occur which is required to be described in the Proxy
Statement or the Registration Statement, such event shall be so described, and
an appropriate amendment or supplement shall be promptly filed by Parent with
the SEC and, as required by law, disseminated to the
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stockholders of the Company. The Registration Statement will comply (with
respect to Parent and Sub) as to form in all material respects with the
provisions of the Securities Act.
Section 2.7 Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Documents filed with the SEC prior to the date of this Agreement or
as set forth in Section 2.7 of the Parent Letter, since December 31, 1999 (A)
Parent and its Subsidiaries have not incurred any liability or obligation
(indirect, direct or contingent) or entered into any material oral or written
agreement or other material transaction that is not in the ordinary course of
business, in each case that would result, individually or in the aggregate, in
a Material Adverse Effect on Parent and (B) Parent and its Subsidiaries have
not sustained any loss or interference with their business or properties from
fire, flood, windstorm, accident or other calamity (including the occurrence of
any business disruptions resulting from the inability of the computer software
or hardware of the Parent and its Subsidiaries, or of any third party vendor,
service provider or supplier of Parent and its Subsidiaries, to correctly
process dates because of the change from 1999 to 2000) (whether or not covered
by insurance) that has had, individually or in the aggregate, a Material
Adverse Effect on Parent. Since December 31, 1999, there has been no event
causing, individually or in the aggregate, a Material Adverse Effect on Parent.
Section 2.8 Permits and Compliance; Defaults. (a) Each of Parent and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, charters, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for
Parent or any of its Subsidiaries to own, lease and operate its properties or
to carry on its business as it is now being conducted (the "Parent Permits"),
and all such Parent Permits are valid and in full force and effect, except
where the failure to be in possession of any of the Parent Permits or the
failure of any such Parent Permit to be in full force and effect would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Parent and its Subsidiaries are in compliance with their respective obligations
under the Parent Permits, with only such exceptions as, individually or in the
aggregate, would not have a Material Adverse Effect on Parent.
(b) Neither Parent nor any of its Subsidiaries is in violation of (A) its
charter, bylaws or other organizational documents, (B) any applicable law,
ordinance, administrative or governmental rule or regulation or (C) any order,
decree or judgment of any Governmental Entity having jurisdiction over Parent
or any of its Subsidiaries, except, in the case of clauses (A), (B) and (C),
for any violations that, individually or in the aggregate, would not have a
Material Adverse Effect on Parent. Except as set forth in the Parent SEC
Documents filed prior to the date of this Agreement or Section 2.8 of the
Parent Letter, no event of default or event that, but for the giving of notice
or the lapse of time or both, would constitute an event of default exists or,
upon the consummation by Parent or Sub of the transactions contemplated by this
Agreement, will exist under any indenture, mortgage, loan agreement, note or
other agreement or instrument for borrowed money, any guarantee of any
agreement or instrument for borrowed money or any lease, contractual license or
other agreement or instrument to which Parent or any of its Subsidiaries is a
party or by which Parent or any such Subsidiary is bound or to which any of the
properties, assets or operations of Parent or any such Subsidiary is subject,
other than any defaults that, individually or in the aggregate, would not have
a Material Adverse Effect on Parent.
Section 2.9 Tax Matters. Except as set forth in Section 2.9 of the Parent
Letter, (i) Parent and each of its Subsidiaries have filed all federal, and all
material state, local and foreign, Tax Returns (as hereinafter defined)
required to have been filed or appropriate extensions therefor have been
properly obtained, and such Tax Returns are correct and complete, except to the
extent that any failure to so file or any failure to be correct and complete
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent; (ii) all Taxes (as hereinafter defined) shown to be due on such Tax
Returns have been timely paid or extensions for payment have been properly
obtained, except to the extent that any failure to so pay or so obtain such an
extension would not, individually or in the aggregate, have a Material Adverse
Effect on Parent; (iii) Parent and each of its Subsidiaries have complied in
all material respects with all rules and regulations relating to the
withholding of Taxes except to the extent that any failure to comply with such
rules and regulations would not, individually or in the aggregate, have a
Material Adverse Effect on Parent; and (iv) all deficiencies asserted or
assessments made as a result of any examination of such Tax Returns by any
taxing authority have been paid in
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full or are being timely and properly contested other than any deficiencies or
assessments that would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. For purposes of this Agreement: (i) "Taxes" means any
federal, state, local or foreign income, gross receipts, property, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or
added minimum, ad valorem, value-added, transfer or excise tax, or other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty or addition to tax imposed with
respect thereto, and (ii) "Tax Return" means any return, report or similar
statement (including the attached schedules) required to be filed with respect
to any Tax, including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
Section 2.10 Actions and Proceedings. Except as set forth in the Parent SEC
Documents filed prior to the date of this Agreement and except as set forth in
Section 2.10 of the Parent Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against Parent or any
of its Subsidiaries, or, to the Knowledge of Parent (as hereinafter defined),
against any of the present or former directors, officers, employees,
consultants, agents or stockholders of Parent or any of its Subsidiaries, as
such, or any of its or their properties, assets or business that, individually
or in the aggregate, would have a Material Adverse Effect on Parent or
materially impair the ability of Parent to perform its obligations hereunder.
Except as set forth in Section 2.10 of the Parent Letter, there are no actions,
suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the Knowledge of Parent, threatened against
Parent or any of its Subsidiaries or, to the Knowledge of Parent, any of its or
their present or former directors, officers, employees, consultants, agents or
stockholders, as such, or any of its or their properties, assets or business or
any Parent Plan (as hereinafter defined) that, individually or in the
aggregate, would have a Material Adverse Effect on Parent or materially impair
the ability of Parent to perform its obligations hereunder. As of the date
hereof, there are no actions, suits, labor disputes or other litigation, legal
or administrative proceedings or governmental investigations pending or, to the
Knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries or, to the Knowledge of Parent, any of its or their present or
former officers, directors, employees, consultants, agents or stockholders, as
such, or any of its or their properties, assets or business or any Parent Plan
relating to the transactions contemplated by this Agreement.
For purposes of this Agreement, "Knowledge of Parent" means the actual
knowledge of the individuals identified in Section 2.10 of the Parent Letter.
Section 2.11 Certain Agreements. Except as disclosed in Parent's Form 10-K
for the fiscal year ended December 31, 1999 or as set forth in Section 2.11 of
the Parent Letter, as of the date of this Agreement there is no contract,
agreement or arrangement to be performed after the date of this Agreement that
is or was required to be filed by Parent as a material contract pursuant to
Item 601 of Regulation S-K under the Securities Act. Each such contract,
agreement or arrangement so disclosed by Parent is valid and binding on Parent
or its respective Subsidiary, as applicable, and in full force and effect,
except to the extent terminated in accordance with their respective terms, and
Parent and each Subsidiary have performed all obligations required to be
performed by them under each such contract, agreement or arrangement, except
where the failure of such contracts to be valid and binding or in full force
and effect or the failure of any such obligation to have been performed would
not, individually or in the aggregate, have a Material Adverse Effect on
Parent.
Section 2.12 ERISA. (a) Except as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, (i) each Parent Plan (as
hereinafter defined) complies in all respects with the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Code and all other
applicable statutes and governmental rules and regulations and (ii) no
"reportable event" (within the meaning of Section 4043 of ERISA) has occurred
with respect to any Parent Plan. Except as would not have a Material Adverse
Effect on Parent, neither Parent nor any of its ERISA Affiliates (as
hereinafter defined) has withdrawn from any Parent Multiemployer Plan (as
hereinafter defined) or instituted, or is currently considering taking, any
action to do so. Except as would not have a Material Adverse Effect on Parent,
no Parent Plan, nor any trust created thereunder, has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not
waived.
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(b) With respect to the Parent Plans, no event has occurred and, to the
Knowledge of Parent, there exists no condition or set of circumstances in
connection with which Parent or any ERISA Affiliate (as hereinafter defined) or
Parent Plan fiduciary could be subject to any liability under the terms of such
Parent Plans, ERISA, the Code or any other applicable law, other than
liabilities for benefits payable in the normal course, and other than any
liability which would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
(c) As used herein, (i) "Parent Plan" means a "pension plan" (as defined in
Section 3(2) of ERISA (other than a Parent Multiemployer Plan)), a "welfare
plan" (as defined in Section 3(1) of ERISA), or any bonus, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, holiday pay, vacation, severance, death benefit,
sick leave, fringe benefit, insurance or other plan, arrangement or
understanding, in each case established or maintained by Parent or any of its
ERISA Affiliates or as to which Parent or any of its ERISA Affiliates has
contributed or otherwise may have any liability, (ii) "Parent Multiemployer
Plan" means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which Parent or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability, and (iii) with respect to any
person, "ERISA Affiliate" means any trade or business (whether or not
incorporated) which is under common control or would be considered a single
employer with such person pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated under those sections or pursuant to
Section 4001(b) of ERISA and the regulations promulgated thereunder.
Section 2.13 Compliance with Worker Safety and Environmental Laws. To the
Knowledge of Parent, the properties, assets and operations of Parent and its
Subsidiaries are in compliance with all applicable federal, state, local and
foreign laws, rules and regulations, orders, decrees, judgments, permits and
licenses relating to public and worker health and safety (collectively, "Worker
Safety Laws") and the protection and clean-up of the environment and activities
or conditions related thereto, including, without limitation, those relating to
the generation, handling, disposal, transportation or release of hazardous
materials (collectively, "Environmental Laws"), except for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent. With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there
are no events, conditions, circumstances, activities, practices, incidents,
actions or plans of Parent or any of its Subsidiaries that interfere with or
prevent compliance or continued compliance with applicable Worker Safety Laws
and Environmental Laws, other than any such interference or prevention as would
not, individually or in the aggregate, have a Material Adverse Effect on
Parent.
Section 2.14 Labor Matters. As of the date of this Agreement, neither Parent
nor any of its Subsidiaries is a party to any collective bargaining agreement
or labor contract. Neither Parent nor any of its Subsidiaries has engaged in
any unfair labor practice with respect to any persons employed by or otherwise
performing services primarily for Parent or any of its Subsidiaries (the
"Parent Business Personnel"), and there is no unfair labor practice complaint
or grievance against Parent or any of its Subsidiaries by the National Labor
Relations Board or any comparable state agency pending or, to the Knowledge of
Parent, threatened in writing with respect to Parent Business Personnel, except
where such unfair labor practice, complaint or grievance would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
There is no labor strike, dispute, slowdown or stoppage pending or, to the
Knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries which may interfere with the respective business activities of
Parent or any of its Subsidiaries, except where such dispute, strike or work
stoppage would not, individually or in the aggregate, have a Material Adverse
Effect on Parent.
Section 2.15 Intellectual Property. (a) Except as set forth in Section 2.15
of the Parent Letter, Parent and its Subsidiaries have, through ownership or
licensing, all patents, trademarks, trade names, service marks, trade secrets,
copyrights and other proprietary intellectual property rights (collectively,
"Intellectual Property Rights") as are necessary to conduct the business of
Parent and its Subsidiaries as currently conducted by Parent and its
Subsidiaries, taken as a whole, except where the failure to have such
Intellectual Property Rights would not, individually or in the aggregate, have
a Material Adverse Effect on Parent. To the Knowledge of Parent, except as set
forth in Section 2.15 of the Parent Letter, neither Parent nor any of its
Subsidiaries has
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infringed any Intellectual Property Rights of any third party other than any
infringements that, individually or in the aggregate, would not have a Material
Adverse Effect on Parent.
(b) Except as set forth in the Parent SEC Documents filed prior to the date
of this Agreement or in Section 2.15 of the Parent Letter, there are no
actions, suits or claims or administrative proceedings or investigations
pending or, to the Knowledge of Parent, threatened that challenge or question
Parent's Intellectual Property Rights and that, individually or in the
aggregate, would have a Material Adverse Effect on Parent.
Section 2.16 Required Vote of Parent. Except as described in Section 2.3, no
vote of Parent is required to approve the Merger of Sub and the Company. No
other vote of the security holders of Parent or Sub is required by law, the
Parent Charter or the Parent Bylaws, the Sub Charter or the Sub Bylaws, or
otherwise in order for Parent to consummate the Merger and the transactions
contemplated hereby.
Section 2.17 Pooling of Interests; Reorganization. To the Knowledge of
Parent, neither Parent nor any of its Subsidiaries has (i) taken any action or
failed to take any action which action or failure would jeopardize the
treatment of the Merger as a pooling of interests for accounting purposes or
(ii) taken any action or failed to take any action which action or failure
would prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
Section 2.18 Brokers. No broker, investment banker or other person, other
than William Blair & Company, L.L.C., the fees and expenses of which (if any)
will be paid by Parent, is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent.
Section 2.19 Operations of Sub. Sub is a direct, wholly owned subsidiary of
Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
Section 2.20 Acquisition for Investment. Parent is acquiring the Company
Common Stock solely for its own account and not with a view to any distribution
or other disposition of such stock or any part thereof or interest therein.
Section 2.21 Parent Activities. As of the date hereof, the activities set
forth in Section 2.21 of the Parent Letter are all of the business activities
of Parent.
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. The Company is duly qualified to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company has no Subsidiaries and, except as set forth in Section
3.1 of the letter dated the date hereof from the Company to Parent which
relates to this Agreement and is designated therein as the Company Letter (the
"Company Letter"), no Joint Ventures (as hereinafter defined), and has never
had any Subsidiaries. As used in this Agreement, "Joint Venture" means, with
respect to the Company, any corporation, limited liability company,
partnership, joint venture or other entity which is not a Subsidiary of the
Company and in which (i) the
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Company, directly or indirectly, owns or controls any shares of any class of
the outstanding voting securities or other equity interests (other than the
ownership of securities primarily for investment purposes as part of routine
cash management or investments of 1% or less in publicly traded companies), or
(ii) the Company is a general partner.
Section 3.2 Capital Structure. As of the date hereof, the authorized capital
stock of the Company consists of 2,000,000 shares of Company Common Stock.
There are (i) 926,546 shares of Company Common Stock issued and outstanding,
all of which are validly issued, fully paid and nonassessable and free of
preemptive rights except as set forth in Section 3.2 of the Company Letter, and
(ii) no shares of Company Common Stock held in the treasury of the Company.
Except as set forth above, no shares of capital stock or other voting
securities of the Company are issued, reserved for issuance or outstanding.
Section 3.2 of the Company Letter sets forth a list of each holder of Company
Common Stock as of the close of business on March 22, 2000 and the number of
shares of Company Common Stock held by each such holder as of such date. Except
as set forth in Section 3.2 of the Company Letter, there are no options,
warrants, calls, rights, puts, agreements or understandings to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver, sell or redeem, or cause to be issued, delivered, sold or redeemed,
any additional shares of capital stock (or other voting securities or equity
equivalents) of the Company or obligating the Company to grant, extend or enter
into any such option, warrant, call, right, put or agreement.
Section 3.3 Authority. On or prior to the date of this Agreement, the Board
of Directors of the Company approved this Agreement, declared this Agreement
and the Merger advisable and fair to and in the best interest of the Company
and its stockholders, resolved to recommend the approval and adoption of this
Agreement by the Company's stockholders and directed that this Agreement be
submitted to the Company's stockholders for approval and adoption, all in
accordance with the DGCL. The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to approval by the
stockholders of the Company of this Agreement, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company, subject, in the case of this Agreement, to (x) approval and
adoption of this Agreement by the holders of two-thirds of the shares of
Company Common Stock and (y) the filing of appropriate Merger documents as
required by the DGCL. This Agreement has been duly executed and delivered by
the Company and (assuming the valid authorization, execution and delivery of
this Agreement by Parent and Sub and the validity and binding effect of the
Agreement on Parent and Sub) constitutes the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except as may be limited by (i) applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors' rights generally or (ii) legal and equitable limitations on the
availability of specific remedies.
Section 3.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
3.4 have been obtained and all filings and obligations described in this
Section 3.4 have been made, and except as set forth in Section 3.4 of the
Company Letter, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company under, any provision of (i) the Company Charter or the Company Bylaws,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to the Company or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
properties or assets, other than, in the case of clauses (ii) or (iii), any
such violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby by the
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Company. No filing or registration with, or authorization, consent or approval
of, any Governmental Entity is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or is necessary
for the consummation by the Company of the Merger and the other transactions
contemplated by this Agreement, except for (i) in connection, or in compliance,
with the provisions of the Bank Act and the HSR Act, (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business, (iii) such filings as may be required
in connection with the taxes described in Section 5.9, (iv) applicable
requirements, if any, of Blue Sky Laws, and (v) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, materially impair the ability of the
Company to perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated hereby.
Section 3.5 Financial Statements. Section 3.5 of the Company Letter contains
(i) the audited balance sheets of the Company as of December 31, 1998 and 1997
and the audited statements of income, changes in stockholders' equity and cash
flows of the Company for the years ended December 31, 1998 and 1997 and (ii)
the unaudited balance sheet of the Company as of December 31, 1999 and the
related statements of income, changes in stockholders' equity and cash flows
for the twelve months then ended. Except as set forth therein, such financial
statements (including, in each case, any notes thereto) have been prepared in
conformity with GAAP applied on a consistent basis during the periods involved
(except that the unaudited financial statements do not contain footnotes and
are subject to normal year-end adjustments), and such financial statements
present fairly, in all material respects in accordance with GAAP, the financial
position and the results of operations of the Company and its cash flows, as of
their respective dates and for the respective periods covered thereby. Except
as disclosed in such financial statements or as required by generally accepted
accounting principles, the Company has not, since December 31, 1998, made any
change in the accounting practices or policies applied in the preparation of
financial statements.
Section 3.6 Registration Statement and Proxy Statement. None of the
information to be supplied by the Company expressly for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement
will (i) in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or (ii) in the case of the Proxy Statement,
at the time of the mailing of the Proxy Statement and at the time of the
Company Stockholder Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Company Stockholder
Meeting any event with respect to the Company, its officers or directors shall
occur which is required at that time to be described in the Proxy Statement or
the Registration Statement, the Company shall deliver to Parent a description
of such event in order to permit Parent promptly to file an appropriate
amendment or supplement with the SEC and, as required by law, disseminate an
appropriate amendment or supplement to the stockholders of the Company. The
Proxy Statement will comply (with respect to the Company) in all material
respects with the provisions of the DGCL, the Company Charter and the Company
Bylaws.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed in
Section 3.7 of the Company Letter or disclosed in the financial statements
contained in Section 3.5 of the Company Letter, since December 31, 1998, (A)
the Company has not incurred any liability or obligation (indirect, direct or
contingent), or entered into any material oral or written agreement or other
material transaction that is not in the ordinary course of business that would
result, individually or in the aggregate, in a Material Adverse Effect on the
Company, (B) the Company has not sustained any loss or interference with its
business or properties from fire, flood, windstorm, accident or other calamity
(including the occurrence of any business disruptions resulting from the
inability of the computer software or hardware of the Company, or of any third
party vendor, service provider or supplier to the Company, to correctly process
dates because of the change from 1999 to 2000) (whether or not covered by
insurance) that has had, individually or in the aggregate, a Material Adverse
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Effect on the Company, (C) there has been no change in the capital stock of the
Company and no dividend or distribution of any kind declared, paid or made by
the Company on any class of its stock, and (D) there has not been (x) any
granting by the Company to any employee of the Company of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the
date of the most recent audited financial statements included in Section 3.5 of
the Company Letter, (y) any granting by the Company to any such employee of any
increase in severance or termination benefits in effect as of the date of the
most recent audited financial statements included in Section 3.5 of the Company
Letter or (z) any entry by the Company into any employment, severance or
termination agreement with any employee. Since December 31, 1998, there has
been no event causing, individually or in the aggregate, a Material Adverse
Effect on the Company.
Section 3.8 Permits and Compliance; Defaults. (a) The Company is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for the Company to own, lease and operate
its properties or to carry on its business as it is now being conducted (the
"Company Permits"), and all such Company Permits are valid and in full force
and effect, except where the failure to be in possession of any of the Company
Permits or the failure of any such Company Permits to be in full force and
effect would not, individually or in the aggregate, have a Material Adverse
Effect on the Company, and, as of the date of this Agreement, no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
the Company (as hereinafter defined), threatened, except where the suspension
or cancellation of any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The Company is in
compliance with its obligations under the Company Permits, with only such
exceptions as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(b) Except as set forth in Section 3.8 of the Company Letter, the Company is
not in violation of (A) its charter, bylaws or other organizational documents,
(B) any applicable law, ordinance, administrative or governmental rule or
regulation or (C) any order, decree or judgment of any Governmental Entity
having jurisdiction over the Company, except in the case of clauses (A), (B)
and (C), for any violations that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. Except as set forth in Section
3.8 of the Company Letter, the Company is not a party to or bound by (i) any
distribution, marketing or non-competition agreement or any other agreement or
obligation which purports to materially limit the manner in which, or the
localities in which, the Company is entitled to conduct its business or (ii)
any agreement evidencing, or guarantee relating to, indebtedness for borrowed
money to the extent the aggregate principal amount outstanding thereunder
exceeds $25,000. Except as set forth in Section 3.8 of the Company Letter, no
event of default or event that, but for the giving of notice or the lapse of
time or both, would constitute an event of default exists or, upon the
consummation by the Company of the transactions contemplated by this Agreement,
will exist under any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any lease, contractual license or other
agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of the properties, assets or operations of the Company
is subject, other than any defaults that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company.
For purposes of this Agreement, "Knowledge of the Company" means the actual
knowledge of the individuals identified in Section 3.8 of the Company Letter.
Section 3.9 Tax Matters. Except as set forth in Section 3.9 of the Company
Letter, (i) the Company has filed all federal, and all material state, local
and foreign, Tax Returns required to have been filed or appropriate extensions
therefor have been properly obtained, and such Tax Returns are correct and
complete, except to the extent that any failure to so file or any failure to be
correct and complete would not, individually or in the aggregate, have a
Material Adverse Effect on the Company; (ii) all Taxes shown to be due on such
Tax Returns have been timely paid or extensions for payment have been properly
obtained, except to the extent that any failure to so pay or so obtain such an
extension would not, individually or in the aggregate, have a
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Material Adverse Effect on the Company; (iii) the Company has complied in all
material respects with all rules and regulations relating to the withholding of
Taxes except to the extent that any failure to comply with such rules and
regulations would not, individually or in the aggregate, have a Material
Adverse Effect on the Company; (iv) no Tax Returns of the Company have been
audited during the past five years by any taxing authority, nor is any such
audit in progress; (v) no waiver or extension of any statute of limitations is
in effect with respect to Taxes or Tax Returns of the Company; (vi) the Company
is not a party to any action or proceeding for assessment or collection of
Taxes, except to the extent that the result of such actions or proceedings
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company; (vii) all deficiencies asserted or assessments made as a result of
any examination of such Tax Returns by any taxing authority have been paid in
full or are being timely and properly contested; (viii) no withholding is
required under Section 1445 of the Code in connection with the Merger; (ix) the
Company has not made any payments, is not obligated to make any payments, and
is not a party to any contract or agreement, whether written or oral, that will
obligate it to make any payments with respect to the transactions contemplated
by this Agreement that would be disallowed as a deduction under Section 280G of
the Code; (x) no material issues that have been raised in writing by the
relevant taxing authority in connection with the examination of the Tax Returns
referred to in clause (i), if any, are currently pending; and (xi) the Company
is not a party to any tax allocation or sharing agreement and the Company has
not been a member of an affiliated group filing a consolidated federal income
tax return and does not have any material liability for taxes of any person
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law) as a transferee or successor or by contract or otherwise.
Section 3.10 Actions and Proceedings. Except as set forth in Section 3.10 of
the Company Letter, there are no outstanding orders, judgments, injunctions,
awards or decrees of any Governmental Entity against the Company or, to the
Knowledge of the Company, any of the present or former directors, officers,
employees, consultants, agents or stockholders of the Company, as such, or any
of its or their properties, assets or business or any Company Plan (as
hereinafter defined) that, individually or in the aggregate, would have a
Material Adverse Effect on the Company or materially impair the ability of the
Company to perform its obligations hereunder. Except as set forth in Section
3.10 of the Company Letter, there are no actions, suits or claims or legal,
administrative or arbitration proceedings or investigations pending or, to the
Knowledge of the Company, threatened against the Company or, to the Knowledge
of the Company, any of its present or former directors, officers, employees,
consultants, agents or stockholders, as such, or any of its or their
properties, assets or business or any Company Plan that, individually or in the
aggregate, would have a Material Adverse Effect on the Company or materially
impair the ability of the Company to perform its obligations hereunder. As of
the date hereof, there are no actions, suits, labor disputes or other
litigation, legal or administrative proceedings or governmental investigations
pending or, to the Knowledge of the Company, threatened against or affecting
the Company or, to the Knowledge of the Company, any of its present or former
officers, directors, employees, consultants, agents or stockholders, as such,
or any of its or their properties, assets or business or any Company Plan
relating to the transactions contemplated by this Agreement.
Section 3.11 Certain Agreements. Except as set forth in Section 3.11 of the
Company Letter, the Company is not a party to or bound by, as of the date of
this Agreement, any contract, agreement or arrangement that is material to the
business, properties, assets, liabilities, financial condition or results of
operations of the Company (each, a "Company Contract"). Each Company Contract
is valid and binding on the Company and in full force and effect and the
Company has performed the obligations required to be performed by it under each
Company Contract, except where the failure of such contracts to be valid and
binding or the failure of such obligations to have been performed would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. No holder of any shares of Company Common Stock granted in connection
with the performance of services for the Company, is or will be entitled to
receive cash from the Company in lieu of or in exchange for such shares under
this Agreement.
Section 3.12 ERISA. (a) Each Company Plan is listed in Section 3.12(a) of
the Company Letter. The Company has delivered or made available to Parent with
respect to each Company Plan (as hereinafter defined),
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true and complete copies of (i) all plan documents and amendments thereto,
trust agreements and amendments thereto and insurance and annuity contracts and
policies, (ii) the current summary plan description, (iii) the Annual Reports
(Form 5500 series) and accompanying schedules, as filed, for the most recently
completed two plan years for which such reports have been filed, (iv) the
financial statements for the most recently completed two plan years for which
statements have been prepared, (v) the most recent determination letter issued
by the Internal Revenue Service (the "IRS") and the application submitted with
respect to such letter, and (vi) all correspondence with the IRS or Department
of Labor concerning any pending audit or controversy. Any "change in control"
or similar provisions contained in any Company Plan are specifically identified
in Section 3.12(a) of the Company Letter.
(b) Except as would not have a Material Adverse Effect on the Company, each
Company Plan complies with its terms and with ERISA, the Code and all other
applicable statutes and governmental rules and regulations. Except as set forth
in Section 3.12(b) of the Company Letter, each Company Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA (a
"Pension Plan") and that is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the IRS, and the
Company is not aware of any circumstances likely to result in revocation of any
such favorable determination letter or of any circumstance indicating that any
such plan is not so qualified in operation. None of the Company Plans is
subject to the law of any jurisdiction outside of the United States of America.
Neither the Company nor any of its ERISA Affiliates has maintained, contributed
to, or had any liability under, any pension plan subject to Title IV of ERISA
or Section 302 of the Code.
(c) With respect to the Company Plans, no event has occurred and, to the
Knowledge of the Company, there exists no condition or set of circumstances in
connection with which the Company or any ERISA Affiliate or Company Plan
fiduciary could be subject to any liability under the terms of such Company
Plans, ERISA, the Code or any other applicable law, other than liabilities for
benefits payable in the normal course, and other than any liability which would
not have a Material Adverse Effect on the Company. Except as set forth in
Section 3.12(c) of the Company Letter, all material contributions required to
be made under the terms of each Company Plan have been timely made. Except as
set forth in Section 3.12(c) of the Company Letter, neither the Company nor any
of its ERISA Affiliates has any material liability or obligation under any
welfare plan to provide benefits after termination of employment to any
employee or dependent other than as required by Section 4980B of the Code.
(d) As used herein, "Company Plan" means a "pension plan" (as defined in
Section 3(2) of ERISA), a "welfare plan" (as defined in Section 3(1) of ERISA),
or any bonus, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, holiday pay,
vacation, severance, death benefit, sick leave, fringe benefit, insurance or
other plan, arrangement or understanding, in each case established or
maintained by the Company or any of its ERISA Affiliates or as to which the
Company or any of its ERISA Affiliates has contributed or otherwise may have
any liability.
(e) Section 3.12(e) of the Company Letter contains a list, and the Company
has heretofore made available to Parent a true and complete copy, of all (i)
severance, employment and consulting agreements with employees and consultants
of the Company and each of its ERISA Affiliates, and (ii) severance programs
and policies of the Company and each of its ERISA Affiliates with or relating
to its employees.
(f) Except as contemplated by this Agreement or as set forth in Section
3.12(f) of the Company Letter, the consummation of the Merger and the other
transactions contemplated by this Agreement will not (i) entitle any employees
of the Company to severance pay or entitle them to severance pay upon their
termination of employment, (ii) accelerate the time of payment or vesting or
trigger any payment of compensation or benefits under, or increase the amount
payable or trigger any other material obligation pursuant to, any of the
Company Plans or (iii) result in any breach or violation of, or a default
under, any of the Company Plans.
Section 3.13 Compliance with Worker Safety and Environmental Laws. To the
Knowledge of the Company, the properties, assets and operations of the Company
are in compliance with all applicable Worker
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Safety Laws and Environmental Laws, except for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. With respect to such properties, assets and operations, including
any previously owned, leased or operated properties, assets or operations,
there are no events, conditions, circumstances, activities, practices,
incidents, actions or plans of the Company that interfere with or prevent
compliance or continued compliance with applicable Worker Safety Laws and
Environmental Laws, other than any such interference or prevention as would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
Section 3.14 Labor Matters. The Company is not a party to any collective
bargaining agreement or labor contract. The Company has not engaged in any
unfair labor practice with respect to any persons employed by or otherwise
performing services primarily for the Company (the "Company Business
Personnel"), and there is no unfair labor practice complaint or grievance
against the Company by the National Labor Relations Board or any comparable
state agency pending or, to the Knowledge of the Company, threatened in writing
with respect to the Company Business Personnel, except where such unfair labor
practice, complaint or grievance would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. There is no labor strike,
dispute, slowdown or stoppage pending or, to the Knowledge of the Company,
threatened against or affecting the Company which may interfere with the
business activities of the Company, except where such dispute, strike or work
stoppage would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
Section 3.15 Intellectual Property. (a) The Company has through ownership or
licensing, all Intellectual Property Rights as are necessary to conduct the
business of the Company as currently conducted by the Company, except where the
failure to have such Intellectual Property Rights would not, individually or in
the aggregate, have a Material Adverse Effect on the Company. To the Knowledge
of the Company, the Company has not infringed any Intellectual Property Rights
of any third party other than any infringements that, individually and in the
aggregate, would not have a Material Adverse Effect on the Company.
(b) Except as set forth in Section 3.15 of the Company Letter, there are no
actions, suits or claims or administrative proceedings or investigations
pending or, to the Knowledge of the Company, threatened that challenge or
question the Company's Intellectual Property Rights and that, individually or
in the aggregate, would have a Material Adverse Effect on the Company.
(c) All patents, registered trademarks, service marks, copyrights and domain
names which are held by the Company, and which are material to the business of
the Company, are to the Knowledge of the Company valid and subsisting. Section
3.15 of the Company Letter contains a list as of the date hereof of (i) all
material registered United States, state and foreign trademarks, service marks,
logos, trade dress, trade names and domain names and pending applications to
register the foregoing, (ii) all material United States and foreign patents and
patent applications and (iii) all material registered United States and foreign
copyrights and pending applications to register the same, in each case owned by
the Company.
Section 3.16 Opinion of Financial Advisor. The Company has received the
written opinion of First Annapolis Capital Inc., dated the date hereof, to the
effect that, as of the date hereof, the Exchange Ratio is fair to the Company's
stockholders from a financial point of view, a copy of which opinion has been
delivered to Parent.
Section 3.17 Certain Company Bylaw Provisions. The Board of Directors of the
Company has, to the extent any Company Bylaw provisions are applicable, taken
all action (including appropriate approvals of the Board of Directors of the
Company) necessary to exempt Parent and its Subsidiaries and affiliates, the
Merger, this Agreement and the transactions contemplated hereby from any
restrictions contained in the Company Bylaws that are impacted by the
transactions contemplated hereby, including without limitation, restrictions on
qualifications of stockholders. No other provisions of the Company Bylaws are
applicable to the Merger, this Agreement or the transactions contemplated
hereby.
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Section 3.18 Required Vote of Company Stockholders. The affirmative vote of
the holders of two-thirds of the outstanding shares of Company Common Stock is
required to adopt this Agreement. No other vote of the security holders of the
Company is required by law, the Company Charter or the Company Bylaws or
otherwise in order for the Company to consummate the Merger and the
transactions contemplated hereby.
Section 3.19 Pooling of Interests; Reorganization. To the Knowledge of the
Company, it has not (i) taken any action or failed to take any action which
action or failure would jeopardize the treatment of the Merger as a pooling of
interests for accounting purposes or (ii) taken any action or failed to take
any action which action or failure would prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.
Section 3.20 Brokers. No broker, investment banker or other person, other
than First Annapolis Capital, the fees and expenses of which will be paid by
the Company (as reflected in an agreement between First Annapolis Capital and
the Company dated October 11, 1999, a copy of which has been furnished to
Parent), is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
Section 3.21 Cash Awards. The cash awards (the "Executive Cash Awards")
granted to each of the persons listed in Exhibit 3.12E of the Company Letter
(collectively, the "Executives") at the November 10, 1999 meeting of the
Executive Committee of the Company's Board of Directors, as amended at the
November 12, 1999, December 13, 1999 and April 4, 2000, meetings of the
Company's Board of Directors (i) are, in the aggregate, equal to the amount set
forth in Exhibit 3.12E of the Company Letter, (ii) are expressly contingent
upon the approval of such grants by stockholders owning at least 75% of the
outstanding Company Common Stock in accordance with Section 280G(b)(5)(B), and
(iii) are the only awards granted to the Executives or any other member of the
Company's management in connection with or related to the transactions
contemplated by this Agreement.
Section 3.22 Repurchased Shares. Since January 1, 1999, the Company has
purchased, in accordance with the Company Bylaws, from the stockholders set
forth in Section 3.22 of the Company Letter the number of shares of Company
Common Stock set forth opposite each such stockholder's name (the "Repurchased
Shares"). Except for the Repurchased Shares, since January 1, 1999, the Company
has not repurchased, nor has it given any notification to any stockholder to
the effect that the stockholder is not eligible to own shares of Company Common
Stock that has not been resolved to the Company's satisfaction.
Section 3.23 February Network Revenue. Section 3.11.A.4.b of the Company
Letter contains a true and correct list of all of the Company's network
participants as of February 29, 2000. Section 3.23 of the Company Letter
contains a true and correct list by billing logo of the dollar amount of the
Company's February Network Revenue (as defined below) attributable to the
Company's participation agreements with all of the Company's network
participants. "February Network Revenue" means the revenue of the Company
during February 2000 under its participation agreements, based on the fees
payable under Schedule A to such agreements with the following adjustments: (a)
POS acquirer fees earned by the Company as a result of POS transactions carried
out by cardholders of a participant are shown, net of POS interchange fees
payable to such participant, as revenue from such participant; and (b) revenues
to the Company of less than $13,000 attributable to the Company's interchange
agreement with Magic Line-Illinois, Inc. have been removed to reflect that
agreement's expiration as of April 1, 2000. Except for the adjustments
described in the previous sentence, the total February Network Revenue
indicated in Section 3.23 of the Company Letter was prepared in a manner
consistent with GAAP and in accordance with the Company's usual practices for
recording network revenue and equals the total revenue of the Company under its
participation agreements in February 2000.
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ARTICLE IV
Covenants Relating to Conduct of Business
Section 4.1 Conduct of Business Pending the Merger. Except as expressly
permitted by clauses (a) through (q) of this Section 4.1, during the period
from the date of this Agreement through the Effective Time, the Company shall
in all material respects carry on its business in the ordinary course of its
business as currently conducted and, to the extent consistent therewith, use
reasonable best efforts to preserve intact its current business organization,
keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers and others having business dealings
with it. Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Agreement, or as set forth in Section
4.1 of the Company Letter, the Company shall not, without the prior written
consent of Parent:
(a) (i) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such, (ii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (iii)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire any such shares, voting securities, equity equivalent or
convertible securities;
(c) amend the Company Charter or Company Bylaws or other comparable
charter or organizational documents;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, limited liability company,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets, other than assets
acquired in the ordinary course of business consistent with past practice
and not material to the Company;
(e) sell, lease, license, mortgage, encumber or otherwise dispose of any
of its properties or assets, other than sales, leases or licenses in the
ordinary course of business consistent with past practice and not material
to the Company;
(f) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (i) indebtedness for
borrowed money not exceeding $25,000 in aggregate principal amount
outstanding at any one time, and (ii) cash management activities carried on
in the ordinary course of business consistent with past practice;
(g) alter (through merger, liquidation, reorganization, restructuring or
in any other fashion) the corporate structure or ownership of the Company;
(h) increase the compensation payable or to become payable to its
directors, officers or employees (except for increases, not in excess of 5%
in the aggregate, in the ordinary course of business consistent with past
practice in salaries or wages of employees of the Company who are not
officers of the Company) or grant any severance or termination pay (other
than to employees who are not officers in the ordinary course of business
consistent with past practice) to, or enter into or amend any employment,
consulting or severance agreement with any current or former director or
officer of the Company, or establish, adopt, enter into, or, except as may
be required to comply with applicable law, amend or take action to enhance
or accelerate any rights or benefits under, any bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
current or former director, officer or employee;
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(i) knowingly violate or knowingly fail to perform any obligation or
duty imposed upon it by any applicable material federal, state or local
law, rule, regulation, guideline or ordinance;
(j) make any change to accounting policies or procedures (other than
actions required to be taken by generally accepted accounting principles);
(k) prepare or file any Tax Return inconsistent with past practice or,
on any such Tax Return, take any position, make any election, or adopt any
method that is inconsistent with positions taken, elections made or methods
used in preparing or filing similar Tax Returns in prior periods unless, in
any such case, so required by applicable law; provided, that the Company
shall provide Parent with written notice not later than the date of filing
of any federal income Tax Return or material state income Tax Return,
setting forth in reasonable detail the inconsistency and the applicable law
that required it;
(l) settle or compromise any material federal, state, local or foreign
income tax liability;
(m) enter into, amend or terminate any noncompetition agreement or any
agreement or contract pursuant to which any third party is granted
exclusive marketing, distribution, material manufacturing or any other
exclusive rights with respect to any Company product, process or
technology;
(n) (i) make or agree to make any new capital expenditure or capital
expenditures which, individually, is in excess of $50,000 or, in the
aggregate, are in excess of $250,000, (ii) enter into or agree to enter
into any material contract or agreement (iii) enter into or agree to enter
into any participation or processing agreement not in the ordinary course
of business consistent with past practice, (iv) amend any participation
agreement, or (v) materially amend any processing agreement or the Company
Operating Rules;
(o) fail to take any action necessary to preserve, or waive or release,
any material right or claim, or pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than payment, discharge or
satisfaction in the ordinary course of business consistent with past
practice;
(p) initiate any litigation or arbitration proceeding or settle or
compromise any material litigation or arbitration proceeding or any claim
involving intellectual property; or
(q) authorize, recommend, propose or announce an intention to do any of
the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Section 4.2 No Solicitation.
(a) From the date hereof until the earlier of the Effective Time or the date
on which this Agreement is terminated in accordance with the terms hereof, the
Company will not, and will cause any officers, directors, employees and
investment bankers, attorneys or other agents retained by the Company not to,
(i) directly or indirectly solicit, initiate or knowingly encourage (including
by way of furnishing non-public information), or take any other action
knowingly to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(as hereinafter defined), (ii) enter into any agreement with respect to any
Acquisition Proposal, or (iii) except as expressly permitted below, engage in
negotiations or discussions with, or furnish any information or data to any
third party relating to, or that may reasonably be expected to lead to, an
Acquisition Proposal (as hereinafter defined) (other than the transactions
contemplated hereby). Notwithstanding anything to the contrary contained in
this Section 4.2 or in any other provision of this Agreement, the Company, and
its officers, directors, investment bankers, attorneys or agents, may:
(i) participate in discussions or negotiations (including, as a part
thereof, making any counterproposal) with or furnish information to any
third party making an unsolicited Acquisition Proposal (a "Potential
Acquiror") if: (A) the Company's Board of Directors reasonably determines
in good faith, after consultation with its financial advisor, that such
third party has submitted an Acquisition Proposal which is a Superior
Proposal (as hereinafter defined), and (B) the Company's Board of Directors
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determines in good faith, based upon advice of outside legal counsel, that
the failure to participate in such discussions or negotiations or to
furnish such information would be inconsistent with the Company Board's
fiduciary duties under applicable law, or
(ii) following receipt of an Acquisition Proposal, disclose to its
stockholders the Company's position as contemplated by Rules 14d-9 and 14e-
2 under the Exchange Act or otherwise make any other disclosure required by
applicable law to its stockholders related to an Acquisition Proposal.
The Company agrees that any non-public information furnished to a Potential
Acquiror will be pursuant to a confidentiality agreement substantially similar
to the confidentiality provisions of the confidentiality agreement entered into
between the Company and Parent. In the event that the Company shall receive any
Acquisition Proposal or any inquiry with respect to or which could lead to any
Acquisition Proposal, it shall promptly inform Parent in writing as to the
terms of such Acquisition Proposal and the identity of the person making any
such Acquisition Proposal or inquiry, and if the Acquisition Proposal is in
writing the Company shall provide Parent a true and complete copy thereof, and
will keep Parent reasonably informed of the status and details (including
amendments or proposed amendments) of any such Acquisition Proposal or inquiry.
(b) For purposes of this Agreement, "Acquisition Proposal" shall mean any
bona fide proposal or offer, or any expression of interest, made by a third
party relating to the Company's willingness or ability to receive or discuss a
proposal or offer for a merger, consolidation or other business combination,
sale of shares of capital stock, tender offer or exchange offer or similar
transaction involving the Company or any proposal or offer to acquire in any
manner, directly or indirectly, a substantial part of the business or assets or
any equity interest in, or voting securities of, of the Company (other than the
transactions contemplated by this Agreement).
(c) The term "Superior Proposal" shall mean any unsolicited Acquisition
Proposal in writing which the Company Board reasonably determines in its good
faith judgment, after consultation with its financial advisor, provides greater
aggregate value from a financial point of view to the Company's stockholders,
in their capacity as stockholders, than the transactions contemplated hereby.
(d) The Company shall immediately cease and cause to be terminated any
discussions or negotiations existing as of the date hereof with any parties
(other than the Parent and Sub) conducted heretofore with respect to any of the
foregoing. The Company agrees to enforce, and not to release any third party
from, any confidentiality or standstill agreement to which the Company is a
party with respect to a merger of, acquisition of, investment in,
reorganization of, or business combination involving, the Company.
Section 4.3 Pooling of Interests; Reorganization. During the period from the
date of this Agreement to the Effective Time, none of Parent, any of its
Subsidiaries, or the Company shall (a) knowingly take or fail to take any
action, which action or failure would jeopardize the treatment of the Merger as
a pooling or interests for accounting purposes or (b) knowingly take or fail to
take any action, which action or failure would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
ARTICLE V
Additional Agreements
Section 5.1 Stockholder Meeting. (a) The Company will, as soon as
practicable following the date of this Agreement duly call, give notice of,
convene and hold a meeting of stockholders (the "Company Stockholder Meeting")
for the purpose of considering the approval of this Agreement and the Executive
Cash Awards. The Company will, through its Board of Directors, recommend to its
stockholders approval of this Agreement and the Executive Cash Awards and shall
solicit such approval by its stockholders and such Board of Directors shall not
withdraw or modify, or propose to withdraw or modify in a manner adverse to
Parent, such recommendation.
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(b) Notwithstanding the foregoing, the Board of Directors of the Company may
at any time prior to the Effective Time withdraw, modify or change any
recommendation and declaration regarding this Agreement or the Merger, or
recommend and declare advisable any other offer or proposal, if the Company has
complied with Section 4.2 and in the reasonable good faith judgment of the
Board of Directors after consultation with outside legal counsel the failure to
so withdraw, modify or change its recommendation and declaration regarding this
Agreement or the Merger or to recommend and declare advisable any other offer
or proposal would be inconsistent with its fiduciary duties to its stockholders
under applicable law. The Company agrees to submit this Agreement to its
stockholders for approval whether or not the Board of Directors of the Company
determines at any time subsequent to the date hereof that this Agreement is no
longer advisable and recommends that the stockholders of the Company reject it.
Section 5.2 Preparation of the Registration Statement and the Proxy
Statement. The Company and Parent shall promptly prepare the Proxy Statement
and Parent shall prepare and file with the SEC the Registration Statement, in
which the Proxy Statement will be included as a prospectus. Each of Parent and
the Company shall use its reasonable best efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing. As promptly as practicable after the
Registration Statement shall have become effective, the Company shall mail the
Proxy Statement to its stockholders. Parent shall also take any action
reasonably required to be taken under any applicable state securities laws in
connection with the issuance of Parent Common Stock in the Merger, and the
Company shall furnish all information concerning the Company and the holders of
Company Common Stock as may be reasonably requested in connection with any such
action.
Section 5.3 Access to Information. (a) Subject to currently existing
contractual and legal restrictions applicable to the Company, the Company shall
afford to the accountants, counsel, financial advisors and other
representatives of Parent reasonable access to, and permit them to make such
inspections as they may reasonably require of, during normal business hours
during the period from the date of this Agreement through the Effective Time,
its officers, employees, properties, books, contracts, commitments and records
(including, without limitation, the work papers of independent accountants, if
available and subject to the consent of such independent accountants) and,
during such period, the Company shall furnish promptly to Parent (i) a copy of
each report, schedule, statement and other document filed by it during such
period pursuant to the requirements of federal or state banking laws and (ii)
all other information concerning its business, properties and personnel as
Parent may reasonably request; provided, that the Company may provide
information which is of a sensitive competitive nature in a form which
minimizes the potential detriment to the Company from such disclosure while
addressing the legitimate business objectives of Parent in seeking such
information.
(b) Subject to contractual and legal restrictions applicable to Parent,
Parent shall afford to the financial advisors and other representatives of the
Company reasonable access to, during normal business hours during the period
from the date of this Agreement through the Effective Time, the senior
executive officers of Parent; provided, that Parent may provide information
which is of a sensitive competitive nature in a form which minimizes the
potential detriment to Parent from such disclosure while addressing the
legitimate business objectives of the Company in seeking such information.
(c) No investigation pursuant to this Section 5.3 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto. All information obtained
pursuant to this Section 5.3 shall be kept confidential in accordance with the
Confidentiality Agreement, dated October 28, 1999 between Parent and First
Annapolis Capital, Inc. (the "Confidentiality Agreement"), all of the terms of
which shall remain in full force and effect after the date hereof.
Section 5.4 Compliance with the Securities Act. (a) Section 5.4 of the
Company Letter contains a list identifying all persons who, at the time of the
Company Stockholder Meeting, may be deemed to be "affiliates" of the Company as
that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act (the "Rule 145 Affiliates"). The Company shall use its reasonable best
efforts to cause each person who is identified as a Rule 145 Affiliate in such
list to deliver to Parent within 30 days of the date hereof a written
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agreement in substantially the form of Exhibit 5.4(a) hereto (the "Company
Affiliate Letter"), executed by each of such persons identified in the
foregoing list. Prior to the Effective Time, if required, the Company shall
amend and supplement Section 5.4 of the Company Letter and use its reasonable
best efforts to cause each additional person who is identified as a Rule 145
Affiliate of the Company to execute the Company Affiliate Letter.
(b) Section 5.4 of the Parent Letter contains a list identifying those
persons who may have been, at the time of the Parent Board of Directors meeting
to approve this Agreement and the Merger, affiliates of Parent under applicable
SEC accounting releases with respect to pooling of interests accounting
treatment. Parent shall use its reasonable best efforts to enter into a written
agreement in substantially the form of Exhibit C hereto (the "Parent Affiliate
Letter") within 30 days of the date hereof with each of such persons identified
in the foregoing list, copies of which shall be delivered to the Company. Prior
to the Effective Time, if required, Parent shall amend and supplement Section
5.4 of the Parent Letter and use its reasonable best efforts to cause each
additional person who is identified as an affiliate of Parent to execute the
Parent Affiliate Letter.
Section 5.5 Listing of Parent Common Stock. Parent shall use its reasonable
best efforts to continue the listing of the Parent Common Stock on Nasdaq
during the term of this Agreement. Parent shall use its reasonable best efforts
to list on Nasdaq, upon official notice of issuance, the shares of Parent
Common Stock to be issued pursuant to Section 1.5.
Section 5.6 Fees and Expenses. (a) Except as provided in this Section 5.6,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
including, without limitation, the fees and disbursements of counsel, financial
advisors and accountants, shall be paid by the party incurring such costs and
expenses; provided, that all reasonable and documented printing expenses and
filing fees (including, without limitation, filing fees under the Securities
Act, the Bank Act and the HSR Act but excluding the fees and expenses of
counsel, financial advisors and accountants) shall be divided equally between
Parent and the Company.
(b) Notwithstanding any provision in this Agreement to the contrary, if this
Agreement is terminated by Parent (A) pursuant to Section 7.1(e), or (B)
pursuant to Section 7.1(f), then in each case, the Company shall (in addition
to any obligation under Section 5.6(c) and without prejudice to any other
rights Parent may have against the Company for a breach of this Agreement)
reimburse Parent upon demand for all reasonable out-of-pocket fees and expenses
incurred or paid by or on behalf of Parent or any Affiliate (as hereinafter
defined) of Parent in connection with this Agreement and the transactions
contemplated herein, including all fees and expenses of counsel, investment
banking firms, accountants and consultants; provided, however, that the Company
shall not be obligated to make payments pursuant to this Section 5.6(b) in
excess of $500,000 in the aggregate. As used herein, "Affiliate" shall have the
meaning set forth in Rule 405 under the Securities Act.
(c) Notwithstanding any provision in this Agreement to the contrary, if (i)
this Agreement is terminated by Parent pursuant to Section 7.1(e) and any
Acquisition Proposal existed between the date hereof and the date of the
Company Stockholder Meeting and, concurrently with or within twelve months
after any such termination, a Third Party Acquisition Event (as hereinafter
defined) occurs or the Company shall enter into any letter of intent, agreement
in principle, acquisition agreement or other similar agreement with respect to
a Third Party Acquisition Event, or (ii) this Agreement is terminated by Parent
pursuant to Section 7.1(f), then, in each case, the Company shall (in addition
to any obligation under Section 5.6(b) and without prejudice to any other
rights Parent may have against the Company for a breach of this Agreement) pay
to Parent a fee (the "Termination Fee") of 3% of the aggregate value of the
shares of Parent Common Stock to be provided to stockholders of the Company
pursuant to Section 1.5(c) determined as though the Closing Date was the date
of such termination, in cash, such payment to be made promptly, but in no event
later than, in the case of clause (i), the later to occur of such termination
and such Third Party Acquisition Event or, in the case of clause (ii), such
termination. As used in this Agreement, a "Third Party Acquisition Event"
involving the Company means (i) a transaction or series of transactions
pursuant to which any person or group (as such term is defined under the
Exchange Act), other than Parent or Sub, or any affiliate thereof ("Third
Party"), acquires (or would acquire
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upon completion of such transaction or series of transactions) more than ten
percent (10%) of the equity securities or voting power of the Company pursuant
to a tender offer or exchange offer or otherwise (other than a merger,
acquisition or other reorganization of one or more of the Company's
stockholders), (ii) a merger, consolidation, share exchange or other business
combination involving the Company pursuant to which any Third Party acquires
ownership (or would acquire ownership upon consummation of such merger,
consolidation, share exchange or other business combination) of more than ten
percent (10%) of the outstanding equity securities or voting power of the
Company or of the entity surviving such merger or business combination or
resulting from such consolidation, (iii) any other transaction or series of
transactions pursuant to which any Third Party acquires (or would acquire upon
completion of such transaction or series of transactions) control of assets of
the Company having a fair market value equal to more than ten percent (10%) of
the fair market value of all the assets of the Company immediately prior to
such transaction or series of transactions, or (iv) any transaction or series
of transactions pursuant to which any Third Party acquires (or would acquire
upon completion of such transaction or series of transactions) control of the
Board of Directors of the Company or by which nominees of any Third Party are
(or would be) elected or appointed to a majority of the seats on the Board of
Directors of the Company.
Section 5.7 Reasonable Best Efforts. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including but not limited to using
reasonable best efforts for the purpose of: (i) obtaining all necessary actions
or non-actions, waivers, consents and approvals from all Governmental Entities
and making all necessary registrations and filings (including filings with
Governmental Entities) and taking all commercially reasonable steps (including
continuing to honor all previous undertakings with Governmental Entities) as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity (including those in connection with the
HSR Act and the Bank Act), (ii) keeping the other parties informed in all
material respects of any material communication received by such party from, or
given by such party to, any Governmental Entity and of any material
communication received or given in connection with any proceeding by a private
party, in each case relating to the Merger or the transactions contemplated by
this Agreement, (iii) permitting the other parties to review any material
communication delivered to, and consulting with the other party in advance of
any meeting or conference with, any Governmental Entity relating to the Merger
or the transactions contemplated by this Agreement or in connection with any
proceeding by a private party, and giving the other party the opportunity to
attend and participate in such meetings and conferences (to the extent
permitted by such Governmental Entity or private party), (iv) obtaining of all
necessary consents, approvals or waivers from third parties, and (v) executing
and delivering any additional instruments necessary to consummate the
transactions contemplated by this Agreement. No party to this Agreement shall
consent to any voluntary delay of the consummation of the Merger at the behest
of any Governmental Entity without the consent of the other parties to this
Agreement, which consent shall not be unreasonably withheld. Without limiting
the foregoing, promptly following the execution and delivery of this Agreement,
the Company shall file with the Office of the Comptroller of the Currency and
the Illinois Bureau of Banks and Trust Companies, and diligently pursue on
behalf, respectively, of its national bank and Illinois state bank stockholders
a request for confirmation of the authority of such stockholders to acquire
Parent Common Stock as a result of the transactions contemplated hereby.
(b) Each party shall use all reasonable best efforts to not take any action,
or enter into any transaction, which would cause any of its representations or
warranties contained in this Agreement to be untrue or result in a breach of
any covenant made by it in this Agreement.
(c) Notwithstanding anything to the contrary contained in this Agreement
(including without limitation this Section 5.7), the Company shall not, without
Parent's prior written consent, commit to any divestiture transaction, and
neither Parent nor any of its Affiliates shall be required to divest or hold
separate or otherwise take or commit to take any action that limits its freedom
of action with respect to, or its ability to retain, the
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Company or any of the businesses, product lines or assets of the Company or
Parent, or any of its Subsidiaries or Affiliates, or that otherwise would have,
individually or in the aggregate, a Material Adverse Effect on Parent or the
Company.
(d) Nothing contained in Section 5.2 or this Section 5.7 shall limit or
restrict Parent or any of its Subsidiaries from entering into or effecting any
agreement relating to any other business combination, acquisition or merger and
no such business combination, acquisition or merger shall be deemed to violate
Section 5.2 or 5.7; provided, however, that, except as set forth in the first
clause of this sentence, no such business combination, acquisition or merger
may violate, or cause Parent or any of its Subsidiaries to violate, the terms
of this Agreement (including, without limitation, Section 5.15).
Section 5.8 Public Announcements. Neither the Parent nor the Company will
issue any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to such
transactions without prior consultation with the other party, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange or the rules of Nasdaq.
Section 5.9 Real Estate Transfer and Gains Tax. Parent and the Company agree
that either the Company or the Surviving Corporation will pay any state or
local tax which is attributable to the transfer of the beneficial ownership of
the Company's real property, if any (collectively, the "Gains Taxes"), and any
penalties or interest with respect to the Gains Taxes, payable in connection
with the consummation of the Merger. The Company and Parent agree to cooperate
with the other in the filing of any returns with respect to the Gains Taxes,
including supplying in a timely manner a complete list of all real property
interests held by the Company and any information with respect to such property
that is reasonably necessary to complete such returns. The portion of the
consideration allocable to the real property of the Company shall be determined
by Parent in its reasonable discretion.
Section 5.10 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplate hereby,
Parent and the Company and their respective Boards of Directors shall use their
reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to minimize the effects of any such statute or
regulation on the transactions contemplated hereby and thereby.
Section 5.11 Indemnification; Directors and Officers Insurance. (a) For six
years from and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, indemnify and hold harmless all past and present
directors, officers, employees or agents of the Company to the fullest extent
permitted by law, any outstanding indemnification agreements listed in Section
5.11 of the Company Letter, the Company Charter or the Company Bylaws, in each
case for all acts or omissions occurring at or prior to the Effective Time, and
shall periodically advance litigation expenses incurred by each such person in
connection with defending any claim, action or investigation arising out of
such acts or omissions (including the cost of any investigation and preparation
incurred in connection therewith). Parent shall provide, or shall cause the
Surviving Corporation to provide, for an aggregate period of not less than six
years from the Effective Time, the Company's current and former directors and
officers an insurance and indemnification policy that provides coverage for
events occurring prior to the Effective Time (the "D&O Insurance") that is no
less favorable with respect to limits and deductibles than the Company's
existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, that the Parent
and Surviving Corporation shall not be required to pay an annual premium for
the D&O Insurance in excess of 150% of the last annual premium paid by the
Company prior to the date hereof, but in such case shall purchase as much
coverage as possible for such amount.
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(b) In the event Parent or any of its successors or assigns (i) consolidates
with or merges into any other person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii) conveys all or
substantially all of its properties and assets to any person then, and in each
case, proper provision shall be made so that the successors and assigns of
Parent assume the obligations set forth in this Section 5.11.
Section 5.12 Notification of Certain Matters. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which it is aware and which would be reasonably likely to cause
(x) any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (y) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in all
material respects, (ii) any failure of Parent, Sub or the Company, as the case
may be, to comply in a timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder or (iii) any change
or event which would be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Parent or the Company, as the case may
be; provided, however, that the delivery of any notice pursuant to this Section
5.12 shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
Section 5.13 Employee Matters. (a) Parent shall cause the Surviving
Corporation to honor all employment and severance agreements to which the
Company is a party as of the date hereof set forth in Section 3.12(e) of the
Company Letter.
(b) To the extent any Parent Plan (or any plan of the Surviving Corporation)
shall be made applicable to any employee or former employee of the Company,
Parent shall, or shall cause the Surviving Corporation to, grant to employees
and former employees of the Company credit for service with the Company for the
purposes of determining eligibility to participate in such plan and the
employee's nonforfeitable interest in benefits thereunder and for purposes of
calculating benefits thereunder (but subject to offset, if necessary, to avoid
duplication of benefits). Parent shall (i) waive (or cause to be waived) any
pre-existing condition limitations that might otherwise apply to employees or
former employees of the Company unless not waived under the Company's
equivalent plan and (ii) recognize (or cause to be recognized) the dollar
amount of all expenses incurred by employees or former employees of the Company
during the calendar year in which the Effective Time occurs for purposes of
satisfying the calendar year deductions and co-payment limitations for such
year, under the relevant welfare benefit plans of Parent or the Surviving
Corporation. Parent shall, or shall cause the Surviving Corporation to, comply
with the terms of all Company Plans, provided, however, nothing in this
Agreement shall be interpreted as limiting the power of the Parent or the
Surviving Corporation to amend or terminate any Company Plan or any other
employee benefit plan, program, agreement or policy in accordance with its
terms or as requiring the Surviving Corporation or Parent to offer to continue
(other than as required by its terms) any written employment contract.
(c) The Company will not, without Parent's prior written consent, (i) amend
any of the Second Amended Agreements (as defined in Section 6.3(e)), as they
exist on the date hereof, or waive any rights of the Company thereunder, or
(ii) terminate the employment of any of the executives who are parties to the
Second Amended Agreements, except for death, Disability or Cause (as such terms
are defined in the Second Amended Agreements).
Section 5.14 Board of Directors Advisory Committees. Parent will, as soon as
practicable following the Effective Date, cause the 3 to 5 individuals
identified in Sections 5.14 (a) and (b) of the Company Letter to be selected as
members of the MAC Advisory Council and the MAC Operations and Technical
Committee, respectively.
Section 5.15 Section 368(a). Following the Closing, Parent (i) shall not (A)
cause or permit the Surviving Corporation to fail the continuity of business
enterprise requirement of federal income tax law; (B) cause or permit the
Surviving Corporation to issue shares of capital stock; (C) liquidate the
Surviving
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Corporation or merge the Surviving Corporation with or into any other
corporation; or (D) sell or otherwise dispose of shares of capital stock of the
Surviving Corporation; unless, in any case, such action or failure to act would
not, singly or in combination with any other such action or failure to act,
cause the Merger to fail to constitute a reorganization within the meaning of
Section 368(a) of the Code, and (ii) shall (and shall cause the Surviving
Corporation and their respective affiliates to) take no other action which
action could reasonably be expected to cause the Merger to fail to be treated
as a reorganization within the meaning of Section 368(a) of the Code.
Section 5.16 EDS Processing Agreement. If the Closing does not occur prior
to May 30, 2000, the Company shall no later than May 30, 2000 take any and all
actions necessary or appropriate to terminate as of a date no later than
October 31, 2000, that certain Network Processing Agreement dated as of
November 18, 1994 by and between the Company and Electronic Data Systems
Corporation ("EDS"), as amended by (i) that certain First Amendment dated June
10, 1995, (ii) that certain Second Amendment dated December 12, 1995, (iii)
that certain Third Amendment dated June 27, 1997, (iv) that certain Fourth
Amendment dated May 10, 1999, and (v) that certain Fifth Amendment dated March
24, 2000. In connection with the foregoing agreement, Parent agrees that the
Company may terminate any exclusivity and noncompetition obligations or
agreements it has with EDS, effective any time after the date hereof.
ARTICLE VI
Conditions Precedent to the Merger
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved
and the transactions contemplated hereby shall have been duly exempted from
Article VIII of the Company Bylaws, in each case by the requisite vote of
stockholders of the Company in accordance with applicable law and the
Company Charter and the Company Bylaws.
(b) Other Approvals. (i) All approvals to be obtained by Parent, Sub or
the Company required under the Bank Act shall have been received and the
waiting period (and any extension thereof) applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated.
(ii) All authorizations, consents, orders, declarations or approvals of,
or filings with, or terminations or expirations of waiting periods imposed
by, any Governmental Entity, which the failure to obtain, make or occur
would have the effect of making the consummation of the Merger or any of
the transactions contemplated hereby a violation of law by Parent, Sub or
the Company or would have, individually or in the aggregate, a Material
Adverse Effect on Parent (assuming the Merger had taken place), shall have
been obtained, shall have been made or shall have occurred.
(c) No Order. Neither any court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of Parent's Subsidiaries,
shall have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) nor the Office of Thrift Supervision
with respect to any stockholder of the Company shall have issued any order
which is then in effect and has the effect of making the Merger or any of
the transactions contemplated hereby illegal.
(d) Litigation. There shall not be instituted or pending any suit,
action or proceeding by any Governmental Entity relating to this Agreement
or any of the transactions contemplated hereby which would have,
individually or in the aggregate, a Material Adverse Effect on the Company
or Parent.
(e) Stockholder Regulatory Approvals. The Company shall have received
confirmation from the Office of the Comptroller of the Currency that it
will not object to the Company's national bank
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stockholders acquiring Parent Common Stock in accordance with this
Agreement, and from the Illinois Bureau of Banks and Trust Companies that
it will not object to the Company's Illinois state bank stockholders
acquiring Parent Common Stock in accordance with this Agreement.
Section 6.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Each of
Parent and Sub shall have performed in all material respects each of its
covenants and agreements contained in this Agreement required to be
performed on or prior to the Effective Time, each of the representations
and warranties of Parent and Sub contained in this Agreement that is
qualified by materiality shall be true and correct on and as of the
Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of
such representations and warranties that is not so qualified shall be true
and correct in all material respects on and as of the Effective Time as if
made on and as of such date (other than representations and warranties
which address matters only as of a certain date which shall be true and
correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and the Company
shall have received a certificate signed on behalf of Parent by its Chief
Executive Officer and its Chief Financial Officer to such effect.
(b) Registration Statement. The Registration Statement shall have been
declared effective by the SEC under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceeding for that purpose shall have been
initiated by the SEC and not concluded or withdrawn; provided, however,
that the Company may waive this condition only after October 31, 2000 and
then only if (i) Parent is reasonably satisfied that the consummation of
the Merger without having the Registration Statement being declared
effective would not violate any applicable securities or Blue Sky laws, and
(ii) the Company shall have delivered to Parent subscription agreements, in
form and substance reasonably acceptable to Parent, executed by each
stockholder of the Company which subscription agreement shall (A) confirm
that such stockholder is an Accredited Investor (as such term is defined in
Rule 501 promulgated under the Securities Act of 1933), (B) acknowledges
that the Parent Common Stock to be delivered by Parent pursuant thereto is
restricted stock that is not publicly registered, (C) acknowledge that the
stock certificate(s) to be issued to such stockholder will bear an
appropriate restrictive legend, and (D) restrict such stockholder from
transferring any Parent Common Stock received from Parent unless (x) an
exemption from the securities laws applies to such transfer transaction, as
confirmed by an opinion of outside legal counsel, and (y) prior to the
transfer the proposed transferee signs an agreement containing all of the
same provisions.
(c) Listing of Parent Common Stock. The Parent Common Stock to be issued
in the Merger shall have been approved for listing on Nasdaq, subject to
official notice of issuance.
(d) Tax Opinion. The Company shall have received an opinion of Skadden,
Arps, Slate, Meagher & Flom (Illinois) ("Skadden, Arps") in form and
substance reasonably satisfactory to the Company, dated the Closing Date,
substantially to the effect that on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state
of facts existing as of the Effective Time, for federal income tax purposes
the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, Skadden, Arps may rely upon
the representations contained herein and may require and rely upon (and may
incorporate by reference) reasonable representations from Parent, Sub, the
Company, and others.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its covenants
and agreements contained in this Agreement
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required to be performed on or prior to the Effective Time, each of the
representations and warranties of the Company contained in this Agreement
that is qualified by materiality shall be true and correct on and as of the
Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of
the representations and warranties that is not so qualified shall be true
and correct in all material respects on and as of the Effective Time as if
made on and as of such date (other than representations and warranties
which address matters only as of a certain date which shall be true and
correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and Parent shall
have received a certificate signed on behalf of the Company by its Chief
Executive Officer and its Chief Financial Officer to such effect.
(b) Tax Opinion. Parent shall have received an opinion of Sidley &
Austin, in form and substance reasonably satisfactory to Parent, dated the
Closing Date, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code. In rendering such
opinion, Sidley & Austin may rely upon representations contained herein and
may require and rely upon (and may incorporate by reference) reasonable
representations from Parent, Sub, the Company, and others.
(c) Pooling. The Company shall have received the written opinion, dated
as of the Effective Time, of Deloitte & Touche LLP that Deloitte & Touche
LLP concurs with management's conclusion that the Company is eligible to be
a party to a business combination accounted for as a pooling of interests
in accordance with generally accepted accounting principles and applicable
published rules and regulations of the SEC. Parent shall have received the
written opinion, dated as of the Effective Time, of Ernst & Young LLP that
Ernst & Young LLP concurs with management's conclusion that Parent is
eligible to be a party to a business combination accounted for as a pooling
of interests in accordance with generally accepted accounting principles
and applicable published rules and regulations of the SEC, and that the
Merger will qualify for pooling of interests accounting. Each of such
written opinions shall be in form and substance reasonably satisfactory to
Parent.
(d) Dissenting Stockholders. The Dissenting Shares shall include no more
than five percent (5%) of the shares of Company Common Stock outstanding
immediately prior to the Effective Time. Parent shall have received a
certificate signed on behalf of the Company by its Chief Executive Officer
and its Secretary to such effect.
(e) Executive Employment Agreements. (i) The executives who are parties
to those certain Second Amended and Restated Change of Control Employment
Agreements entered into by such executives on the date hereof (the "Second
Amended Agreements") shall still be employed by the Company, unless their
employment has been terminated as a result of the death or Disability of
any such executive, (ii) the Second Amended Agreements shall not have been
further amended, (iii) such agreements shall be in full force and effect
and (iv) there shall have been no assertion by any of the executives or the
Company that any of the Second Amended Agreements, in whole or in part, is
not effective or is in breach.
(f) Participant Base. The network participants (other than those that
have joined or have agreed to join the MAC network in Illinois or Indiana)
who between the date hereof and the Closing Date (1) cease participating in
the Company's network, (2) terminate (without subsequently rescinding such
termination) their participation agreement with the Company or (3) notify
the Company (without subsequently rescinding such notice) that they will
cease participating in the Company's network or will terminate their
participation agreement with the Company shall have accounted for, in the
aggregate, less than $100,000 of the Company's February Network Revenue.
Parent shall have received a certificate signed on behalf of the Company by
its Chief Executive Officer and its Chief Financial Officer to such effect.
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ARTICLE VII
Termination, Amendment and Waiver
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company or
Parent:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party shall have failed
to comply in any material respect with any of its material covenants or
agreements contained in this Agreement required to be complied with prior
to the date of such termination, which failure to comply has not been cured
within 30 days following receipt by such other party of written notice from
the non-breaching party of such failure to comply;
(c) by either Parent or the Company if there has been (i) a breach by
the other party (in the case of Parent, including any breach by Sub) of any
representation or warranty that is not qualified as to materiality which
has the effect of making such representation or warranty not true and
correct in all material respects or (ii) a breach by the other party (in
the case of Parent, including any breach by Sub) of any representation or
warranty that is qualified as to materiality, in each case which breach has
not been cured within 30 days following receipt by the breaching party from
the non-breaching party of written notice of the breach;
(d) by Parent or the Company if: (i) the Merger has not been effected on
or prior to the close of business on October 31, 2000; provided, however,
that either party may by written notice to the other party delivered on or
prior to October 31, 2000 extend such date until the day immediately
preceding the first anniversary hereof if the failure of the Merger to be
effected on or prior to October 31, 2000 shall have resulted from the
failure of the conditions set forth in Section 6.1(b) to be satisfied; and
provided, further, that the right to terminate this Agreement pursuant to
this Section 7.1(d)(i) shall not be available to any party whose failure to
fulfill any of its obligations contained in this Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or
prior to the aforesaid date; or (ii) any court or other Governmental Entity
having jurisdiction over a party hereto shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable;
(e) by Parent if the stockholders of the Company do not approve this
Agreement at the Company Stockholder Meeting or at any adjournment or
postponement thereof;
(f) by Parent if (i) the Board of Directors of the Company shall not
have recommended, or shall have resolved not to recommend, or shall have
qualified or modified or withdrawn its recommendation of the Merger or
declaration that the Merger is advisable and fair to and in the best
interest of the Company and its stockholders, or shall have resolved to do
so, (ii) prior to the Company Stockholder Meeting any person (other than
Parent or its Affiliates) acquires or becomes the owner of 10% or more of
the outstanding shares of Company Common Stock unless such person either is
then subject to, or at least 30 days prior to the Closing Date executes, a
Company Voting Agreement with respect to all of the shares of Company
Common Stock then held by such person, including such acquired shares, or
(iii) the Board of Directors of the Company shall have recommended to the
stockholders of the Company any Acquisition Proposal or shall have resolved
to do so; and
(g) by the Company, by written notice from the Company to Parent
delivered not later than the second business day prior to the Closing Date,
if the Parent Average Price at the end of the Calculation Period is less
than $20; provided that it is understood that the right to terminate set
forth in this Section 7.1(g) may not be exercised until after all of the
Closing conditions set forth in Article VI hereof have been satisfied or
waived.
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The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the last sentence of Section 5.3(c) and the entirety of
Section 5.6, which shall survive the termination); provided, however, that
nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for any willful breach of a representation or warranty contained in
this Agreement or the breach of any covenant contained in this Agreement. The
Confidentiality Agreement shall remain in full force and effect notwithstanding
the termination of this Agreement.
Section 7.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
General Provisions
Section 8.1 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
Section 8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Concord EFS, Inc.
Electronic Payment Services, Inc.
1100 Carr Road
Wilmington, Delaware 19809
Attention: Marcia E. Heister
Facsimile No.: (302) 791-8762
with a copy to:
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
Attention: Imad I. Qasim
Facsimile No.: (312) 853-7036
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(b) if to the Company, to:
Cash Station, Inc.
200 South Wacker
Suite 1000
Chicago, IL 60606
Attention: James H. Hayes
Facsimile No.: (312) 977-1945
with a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Suite 2100
Chicago, IL 60606
Attention: William R. Kunkel
Facsimile No.: (312) 407-0411
Section 8.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents, table of defined terms and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement
and the Confidentiality Agreement constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof. This Agreement, except for
the provisions of Sections 5.11 and 5.15 is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
Section 8.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. The parties hereby irrevocably submit to the jurisdiction of
the Federal courts of the United States of America and the state courts located
in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred
to in this Agreement, and in respect of the transactions contemplated hereby,
and hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Federal or state court. The parties
hereby consent to and grant any such court jurisdiction over the person of such
parties and over the subject matter of such dispute and agree that mailing of
process or other papers in connection with any such action or proceeding in the
manner provided in Section 8.2 or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Any attempted assignment in violation of this
Section 8.7 shall be deemed to be void and of no force or effect.
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Section 8.8 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 terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties 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 in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
Cash Station, Inc.
/s/ Stephen S. Cole
By: _________________________________
Name: Stephen S. Cole
Title:President
Concord EFS, Inc.
/s/ Edward T. Haslam
By: _________________________________
Name: Edward T. Haslam
Title:Chief Administrative
Officer
SWCI Acquisition Corp.
/s/ Edward T. Haslam
By: _________________________________
Name: Edward T. Haslam
Title:Treasurer
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ANNEX B
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of April 12, 2000 (this "Agreement"), by the
undersigned stockholder (the "Stockholder") of Cash Station, Inc., a Delaware
corporation (the "Company"), for the benefit of Concord EFS, Inc., a Delaware
corporation ("Parent").
RECITALS
WHEREAS, Parent, SWCI Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), and the Company are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), whereby, upon the terms and subject to the conditions set forth in
the Merger Agreement, the issued and outstanding shares of Common Stock, $.01
par value per share, of the Company ("Company Common Stock"), not owned
directly or indirectly by Parent or the Company, will be converted into shares
of Common Stock, par value $0.33 per share, of Parent ("Parent Common Stock");
WHEREAS, the Stockholder owns of record that number of shares of Company
Common Stock appearing on the signature page hereof (such shares of Company
Common Stock, together with any other shares of capital stock of the Company
acquired by such Stockholder after the date hereof and during the term of this
Agreement, being collectively referred to herein as the "Subject Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that the Stockholder agree, and in order to
induce Parent to enter into the Merger Agreement the Stockholder has agreed, to
enter into this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements set forth herein, the Stockholder agrees as follows:
1. Covenants of Stockholder. Until the termination of this Agreement in
accordance with Section 5, Stockholder agrees as follows:
(a) At the Company Stockholder Meeting (or at any adjournment thereof)
or in any other circumstances upon which a vote, consent or other approval
with respect to the Merger and the Merger Agreement is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares in favor
of the Merger, the adoption of the Merger Agreement and the approval of the
terms thereof and each of the other transactions contemplated by the Merger
Agreement.
(b) At any meeting of stockholders of the Company or at any adjournment
thereof or in any other circumstances upon which the Stockholder's vote,
consent or other approval is sought, the Stockholder shall vote (or cause
to be voted) the Subject Shares against any amendment of the Company's
Amended and Restated Articles of Incorporation, or By-Laws, which amendment
would in any manner impede, frustrate, prevent or nullify the Merger, the
Merger Agreement or any of the other transactions contemplated by the
Merger Agreement or change in any manner the voting rights of any class of
capital stock of the Company. The Stockholder further agrees not to commit
or agree to take any action inconsistent with the foregoing.
(c) The Stockholder agrees not to enter into any other voting
arrangement, whether by proxy, voting agreement or otherwise, in relation
to the Subject Shares, and agrees not to commit or agree to take the
foregoing action.
(d) The Stockholder shall not, nor shall the Stockholder permit any
affiliate (other than the Company), director, officer, employee, investment
banker, attorney or other advisor or representative of the Stockholder to,
(i) directly or indirectly solicit, initiate or knowingly encourage the
submission of, any Acquisition Proposal or (ii) except as expressly
permitted by the Merger Agreement, directly or indirectly
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participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes or
may reasonably be expected to lead to, any Acquisition Proposal.
(e) The Stockholder shall use the Stockholder's reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with Parent in doing, all things necessary,
proper or advisable to support and to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by the Merger Agreement.
2. Representations and Warranties of Stockholder. The Stockholder
represents and warrants to Parent as follows:
(a) The Stockholder is the record and beneficial owner of, and has good
and marketable title to, the Subject Shares, including the shares set forth
below the Stockholder's name on the signature page hereto. The Stockholder
does not own, of record or beneficially, any shares of capital stock of the
Company other than the Subject Shares. The Stockholder has the sole right
to vote, and the sole power of disposition with respect to, the Subject
Shares, and none of the Subject Shares is subject to any voting trust,
proxy or other agreement, arrangement or restriction with respect to the
voting or disposition of such Subject Shares, except as contemplated by
this Agreement.
(b) This Agreement has been duly executed and delivered by the
Stockholder. Assuming the due authorization, execution and delivery of this
Agreement by Parent, this Agreement constitutes the valid and binding
agreement of the Stockholder enforceable against the Stockholder in
accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
of general application which may affect the enforcement of creditors'
rights generally and by general equitable principles. The execution and
delivery of this Agreement by the Stockholder does not and will not
conflict with any agreement, order or other instrument binding upon the
Stockholder, nor require the Stockholder to make or obtain any regulatory
filing or approval other than filings, if any, required pursuant to the
Securities Exchange Act of 1934, as amended.
3. Representations and Warranties of Parent. Parent represents and warrants
to Stockholder as follows:
(a) This Agreement has been duly executed and delivered by Parent.
Assuming the due authorization, execution and delivery of this Agreement by
the Stockholder, this Agreement constitutes the valid and binding agreement
of Parent enforceable against Parent in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general application which may affect
the enforcement of creditors' rights generally and by general equitable
principles. The execution and delivery of this Agreement by Parent does not
and will not conflict with any agreement, order or other instrument binding
upon Parent, nor require Parent to make or obtain any regulatory filing or
approval other than filings, if any, required pursuant to the Securities
Exchange Act of 1934, as amended.
4. Affiliate Letter. The Stockholder agrees to execute and deliver on a
timely basis an Affiliate Letter in the form of Exhibit 5.4(a) to the Merger
Agreement, when and if requested by Parent.
5. Termination. The obligations of the Stockholder hereunder shall
terminate upon the first to occur of (A) the termination of the Merger
Agreement pursuant to Section 7.1 thereof, (B) the Effective Time, and (C) an
amendment to the Merger Agreement that results in a change in the Merger
Consideration that is materially adverse to Stockholder; provided, however,
that, if the Merger Agreement is terminated by Parent pursuant to (i) Section
7.1(c) of the Merger Agreement, but only in the event of a wilful breach by
the Company, or (ii) Section 7.1(b), 7.1(e) or 7.1(f) of the Merger Agreement,
this Agreement shall not terminate until the first anniversary of the
termination of the Merger Agreement.
6. Further Assurances. The Stockholder will, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as Parent may reasonably request for
the purpose of effectively carrying out the transactions contemplated by this
Agreement.
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7. Successors, Assigns and Transferees Bound. Any successor, assignee or
transferee shall be bound by the terms hereof, and the Stockholder shall take
any and all actions necessary to obtain and deliver to Parent (i) the written
confirmation from such successor, assignee or transferee that it is bound by
the terms hereof and (ii) an Affiliate Letter in the form of Exhibit 5.4(a) to
the Merger Agreement, in each case, prior to such succession, assignment or
transfer.
8. Remedies. The Stockholder acknowledges that money damages would be both
incalculable and an insufficient remedy for any breach of this Agreement by it,
and that any such breach would cause Parent irreparable harm. Accordingly, the
Stockholder agrees that in the event of any breach or threatened breach of this
Agreement, Parent, in addition to any other remedies at law or in equity it may
have, shall be entitled, without the requirement of posting a bond or other
security, to equitable relief, including injunctive relief and specific
performance.
9. Severability. The invalidity or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the validity or enforceability
of any other provision of this Agreement in such jurisdiction, or the validity
or enforceability of any provision of this Agreement in any other jurisdiction.
10. Amendment. This Agreement may be amended only by means of a written
instrument executed and delivered by both the Stockholder and Parent.
11. Governing Law. This Agreement shall be governed by, and construed in
accordance in accordance with, the laws of the State of Delaware regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
12. Submission to Jurisdiction. Each party hereto hereby irrevocably submits
in any suit, action or proceeding arising out of or related to this Agreement
or any of the transactions contemplated hereby to the exclusive jurisdiction of
the courts of the United States and the jurisdiction of the courts of the State
of Delaware and waives any and all objections to jurisdiction that it may have
under the laws of the State of Delaware or the United States and any claim or
objection that any such court is an inconvenient forum.
13. Capitalized Terms. Capitalized terms used in this Agreement that are not
defined herein shall have such meanings as set forth in the Merger Agreement.
14. Counterparts. For the convenience of the parties, this Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15. No limitation on Actions of the Stockholder as Director. In the event
the Stockholder is, or has an employee serving as, a director of the Company,
notwithstanding anything to the contrary in this Agreement, nothing in this
Agreement is intended or shall be construed to require the Stockholder or such
employee to take or in any way limit any action that the Stockholder or such
employee may take to discharge the Stockholder's or such employee's fiduciary
duties as a director of the Company.
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IN WITNESS WHEREOF, Stockholder has signed this Agreement as of the date
noted above.
/s/
-------------------------------------
Name:
Number of shares of Company Common
Stock owned beneficially and of
record by the Stockholder on the
date hereof:
Accepted and Agreed to
as of the date set forth above:
Concord EFS, Inc.
/s/ Edward T. Haslam
By: _________________________________
Name: Edward T. Haslam
Title: Chief Administrative Officer
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ANNEX C
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
(S) 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to (S) 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S) 251 (other than a merger effected pursuant to (S)
251(g) of this title), (S) 252, (S) 254, (S) 257, (S) 258, (S) 263 or (S) 264
of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)(S)
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
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c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228 or
(S) 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such
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second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of
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interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon
the appraisal prior to the final determination of the stockholder entitled to
an appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section
and who has submitted such stockholder's certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that such stockholder is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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ANNEX D
April 12, 2000
Board of Directors
Cash Station, Inc.
200 South Wacker Drive
Suite 1000
Chicago, IL 60606
Members of the Board:
Cash Station, Inc. (the "Company"), Concord EFS, Inc. ("Parent"), and SWCI
Acquisition Corp., a wholly-owned subsidiary of Parent ("Sub"), propose to
enter into an Agreement and Plan of Merger (the "Agreement") pursuant to which
Sub will be merged with and into the Company (the "Merger"). In connection with
the Merger, each share of common stock of the Company ("Company Common Stock")
issued and outstanding immediately prior to the acceptance for filing of a
Certificate of Merger with the Secretary of the State of Delaware (the
"Effective Time") shall by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive 2.6982
validly issued, fully paid and nonassessable shares of Parent Common Stock (the
"Consideration"). Except for cash payable in lieu of fractional shares, 100
percent of the Consideration shall be paid in the form of shares of common
stock, $0.33 1/3 par value per share, of Parent ("Parent Common Stock").
The Parent Common Stock shall be valued at the quotient (calculated to the
nearest hundredth) of (i) the sum for all trading days during the period of
twenty (20) consecutive trading days (the "Calculation Period") ending at the
end of the fifth trading day immediately preceding the scheduled closing date
of the Merger (the "Closing Date") of (x) the average of the high and low sales
price as reported on the Nasdaq National Market System ("Nasdaq") of a share of
Parent Common Stock on each such day, multiplied by (y) the trading volume as
reported on Nasdaq of shares of Parent Common Stock on each such day, divided
by (ii) the sum of the trading volumes as reported on Nasdaq of shares of
Parent Common Stock for all such days during the Calculation Period (the
"Parent Average Price"). The ratio of shares of Parent Common Stock issuable
for each share of Company Common Stock is referred to as the "Exchange Ratio,"
and will be calculated to four decimal places.
In the event the Parent Average Price is less than $22.40, then the Exchange
Ratio shall be increased to the number obtained by dividing (x), the quotient
obtained by dividing $56 million by the Parent Average Price, by (y), the
Company Diluted Share Number (as defined in the Agreement), and all references
to the Exchange Ratio shall be deemed to be to the Exchange Ratio as so
increased; provided, however, that in the event the Parent Average Price is
less than $20.00, then the Exchange Ratio shall be the number obtained by
dividing (x) 2.8 million by (y) the Company Diluted Share Number, and all
references to the Exchange Ratio shall be deemed to be to the Exchange Ratio as
so adjusted. Notwithstanding the foregoing, no fractional shares of Parent
Common Stock will be issued as a result of the Merger, and in lieu of the
issuance of fractional shares, cash will be paid to the holders of the Company
Common Stock in respect of any fractional share that would otherwise be issued
based on the closing price of the Parent Common Stock on the Closing Date.
You have asked us whether, in our opinion, the proposed consideration to be
received by the stockholders of the Company pursuant to the Merger is fair to
such stockholders from a financial point of view. In arriving at the opinion
set forth below, we have, among other things:
(1) Reviewed the Company's audited financial statements and related
financial information for the three fiscal years ended December 31, 1999;
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(2) Reviewed Parent's Annual Reports to Shareholders, Annual Reports on
Forms 10-K and related financial information for the three fiscal years ended
December 31, 1999, and other documents;
(3) Reviewed and discussed with management of the Company and Parent,
respectively, certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets and prospects of the Company and
Parent, respectively furnished to us by each party before and after giving
effect to the Merger;
(4) Reviewed the reported prices and trading activity for shares of Parent
Common Stock and compared them with those of certain publicly-traded companies
which we deemed to be reasonably similar to Parent;
(5) Compared financial and operating data of the Company and Parent to
financial and operating data of certain publicly-traded companies which we
deemed reasonably similar to the Company and Parent, respectively;
(6) Compared the proposed financial terms of the transactions contemplated
by the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
(7) Reviewed a draft dated April 5, 2000 of the Agreement;
(8) Participated in discussions with the legal advisors of the Company; and,
(9) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we deemed
necessary, including our assessment of general and industry specific economic,
market and monetary conditions.
In our review and analysis and in preparing our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information provided to us by the Company or otherwise made available to us,
and we have no reason to believe it is not accurate and complete. We have not
undertaken independently to verify any such information. We have not conducted
a physical inspection of the properties or facilities of Company or Parent, and
we have not made or obtained any independent valuations or appraisals of any
such properties or facilities.
With respect to the financial forecasts of the Company and Parent provided
to us by management of the two companies, respectively, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of the senior management of the Company and Parent as to
the future financial performance of the respective companies and have not
undertaken any independent analysis to verify the reasonableness of the
assumptions underlying such forecasts. Our opinion is necessarily based upon
information currently available to us and on economic, financial, market and
other conditions as they exist and can be evaluated as of the date hereof. No
limitations were imposed on or instructions given by either the Company or
Parent with respect to our investigation or the procedures we followed in
rendering our opinion, and the managements of the Company and Parent,
respectively, cooperated fully in connection with our investigation.
Our firm is experienced in providing advice in connection with mergers and
acquisitions and related transactions. We have acted as financial advisor to
the Company in connection with the Merger and will be paid a fee for our
services as financial advisor. In addition, the Company has agreed to indemnify
us for certain liabilities arising out of this engagement.
Based upon and subject to the foregoing, we are of the opinion that the
consideration to be received as a result of the Merger by the holders of
Company Common Stock is fair from a financial point of view to such holders.
Our advisory services and the opinion expressed herein are provided for the
use of the Board of Directors of the Company in its evaluation of the proposed
Merger, and our opinion is not intended to be and does not
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constitute a recommendation to any shareholder as to how such shareholder
should vote on the Merger. Our opinion does not address the relative merits of
the Merger or alternative business strategies that may be available to the
Company, and we express no opinion herein as to the price at which Parent
shares may trade following the announcement or consummation of the Merger. This
opinion may be reproduced in full in any proxy or information statement mailed
to stockholders of the Company but may not otherwise be disclosed publicly,
referred to or communicated by you in any manner without our prior written
approval and this opinion must be treated as confidential.
Very truly yours,
First Annapolis Capital, Inc.
/s/ Lee E. Manfred
By:__________________________________
Principal
Title: ______________________________
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (DGCL) empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of such corporation), by reason of the fact
that such person was an officer or director of such corporation, or is or was
serving at the request of such corporation as a director, officer, employee or
agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such officer or director acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests, and, for criminal proceedings, had no reasonable
cause to believe his conduct was unlawful. A Delaware corporation may indemnify
officers and directors in an action by or in the right of the corporation under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation in the performance of his duty. Where an officer or director is
successful on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify him against the expenses which such
officer or director actually and reasonably incurred.
In accordance with the DGCL, the registrant's Restated Certificate of
Incorporation, as amended, contains a provision to limit the personal liability
of the registrant's directors for violation of their fiduciary duty. This
provision eliminates each director's liability to the registrant or its
stockholders for monetary damages except to the extent provided by the DGCL (i)
for any breach of the director's duty of loyalty to the registrant or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under section 174
of the DGCL providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions, or (iv) for any
transactions from which a director derived an improper personal benefit. The
effect of this provision is to eliminate the personal liability of directors
for monetary damages for actions involving a breach of their fiduciary duty of
care, including any such actions involving gross negligence.
The registrant's by-laws provide for indemnification of the registrant's
officers and directors to the fullest extent permitted by applicable law. In
addition, the registrant maintains insurance policies which provide coverage
for its officers and directors in certain situations where the registrant
cannot directly indemnify such officers or directors.
Item 21. Exhibits and Financial Statement Schedules
(a) The following is a list of Exhibits included as part of this registration
statement. Concord agrees to furnish supplementally a copy of any omitted
schedule to the SEC upon request. Items marked with an asterisk are filed
herewith.
<TABLE>
<C> <S> <C>
2.1 Agreement and Plan of Merger dated as of April 12, 2000
among Concord EFS, Inc., SWCI Acquisition Corp. and Cash
Station, Inc. (included as Annex A to the proxy statement
and prospectus).*
2.2 Form of Stockholder Agreement dated as of April 12, 2000
between Concord EFS, Inc. and certain stockholders of Cash
Station, Inc. (included as Annex B to the proxy statement
and prospectus).*
5.1 Opinion of Sidley & Austin, as to the legality of the
securities being registered.*
8.1 Opinion of Sidley & Austin, as to certain United States
federal income tax consequences of the merger.**
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S> <C>
8.2 Opinion of Skadden, Arps, Slate, Meagher & Flom
(Illinois), as to certain United States federal income tax
consequences of the merger.**
23.1 Consent of Ernst & Young LLP**
23.2 Consent of Deloitte & Touche LLP**
23.3 Consent of Sidley & Austin (included in Exhibit 5.1 to
this Registration Statement).*
23.4 Consent of Sidley & Austin (included in Exhibit 8.1 to
this Registration Statement).**
23.5 Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)
(included in Exhibit 8.2 to this Registration
Statement).**
23.6 Consent of First Annapolis Capital, Inc.**
24.1 Powers of Attorney*
99.1 Form of proxy card to be mailed to holders of Cash
Station, Inc. common stock.*
99.2 Opinion of First Annapolis Capital, Inc. as to the
fairness of the consideration to be received by Cash
Station stockholders in the merger (included as Annex D to
the proxy statement and prospectus).*
</TABLE>
--------
* Previously filed
**Filed herewith
(b) Financial Statements of Cash Station, Inc.
(c) Not Applicable.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, as amended, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934, as amended (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act), that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of
II-2
<PAGE>
determining any liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form S-4, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Memphis,
State of Tennessee on June 27, 2000.
Concord Efs, Inc.
/s/ Dan M. Palmer
By: _________________________________
Dan M. Palmer
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Dan M. Palmer Chairman of the Board of June 27, 2000
____________________________________ Directors and, Chief
Dan M. Palmer Executive Officer
(Principal Executive
Officer)
/s/ Edward T. Haslam Chief Financial Officer June 27, 2000
____________________________________ (Principal Financial and
Edward T. Haslam Accounting Officer)
/s/ Edward A. Labry III President and Director June 27, 2000
____________________________________
Edward A. Labry III
* Director
____________________________________
Douglas C. Altenbern
* Director
____________________________________
Richard Buchignani
* Director
____________________________________
Richard M. Harter
* Director
____________________________________
Joyce Kelso
* Director
____________________________________
Richard Kiphart
* Director
____________________________________
Jerry D. Mooney
* Director
____________________________________
Paul L. Whittington
</TABLE>
/s/ Edward T. Haslam
*By: _____________________
Edward T. Haslam
As Attorney-in-Fact
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<PAGE>
INDEX TO EXHIBITS
<TABLE>
<C> <S> <C>
2.1 --Agreement and Plan of Merger dated as of April 12, 2000 among
Concord EFS, Inc., SWCI Acquisition Corp. and Cash Station, Inc.
(included as Annex A to the proxy statement and prospectus).*
2.2 --Form of Stockholder Agreement dated as of April 12, 2000 between
Concord EFS, Inc. and certain stockholders of Cash Station, Inc.
(included as Annex B to the proxy statement and prospectus).*
5.1 --Opinion of Sidley & Austin, as to the legality of the securities
being registered.*
8.1 --Opinion of Sidley & Austin, as to certain United States federal
income tax consequences of the merger.**
8.2 --Opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois), as to
certain United States federal income tax consequences of the
merger.**
23.1 --Consent of Ernst & Young LLP**
23.2 --Consent of Deloitte & Touche LLP**
23.3 --Consent of Sidley & Austin (included in Exhibit 5.1 to this
Registration Statement).*
23.4 --Consent of Sidley & Austin (included in Exhibit 8.1 to this
Registration Statement).**
23.5 --Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)
(included in Exhibit 8.2 to this Registration Statement).**
23.6 --Consent of First Annapolis Capital, Inc.**
24.1 --Powers of Attorney*
99.1 --Form of proxy card to be mailed to holders of Cash Station, Inc.
common stock.*
99.2 --Opinion of First Annapolis Capital, Inc. as to the fairness of
the consideration to be received by Cash Station stockholders in
the merger (included as Annex D to the proxy statement and
prospectus)*
</TABLE>
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*Previously filed.
**Filed herewith.
